STOCK MARKET

HISTORY OF STOCK EXCHANGE

The first stock exchange in India, Bombay stock Exchange (BSE) was established in 1875 as The Native Share and Association and has evolved over the years into its present status as the premier stock exchange in the country. It may be noted that BSE is the oldest stock exchange in Asia, even older than the Tokyo stock Exchange, which was founded in 1878. The countrys second stock exchange was established in Ahmedabad in 1894, followed by the Calcutta stock Exchange (CSE). CSE can also trace its origin back to 19th century. From a get together under a NEEM TREE way back in the 1830s, the CSE was formally established in May 1908.

Traditionally In stock Market, the investors invest their money in shares under the guidance of the Brokers of any stock broking company. This is convenient to those investors who are not familiar with the computer and the use of internet. But it requires more dealers to the share broking companies to give guidance related to investment. There was a chance of inaccuracy of price because it is a time consuming process. The cost of the company also increases due to more paperwork. The investor point of view, there was a problem of privacy. The information of investor may leak by the broker. So, to remove these limitations of traditional broking, there was an emergence of new concept e-Broking.

Stock exchange is a place where securities are bought and sold. Stock exchanges are exposed to high degree of volatility, price fluctuations and it is driven by the demand supply of stocks. Stock Brokers are the authorized person who is allowed to buy and sell stocks on behalf of individuals and institutions and the authority is granted by SEBI.

E-BROKING

Today is world of technology. So, the person who adopt it, get the success. So, E-Broking means broking through electronic means. E-Broking is the broking in which the investors who are familiar with the use of computer and Internet they directly trade in stock market. They trade any time at any place when the stock market is open. The cost of transaction is also reducing with time. The investors have a large range of option for the trading. It is a paperless transaction so it reduces the cost of company. There was a facility of live streaming quotes, which give exact price of share which prevailing in the market at that time.

Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other dont. Full service online brokerage is linked to existing brokerage. These brokers allow their client to place online orders with the option of talking/chatting to brokers if advice is needed. Brokerage rates here are higher. Online trading is still in its infancy stage in India.

INTERNET TRADING IN INDIA

In the past, investors had no option but to contact their broker to get real time access to market data. The Net brings data to the investor on line and net broking enables him to trade on a click. Now information has become easily accessible to both retail as well as big investors.

The development of broking in India can be categorized in 3 phases:

Stock brokers offering on their sites features such as live portfolio manager, live quotes, market research and news to attract more investors.

Brokers offering on line broking and relationship management by providing and offering analysis and information to investors during broking and nonbroking hours based on their profile and needs, that is, customized services. Brokers (now e-brokers) will offer value management or services such as initial public offerings on line, asset allocation, portfolio management, financial planning, and tax planning, insurance services and enable the investors to take better and well-considered decisions.

OBJECTIVES OF INTERNET TRADING

Increase transparency in the markets.

Enhance market quality through improved liquidity, by increasing quote continuity and market depth.

Reduce settlement risks due to open trades, by elimination of mismatches.

Provide management information system (MIS).

Introduce flexibility in system, to handle growing volumes easily and to support nationwide expansion of market activity.

PROCEDURE FOR INTERNET TRADING

Step-1: Those investors interested in doing the trading over internet system, that is, NEAT-ISX, should approach the brokers and register with the Stock Broker. Step-2: After registration, the broker will provide to them a login name, password and a personal identification number (PIN). Step-3: Actual placement of an order. An order can then be placed by using the place order window as under: o First by entering the symbol and series of stock and other parameters such as quantity and price of the scrip on the place order window. o Second, fill in the symbol, series and the default quantity. Step-4: Thus, the investor has to review the order placed by clicking the review option. He may also re-set to clear the values. Step-5: After the review has been satisfactory; the order has to be sent by clicking on the send option. Step-6: The investor will receive an ``Order Confirmation'' message along with the order number and the value of the order. Step-7: In case the order is rejected by the Broker or the Stock Exchange for certain reasons such as invalid price limit, an appropriate message will appear at the bottom of the screen. At present, a time lag of about ten seconds is there in executing the trade. Step-8: It is regarding charging payment, for which there are different modes. Some brokers will take some advance payment from the investors and will fix their trading limits. When the trade is executed, the broker will ask the investor for transfer of funds by the investor to his account.

FACTORS TO KEEP IN MIND WHILE SELECTING ONLINE BROKERS

Brokerage cost:

It is important to weigh up the subscription and trading costs charged by an online broker against benefits offered by the site. All online brokers display their charges on their sites. Some make sure you find the charges easily, while with others you will have to search a bit.

Safety:

Please make sure site has 128-bit encryption to ensure safety of transaction online. ICICIDirect.com, 5paisa.com are few sites with 128-bit encryption. You normally get a secured Login id and password. It is always advisable to frequently change trading password. Ideally online trading site should be fully integrated. The greater the backward integration, the better it is for the customer. Ideally broking account, demat account and bank account should be linked electronically.

Rate refresh:

Rate refresh has to be real-time with no time lag. The speed and reliability comes with huge investment in technology. It is always advisable to check rates of online broking sites with BSE/ NSE terminal rates.

Speed of execution:

System has to be fast and reliable that does just one job- executes your trades. The last thing you need is a site that is heavily congested with the users who are downloading heavy jpeg graphs or pulling the latest story why market is moving. The

site should be one click wonder where squaring off all your positions or canceling all your pending orders takes one click and a confirmation of action.

Trading limit:

For trading, all sites provide 4 times buy and sell limit against margin money put in by customer. For delivery of shares, buying limit is equal to margin money put in by customer. Couple of sites also provides margin funding for buying of shares.

Free trial period:

Site should allow users free trial period to familiarize yourself with system before you decide to become trading member of the site.

Intraday chart/ historical chart:

The site should provide intraday chart tick by tick time and price data / historical chart for technical analysis by investors of particular scrip. Lot of people trade based on charting packages.

SUCCESS FACTORS FOR E-BROKING

There are three key success factors for e-broking,

(i) Scalability and robustness of the trading system:

The fundamental difference between the Internet as a transaction medium and the conventional closed user group network is that the Net is a universal platform providing concurrent access to infinite users at any given point in time. Consequently, it becomes imperative for any Net-based application to have a proven capability for scalability and robustness which ensures the ability to handle and process requests from multiple users at any given point in time.

(ii) Bandwidth optimization:

In the Indian context where availability of a sufficient bandwidth is limited, the application software should demonstrate intelligence in optimizing the available bandwidth by deploying advanced technologies such as streaming.

(iii) Integration with third party systems:

On the Net, with information feeds available from multiple points, it is prudent to deploy applications that are built on open architecture methodology for interfacing with third party systems in the new Net age.

CHALLENGES IN INTERNET TRADING

For Internet trading to succeed, it is imperative to have both 1. A robust business model and 2. Comprehensive technology strategy. Some of the challenges are discussed: Transaction fulfillment--In the Net-based economy, it is both prudent and essential for a broker/intermediary to offer total solution to the clients at a single point. Total solutions would essentially mean offering interfaces with banks, depositories, information feeds, etc. for efficiency in trade completion and reducing duplication of client information. The service providers will have to go beyond the stage of mere order execution and emerge as "informediaries" rather than "intermediaries". This will not only ensure lower trading costs in terms of offering cross services but will also help in maximizing ROIs.

