A

Project Report
On

EQUITY AND DERIVATIVE

MARKET
Undertaken
At

NIRMAL BANG SECURITIES (P) LTD.

AHMEDABAD
Duration: From: 1ST JUNE 2012 to 31ST JULY 2012
Submitted to

Ahmedabad Institute of Technology (AIT)

Ahmedabad
Submitted By
YOGESH B. GAJERA
ROLL NO: 31
BATCH 2012-2013

CERTIFICATE

Preface
Education is when you read the fine print; experience is
what you get when you dont.
-Pete Seeger 1919.
One can never deny for the importance of the practical exposure of the
problem for its better understanding and greater grip of coming out with an
industrially acceptable solution. Being the MANAGEMENT students and
performing small practical even is in itself an experience of responsibility on our
head. The summer project is certainly the best chance to work in the Industry and
have practical understanding of market condition.
In view of above, this report has been completed as a part of summer
training prescribed for the MASTER OF BUSINESS ADMINISTRATION. This
had been made in order to know the perception among the investors towards equity
scheme at NIRMAL BANG SECURITY (P) LTD. at Ahmadabad region. This will
help us to know the factors which affect the Investors perception towards equity
scheme

are Market condition, service condition, return on investment and

investors personal belief. For this purpose we have made a questionnaire. This has
helped us to take data from the target sample, by making the survey we have
collected data as per the guideline provided. Thus results oriented by this project
help us to find the factors which affect Investors perception towards different
equity scheme at NBSPL.

ACKNOWLEDGEMENT
There is no such thing as a self made man, we all are made
up thousands of others George Adams.
It is great pleasure for me to acknowledge the kind of help
and guidance received tome during my project work. I was
fortunate enough to get support from a large number of people to
whom I shall always remain grateful.
I would like to express my sincere gratitude to Mr. Diptesh
Shirshikar and Mr. Ravi Tandon for giving me this opportunity to
undergo this lucrative project with Nirmal Bang Security Pvt. Ltd.
and also for their great guidance and advice on this project,
without which I will not be able to complete this project.
I am very thankful to our Director Sir Dr. Sharad Joshi for
giving me valuable
suggestion and encouragement to bring out good project.
I am very thankful to my mentor Prof. Mr. Nisarg Joshi for
him inspiration and for initiating diligent efforts and expert
guidance in course of my study and completion of the project and
I am very thankful to my project guide for giving me timely and
concrete guidance for making this project successful.
I would like to thankful to customers and staff members of
Nirmal Bang Security Pvt. Ltd. For helped me during the project
report and providing me more and more valuable information for
my project report.

I would thank to God for their blessing and my Parents also

for their valuable
suggestion and support in my project report.
I would also like to thank our friends and those who have
helped us during this project directly or indirectly.
YOGESH GAJERA

CONTENT

INTRODUCTION
As an MBA student we have given a good opportunity to use
our theoretical knowledge into the practical in the company where
we are taking training.
The study is focuses on the research regarding the investors
preference and behavior for the product of India Infoline. I have
chosen this topic mainly for the following purpose.
I want to apply my theoretical knowledge into practical which I
have gain through my first year of MBA.
We have not more knowledge about stock market in the real
market sense, so to receive the current market knowledge we
have select a broking company Nirmal Bang, Ahmedabad.
In real market, it is necessary to have a current knowledge of
the securities market.
I come to know that which product is the most preferred by the
investors.

Industry profile
The Indian broking industry has come a long way in the last decade and has
also undergone a significant paradigm shift. The industry has shed most of its
negative trappings of the past and is now being considered a preferred sector for
building long term careers by professionals from all disciplines.
Unprecedented growth of market volumes and growing participation by
investors spread beyond the traditional geographical pockets, coupled with
professionalization of work cultures and demand for value-added services like
investment advisory and portfolio management, has created a huge demand for
talent at all levels.
This growth story is expected to be sustained for at least a decade or even more
because of the steady increase in the investor penetration and wider acceptance
of stock investments as a reliable option for long term wealth creation.
Robust all round economic growth and favorable demographics are other
important factors which are transforming India from a nation of savers to
investors. Improved quality of the Indian regulatory framework and high
compliance standards, have led to greater transparency in all transactions and
minimized the systemic risks.
Historically, the Indian financial services industry has been dominated by the
banking sector. However, globalization & liberalization of Indian Equity
Markets has led to rapid modernization and the professionalization of the
financial sector.

 This has led to the emergence of the broking industry, as an important part of
the financial services sector, competing for talent with banks, insurance
companies etc. The Indian Broking industry has indeed come of age and it is
attracting huge investments from large domestic corporate houses as well as
from international players.
The Indian Broking industry is now in a most exciting phase and is likely to
grow at a much faster rate compared with many other sectors. High quality
Research & Advice, State-of-the-art Technology & Business Analytics,
Progressive HR Practices and CRM/Quality Management systems, have
emerged as the new drivers of competitive advantage in this business.
The scope of services provided by domestic brokerages has also moved up the
value chain from mere Execution & Settlement to cover the full range of
financial products to meet the diverse needs of customers, who are better
educated and aware about Personal Financial Planning.
In actuality the brokerage industry continues to develop rapidly. Many of the
traditional restrictions against banking activities within the brokerage industry
are being eliminated and the barriers are disappearing. Due to this, some
commercial banks have as subsidiaries, brokerage houses that offer discounts
and some of them have available accounts that offer all of the services that are
offered by a checking account.
The basic function of a brokerage firm is to execute buy and sell orders for
clients. Traditionally these firms have offered the investigation of the quality
and the possibilities of investing in a variety of investment products. It is still
accustomed for brokerage firms to offer information about possible investments
free of charge.
This activity of bringing free of charge stock investment reports is one of the
main tools that are utilized by brokerage houses to compete against other firms
and to investors it continues to be an important service.

