When considering a fund's volatility, an investor may find it difficult to decide which fund will

provide the optimal risk-reward combination. Many websites provide various volatility measures for
mutual funds free of charge; however, it can be hard to know not only what the figures mean but also
how to analyze them. Furthermore, the relationship between these figures is not always obvious. Read
on to learn about the four most common volatility measures and how they're applied in the type of risk
analysis that is based on modern portfolio theory. (Learn more about modern portfolio theory .

1. Standard Deviation
As with many statistical measures, the calculation for standard deviation can be intimidating, but, as
the number is extremely useful for those who know how to use it, there are many free mutual fund
screening services that provide the standard deviations of funds.
The standard deviation essentially reports a fund's volatility, which indicates the tendency of the
returns to rise or fall drastically in a short period of time. A security that is volatile is also considered
higher risk because its performance may change quickly in either direction at any moment. The
standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates
in relation to its mean return, the average return of a fund over a period of time.
A fund that has a consistent four-year return of 3%, for example, would have a mean, or average, of
3%. The standard deviation for this fund would then be zero because the fund's return in any given
year does not differ from its four-year mean of 3%. On the other hand, a fund that in each of the last
four years retured -5%, 17%, 2% and 30% will have a mean return of 11%. The fund will also exhibit
a high standard deviation because each year the return of the fund differs from the mean return. This
fund is therefore more risky because it fluctuates widely between negative and positive returns within
a short period.
A note to remember is that, because volatility is only one indicator of the risk affecting a security, a
stable past performance of a fund is not necessarily a guarantee of future stability. Since unforeseen
market factors can influence volatility, a fund that this year has a standard deviation close or equal to
zero may behave differently in the following year.
Ways to Measure Volatility
Volatility is something that we can use when looking for good breakout trade opportunities.
Volatility measures the overall price fluctuations over a certain time and this information can be used
to detect potential breakouts.
There are a few indicators that can help you gauge a pair's current volatility. Using these indicators
can help you tremendously when looking for breakout opportunities.
1. Moving Average
Moving averages are probably the most common indicator used by traders and although it is a simple
tool, it provides invaluable data.
Simply put, moving averages measures the average movement of the market for an X amount of time,
where X is whatever you want it to be.
For example if you applied a 20 SMA to a daily chart, it would show you the average movement for
the past 20 days.
There are other types of moving averages such as exponential and weighted, but for the purpose of
this lesson we won't go too much in detail on them.
For more information on moving averages or if you just need to refresh yourself on them, check out
our lesson on moving averages.
2. Bollinger Bands
Bollinger bands are excellent tools for measuring volatility because that is exactly what it was
designed to do.
Bollinger bands are basically 2 lines that are plotted 2 standard deviations above and below a moving
average for an X amount of time, where X is whatever you want it to be.
So if we set it at 20, we would have a 20 SMA and two other lines. One line would be plotted +2
standard deviations above it and the other line would be plotted -2 standard deviations below.
When the bands contract, it tells us that volatility is low.
When the bands widen, it tells us that volatility is high
3. Average True Range (ATR)
Last on the list is the ATR.
The ATR is an excellent tool for measuring volatility because it tells us the average trading range of
the market for X amount of time, where X is whatever you want it to be.
So if you set ATR to 20 on a daily chart, it would show you the average trading range for the past 20
days.
When ATR is falling, it is an indication that volatility is decreasing. When ATR is rising, it is an
indication that volatility has been on the rise
To determine how well a fund is maximizing the return received for its volatility, you can compare
the fund to another with a similar investment strategy and similar returns. The fund with the lower
standard deviation would be more optimal because it is maximizing the return received for the amount
of risk acquired. Consider the following graph:
• Risk
• Systematic risk
• Unsystematic risk
• Return
• Portfolio
• Beta
• Leverage
• Diversification
SYSTEMATIC RISK
Systematic risk is due to the influence of external factors on an organization. Such factors are
normally uncontrollable from an organization's point of view.It is a macro in nature as it affects a
large number of organizations operating under a similar stream or same domain. It cannot be planned
by the organization.
The types of systematic risk are depicted and listed below.
1. Interest rate risk
2. Market risk and
3. Purchasing power or inflationary risk.
Now let's discuss each risk classified under this group.

1. Interest rate risk

Interest-rate risk arises due to variability in the interest rates from time to time. It particularly affects
debt securities as they carry the fixed rate of interest.
The types of interest-rate risk are depicted and listed below.
1. Price risk and
2. Reinvestment rate risk.
2. Market risk
Market risk is associated with consistent fluctuations seen in the trading price of any particular shares
or securities. That is, it arises due to rise or fall in the trading price of listed shares or securities in the
stock market.
The types of market risk are depicted and listed below
1. Directional risk,
2. Non-directional risk,
3. Basis risk and
4. Volatility risk.
5. Relative risk.