A true Internet trading system should deliver cost effective transaction fulfillment at a single point.

FUTURE OF INTERNET TRADING

International marketplaces are already witnessing re-alignments and changes with the emergence of electronic communication networks (ECNs) such as INSTINET and ISLAND, which are already contributing substantial business volumes to mainline exchanges such as NASDAQ and the NYSE. Concurrently, exchanges worldwide are looking at striking strategic alliances such as the Global Equity Market (GEM). With Net trading in securities and rapid consolidation between multiple stock exchanges, the international securities marketplace is fast becoming a "global village" through the creation of a universal virtual equity market. Therefore the challenge for the technology providers is to develop and deploy advanced e-trading tools and applications using electronic straight through processing technologies.

TRADING IN STOCK MARKET

TRANSACTION

Decision to trade

Placing Order

Funds or Securities

Transaction Cycle

Trade Execution

Settlement of trades

Clearing of Trades

CYCLE: A person holding assets either to meet his liquidity needs or to reshuffle his holdings in response to changes in his perception about risk and return of the assets decides to buy or sell the securities. He selects a broker and instructs him to place buy/sell order on an exchange. The order is converted to a trade as soon as it finds a matching sell/buy order. At the end of the trade cycle, the trades are netted to determine the obligations of the trading members securities/funds as per settlement cycle. Buyer/seller delivers funds/ securities and receives securities/funds and acquires ownership of the securities. A securities transaction cycle is presented above. Just because of this Transaction cycle, the whole business of Securities and Stock Broking has emerged. And as an extension of stock broking, the business of Online Stock broking/ Online Trading/ EBroking has emerged.

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STOCK MARKET BASICS:

What are Corporations? Companies are started by individuals or may be a small circle of people. They pool their money or obtain loans, raising funds to launch the business. A choice is made to organize the business as a sole proprietorship where one person or a married couple owns everything, or as a partnership with others who may wish to invest money. Later they may choose to "incorporate". As a corporation, the owners are not personally responsible or liable for any debts of the company if the company doesn't succeed.

Corporations issue official-looking sheets of paper that represent ownership of the company. These are called stock certificates, and each certificate represents a set number of shares. The total number of shares will vary from one company to another, as each makes its own choice about how many pieces of ownership to divide the corporation into. One corporation may have only 2,500 shares, while another, such as IBM or the Ford Motor Company, may issue over a billion shares.

Companies sell stock (pieces of ownership) to raise money and provide funding for the expansion and growth of the business. The business founders give up part of their ownership in exchange for this needed cash. The expectation is that even though the owners have surrendered a portion of the company to them public, their remaining share of stock will become increasingly valuable as the business grows.

Corporations are not allowed to sell shares of stock on the open stock market without the approval of the Securities and Exchange Commission (SEC). This transition from a privately held corporation to a publicly traded one is called going public, and this first sale of stock to the public is called an initial public offering, or IPO.

Why do people invest in the stock market?

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When you buy stock in a corporation, you own part of that company. This gives you a vote at annual shareholder meetings, and a right to a share of future profits. When a company pays out profits to the shareholder, the money received is called a "Dividend". The corporation's board of directors choose when to declare a dividend and how much to pay. Older and larger companies pay a regular dividend; newer and smaller companies do not.

The average investor buys stock hoping that the stock's price will rise, so the shares can be sold at a profit. This will happen if more investors want to buy stock in a company than wish to sell. What is usually responsible for increased interest in a company's stock is the prospect of the company's sales and profits going up. A company who is a leader in a hot industry will usually see its share price rise dramatically.

What is a stock market index? In the stock market world, you need a way to compare the movement of the market, up and down, from day to day, and from year to year. An index is just a benchmark or yardstick expressed as a number that makes it possible to do this comparison. For e.g. S&P CNX Nifty is the index of NSE and SENSEX is the index of BSE.

Market Cap As you become familiar with stock and mutual fund investing, you will encounter the term "Cap", as in Small-Cap, Mid-Cap, and Large-Cap. Cap is short for capitalization.

As a stock market term, the capitalization of a company is calculated by multiplying the total number of shares by the current price per share. If a company has 500 million shares trading at Rs.20 a share, its market cap is Rs.10 billion (500,000,000 x 20). This is the total value of the company's stock, the value that the world of stock market investors has placed on the company. Much of this perceived value is due to

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the expectations of a company's future prospects. Market cap is not dictated by how "big" a company is.

Today, we define a large-cap company as one whose stock is valued at over $10 billion (some still say over $5 billion), a mid-cap from $1 to $10 billion, a small-cap from $250 million to $1 billion, and a company whose stock value is under $250 million as a micro-cap. Depending on who you listen to or how old your reference book is, these definitions will vary. A related point - don't think a company is big just because it has a high stock price, or that it is small just because its stock price is low.

Supply and Demand A stock's price movement, up and down until the end of the trading day is strictly the result of supply and demand. SUPPLY is the no. of shares offered for sale at anyone one moment.

The DEMAND is the number of shares investors wish to buy at exactly the same time. What a share of a company is worth on anyone day or at any one minute, is determined by all investors voting with their money. If investors want a stock and are willing to pay more, the price will go up. If investors are selling a stock and there aren't enough buyers, the price will go down.

How does one buy stocks? Buying stocks is not as simple as walking into a stockbroker's office and buying shares like you would a pair of shoes from a store. You are required to open an account with the brokerage, like opening an account at a bank. Some brokers will allow you to open an account with very little money. The firm will then hold this money in an interest earning cash account, awaiting your orders to buy or sell stock, or other securities such as bonds or mutual funds.

When you buy or sell, you pay a commission that is deducted from your account. When a stock is purchased, the ownership of the shares may be listed in one of two ways. "Listed" means how the corporation tracks the ownership of their stock. If you 13

choose to have the stock listed in your name, you will receive the actual stock certificates. Most investors choose to have the ownership listed in the broker's name, called "held in street name", with the broker keeping track of whose trading account the stock actually belongs to. The benefits are reduced paperwork, consolidated portfolio statements, no concerns about storing and processing the paper certificates, and the ability to instantly sell and transfer the shares.

Either way, any dividends are credited to your account. Stocks held in street name are insured by the federal government against fraud or financial failure of the brokerage company.

Why do people sell their stock? The reasons people sell their stock are more complex. We can never say with full surety why people sell their stock. It is very subjective and can not work for all. But most probably the following are the reasons which play a great roll in case of selling of the stock.

A person may just need the money. He or she may have watched the price go up, and have a hunch this is a good time to lock in their profit and sell some or all their shares. Bad news concerning a company or its industry, or a disappointing earnings report is sure to prompt heavy selling. An investor may see better opportunities in another company, and so sell his stocks that aren't moving up.

But usually, investors sell because they've watched the price fall, and just want to get out before they lose even more.

