CHAPTER-1

INTRODUCTION
A mechanism that allows trade is called a market. The original form of trade was
barter, the direct exchange of goods and services. Modern traders instead, generally
negotiate through a medium of exchange, such as money. As a result, buying can be
separated from selling, or earning. The invention of money (and later credit, paper money
and non-physical money) greatly simplified and promoted trade. Trade between two
traders is called bilateral trade, while trade between more than two traders is called
multilateral trade. Trade exists for many reasons. Due to specialization and division of
labor, most people concentrate on a small aspect of production, trading for other products.
Trade exists between regions because different regions have a comparative advantage in
the production of some tradable commodity, or because different regions' size allows for
the benefits of mass production. As such, trade at market prices between locations
benefits both locations. Trading can also refer to the action performed by traders and
other market agents in the financial markets.
The only stock exchange operating in the 19th century were those of Bombay set
up in 1875 and Ahmedabad set up in 1894 these were organized as voluntary non-profit
making organization of brokers to regulate and protect interest. Before the control
insecurities trading became a central subject under the constitution in 1950, it was a state
subject and the Bombay securities contract (CONTROL) Act of 1952 used to regulate
trade in securities. Under this act, the Bombay stock exchange in 1927 and Ahmedabad in
1937.During the war boom, a number of stock exchanges were organized in Bombay,
Ahmedabad and other centers, but they were not recognized. Soon after it became a
central subject, central legislation was proposed and a committee headed by A.D.
Gorwala went in to the bill for securities regulation.

On the basis of committees

recommendations and public discussions the securities contracts (regulations) Act

became law in 1956.
1

SCOPE OF THE PROJECT

Investor can assess the company financial strength and factors that effect the
company. Scope of the study is limited. We can say that 70% of the analysis is
proved good for the investor, but the 30% depends upon market sentiment.
The topic is selected to analyses the factors that affect the future EPS of a
company based on fundamentals of the company.
The market standing of the company studied in the order to give a better scope to
the Analysis is helpful to the investors, share holders, creditors for the rating of the
company.

OBJECTIVES OF THE PROJECT

To study the nature and structure of capital market.
To know the functioning of Karvy Stock Broking Ltd.
To perform the equity analysis.
To provide the way of approach for the investor to invest wisely in the market.
The purpose of doing this project is mainly to the facts - that affects the company
performance.
To assess the future EPS of the company.

METHODOLOGY
PRIMARY SOURCE
Gathered information by interacting with B. Satish Kumar (Associate Vice President),
KARVY STOCK BROKING LTD, Secunderabad.
SECONDARY SOURCE:
I referred Equity related articles from various magazines, newspapers and
journals. Material provided by Karvy Stock Broking Ltd
Browsing the concerned sites.
The collected data was analyzed by using graphs relative rating methods.
We did a sample survey for to find how many people aware of equity and how many
people invested in equity market.

LIMITATIONS OF THE PROJECT

Time constraint was a major limiting factor.
Forty five days were insufficient to even grasp the theoretical concepts.
Several other strategies that could have been studied were not done.
Lack of knowledge with the brokers.
Difference of theory from practice.
Absence of required knowledge and technology.

CHAPTER-II
INDUSTRY PROFILE
STOCK EXCHANGE:
Stocks (Shares, equity) are traded in stock exchange. India has two big stock
exchanges (Bombay Stock Exchange - BSE and National Stock Exchange - NSE) and few small
exchanges like Jaipur Stock Exchange etc. Click here to see the list of Stock Exchanges in India
Investor can trade stocks in any of the stock exchange in India.
Stock Broker:
Investor requires a Stock Broker to buy and sell shares in stock exchanges (BSE, NSE
etc.). Stock Broker is registered member of stock exchange. A stockbroker can register to one or
more stock exchanges.
Only stockbrokers can directly buy and sell shares in Stock Market. An investor must
contact a stockbroker to trade stocks. Broker charge commissions (brokerages) for their service.
Brokerage is usually a percent of total amount of trade and varies from broker to broker.
Stock Trading:
Traditionally stock trading is done through stockbrokers, personally or through
telephones. As number of people trading in stock market increase enormously in last few years,
some issues like location constrains, busy phone lines, miss communication etc start growing in
stock broker offices. Information technology (Stock Market Software) helps stock brokers in
solving these problems with Online Stock Trading.
Online Stock Market Trading is an Internet based stock trading facility. Investor can
trade shares through a website without any manual intervention from Stock Broker.
In this case these Online Stock Trading companies are stockbroker for the investor. They are
registered with one or more Stock Exchanges.

Mostly Online Trading Websites in India trades in BSE and NSE. There are two
different type of trading environments available for online equity trading. Installable software
based Stock Trading Terminals. These trading environments require software to be installed on
investors computer. This software is provided by the stockbroker. This softwares require high
speed internet connection. These kind of trading terminals are used by high volume intraday
equity traders. Below is the detail comparison of major Online Stock Market Trading websites in
India. This comparison is to help investor to take calculated decision while searching for new
trading portal.
1. ICICI Direct
2. Share khan
3. India bulls
4. 5Paisa
5. Motilal Oswal Securities
6. HDFC Securities
7. Reliance Money
8. IDBI Paisa Builder
9. Religare
10. Geojit
11. Karvy stock broking ltd
12. Kotak Securities
13. Standard Chartered-STCI Capital Markets Ltd
14. Angel Trade
15. HSBC Invest Direct

DEFINITION OF STOCK EXCHANGE:

Stock exchange means anybody or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of buying, selling
or dealing in securities.

It is an association of member brokers for the purpose of self-regulation and

protecting the interests of its members. It can operate only if it is recognized by the Government
under the securities contracts (regulation) Act, 1956. The recognition is granted under section 3
of the Act by the central government, Ministry of Finance.
HISTORY OF STOCK EXCHANGE:
The only stock exchanges operating in the 19 th century were those of Bombay set up
in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non profit-making
association of brokers to regulate and protect their interests. Before the control on securities
trading became central subject under the constitution in 1950, it was a state subject and the
Bombay securities contracts (control) Act of 1925 used to regulate trading in securities. Under
this act, the Bombay stock exchange was recognized in 1927 and Ahmadabad in 1937.
During the war boom, a number of stock exchanges were organized in Bombay,
Ahmadabad and other centers, but they were not recognized. Soon after it became a central
subject, central legislation was proposed and a committee headed by A.D. Gorwala went into the
bill for securities regulation. On the basis of the committees recommendations and public
discussion, the securities contracts (regulation) Act became law in 1956.
FUNCTIONS OF STOCK EXCHANGE:
Maintains activity training
Fixation of prices
Ensures safe and fare dealings
Aids in financing the industry
Dissemination of information
Performance end users
Self regulating organization
BYLAWS

Besides the above act, the securities contracts (regulation) rules were also made in
1975 to regulative certain matters of trading on the stock exchanges. There are also bylaws of the
exchanges, which are concerned with the following subjects.
Opening / closing of the stock exchanges, timing of trading, regulation of blank
transfers, regulation of Badla or carryover business, control of the settlement and other activities
of the stock exchange, fixating of margin, fixation of market prices or making up prices,
regulation of taravani business (jobbing), etc., regulation of brokers trading, brokerage chargers,
trading rules on the exchange, arbitrage and settlement of disputes, settlement and clearing of the
trading etc.
REGULATION OF STOCK EXCHANGES
The securities contracts (regulation) act is the basis for operations of the stock
exchanges in India. No exchange can operate legally without the government permission or
recognition. Stock exchanges are given monopoly in certain areas under section 19 of the above
Act to ensure that the control and regulation are facilitated. Recognition can be granted to a stock
exchange provided certain conditions are satisfied and the necessary information is supplied to
the government. Recognition can also be withdrawn, if necessary. Where there are no stock
exchanges, the government licenses some of the brokers to perform the functions of a stock
exchange in its absence.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI).

SEBI was set up as an autonomous regulatory authority by the government of
India in 1988 to protect the interests of investors in securities and to promote the development
of, and to regulate the securities market and for matter connected therewith or incidental
thereto. It is empowered by two acts namely the SEBI Act, 1992 and the securities contract
(regulation) Act, 1956 to perform the function of protecting investors rights and regulating the
capital markets.
7

INDIAN STOCK MARKET:

HISTORICAL BACKGROUND:
The stock market provides a market place for the purchase and sale of securities
evidencing the ownership of business property or of a public or business debt . The origin of the
stock market therefore goes back to the time when securities representing this property or
promises to pay were the first issued and made transferable from one person to another .
The earliest record of securities dealing in India were loan transactions of East
India company , way back in the eighteenth century . By 1830s there was a perceptible
increase in the volume of business , not only in loan but also in corporate stock and
shares . In 1850, the companies Act introducing

limited liability was enacted and with

it commenced the era of modern joint stock enterprise in India . The Act also served to
generate investor interest in corporate securities .
From 1850 to 1865, the history of brokers and their rise to power in Bombay
is the history of Premchand Roychand . Brokerage business attracted many people into the field
and by 1860, the number of brokers had

increased to 60.

An important early in the development of the stock market in India was the
formation of Native share and s tock Brokers Association in Bombay, in 1857, the
precursor of the present day Bombay stock Exchange. Infact, the oldest stock exchange in
Asia is the BSE having been established in 1875,while the Tokyo stock Exchange was founded
in 1878.
The setting up of BSE was followed by the formation of associations in Ahmadabad
(1894) , Calcutta (1908)and Madras (1937).

NATIONAL STOCK EXCHANGE:

The NSE was incorporated in November 1992 with an equity capital of Rs.25 crores,
the International Securities Consultancy (ISC) of Hong Kong has helped in setting up NSE. ISC
has prepared the detailed business plans and installation of hardware and software system.
The Promotion for NSE were financial institutions, insurance companies, banks and SEBI capital
market Ltd., infrastructure leasing and financial services and stock holding corporation ltd. It has
been set up to strengthen the move towards professionalization of the capital market as well as
provide nationwide securities trading facilities to investors.
NSE is not an exchange in the traditional sense where brokers own and manage the
exchange. A two tier administrative set up involving a company board and a governing aboard of
the exchange is envisaged.
NSE is a national market for shares PSU bonds, debentures and government securities
since infrastructure and trading facilities are provided.
NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The NSE -50. The new index,
which replaced the existing NSE-100 index is expected to serve as an appropriate Index foe
the new segment of futures and options. Nifty means National Index for Fifty Stocks. The NSE
50 comprises 50 companies that represent 20 broad Industry groups with an aggregate
market capitalization

of around Rs 1,70,000 crores. All companies includes in the Index

have a market capitalizations in excess of Rs. 400 crores each and should have traded for
85% of trading days at an impact cost of less than 1.5%

The base period for the index is the close of prices on Nov 3, 1995, which make one
year of completions of operations of NSEs capitals markets segments . The base values of the
Index has been set at 1000.
NSE--MIDCAP INDEX:
The NSE midcap Index or the Junior Nifty comprises 50 stocks that represent 21abroad
Industry groups and will provide proper representation of the madcap segments of the
Indian capitals Market. All stocks in the index should market capitalizations of greater than Rs.
200 corers and should have traded 85% of the trading days at an impact cost of less 2.5%.
The base period for the index is Nov 4, 1996, which signifies two years for
completion of operations of the capitals market segment of the operations. The values of the
Index has been set at 1000. Average daily turnover of the present scenario 258212 (lakhs) and
number of averages daily trades 2160(lakhs). Ex: Satyam computers.

BOMBAY STOCK EXCHANGE:

The stock exchange, Mumbai, population known as BSE was established in
1875 as The Native share and stock brokers association , as a voluntary non-profit making
association . It has an evolved over the years into its present status as the premier stock exchange
in the Asia, even older than the Tokyo stock Exchange, which was founded in 1878.
The exchange , while providing an efficient and transparent market for trading in
securities, uphold the interest of the investors and ensure redressed of

their

grievances,

whether against the companies or its own member brokers. It also strives to educate and
enlighten the investors by making available necessary information inputs and conducting
investor education programmes.

