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On
AT
Submitted to
By
Juhi Sethi
Roll No. - 0922270018
E mail- sethijuhi@yahoo.com
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PREFACE
To maintain and cope up with the growing competition from the various online
trading providers, India Infoline needs to find potential clients and also new
investors and satisfy there needs.
The Broad objective of the project is to equipped the trainees with all the quality
Which is essential to face any circumstances which can arise while providing
service to the clients?
This project will accomplish to understand how the people interact with
technology savvy products and if they are ready for doing all the trading through
net. The project also helps in understanding the trend of the particular sector
(banking sector) in different market condition.
All these steps help me to understand how to cope up with different types of
people and there diversified need satisfaction level.
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ACKNOWLEDGEMENT
It would not be fair enough at all if I would not thank Mr. SANDEEP
Relationship Manager (RM) INDIA INFOLINE Ltd. NOIDA for providing
enough knowledge and making us acquainted with the job of client servicing. It’s
been an amazing experience working under him.
Last but not the least I would like to thanks each and every member of the INDIA
INFOLINE LTD. for being so cooperative and helpful.
JUHI SETHI
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Contents
1. Executive Summary 5
2. Objectives 6
3. Company Profile 7
a) Introduction 8
b) Infrastructure 12
c) Management 13
d) Competitive Advantage 15
e) Products 18
4. Stock exchange 24
a) Securities 27
b) Regulator 28
C) Participants 30
d) Segments of Securities market 33
e) NSE and BSE 41
f) Stock Trading 45
5. Research Methodology 50
6. SWOT Analysis 83
7. Conclusion 89
8. Limitations 91
9. Questionnaire 93
23. Bibliography 95
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Executive Summary
The project reflects information about products and services provided by the India
Infoline to their customers. This also includes requirement and ways to acquire
client acquisition has been explained and the problems faced to handle the clients.
Also I have compared the mutual funds on different parameters such as risk and
returns, facilities, volume of investing money, good promotional schemes,
redemption, and investing time
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Objectives
• To analyze the Indian Stock Market. How it works. What are the
options available in the Capital Market to invest?
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COMPONY
PROFILE
A-154-D, SECTOR-63,
Opp. Fortis hospital,
Noida (U.P)-201306
Phone No.- 0120-6498124
INTRODUCTION
In 1999, IIFL identified the potential of the Internet to cater to a mass retail
segment and transformed its business
model from providing information services to institutional to retail customers.
Hence, IIFL launched our Internet
Portal, www.indiainfoline.com and started providing news and market
information, independent research, interviews
With business leaders and other specialized features.
In May 2000, the name of the Company was changed to India Infoline Limited to
reflect the transformation. Over a
period of time, IIFL have emerged as one of the leading business and financial
information services provider in India.
Its broking service was launched under the brand name of 5paisa through our
subsidiary, India Infoline Securities
Private Limited and www.5paisa.com, the e-broking portal, was launched for
online trading in June 2000. It combined
competitive brokerage rates and research, supported by Internet technology.
Besides investment advice from an
experienced team of research research analysts, we also offer real time stock
quotes, market news and price charts with multiple tools for technical analysis.
India Infoline has been awarded the ‘Best Broker, India’ by Finance
Asia and the ‘Most improved brokerage, India’ in the Asia Money
polls. India Infoline was also adjudged as ‘‘Fastest Growing Equity
Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the
field of equity research, India Infoline’s research is acknowledged by
none other than Forbes as ‘Best of the Web’ and ‘…a must read for
investors in Asia’.
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- Member of BSE.
• In a span of less than five years of its retail operations, FSL recorded a
healthy growth rate both in business volumes and profitability.
• INDIA INFOLINE aims to have its footprint all across the country by the
end of year so that it may add value to the investing community in the
country.
Infrastructure
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Offices
A network of 1,616 business locations spread over 445 cities and towns
across India facilitates the smooth acquisition and servicing of a large
customer base. All our offices are connected with the corporate office
in Mumbai with cutting edge networking technology
Management
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INDIA INFOLINE is led by individuals who are professionals and
leaders in every sense of the word.
Founder
• Mr. Nirmal Jain Chairman & Managing Director India Infoline
Ltd.
Board of Directors
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• Mr. Nirmal Jain Chairman & Managing Director India Infoline Ltd.
• Mr. Sat Pal Khattar Non Executive Director India Infoline Ltd.
1. Research
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We have our roots in equity research. Our original business model was to
provide research and information services on Indian business and capital
markets to institutional customers. Our executive directors have equity
research and investment experience in leading banks and brokerage
houses.
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We have 73 branches across 36 towns and cities in India. These branches
help in customer acquisition as well as customer service. This is a part of
a conscious “bricks and clicks” strategy to reach out to our customers.
India Infoline.com and 5paisa.com are well known brands amongst retail
investors across India. In all the cities that we have expanded into, we
have been able to leverage upon brand awareness and have established
a customer base.
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8. Robust Risk Management Systems:
We manage the risks associated with our broking operations through use
of internally developed credit Algorithms implemented through fully
automated risk management software and selective direct monitoring
Of certain operating parameters. Our automated risk management
procedures rely primarily on internally developed Risk Management System
and systems provided by our vendors.
EQUTIES…..
MUTUAL FUND
DERIVATIVES (F & O)
COMODITIES
PMS
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WEALTH MANAGEMENT
INSURANCE
Equity (Shares):
Mutual Fund:
Derivative (F&O)-
Derivatives (Futures & Options) are ideal instruments to protect your portfolio
against risk. You can trade with index movements, hedge and leverage your
portfolio by limiting risk but keeping your upside unlimited.