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Ten Golden rules for Investing

Warren Buffet has suggested ten golden rules for investing which proves to be immense use to the investors who want a better investment in stock markets,

Motilal Oswal follows these rules which are as described below:

Never invest in a business you cannot understand. Concentrating on a few holdings can reduce risk. Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. Buy companies with strong histories of profitability and with a dominant business franchisee. Be fearful when others are greedy and greedy when others are fearful. Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market. Do not take yearly results too seriously. Instead, focus on four or five year averages. Focus on return on equity, not earnings per share (EPS). Calculate owner earnings to get a true reflection of value. Look for companies with high profit margins. Always invest for the long term. Ask: Does the business have favorable long term prospects?

The above mentioned ten principles provide a kind of guidance to the investors, which prove to be helpful to give the investor maximum return for their investment.

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Company profile
The story of Motilal Oswal Securities Ltd (MOSt) goes back many years, when Mr. Motilal Oswal and Mr. Raamdeo Agrawal met each other as students in a Mumbai suburban hostel in the early eighties. Both the young chartered accountants hailing from a rural & an unpretentious background had a common dream viz 'to build a professional organization with strong value systems, to provide reliable & honest investment advice to investors'. Thus was born their first enterprise called "Prudential Portfolio Services" in 1987. Motilal Oswal gets incorporated as Motilal Oswal Securities Ltd. in the year 1995.The institutional business unit has relationships with several leading foreign institutional investors in the US, UK, Hong Kong and Singapore. Motilal Oswal Financial Services is a well diversified financial services group having businesses in securities, commodities, investment banking and venture capital.with 1160 Business locations and more than 2,00,000 investors in over 360 cities, Motilal Oswal is well suited to handle all your wealth creation and wealth management needs. The company has in the last year placed 9.48% with two leading private equity investors - New Vernon Private Equity Limited and Bessemer Venture Partners at post money company valuation of Rs. 1345 crore. (Rs. 13.45 billion). Motilal Oswal Financial Services Ltd ties-up with State Bank of India to offer online trading. Motilal Oswal Financial Services Ltd was declared as the Best Research House for Indian Stocks in 2006 as per AQ Research

Motilal Oswal Financial Services Ltd., consists of four companies.

(1) Motilal Oswal Investment Advisors Pvt. Ltd. (2) Motilal Oswal Commodities Broker (P) Ltd. (3) Motilal Oswal Venture Capital Advisors Private Limited (4) Motilal Oswal Securities Ltd. (MOSt).

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Mission and Vision

Motilal oswal core objective is to position ourselves as globally respected investment bank by assisting our clients in value creation. Motilal oswal are on the correct roadmap to pursue our mission with our Team inculcating the following values with utmost sincerity.

Integrity Motilal oswal commitments and work on transactions keeping in mind long term interests of the clients

Client Orientation Motilal oswal come out with solutions keeping in mind priorities and needs of the clients.

Knowledge based solution offering Motilal oswal quest for solution offering supported by knowledge and research on underlying business and products, results in high quality financial and strategic advice.

Quality Motilal oswal endeavor to follow the best of the global service standards and processes results in outstanding execution support for transactions.

Passion Motilal oswal are passionate about our transactions resulting in innovative solutions and enhancing probability of transaction closures .

Motilal oswal Core Purpose To be a well respected and preferred global financial services organization enabling wealth creation for all our customers.

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STOCK CLUSTER

At Motilal Oswal, all the scripts are divided under six categories and on that basis the company will give advice for the investment. Each cluster represents a certain profile in terms of business fundamentals as well as the kind of returns you can expect over a certain time horizons and return objectives.

Evergreen: Dominant players with strong brands, robust management credentials, supernormal shareholder returns. They will steadily compound 18-20% per year for next five to ten years.

Appleegreen: Potentially steady compound, but five to ten years graph bit unclear. They could gallop at 25-30 per-years over the next two to three years.

Emerging Star: Young companies, likely to rule chosen niches. Even better, the niches could balloon into full-blow markets. Potentially ten-baggers if youre patient.

Ugly Duckling: Trading below fair value or at huge discount to peer group. But somethings cooking. Could double in two to three years time.

Vultures Pick: Companies with valuable assets at throwaway prices. Buy & await predators. Startlingly high returns possible.

Cannonball: Seasons favourites. Typically fast gainers in rising markets, could return 30-50% within six months. Get in, cash in, get out.

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PRODUCTS AT MOTILAL OSWAL

Motilal Oswals product Offline Online Other Services

Freedom A/C
Offline:

Value Investing A/C

Easy A/C

Offline A/c is the A/c for the investors who are not familiar with the use of

computer. The A/C opening charges Rs. 500 (One time) For 1st Year Demat A/C is Free, On 2nd Year AMC charge is applicable. Online Types of Account Freedom Account High Volume Trader

Value Investing Account - High Value Investor Easy Account Freedom Account

A combination of both

If the ups and down of the stock market are simply irresistible for you to stay away from action and you want to do it all by yourself, you have chosen one of the best E broking trading platforms in the country. Having gone through rigorous testing in real market conditions, we bring you a trading terminal that allows you to maintain pace with complete market action. Our high performance EXE based trading platform with advanced features like integrated DP + bank account + trading account, single screen market watch for NSE & BSE cash and derivatives, tick by tick charting with advanced tool, online technical calls, real time reports makes it the most preferred product for active day traders, jobbers Whats more, you also get the most competitive brokerage rates along with

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host of other benefits and the most trusted name making it the best proposition available in the country. Value Investing Account If you believe in value investing and want to pick only the best stocks amongst the 6000 listed on the stock exchanges, this is the right account for you. We specialize in providing our customers with Solid Research and Solid Advice. What more, you also get access to our research reports and assistance in evaluating and restructuring your portfolio continuously through a highly qualified advisor. This product is meant for our platinum customer who knows that money is made by sitting. Easy Account If you like to go easy with your equity investments explore the benefits of having online terminal on your desktop. Watch the live price movements, online fund transfer facility along with a trading account linked with your demat and bank account giving you complete comfort while investing in equities.

Other Services: Dial-n-Trade Depository Services Commodity Trading Derivative Trading Mutual fund Portfolio Management Services Online IPO Research Based Information Provided

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SERVICES AT MOTILAL OSWAL

Online BSE and NSE Trading:

Motilal Oswal is a registered Stock Broker with the Bombay Stock Exchange and National Stock Exchange to trade on behalf of clients. The screen-based trading is done on BOLT- BSE Online Trading and NEAT- National Exchange Automated Trading, terminals. There are two types of transactions executed on these terminals viz. intra-day and delivery based transactions. Intraday transactions are those, in which the squaring up of deal is done on the same day, while in delivery based transaction the squaring up is not done on the same day, but the stock is to be traded on the basis of rolling settlement i.e. T+2. The Brokerage of Intraday transaction is 0.10% single side, while brokerage on delivery based transactions is 0.50% on both side, i.e. while purchasing as well as selling.