 Some investors prefer other types of services since many investors dont believe
that these investment reports are useful. In order to capture this vast diverse
clientele, the brokerage industry has segmented itself. After the restrictions in
commissions were eliminated, several brokerages began to open up their doors
as discount brokerage firms. In actuality, brokerage firms may be classified into
full service brokers and discount brokers.
Full service brokerage firms continue to offer informative stock reports and a
level of service much higher than other brokerage houses. Discount brokerage
houses only dedicate themselves to execute orders for clients.
Full service brokers are sellers looking for purchasing and selling for clients
and offering more customer service than is available from discount brokers. It is
many times possible that a client will not even know who is taking care of the
buy or sell order that they place.
There is a new sense of confidence among the domestic brokers as the broking
industry is passing through the most exciting times. Those who have survived
the earlier bear phase have made their fortunes as the overall revenues have
gone up multifold.
In coming days, shortage of skilled talent and proper infrastructure will be one
of the major challenges. Going forward, technology will play a key role and the
domestic broking houses have to upgrade it. Depth of multiple products is also
a challenge for the domestic houses.
Also on the regulatory front, domestic institutional investors cannot give more
than five per cent business to any single broker. However, FIIs have no such
restrictions resulting in restriction of revenues. As the dynamics of the mutual
fund (MF) industry has changed in India, the current restriction also needs to be
reconsidered.
Brokers were painful for the last three months due to falling volumes, so their
business will be affected. But for the last two years, most of them have made good

money. Hence, there is headroom for survival. There is also a possibility of

consolidation among the retail brokerages.

Company profile
Nirmal Bang Securities Pvt Ltd (Nirmal Bang) is amongst the top full-service
Broking firm established in the year 1989. It started as a small localized player
and ultimately transformed into a diverse group in a span of 20 years.
Nirmal Bang Securities Private Limited, a retail broking house, provides an
online share trading platform to customers to trade on equities, derivatives,
commodities, currency derivatives, insurance, depository services, and
subscription to initial public offerings and mutual funds in India.
The company offers comprehensive range of products and services to meet the
financial needs of its investors. It is solidly capitalized to meet the demands of
retail clients and sufficiently caring to ensure that service is not compromised.
The company offers daily and company reports, stock ideas, and sector updates.
It also provides franchising opportunities to individual to use its infrastructure
by being its channel partners.

History:
The Nirmal Bang group of companies was founded by Nirmal Bang, Dilip Bang
and Kishore Bang. The group always believed in developing retail client
network and had wide network of clients all over India.
It started up the DP services and also added broking into commodities and
insurance advisory services to diversify into allied activities. Thus Nirmal Bang
became a corporate member of BSE with three membership rights.

 The company, besides broking is a depository participant with NSDL and

CDSL. Bang Equity Broking Private Limited was formed in the year 1997. This
company also became the corporate member of the BSE with three membership
rights in the year 1999. The Group was thus the first in the history of the
Bombay Stock Exchange to acquire six membership rights of the Exchange.
Nirmal Bang is a professionally driven organization having
people with diverse

Major Strengths: Professionally driven- professional backgrounds. The blend of experience,

skill and dedication is shared with all clients. The group has more than 300
well-experienced and efficient staff to cater to the large clientele base.
ApproachThe company focuses on adequate and thorough research on local and world-wide
developments, balancing these with the astute discovery of intrinsic values,
synergies and growth.
AimIt aims at maximizing returns of its investors depending upon the investment
motive. Simply to help customers maximize their returns. Their interests no matter
how big or small - come first.
CommitmentThe Company is committed in providing service at par excellence and become
customers spirit of change.

Major Offerings:Nirmal Bang currently offers the full stock brokerage services in line with the
overall strategy of the group. Some of the major offerings include the following:
Trading in Equities & DerivativesEquity trading is offered to retail clients through multiple channels including
online trading in the BSE and the NSE, for cash & derivatives segments. Live
quotes, market commentary and major news are also offered through its website.
This segment contributes a major portion of its revenue.
Trading in Commodities-

The group company is a member of Indias premier commodity exchanges,

namely, the Multi Commodity Exchange of India Ltd (MCX), the National
Commodity & Derivatives Exchange Ltd (NCDEX).
Online TradingThe company offers an online trading portal which is developed and maintained by
Financial Technologies (India) Ltd.
DepositoryNirmal Bang is a depository participant of NSDL and CDSL. It offers depository
services through an online platform provided by Apex Soft cell.
IPONirmal Bang is also involved in the marketing of IPOs. It even offers information
about forthcoming IPOs, open issues, new listing etc.

Reach & Access: Nirmal Bang has pan India presence with offices and branches spread across all
major cities and states. Its wide spread network is further supported by
franchisees and more than 200 sub brokers. As on Oct 2007, the company had
180 offices, 242 sub brokers and more than 300 employees.
The company has tie ups with some of the leading IT solution providers for
constant support and development of its technology set up. It has about50
VSATs that enhance connectivity across several branches and terminals.
Some of its technology partners include Financial Technologies, Apex Softcell
and Reliable Software.

Performance: During the first 10 months of CY07, Nirmal Bang reported growth across all its
major businesses namely; equity and derivative reporting a growth of 200%and
75% and commodity reported a growth of 50% respectively. Number of

terminals went up to 800 in 2007. Similarly number of offices and sub-brokers

also underwent a substantial rise.
The company added 15,000 domestic customer accounts in 2007 as compared
to 3,000 in the previous year. The E-broking business also showed100% growth
and it added about 300 e-broking accounts.

Future Plans:Nirmal Bang plans to enhance its FII and institutional client base. The company is
further planning to enhance its existing service portfolio by introducing investor
advisory, portfolio management services and merchant banking services in the near
future.