3. Purchasing power or inflationary risk:

Purchasing power risk is also known as inflation risk. It is so, since it emanates (originates) from the
fact that it affects a purchasing power adversely. It is not desirable to invest in securities during an
inflationary period.
The types of power or inflationary risk are depicted and listed below.
1. Demand inflation risk and
2. Cost inflation risk.
The meaning of demand and cost inflation risk is as follows:
1. Demand inflation riskarises due to increase in price, which result from an excess of demand
over supply. It occurs when supply fails to cope with the demand and hence cannot expand anymore.
In other words, demand inflation occurs when production factors are under maximum utilization.
2. Cost inflation riskarises due to sustained increase in the prices of goods and services. It is
actually caused by higher production cost. A high cost of production inflates the final price of finished
goods consumed by people.
The percent of risk which we cannot minimize or reduce through diversification is considered as
systematic risk. This means that this type of risk is impossible to eliminate by an individual. It is
directly related with the market, that’s why systematic risk also known as market risk. From my point
of view systematic risk is arisen from the macro economic factors (inflation, unemployment rate, oil
price etc.) which are beyond our control. Only through proper economic planning of government can
reduce these types of risk. One important thing you need to know that although implementation of
effective economic policies by government would reduce this type of risk but it needs time to be
visible in the market. That’s why we cannot consider it when taking our individual investment
decisions.
UNSYSTEMATIC RISK:
Risk that is unique to a certain asset or company. An example of nonsystematic risk is the possibility
of poorearnings or a strike amongst a company's employees. One may mitigate nonsystematic risk by
buying different ofsecurities in the same industry and/or by buying in different industries. For
example, a particular oil company has thediversifiable risk that it may drill little or no oil in a given
year. An investor may mitigate this risk by investing inseveral different oil companies as well as in
companies having nothing to do with oil. Nonsystematic risk is alsocalled diversifiable risk. See
alsoUnsystemic risk is a type of risk that is caused by factors inside the organization. Examples of an
unsystemic risk include a strike, failure to keep up with a new competitor, a product recall or a change
in management. Unsystemicrisk contrasts with systemic risk, which is caused by external factors that
an organization has no control over. Unsystematic risk is company specific or industry specific risk.
This is risk attributable or specific to the individual investment or small group of investments. It is
uncorrelated with stock market returns. Other names used to describe unsystematic risk are specific
risk, diversifiable risk, idiosyncratic risk, and residual risk.Examples of risk that might be specific to
individual companies or industries are business risk, financing risk, credit risk, product risk, legal risk,
liquidity risk, political risk, operational risk, etc. Unsystematic risks are considered governable by the
company or industry.Proper diversification can nearly eliminate unsystematic risk. If an investor owns
just one stock or bond and something negative happens to that company the investor suffers great
harm. But if an investor owns a diversified portfolio of 20, 30, or 40 individual investments, the
damage done to the portfolio is minimized.
TYPES OF UNSYSTEMATIC RISK:
1. Credit Risk (also known as Default Risk)
Credit risk is just the risk that the person you have given credit to, i.e. thecompany or individual, will
be unable to pay you interest, or pay back your principal, on its debt obligations. If you are investing
in Infrastructure Bonds orCompany Fixed Deposits right now, you should be aware of the credit /
default risk involved. Government bonds have the lowest credit risk (but it is not zero - think of
Portugal, Ireland or Spain right now), while low rated corporate deposits (junk bonds) have high
credit risk. Before investing in a bond or a corporate deposit, be sure to check how highly it is rated
by a well known rating agency such as CRISIL, ICRA or CARE. Remember, even a bank FD has
somecredit risk, as only a maximum of Rs. 1 lakh is guaranteed by the Government.
2. Country Risk
When a country cannot keep to its debt obligations and it defaults, all of its stocks, mutual funds,
bonds and other financial investment instruments are affected, as are the countries it has financial
relations with. If a country has a severe fiscal deficit, it is considered more likely to be risky than a
country witha low fiscal deficit, ceteris paribus. Emerging economies are considered to be more risky
than developed nations.