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Commodity
Wealth Management
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Insurance
An entry into this segment helped complete the client’s product basket;
concurrently, it graduated the Company into a one-stop retail financial
solutions provider. To ensure maximum reach to customers across
India, we have employed a multi pronged approach and reach out to
customers via our Network, Direct and Affiliate channels. Following
the opening of the sector in 1999-2000, a number of private sector
insurance service providers commenced operations aggressively and
helped grow the market.
India infoline is the most comprehensive website, which allows you to invest
in shares, mutual funds, derivatives (Future and Option) and other financial
products.
1. TRADING IN SHARES
CASH TRADING
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This is a delivery based trading system, which is generally done with the intention
of taking delivery of shares
BTST
Buy Today Sell Tomorrow (BTST) is a facility that allows you to sell shares even
on 1st and 2nd day after the buy date, without waiting you have the receipt of
shares into your Demat account.
CALL TRADE
CALL Trade allows you to call on a local number &trade on the telephone
through our Customer Service Executive.
TRADING ON BSE/NSE:
Through INDIA INFOLINE the share can be traded on NSE as well as BSE.
2. TRADE IN DERIVATIVES
FUTURE
Through INDIA INFOLINE you can now trade in index and stock futures on the
NSE. In future trading, you take buy/sell index contracts having a longer contract
period of up to 3 months.
Trading in Future is simple during course of contract life; the price moves in
favor, you make profit.
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Presently only selected stocks, which meet the criteria on liquidity and volume,
have been enabled for future trading.
OPTION
An option is a contract, which gives the buyer the right to buy or sell shares at a
specific price, on or before a specific date. For this, the buyer has to pay to the
seller some money, which is called premium. There is no obligation on the buyer
to complete the transaction if the price is not favorable to him. To take the buy/
sell position on index options you have to place certain %age of order value as
margin. With options trading, you can leverage on your trading limit by taking
buy/sell positions much more than what you could have taken in cash segment.
The Buyer of a call option has the right but not obligation to purchase the
underlying Asset at the specific strike price by paying a premium where as the
seller of the Call has the obligation of selling the Underlying Asset at the specific
strike price.
By paying lesser amount of premium, you can create position under OPTIONS
and take advantage of more trading opportunities.
INDIA INFOLINE brings you the same convenience while investing in Mutual
Funds as hassle free and less paperwork investing.
You can now invest in any mutual fund like standard charter MF, Prudential
ICICI MF, Alliance MF, Franklin Templeton MF, Sunderam MF, Birla sun life;
HDFC MF, Principal MF, etc are the mutual funds available for investment. You
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can invest in mutual funds without the hassles of identity proof. You need on
signature on the mutual fund .You also get on information of performance of your
investment through online current NAV.
PURCHASE
You may invest / purchase prudential ICICI MF, JM MF, ALLIANCE MF,
FRANKLINE TEMPLETON MF, SUNDARAM MF, BIRLA SUN LIFE MF,
HDFC MF and STANDARD CHARTERED MF without hassles of identity
proof.
REDEMPTION
When ever you required your money, you get it easily. For that purpose you put
on signature on the redemption form. You get you’re your money by on –line or
by physical process (cheque).
STOCK EXCHANGE
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SEBI
(Security Exchange Board Of India)
NSDL CDSL
(National securities (Central depository
depository limited) services limited)
NSE BSE
(National stock exchange) (Bombay stock exchange)
NIFTY SENSEX
BROKERS
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could be a regional stock exchange whose area of operation/jurisdiction
is specified at the time of its recognition or national exchanges, which
are permitted to have nationwide trading since inception. NSE was
incorporated as a national stock exchange.
Equity’/Share
Total equity capital of a company is divided into equal units of small
denominations, each called a share. For example, in a company the total equity
capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such
unit of Rs 10 is called a Share. Thus, the company then is said to have 20,00,000
equity shares of Rs 10 each. The holders of such shares are members of the
company and have voting rights.
Equity Market
In finance a share is a unit of account for various financial instruments
including stocks, mutual funds, limited partnerships, and REIT's. In British
English, the usage of the word share alone to refer solely to stocks is so common
that it almost replaces the word stock itself.
By owning a share you can earn a portion and selling shares you get capital gain.
So, your return is the dividend plus the capital gain. However, you also run a risk
of making a capital loss if you have sold the share at a price below your buying
price
Trade in shares
Every transaction in the stock exchange is carried out through licensed members
called brokers. To trade in shares, you have to approach a broker However, since
most stock exchange brokers deal in very high volumes, they generally do not
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entertain small investors. These brokers have a network of sub-brokers who
provide them with orders.
The general investors should identify a sub-broker for regular trading in shares
and place his order for purchase and sale through the sub-broker.
The sub/broker will transmit the order to his broker who will then execute it.
In equity market SEBI is actively participating without them equity market can’t
control so it necessary to know about SEBI.
Index
An Index shows how a specified portfolio of share prices is moving in order to
give an indication of market trends. It is a basket of securities and the average
price movement of the basket of securities indicates the index movement, whether
upwards or downwards.
Depository
A depository is like a bank wherein the deposits are securities (viz. shares,
debentures, bonds, government securities, units etc.) in electronic form.
Dematerialization
SECURITIES
Securities:
The definition of ‘Securities’ as per the Securities Contracts Regulation Act
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(SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other
marketable securities of similar nature in or of any incorporate company or body
corporate, government securities, derivatives of securities, units of collective
investment scheme, interest and rights in securities, security receipt or any other
instruments so declared by the Central Government.
REGULATOR
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The absence of conditions of perfect competition in the securities market makes
the role of the Regulator extremely important. The regulator ensures that the
market participants behave in a desired manner so that securities market continues
to be a major source of finance for corporate and government and the interest of
investors are protected.