Introduction of Stock market

India is one of the oldest stock markets in the world with a strong presence
of domestic and local intermediation. Stock markets in India surged over a decade
on back of a wide range of economic reforms, liberalization of financial markets
buoyed by greater freedom and flexibility. A stock market or equity market is a
public entity (a loose network of economic transactions, not a physical facility or
discrete entity) for the trading of company stock (shares) and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only
traded privately.
The size of the world stock market was estimated at about $36.6 trillion at
the beginning of October 2008.The total world derivatives market has been
estimated at about $791 trillion face or nominal value, 11 times the size of the
entire world economy. The value of the derivatives market, because it is stated in
terms of notional values, cannot be directly compared to a stock or a fixed income
security, which traditionally refers to an actual value. Moreover, the vast majority
of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is
offset by a comparable derivative 'bet' on the event not occurring). Many such
relatively illiquid securities are valued as marked to model, rather than an actual
market price.
The Bombay Stock Exchange (BSE) and the National Stock Exchange of
India Limited (NSE) are the two primary exchanges in India. In addition, there are
22 Regional Stock Exchanges. However, the BSE and NSE have established
themselves as the two leading exchanges and account for about 80% of the equity
volume traded in India. The NSE and BSE are equal in size in terms of daily traded
volume. The average daily turnover at the exchanges has increased from
Rs851crore in 1997-98 to Rs1284crore in 1998-99 and further to Rs2273crore in
1999-2000. NSE has around 1500 shares listed with the total market capitalization
of around Rs9, 21,500crore.
The markets are closed on Saturdays and Sundays. Both the exchanges
have switched over from the open outcry trading system to a fully automated
computerized mode of trading known as BOLT (BSE On Line Trading) and
NEAT (National Exchange Automated Trading) system. It facilitates more
efficient processing, automatic order matching, faster execution of trades and
transparency. The scrip traded on the BSE has been classified into A, B1,
B2, C, F, and Z groups. The A group shares represent those,
which are in the carry forward system (Badla). The F group represents the
dept market (fixed income securities) segment. The Z group scrip is the
blacklisted companies. The C group covers the odd lot securities in A, B1, &

B2 groups and Rights renunciations. The key regulator governing Stock

Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and
other participants in Indian secondary and primary market is the Securities and
Exchange Board of India (SEBI) Limited.
The stocks are listed and traded on stock exchanges which are entities of a
corporation or mutual organization specialized in the business of bringing buyers
and sellers of the organizations to a listing of stocks and securities together. The
largest stock market in the United States, by market capitalization, is the New York
Stock Exchange (NYSE). In Canada, the largest stock market is the Toronto Stock
Exchange. Major European examples of stock exchanges include the Amsterdam
Stock Exchange, London Stock Exchange, Paris Bourse, and the Deutsche Bores
(Frankfurt Stock Exchange). In Africa, examples include Nigerian Stock
Exchange, JSE Limited, etc. Asian examples include the Singapore Exchange, the
Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock
Exchange, and the Bombay Stock Exchange. In Latin America, there are such
exchanges as the BM&F Bovespa and the BMV.
Market participants include individual retail investors, institutional investors such
as mutual funds, banks, insurance companies and hedge funds, and also publicly
traded corporations trading in their own shares. Some studies have suggested that
institutional investors and corporations trading in their own shares generally
receive higher risk-adjusted returns than retail investors.

Industry profile

 Meaning of the stock market

When people talk about the Stock Market, it's not always
clear what they are referring to. Is the Stock Market a place? Or is
it something different? To many people it is an abstract idea. They
buy stocks in "the stock market" without ever leaving the comfort
of their computer terminal. But the stock market is indeed a
physical place with buildings and addresses, a place you can go
for visit. The stock market is one of the most important sources
for companies to raise money.
Essentially a market is a place which introduces a buyer to a
seller. In the case of stocks the buyer and seller are dealing in
small ownership portions of companies or shares. A stock
exchange, share market or bourse is a corporation or mutual
organization which provides facilities for stock brokers and
traders, to trade company stocks and other securities. The initial
offering of stocks and bonds to investors is by definition done in
the primary market and subsequent trading is done in the
secondary market. A stock exchange is often the most important
component of a stock market. Supply and demand in stock
markets is driven by various factors which, as in all free markets,
affect the price of stock.
There is usually no compulsion to issue stock via the stock
exchange itself, nor must stock be subsequently traded on the
exchange. Such trading is said to be off exchange or over-thecounter.

 Primary market:
A market is primary if the proceeds of sales go to the
issuer of the securities sold.
This is part of the financial market where enterprises issue
their new shares and bonds. It is characterized by being the only
moment when the enterprise receives money in exchange for
selling its financial assets.

The primary market provides the channel for sale of new

securities.

Primary market provides opportunity to issuers of

securities; Government as well as corporate, to raise resources

to meet their requirements of investment and/or discharge some
obligation. They may issue the securities at face value, or at a
discount/premium and these securities may take a variety of
forms such as equity, debt etc. They may issue the securities in
domestic market and/or international market.

Different kind of issues:

Primarily, issues can be classified as a Public, Rights or
Preferential issues (also known as private placements). While
public and rights issues involve a detailed procedure, private

placements or preferential issues are relatively simpler. The

classification of issues is illustrated below:

1) Public issues:
Initial Public Offering (IPO) is when an unlisted company
makes either a fresh issue of securities or an offer for sale of its
existing securities or both for the first time to the public.

A follow on public offering (Further Issue) is when an

already listed company makes either a fresh issue of securities
to the public or an offer for sale to the public, through an offer
document.

2) Rights Issue is when a listed company which proposes to issue

fresh securities to its existing shareholders as on a record date.
The rights are normally offered in a particular ratio to the
number of securities held prior to the issue. This route is best
suited for companies who would like to raise capital without
diluting stake of its existing shareholders.