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A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public

representatives and an executive directors is the apex body ,which decides the policies and
regulates the affairs of the exchange.
The executive director as the chief executive officer is responsible for the day today
administration of the exchange. The average daily turnover of the exchange during the year
2000-01 (April March) was Rs. 3984.19 crores and average number of daily trades 5.69 lakhs.
How ever the average daily turn over of the exchange during the year 2001-02 has
declined to Rs. 1244.10 crores and number of average daily trades during the period to 5.17
lakhs .
The average daily turnover of the exchange during the year 2002-2003 declined and
number of average daily trades during the period is also decreased.
The Ban on all deferral product like BLESS AND ALBM in the Indian capital
market by SEBI with effect from July 2, 2001 , abolition of account period settlements,
introduction of compulsory rolling settlement in all script traded on the exchange with
effect from DEC 31 , 2001 ,etc., have adversely impacted the liquidity and consequently
there is a considerable decline in the daily turn over at the exchange . The average
daily turn over of

the

exchange

present

scenario is 110363 (lakhs) and number of

average daily trades 1057 (lakhs).

BSE INDICES:
In order to enable the market participants, analysts etc., to track the various
ups
1986

and downs in the Indian stock market , the exchange

an

equity

stock

index

called

BSE--SENSEX that

has

introduced in

subsequently

became the

barometer of the moment of the share prices

in the Indian stock market . It is a

Market Capitalization Weighted

30

index

of

components

stocks representing a

sample of large ,well established and leading companies. The base year of is1978-79. The
11

Sensex is widely report in both domestic and

International market through print as well

as electronic media .
Sensex calculated using a market capitalization weighted method. As per this
methodology. The level of the index reflects the total market value of all 30- component
Stock from different industries related to particular base period . The total market value of
a company is determined by multiplying the price of its stock by the number of Shares
outstanding . Statisticians call an index of set of combined variable (such as price and number
of shares ) a composite Index . An indexed

number is

used to represent the result

of this calculation in order to make the value easier to work with and track over a
time . It is much
on actual

easier to graph a chart based on Indexed values than one based

value world over majority of the well-knowing indices are constructed using

Market capitalization weighted method.

In practice , the daily calculation of SENSEX
aggregate

market value of the 30 companies

is done by dividing the

in the Index comparable over a period

or time and if the reference point for the entire Index maintenance adjustments.
SENSEX is widely used to describe the mood in the Indian stock markets . Base
year average is changed as per the formula new base year average = old base year average
*(new market value / old market value, there are24 stock exchanges recognized under the
securities Contract (regulation) Act,1956.At present there are 19 are working).
GROWTH OF STOCK EXCHANGE IN INDIA:
The stock market activities in India were relatively on a low key during the
beginning of the decade of 80s securities mainly because of the allies regime till 1947.
Afterwards, the Government of India concentrated more on administration and less on
development and pursuit of the philosophy of public sector dominating the economy. Stock
Exchange was placed under the exclusive regulation of the Government through proclamation in
1930s of the constitution of India.
12

During the 1950s & 1960s Indian economy was dominated by the public sector,
which was consider as the major vehicle for economic and industrial development. This trend has
changed since mid 80s with liberalization of Government policies and greater freedom given
to private sector.
This policy of progressively deregulating the economy led to the emerge of stock
market as a major instrument of finance for industry and trade. India can boast of being one of
the oldest stock markets in Asia. The Bombay Stock exchange (BSE) was founded in 1875, while
the London Stock Exchange was established in 1773.
PRESENT SCENARIO:
The decade of 80s witnessed the emergence of stock market as major source
of

finance for trade and industry . The process of liberalization

and deregulation has

led to a pace of growth almost unparalleled in the history of any nation. Average annual
capital mobilization from market, which used to about Rs.70 crores in the 60s and about Rs. 90
crores in the 70s increased manifold during the 80s with the amount raised in 1989-90 being
of the order of Rs.647.3 crores.
The number of listed companies rose from 2265 in 1980 to over Rs. 680 the end of
1998 the daily turnover accordingly shot up Rs. 25 crores in 1979-80 to about Rs 260 crores
in 1994-9 . The number of shareholders increased from 10 lakhs in 198 to 1.5 crore in 1998.
The number of share holder and investors in mutual funds has also risen
sharply from about 2 million to over 40 million during this period , rendering this nation to
the position of having the second largest investor population in the world next only to USA.
At present, there are 19 Stock Exchange recognized under securities Contracts
(Regulation) Act, 1956. These recognized stock exchanges mobilize and
saving of the general public into productive channels of investment.
13

direct the flow of

INTRODUCTION TO THE COMPANY

Introduction:
Success is a journey, not a destination. If we look for examples to prove this quote
then we can find many but there is none like that of karvy. Back in the year 1981, five people
created history by establishing karvy and company which is today known as karvy, the largest
financial service provider of India.
Success sutras of Karvy:
The success story of karvy is driven by 8 success sutras adopted by it namely trust,
integrity, dedication, commitment, enterprise, hard work and team play, learning and
innovation, empathy and humility. These are the values that bind success with karvy.
Vision of Karvy:
To achieve & sustain market leadership, Karvy shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide world class quality
services. In the process Karvy shall strive to meet and exceed customer's satisfaction and set
industry standards.
Mission statement:
Our mission is to be a leading and preferred service provider to our customers, and we
aim to achieve this leadership position by building an innovative, enterprising , and
technology driven organization which will set the highest standards of service and business
ethics.

14

The Success Ladder:

Company overview:
Karvy was established as karvy and company by five chartered accountants during the
year 1979-80, and then its work was confined to audit and taxation only. Later on it diversified
into financial and accounting services during the year 1981-82 with a capital of rs.150000. it
achieved its first milestone after its first investment in technology. Karvy became a known name
during the year 1985-86 when it forayed into capital market as registrar.
Evolution of KARVY:
It is well said that success is a journey not a destination and we can see it being proved by
karvy. Under this section we will see that how this karvy and company of 1980 became
karvy of 2008. Karvy blossomed with the setting up of its first branch at Mumbai during the
year 1987-88. The turning point came in the year 1989 when it decided to enter into one of the
not only emerging rather potential field too i.e; stock broking. It added the feather of stock
15

broking into its cap. At the same time it became the member of Hyderabad Stock Exchange
through associate firm karvy securities ltd and then karvy never looked back..it went on
adding services one after another, it entered into retail stock broking in the year 1990. Karvy
investor service centers were set up in the year 1992. Karvy which already enjoyed a wide
network through its investor service centers, entered into financial product distribution services
in the year 1993. One year more and karvy was now dealing into mutual fund services too in the
year 1994 but it didnt stopped there, it stepped into corporate finance and investment banking in
the year 1995.
Karvys strategy has always been being the first entrant in the market. Karvy again hit the
limelight by becoming the first registrar in the country to be awarded ISO 9002 in the year 1997.
Then it stepped into the other most happening sector i.e; IT enabled services by establishing its
own BPO units and at a gap of just 1 year it took the path of e-Business through its website
www.karvy.com . Then it entered into insurance services in the year 2001 with the launch of its
retail arm karvy- the finapolis: your personal finance advisor. Then in the year 2002 it
launched its PCG(Private Client Group) which looks after its High Networth Individuals .and
maintain their portfolio and provides them with other financial services. In the year 2003, it
commenced secondary debt and WDM trading.
It was a decade which saw many Indian companies going global..so why the largest
financial service provider of India should lag behind? Hence, karvy launched karvy global
services limited after entering into a joint venture with Computershare, Australia in the year
2004.the year 2004 also saw karvy entering into commodities marketing through karvy
comtrade.
Year 2005 saw karvy establishing a separate branch for its insurance services under the
head karvy insurance broking ltd and in the same year, after being impressed with the rapid
growth of Karvy Stock Broking limited, PCG group of Hong Kong acquired 25% stake at KSBL.
In the year 2006, karvy entered into one of the hottest sector of present time i.e real estate
through Karvy realty& services (India) ltd. hence , we can see now karvy being established as
the lagest financial service provider of the country.

16

Now Karvy group consists of 11 highly renowned entities which are as follow:

The first securities registry to receive ISO 9002 certification in India. Registered with
SEBI as Category I Registrar, is Number 1 Registrar in the Country. The award of being Most
Admired Registrar is one among many of the acknowledgements we received for our customer
friendly and competent services.

Karvy Stock Broking ltd. Consists of five units namely stock broking servics, depository
participant, advisory services, distribution of financial products, advisory services and private
client goups.

It is registered with SEBI as a category 1 merchant banker. Its clientele includesinclude

leading corporate, State Governments, foreign institutional investors, public and private sector
companies and banks, in Indian and global markets.

17

Karvy insurance broking ltd is also a part of Karvy Stock Broking ltd. At Karvy
Insurance Broking Limited both life and non-life insurance products are provided to retail
individuals, high net-worth clients and corporates.

The company provides investment, advisory and brokerage services in Indian

Commodities Markets. And most importantly, it offer a wide reach through our branch network
of over 225 branches located across 180 cities.

Karvy Global is a leading business and knowledge process outsourcing Services

Company offering creative business solutions to clients globally. It operates in banking and
financial services, inurance, healthcare and pharmaceuticals, media , telecom and technology. It
has its sales and business development office in New York, USA and the offshore global delivery
center in Hyderabad, India.

Karvy Realty (India) Limited is engaged in the business of real estate and property services
offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector

Facilitating financial support for real estate and investments in properties

Real estate portfolio advisory services

18

Karvy Computershare Private Limited is a joint venture between Computershare,

Australia and Karvy Consultants Limited, India in the registry management services industry.
Computershare, Australia is the worlds largest and only global share registry providing financial
market services and technology to the global securities industry. Karvy Corporate and Mutual
Fund Share Registry and Investor Services business, India's No. 1 Registrar and Transfer Agent
and rated as India's "Most Admired Registrar" for its overall excellence in volume management,
quality processes and technology driven services.

KDMSL is emerging as a leading service provider in the areas of E-governance

processing, insurance back office processing, record keeping, back office for BFSI clientele and
is in pursuit to establish credentials in the areas of Telecom processing, Data management
requirements of large corporate.
KDMSL is striving to achieve leadership position by tapping the Indian retail sector
boom, through a combination of our extensive branch network and proprietary IT backbone.
Needless to say, KDMSL is run as an independent outfit with seasoned professionals on board,
who have decades of expertise in the industry.
KDMSL is a fully owned subsidiary of Karvy Stock Broking Limited (KSBL),
incorporated in April 2008 and is head quartered at Hyderabad.

Karvy Now presents Karvy Fortune, a correlate opportunity from Indias foremost
financial services provider, karvy. It offers complete Karvys spectrum of financial products.
Karvy fortune gives the opportunity to associate with Karvy Family as Franchisee, Remisser,
E Franchisee or as an Independent Financial Advisors.

19

In its ambition to emerge as a complete financial advisor, KARVY has recently launched
its personal financial planning wing, KARVY Financial Planning. It proposes to cater all advice
to its customer pertaining to personal finance.
With India emerging as a strong market, the investments avenues have also increased, to
advice our customers the right avenue according to their suitability.
Our vision is "To cater to the unique needs and requirements of the mass affluent by
providing complete financial solutions and thereby enabling them to transform their dreams into
reality."

Organization structure of karvy:

Talking about the organization structure of karvy, we have the board of directors as the
supreme governing body , the chairman being Mr. C parthasarthy, mr. m yugandhar as the
managing director, mr m s ramakrishna andmr. Prasad v. potluri as directors.
The board of diretors head the karvy group, karvy computershares limited, karvy
investors services ltd., karvy comtrade, Karvy Stock Broking ltd., and karvy global services ltd.
Karvy group being the flagship company looks after the functional departments such as
corporate affairs, group human resources, finance & accounting, training & development,
technology services and corporate quality.
Karvy computershare private limited facilitates mutual fund services, share registry and
issue registry whereas merchant banking is looked after by karvy investor services ltd. Karvy
Stock Broking ltd heads its another branch too ie. Karvy insurance broking ltd. The services
offered by KSBL are: stock broking, depository, research, distribution, personal client group and
institutional desk. And finally the BPO services are managed by karvy global services ltd.
Summarizing it in a diagram, it can be presented as:

20

Spectrum of services offered by Karvy:

Karvy being the top registrar and transfer agent, functions as registrar in most of the
issues in the country. Talking about the mutual fund services offered by Karvy, we can get the
products of 33 AMCs over here. it deals in both closed ended funds as well as open ended too.
Now one must be thinking why to get the mutual funds from Karvy instead of getting it directly
from AMCs???we have great reasons for it: the first one being ; if we avail the services of Karvy
then we can get the information about all the AMCs and their products at a single place along
with expert recommendations whereas at an AMC we can get information about the products of
that specific AMC only. And the second being wide network of Karvy.nowadays we can find
Karvy offices at remote areas too.