• Registering and regulating the working of stock brokers sub- brokers, share
transfer agents, bankers to an issue, trustees of trust deeds, registers to an
issue, merchant bankers, underwriters, portfolio manager, investment
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advisers and such other intermediaries who may be associated with
securities markets in any manners;
PARTICIPANTS
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The securities market essentially has three categories of participants, namely, the
issuers of securities, investors in securities and the intermediaries, such as
merchant bankers, brokers etc. While the corporate and government raise
resources from the securities market to meet their obligations, it is households
that invest their savings in the securities market.
DEPOSITORY PARTICIPATION
• A depository is an organization form to provide electronic depository
facilities for securities trade. Securities are then held in the electronic form
through the medium of participants (DPs). The national Securities
Depository Limited (NSDL) is the first Depository in India. The function of
NSDL is regulated by the SEBI.
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• The depository is not just another custodian. The depository can legally
transfer beneficial ownership. The main objective of depository is to reduce
settlement risk by minimizing paperwork involved in trading, settling and
transferring securities.
• Depending upon the DP. There may or may not be an opening account fees
towards transaction and custody.
2. CSDL
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1. NATIONAL SECURITIES DEPOSITORY LTD (NSDL)
In order to solve the problems associated with trading securities, NSE joined
hand with the Industrial Development Bank of India (IDBI) and the Unit Trust
of India (UTI) to promote dematerizalition of securities.
NSDL, commenced operations in November 1996 and has since established a
national infrastructure of international standard to handle trading and
settlement in dematerialized form and thus completely eliminated the risk to
investors associated with fake paper.
The Kolkata Stock Exchange Association Limited, Bank Of India HDFC Bank
Limited CDSL is another Depository after NSDL. Its promoter are Bombay Stock
Exchange,, Standard chartered Bank, State Bank of India Bank Of Baroda Union
Bank Of India, Bank Of Maharastra Centurion Bank etc.
As on 30 June 2001 CDSL has signed agreement with 3297 companies. Of these 3528 are
available for Demat services. CDSL has 160 DPs offering Depository services in 78 cities
across 147 locations in the country.
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sale of new securities while the secondary market deals in securities previously
issued.
1. PRIMARY MARKET
2. SECONDARY MARKET
1. PRIMARY MARKET
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.
The nominal or stated amount (in Rs.) assigned to a security by the issuer. For
shares, it is the original cost of the stock shown on the certificate; for bonds, it is
the amount paid to the holder at maturity. Also known as par value or simply par.
For an equity share, the face value is usually a very small amount (Rs. 5, Rs. 10)
and does not have much bearing on the price of the share, which may quote
higher in the market, at Rs. 100 or Rs. 1000 or any other price. For a debt
security, face value is the amount repaid to the investor when the bond matures
(usually, Government securities and corporate bonds have a face value of Rs.
100). The price at which the security trades depends on the fluctuations in the
interest rates in the economy.
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Securities are generally issued in denominations of 5, 10 or 100. This is known as
the Face Value or Par Value of the security as discussed earlier. When a security
is sold above its face value, it is said to be issued at a Premium and if it is sold at
less than its face value, then it is said to be issued at a Discount.
ISSUE OF SHARES
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• 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.
Categories of shares
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Issue price
The price at which a company's shares are offered initially in the primary market
is called as the Issue price. When they begin to be traded, the market price may be
above or below the issue price.
Market Capitalization
An Initial Public Offer (IPO) is the selling of securities to the public in the
primary market. It is when an unlisted company makes either a fresh issue of
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securities or an offer for sale of its existing securities or both for the first time to
the public. This paves way for listing and trading of the issuer’s securities. The
sale of securities can be either through book building or through normal public
issue.
Indian primary market ushered in an era of free pricing in 1992. Following this,
the guidelines have provided that the issuer in consultation with Merchant Banker
shall decide the price. There is no price formula stipulated by SEBI. SEBI does
not play any role in price fixation. The company and merchant banker are
however required to give full disclosures of the parameters which they had
considered while deciding the issue price. There are two types of issues, one
where company and Lead Merchant Banker fix a price (called fixed price) and
other, where the company and the Lead Manager (LM) stipulate a floor price or a
price band and leave it to market forces to determine the final price (price
discovery through book building process).
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conducting online IPOs through the Book Building process. NSE operates a fully
automated screen based bidding system called NEAT IPO that enables trading
members to enter bids directly from their offices through a sophisticated
telecommunication network. Book Building through the NSE system offers
several advantages:
• The NSE system offers a nation wide bidding facility in securities
• It provide a fair, efficient & transparent method for collecting bids using
the latest electronic trading systems
• Costs involved in the issue are far less than those in a normal IPO
• The system reduces the time taken for completion of the issue process
The IPO market timings are from 10.00 a.m. to 3.00 p.m. On the last day of the
IPO, the session timings can be further extended on specific request by the Book
Running Lead Manager.
What is ‘Lock-in’?
‘Lock-in’ indicates a freeze on the sale of shares for a certain period of time.
SEBI guidelines have stipulated lock-in requirements on shares of promoters
mainly to ensure that the promoters or main persons, who are controlling the
company, shall continue to hold some minimum percentage in the company after
the public issue.
Any company making a public issue or a listed company making a rights issue of
value of more than Rs 50 lakes is required to file a draft offer document with
SEBI for its observations. The company can proceed further on the issue only
after getting observations from SEBI. The validity period of SEBI’s observation
letter is three months only i.e. the company has to open its issue within three
months period.
2. SECONDARY MARKET
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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.
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 conduit—by
facilitating value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via price
discovery) that guides management decisions.
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, Over-the-Counter (OTC) is
a part of the dealer market.