3) A Preferential issue is an issue of shares or of convertible

securities by listed companies to a select group of persons
under Section 81 of the Companies Act, 1956 which is neither a
rights issue nor a public issue. This is a faster way for a
company to raise equity capital. The issuer company has to
comply with the Companies Act.

secondary market:
Secondary market refers to a market where securities are
traded after being initially offered to the public in the primary
market and/or listed on the Stock Exchange. Majority of the
trading is done in the secondary market. Secondary market
comprises of equity markets and the debt markets.

To explain further, it is trading in previously issued financial

instruments. An organized market for used securities. Examples
are the New York Stock Exchange (NYSE), Bombay Stock
Exchange (BSE), National Stock Exchange NSE, bond markets,
over-the-counter

markets,

residential

mortgage

loans,

governmental guaranteed loans etc.

Role of the secondary market:
For the general investor, the secondary market provides an
efficient

platform

for

trading

of

his

securities.

For

the

management of the company, Secondary equity markets serve

as a monitoring and control conduitby facilitating valueenhancing

control

incentive-based

activities,

management

enabling
contracts,

implementation
and

of

aggregating

information (via price discovery) that guides management

decisions.

Function of secondary market:

Secondary market provides to an issuer of securities, whether
the issuer is a corporation or a governmental unit, regular
information about the value of the security. The periodic
trading of the asset reveals to the issuer the consensus price
that, the asset commands in an open market. Thus, firm can
discover what value investors attach to their stocks, and firm
& non corporate issuers can observe the prices of their bonds
and the implied interest rates investors expect & demand for

them. Such information helps issuers assess how well they are
using

the

funds

acquired

from

earlier

primary

market

activities, and it also indicates how receptive investors would

be to new offering.

Secondary market offers issuer is that it provides the

opportunity for the original buyers of asset to reverse their
investment by selling it for cash. Unless investors feel
confident that they can shift from one financial asset to
another as they may deem necessary, they would naturally be
reluctant to buy any financial asset. Such reluctance would
harm potential issuers in one of two ways: either issuer would
be unable to sell new securities at all or there would have to
pay a high rate of return, because investors would demand
greater compensation for the expected illiquidity of the
securities.

Investors in financial assets receive several benefits from a

secondary market. Such a market obviously offers them
liquidity for their assets as well as information about the assets
fair or consensus values.

Secondary market brings together many interested parties

and so can reduce the cost of searching for likely buyers and
sellers of assets.

Moreover, by accommodating many traders. Secondary

markets keep the cost of transactions low. By keeping the
costs of both searching and transacting low, secondary market
encourage investors to purchase financial assets.

Many Secondary markets are continuous markets, which

mean that prices are determined continuously throughout the
trading day as buyers and sellers submit orders. For examples,
Given the order flow at 10 A.M., the market clearing price of a
stock on some organized stock exchange may be Rs.70; at 11
a.m. of the same trading day, the market clearing price of the
same

stock,

but

with

different

order

flows,

may

be

Rs.70.75.Thus, in a continuous market, prices may vary with the

patterns of orders reaching the market and not because of any
change in the basic situation of supply and demand.
A contrasting market structure is the call market, in which
orders are batched or grouped together for simultaneous
execution at the same price. That is, at certain times in the
trading day (or possibly more than once in a day), a market
maker holds an auction for a stock. The auction may be oral or
written.

Difference

between

Secondary market:

the

primary

market

and

the

 In the primary market, securities are offered to public for

subscription for the purpose of raising capital or fund.
Secondary market is an equity trading venue in which already
existing/pre-issued securities are traded among investors.
Secondary market could be either auction or dealer market.
While stock exchange is the part of an auction market, Overthe-Counter (OTC) is a part of the dealer market.

Factors affecting stock market :

Actions of investors
Business conditions
Government actions
Economic Indicators
Foreign market

Performance of the industry:

STOCK MARKET
The Indian stock exchanges hold a place of prominence not
only in Asia but also at the global stage. The Bombay Stock
Exchange (BSE) is one of the oldest exchanges across the world,
while the National Stock Exchange (NSE) is among the best in
terms of sophistication and advancement of technology. The
Indian stock market scene really picked up after the opening up of
the economy in the early nineties. The whole of nineties were
used to experiment and fine tune an efficient and effective
system. The badla system was stopped to
control unnecessary volatility while the derivatives segment
started as late as 2000. The corporate governance rules were

gradually put in place which initiated the process of bringing the

listed companies at a uniform level. On the global scale, the
economic environment started taking paradigm shift with the dot
com bubble burst, 9/11, and soaring oil prices. The slowdown in
the US economy and interest rate tightening made the equation
more complex. However after 2000 riding on a robust growth and
a maturing economy and relaxed regulations,
outside investors- institutional and others got more scope to
operate. This opening up of the system led to increased
integration with heightened cross-border flow of capital, with India
emerging as an investment hot spot resulting in our stock
exchanges being impacted by global cues like never before.
The study pertains to comparative analysis of the Indian
Stock Market with respect to various international counterparts.
Exchanges are now crossing national boundaries to extend their
service areas and this has led to cross-border integration. Also,
exchanges have begun to offer cross-border trading to facilitate
overseas investment options for investors. This not only increased
the appeal of the exchange for investors but also attracts more
volume. Exchanges regularly solicit companies outside their home
territory and encourage them to list on their
exchange and global competition has put pressure on
corporations to seek capital outside their home country. The
Indian stock market is the world third largest stock market on the
basis of investor base and has a collective pool of about 20 million
investors. There are over 9,000 companies listed on the stock
exchanges of the country. The Bombay Stock Exchange,
established in 1875, is the oldest in Asia. National Stock
Exchange, a more recent establishment which came into
existence in 1992, is the largest and most advanced stock market
in India is also the third biggest stock exchange in Asia in terms of
transactions. It is among the 5 biggest stock exchanges in the
world in terms of transactions volume.
Listed Securities
Listing in a stock exchange refers to the admission of the
securities of the company for trade dealings in a recognized stock

exchange. The securities may be of any public limited company,

Central or State Government, quasi-governmental and other
financial institutions/corporations, municipalities, etc. Securities of
any company are listed in a stock exchange to provide liquidity to
the securities, to mobilize savings and to protect the interests of
the investors.
India has the highest number of companies listed in the stock
market. Out of this, about 75 % of the companies are listed with
the Bombay Stock Exchange. After India, United States has the
highest number of companies listed.
Paramet
ers