21

Along with these, Karvy is very well handling the role of depository participant. Being
registered with both the depositories i.e.; NSDL (national securities depository ltd) and CDSL
(central depository services ltd), Karvy can have access to both. Its wide network also facilitates
it in distribution of retail financial products.
Karvy believes in being updated always. So it is always ready to use latest technologies
so that its clients always be in touch with the latest happenings along with Karvy. It offers ebusiness through internet through its website: www.karvy.com . Other than it, it also provides its
various services through SMSes.
Karvys services are not limited to its investors only rather its offerings are for its
corporate clients and distributors too. it is very well aware of the fact that in this era of neck to
neck competition, we cant ignore any of the aspects of our business.so theres a offering for
everybodyeveryones welcome at Karvy.

Why should investors choose for Karvy?

Excellence is next to nothing.and here at Karvy everybody tries their best to offer
excellent services to its clientele through its offerings maintaining the Karvy culture which
includes:
1. Controlled and low cost service culture: Karvy is there to serve its client at the
minimum possible cost. it controls cost by its various cost- cutting techniques and minimization
of avoidable costs.
2. Large volume processing capability: being the largest financial service provider in the
country, it has the unique distinction of operating its activities on a large scale which benefits all
the parties cordially.
3. Adherence to strict time schedule: Karvy knows that time is money and tries it best to
finish the task within the stipulated time schedule.

22

4. Expertise in coordinating multi-location responses: Karvy has got a wide network and
hence one can find its branches at most of the places in India. Thus it enjoys its presence
everywhere and coordinates among itself in solving the queries and in responding to any
situation.
5.Expertise in managing independent entities such as banks, post-office etc.: the work
culture of Karvy and the ethics followed inside Karvy makes its workforce compatible with
everybody, so the Karvy people establishes good coordination with independent entities too.

6. Pooling of group resources: Karvy group consists of eight subsidiaries, so it can easily
pool up its resources for accomplishment of its goals, whenever needed. The groups can help
each other whenever there are peaks and lows, and even in the case when they have huge targets
just as we saw few years back, Tata group pooling its resources to acquire Corus.
How Karvy achieved it?
The core competency of Karvy lies in the following points due to which it enjoys a
competitive edge over its competitors. The following culture adopted by karvy makes it all time
favorite among its clientele:
1. Professionally managed by qualified and trained manpower.
2. Uniquely structured in-house software and hardware department
3. Query handling within 48 hrs.
4. Strong secretarial, accounting and audit systems.
5. Unique work culture of working 7 days a week in 3 shifts.
6. Unmatched network spreading all over India.
How Achievements sounds synonymous to karvy:
The landmarks achieved by karvy very well define its success story. In the previous
pages, we learnt how a company started by five chartered accountants, named as karvy and
company turned into todays karvy group, the largest financial intermediary of India. But success
didnt came to karvy at a flow, the hard work and dedication of its workforce made it what it is
todaygradually it achieved the following landmarks and now it has became what we call the
karvy group, now it is:
23

1. Largest independent distributor for financial products.

2. amongst the top 5 stock broker.
3. among the top 3 depository participants.
4. Largest network of branches & business associates.
5. ISO 9002 certified operations by DNV.
6. amongst top 10 investment bankers.
7. Adjudged as one of the top 50 IT users in India by MIS south Asia.
8. full- fledged IT driven operation.
9. Indias no.1 registrar & securities transfer agent.
Clientele of Karvy:
Karvys culture has helped Karvy in achieving such a distinct position in the market where it can
boast of its huge client base. Be it a retail investor investing Rs. 500 in a SIP in Reliance mutual
fund or be it the largest corporate house of the country: Reliance industries- everybody is
heading towards Karvy for their wealth maximization, lets have a look at the clientele of Karvy :
According to the data published in year 2007, Karvy Stock Broking ltd. Operates through more
than 12000 terminals, more than 290000 accounts are maintained and commands over 3.14%
market share of NSE. The distribution services have access to more than Rs. 40 billion Assets
under Management. Karvy being a depository participant with both NSDL and CDSL, manages
more than 700000 accounts from more than 380 locations. Talking about the registry services, it
manages over 750 public/ right issues. At the same time, it is managing over 16 million
portfolios as registrar.
If we took a look at some of the top corporate houses availing the services of Karvy then
we have: Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund, Duetsche
Mutual Fund, Yogokawa, Marico Industries, Patni Computers, Morgan Stanley, Glenmark,
CRISIL, 3M, Kotak Mahindra Bank, Bharti Televenture, Infosys Technologies, Wipro, Infotech,
IPCL,TATA consultancy services, UTI mutual fund etc. Thus in total karvy serves over 16
million investors and 300 corporate.
Now, as the project was carried on in Burdwan, so there is a special reference to
working of Karvy at eastern zone and Stock Broking in particular.

24

KARVY at eastern zone:

Karvy Stock Broking Ltd was started 11 yrs ago i.e.; during the year 1996 at Jatin Das
road which was later on established as the regional head office. Presently Mr. Alok Chaturvedi is
heading the eastern zone. Talking about the zonal offices, Karvy has zonal offices at Kolkata,
south Bengal, north Bengal, North east, Jharkhand, Bihar, Orissa and Chhattisgarh. Each zonal
office has got its own zonal heads. Karvy is a member of three stock exchanges of India:
National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Hyderabad Stock
Exchange (HSE).

Structure according to the Products offered by Karvy:

REGIONAL
HEADS

PRODUCT
PRODUCT

HEADS
HEADS
Debt
Debt Division
Division

Reality
Reality

Mutua
Mutua
ll
funds
funds

Insuranc
Insuranc
ee

Broking
Broking

Comm
Comm
oditie
oditie
ss

Stock
Stock

Broking
Broking

25

DP
DP

Merchant
Merchant
&
& inv.
inv.
Banking
Banking

PMS
PMS

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high
success rate as a wealth management and wealth accumulation option. The difference between
unpredictability and a safety anchor in the market is provided by in-depth knowledge of market
functioning and changing trends, planning with foresight and choosing one’s options with
care. This is what we provide in our Stock Broking services.
We offer services that are beyond just a medium for buying and selling stocks and shares.
Instead we provide services which are multi dimensional and multi-focused in their scope. There
are several advantages in utilizing our Stock Broking services, which are the reasons why it is
one of the best in the country.
We offer trading on a vast platform ; National Stock Exchange and Bombay Stock
Exchange. More importantly, we make trading safe to the maximum possible extent, by
accounting for several risk factors and planning accordingly. We are assisted in this task by our
in-depth research, constant feedback and sound advisory facilities. Our highly skilled research
team, comprising of technical analysts as well as fundamental specialists, secure result-oriented
information on market trends, market analysis and market predictions. This crucial information is
given as a constant feedback to our customers, through daily reports delivered thrice daily ; The
Pre-session Report, where market scenario for the day is predicted, The Mid-session Report,
timed to arrive during lunch break , where the market forecast for the rest of the day is given and
The Post-session Report, the final report for the day, where the market and the report itself is
reviewed. To add to this repository of information, we publish a monthly magazine
“Karvy ; The Finapolis”, which analyzes the latest stock market trends and takes a
close look at the various investment options, and products available in the market, while a
weekly report, called “ Karvy Bazaar Baatein”, keeps you more informed on the
immediate trends in the stock market. In addition, our specific industry reports give
comprehensive information on various industries. Besides this, we also offer special portfolio
analysis packages that provide daily technical advice on scrips for successful portfolio
management and provide customized advisory services to help you make the right financial
moves that are specifically suited to your portfolio.
Our Stock Broking services are widely networked across India, with the number of our
trading terminals providing retail stock broking facilities. Our services have increasingly offered
customer oriented convenience, which we provide to a spectrum of investors, high-networth or
otherwise, with equal dedication and competence.
But true to our spirit, this success is not our final destination, but just a platform to launch
further enhanced quality services to provide you the latest in convenient, customer-friendly stock
management.
Over the years we have ensured that the trust of our customers is our biggest returns.
Factors such as our success in the Electronic custody business has helped build on our tradition
of trust even more. Consequentially our retail client base expanded very fast.

26

To empower the investor further we have made serious efforts to ensure that our research
calls are disseminated systematically to all our stock broking clients through various delivery
channels like email, chat, SMS, phone calls etc.
Our foray into commodities broking has been path breaking and we are in the process of
converting existing traders in commodities into the more organized mainstream of trading in
commodity
futures,
both
as
a
trading
and
risk
hedging
mechanism.
In the future, our focus will be on the emerging businesses and to meet this objective, we
have enhanced our manpower and revitalized our knowledge base with enhances focus on
Futures and Options as well as the commodities business.
Depository Participants
The onset of the technology revolution in financial services Industry saw the emergence
of Karvy as an electronic custodian registered with National Securities Depository Ltd (NSDL)
and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards enabling further
comfort to the investor by promoting paperless trading across the country and emerged as the top
3 Depository Participants in the country in terms of customer serviced.
Offering a wide trading platform with a dual membership at both NSDL and CDSL, we
are a powerful medium for trading and settlement of dematerialized shares. We have established
live DPMs, Internet access to accounts and an easier transaction process in order to offer more
convenience to individual and corporate investors. A team of professional and the latest
technological expertise allocated exclusively to our demat division including technological
enhancements like SPEED-e, make our response time quick and our delivery impeccable. A wide
national network makes our efficiencies accessible to all.

27

SWOT ANALYSIS

SRENGTH:1.
2.
3.
4.

Co-operative and experienced branch Managers

Good database
Low pricing
Karvy Brand

WEAKNESS:1.
2.
3.
4.

Inexperienced staff
Low awareness due to lack of advertisement
Lack of loyal clientage
Developing product

OPPORTUNITY:1. Untapped Market

2. Increased spending power
3. Changing mindset of customers
4. Unpredictable sensex

THREATS:1. Reach
2. Stiff competition from existing players in the market
3. Better products
28

What does Karvy Stock Broking Ltd offers?

Personalised service
Companies believes in providingpersonalized service and individual attention to each client to
ensure that we understand their goals and help them to achieve it.
Professional advice
Companies provide expert advice on equity and debt portfolios with an objective to provide
consistent long-term return while taking calculated market risks. Companies approach helps
client build a proper mix of products, and not concentrate on just one individual products. Hence,
serving long-term objectives in the best way.

Long-term relationship
Company believes that long-term vision is the only means to steady wealth creation. However to
achieve this one also need to take advantage of short term market opportunities while not losing
sight of long term objectives. Hence it partners all its clients in realizing their long-term vision.
Access to research report
Company provides the clients with access to the expert opinion of economists and analysts.
Transparency and confidentiality
Companies clients receive regular portfolio statements from relationship managers via e-mail.

29

REVIEW OF LITERATURE

F IN A N C IA L MA R K E T S :

DEFINITION:
THE TERM FINANCIAL MARKETS CAN BE A CAUSE OF MUCH CONFUSION. FINANCIAL

MARKETS COULD MEAN:

1. Organizations that facilitate the trade in financial products. i.e. Stock exchanges
facilitate the trade in stocks, bonds and warrants.
2. The coming together of buyers and sellers to trade financial products. i.e. stocks and
shares are traded between buyers and sellers in a number of ways including: The use of
stock exchanges; directly between buyers and sellers etc. In academia, students of finance
will use both meanings but students of economics will only use the second meaning.
Financial markets can be domestic or they can be international.