STOCK EXCHANGE
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Role of a Stock Exchange in buying and selling shares
The stock exchanges in India, under the overall supervision of the regulatory
authority, the Securities and Exchange Board of India (SEBI), provide a trading
platform, where buyers and sellers can meet to transact in securities. The trading
platform provided by NSE is an electronic one and there is no need for buyers and
sellers to meet at a physical location to trade. They can trade through the
computerized trading screens available with the NSE trading members or the
internet based trading facility provided by the trading members of NSE.
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The National Stock Exchange of India Ltd. (NSE), set up in the year
1993, is today the largest stock exchange in India and a preferred exchange for
trading in equity, debt and derivatives instruments by investors. NSE has set up a
sophisticated electronic trading, clearing and settlement platform and its
infrastructure serves as a role model for the securities industry. The standards set
by NSE in terms of market practices; products and technology have become
industry benchmarks and are being replicated by many other market participants.
It provides a screen-based automated trading system with a high degree of
transparency and equal access to investors irrespective of geographical location.
The high level of information dissemination through the on-line system has
helped in integrating retail investors across the nation. The exchange has a
network in more than 350 cities and its trading members are connected to the
central servers of the exchange in Mumbai through a sophisticated
telecommunication network comprising of over 2500 VSATs. NSE has around
850 trading members and provides trading in over 1000 equity shares and 2500
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debt securities. Besides this, NSE provides trading in various derivatives products
such as index futures, index options, stock futures, stock options and interest rate
futures.
At NSE, it has always been our endeavor to continuously upgrade the skills and
proficiency of the Indian investor. Since, financially literate investors are the
backbone of the securities market, knowledge and awareness about the securities
market is of the foremost concern to us, starting with the most basic of
information being made available as the first step.
This booklet has therefore been prepared for those of you who are keen to acquire
some basic but key information about the stock markets as an initial step towards
becoming a more informed investor. We hope this booklet will act as a means of
satisfying some of your initial queries on the stock markets.
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Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a
rich heritage. Popularly known as "BSE", it was established as "The Native Share
& Stock Brokers Association" in 1875. It is the first stock exchange in the country
to obtain permanent recognition in 1956 from the Government of India under the
Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-
eminent role in the development of the Indian capital market is widely recognized
and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons
(AOP), the Exchange is now a demutualised and corporatised entity incorporated
under the provisions of the Companies Act, 1956, pursuant to the BSE
(Corporatization and Demutualization) Scheme, 2005 notified by the Securities
and Exchange Board of India (SEBI).
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The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-
weighted index composed of 30 stocks with the base April 1979 = 100. It consists
of the 30 largest and most actively traded stocks, representative of various sectors,
on the Bombay Stock Exchange. These companies account for around one-fifth of
the market capitalization of the BSE.
The base value of the Sensex is 100 on April 1, 1979 and the base year of BSE-
SENSEX is 1978-79.
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and
modify its composition to make sure it reflects current market conditions.
The abbreviated form "Sensex" was coined by Deepak Mohoni around 1990
while writing market analysis columns for some of the business newspapers and
magazines. It gained popularity over the next year or two.
The stock market has grown by over ten times from June 1990 to today. Using
information from April 1979 onwards, the long-run rate of return on the BSE
Sensex can be estimated to be 0.52% per week (continuously compounded) with a
standard deviation of 3.67%. This translates to 27% per annum, which translates
to roughly 18% per annum after compensating for inflation.
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STOCK TRADING
The trading on stock exchanges in India used to take place through open outcry
without use of information technology for immediate matching or recording of
trades. This was time consuming and inefficient. This imposed limits on trading
volumes and efficiency. In order to provide efficiency, liquidity and transparency,
NSE introduced a nationwide, on-line, fully automated screen based trading
system (SBTS) where a member can punch into the computer the quantities of a
security and the price at which he would like to transact, and the transaction is
executed as soon as a matching sale or buy order from a counter party is found.
NEAT
NSE is the first exchange in the world to use satellite communication technology
for trading. Its trading system, called National Exchange for Automated Trading
(NEAT), is a state of-the-art client server based application. At the server end all
trading information is stored in an in memory database to achieve minimum
response time and maximum system availability for users. It has uptime record of
99.7%. For all trades entered into NEAT system, there is uniform response time
of less than one second.
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TYPES OF TRADERS
Hedgers :
Hedgers are those who protect themselves from the risk associated with the price
of an asset by using derivatives. A person keeps a close watch upon the prices
discovered in trading and when the comfortable price is reflected according to his
wants, he sells futures contracts. In this way he gets an assured fixed price of his
produce.
In general, hedgers use futures for protection against adverse future price
movements in the underlying cash commodity. Hedgers are often businesses, or
individuals, who at one point or another deal in the underlying cash commodity.
Speculators :
Speculators are some what like a middle man. They are never interested in actual
owing the commodity. They will just buy from one end and sell it to the other in
anticipation of future price movements. They actually bet on the future movement
in the price of an asset.
They are the second major group of futures players. These participants include
independent floor traders and investors. They handle trades for their personal
clients or brokerage firms.
Arbitrators :
According to dictionary definition, a person who has been officially chosen to
make a decision between two people or groups who do not agree is known as
Arbitrator. In commodity market Arbitrators are the person who takes the
advantage of a discrepancy between prices in two different markets. If he finds
future prices of a commodity edging out with the cash price, he will take
offsetting positions in both the markets to lock in a profit. Move over the
commodity futures investor is not charged interest on the difference between
margin and the full contract value.
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How does an investor get access to internet based trading
facility?
There are many brokers of the NSE who provide internet based trading facility to
their clients. Internet based trading enables an investor to buy/sell securities
through internet which can be accessed from a computer at the investor’s
residence or anywhere else where the client can access the internet. Investors need
to get in touch with an NSE broker providing this service to avail of internet
based trading facility.
Contract Note
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• Contract number, date of issue of contract note, settlement number and
time period for settlement.