Free Access to Investment Advice through R&D

The Research and Development at Motilal Oswal is done at its Head office Mumbai. From there it forwards the relevant data and tips on particular shares and scripts at the relevant time. The R&D department Head Mr. Hemang Jani forwards all the details regarding all stocks and scripts to all the branches through Internet. At the end of each trading day there is a Teleconference, through which the R&D department Head MR. Hemang Jani talks with each Branch heads and discusses about each days closing position and shows their predictions about next days opening position. The quarries regarding stock positions and other relevant matter of the branch heads of each branch is being solved through teleconference. The various publications of Motilal Oswal viz. Derivatives Digest, Valueline, Eagle eye, High Noon, Investors Eye, Commodities Beat, Commodity Traders corner, Motilal Oswal Xclusive, etc. are being prepared by the research team of Motilal Oswal made up of highly experienced people from diverse field.

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Depository Participation

Motilal Oswal is a registered Depository Participant (DP) with National Securities Depository Ltd. (NSDL). The participants are required to enter into an agreement with beneficial owners. It is required that separate accounts shall be opened by every participant in the name of each of the beneficial owner and the securities of each beneficial owner shall be segregated and shall not be mixed up with the securities of other beneficial owners or with the participants own securities. The participants are obliged to reconcile the records with every depository on a daily basis. Participants are required to maintain the following records for a period of five years.

Records of all the transactions entered into with a depository and with a beneficial owner:

ISSUER AGENT CLEARING CORPORATION CLEARING MEMBER DEPOSITORY PARTICIPANT STOCK EXCHANGE TRADING MEMBER INVESTOR DEPOSITORY

Details of security dematerialized, rematerialized on behalf of beneficial owners with whom it has entered into an agreement; Records of instructions received from beneficial owners and statements of account provided to beneficial owners; and Record of approval, notice, entry and cancellation of pledge.

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Derivatives Trading

Motilal Oswal is a Trading Member registered with the Stock Exchange, according to the norms and Guidelines given by the SEBI. Two types of users access the NEAT F&O trading system: The Trading Members and the Clearing Members. The Trading Members (TM) has access to functions such as, order matching, order and trade management. The Clearing Member (CM) uses the trader workstation for the purpose of monitoring the trading member(s) for whom he clears the trades. Additionally, he can enter and set limits to position, which a trading member can take. Motilal Oswal provides the service of derivatives trading on NEAT F&O to its clients.

Online IPO

Online IPO (Initial Public Offering) is a new service started by Motilal Oswal for providing the application form of any companys issues of shares just like the TCS issue can be subscribed by filling an online form to reduce the paper work and the fund transfer facility is also provided to the clients for transferring the funds online. It is given on its web-site for helping the clients who are not able to collect the forms manually and the speed of filling and reducing the risk of misplacing of forms, not reaching in time, etc.

Internet Based Online Trading

The Online trading facilities provided by Motilal Oswal is basically divided into two types of accounts, viz. Classic Account and Speedtrade and SpeedTradePlus The online trading through Motilal Oswal website also comes with Dial-nTrade service that enables you to buy and sell shares by calling our dedicated toll-free number. Speedtrade and Speedtrade Plus: SPEEDTRADE is a next-generation online trading product that brings the power of the brokers terminal to the clients PC. Through SPEEDTRADE PLUS the client is also allowed to trade on Derivatives.

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Streamer: Streamer account is just for the new learners of market and is a new service offered by Motilal Oswal to give the view of the market online to the customers who dont have any experiences of the stock market and it is software provided to see the ups and downs of market with the screen on your PC. It costs Rs.2000 per quarter and there will not be any facility for trading and just you can see how trading is done on the market.

The various benefits the client gets from the online trading are:

Freedom from Paperwork: Integrated trading, bank and Demat account (auto pay-in and pay-out of securities) with digital contracts removes all paperwork.

Instant Credit And Transfer: Instant transfer of funds from bank accounts of clients choice to his/her Motilal Oswal trading account.

Trade Anywhere: Enjoy the ease of trading from any part of the world in a completely secure environment.

Dial n Trade: Call Motilal Oswal on a toll free number to place orders through Motilal Oswals telebrokers.

Timely Advice: Make informed decisions with expert advice, investment calls and live market commentary.

Real-Time Portfolio Tracking: Benefit from real-time information of your investment and current portfolio value.

After-Hour Orders: The Client can place orders after the market hours, which get executed as soon as markets open.

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PORTERS MODEL

POTENTIAL ENTERANT Investmart Various Banks Geojit Cipher UTI Securities Ltd. Refco Group Ltd. IDBI Capital Mkt. Services Ltd. SUPPLIERS Web maintainers NSCL CSDL NSE BSE MCX NCDEX COMPETITORS ICICI Web Trade Ltd 5paisa.com Kotak Securities Ltd India Bulls Motilal Oswal Securities Ltd HDFC Securities Ltd Marwadi Finance Ltd BUYERS Small Investors Franchise/Business Partners HNIs MF Companies HUF Institutional Investors

SUBSTITUTES Mutual Funds Insurance Bank FD

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COMPARISION OF ONLINE TRADING PRODUCTS

Cos. / Features

Products Offered Ground A/c, EBroking, Commodity, DP, PMS Ground A/c, Online A/c, Commodity, DP Online A/c,MF E-Broking Ground A/c, Online A/c, Commodity, DP, PMS Ground A/c, Online A/c, Commodity, DP,MF E-Broking, Insurance Ground A/c, EBroking Insurance, MF, E-Broking, Ground A/c

Online BSE/ NSE Yes Yes Yes Yes Yes

Online F&O Yes Yes Yes Yes Yes

Online IPO Yes Yes No No Yes

Share khan Kotakstreet.com ICICI Direct.com HDFC Motilal Oswal

A/c Opening Charges Classic 750/-ST 1000/500 750 600 Up to 400

Deposits

10000 50000 --------5000

Indiabulls 5-Paisa.com Angel Broking IL&FS

Yes Yes Yes Yes

Yes Yes No Yes

Yes No Yes Yes

250 500 500 500

----5000 50000 ------

If we check the above table, we can come to know that the rates of Motilal Oswal is quite competitive than other brokerage houses. One other best point of Motilal Oswal is if a person is having a online/offline trading account as well as Demat account with Motilal Oswal, they wont be charged any kind of Demat transfer charges, which are charged when the shares are sold from the Demat account.

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SUPPLIERS

NSDL & CSDL are the regulatory bodies for Depository Participants like SSKI, SHCIL, ICICIdirect.com, etc. Also these regulatory bodies have got an upper hand as the bargaining power stock broking houses like SSKI, etc. would be less. NSE & BSE are playgrounds where common an investor trade through stock broking houses, for which they have to take permission from NSE/BSE. NSE & BSE are under the purview of SEBI, thats why stock broking houses like SSKI, have low bargaining power. But here there is one advantage that NSE/BSE have i.e. they cannot go for forward integration. MCX & NCDEX are stock exchanges which trade in commodities and derivatives. Here again stock broking houses have to follow rules and regulation of the same. Web maintainers are companies which maintain web sites & technical aspects of the same. Here stock broking houses like SSKI can have more bargaining power due to stiff competition among web maintaining companies. Web maintainers are companies who make and maintain softwares for stock broking houses. If say for example stock broking houses switches over to other web maintainers then that company cannot understand the mechanisms of softwares. So it is quite high switching cost.

BUYERS

There are various types of investors who trade through stock broking houses like SSKI, which includes investors like small investors, medium net worth investors, business partners, institutional investors and mutual fund companies. Here the bargaining power of stock broking houses depends on how big the investor is. So here we can say that bargaining power of stock broking houses is high in case of small investors & HUF.