BSE

NSE

NYSE

Tokyo
stock
exchan
ge
NIKKEI225

Name

SENSEX

NIFTY

Hang Seng KOSPI

NO. Of
Compan
y
Method
of
Calculati
on

30

50

Doe
Jones
Industri
al
Averag
e
30
225

Free float
Market
Capitalizat
ion
Method

Weight
ed
Averag
e

Weight
ed
Averag
e
Method

Weighted
Capitalizat
ion Stock
Market
Method

Price
Averag
e
Method

Hong Kong Kerea

Stock
Stock
exchange exchange

33
Market
Capitalizat
ion Bassed
Method

Research Methodology

Research objectives:
To know the preference and behavior of the investor for the
equity of different broking firm.

To know future prospects of their investment in the financial

security like Equity.

To know percentage of people invest in equity.

Scope of study:
Area covered: In the Ahmedabad, C.G Road, Navrangpura,
Vastrapur, and Naherunagar.
Time taken: 2 weeks

Data collection:
In my project I have collected the information though the
primary and secondary sources.
Primary data:
The primary information includes the fresh research work done
by me regarding the product of the different broking
companies. The sources of the primary information are as
under:

 Residential
Shop-keepers
People in the industry
Secondary data:
The secondary information proved very helpful for me to
prepare my questionnaire and project. It also gives the
information regarding the company profile, present market
scenario, competitors and company share. The sources of
secondary data are as under:
Internet
Broacher
Sample design:

Type of research:
It was the quantitative research done through questionnaire
and the telephonic interview.

Type of sampling:
It was the convenience sampling.

Sample size:
100 people in which 12 from industries, 54 from offices of
NBSPL, 10 Residential and 24 others.

Sample unit:
We have covered the population including service people,
businessmen, retired person and also students.
Field work:
The researcher covers 100 respondents and all of them
filled up the questionnaire. Some of the respondents had no
patience but on the other hand there were some of them who
were truly interested into the survey.
Such respondents really encouraged the researcher a lot to
carry out the survey. Average time taken by the respondent to
fill up the questionnaire was 10 minutes. Some of them
thought they were making commitments on their part even
though the researcher told them that it was not so.
However an honest attempt is made to report and analyze
the respondents as objectively as possible without allowing the
investigators bias to dominate them.

Data analysis tools:

In this study, the different data analysis tools are used,
like SWOT Analysis, Hypothesis Analysis through Chi-square
and Graphical Analysis through chart.
Limitation of the project study:
The main limitations of the study are as under:
Personal bias of the people

 The sample size of 100 is also limited for the research

The time permitted for the project is also limited for any
research

Data Analysis
Data Analysis Tools:
SWOT Analysis:

Strengths:
Original research
Integrated technology platform
One Stop shop
Pan - India distribution network
India Infoline.com and 5paisa.com have developed into
brands

Weaknesses:
Lack of a banking arm to complete the bank-brokerdepository chain
Insignificant presence in institutional Segment

Opportunities

 Changing demographics with higher disposable income

and increasingly complex
financial instruments will drive
demand for investment advisory services
Rapid penetration of Internet and computers means that
technology enabled financial services will gain market
share

It has recently launched Investment banking and institutional

broking business.

Threats
Economic slowdown
Volatile movement in indices events like May 17, 2004
Stock markets falls will have a cascading effect on our
mutual fund mobilization
Increase/decrease in interest rate can affect our debt/
income fund mobilizations
Future changes in personal taxation rules can impact
insurance sales
Increasing competition from large and particularly foreign
players

Detail calculation through hypothesis :

Chi square test has been used for the testing of
hypothesis.
Level of significance =
Degrees of freedom= DOF
Hypothesis 1:

H0: The percentage of investment is independent to the

income of the person.
H1: The percentage of investment is dependent on the income
of the person.
At 5% level of significance, the value of tabulated 2 is given by:
=0.05 and DOF = (5-1) (4-1) =12
2 (tabulated) = 21.03

5000-10000
11000-15000
16000-20000
21000-25000
>25000
Total

5%-10%
10
15
12
5
0
42

10%-20%
2
8
7
9
5
31

OBSERVED

EXPECTED

VALUE (O)

VALUE (E)

10
15
12
5
0
2
8
7
9
5
0
4
1
6
9
0

6
9
20
11
5
10
14
4
4
2
4
9
5
2
3
5

20%-30%
0
4
1
6
9
20

(O E ) 2
16
36
64
36
25
64
36
9
25
9
16
25
16
16
36
25

>30%
0
2
1
1
3
7

(O E ) 2
E
2.67
4
3.2
3.27
5
6.4
2.57
2.25
6.25
4.5
4
2.77
3.2
8
12
5

Total
12
29
21
21
17
100

2
1
1
3

8
5
6
8

36
16
25
25
Total:

4.5
3.2
4.16
3.12
90.06

(calculated) = 90.05
Interpretation: here 2 (calculated) > 2 (tabulated)
Here, I reject the null hypothesis.
It means that the investment is dependent on the income of the person.