An investor does not get any protection if he trades outside a stock exchange.
Trading at the exchange offers investors the best prices prevailing at the time in
the market, lack of any counter-party risk which is assumed by the clearing
corporation, access to investor grievance and redressed mechanism of stock
exchanges, protection up to a prescribed limit, from the Investor Protection Fund
etc.
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Precautions must one take before investing in the stock
markets
Here are some useful pointers to bear in mind before you invest in the markets:
• Make sure your broker is registered with SEBI and the exchanges and do
not deal with unregistered intermediaries.
• Ensure that you receive contract notes for all your transactions from your
broker within one working day of execution of the trades.
• All investments carry risk of some kind. Investors should always know the
risk that they are taking and invest in a manner that matches their risk
tolerance.
• Do not be misled by market rumors, luring advertisement or ‘hot tips’ of
the day.
• Take informed decisions by studying the fundamentals of the company.
Find out the business the company is into, its future prospects, quality of
management, past track record etc Sources of knowing about a company
are through annual reports, economic magazines, and databases available
with vendors or your financial advisor.
• If you’re financial advisor or broker advises you to invest in a company
you have never heard of, be cautious. Spend some time checking out about
the company before investing.
• Do not be attracted by announcements of fantastic results/news reports,
about a company. Do your own research before investing in any stock.
• Do not be attracted to stocks based on what an internet website promotes,
unless you have done adequate study of the company.
• Investing in very low priced stocks or what are known as penny stocks does
not guarantee high returns.
• Be cautious about stocks which show a sudden spurt in price or trading
activity.
• Any advice or tip that claims that there are huge returns expected,
especially for acting quickly, may be risky and may to lead to losing some,
most, or all of your money.
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Research
Methodology
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Market Research Analysis
Preference of investment
7% 2%
16%
Only shares --75%
Mutual Funds --16%
Bonds --7%
Derivatives --2%
75%
Interpretation: This shows that although the mutual fund market is on rise
yet, the most favored investment continues to be in the Share Market. So, with a
more transparent system, investment in the Stock Market can definitely be
increased.
Ye s -- 91%
No -- 9%
91%
Page | 51
Awareness of India Infoline as a Brand
37%
Yes -- 63%
No -- 37%
63%
Yes -- 20%
No -- 80%
80%
Page | 52
DEMAT Account Market
18% 20%
IIFL-20%
Sharekhan-15%
ICICI Direct-25%
15% India Bulls-22%
22%
Others-28%
25%
Interpretation: This shows that even with sufficiently high Brand Equity,
INDIA INFOLINE ranks only 3rd amongst the Demat Account providers. This is
probably because of two main reasons.
1. Lack of promotion and unfocussed approach towards Product awareness.
2. Non – transparent marketing policies of the company.
Hence, the company should crystallize its products and should indulge in
aggressive marketing and promotion.
Yes -- 92%
No -- 8%
92%
Page | 53
Frequency of Trading
11% 9%
25% Daily-9%
Weekly-27%
Monthly-53%
Yearly-11%
55%
Interpretation: In spite of the huge returns that the share market promises, we
see that there is still a dearth of active trade and investors. This is because of non
transparent structure of the Indian share market and the skepticism of the target
audience that is generated by the volatility of the stock market. It requires
efficient bureaucratic intervention on the part of the Government.
7% 2%
16%
Upto 10%--71%
Upto 25%--19%
Upto 50%--7%
Above 50%--3%
75%
Interpretation: This shows that people invest only up to 10% of their earnings
in the stock market, again reiterating the volatile and non-transparent structure of
the Indian stock market. Hence, effective and efficient steps should be undertaken
to woo the customers to investment more in the lucrative stock market.
Page | 54
Rating of Share Trading Companies
13% 20%
IIFL-15%
Sharekhan-20%
ICICI Direct-30%
Others-10%
40% 27%
Page | 55
RESEARCH METHODOLOGY
RESEARCH DESIGN
The study is aimed at analysis of securities from a selected sector viz, cement
industry. The tools used, fundamental analysis, is objective and empirically
proven to value securities.
The five companies that contribute to the portfolio construction are selected on
the basis of earning per share and the relative market capitalization they have. The
past performance and the volume of trading in the market are also taken in to
consideration. These five companies are in turn selected from a bigger list of ten
companies, which are taken on random basis from the NSE (National stock
exchange) NIFTY cement industry. It gives investor an idea as to the avenues in
cement and marketing industry where in he could make his investment.
SOURCE OF DATA
Data was collected from primary as well as secondary sources.
PRIMARY SOURCES
Discussion with members, staff and brokers of IIFL
SECONDARY SOURCES
Various web sites of stock markets
Software packages of CSE
Published financial documents of companies.
Financial research reports of government and non-government
organizations.
Various books and journals of portfolio management.
Page | 56
PERIOD OF STUDY
The main purpose of fundamental analysis is to find out the intrinsic value of a
security. The intrinsic value is the true economic worth of a financial asset. Other
than intrinsic value various ratios are also used to compare the company with
other companies and with the industry.
PAT
Return On Equity =
Net worth
Page | 57
Market price of share
Price Earning Ratio =
EPS
Current asset
Current Ratio =
Current liability
Total debt
Debt Equity Ratio =
Owner’s capital
PAT
Net Profit Margin =
Net sales
Long term growth rate in dividend and earnings = Average retention ratio *
Average ROE
OBJECTIVES
Page | 59
1. To analyze the growth rate of the organization
2. The main objective of the study is to compare the intrinsic value of scrip’s
with market values and recommends, buy or sell options.