3. Political Risk
This is also higher in emerging economies. It is the risk that a country's government will suddenly
change its policies. For example, today with the continuing raging debate on FDI in retail, India's
policies will not be looking very attractive to foreign investors, and stock prices are negatively
affected.
4. Reinvestment Risk
This is the risk that you lock into a high yielding fixed deposit or corporate deposit at the highest
available rate (currently above 9.50%), and when your interest payments come in, there is no
equivalent high interest rate investment avenue available for you to reinvest these interest proceeds
(for example if your interest is paid out after 1 year and the prevailing interest rate is 8% at that time).
Currently as we are at an interest rate peak, it would be advisable to lock in for a longer tenor
(provided your financial goal time horizon permits) to avoid facing reinvestment risk.
5. Interest Rate Risk
A golden rule in debt investing is this: Interest Rates go up, prices of bonds go down. And vice versa.
So for example in our situation today, we appear to be at an interest rate peak. This means that since
interest rates are going to go down from here, prices of bonds are going to go up. So if you were to
invest in debtfunds now, you would be buying at a low, and can sit back and watch as your
investments start to give gains as interest rates fall.
6. Foreign Exchange Risk
Forex risk applies to any financial instruments that are denoted in a currency other than your own. For
example, if a UK firm has invested in India, and the Indian investment does well in rupee terms, the
UK firm might still lose money because the Rupee has depreciated against the Pound, so when the
firm decides to pull out its investment on maturity, it gets fewer pounds on redemption. With the
recent very sharp fall in the rupee, the forex risk of our country as an investment destination has
greatly increased.
7. Inflationary Risk
Inflationary risk, or simply, inflation risk, is when the real return on your investment is reduced due to
inflation eroding the purchasing power of your funds by the time they mature. For example, if you
were to invest in a fixed deposit today and you were to earn a 10% interest on it in 1 year's time, then
if inflation has been 8% in that year, your real rate of return comes down to 2%, keeping purchasing
power in mind.

8. Market Risk:
This is the risk that the value of your investment will fall due to market risk factors, which include
equity risk (risk of stock market prices or volatility changing), interest rate risk (risk of interest rate
fluctuations), currency risk (risk of currency fluctuations) and commodity risk (risk of fluctuations in
commodityprices). There are other types of risk too, such as legislative risk, global risk,timing risk
and more, but for the scope of this article, the ones explained aboveare the main ones you need to
keep in mind, both on a macro (country) and a micro (individual investments) level.
ELIMINATION OF RISKS
There is some good news though credit risk can be simply eliminated by investing in sovereign
securities-securities issued by the government. There is simply no risk of default. Or so we hope, for
retail investors,MFs offer gilt schemes,where almost the entire corpus is invested in securities thereby
achieving the same result .interest rate risk discussed earlier is always prevalent.However,it comes
into play only when a transaction is undertaken during the pendency of the fixed income
instrument .Ergo ,it follows that if the investment is held till maturity; there would be no interest rate
risk. Investments such as Public Provident Fund(PPF),relief bonds etc are normally held till
maturity.These are examples where both the risks inherent in debt instruments are at a bare minimum.
Government Action Risk
This is a unique kind of risk,which has reared its ugly head in recent times. In the previous paragraph,
it is mentioned that the interest rate risk is eliminated by simply holding the instrument till maturity.
However, such principles of investment had not contended with unilateral governmental action. For
example, the rates of ppf over the past three years have been consistently reduced by the authorities
from 12%p.a to 8%p.To add insult to injury these rates are applicable on the entire corpus and not on
additional investment. Relief bonds have come down to8%rates in other small saving instruments
have also been slashed across the board.Unfortunately,there is no escape from this risk that of our
government.
BENEFITS TO A SHAREHOLDER
Why should you purchase shares of a company? What are benefits that accrue to as a shareholder?
Apart from the right to vote and decide the future course of action that a company takes, the real
benefit that you, as a shareholder have is in form of participation that you get in profit made by the
company. At the same time, your liability is limited Only to the face value of the shares held by you.
The benefits distributed by the company to its shareholders.
1. Monetary Benefits and 2) Non Monetary Benefits.
Monetary Benefits:
A. Dividend:
An equity shareholder has a right on the profits generated by the company. Profits are distributed in
part or in full in the form of dividends. Dividend is an earning on the investment made in shares, just
like interest in case of bonds or debentures. A company can issue dividend in two forms: a) Interim
Dividend and b) Final Dividend. While final dividend is distributed only after closing of financial
year; companies at times declare an interim dividend during a financial year. Hence if X Ltd. earns a
profit of Rs 40 crore and decides to distribute Rs 2 to each shareholder, a holding of 200 shares of X
Ltd. would entitle you to Rs 400 as dividend. This is a return that you shall earn as a result of the
investment made by you by subscribing to the shares of X Ltd.
B. Capital Appreciation:
A shareholder also benefits from capital appreciation. Simply put, this means an increase in the value
of the company usually reflected in its share price. Companies generally do not distribute all their
profits as dividend. As the companies grow, profits are re-invested in the business. This means an
increase in net worth, which results in appreciation in the value of shares. Hence, if you purchase 200
shares of X Ltd at Rs 20 per share and hold the same for two years, after which the value of each
share is Rs 35. This means that your capital has appreciated by Rs 3000.
1. Non-Monetary Benefits: Apart from dividends and capital appreciation, investments in shares
also fetch some type of non-monetary benefits to a shareholder. Bonuses and rights issues are two
such noticeable benefits.