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While the bargaining power is moderate in case of HNI (High New Worth Investors)/ MNIs (Medium Net Worth Investors) and business partners. But the in case of mutual fund companies and institutional investors bargaining power is less. There is competitive buzz in stock broking industry; competitors are offering low brokerage and best services with added feature. So switching cost is pretty much less. So the buyer can easily switch over to competitors product.

ENTRY BARRIERS

Huge capital: - Capital is necessary not only for fixed facilities but also for customers credit and absorbing start up losses. To start a stock broking house, one needs huge capital for technology up gradation and skilled manpower. Technology: - Stock broking requires huge capital to make their products user friendly, which in turn requires capital to employ skilled manpower. Regulatory Constraints: - Obtaining a license is a tedious job. It should comply with the regulation of the governing bodies like SEBI, NSDL, etc. For a stock broking houses to plunge into the stock broking industry, it needs to have some kind of financial background and expertise. Thus, regulators constraints could be an entry barrier. Experience curve: - The core competency in this industry is the services which are provided to the end-users and the research based activities which includes TIPS, fundamental as well as technical script analysis. Also the most important thing which helps already established firms is-TRUST which people would be having on them. Network: - The Reach to the customer is the key factor in the industry. The network of the companies Motilal Oswal is very efficient and spreaded all over India. It will take time for a new entrant to establish such a huge network, which says that, Network can come up as most difficult entry barrier to overcome.

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Expected Retaliation: - Whenever a new player comes in the industry, the old companies have an option to reduce the prices of their product. This kind of practice is called expected Retaliation which is possible in this industry in terms of less brokerage rates and reduced account opening charges. E.g. Motilal Oswal was having two types of accounts viz. speed trade speed trade plus, which were costing 1000 & 1500 account opening charges respectively,But due to competition, they have come up with only one account speed trade plus with the account charges of Rs.1000.

COMPETITORS The company is facing the competition from local as well as national level players. The local players provide facility for off-line trading while the national players like ICICIdirect.com and Kotakstreet.com, HDFC Security provide online trading services. There are also other big names like Indiabulls, Motilal Oswal, 5paisa and Marwadi encircles the company form both the sides by providing online and off-line trading with competitive services.

POTENTIAL ENTRANTS The potential entrants in like Investmart, Jeojit and Cipher which are coming in near future to Gandhinagar City. Nationalized banks are also thinking to enter in this field by tying up with broking houses. E.g. Bank Of Baroda.

SUBSTITUTES Here substitutes are such instruments which can be used instead of investing in shares. The instruments like Bank FD, insurance, mutual funds are the substitutes. If the use of this instruments increase this may be disadvantage for the stock broking houses. The companies and banks which are having these instruments can plunge into this industry.

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COMPETITIVE ANALYSIS

Follower: The followers are those who just blindly follow the other player which are leader and challenges.

The players like 5 paisa, Motilal Oswal, HDFC Securities, Kotakstreet are the followers.

LEADER: ICICIdirect.com is a leader in the online account which is having 1,24,000 accounts in the country.

While in offline account Motilal Oswal is leading with 64,000 offline accounts.

NICHER: ICICIdirect.com and Kotakstreet.com are the two stock broking houses which are focusing only on online investors.

CHALLENGER: Motilal Oswal, Kotakstreet and Indiabulls come under this head.

Motilal Oswal challenges competitors by providing quality services and research based advice.

Indiabulls is also challenging with low brokerage rates and class one service.

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BACKOFFICE WORK AT MOTILAL OSWAL

Motilal Oswal is very efficient company and it handles the back office work with great efforts. The company gives lots of attention to the handling of all the details regarding the client and the information is provided by the staff members of the company. So, the company also gives the guarantee for the privacy of the details that are stored in the back office.

Back office is the main pool of information on which the company and the branch works on to decide how much limit should be given to the client. The back office work is generally carried out in the early morning and after the trading hours. So, the trading hours would not get disturbed.

At Motilal Oswal, the back office is the main link and which is provided by the Head Office through Net. The branch is required to maintain it and update it all the times to get the data and other related information updated. So, early in the morning the Back office is updated and the copy of the ledger balance of the client and the stock report are printed out so that the clients limit or the decision of the selling of delivery can be taken without disturbing the terminal and the working hours. Back office contains:

Client details Collection Request Ledger bal Pay out request Credit management

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Client Details: Motilal Oswal maintains all the details regarding the customer which include the details of their address, their contact no, the copies of their required information such as pan card photocopy and bank statement etc, if required. The other details of the client such as the bank details, the DP holding statement, and other things are maintained and updated at times.

Collection request: This section handles the things like the collection and cheque request made by or to the client. In this section the cheque information for Pay in and pay out are provided. Here the entry would be made as soon as the client pay the amount through cheque then the cheque is sent to the bank for clearing and if the amount is not transferred to the companys account within two days, the reversal entry is made and the extra charge would be recovered for that from the account of the client. None can make the payment in cash. Each and every client is required to make payment through cheque. So, the money get easily tranfered to the Head Office.

Ledger Balance: This section gives idea about the balance of the client in the account of Motilal Oswal. Generally the company wants to have the positive balance of the client. But the company also allows trading on five times on the stock value and ten times on the balance in ledger. That amount is required to be collected from the client within two days. Payout Request: The client who has the balance in his account can demand for the payment through cheque. In Motilal Oswal, the pay out is given through Back office on which the Ahmedabad branch will give the cheque in the name of the client within two days. The client is given full authority to ask for pay out at any point of time if he has credit balance in his accont.

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Credit Management: The credit management is done with great care to give the limit extension to the client. For this calculation, the stock value of the client in his DP account is calculated and the ledger balance of the client in his account is deducted from that amount. The resulted amount will decide the limit that would be allowed to the client.

Eg. Suppose a client has following stock in the account of Motilal Oswal Reliance: worth TCS: ITC: worth worth 56000 41000 36000 133000

Now if the client has only 10000 balances in the account then the request for payment would be made. Generally the margin on credit is Rs. 100000 ie. The resulted amount should be minimum one lack rupees. If the client is unable to make payment within fifteen days then the his holding is sold in the market even at a loss to the client but the amount is recovered so that the shortage of payment to the terminal or to the branch does not occur. Sometimes the shortage of payment cause the terminal to be Hanged. So, the branch is required to follow the credit management fully and strictly.

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SWOT ANALYSIS
During this training at Motilal Oswal, we had come to know the Strengths Weaknesses Opportunities Threats for the company and it is very useful for a company to analyze them. Therefore, the SWOT analysis is presented here and the suggestions for maintaining strengths and removing weaknesses are explained in detail.

Strengths: Well-maintained infrastructure. Infrastructure does not just include the office area but also the facilities present there. Lowest brokerage and other charges w.r.t. competitors. The brokerage is not the minimum but the company does not collect the other charges which do not exist like other competitors. The best investment advice correct up to 70-90 % through dedicated research and reports. The R&D department of the company is very dedicated and the tips given by the company is on an average 97% right. One of the best DPs in India. The company has the record top provide best DP service and other facility.