3. Analysis of company performance through various ratios
4. To find the earning performance of the organization.
5. To get an idea for the investor for making investment.
1. ACC LIMITED
TABLE 1.1
Source: Compiled from the audited financial statements of ACC LTD for
the respective years
Page | 60
The table reveals the E.P.S of Acc Ltd shows a Steady increase from 10.78
in 2005 to 73.2 in 2009. This is a good boost to build the investors’
confidence in the company.
The D.P.S & Pay out ratio shows a decrease from the year 2003 to 2008.
This indicates that company had adopted measure for retaining the profits
rather than paying out as dividend. This in turn will help the company to
have funds accumulated for future growth.
CHART 1.1
PAY OUT RATIO
PAY OUT RATIO
0.4
0.35
0.3
0.25
0.2 PAY OUT RATIO
0.15
0.1
0.05
0
2009 2008 2007 2006 2005
YEARS
TABLE 1.2
RETURN ON EQUITY
Page | 61
YEAR 2009 2008 2007 2006 2005
Share Capital 187.83 187.48 184.72 178.74 177.40
Reserve & 3964.78 2955.16 1951.21 1418.45 1175.79
Surplus
Net Worth 4152.61 31426.40 21359.30 15971.90 13531.90
Profit After 1438.59 1231.84 5441.80 3783.90 2002.40
Tax
R.O.E 34.64 39.20 25.48 23.69 14.80
Table reveals the R.O.E of ACC ltd shows a steady increase from 14.80 in
2005 to 34.64 in 2009. This shows the increase in Net Profit. This is a good
boost to build the investors confidence in the company
TABLE 1.3
Source: Compiled from the audited financial statements of ACC Ltd for the
respective years
TABLE 1.4
RATE OF GROWTH
Page | 62
The Net profit Ratio indicates that the profitability of the company is
improving over the years and indicates the efficiency in the management
TABLE 1.5
RATIOS
Page | 63
TABLE 1.6
Source: Compiled from the audited financial statements of ACC LTD for
the respective years.
CHART 1.2 1.7
70000
60000
50000
40000
PAT
30000 SALES
20000
10000
0
2009 2008 2007 2006 2005
YEARS
TABLE 1.7
Page | 64
CHART 1.3
6000
5000
4000
PAT 3000
P.A.T(RS.MN)
2000
1000
0
2009 2008 2007 2006 2005
YEARS
TABLE 1.8
YEAR R.O.E %
2009 34.64
2008 39.20
2007 25.48
2006 23.69
2005 14.80
Source: Compiled from the audited financial statements of ACC LTD for the
respective years
Page | 65
CHART 1.4
2z
RETURN ON EQUITY
45
40
35
30
ROE
25
Series1
20
15
10
5
0
2009 2008 2007 2006 2005
YEARS
= 0.27+0.24+.27+0.35+0.43
= 0.31
5
=27.56
Page | 66
Normalized P.E Ratio
= 0.689
Growth in Equity
= Average Retention Ratio * Average Return On Equity
= 0.69 * 27.56
= 19.02
= 73.2 * 19.02
= 1392.26
Intrinsic Value
Page | 67
2. GRASIM INDUSTRIES LTD
TABLE 2.1
The Table reveals the E.P.S of Grasim Industries shows a steady increase from
85.01 in 2005 to 239.03 in 2009. This is a good boost to build the investors
confidence in the company.
The DPS shows a steady increase and Pay out ratios shows fluctuation in all 5
year. This indicates the company has adopted measure for retaining the profits
rather than paying out as dividend. This in turn will help the company to have
funds accumulated for future growth.
CHART 2.1
0.25
0.2
0.15
PAY OUT RATIO
0.1
0.05
0
2009 2008 2007 2006 2005
YEARS
Page | 68
TABLE 2.2
RETURN ON EQUITY
YEAR 2009 2008 2007 2006 2005
Share Capital 916.90 916.90 916.90 916.90 916.90
Reserve & Surplus 8044.12 61383.5 48903.90 42366.60 35191.40
0
Net Worth 8135.81 62300.4 49820.80 43283.50 36108.30
0
Profit After Tax 2232.6 15358.1 8632.10 8857.10 7792.60
0
R.O.E 27.44 24.65 17.33 20.46 21.58
TABLE 2.3
TABLE 2.4
RATE OF GROWTH
YEAR 2009 2008 2007 2006 2005
Sales 10278.68 86044.50 66728.10 62060.70 52217.50
P.A.T 2232.6 15358.10 8632.10 8857.10 7792.60
E.P.S 239.03 167.5 94.10 96.62 85.01
D.P.S 0.30 27.5 20 16 14
Page | 69
TABLE 2.5
RATIOS
YEAR 2009 2008 2007 2006 2005
Current Ratio 0.90 0.94 0.93 0.86 0.82
Debt Equity 0.43 0.44 0.43 0.51 0.63
Ratio
Net Profit 20.15 17.85 12.94 14.27 14.94
Margin %
The current Ratio of GRASIM INDUSTRIES throughout the period under study is
below the benchmark of 2:1, The Table indicates that the liquidity and short term
solvency of the company is not satisfactory.
The debt Equity Ratio of Grasim Industries throughout the period under study is
below the maximum limit of 1:1, indicates long term solvency of the firm is
satisfactory.