A. Bonus:
An issue of bonus shares is the distribution free of cost to the shareholders usually made when a
company capitalises on profits made over a period of time. Rather than paying dividends, companies
give additional shares in a pre-defined ratio. Prima facie, it does not affect the wealth of shareholders.
However, in practice, bonuses carry certain latent advantages such as tax benefits, better future
growth potential, an increase in the floating stock of the company, etc. Hence if X Ltd decides to issue
bonus shares in a ration of 1:1, every existing shareholder of X Ltd would receive one additional share
free for each share held by him. Of course, taking the bonus into account, the share price would also
ideally fall by 50 percent post bonus. However, depending upon market expectations, the share price
may rise or fall on the bonus announcement.
B. Rights Issue:
A rights issue involves selling of ordinary shares to the existing shareholders of the company. A
company wishing to increase its subscribed capital by allotment of further shares should first offer
them to its existing shareholders. The benefit of a rights issue is that existing shareholders maintain
control of the company. Also, this results in an expanded capital base, after which the company is able
to perform better. This gets reflected in the appreciation of share value.
C. Risks In equity investment:
Although an equity investment is the most rewarding in terms of returns generated, certain risks are
essential to understand before venturing into the world of equity. These can be described as follows:
1.Market/ Economy Risk:
The performance of any company depends on the growth of an economy. An economy, which
continues to prosper, ensures that companies operating in it benefit from its growth. However, an
equity shareholder also runs the risk of any downturn in the economy affecting the performance of his
company. Economy related risks are usually reflected in the factors such as GDP growth, inflation,
balance of payment positions, interest rates, credit growth etc. A slowdown in the economy pinches
almost all sectors, especially infrastructure, services and manufacturing companies.

2.Industry Risk:
All industries undergo some kind of cyclical growth. Shareholders get rewarded most during the
expansion stage. For instance, the last few years have been very rewarding for investors in real estate.
However, once the industry reaches a maturity stage, the rewards from investment are limited.
Further, companies belonging to industries where growth has retarded incur losses or declining gains.
Industry specific government regulations too impact returns from investments made therein.

3.Management Risk:
The management is the face of an enterprise. It is the team which gives direction to the future course
of action that a company will take. Quality of management is hence paramount. Management changes
often have a serious impact on policy matters of companies, thereby impacting the share price. A
management which is unable to meet the challenges posed by competition is likely to suffer in
performance.
4.Business Risk:
Business risk is a function of the operating conditions faced by a company and the variability that
these conditions inject into operating income and hence expected dividends. Business risk can be
classified into two broad categories: external and internal. Internal business risk is largely associated
with the efficiency with which a company conducts its operations within the broader environment
imposed upon it. External risk is the result of operating conditions imposed upon the company by
circumstances beyond its control.
5.Financial Risk:
Financial risk is associated with the way in which a company finances its activities. A company,
borrowing money for business, creates fixed payment obligations in form of interest that must be
sustained. Beyond a specified limit, the residual income left for shareholders gets reduced, thereby
affecting the returns on shares. More importantly, it increases default risk, i.e, a heavily leveraged
company, is at a greater risk of not being able to meet its liabilities and hence going bankrupt.

6.Exchange Rate Risk:

Companies today earn sizeable revenues from outside their parent country. Hence, any appreciation in
the currency, as was recently witnessed with technology companies, adversely affects earnings, which
results in falling or stagnant share prices.
7.Inflation Risk:
Rising prices or inflation reduces purchasing power for the common man resulting in a slowdown in
the demand in the economy. This has implications for all the sectors in the economy. Hence, in an
inflationary environment, share prices of most companies face a downturn as the expected fall in
demand reduces their future expected income.
8.Interest Rate Risk:
Interest rate risk refers to the uncertainty of future market values and size of future income, caused by
fluctuations in the general level of interest rates. Rising interest rates increase cost of borrowing,
which results in an increase in the prices of products and a corresponding slowdown in demand.
Hence, an interest rate hike affects share prices of companies cutting across the board.
How to overcome risks:
Most risks associated with investments in shares can be reduced by using the tool of diversification.
Purchasing shares of different companies and creating a diversified portfolio has proven to be one of
the most reliable tools of risk reduction
INDUSTRY PROFILE
The securities market achieves one of the most important functions of channeling idle resources to
productive resources or from less productive resources to more productive resources. Hence in the
broader context the people who save and investors who invest focus more towards the economy’s
abilities to invest and save respectively. This enhances savings and investments in the economy, the
two pillars for economic growth. The Indian Capital Market has come a long way in this process and
with a strong regulator it has been able to usher an era of a modern capital market regime. The past
decade in many ways has been remarkable for securities market in India. It has grown exponentially
as measured in terms of amount raised from the market, the number of listed stocks, market
capitalization, trading volumes and turnover on stock exchanges, and investor population. The market
has witnessed fundamental institutional changes resulting in drastic reduction in transaction costs and
significant improvements in efficiency, transparency and safety.
Stock market:
When investors think of the stock market, they Nov imagine a specific place - such as a stock
exchange. In fact, the stock market is the abstract idea of stock trading and stock exchange. All selling
of stocks - at stock exchanges and in other ways - affects the market overall. Following stock market
information in the news can help you make the right decisions about stock market investing.
Need of stock market:
The stock market is simply a term for the overall market or industry that is concerned with buying and
selling company stock, both private and publicly traded securities. The stock market does many
things. It helps to set prices of stocks. The more a stock is traded on the market and the more in
demand the stock, the higher is its value. Having a stock market that is interconnected with stock
markets around the world helps traders and investors to see how Specific stocks are doing.
Of course, the stock market is mainly present to create money. Through the market, investors - both
companies and individuals - can buy stocks, which effectively make them own a small part of a
company. If the company prospers, investors are rewarded with dividends and profits. Companies, by
becoming public and offering stocks to the public, can raise money and improve their profile through
business expansions which can help them make great profit.
How to invest in stock market:
Most financial experts recommend that investors must consult a full-service financial advisor initially.
This type of advisor can provide advice and can help ensure that an investor's money gets a good
return. More experienced investors Nov be interested in one of the online investing options. These
allow almost anyone with a fast internet connection and a subscription to an investment site to buy
and sell stocks when they wish.
The stock market:
One of the most basic advices that people give when speaking about the stock market is to buy low,
sell high. But this is a short-term view of the mechanics of how the stock market works (another
example of this short-term view is short selling stocks). In reality, shares are more complex than that.
Stock market is the term given to the act of trading company shares, stocks, and other securities and
its derivatives. The stock market has a number of players, which could be range from an individual
stockholder to a very large corporate trader. These players can be anybody coming from any part of
the world. Trading in the stock market can be done privately with an attorney or with a professional
stock exchange dealer who have the power to execute the order.
For the most part, stock market is very volatile in nature and that's the reason why it is so hard to
predict. But due to persistent studies, the changes in the stock market can now be calculated in a
relatively acceptable precision. Here are the various efforts carried out by stock market experts to
predict the market's movements.
STOCK MARKETS IN INDIA:
Stock exchanges are the perfect type of market for securities whether of government and semi-govt
bodies or other public bodies as also for shares and debentures issued by the joint-stock companies. In
the stock market, purchases and sales of shares are affected in conditions of free competition.
Government securities are traded outside the trading ring in the form of over the counter sales or
purchase. The bargains that are struck in the trading ring by the members of the stock exchanges are at
the fairest prices determined by the basic laws of supply and demand.
Definition of a stock exchange:
“Stock exchange means anybody or individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.”
The securities include:
 Shares of public company.
 Government securities.
 Bonds