Weaknesses: The company is passing through the following weaknesses which can be the hurdle to the success of the company. Less awareness in the market. The Motilal Oswal is not having a good reputation or recognition in the market. The more amd more awareness should be created. The marketing team is not much experienced and so the company can not make its stand in the mind of the investors.

The company is following a rigid credit management system. So sometimes the limit problem or the compulsory selling of the securities happens.

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Opportunities: Opportunities are something that the company should grab to make the stand in the market against the competitors. The opportunities for the stock broking industry are as follows: Slope of stock market towards delivery based transaction. The company is having advantage in this volatile market because the investors are having the trading on the delivery basis. Large potential market for delivery and intra-day transactions. Attract the customers who are dissatisfied with other broker & DPs. For that the company is preparing a list of customers.

Threats: The company should take care of the following points as they play a big roll in the success of the company. Decreasing rates of brokerage in the market. The competitors are getting sharp change on that. Increasing competition against other brokers & DPs. A threat of loosing clients for any kind of weakness of the company. Normally the rigid credit policies of the company is playing a negative roll for the market. Loosing the untapped market with the entry of the competitors.

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MAJOR PLAYERS IN THE INDUSTRY

INDIA BULLS 5PAISA.COM ANGEL BROKING ICICI DIRECT IL&LS INVESTMENT UTI SECURITIES MOTILAL OSWAL KARVY KOTAK SECURITIES LIMITED HDFC SECURITIES LTD IDBI CAPITAL MARKET SERVICES LTD

NUMBER OF TERMINAL IN INDIA.

Broker Name Angle broker Motilal oswal Indiabulls Icici securities India infoline Anagram securities S.M.C. Global

No of Terminal 5081 4179 3231 1051 970 999 3231

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NO OF SUB-BROKER IN INDIA

COMPANY NAME Karvy stock broking Angle Broking S.M.C. Global Motilal Oswal I.C.I.C.I. Ashit c. maheta Anagram securities

No of sub broker 15000 2408 800 638 587 320 964

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CALCULATION OF SENSEX
In 1875, in the period of its inception, there were 318 registered members in what we call today Bombay Stock Exchange. Since that long period of time Indian stock market has seen lots of changes comprising both kind of experience i.e. good and bad. Up to the eighties there was no any barometer to set a standard for measuring the ups and down in share market.

To formulate the measure rode for ups and downs BSE came with the stock index that has subsequently become the barometer for Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. . SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.

The index was initially calculated based on the Full Market capitalization methodology but was shifted to the free-float methodology with effect from 1st September 2003.The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.

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SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization

The calculation of SENSEX involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scripts etc. During market hours, prices of the index scripts are used by the trading system to calculate SENSEX every 15 seconds.

Understanding Free-float Methodology

Concept:

Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalization of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.

39

Definition of Free-float: Share holdings held by investors that would not, in the normal course come into the open market for trading are treated as 'Controlling/ Strategic Holdings' and hence not included in free-float. In specific, the following categories of holding are generally excluded from the definition of Free-float: Holdings by founders/directors/ acquirers which has control element Holding through Route of Foreign Direct Investment Holdings by persons/ bodies with "Controlling Interest" Government holding as promoter/acquirer Strategic stakes by private corporate bodies/ individuals Equity held by associate/group companies (cross-holdings) Equity held by Employee Welfare Trusts Locked-in shares and shares which would not be sold in the open market in normal course. The remaining shareholders would fall under the Free-float category. Major advantages of Free-float Methodology: A Free-float index reflects the market trends more rationally as it takes into consideration only those shares that are available for trading in the market. Free-float Methodology makes the index more broad-based by reducing the concentration of top few companies in Index. For example, the concentration of top five companies in SENSEX has fallen under the free-

40

float scenario thereby making the SENSEX more diversified and broadbased. A Free-float index aids both active and passive investing styles. It aids active managers by enabling them to benchmark their fund returns vis-vis an investable index. This enables an apple-to-apple comparison thereby facilitating better evaluation of performance of active managers. Being a perfectly replicable portfolio of stocks, a Free-float adjusted index is best suited for the passive managers as it enables them to track the index with the least tracking error. Free-float Methodology improves index flexibility in terms of including any stock from the universe of listed stocks. This improves market coverage and sector coverage of the index. For example, under a Fullmarket capitalization methodology, companies with large market capitalization and low free-float cannot generally be included in the Index because they tend to distort the index by having an undue influence on the index movement. However, under the Free-float Methodology, since only the free-float market capitalization of each company is considered for index calculation, it becomes possible to include such closely held companies in the index while at the same time preventing their undue influence on the index movement. Globally, the Free-float Methodology of index construction is considered to be an industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have adopted the same. MSCI, a leading global index provider, shifted all its indices to the Free-float Methodology in 2002. The MSCI India Standard Index, which is followed by Foreign Institutional Investors (FIIs) to track Indian equities, is also based on the Free-float Methodology. NASDAQ-100, the underlying index to the famous Exchange Traded Fund (ETF) - QQQ is based on the Free-float Methodology.

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Determining Free-float factors of companies: BSE has designed a Free-float format, which is filled and submitted by all index companies on a quarterly basis with the Exchange. The Exchange determines the Free-float factor for each company based on the detailed information submitted by the companies in the prescribed format. Free-float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the Freefloat market capitalization. Once the Free-float of a company is determined, it is rounded-off to the higher multiple of 5 and each company is categorized into one of the 20 bands given below. A Free-float factor of say 0.55 means that only 55% of the market capitalization of the company will be considered for index calculation. Free-float Bands:

%Free-Float Free-Float Factor >0 5% >5 10 % >10 15% >15 20% >20 25% >25 30% >30 35% >35 40% >40 45% >45 50% 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

%Free-Float

Free-Float Factor

>50 55% >55 60% >60 65% >65 70% >70 75% >75 80% >80 85% >85 90% >90 95% >95 100%

0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00

Index Closure Algorithm The closing SENSEX on any trading day is computed taking the weighted average of all the trades on SENSEX constituents in the last 30 minutes of trading session. If a SENSEX constituent has not traded in the last 30 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day's closing price is taken for computation of Index closure. 42

The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value. Maintenance of SENSEX One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that replacement of stocks in Index, additional issue of capital and other corporate announcements like 'rights issue' etc. do not destroy the historical value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values. The Index Cell of the exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell ensures that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity. The Index Committee of the Exchange comprises of experts on capital markets from all major market segments. They include Academicians, Fund-managers from leading Mutual Funds, FinanceJournalists, Market Participants, Independent Governing Board members, and Exchange administration. On-Line Computation of the Index: During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time. Adjustment for Bonus, Rights and Newly issued Capital: The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value despite the non-occurrence of any economic activity of substance. At the Index Cell of the Exchange, the base value is adjusted, which is used to alter market capitalization of the component stocks to arrive at the SENSEX value.