TABLE 2.6
YEAR SALES
2009 10278.68
2008 86044.50
2007 66728.10
2006 62060.70
2005 52217.50
Page | 70
Source: Compiled from the audited financial statements of GRASIM
INDUSTRIES for the respective years
CHART 2.2
90000
80000
70000
60000
SALES50000
40000
30000 SALES
20000
10000
0
2009 2008 2007 2006 2005
YEARS
TABLE 2.7
25000
20000
15000
PAT
10000 P.A.T(RS.MN)
5000
0
2009 2008 2007 2006 2005
YEARS
TABLE 2.8
YEAR R.O.E %
2009 27.44
2008 24.65
2007 17.33
2006 20.46
2005 21.58
CHART 2.4
Page | 72
RETURN ON EQUITY
30
25
20
ROE
15 Series1
10
5
0
2009 2008 2007 2006 2005
YEARS
= 0.13+0.16+0.21+0.16+0.16
= 0.164
=1-.164
= 0.84
=27.44+24.65+17.33+20.46+21.58
5
=22.29
Page | 73
Normalized P.E Ratio
= 0.5
Growth in Equity
= Average Retention Ratio * Average Return On Equity
= 0.84 * 22.29
= 18.72
= 239.03 * 18.72
= 4475.50
Intrinsic Value
= Projected E.P.S * P.E ratio
=4475.50*0.5
= 2237.75
The market price as on 31 January 2009 is 1197.30. Since the market price is
lower than intrinsic value (2237.75), such share is considered to be under priced
and this share is suitable for investment.
Page | 74
3. GUJARAT AMBUJA CEMENTS LTD
TABLE 3.1
The Table reveals the EPS of Gujarat Ambuja Cement shows a fluctuating trend
over the years. This is not favorable to build the investors confidence in the
company.
The DPS & Payout ratio was showing an increasing trend but in the last year it is
decreased due to several market fluctuations. This indicates the company had
adopted measure for retaining the profits rather than paying out as dividend. This
in turn will help the company to have funds accumulated for future growth
CHART 3.1
Page | 75
PAY OUT RATIO
0.4
0.3 PAY OUT RATIO
0.2
0.1
0
2009 2008 2007 2006 2005
YEARS
TABLE 3.2
RETURN ON EQUITY
YEAR 2009 2008 2007 2006 2005
Share Capital 3044.8 3033.70 2703.80 1794 1553.00
Reserve & Surplus 4356.39 31872.1 19080.10 18422.90 14612.50
0
Net Worth 46608.7 34905.8 21783.90 20216.90 16165.50
0
Profit After Tax 1769.1 1503.25 4682.90 3367.90 2220.90
R.O.E 3.79 4.31 21.50 16.66 13.74
Page | 76
TABLE 3.3
PRICE EARNING RATIO
TABLE 3.4
RATE OF GROWTH
YEAR 2009 2008 2007 2006 2005
Sales 56713.9 62141.60 25979.50 19583.40 17347.20
P.A.T 1769.1 1503.25 4682.90 3367.90 2220.90
E.P.S 11.03 6.32 3.27 17.75 13.40
D.P.S 175 165 90 80 70
TABLE 3.5
RATIOS
YEAR 2009 2008 2007 2006 2005
Current Ratio 1.05 0.91 0.63 0.76 1.12
Debt Equity 0.15 0.35 0.57 0.83 1.10
Ratio
Net Profit 29.67 24.19 18.03 17.20 12.80
Margin %
Page | 77
The current ratio of Ambuja Cements throughout the period under study is below
the benchmark 2:1. Table indicates that the liquidity and short term solvency of
the company is not satisfactory.
The Debt Equity Ratio throughout the period under study is below the maximum
limit of 1:1, indicates long term solvency of the firm is satisfactory.
TABLE 3.6
CHART 3.2
Page | 78
SALES TURN OVER
70000
60000
50000
SALES40000
30000 SALES
20000
10000
0
2009 2008 2007 2006 2005
YEARS
TABLE 3.7
YEAR P.A.T(RS.MN)
2009 1769.1
2008 1503.25
2007 4682.90
2006 3367.90
2005 2220.90
CHART 3.3
Page | 79
PROFIT AFTER TAX
5000
4500
4000
3500
3000
PAT 2500
2000 P.A.T(RS.MN)
1500
1000
500
0
2009 2008 2007 2006 2005
YEARS
TABLE 3.8
YEAR R.O.E %
2009 3.79
2008 4.31
2007 21.50
2006 16.66
2005 13.74
CHART 3.4
Page | 80
RETURN ON EQUITY
25
20
ROE
15
Series1
10
0
2009 2008 2007 2006 2005
YEARS
= 0.16+0.26+0.28+0.45+0.52
= 0.334
=1-.334
= 0.67
=3.79+4.31+21.5+16.66+13.74
Page | 81
5
=12.00
= 0.64
Growth in Equity
= Average Retention Ratio * Average Return On Equity
= 0.67 * 12.00
= 8.04
= 11.03 * 8.04
= 88.68
Intrinsic Value
= Projected E.P.S * P.E ratio
=88.68*0.64
= 56.75
The market price as on 31 January 2009 is 70.45. Since the market price is
higher than intrinsic value (56.75), such share is considered to be over priced
and this share is not suitable for investment.
Page | 82
SWOT ANALYSIS
Page | 83
A SWOT analysis focuses on the internal and external
environments, examining strengths and weaknesses in
the internal environment and opportunities and threats
in the external environment.
STRENGTHS
Services
Page | 84
other support services that make retail investors more confident and assured
with their trading. SMS alerts (allowing traders and investors to make the
most of the available opportunities), Softer, intangible features like imagery,
equity driving preference. Through efficient trading processes Investors can
place their orders directly on the Internet, do all the information seeking and
basically own the investing process.
Distribution Network
We have a growing network of 150 branches and more than 300 business partners
spread across 180 cities in India and a fully operational international office at
London
OUR target is to have 350 branches and 1000 business partners in 300 cities of
India and more than 7 International offices by the end of 2006.
Unlike a traditional broking firm, INDIA INFOLINE group works on the
philosophy of partnering for wealth creation.
Products
Company’s product line is quite flexible in the sense that there is a product for
every kind of investors. Also all the products cover all the loop holes of all the
products offered by the other competitors like low cost, user friendly online
trading services etc.