History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875 and
Ahmadabad set up in 1894. These were organized as voluntary non-profit-making associations of
brokers to regulate and protect their interests. Before the control on securities under the constitution in
1950, it was a state subject and the Bombay securities contracts (control) act of 1925 used to regulate
trading in securities. Under this act, the Mumbai stock exchange was recognized in 1927 and
Ahmadabad in 1937. During the war boom, a number of stock exchanges were organized. Soon after
it became a central subject, central legislation was proposed and a committee headed by A.D.Gorwala
went into the bill for securities regulation. On the basis of the committee’s recommendations and
public discussion, the securities contract (regulation) act became law in 1956.
Functions of Stock Exchanges:
Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed
companies, they help trading and raise funds from the market. Over the hundred and twenty years
during which the stock exchanges have existed in this country and through their medium, the central
and state government have raised crores of rupees by floating public loans. Municipal corporations,
trust and local bodies have obtained from the public their financial requirements, and industry, trade
and commerce- the backbone of the country’s economy-have secured capital of crores or rupees
through the issue of stocks, shares and debentures for financing their day-to-day activities, organizing
new ventures and completing projects of expansion, diversification and modernization. By obtaining
the listing and trading facilities, public investment is increased and companies were able to raise more
funds. The quoted companies with wide public interest have enjoyed some benefits and assets
valuation has become easier for tax and other purposes.
THE MAJOR STOCK EXCHANGES IN INDIA:
NSE:
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study
Group on Establishment of New Stock Exchanges, which recommended promotion of a National
Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the
country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial
Institutions at the behest of the Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country. On its recognition as a stock
exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and operations in Derivatives segment
commenced in June 2000.
NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up
with the main objectives of:
• Establishing a nation-wide trading facility for equities and debt instruments.
• Ensuring equal access to investors all over the country through an appropriate communication
network.
• Providing a fair, efficient and transparent securities market to investors using electronic
trading systems.
• Enabling shorter settlement cycles and book entry settlements system.
• Meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology, have become industry
benchmarks and are being emulated by other market participants.
BSE:
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native
Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock
Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons
(AOP) and is currently engaged in the process of converting itself into demutualised and corporate
entity. It has evolved over the years into its present status as the premier Stock Exchange in the
country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956
from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while
providing an efficient and transparent market for trading in securities, debt and derivatives upholds
the interests of the investors and ensures redresses of their grievances whether against the companies
or its own member-brokers. It also strives to educate and enlighten the investors by conducting
investor education programmers and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and regulates the
affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the
broking community (one third of them retire ever year by rotation), three SEBI nominees, six public
representatives and an Executive Director & Chief Executive Officer and a Chief-Operating-Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration
of the Exchange and the Chief Operating Officer and other Heads of Department assist him. The
Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to constitution of the
Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three
elected directors, three SEBI nominees or public representatives, Executive Director & CEO and
Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in
which the Governing Board has powers as an Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-brokers, declaration of a member-
broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins
and other monies payable by the member-brokers to the Exchange, etc.
REGULATORY FRAME WORK OF STOCK EXCHANGE:
A comprehensive legal framework was provided by the “Securities Contract Regulation Act, 1956”
and “Securities Exchange Board of India 1952”. Three tier regulatory structure comprising
 Ministry of finance
 The Securities And Exchange Board of India
 Governing body

Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation for the admission of
members in the stock exchanges. The qualifications for becoming a member of a recognized stock
exchange are given below:
• The minimum age prescribed for the members is 21 years.
• He should be an Indian citizen.
• He should be neither a bankrupt nor compound with the creditors.
• He should not be convicted for fraud or dishonesty.
• He should not be engaged in any other business connected with a company.
• He should not be a defaulter of any other stock exchange.
• The minimum required education is a pass in 12th standard examination.
SEBI (Securities and exchange board of India):
The securities and exchange board of India was constituted in 1988 under a resolution of government
of India. It was later made statutory body by the SEBI act 1992.according to this act, the SEBI shall
constitute of a chairman and four other members appointed by the central government.
With the coming into effect of the securities and exchange board of India act, 1992 some of the
powers and functions exercised by the central government, in respect of the regulation of stock
exchange were transferred to the SEBI.
DEPENDENCE OF SECURITIES MARKET:
Three main sets of entities depend on securities market- the corporate, the government & households.
While the corporate and governments raise resources from the securities market to meet their
obligations, the households invest their savings in securities.
Primary market & secondary market:
The securities market comprises two segments- primary market (new issues, offer for sale) &
secondary market (trading of stocks). There are two major types of issuers who issue securities. The
corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the
governments (central and state governments) issue debt securities (dated Securities, treasury bills).
The two major exchanges, namely the NSE and the BSE provide trading of securities.
Laws governing capital market:
The four main legislations governing the securities market are:
(a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and regulate
securities market.
(b) The Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation
to issue, allotment and transfer of securities, and disclosures to be made in public issues.
(c) The Securities Contracts (Regulation) Act, 1956, read with the Securities Contracts (Regulation)
Rules, 1957 which provide for regulation of transactions in securities through control over stock
exchanges; and
(d) The Depositories Act, 1996 which provides for electronic maintenance and transfers of ownership
of d-mat securities.
Regulators:
SEBI is the primary regulator of the Securities Market and the entities operating therein. The SEBI
Act and the Depositories Act are mostly administered by SEBI. Government and regulations by SEBI
frame the rules under the securities laws. All these are administered by SEBI. The powers under the
Companies Act relating to issue and transfer of securities and non-payment of dividend are
administered by SEBI in case of listed public companies and public companies proposing to get their
securities listed.