TYPES OF FINANCIAL MARKETS

The financial markets can be divided into different subtypes:
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common
stock, and enable the subsequent trading thereof. Bond markets, which provide
financing through the issuance of Bonds, and enable the subsequent trading
thereof.
Commodity markets, which facilitate the trading of commodities. Money markets,
which provide short term debt financing and investment.
30

 Derivatives markets, which provide instruments for the management of financial

risk. Futures markets, which provide standardized forward contracts for trading
products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange

Capital market
The capital market is the market for securities, where companies and the government can
raise long-term funds. The capital market includes the stock market and the bond market.
Financial regulators, such as the U.S. Securities and Exchange Commission, oversee the
capital markets in their designated countries to ensure that investors are protected against
fraud. The capital markets consist of the primary market, where new issues are distributed
to investors, and the secondary market, where existing securities are traded.
The capital markets consist of primary markets and secondary markets. Newly formed
(issued) securities are bought or sold in primary markets. Secondary markets allow
investors to sell securities that they hold or buy existing securities.

SHARE
31

What is share?
In finance a share is a unit of account for various financial instruments including
stocks, mutual funds, limited partnerships, and REITs. 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 .In simple Words, a share or stock is a document issued by a company,
which entitles its holder to be one of the owners of the company. A share is issued by a
company or can be purchased from the stock market. 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.
A company's stock price reflects what investors think about the stock, not necessarily what
the company is "worth." For example, companies that are growing quickly often trade at a higher
price than the company might currently be "worth." Stock prices are also affected by all forms of
company and market news. Publicly traded companies are required to report quarterly on their
financial status and earnings. Market forces and general investor opinions can also affect share
price.

Types of Shares:
1. Equity Shares: An equity share, commonly referred to as ordinary share, represents the
form of fractional ownership in a business venture.

What is an 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.
32

2. Rights Issue/ Rights Shares:

The issue of new securities to existing shareholders at a ratio to those already held, at a
price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares
for every 3 shares held at a price of Rs. 125 per share.

3. Bonus Shares:
Shares issued by the companies to their shareholders free of cost based on the number of
shares the shareholder owns.

4.Preference shares:
Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a
fixed rate to be paid regularly before dividend can be paid in respect of equity share.
They also enjoy priority over the equity shareholders in payment of surplus. But in the
event of liquidation, their claims rank below the claims of the companys creditors,
bondholders/debenture holders. Shares of a firm that encompass preferential rights over
ordinary common shares, such as the first right to dividends and any capital payments.

5.Cummulative Preference Shares:

A type of preference shares on which dividend accumulates if remained unpaid. All
arrears of preference dividend have to be paid out before paying dividend on equity
shares.

6.Cummulative Convertible Preference Shares:

A type of preference shares where the dividend payable on the same accumulates, if not
paid. After a specified date, these shares will be converted into equity capital of the
company.

7. Bond:

33

Bond is a negotiable certificate evidencing indebtedness. It is normally unsecured. A debt

security is generally issued by a company, municipality or government agency. A bond
investor lends money to the issuer and in exchange, the issuer promises to repay the loan
amount on a specified maturity date. The issuer usually pays the bond holder periodic
interest payments over the life of the loan. The various types of Bonds are as Follows:
Zero Coupon Bond:

Bond issued at a discount and repaid at a face value. No periodic interest is paid. The
difference between the issue price and redemption price represents the return to the
holder. The buyer of these bonds receives only one payment, at the maturity of the bond.
Convertible Bond:

A bond giving the investor the option to convert the bond in to equity at a fixed
conversion price.

Treasury Bills:
Short-term (up to one year) bearer discount security issued by government as a means of
financing their cash requirements.

Dividends
If you've ever owned stocks or held certain other types of investments, you might already
be familiar with the concept of dividends. Even those people who have made investments
that paid dividends may still be a little confused as to exactly what dividends are,
however after all, just because a person has received a dividend payment doesn't mean
that they fully appreciate where the payment is coming from and what its purpose is. If

34

you have ever found yourself wondering exactly what dividends are and why they're
issued, then the information below might just be what you've been looking for.

Defining the Dividend

Dividends are payments made by companies to their stock holders in order to share a
portion of the profits from a particular quarter or year. The amount that any particular
stockholder receives is dependent upon how many shares of stock they own and how
much the total amount being divided up among the stockholders amounts to. This means
that after a particularly profitable quarter a company might set aside a lump sum to be
divided up amongst all of their stockholders, though each individual share might be worth
only a very small amount potentially fractions of a cent, depending upon the total number
of shares issued and the total amount being divided. Individuals who own large amounts
of stock receive much more from the dividends than those who own only a little, but the
total per-share amount is usually the same.

When Dividends Are Paid

How often dividends are paid can vary from one company to the next, but in general they
are paid whenever the company reports a profit. Since most companies are required to
report their profits or losses quarterly, this means that most of them have the potential to
pay dividends up to four times each year. Some companies pay dividends more often than
this, however, and others may pay only once per year. The more time there is between
dividend payments can indicate financial and profit problems within a company, but if the
company simply chooses to pay all of their dividends at once it may also lead to higher
per-share payments on those dividends.

35

DEBT INSTRUMENT
What is a Debt Instrument?
Debt instrument represents a contract whereby one party lends money to another on predetermined terms with regards to rate and periodicity of interest, repayment of principal
amount by the borrower to the lender. In the Indian securities markets, the term bond is
used for debt instruments issued by the Central and State governments and public sector
organizations and the term debenture is used for instruments issued by private corporate

What are the features of debt instruments?

Each debt instrument has three features: Maturity, coupon and principal.

Maturity:
Maturity of a bond refers to the date, on which the Bond matures, which is the date on
which the borrower has agreed to repay the principal. Term-to-Maturity refers to the
number of years remaining for the bond to mature. The Term-to-Maturity changes
everyday, from date of issue of the bond until its maturity. The term to maturity of a bond
can be calculated on any date, as the distance between such a date and the date of
maturity. It is also called the term or the tenure of the bond.

Coupon:
Coupon refers to the periodic interest payments that are made by the borrower (who is
also the issuer of the bond) to the lender (the subscriber of the bond). Coupon rate is the
rate at which interest is paid, and is usually represented as a percentage of the par value
of a bond.

Principal:
Principal is the amount that has been borrowed, and is also called the par value or face
value of the bond. The coupon is the product of the principal and the coupon rate. The
name of the bond itself conveys the key features of a bond. For example, GS CG2008
11.40% bond refers to a Central Government bond maturing in the year 2008 and paying
36

a coupon of 11.40%. Since Central Government bonds have a face value of Rs.100 and
normally pay coupon semi-annually, this bond will pay Rs. 5.70 as six- monthly coupon,
until maturity.

What is meant by Interest payable by a debenture or a bond?

Interest is the amount paid by the borrower (the company) to the lender (the debentureholder) for borrowing the amount for a specific period of time. The interest may be paid
annual, semi-annually, quarterly or monthly and is paid usually on the face value (the
value printed on the bond certificate) of the bond.

What are the Segments in the Debt Market in India?

There are three main segments in the debt markets in India,
viz.,
(1) Government Securities,
(2) Public Sector Units (PSU) bonds, and
(3) Corporate securities.
The market for Government Securities comprises the Centre, State and State-sponsored
securities. In the recent past, local bodies such as municipalities have also begun to tap
the debt markets for funds. Some of the PSU bonds are tax free, while most bonds
including government securities are not tax-free. Corporate bond markets comprise of
commercial paper and bonds. These bonds typically are structured to suit the
requirements of investors and the issuing corporate, and include a variety of tailor- made
features with respect to interest payments and redemption.

Who are the Participants in the Debt Market?

Given the large size of the trades, Debt market is predominantly a wholesale market, with
dominant institutional investor participation. The investors in the debt markets are mainly
banks, financial institutions, mutual funds, provident funds, insurance companies and
corporates.
37

How can one acquire securities in the debt market?

You may subscribe to issues made by the government corporates in the primary market.
Alternatively ,you may purchase the same from the secondary market through the stock
exchanges.

DERIVATIVE
What is a Derivative?
Derivative is a product whose value is derived from the value of one or more basic
variables, called underlying. The underlying asset can be equity, index, foreign exchange
(forex), commodity or any other asset. Derivative products initially emerged as hedging
devices against fluctuations in commodity prices and commodity-linked derivatives
remained the sole form such products for almost three hundred years. The financial
derivatives came into spotlight in post-1970 period due to growing instability in the
financial markets. However, since their emergence, these products have become very
popular and by 1990s, they accounted for about two thirds of total transactions in
derivative products.

What are Types of Derivatives?

Forwards:

A forward contract is a customized contract between two entities, where settlement takes
place on a specific date in the future at todays pre-agreed price.
Futures:

A futures contract is an agreement between two parties to buy Or sell an asset at a certain
time in the future at a certain price.
Options:
38

An Option is a contract which gives the right, but not an obligation, to buy or sell the
underlying at a stated date and at a stated price.

Options are of two types - Calls and Puts options:

Calls give the buyer the right but not the obligation to buy a given quantity of the

underlying asset, at a given price on or before a given future date.

Puts give the buyer the right, but not the obligation to sell a Given quantity of
underlying asset at a given price on or before a given future date. Presently, at NSE
futures and options are traded on the Nifty, CNX IT, BANK Nifty and 116 single stocks.

Warrants:
Options generally have lives of up to one year. The majority of options traded on
exchanges have maximum maturity of nine months. Longer dated options are called
Warrants and are generally traded over-the counter.

What is an Option Premium?

At the time of buying an option contract, the buyer has to pay premium. The premium is
the price for acquiring the right to buy or sell. It is price paid by the option buyer to the
option seller for acquiring the right to buy or sell. Option premiums are always paid
upfront.

What is Commodity Exchange?

A Commodity Exchange is an association, or a company of any other body corporate
organizing futures trading in commodities. In a wider sense, it is taken to include any
organized market place where trade is routed through one mechanism, allowing effective
competition among buyers and among sellers this would include auction-type
exchanges, but not wholesale markets, where trade islocalized, but effectively takes place

39

through many non-related individual transactions between different permutations of

buyers and sellers.

What is meant by Commodity?

FCRA Forward Contracts (Regulation) Act, 1952 defines goods as every kind of
movable property other than actionable claims, money and securities. Futures trading is
organized in such goods or commodities as are permitted by the Central Government. At
present, all goods and products of agricultural (including plantation), mineral and fossil
origin are allowed for futures trading under the auspices of the commodity exchanges
recognized under the FCRA.

What is Commodity derivatives market?

Commodity derivatives market trade contracts for which the Underlying asset is
commodity. It can be an agricultural commodity like wheat, soybeans, rapeseed, cotton,
etc or precious metals like gold, silver, etc.

What is the difference between Commodity and Financial derivatives?

The basic concept of a derivative contract remains the same whether the underlying
happens to be a commodity or a financial asset. However there are some features which
are very peculiar to commodity derivative markets. In the case of financial derivatives,
most of these contracts are cash settled. Even in the case of physical settlement, financial
assets are not bulky and do not need special facility for storage. Due to the bulky nature
of the underlying assets, physical settlement in commodity derivatives creates the need
for warehousing. Similarly, the concept of varying quality of asset does not really exist as
far as financial under lying are concerned. However in the case of commodities, the
quality of the asset underlying a contract can vary at times.

What is a Mutual Fund?

40

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of
India) that pools money from individuals/corporate investors and invests the same in a
variety of different financial instruments or securities such as equity shares, Government
securities, Bonds, debentures etc. Mutual funds can thus be considered as financial
intermediaries in the investment business that collect funds from the public and invest on
behalf of the investors. Mutual funds issue units to the investors. The appreciation of the
portfolio or securities in which the mutual fund has invested the money leads to an
appreciation in the value of the units held by investors. The investment objectives
outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The
investment objectives specify the class of securities a Mutual Fund can invest in. Mutual
Funds invest in various asset classes like equity, bonds, debentures, commercial paper
and government securities.

SECURITIES
What is meant by Securities?
The definition of Securities as per the Securities Contracts Regulation Act (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.