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The Index Cell of the Exchange keeps a close watch on the events that might affect the index on a regular basis and carries out daily maintenance of all the 14 Indices Adjustments for Right Issue When a company, included in the compilation of the index, issues right shares, the free-float market capitalization of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalisation (see 'Base Market Capitalization Adjustment' below). Adjustments for Bonus Issue: When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change. Therefore, there is no change in the Base Market Capitalisation, only the 'number of shares' in the formula is updated. Other Issues: Base Market Capitalisation Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc. Base Market Capitalisation Adjustment: The formula for adjusting the Base Market Capitalisation is as follows: New Base Market = Old Base Market Capitalization Market Cap Old Market Capitalisation To illustrate, suppose a company issues right shares which increases the market capitalisation of the shares of that company by say, Rs.100 crores. The existing Base Market Capitalisation (Old Base Market Capitalisation), say, is Rs.2450 crores and the aggregate market capitalisation of all the shares included in the index before the right issue is made is, say Rs.4781 crores. The "New Base Market Capitalisation will then be: x New Capitalisation

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2450 x (4781 + 100) / 4781 = Rs. 2501.24 crore the index number from then onwards till the next base change becomes necessary. SENSEX - Scrip selection criteria: The general guidelines for selection of constituents in SENSEX are as follows: Listed History: The scrip should have a listing history of at least 3 months at BSE. Exception may be considered if full market capitalisation of a newly listed company ranks among top 10 in the list of BSE universe. In case, a company is listed on account of merger/ demerger/ amalgamation, minimum listing history would not be required. Trading Frequency: The scrip should have been traded on each and every trading day in the last three months. Exceptions can be made for extreme reasons like scrip suspension etc. Final Rank: The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market capitalisation and 25% weightage to the liquidity rank based on three-month average daily turnover & threemonth average impact cost. Market Capitalization Weightage: The weightage of each scrip in SENSEX based on three-month average free-float market capitalisation should be at least 0.5% of the Index. Industry Representation: Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE. Track Record: In the opinion of the Committee, the company should have an acceptable track record.

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Index Review Frequency:

The Index Committee meets every quarter to review all BSE indices. In case of a revision in the Index constituents, the announcement of the incoming and outgoing scrips is made six weeks in advance of the actual implementation of the revision of the Index. Castle-in-the-Air Theory

The Castle-in-the-Air Theory ignores investment intrinsic values and looks to the interpretation and prediction of investor sentiments and actions in order to make their investment positions before the crowd. Lord Maynard Keynes, a respected economist and successful investor, expounded on the theory in 1936. He reported on how investors gravitated away from the hard work of determining intrinsic value to discern how the investing public will act in the future as they build castles in the sky based on their hopes and dreams. Instead of using investment valuation techniques, followers of this theory tried to divine the psychology of the market and where it was headed. It made no difference if a stock currently priced at $25 per share possessed intrinsic value of $30 per share if investors had a negative opinion of the company and their declining demand for the stock would drive its price down to the $20 per share level. Correctly anticipating that market sentiment and shorting the stock would be the proper investment move under the Castle-in-the-Air theory. Understanding how the crowd thinks and reacts in both normal circumstances and panic situations can deliver a big edge to investors willing to study individual and crowd psychology in relation to the stock market. Market psychology and the herd instinct often play a leading, if not major role in the determination of stock prices and market direction. Popular investment approaches that use investor psychology as a base include odd-lot theory, contrarians investing, consensus indicators, etc.

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Some strategists have even gone so far as to classify investors into specific investment personalities. One such model considers investors falling into one of five classifications ranging from straight arrow to careful to confident to anxious to impetuous, based on personality characteristics such as exhibiting confidence, anxiety, or caution Knowing your own personality make-up and how it relates to the investment markets can also help improve your chances of success. Dr. Sully Blotnick, a research psychologist and author of business-related books, developed a profile of the successful investor. According to his theory, the most successful investors tend to concentrate their investments in a narrow range of investments or stocks. Contrary to popular opinion, concentration, not diversification, provides the success edge. Of course, you must balance the degree of risk you are willing to assume with the opportunity for greater returns. Another trait of the successful investor is the ability to stick with their investment choices and let their profits run. On the other hand, unsuccessful investors tend to follow fads and sell out too soon. Finally, successful investors tend to invest in what they know industries and companies with which they are already familiar.

At Motilal Oswal: Generally local traders are not well aware about the highly scientific techniques that need depth of the knowledge about the method of that theory and a particular script because all the data required about the company in research are not easily available and if available it is to hard to collect it. So instead of using the highly time consuming theories it is better to use castle in the air theory to take immediate decision. If we think more practically all the valuation theories are used to predict the long term condition of a particular script but castle in the air theory is only theory that helps investors to have decision immediately.

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In Motilal Oswal we have observed that most of the client keeps continuous watch over buying and selling pressure of selected scripts which they believes the best among all others. Buying and selling pressure reveals the general tendency of all over investors about the market. So it is totally psychological phenomenon that helps the investors to predict about the next movement of the index. Even the opinion of market researchers which are given on the basis of technical analysis are many time proved to be in inverse direction to the market trend so its more genuine to go with what we feel about the market based on personal observation which are supported by the current buying and selling pressure. It has also been observed that generally when a person is at profit poison it does not wait for more high in scripts but when he or she is at loss waits with the hop of increase in the share and unfortunately gets higher loss. On the bases of all above observation it can be concluded that to be the land mark in the field of share market you need to have immense passion and insight to generate profit and more importantly to avert loss.

P/E Ratio and EPS (P/E is a price earning multiple)

P/E = Market price of a share EPS

The above formula shows that EPS has an inverse relation with P/E (i.e. if P/E increases then EPS will decreases and vice versa.). But the market price of a share has a direct relation with P/E (i.e. if P/E increases then the price of the shares also increases and vice versa.). The company with less P/E is more attractive in terms of valuation. So for the investors who wants the regular income and also who can hold the scrips for long term should go for that companies having less P/E. P/E is one of the indicators, which helps to know the performance of the company, but it is not the measure to know company fundamentals. There are many other factors, which affects the companys performance. Also the Sentiments of the

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market affect the market price of the company but they are the technical of the company, which knows about the company for a short period of time. For example, price/earnings (P/E) ratio shows how much investors are willing to pay for a rupee of a company's earnings. A P/E of 15 indicates, for every Re.1 of pershare earnings, investors are paying Rs.15. A company's P/E ratio should be measured against those of its competitors. For high-growth stocks, the P/E is often measured against the projected earnings growth rate, so a company with annual earnings growth potential of 30% could warrant a P/E ratio of 30 or more. When its P/E ratio falls below that of the market, its peers, or its growth rate, a stock may be attractive for purchase.

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QUESTIONS OF THE INVESTORS

Q. What is the function of the Capital Market? A. Capital Market enhances capital formation in the economy and comprises of a) Primary Market is a place where new offerings by Companies are made either as an Initial Public Offering (IPO) or Rights Issue. b) Secondary Market is a market where securities are traded after being initially offered to the public in the Primary Market and/or listed on the Stock Exchange.

Q. What returns can I expect from my investments in equity shares? What are the risks? A. Equity shares are High-Risk High-Return Investments. The major distinction of Equity investment from all other investment avenues is that while the return from many avenues such as Bank Deposits, Small Saving schemes, Debentures, Bonds etc are fixed and certain, the earnings from equity investments are highly uncertain and varied. A good scrip picked up at the right time could fetch fairly good returns else the return may be meager or it may even turn negative.