Graphs showing the no. of investors according to age of the person and the preferences
of securities.
18-25

26-35

36-55

>56

Total

Equity

22

27

35

87

Mutual Fund

12

19

Insurance

12

24

48

Fixed Deposit

Commodity

Total

32

47

77

165

40
35

30

27
24

22
20
12

12

10

7
3

Equity

Mutual Fund0

18-25

Insurance

26-35

4
1

Fixed
Diposit
0

36-55

Commodity
0
0 0

>56

Graph showing the no. of respondent according to the income of the person and the
preference of the securities.
5000-10000 11000-15000 16000-20000 21000-25000

>26000

Total

Equity

13

30

17

20

88

Mutual Fund

18

Insurance

10

10

13

11

150

Fixed Deposit

Commodity

Total

27

47

28

41

24

167

30
25
20
5000-10000
15

11000-15000

10
5
021000-25000

>26000

Interpretation through the graph:

1) Occupation of the person:

16000-20000

40.00%
35.00%
30.00%
25.00%
20.00%

40%
no.of respondent

38%

15.00%
10.00%

10%

5.00%
0.00%

business

profession

5%
service

retired

8%
other

From the above data, I can conclude that 37.50%

businessmen, 10% professional people, 40% servicemen,
5% retired, & 7.50% other people are interested in
investment of securities. They invest more in securities and
also want more return from the investment.
2) How many people invest in the non financial securities?

no.of respondent
Real Estate

Commodity

Business

Other

20%
9%

53%
18%

This chart shows that people invest less in non-financial

securities compare to
financial securities. Here, the graph
shows that most of the people are not interested in the nonfinancial securities.

3) No. of respondent according to broking firm

35%
30%
25%
20%
15%
10%
5%
0%

32%
16%

15%

7%

5%

10%

12%
3%

no. of respondent

From the above chart it can be said that India Infoline is in

the top three positions. No of respondents in other firm are
32% which includes Monarch, Shah Brothers, Patel capital
investment & Arcadia brothers.
4) Kind of transaction has been done by investors.

60%
50%
40%
30%
20%
10%
0%

56%

Intraday

44%

delivery
no. of respondent

From the above graph, I can say that 44% of the people
are investing in delivery basis and 56% of the people are
investing in intraday basis. It means that most of the
people are interested in investment rather than trading.

5) How much return you expect from your investment?

no. of respondent
8%

10%-20%
34%

27%

20%-30%
30%-40%
>40%

31%

Here, this graph shows the % of return expected by the

respondents. The investors invest in equity expect more return
than the other investors, Because they have more risk taking
capacity.

Table showing details of different broking firm about the securities like Equity

Margin

Brokerage

Exposure

Money

Intra-

(for intra)

Company
Account

Opening

India Infoline

750

2555

0.05-0.50

10 times

607

Kotak
Securities

750/-

5000

0.06- 0.55

4 times

890

ICICI direct

500

1000

0.05-0.05

5 times

2124

Motilal oswal

415

Not
restricted

0.03-0.30

4 times

430

Religare

299

5000

0.02-0.20

20 times

1837

Angel broking

731

5000

0.03-0.30

20 times

120

Reliance
money

750

Not
restricted

0.05-0.25

5 times

10000

Share khan

750

5000

0.03-0.30

4 times

250

HDFC

799

5000

0.05-0.50

5 times

Nil

Nirmal bang

5000

0.03-0.30

10 times

Nil

Branches

Delivery
(%)

Research Finding
Brokerage of India Nirmal Bang is lower than others broking firms like HDFC, India
Infoline, Kotak securities, ICICI Direct, Reliance Money they are charging 0 .05% for
Intraday and 0 .50% for Delivery Where Nirmal bang is taking 0 .03% for Intraday and 0 .
30% for Delivery.
Exposure is less than other firms. Nirmal bang offers ten times exposure on margin where
as India Infoline, Religare and India bulls offer twenty times exposure on margin money.
India Infoline takes Rs.750 for lifetime services, where as Nirmal bang take no charges.
Relationship manager changes many times, it creates problem for the offline customers.
India Infoline has hidden charges, Customer are not much aware about that.
Customer satisfaction of India Infoline not so good.
Most of the customers are trading online.
Most of the customers approach towards the broking firm is through the relationship
manager.
Some of the people are not much aware of share market and its benefit.

Recommendation
To increase awareness about Share Market and the name Nirmal Bang itself, the Company
should organize campaign. The campaign can be weekly, monthly, yearly, it will give a
good result to the company to capture market in the competitive position.
The company should reduce the margin money. It can help to acquire more Customers, if
the firms bring plans for no boundation of margin money.

The Company should increase their focus on the less margin money customers also .It can
help to make more customers of low margin money which can increase the revenue of the
firm. The Relationship managers focus only to the high margin money customer because
from them they will get high brokerage that should not be happened from the less margin
money customer.

Transaction error should be avoided. Transaction should be done properly, taking in

consideration that it is one of the most required quality of a firm. Wrong transaction or default
transaction may lead the prestige of the company to be down.

DERIVATIVES
INTRODUCTION TO DERIVATIVES
The emergence of the market for derivative products, most
notably forwards, futures and options, can be traced back to the
willingness of risk-averse economic agents to guard themselves
against uncertainties arising out of fluctuations in asset prices. By
their very nature, the financial markets are marked by a very high
degree of volatility. Through the use of derivative products, it is
possible to partially or fully transfer price risks by lockingin asset
prices. As instruments of risk management, these generally do
not influence the fluctuations in the underlying asset prices.
However, by locking-in asset prices, derivative products minimize
the impact of fluctuations in asset prices on the profitability and
cash flow situation of risk-averse investors.
Derivative products initially emerged as hedging devices against fluctuations
in commodity prices, and commodity-linked derivatives remained the sole form of
such products for almost three hundred years. Financial derivatives came into
spotlight in the post-1970 period due to growing instability in the financial
markets. However, since their emergence, these products have become very
popular and by 1990s, they accounted for about two-thirds of total transactions in
derivative products. In recent years, the market for financial derivatives has grown
tremendously in terms of variety of instruments available, their complexity and
also turnover. In the class of equity derivatives the world over, futures and options
on stock indices have gained more popularity than on individual stocks, especially
among institutional investors, who are major users of index-linked derivatives.
Even small investors find these useful due to high correlation of the popular
indexes with various portfolios and ease of use. The lower costs associated with
index derivatives visavis derivative products based on individual securities is
another reason for their growing use.
1 Derivatives defined2
Derivative is a product, whose value is derived from the value of one or more
basic variables, Called bases (underlying asset, index, or reference rate), in a