INDEX
What is an Index?
An Index shows how a specified portfolio of share prices are moving in order to give an
indication of market trends. It is a basket of securities and the average price movement of
41

the basket of securities indicates the index movement, whether upwards or downwards.
An index is a number used to represent the changes in a set of values between a base time
period and another time period. A stock index is a number that helps measure the levels
of the market. Return on the index are expected to represent return that an investor can
get if he has the portfolio representing the entire market .various indices are computed for
use by the investors. Market indices have always been of great important in the world of
security analysis and portfolio management. People from all walks of life are affected by
market indexes. Economists, technicians and statisticians use stock marker indexes to
study long term growth patterns on the economy, to forecast business cycle patterns
Investors use the market index as a bench mark against which to evaluate the
performance of the it own or institutional portfolios. Technical analysts, base their
decision to buy and sell on tha pattern that appears in tha time series of the market
indexes. Market indexes are also used as economics indicators. The various indexes that
are complied in the Indian markets
are:

A) BSE Sensitive Index :

The Bombay stock exchange had started its own price index since 1986. Called the BSE
Sensitive Index. It consists of 30 scrips which actively traded. Many of which are in
Group A (specified shares) and a few in Group B (non-specified). It represents all the
major industries quoted on the exchange and has a base-year 1978-79.

B) BSE National index:

The BSE National Index was started by the Bombay Stock Exchange in 1988-89 with the
base year 1983-84. This series consists of 100 scrips belonging to NSE sensitive series.
These 100 scrips are chosen from all industrial group which represent the listing on all
major exchanges The method of complication is similar to that of BSE sensitive Index.
42

C) BSE200 ARE Dollex:

Two other indexes are complied by BSE since 1993. With base year 1989-90. Both
include activity traded scrips. BSE 200 is in rupee terms while the Dollex is in dollar
terms.

D) S & P CNX Nifty:

It is a well diversified 50 stock index accounting for 25 sectors of the economy. It has
1995 as the base year. Unlike other indices, the base value is fixed at 1000.

E) RBI Index:
The RBI complied security indices form 1949 onwards. These were classified under the
following heads:
1 Govt. and semi-Govt. securities
2 Debentures of companies.
3 Equity shares of companies

DEMAT ACCOUNT
What's a demat account?
Demat refers to a dematerialized account. Just as you have to open an account with a
bank if you want to save your money, make cheque payments etc, you need to open a
demat account if you want to buy or sell stocks. So it is just like a bank account where
actual money is replaced by shares. You have to approach the DPs (remember, they are
like bank branches), to open your demat account. Let's say your portfolio of shares looks
like this: 40 of Infosys, 25 of Wipro, 45 of HLL and 100 of ACC. All these will show in
43

your demat account. So you don't have to possess any physical certificates showing that
you own these shares. They are all held electronically in your account. As you buy and
sell the shares, they are adjusted in your account.

What is Dematerialization?
Dematerialization is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited to the
investors account with his Depository Participant (DP).

DEPOSITORY
What is a Depository?
A depository is like a bank wherein the deposits are securities (viz. shares, debentures,
bonds, government securities, units etc.) in electronic form. A depository is an
organization where the securities of a shareholder are held in the electronic from though
the medium of a depository participant The function of a depository are similar to that of
a bank. If an investor desires to utilize the services of a depository the investor has to
open an account with the depository through a depository participant. A Depository
participant is the reprehensive (agent) in the depository system. The D.P will maintain the
securities account
balances and intimate to the Holder about their holdings form time to time. SEBI has
permitted banks, financial institutions, custodies, stock brokers, etc, to become
participants in the depository. The main objective of a depository is to minimize the paper
works involved with the ownership, trading and transfer of securities. If an investor
intends to get back his securities in the physical form he can do so by requesting the
Depository participant. This is known as Dematerialization.

What's the difference between a depository and a depository participant?

44

A depository is a place where the stocks of investors are held in electronic form. The
depository has agents who are called depository participants (DPs). Think of it like a
bank. The head office where all the technology rests and details of all accounts held is
like the depository. And the DPs are the branches that cater to individuals. There are only
two depositories in India -- the National Securities Depository Ltd (NSDL) and the
Central Depository Services Ltd (CDSL). There are over a 100 DPs.

Is a demat account a must?

Nowadays, practically all trades have to be settled in dematerialized form. Although the
market regulator, the Securities and Exchange Board of India (SEBI), has allowed
trades of up to 500 shares to be settled in physical form, nobody wants physical shares
any more. So a demat account is a must for trading and investing. Most banks are also
DP participants, as are many brokers.
You can choose your very own DP.
To get a list, visit the NSDL and CDSL websites and see who the registered DPs are. A
broker is separate from a DP. A broker is a member of the stock exchange, who buys and
sells shares on his behalf and on behalf of his clients.

Where do I begin?

Look for a DP to have an account with Most banks are also DP participants, as are
many brokers. You can choose your very own DP.

To get a list, visit the NSDL and CDSL websites and see who the registered DPs are.
A broker is separate from a DP. A broker is a member of the stock exchange, who buys
and sells shares on his behalf and on behalf of his clients. A DP will just give you an
account to hold those shares. You do not have to take the same DP that your broker takes.
45

You can choose your own. But many brokers offer special incentives in the form of lower
charges for opening demat accounts with their DPs.

Get your documents in place

Once you approach your DP, you will be guided through the formalities of opening an
account. You must fill up an account opening form and sign an agreement with your DP.
The DP will ask for some documents as proof of your identity and address. Check with
them what they require. For instance, some may accept a driver's license, others may not.
Here is a broad list (you won't need all of them though)
PAN card
Voter's ID
Passport
Ration card
Driver's license
Photo credit card
Employee ID card
Bank attestation
IT returns
Electricity/ Landline phone bill
While they only ask for photocopies of the documents, they will need the originals for
verification. You will have to submit a passport size photograph on which you sign
across.

How many shares you need to have to open an account When opening an account
with a bank, you need a minimum balance.
46

Not so with a demat account. A demat account can be opened with no balance of shares.
And there is no minimum balance to be maintained either. You can have a zero balance in
your account.

What will it cost? The charges for account opening, annual account maintenance
fees and transaction charges vary between DPs. To get a comparative idea, visit
the websites of NSDL and CDSL.

Can I nominate? Sure. You can nominate whoever you like by filling up the

nomination details in the account opening form. This is to enable the nominee to
receive the securities after the death of the holder of the demat account.

STOCK MARKET
A stock market is a private or public market for the trading of company stock and
derivatives of company stock at an agreed price; both of these are securities listed on a
stock exchange as well as those only traded privately.
Stock market is also referred to as the Corporate Debt or Capital Market. While the
money market, which deals with short-term financial needs of business and industry, is
restricted to funds needed for a period of one year or less, instruments of the debt/capital
markets are raised for medium or long term needs. Indian Stock Market consists of three
distinct segments:
1. The Public Debt Market i.e. the market for Government securities, (also called
Gilt-edged Market). These are interest bearing and dated securities. This market is
regulated by RBI, the Central Bank and Banker to the Government.

47

2. PSU Bonds Market i.e. Bonds floated by public Sector units, Nationalized banks
and financial Institutions for raising Tier-II capital and also debentures floated by
Corporates. This is represented as the Corporate Debt Market.
3. The Equity Market for raising of equity or preference share capital by all
corporates. Money invested in company shares is not refundable, but if the shares
are listed in a stock exchange these can be sold or purchased, thus providing
liquidity to such investments. Shares do not carry interest, but shareholders can
participate in sharing the profits of the corporate body declared by way of
Dividends, bonus shares etc. While the hope of receiving attractive dividends
motivates the public to subscribe to the share capital, declaring dividend is not a
legal obligation on the part of the Companies, and hence not a right on the part of
the shareholders. But shareholders enjoy various other rights as conferred by the
Indian Companies Act, 1956. Indian Public companies generally follow the
objective of increasing shareholders wealth as the prime goal of financial
management
At this context it is relevant to mention about two categories of stock market, i.e.

Primary Market covering new public issues of all categories of securities,

including G-sec, bonds and equity/preference capital.

Secondary market, which deals with already issued securities of all types.
Transactions of the secondary market are carried out through one of the authorized
stocks exchanges, where the traded security is listed.

The expression 'stock market' refers to the system that enables the trading of company
stocks (collective shares), other securities, and derivatives. Bonds are still traditionally
traded in an informal, over-the-counter market known as the bond market. Commodities
are traded in commodities markets, and derivatives are traded in a variety of markets

48

Trading
Participants in the stock market range from small individual stock investors to large
hedge fund traders, who can be based anywhere. Their orders usually end up with a
professional at a stock exchange, who executes the order.Some exchanges are physical
locations where transactions are carried out on a trading floor, by a method known as
open outcry. This type of auction is used in stock exchanges and commodity exchanges
where traders may enter "verbal" bids However, buyers and sellers are electronically
matched. One or more NASDAQ market makers will always provide a bid and ask price
at which they will always purchase or sell 'their' stock. The Paris Bourse, now part of
Euronext, is an order-driven, electronic stock exchange. It was automated in the late
1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on
the trading floor or the Palais Brongniart. In 1986, the CATS trading system was
introduced, and the order matching process was fully automated.From time to time,
active trading (especially in large blocks of securities) have moved away from the 'active'
exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit
Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges
to their internal systems. That share probably will increase to 18 percent by 2010 as more
investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of
securities themselves, according to data compiled by Boston-based Aite Group LLC, a
brokerage-industry consultant

Market participants
Many years ago, worldwide, buyers and sellers were individual investors, such as
wealthy businessmen, with long family histories (and emotional ties) to particular
corporations. Over time, markets have become more "institutionalized"; buyers and
sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds,
hedge funds, investor groups, and banks). The rise of the institutional investor has
brought with it some improvements in market operations. Thus, the government was
49

responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small'
investor.

Capital Market in India

This is the market consisting of large number of individual investors, household savers,
professionals, and agriculturists, who are able to a preserve, a part of their current
earnings to invest in securities. They form the class of capital providers. On the other side
the corporate bodies engaged in Industry, trade and other business ventures are the
productive users of very large amount of capital. It is the capital market that transforms
the savings of large number of individuals to productive channel to meet the demands of
capital for Industry, trade and business. The financial/security market intermediaries
serve as the link between capital providers and capital seekers.
The individual savers are not organised. They can invest if they could secure the trust and
confidence that the funds invested would be prudently employed and they could
confidently expect to get a fair return/reward on their hard-earned savings. This is the
function of organised capital market to regulate market forces to ensure fair dealings, to
motivate savings on the part of the investors and to secure smooth flow of savings/capital
from investors to capital seekers for productive needs. This supervisory and regulatory
function is performed by SEBI, the market regulator and market developer
The capital market consists of the following components:

The scattered investors, who are regular savers and the purveyors of capital needed
by business and industry. Inter-se they are not organised.

The Corporate and Business houses who are the users or seekers of this capital,
who are mutually better organised.

The Financial Intermediaries who link the investors and the capital seekers/users,
who are professionals.
50

SEBI, the market developer and market regulator (the apex organization).

The Corporate Sector draws its capital requirements from the following sources:

Promoters Contribution;

Equity Capital raised from the shareholders (generally referred to as equity

capital);

Preference share capital raised from the shareholders

Bonds/Debentures raised from the Public (generally referred to as Debt Capital);

Term Loans from Banks & Financial Institutions;

Short-term Working Capital from Banks;

Unsecured Loans & Deposits; and

Internal generation of Funds (Profits/surpluses reproached and held as Reserves).

Stock market is also referred to as the Corporate Debt or Capital Market. While the
money market, which deals with short-term financial needs of business and industry is
restricted to funds needed for a period of one year or less, instruments of the debt/capital
markets are raised for medium or long term needs. Indian Stock Market consists of three
distinct segments:

The Public Debt Market i.e. the market for Government securities (also called
Gilt-edged Market). These are interest bearing and dated securities. This market is
regulated by RBI, the Central Bank of the country and banker to the Government.