COMPANY PROFILE
SMC Group, founded in 1990, is India’s best Equity Broking House and the Largest Distribution
Network, providing a wide range of financial services and investment solutions. A blend of extensive
experience, diverse talent and client focus has made us achieve this landmark.

Over the years, SMC has expanded its operations domestically as well as internationally. Existing
network includes regional offices at Mumbai, Kolkata, Chennai, Cochin, Ahmedabad, Jaipur,
Hyderabad, Bangalore plus a growing network of 2300+ offices spread across 425 cities/towns in
India.
We offer a diverse range of financial services which includes institutional and retail brokerage of
equity, currency, commodities, derivatives, online trading, depository services, fixed Deposits, IPOs
and mutual funds distribution, dedicated desk for NRI and institutional clients, insurance broking,
clearing services, margin funding, investment banking, portfolio management, wealth
advisory&research. We have a highly efficient workforce of over 6000 employees and over 7500
financial advisors serving the financial needs of more than 6, 00,000 satisfied investors.

We are also amongst the first financial firms in India to expand operations in the lucrative gulf
market, by acquiring license for broking and clearing member with Dubai Gold and Commodities
exchange (DGCX.

The SMC Advantage:

• Large avenues of investment solutions and financial services under one roof
• Personalized solution and attention offered to each investors
• Research support and timely advice by our high-tech research wing
• An extensive network of branch offices
• A perfect blend of latest technology and rich experience of over 20 years
• Honesty, transparency and fairness imbibed in all our dealings
Providers of one of the best trading platforms in terms of speed, convenience and risk management to
trade in NSE, BSE, F&O, NCDEX, MCX,, MCX-SX, NMCE, ICEX, ACE & DGCX
Founders & Promoters
Subhash C. Aggarwal
Chairman & Managing Director: SMC Global Securities Ltd
Mr. Aggarwal is co-founder and promoter of SMC Group. He has vast experience, in-depth
knowledge and strong understanding of various intricacies of the Securities Market and Financial
Services. He has exhaustive and rich experience of securities business of more than 20 years. His
exceptional leadership skills and outstanding commitment have made this group one of the leading
brokerage and distribution houses of the country. Under his leadership, SMC has diversified its
business from stock broking and arbitrage to Commodities Broking, Distribution of Mutual Funds,
IPOs, Insurance products, Wealth Management and Advisory Services. Mr. Aggarwal is a Fellow
member of ICAI.
Mahesh C. Gupta
Vice-Chairman & Managing Director: SMC Global Securities Ltd.
Mr. Gupta has co-founded and promoted the SMC Group. He has rich experience of more than 20
years in the securities market. His exceptional leadership skills and outstanding commitment has
made SMC as one of the leading investment solutions and services provider. He possesses expertise in
managing and controlling the finance needs, risk management and surveillance. His disciplined style
of working is an inspiration to the workforce of SMC. Mr. Mahesh C. Gupta is a fellow member of
ICAI
Corporate Ethos
Our Vision
To be a global major in providing complete investment solutions, with relentless focus on investor
care, through superior efficiency and complete transparency.
Core Values
Ethical deals: Honesty is the only policy.
Experience and trust: Over 20 years of experience has made SMC earn the trust of more than 6,
00,000 Investors
Expertise: Know-how and skills to provide investors an edge.
Personalized Solutions: Every investor is unique. Every solution is unique.
Our Approach
Value for investor’s trust: SMC values the trust reposed in by the clients and is committed to uphold it
at all cost.