contractual manner. The underlying asset can be equity, forex, commodity or any
other asset. For example, wheat farmers may wish to sell their harvest at a future
date to eliminate the risk of a change in prices by that date. Such a transaction is an
example of a derivative. The price of this derivative is driven by the spot price of
wheat which is the underlying. In the Indian context the Securities Contracts
(Regulation) Act, 1956 {SC(R)A} defines derivative to include
1. A security derived from a debt instrument, share, loan whether secured or
unsecured, risk instrument or contract for differences or any other form of
security.
2. A contract which derives its value from the prices, or index of prices, of
underlying
securities. Derivatives are
securities under the SC(R)A and hence the trading of derivatives is governed
by the regulatory framework under the SC(R)A.

Exchange-Traded and Over-the-Counter Derivative Instruments

OTC (over-the-counter) contracts, such as forwards and
swaps, are bilaterally negotiated between two parties. The terms
of an OTC contract are flexible, and are often customized to fit the
specific requirements of the user. OTC contracts have substantial
credit risk, which is the risk that the counterparty that owes
money defaults on the payment. In India, OTC derivatives are
generally prohibited with some exceptions: those that are
specifically allowed by the Reserve Bank of India (RBI) or, in the
case of commodities (which are regulated by the Forward Markets
Commission), those that trade informally in havala or forwards
markets.
An exchange-traded contract, such as a futures contract, has a
standardized format that specifies the underlying asset to be delivered, the size of
the contract, and the logistics of delivery. They trade on organized exchanges with
prices determined by the interaction of many buyers and sellers. In India, two
exchanges offer derivatives trading: the Bombay Stock Exchange (BSE) and the
National Stock Exchange (NSE). However, NSE now accounts for virtually all
exchange-traded derivatives in India, accounting for more than 99% of volume in
2003-2004. Contract performance is guaranteed by a clearinghouse, which is a
wholly owned subsidiary of the NSE.4 Margin requirements and daily marking-tomarket of futures positions substantially reduce the credit risk of exchange-traded
contracts, relative to OTC contracts.

Types of derivatives
The most commonly used derivatives contracts are
forwards, futures and options which we shall discuss in detail
later. Here we take a brief look at various derivatives contracts
that have come to be used.
Forwards: A forward contract is a customized contract between two entities,
where settlement takes place on a specific date in the future at todays pre-agreed
price.
Futures: A futures contract is an agreement between two parties to buy or sell an
asset at a certain time in the future at a certain price. Futures contracts are special
types of forward contracts in the sense that the former are standardized exchangetraded contracts.
Options: Options are of two types - calls and puts. Calls give the buyer the right
but not the obligation to buy a given quantity of the underlying asset, at a given
price on or before a given future date. Puts give the buyer the right, but not the
obligation to sell a given quantity of the underlying asset at a given price on or
before a given date.
Warrants: Options generally have lives of up to one year, the majority of options
traded on options exchanges having a maximum maturity of nine months. Longerdated options are called warrants and are generally traded over-the-counter.
LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities.
These are options having a maturity of upto three years.
Baskets: Basket options are options on portfolios of underlying assets. The
underlying asset is usually a moving average of a basket of assets. Equity index
options are a form of basket options.
Swaps: Swaps are private agreements between two parties to exchange cash flows
in the future according to a prearranged formula. They can be regarded as
portfolios of forward contracts. The two commonly used swaps are :
Interest rate swaps: These entail swapping only the interest related cash
flows between the parties in the same currency.
Currency swaps: These entail swapping both principal and interest between

the parties, with the cash flows in one direction being in a different currency
than those in the opposite direction.
Swaptions: Swaptions are options to buy or sell a swap that will become operative
at the expiry of the options. Thus a swaption is an option on a forward swap.
Rather than have calls and puts, the swaptions market has receiver swaptions and
payer swaptions. A receiver swaption is an option to receive fixed and pay floating.
A payer swaption is an option to pay fixed and receive floating.

Development of Derivative Markets in India

Derivatives markets have been in existence in India in some

form or other for a long time. In the area of commodities, the
Bombay Cotton Trade Association started futures trading in 1875
and, by the early 1900s India had one of the worlds largest
futures industry. In 1952 the government banned cash settlement
and options trading and derivatives trading shifted to informal
forwards markets. In recent years, government policy has
changed, allowing for an increased role for market-based pricing
and less suspicion of derivatives trading. The ban on futures
trading of many commodities was lifted starting in the early
2000s, and national electronic commodity exchanges were
created.
In the equity markets, a system of trading called badla involving some
elements of forwards trading had been in existence for decades.6 However, the
system led to a number of undesirable practices and it was prohibited off and on till
the Securities and Exchange Board of India (SEBI) banned it for good in 2001. A
series of reforms of the stock market between 1993 and 1996 paved the way for the
development of exchange-traded equity derivatives markets in India. In 1993, the
government created the NSE in collaboration with state-owned financial
institutions. NSE improved the efficiency and transparency of the stock markets by
offering a fully automated screen-based trading system and real-time price
dissemination. In 1995, a prohibition on trading options was lifted. In 1996, the
NSE sent a proposal to SEBI for listing exchange-traded derivatives. The report of
the L. C. Gupta Committee, set up by SEBI, recommended a phased introduction
of derivative products, and bi-level regulation (i.e., self-regulation by exchanges
with SEBI providing a supervisory and advisory role). Another report, by the J. R.
Varma Committee in 1998, worked out various operational details such as the
margining systems. In 1999, the Securities Contracts (Regulation) Act of 1956, or
SC(R)A, was amended so that derivatives could be declared securities. This
allowed the regulatory framework for trading securities to be extended to
derivatives. The Act considers derivatives to be legal and valid, but only if they are
traded on exchanges. Finally, a 30-year ban on forward trading was also lifted in
1999.
The economic liberalization of the early nineties facilitated the introduction of
derivatives based on interest rates and foreign exchange. A system of marketdetermined exchange rates was adopted by India in March 1993. In August 1994,
the rupee was made fully convertible on current account. These reforms allowed

increased integration between domestic and international markets, and created a

need to manage currency risk. Figure 1 shows how the volatility of the exchange
rate between the Indian Rupee and the U.S. dollar has increased since 1991.7 The
easing of various restrictions on the free movement of interest rates resulted in the
need to manage interest rate risk.