WEAKNESS
Branding
Though the company has efficient products but large part of investment interested
population does not know the company. The most basic expectation for a trader or
investor when one begins trading is that one must get timely delivery of shares
Page | 85
and proceeds from sale of shares. Also ones cash balances with the broker must
be safe and secure. Though this confidence in the broker comes with time and
experience, good and transparent practices also play a major role in imbibing
confidence in traders
Most of the banks due to good branding have the faith of the customers of their
banking database. So they enjoy the liberty of huge database and customers find it
more reliable to trade there rather than with a unknown broker. Also banks like
HDFC Bank and ICICI Bank have the advantage of linking the trading accounts
of their customers to saving accounts. This makes trading easier, and at the same
time a trader withdraws exactly as much money from his account as is needed to
complete the trade. Similarly sales proceeds are credited directly to saving
account.
OPPORTUNITIES
The external environment analysis may reveal certain new opportunities for profit
and growth.
Page | 86
Ever-Increasing Market
After the NSE brought the screen based trading system stock markets are now
more secured which has attracted lot of retail investors and the demand is
increasing day by day. This has resulted in improved liquidity and heavy volumes
on transactions. INDIA INFOLINE is one of the early entrants here. As to how
much it will roar and how swift it can swoop on the market, the future alone can
answer such queries. INDIA INFOLINE has been a mega player and is known for
being a mover of stocks. It is also known for putting big deals through and enjoys
good networking with the FIIs. It has been dynamic enough to move with the
times and capture the opportunities that the market throws up from time to time.
Improving Technology
In country like India technology is always improving which gives the company a
chance to keep on improving their product with time whereas for the small
players like local brokers it will be difficult to keep the same pace as the changing
technology. Also with SEBI lying down some strict guidelines small brokers are
finding it harder to retain the customers with no research department and small
capital. The traditional business model is highly dependent on a large network of
sub-brokers, and many established players may not have systems (technology,
customer service, etc.) capable of directly servicing so many retail customers.
With so many competitors offering their products in the market but no one is able
to completely satisfy the customers. Some have the problem of lack of
information or some were scared of volatility of the stock markets. INDIA
INFOLINE has the opportunity to tap this unsatisfied set of customers and to
make hold in the market. The Internet serves to break all barriers to information,
as it offers an extremely hassle-free investing platform. And, INDIA INFOLINE
hopes to fully utilize and capitalize on this platform. This original idea by INDIA
Page | 87
INFOLINE itself was born out of the consumer's need for a more transparent,
easy to understand and convenient option of investing in stocks.
Education Level
The education level in the country is improving year after year as far as
technology goes. With that the understanding of the stock market is also
increasing and a lot of retail investors are steeping in the markets which are being
shown by increasing volumes, transactions and indices.
THREATS
New Competitors
A lot of new competitors are trying to enter the market in this bullish run to taste
the flavor of this cherry. This is creating a lot of competition for large players like
INDIA INFOLINE and it is creating little confusion in the minds of the customers
about the services provided by the broker. Also many banking firms are entering
into the market with huge investment. Competitors like ICICI, kotuku; HDFC, 5-
paisa etc. are posing a lot of threats to the company.
Page | 88
Technology Based Business
Online trading is totally based on the technology which is quite complex.
Typically, the technology solution has to start from the Internet front-end
(or the screen that you see when you begin trading). Then it needs to get into
the 'middle tier' of risk management systems that assess data from banks and
depository participants (DP), calculate client risk at that point in time, and
give the 'Go/No go' advice to the trade. So technology is a kind of threat
because unless until it is working properly it is good but internet is not that
safe. Though a lot of cyber laws are being made but not yet executed.
CONCLUSION
4. INDIA INFOLINE is the only one that does not have any demat
transaction charges either on buying or selling
Page | 90
9. INDIA INFOLINE research reports come in client e-mail at free
of cost around 5-6 times in a day. But some brokers charged for it
and some provide it only at once in a day, while it is paid in
indiabulls, icicidirect.com and 5paisa.com.
To sum up, we can say that computerization and automation are not
to be avoided. Technology has been able to make the stock markets
accessible to every individual. It has also led to positive
developments in terms of reduced costs and fewer errors but as some
experience has indicated, it cannot be applied as a panacea for all
problems. Regulation and knowledge dissemination are still
important; the use of technology should be preceded by a detailed
study and assessment of all other alternatives.
Since the area is not known before it takes lot of time in convincing
people to start investing in shares primarily in ipo’s
Services of competitors
As people are doing trading from there respective brokers, they are
quite comfortable to trade via phone.
Page | 92
Since most of the people are quite experienced and also they are not
techno savvy. Also Internet penetration is poor in India.
Some respondents are unwilling does not respond, as they are quite
annoyed with the phone call and some don’t have time.
Inaccurate leads
Sometimes leads are provided which had error in it which varies from
only 5 digit phone numbers to wrong phone number.
Misleading concepts
Some people think that shares are too risky and just another name of
gamble but they don’t know it’s not at all that risky for long investors.
Personal Details
Name : ……………… India infoline Ltd
Age : ……..……….. Sec-63, Noida
Sex : ………………..
Page | 93
Address and phone no : ...……………..
E-mail address : …….………...
Page | 94
7. How much would you like to invest of your total monthly
saving in ‘Equity Market’?
Upto ……………………….
Bibliography
Page | 95
• Intelligent Stock Market Investing. By N. J. Yasaswy
• The Indian Securities Market By Tadashi Endo.
• The Big Picture : Reflections on Our Economics Times By T. T. Ram
Mohan
URLs
• News.bbc.co.uk/hi/English/business
• www.stocktradingschool.com
• www.iii.co.uk./sharedealing
• www.indiainfoline.com
• www.5paisa.com
• www.google.com
• investopedia.com/articles
Page | 96