PSU Bonds Market i.e. Bonds floated by public Sector units, nationalized banks
and financial Institutions for raising Tier-II capital and also debentures floated by
corporates. This is represented as the Corporate Debt Market.
51

The Equity Market for raising of equity or preference share capital by all
corporates. Money invested in company shares is not refundable, but if the shares
are listed in a stock exchange these can be sold or purchased, thus providing
liquidity to such investments. Shares do not carry interest, but shareholders can
participate in sharing the profits of the corporate body declared by way of
dividends, bonus shares etc. While the hope of receiving attractive dividends
motivates the public to subscribe to the share capital, declaring dividend is not a
legal obligation on the part of the companies, and hence not a right on the part of
the shareholders. But shareholders enjoy various other rights as conferred by the
Indian Companies Act, 1956. Indian Public companies generally follow the
objective of increasing shareholders wealth as the prime goal of financial
management.

At this context it is relevant to mention about two categories of stock market, i.e.

Primary market covering new public issues of all categories of securities,

including G-sec, bonds and equity/preference capital.

Secondary market, which deals with already issued securities of all types.
Transactions of the secondary market are carried out through one of the authorized
stock exchanges, where the traded security is listed.

52

CHAPTER-IV
ANALYSIS OF THE PROJECT

ROLE OF CAPITAL MARKET

The primary role of the capital market is to raise long-term funds for governments,
banks, and corporations while providing a platform for the trading of securities.

This fundraising is regulated by the performance of the stock and bond markets
within the capital market. The member organizations of the capital market may issue
stocks and bonds in order to raise funds. Investors can then invest in the capital
market by purchasing those stocks and bonds.
The capital market, however, is not without risk. It is important for investors to understand
market trends before fully investing in the capital market. To that end, there are various
market indices available to investors that reflect the present performance of the market.

Regulation of the Capital Market

Every capital market in the world is monitored by financial regulators and their respective
governance organization. The purpose of such regulation is to protect investors from fraud
and deception. Financial regulatory bodies are also charged with minimizing financial
losses, issuing licenses to financial service providers, and enforcing applicable laws.

The Capital Markets Influence on International Trade

53

Capital market investment is no longer confined to the boundaries of a single nation.

Todays corporations and individuals are able, under some regulation, to invest in the
capital market of any country in the world. Investment in foreign capital markets has
caused substantial enhancement to the business of international trade.
The Primary and Secondary Markets
The capital market is also dependent on two sub-markets the primary market and the secondary
market. The primary market deals with newly issued securities and is responsible for generating new
long-term capital. The secondary market handles the trading of previously-issued securities, and
must remain highly liquid in nature because most of the securities are sold by investors. A capital

market with high liquidity and high transparency is predicated upon a secondary market
with the same qualities.

ROLE OF CAPITAL MARKET IN INDIA:

Indias growth story has important implications for the capital market, which has grown
sharply with respect to several parameters amounts raised number of stock exchanges
and other intermediaries, listed stocks, market capitalization, trading volumes and turnover,
market instruments, investor population, issuer and intermediary profiles.
The capital market consists primarily of the debt and equity markets. Historically, it contributed
significantly to mobilizing funds to meet public and private companies financing requirements.
The introduction of exchange-traded derivative instruments such as options and futures has
enabled investors to better hedge their positions and reduce risks.
Indias debt and equity markets rose from 75 per cent in 1995 to 130 per cent of GDP in 2005. But
the growth relative to the US, Malaysia and South Korea remains low and largely skewed,
indicating immense latent potential. Indias debt markets comprise government bonds and the
corporate bond market (comprising PSUs, corporates, financial institutions and banks).

India compares well with other emerging economies in terms of sophisticated market design of

54

equity spot and derivatives market, widespread retail participation and resilient liquidity.

SEBIs measures such as submission of quarterly compliance reports, and company

valuation on the lines of the Sarbanes-Oxley Act have enhanced corporate governance.
But enforcement continues to be a problem because of limited trained staff and
companies not being subjected to substantial fines or legal sanctions.
Given the booming economy, large skilled labour force, reliable business community, continued
reforms and greater global integration vindicated by the investment-grade ratings of Moodys

and Fitch, the net cumulative portfolio flows from 2003-06 (bonds and equities)
amounted to $35 billion.
The number of foreign institutional investors registered with SEBI rose from none in
1992-93 to 528 in 2000-01, to about 1,000 in 2006-07.
Indias stock market rose five-fold since mid-2003 and outperformed world indices with
returns far outstripping other emerging markets, such as Mexico (52 per cent), Brazil
(43 per cent) or GCC economies such as Kuwait (26 per cent) in FY-06.
In 2006, Indian companies raised more than $6 billion on the BSE, NSE and other regional
stock exchanges. Buoyed by internal economic factors and foreign capital flows, Indian
markets are globally competitive, even in terms of pricing, efficiency and liquidity.

US sub prime crisis:

The financial crisis facing the Wall Street is the worst since the Great Depression and
will have a major impact on the US and global economy. The ongoing global financial
crisis will have a domino effect and spill over all aspects of the economy. Due to the
Western worlds messianic faith in the market forces and deregulation, the market
friendly governments have no choice but to step in.
The top five investment banks in the US have ceased to exist in their previous forms. Bears
Stearns was taken over some time ago. Fannie Mae and Freddie Mac are nationalised to
prevent their collapse. Fannie and Freddie together underwrite half of the home loans in the
United States, and the sum involved is of $ 3 trillionabout double the entire annual output of

55

the British economy. This is the biggest rescue operation since the credit crunch began.
Lehman Brothers, an investment bank with a 158 year-old history, was declared bankrupt;
Merrill Lynch, another Wall Street icon, chose to pre-empt a similar fate by deciding to sell to
the Bank of America; and Goldman Sachs and Morgan Stanley have decided to transform

56

The question arises: why has this happened?

Besides the cyclical crisis of capitalism, there are some recent factors which have
contributed towards this crisis. Under the so-called innovative approach, financial
institutions systematically underestimated risks during the boom in property prices, which
makes such boom more prolonged. This relates to the shortsightedness of speculators and
their unrestrained greed, and they, during the asset price boom, believed that it would stay
forever. This resulted in keeping the risk aspects at a minimum and thus resorting to more
and more risk taking financial activities. Loans were made on the basis of collateral whose
value was inflated by a bubble. And the collateral is now worth less than the loan. Credit
was available up to full value of the property which was assessed at inflated market prices.
Credits were given in anticipation that rising property prices will continue. Under looming
recession and uncertainty, to pay back their mortgage many of those who engaged in such
an exercise are forced to sell their houses, at a time when the banks are reluctant to lend
and buyers would like to wait in the hope that property prices will further come down. All
these factors would lead to a further decline in property prices.

Effect of the subprime crisis on India:

Globalization has ensured that the Indian economy and financial markets cannot stay
insulated from the present financial crisis in the developed economies.
In the light of the fact that the Indian economy is linked to global markets through a full
float in current account ( trade and services) and partial float in capital account (debt
and equity), we need to analyze the impact based on three critical factors: Availability of
global liquidity; demand for India investment and cost thereof and decreased consumer
demand affecting Indian exports.
The concerted intervention by central banks of developed countries in injecting liquidity is
expected to reduce the unwinding of India investments held by foreign entities, but fresh

57

investment

flows

into

India

are

in

doubt.

The impact of this will be three-fold: The element of GDP growth driven by off-shore
flows (along with skills and technology) will be diluted; correction in the asset prices
which were hitherto pushed by foreign investors and demand for domestic liquidity
putting pressure on interest rates
.
While the global financial system takes time to nurse its wounds leading to low
demand for investments in emerging markets, the impact will be on the cost and
related risk premium. The impact will be felt both in the trade and capital account.
Indian companies which had access to cheap foreign currency funds for financing their
import and export will be the worst hit. Also, foreign funds (through debt and equity) will
be available at huge premium and would be limited to blue-chip companies.

The impact of which, again, will be three-fold: Reduced capacity expansion leading to
supply side pressure; increased interest expenses to affect corporate profitability and
increased demand for domestic liquidity putting pressure on the interest rates.
Consumer demand in developed economies is certain to be hurt by the present crisis,
leading to lower demand for Indian goods and services, thus affecting the Indian exports.
The impact of which, once again, will be three-fold: Export-oriented units will be the worst hit
impacting employment; reduced exports will further widen the trade gap to put pressure on rupee
exchange rate and intervention leading to sucking out liquidity and pressure on interest rates.

The impact on the financial markets will be the following: Equity market will continue to
remain in bearish mood with reduced off-shore flows, limited domestic appetite due to liquidity
pressure and pressure on corporate earnings; while the inflation would stay under control,
increased demand for domestic liquidity will push interest rates higher and we are likely to
witness gradual rupee depreciation and depleted currency reserves. Overall, while RBI would

58

inject liquidity through CRR/SLR cuts, maintaining growth beyond 7% will be a struggle.
The banking sector will have the least impact as high interest rates, increased demand for rupee
loans and reduced statutory reserves will lead to improved NIM while, on the other hand, other
income from cross-border business flows and distribution of investment products will take a hit.

Banks with capabilities to generate low cost CASA and zero cost float funds will gain
the most as revenues from financial intermediation will drive the banks profitability.
Given the dependence on foreign funds and off-shore consumer demand for the India
growth story, India cannot wish away from the negative impact of the present global
financial crisis but should quickly focus on alternative remedial measures to limit
damage and look in-wards to sustain growth!
Role of capital market during the present crisis:
In addition to resource allocation, capital markets also provided a medium for risk
management by allowing the diversification of risk in the economy. The wellfunctioning capital market improved information quality as it played a major role in
encouraging the adoption of stronger corporate governance principles, thus
supporting a trading environment, which is founded on integrity.
liquid markets make it possible to obtain financing for capital-intensive projects
with long gestation periods..
For a long time, the Indian market was considered too small to warrant much attention. However,
this view has changed rapidly as vast amounts of international investment have poured into our
markets over the last decade. The Indian market is no longer viewed as a static universe but as a
constantly evolving market providing attractive opportunities to the global investing community.
Now during the present financial crisis, we saw how capital market stood still as the symbol of
better risk management practices adopted by the Indians. Though we observed a huge fall in the

59

sensex and other stock market indicators but that was all due to low confidence
among the investors. Because balance sheet of most of the Indian companies listed
in the sensex were reflecting profit even then people kept on withdrawing money.
While there was a panic in the capital market due to withdrawal by the FIIs, we saw
Indian institutional investors like insurance and mutual funds coming for the rescue
under SEBI guidelines so that the confidence of the investors doesnt go low.
SEBI also came up with various norms including more liberal policies regarding participatory
notes, restricting the exit from close ended mutual funds etc. to boost the investment.

While talking about currency crisis, the rupee kept on depreciating against the dollar
mainly due to the withdrawals by FIIs. So , the capital market tried to attract FIIs once
again. SEBI came up with many revolutionary reforms to attract the foreign investors
so that the depreciation of rupee could be put to hault.

60

INDIAN STOCK MARKET AN OVERVIEW

Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meagre and obscure.
The East India Company was the dominant institution in those days and business in its
loan securities used to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses
took place in Bombay. Though the trading list was broader in 1839, there were only
half a dozen brokers recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was
stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to
250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for
example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a
place in a street (now appropriately called as Dalal Street) where they would conveniently
assemble and transact business. In 1887, they formally established in Bombay, the "Native
Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange
"). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated
in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations

Ahmedabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmedabad and rapidly forged ahead. As new mills were

61

floated, the need for a Stock Exchange at Ahmedabad was realized and in 1894
the brokers formed "The Ahmedabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmedabad, the jute industry was to Calcutta.
Also tea and coal industries were the other major industrial groups in Calcutta. After the Share
Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a
boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June
1908, some leading brokers formed "The Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in India with the
Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company Limited in
1907, an important stage in industrial advancement under Indian enterprise was reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with
100 members. However, when boom faded, the number of members stood reduced
from 100 to 3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there was a rapid
increase in the number of textile mills and many plantation companies were floated. In 1937, a
stock exchange was once again organized in Madras - Madras Stock Exchange Association
(Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged
with the Punjab Stock Exchange Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth
The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump.
But, in 1943, the situation changed radically, when India was fully mobilized as a supply base.