Derivatives Instruments Traded in India

In the exchange-traded market, the biggest success story has been derivatives
on equity products. Index futures were introduced in June 2000, followed by index
options in June 2001, and options and futures on individual securities in July 2001
and November 2001, respectively. As of 2005, the NSE trades futures and options
on 118 individual stocks and 3 stock indices. All these derivative contracts are
settled by cash payment and do not involve physical delivery of the underlying
product (which may be costly).
Derivatives on stock indexes and individual stocks have grown rapidly since
inception. In particular, single stock futures have become hugely popular,
accounting for about half of NSEs traded value in October 2005. In fact, NSE has
the highest volume (i.e. number of contracts traded) in the single stock futures
globally, enabling it to rank 16 among world exchanges in the first half of 2005.
Single stock options are less popular than futures. Index futures are increasingly
popular, and accounted for close to 40% of traded value in October 2005. Figure 2
illustrates the growth in volume of futures and options on the Nifty index, and
shows that index futures have grown more strongly than index options.
NSE launched interest rate futures in June 2003 but, in contrast to equity
derivatives, there has been little trading in them. One problem with these
instruments was faulty contract specifications, resulting in the underlying interest
rate deviating erratically from the reference rate used by market participants.
Institutional investors have preferred to trade in the OTC markets, where
instruments such as interest rate swaps and forward rate agreements are thriving.
As interest rates in India have fallen, companies have swapped their fixed rate
borrowings into floating rates to reduce funding costs.10 Activity in OTC markets
dwarfs that of the entire exchange-traded markets, with daily value of trading
estimated to be Rs. 30 billion in 2004 (FitchRatings, 2004).
Foreign exchange derivatives are less active than interest rate derivatives in
India, even though they have been around for longer. OTC instruments in currency
forwards and swaps are the most popular. Importers, exporters and banks use the
rupee forward market to hedge their foreign currency exposure. Turnover and
liquidity in this market has been increasing, although trading is mainly in shorter
maturity contracts of one year or less (Gambhir and Goel, 2003). In a currency
swap, banks and corporations may swap its rupee denominated debt into another
currency (typically the US dollar or Japanese yen), or vice versa. Trading in OTC
currency options is still muted. There are no exchange-traded currency derivatives
in India.

Exchange-traded commodity derivatives have been trading only since 2000,

and the growth in this market has been uneven. The number of commodities
eligible for futures trading has increased from 8 in 2000 to 80 in 2004, while the
value of trading has increased almost four times in the same period (Nair, 2004).
However, many contracts barely trade and, of those that are active, trading is
fragmented over multiple market venues, including central and regional exchanges,
brokerages, and unregulated forwards markets. Total volume of commodity
derivatives is still small, less than half the size of equity derivatives (Gorham et al,
2005).

Derivatives Users in India

The use of derivatives varies by type of institution. Financial

institutions, such as banks, have assets and liabilities of different
maturities and in different currencies, and are exposed to
different risks of default from their borrowers. Thus, they are likely
to use derivatives on interest rates and currencies, and
derivatives to manage credit risk. Non-financial institutions are
regulated differently from financial institutions, and this affects
their incentives to use derivatives. Indian insurance regulators, for
example, are yet to issue guidelines relating to the use of
derivatives by insurance companies.
In India, financial institutions have not been heavy users of
exchange-traded derivatives so far, with their contribution to total
value of NSE trades being less than 8% in October 2005.
However, market insiders feel that this may be changing, as
indicated by the growing share of index derivatives (which are
used more by institutions than by retail investors). In contrast to
the exchange-traded markets, domestic financial institutions and
mutual funds have shown great interest in OTC fixed income
instruments. Transactions between banks dominate the market for
interest rate derivatives, while state-owned banks remain a small
presence (Chitale, 2003). Corporations are active in the currency
forwards and swaps markets, buying these instruments from
banks.
Why do institutions not participate to a greater extent in
derivatives markets? Some institutions such as banks and mutual
funds are only allowed to use derivatives to hedge their existing
positions in the spot market, or to rebalance their existing
portfolios. Since banks have little exposure to equity markets due
to banking regulations, they have little incentive to trade equity
derivatives.11 Foreign investors must register as foreign
institutional investors (FII) to trade exchange-traded derivatives,
and be subject to position limits as specified by SEBI.
Alternatively, they can incorporate locally as a broker-dealer.12
FIIs have a small but increasing presence in the equity derivatives
markets. They have no incentive to trade interest rate derivatives
since they have little investments in the domestic bond markets
(Chitale, 2003). It is possible that unregistered foreign investors

and hedge funds trade indirectly, using a local proprietary trader

as a front (Lee, 2004).
Retail investors (including small brokerages trading for themselves) are the
major participants in equity derivatives, accounting for about 60% of turnover in
October 2005, according to NSE. The success of single stock futures in India is
unique, as this instrument has generally failed in most other countries. One reason
for this success may be retail investors prior familiarity with badla trades which
shared some features of derivatives trading. Another reason may be the small size
of the futures contracts, compared to similar contracts in other countries. Retail
investors also dominate the markets for commodity derivatives, due in part to their
long-standing expertise in trading in the havala or forwards markets.