Q. Whom should I contact for my Stock Market related transactions? A. To be able to buy or sell shares in the stock markets a client would need to be registered with a stock broker like MOTILAL OSWAL who holds membership in stock exchanges and who is registered with SEBI.

Q. Am I required to sign any agreement with broker or sub-broker? A. Yes, you have to sign the Member-Client agreement for the purpose of engaging a broker to execute trades on your behalf from time to time and furnish details relating to yourself to enable the member to maintain Client Registration Form.

Q. What is meant by bullish and bearish trend? A. When the market goes up it is called a bullish trend and when the market goes down it is called a bearish trend.

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Q. What is taking a position? A. When you act upon a stock and buy into it, you are taking a position. A position is an amount of money committed to an investment in anticipation of favorable price movements. There are two kinds of positions : a) Long positions are what most people do. When you buy long, that means you are anticipating an upward movement in the price, and that is how you profit. b) Short positions are the tricky ones. When you buy short, you are anticipating a fall in the price and the fall is the source of your profits. The shares will be sold and when the price falls they will be repurchased and given back and the difference is the where the investor profits.

Q. What is an index? A. An index is a stock-market indicator created as a statistical measure of the performance of an entire market or segment of a market based on a sample of securities from the market. An index is a means to evaluate the overall performance of a market or of a segment of the market. An index measures aggregate market movement. Apart from being a general market indicator, indices are used as a benchmark to evaluate individual portfolio performance. Professional money managers will always try to outperform the market, i.e. they will always try to do better than the indices. For example, if the value of a portfolio moves up by 10% while the index moved up by only 5% then the portfolio is doing better than the market.

Q. What is a Contract Note? A. Contract Note is a confirmation of trades done on a particular day on behalf of the client. It establishes a legally enforceable relationship between the client and Motilal Oswal with respect to the settlement of the trades. The Contract Note would show settlement number, order number, trade number, time of trade, quantity and price of the trades, brokerage charged, etc.

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Q. What do you mean by Market Trades and Off Market Trades? A. Any trade settled through a clearing corporation is termed as a Market Trade. These trades are done through stock brokers on a stock exchange. Off Market Trade is one which is settled directly between two parties without the involvement of a clearing corporation. The same delivery instruction slip can be used either for market trade or off-market trade by ticking one of the two options.

Q. What is a Rolling Settlement? A. In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. Normally, the trades pertaining to the rolling settlement are settled on a T+2 day basis.

Q. What is an Auction?
A. The securities are put up for auction by the Exchange on account of non-delivery of securities by the selling trading member to ensure that the buying trading member receives the securities due to him. The non-delivery by the trading member could arise on account of short delivery. The Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member.

Q. What happens if I could not make the payment of money or deliver shares on the pay-in day? A. In case of purchase on your behalf, the member broker has the liberty to close out transactions by selling securities in case you fail to make full payment to the broker for the execution of contract before pay-in day as fixed by Stock Exchange for the concerned settlement period unless you already have an equivalent credit with the broker. The shortages in case of sales are met through auction process and the difference in price indicated in Contract Note and price received through auction is paid by member to the Exchange which is then liable to be recovered from the client. In both the cases any loss in transactions will be deductible from the margin money paid by you.

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Q.

What

happens

if

the

shares

are

not

bought

in

the

auction?

A. If the shares could not be bought in the auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulate that the close out price will be the highest price recorded in that scrip in the settlement in which the concerned contract was entered into and upto the date of auction/close out OR 20% above the official closing price on the exchange.

Q. What happens if I do not get my money or share on the due date? A. In case a broker fails to deliver to you in time and make the proper payment of money/shares or you have a complaint against the conduct of the broker, you can file a complaint with the respective stock exchange. The exchange is required to resolve all complaints. To resolve the dispute the complainant can also resort to arbitration as provided on the reverse of Contract Note /Purchase or Sale Note. However, if the complaint is not addressed by the Stock Exchanges or is unduly delayed then the complaints along with supporting documents may be forwarded to Secondary Market Department of SEBI.

Q. What are the additional charges other than brokerage that can be levied on the investor? A. The trading member can charge: 1. Securities Transaction Tax. 2. Service tax as applicable. 3. Transaction charges levied by NSE, Stamp duty and other charges directly attributable to the transaction. The brokerage and service tax is indicated separately in the contract note.

Q. What are the tax implications of investing in Indian equities? A. Tax rates on investments gains are categorized as long term & short term capital gains. (a) Long term capital gains Long Term investments that are held for more than 12 months are termed as long term capital assets. Profit on sale of such assets is termed

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as long term capital gain (LTCG) which as per the latest Budget notification will attract nil tax. (b) Short term capital gains Shares that are held for less than 12 months are classified as short term capital assets which as per the latest Budget notification will attract 10% tax.

Q. Who is a Portfolio Manager? A. Any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the client, as the case may be is a Portfolio Manager. Each and every Portfolio manager should have the registered no. provided by SEBI to officially deal in portfolio.

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CONCLUSION

The research conducted by me is summarized as under: From the research, it could be concluded that Motilal Oswal in all ways as compared with the other stock broking houses has a good scope in the Rajkot city. But since it has just finished few years of inception in Rajkot, it hasnt gained much popularity in comparison Marwadi, Karvy, Indiabulls etc. Motilal Oswal in all ways is good, just that it needs to give more advertisement and fast services to the customers. It also needs to educate the people of Rajkot society, especially the once who could afford a high deposits and wants a margin for his more trading. By this way company can get two folded benefits as it can generate a good amount of brokerage by high volume of trading and also earn the interest reate on the funding facilities given to the customers. Still in Rajkot city the brand name (Motilal Oswal) needs to be emphasized on, while marketing & selling the product. Still the market is not 100% fully aware that what Motilal Oswal is. It could come up with products which cater to all segments of the society after a little cost cutting, than fixing up a standard service for all its customers, whose needs vary diversely.

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RECOMMENDATION

Motilal Oswal needs to make its marketing team strong and also it should increase marketing activities such as promotional campaigns. Motilal Oswal should educate the investors about Derivatives by organizing classes, corporate presentations, taking part in consumer fairs, organizing events. Company should show the benefits of trading on Derivatives & Commodities Motilal Oswal should turn existing customers (who are trading in Equity only) towards Derivatives. Motilal Oswal can also use Newspapers and Local New Channels as a medium of advertising. Motilal Oswal may also use its helpline number for giving education on Derivatives. Company may appoint special team for giving education & attracting people towards trading on Derivatives & Commodities. The company should make the policies of credit not risky but to some extent more friendly, so, it will at least not lose the existing clients. The infrastructure of the company should be given proper attention because, now a days the clients want facilities but not at the cost of the infrastructure. The company is amongst the leading broking companies. And if the above mentioned points are given proper attention, the company will have the good image in the minds of the clients which will turn out to be in the form of the better turnover and better holdings.

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Bibliography Here is the list of sites through which I got the information related to my project. I have used them as the primary information and has presented them in my own language. Websites:

1. www.Google.com 2. www.bseindia.com 3. www.nseindia.com 4. www.Motilal Oswal.com

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