Integrity and honesty: Integrity, honesty and transparency are the underlying principles in all our
dealings.
Personalizedattention: The most valued asset is our relationship with the clients, which has been built
over years by giving personalized attention.
Network which works: SMC has a vast network extending to 425+cities and towns ensuring easy
accessibility, convenience and hassle free trading experience.
Research based advisory services: SMC offers proactive and timely world class research based advice
and guidance to its clients to enable them to take informed decisions.
Our Credentials
• Best Equity Broking House (Source: BSE-Dun and Bradstreet, 2010)
• Largest distribution network in the country (Source: BSE-Dun and Bradstreet, 2010)
• Awarded the Fastest Growing Retail Distribution Network in financial services (Source:
Business Sphere, 2010)
• Received Major Volume Driver award from BSE for 3 years consecutively(2004-05, 2005-06
and 2006-07)
• Nominated amongst the top 3, in the CNBC Opt mix Financial Services Award 2008 under
"National Level Retail Category"
• Amongst the First Financial Firms in India to expand operations in the lucrative gulf market,
by acquiring license for broking and clearing member with Dubai Gold and Commodities exchange
(DGCX)
• One of the largest proprietary desk for doing near risk-free arbitrage in equities and
commodities
Institute of Economic Studies (IES) has honored our Chairman with the ‘Pride of India’ and ‘Udyog
Rattan’ awards. Also, IIFS has conferred him with ‘Glory of India’ award recently
Memberships & Registrations
Trading Member of NSE, BSE, NCDEX, MCX, DGCX, NMCE, ICEX, ACE, MCX-SX, National
Spot Exchange Ltd.(NSEL) & NCDEX Spot Exchange Ltd.( NSPOT).
• Clearing Member in NSE (F&O, Currency), BSE (F&O, Currency),
MCX (Commodities), NCDEX, MCX-SX, ICEX, ACE & DGCX
• Depository Participant with CDSL & NSDL
• Category 1 Merchant banker
• Corporate Insurance Broker for Life & General Insurance
(Registered with IRDA)
• Distributor of IPOs & Mutual Funds (Registered with AMFI)
• Portfolio Management Services (PMS) registered with SEBI
• Non-Banking Financial Company (NBFC) registered with RBI
• Association with London based ICON Capital,
(Registered under FSA & NSA ,London)
ACE Derivatives and commodities Exchange (ACE)
Register
With more than 2300 offices across 425 cities and a substantial client base of over 6, 00,000 satisfied
investors, SMC is known for its life-long and steady relationships with all its Business
Partners/Associates. We believe in long-term commitment and association that plays a vital role in the
growth of any business.

SMC believes in growing with its Business Partners/Associates. Our dedicated efforts and continuous
improvement in our services has made us one of the most respected and largest broking houses with a
huge network of Business Partners/Associates across India. SMC provides its sub-broker with the
right tools and support. Association with SMC means a strong bond with
one of the largest broking firms of India. SMC invites you to become a Business Partners/Associates
Offerings
SMC facilitates trading activities in all the major market segments including; equity, derivatives,
commodities, interest derivatives and currency futures. It’s robust and user-friendly trading platform
enables to execute trades simultaneously across all Segments. We also have whole bucket of other
services like online trading, depository, IPO, mutual funds, insurance broking, institution broking,
margin funding, NRI services, clearing services, investment banking, PMS
• A broking house having perfect blend of latest technology and rich experience of over 20
years. Technological tools include VPN network of HCL Comnet, HECL, Aircel& Tulip.
• Best Equity Broking House (Source: BSE-Dun and Bradstreet, 2010)
• Largest distribution network in the country (Source: BSE-Dun and Bradstreet, 2010)
• Received Major Volume Driver award from BSE for 3years consecutively
• Awarded fastest growing Retail Distribution Network in financial services (source: Business
sphere, 2010)
• Large avenues of investment solutions and financial services under one roof.
• Overall support in start-up, training, marketing, advertising, client acquisition and recruiting
etc.
• Perfect back office support which helps you to make their dealing with company as well as
clients in very efficient manner
• Strong research support backed by high end technology
• One of the best trading platforms in terms of speed, convenience and risk management
• Marketing support though TV, Newspapers, Website, Brochures, Posters, Personalized
solution and attention offered to each investor
Research
Overview
With the EIC (Economy, Industry, Company) approach, our Research team offers timely Research
reports covering investment summary, trend of world markets, sector trends, commodity trends. The
same is covered in our esteemed weekly magazine “Wise Money”. We have a team of highly
experienced analysts, who cover stocks, commodity, currency, mutual funds and special reports. All
our research reports, estimates and enhanced analytics are available on our website
www.smctradeonline.com
Our offerings
Equity Reports:
• Morning Mantra
• Evening Buzzer
• Derivatives
• IPO Reports
• Wise Money equity content.
Commodities Reports:
• Morning Mantra- Agri
• Morning Mantra- metals & energy
• Afternoon Metals & Energy
• Evening Buzzer- Agri& Metals
• Special Commodities Updates
• Trading opportunity report
• DGCX Daily
Currency Reports:
• Currency Daily
• Afternoon Currency Buzzer
Mutual fund Reports:
• NFO Analysis
• Mutual Fund Tracker
• Mutual Fund Weekly update
• Portfolio Monitor
Special reports:
• Result Updates
• Pre-Budget Analysis
• Post-Budget Analysis
Newsletters:
• Wise Money