62

On account of the restrictive controls on cotton, bullion, seeds and other

commodities, those dealing in them found in the stock market as the only outlet for
their activities. They were anxious to join the trade and their number was swelled by
numerous others. Many new associations were constituted for the purpose and
Stock Exchanges in all parts of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited
and the Delhi Stocks and Shares Exchange Limited - were floated and later in June
1947, amalgamated into the Delhi Stock Exchange Association Limited.
Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.
Most of the other exchanges languished till 1957 when they applied to the Central Government
for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta,
Madras, Ahmedabad, Delhi, Hyderabad and Indore, the well-established exchanges, were
recognized under the Act. Some of the members of the other Associations were required to be
admitted by the recognized stock exchanges on a concessional basis, but acting on the
principle of unitary control, all these pseudo stock exchanges were refused recognition by the
Government of India and they thereupon ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above).
The number virtually remained unchanged, for nearly two decades. During eighties, however, many
stock exchanges were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange
Association Limited (at Kanpur, 1982), and Pune Stock Exchange Limited

63

(1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock Exchange Limited
(1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange
Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock
Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot,
1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established
exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized
stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI)
and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favoring government policies towards security market industry.

64

Growth Pattern of the Indian Stock Market

Sl.No.

As on 31st 1946 1961 1971 1975 1980 1985 1991

1995

December
1

No. of

14

20

22

Stock Exchanges
No. of

1125 1203 1599 1552 2265 4344 6229

8593

1506 2111 2838 3230 3697 6174 8967

11784

Listed Cos.
No. of Stock

Issues of
Listed Cos.

Capital of Listed
Cos. (Cr. Rs.)
Market value of

270 753 1812 2614 3973 9723 32041 59583

971 1292 2675 3273 6750 25302 110279 478121

Capital of Listed
Cos. (Cr. Rs.)
Capital per

24

63

113 168 175 224

86

107 167 211 298 582

514

693

1770

5564

344

803

Listed Cos. (4/2)

(Lakh Rs.)
Market Value of

Capital per Listed

Cos. (Lakh Rs.)
(5/2)
Appreciated value 358 170 148 126 170 260

of Capital per
Listed Cos. (Lak Rs.)

Trading Pattern of the Indian Stock Market

65

Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend paying,
growth-oriented companies with a paid-up capital of at least Rs.50 million and a market
capitalization of at least Rs.100 million and having more than 20,000 shareholders are,
normally, put in the specified group and the balance in non-specified group.
Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when entering into
the contract which shall not be more than 14 days following the date of the contract" : and

(b) forward transactions "delivery and payment can be extended by further period of 14
days each so that the overall period does not exceed 90 days from the date of the
contract". The latter is permitted only in the case of specified shares. The brokers who
carry over the outstanding pay carry over charges (cantango or backwardation) which
are usually determined by the rates of interest prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy and
sell securities on his own account and risk, in contrast with the practice prevailing on New York
and London Stock Exchanges, where a member can act as a jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long settlement
periods and benami transactions, which affected the small investors to a great extent. To provide
improved services to investors, the country's first ringless, scripless, electronic stock exchange OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust of India,
Industrial Credit and Investment Corporation of India, Industrial Development Bank of

India, SBI Capital Markets, Industrial Finance Corporation of India, General

Insurance Corporation and its subsidiaries and CanBank Financial Services.
Trading at OTCEI is done over the centers spread across the country. Securities
traded on the OTCEI are classified into:

Listed Securities - The shares and debentures of the companies listed on the
OTC can be bought or sold at any OTC counter all over the country and they
should not be listed anywhere else

Permitted Securities - Certain shares and debentures listed on other

exchanges and units of mutual funds are allowed to be traded

Initiated debentures - Any equity holding at least one lakh debentures of a

particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The
original certificate will be safely with the custodian. But, a counter receipt is generated
out at the counter which substitutes the share certificate and is used for all transactions.
In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 14 days.

Compared to the traditional Exchanges, OTC Exchange network has the following advantages:

OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.

Greater transparency and accuracy of prices is obtained due to the screenbased scripless trading.

Since the exact price of the transaction is shown on the computer screen, the
investor gets to know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

In the case of an OTC issue (new issue), the allotment procedure is completed
in a month and trading commences after a month of the issue closure, whereas
it takes a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency
investors are gradually becoming aware of the manifold advantages of the OTCEI.
National Stock Exchange (NSE)
With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of
the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial
Credit and Investment Corporation of India, Industrial Finance Corporation of India, all
Insurance Corporations, selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.
Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as government
securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players
like banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading
mechanism which adopts the principle of an order-driven market. Trading members
can stay at their offices and execute the trading, since they are linked through a
communication network. The prices at which the buyer and seller are willing to
transact will appear on the screen. When the prices match the transaction will be
completed and a confirmation slip will be printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in

the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the major
source of long-term finance for industrial projects, India cannot afford to damage the capital
market path. In this regard NSE gains vital importance in the Indian capital market system.

Process for the studyof capital market

The purpose of this project was to find a successful trading system using candlesticks and
moving averages in tandem. Two exponential moving averages were used namely 8
EMA and 34 EMA with the help of which trading signal has to be generated over a one
year time period from May 2013 to June 2014. Two different strategies were used as
mentioned above and the study was done on 14 selected securities namely, Balrampur
Chini, DLF, ITC, Reliance Capital, Suzlon Energy, JP Associates, Sesa Goa, Bhushan
Steel, Infosys, Ansal Properties, ICICI Bank, HUL, L&T and ONGC. Along with this the
same study is also done on Nifty futures. The study was conducted by plotting fifteen
minute candlestick chart along with the two EMAs simultaneously on Metastock.

findings
The following table illustrates the accuracy and the returns for the study over a period of
one year:
Scrips
Balrampur
Chini
DLF
ITC
Reliance
Capital
Suzlon Energy
JP Associates
Sesa Goa
Bhushan Steel
Infosys
Ansal
Properties
ICICI Bank
HUL
L&T
ONGC

Returns
in 1st
strategy
18.7
8
57.

Returns in
2nd
strategy
23.7
4
50.3

Accur
acy
(1st)
47.19

Accur
acy
(2nd)
42.7

39.8

41.84

4.13

39.13

34.78

17.3
9
15.8

30.48

28.57

36.67

33.33

3
32.2
9
9.39

50

50

34.95

33.98

11.6

41.7

37.5

12.
4
12.8

14.6
3
-

44.68

46.81

38.55

31.33

9
36.9
2
15.3

4.25
31.9
4
19

49.44

50.56

38.71

35.48

9
11.6
8
4.9

15.0
5
13.4

38.46

33.65

32.14

33.93

3
2.7
3
0.6
5
42.5
3
37.9
7
76.4
9
100.23

Table 2.1: Outcome showing 8

returns and accuracy for both the strategies

Analysis
In the first strategy, the returns were highest for Bhushan Steel at 100.23% followed by
Sesa Goa at 76.49% and DLF at 57.3%. On the other hand the lowest return was given by
Reliance Capital at 0.65% followed by ITC at 2.73% and ONGC at 4.98%.
Following charts illustrates the trend for Bhushan Steels and Reliance
Capital:

Chart
3.2:
Illustration
Bhushan Steels

of

In the second strategy, the returns were highest for DLF at 50.3% followed by JP
Associates at 32.29% and ICICI Bank at 31.94%. On the other hand the lowest return
was given by Ansal Properties at -4.25% followed by ITC at 4.13% and Sesa Goa at 9.39%.
Following charts illustrates the trend for DLF and Ansal
Properties:

Chart 3.4: Illustration

of DLF

Chart 3.5: Illustration of Ansal

Properties

Study of Nifty Futures for a period of May 2014 to June 2015

With the same strategies, a similar study was conducted on one of Indias premier Index
futures, i.e., Nifty Futures. The following table shows the outcome of the study:
Nifty Futures
st

Return in 1 strategy

395.7 points

st

Accuracy in 1 Strategy 36.84%

Return in 2

nd

strategy

Accuracy in 2

nd

173.8 points

Strategy 33.68%

Table 1: Outcome of Nifty Futures

With the first strategy, there was a benefit of about 400 points where as, with the second
strategy it was 173.8 points.

Chart 3.6: Illustration of Nifty Futures

Conclusion of the study of both the trading strategies

With the study of 14 different scrips and an Index future on both the trading strategies, it
was observed that the first strategy was comparatively better than the second strategy.
For most of the scrips the returns were higher if trading is done with the first strategy. The
return for all the 14 scrips taken together comes to 430.94% and 254.44% taking the first and
the second strategies respectively. For Nifty futures also, the returns were higher with the
first trading strategy.
From the above study, it can be clearly concluded that the first strategy stands ahead in
comparison with the second.
Based on this conclusion, a further study is conducted for the futures contract of the entire
50 scrips comprising Nifty.

Nifty Fifty Stock Futures analysis for a period of one year from May
2015 to June 2016
After an in-depth study of both the trading strategies, it has already been concluded that the
first strategy stay ahead in comparison with the second one. Based on the outcome of the
previous study, another research is carried out with the futures contract of the 50 scrips
comprising the Nifty.
In this study, I have analyzed both the EMAs with double crossover method, i.e., when the 8
EMA crosses above the 34 EMA, a buy signal is generated. Conversely, when the 8 EMA
crosses below the 34 EMA, a sell signal is generated. As these are future contracts, I am
considering both the long and short calls for the purpose of study, as this will enable the
readers to understand the returns in both the calls.
Following table shows the outcome of the above study. It contains the return and accuracy
for both long and short calls.
S. No.
1
2
3
4
5
6
7
8
9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
8
1
9
2
0
2
1

Nifty 50
Stock
ABBFutures
ACC
Ambuja Cements
Axis Bank
Bharti Airtel
BHEL
BPCL
Cairn India
Cipla
DLF
GAIL
HCL Tech
HDFC
HDFC Bank
Hero Honda
Hindalco
HUL
ICICI Bank
Idea Cellular
IDFC
Infosys

Long Calls
Return Accurac
11.70% y48.5%
-4.24%
30.8%
-9.02%
46.9%
52.57%
62.5%
9.22%
46.4%
15.32%
46.4%
36.95%
53.3%
26.36%
54.8%
3.62%
38.2%
41.70%
42.3%
10.74%
53.8%
55.62%
58.3%
30.73%
61.5%
37.47%
57.7%
28.83%
54.2%
45.45%
58.3%
32.95%
57.7%
44.48%
59.3%
15.45%
42.3%
45.15%
60.7%
53.25%
71.4%

Short Calls
Return Accurac
5.90% y33.3%
10.80%
48.0%
-10.91%
31.0%
18.93%
48.1%
25.81%
51.7%
-3.55%
48.1%
3.46%
46.7%
5.46%
36.7%
-15.73%
34.4%
59.17%
64.0%
0.85%
42.3%
12.27%
47.8%
11.61%
46.2%
13.13%
40.0%
14.33%
54.2%
22.07%
47.8%
14.98%
56.5%
34.26%
59.3%
23.95%
42.3%
19.35%
48.1%
11.39%
50.0%

S. No.
2
2
2
3
2
4
2
5
2
6
2
7
2
8
2
9
3
0
3
1
3
2
3
3
3
4
3
5
3
6
3
7
3

Nifty 50
Stock
ITCFutures
Jaiprakash Asso.
jindal Steel
Kotak Mahindra
Larsen & Toubro
Mahindra &
Mahindra
Maruti Suzuki
NTPC
ONGC
PNB
Power Grid Corp
Ranbaxy labs
Reliance Capital
Reliance
Reliance Comm.
Reliance Infra
Reliance Power
SAIL
SBI
Siemens
Sterlite India
Sun Pharma
Suzlon Energy
Tata Motors
Tata Power
Tata Steel
TCS
Unitech
Wipro

Long Calls
Return Accurac
19.34% y55.2%
38.41%
44.4%
81.73%
67.9%
45.30%
64.3%
14.38%
41.9%

Short Calls
Return Accurac
-4.83% y44.8%
32.19%
38.5%
-6.51%
26.9%
10.74%
44.4%
5.24%
26.7%

55.15%
41.99%
11.85%
8.60%
35.72%
16.20%
53.02%
29.23%
52.85%
44.24%
3.41%
37.41%
52.59%
66.70%
65.44%
75.59%
53.86%
31.64%
98.75%
29.44%
67.89%
63.00%
52.92%
39.82%

8.08%
22.12%
12.33%
6.47%
-8.57%
20.26%
17.43%
48.00%
21.00%
47.68%
40.20%
41.78%
16.48%
20.25%
38.09%
17.61%
16.33%
100.54
%
23.74%
-4.65%
11.40%
2.42%
83.46%
2.33%

54.2%
45.8%
51.9%
31.3%
46.7%
50.0%
43.5%
57.9%
75.0%
62.5%
33.3%
60.9%
59.1%
68.2%
70.0%
71.4%
94.1%
45.0%
62.5%
50.0%
61.5%
58.3%
45.5%
53.9%

8
3
9
4
0
4
1
4
2
4
3
4
4
4
5
4
6
4
7
4
8
4
9
5
Table02.3: Outcome showing returns and accuracy for long and short calls

47.8%
52.2%
44.4%
21.9%
33.3%
50.0%
50.0%
70.0%
47.8%
43.5%
42.3%
68.2%
64.0%
63.2%
60.0%
50.0%
53.3%
68.2%
37.5%
25.0%
32.0%
40.0%
71.4%
42.3%

Interpritation
In the long calls, the returns were highest for Tata Motors at 98.75% followed by Jindal
Steel at 81.73% and Sterlite Industries at 75.59%%. On the other hand the lowest return
was given by Ambuja Cements at -9.02% followed by ACC at -4.24% and Reliance Infra at
3.41%.
Following charts illustrates the trend for Tata Motors and Ambuja
Cements:

Chart 3.7: Illustration of Tata

Motors

Chart 3.8: Illustration of Ambuja

cements

Interpritation
In the short calls, the returns were highest for Suzlon Energy at 100.54% followed by
Unitech at 83.46% and DLF at 59.17%. On the other hand the lowest return was given by
Cipla at -15.73% followed by Ambuja Cements at -10.91% and PNB at -8.57%.
Following charts illustrates the trend for Suzlon Energy and
Cipla:

Chart 3.9: Illustration of Suzlon

energy

Chart 3.10: Illustration of

Cipla

CAPITAL MARKET EFFICIENCY

An efficient capital market is a market where the share prices reflect new
information accurately and in real time.
Capital market efficiency is judged by its success in incorporating and inducting
information, generally about the basic value of securities, into the price of securities. This
basic or fundamental value of securities is the present value of the cash flows expected
in the future by the person owning the securities.
The fluctuation in the value of stocks encourage traders to trade in a competitive manner with the
objective of maximum profit. This results in price movements towards the current value of the cash
flows in the future. The information is very easily available at cheap rates because of the presence
of organized markets and various technological innovations. An efficient capital market incorporates
information quickly and accurately into the prices of securities.

In the weak-form efficient capital market, information about the history of previous returns
and prices are reflected fully in the security prices; the returns from stocks in this type of
market are unpredictable.
In the semi strong-form efficient market, the public information is completely reflected in
security prices; in this market, those traders who have non-public information access
can earn excess profits.
In the strong-form efficient market, under no circumstances can investors earn excess
profits because all of the information is incorporated into the security prices.
The funds that are flowing in capital markets, from savers to the firms with the aim of financing
projects, must flow into the best and top valued projects and, therefore, informational
efficiency is of supreme importance. Stocks must be efficiently priced, because if the
securities are priced accurately, then those investors who do not have time for market analysis
would feel confident about making investments in the capital market.

Balance Sheet of Karvy stock broking ltd ------------------- in Rs. Cr. ------------------Mar 16

Mar 15 Mar 14

Mar 13

Mar 12

12 mths

12 mths

12 mths

12 mths

12 mths

Total Share Capital

11.23

11.23

11.23

11.23

11.23

Equity Share Capital

11.23

11.23

11.23

11.23

11.23

Share Application Money

0.00

0.00

0.00

0.00

1.52

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

17.46

16.68

19.53

22.57

29.47

Revaluation Reserves

0.00

0.00

0.00

0.00

0.00

Networth

28.69

27.91

30.76

33.80

42.22

Secured Loans

0.00

0.00

0.06

21.77

20.47

Unsecured Loans

0.00

0.00

0.00

0.00

0.00

Total Debt

0.00

0.00

0.06

21.77

20.47

Total Liabilities

28.69

27.91

30.82

55.57

Mar 16

Mar 15 Mar 14

Mar 13

Mar 12

12 mths

12 mths

12 mths

12 mths

Sources Of Funds

Application Of Funds

12 mths

62.69

Gross Block

10.76

10.97

12.91

18.85

18.72

Less: Accum. Depreciation

4.88

4.30

5.35

6.74

5.16

Net Block

5.88

6.67

7.56

12.11

13.56

Capital Work in Progress

0.00

0.00

0.00

0.60

1.16

Investments

9.35

9.35

9.35

10.35

10.34

Inventories

0.15

0.02

0.01

0.01

0.08

Sundry Debtors

15.56

12.95

15.85

27.91

12.39

Cash and Bank Balance

6.39

6.40

25.66

4.26

2.62

Total Current Assets

22.10

19.37

41.52

32.18

15.09

Loans and Advances

32.07

44.93

19.73

24.25

33.36

Fixed Deposits

0.00

0.00

0.00

39.65

35.68

Total CA, Loans & Advances

54.17

64.30

61.25

96.08

84.13

Deffered Credit

0.00

0.00

0.00

0.00

0.00

Current Liabilities

36.73

47.06

42.71

59.31

42.03

Provisions

3.98

5.36

4.65

4.26

4.48

Total CL & Provisions

40.71

52.42

47.36

63.57

46.51

Net Current Assets

13.46

11.88

13.89

32.51

37.62

Miscellaneous Expenses

0.00

0.00

0.00

0.00

0.00

Total Assets

28.69

27.90

30.80

55.57

62.68

Contingent Liabilities

10.72

10.72

12.26

11.57

1.58

Book Value (Rs)

25.55

24.85

27.39

30.10

36.24

Karvy
stock
broking
ltd

Standalone Profit & Loss

account

Previous Years

------------------- in Rs. Cr. ------------------Mar 16

Mar 15

Mar 14

Mar 13

Mar 12

12 mths 12 mths 12 mths 12 mths 12 mths

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses

18.68
0.00
18.68
1.97
0.00
20.65

20.07
0.00
20.07
1.31
0.00
21.38

31.13
0.00
31.13
1.90
0.00
33.03

44.05
0.00
44.05
2.53
0.00
46.58

34.56
0.00
34.56
3.57
0.00
38.13

0.00
0.00
7.67
6.58
0.00
2.94
0.00
17.19

0.00
0.00
12.07
6.64
0.00
5.88
0.00
24.59

0.00
0.00
14.26
9.53
0.00
8.85
0.00
32.64

0.00
0.00
18.46
0.00
23.14
8.97
0.00
50.57

0.00
0.00
17.53
0.00
21.47
7.32
0.00
46.32

Mar 16

Mar 15

Mar 14

Mar 13

Mar 12

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit
PBDIT
Interest
PBDT

1.49
3.46
1.55
1.91

-4.52
-3.21
1.01
-4.22

-1.51
0.39
2.12
-1.73

-6.52
-3.99
2.55
-6.54

-11.76
-8.19
2.96
-11.15

Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

Karvy stock broking ltd

1.61
0.00
0.30
0.00
0.30
-0.49
0.78
17.20
0.00
0.00
0.00

1.62
0.00
-5.84
0.00
-5.84
-2.99
-2.85
24.59
0.00
0.00
0.00

1.97
0.00
-3.70
0.00
-3.70
-0.67
-3.02
32.63
0.00
0.00
0.00

2.14
0.00
-8.68
-0.03
-8.71
-0.30
-8.38
50.57
0.00
0.00
0.00

2.15
0.00
-13.30
-0.02
-13.32
-0.14
-13.16
46.32
0.00
0.00
0.00

112.32
0.69
0.00
25.55

112.32
-2.54
0.00
24.85

112.32
-2.69
0.00
27.39

112.32
-7.46
0.00
30.10

112.32
-11.72
0.00
36.24

Previous Years

Cash Flow

------------------- in Rs. Cr. -------------------

Mar 16

Net Profit Before Tax

Net Cash From Operating Activities
Net Cash (used in)/from
Investing Activities
Net Cash (used in)/from Financing
Activities
Net (decrease)/increase In Cash and
Cash Equivalents
Opening Cash & Cash Equivalents
Closing Cash & Cash Equivalents

Mar 15

Mar 14

Mar 13

Mar 12

12 mths

12 mths

12 mths

12 mths

12 mths

0.32
1.54

-5.76
-17.21

-3.69
0.78

-8.69
5.50

-13.30
-26.47

0.13

-0.65

4.82

1.39

1.40

-1.68

-1.40

-23.83

-1.26

18.98

-0.02

-19.26

-18.23

5.62

-6.09

6.41
6.39

25.66
6.40

43.89
25.66

38.28
43.91

44.40
38.30

CHAPTER-6
FINDINGS

All the firms which we have taken in to account are listed on NSE & BSE.

Bombay Stock Exchange (BSE) is largest stock exchange in the country.

The firms websites is always available to provide the best services & best trading
tools in the field of online trading.

As the income level is more people are investing more to get good returns.

SUGGESTIONS

1. Before buying the share it is essential that investor must shack the position of liquidity (all
A group shares has high liquidity). The source of information about liquidity can get from
the brokers
2. Avoid buying shares of the company with an equity capital less than Rs.1 cr.
3. Avoid buying the share 9f the company with the number of share holders less than 5000.

4. Avoid buying shares of the company which are traded infrequently.

5. Avoid buying shares of the company which are not traded on your stock exchange.
6. Investor must show interest in steady and fast growth shares only.
7. Avoid buying Turn rounds (making loss continuously), Cyclical (cycles of good and bad
performance), Dog shares (very inactive or passive).
8. Avoid companies with low PIE ratio relative to the market as always.
9. If the investor is confident of EPS moving up and expects PIE to increase as well stick to
the shares and be patients.
10. Another side of the analysis is that investor must also know the factors.
Is the market in a good mood or not at that time?
How will the market feel about the share?

CONCLUSION

Let me end by bringing in the beginning. It is globally recognized that the growth of the
economy depends to a large extent globally on the growth of the Securities Market as it
provides the vehicle for raising resources and managing risks. Today, the wheels of the
economy cannot move without the Securities Market. Indeed, it is a modern marvel for
accomplishing astonishing numbers in terms of economic growth.
Further, todays Securities Markets are absolutely different from what they were 10 years ago
or will be in the next 10 years. They would remain in transition. There would be ups and

downs. Many would succeed and many would vanish along the transformation journey. This
would always be the reconfirmation of the point that businesses are no more businesses; they
have become battles of competency.
To conclude, I would say that the Securities Market opportunity zone is contracting
somewhere and expanding somewhere. This may appear paradoxical. It must be understood
that leadership demands a brilliant focus on emerging opportunities, competence building,
strategies for the leadership position in the opportunity zones and principles-centered
business practices. Therefore, we need to create a culture, which embraces change and
moves ahead with an objective to lead. Let us compete for the future global opportunities.

BIBLIOGRAPHY
BOOKS:
1. Khan.M.Y, 2006, Financial Services, 3rd Edition, Tata Mcgraw Hill, New delhi-8.
2. Rejda.G.E, 2002, Principles of Risk Management & Insurance, 7th Edition, Pearson
Education.
3. Gordon & Natarajan, 2006, Financial Market and Services, 3rd Edition, Himalaya
Publishing House, Mumbai.
4. Learning cycle in capital market in India By R.khannan.

WEBSITES:
www.nseindia.com.

www.bseindia.com.
www.capitalmarket in India.com.
www.wikipedia.org/wiki/capitalmarkets.
www.sebi.gov.in
www.rbi.org.in