1

TRAINING REPORT

ON

“FINANCIAL SERVICES PROVIDED BY ANAND RATHI”

Submitted to

MAHARSHI DAYANAND UNIVERSITY, ROHTAK In partial fulfillment of the requirements

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

(INDUSTRY INTEGRATED)

(IV Semester) Submitted by

Name: Varsha Wahane

Regn.No: 1073901755

Guru Gram Business School

ELC CODE: 151012055 Unnati Park Besa, Nagpur-440008

August 2012

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CERTIFICATE

This is to certify that VARSHA WAHANE, a student

of Maharishi Dayanand University, Rohtak, has

prepared his training report entitled “FINANCIAL

SERVICES PROVIDED BY ANAND RATHI”

“ANAND RATHI FINANCIAL SERVICES,

NAGPUR,” under my guidance. He has fulfilled all

requirements leading to award of the degree of

MBA (industry integrated). This report is the record

of bonafide training undertaken by him and no part

of it has been submitted to any other University or

Educational Institution for award of any other

degree/diploma/fellowship or similar titles or prizes.

I wish her all success in life.

PROF AJAY PATOLE

CO-ORDINATOR (MBA)

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DECLARATION

I hereby declare that the Training Report conducted at

ANAND RATHI FINANCIAL SERVICES

Under the guidance of

Prof. Ajay Patole

Submitted in Partial fulfillment of the requirements for the

Degree of

MASTER OF BUSINESS ADMINISTRATION

(Industry Integrated)

TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

is my original work and the same has not been submitted for the

award of any other Degree/Diploma/Fellowship or other similar

titles or prizes.

Place:-Nagpur

Date-___________

Regn.No: 1073901755

Roll no. : 1090210509

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CERTIFICATE

This is to certify that Miss Varsha Wahane who is

pursuing MBA (Industry Integrated) course of

Maharshi Dayanand University, Rohtak, at Guru

gram Business School, Nagpur has undergone

management training at our organization from

01-08-2011 to PRESENT.

His performance during the period was found to Be

very good.

We wish her success future endeavors.

(Assistant Branch Manager)

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ACKNOWLEGEMENT

Completing a task is never a one-man effort. It is

often the result of valuable contribution of

individuals in direct and indirect manner that helps

in achieving an objective.

It is the indeed a great pleasure and movement of

immense satisfaction for me to express my profound

gratitude towards my guide Prof. AJAY PATOLE of

GURUGRAM BUSINESS SCHOOL, BESA ROAD, NAGPUR , I

take pride to thank him for his able guidance and

time to time attention that was bestowed on me right

for the inception to the successful completion of the

project.

Also, my heartful thanks to all respondents and

friend who directly and indirectly helped me

completing this project report.

I am also thankful to all such people, the name of

who haven’t appeared hears but without their help

this project wouldn't have been completed.

Miss. Varsha Wahane

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CONTENTS

CHAPTER: 1

INTRODUCTION………………………………..1

1.1 General introduction about the sector………………….……

1.2 Industry

Profile………………………………………….…..

a) Origin and

development………………………………………

b) Growth and present status of the industry……………………

c) Future of the

industry…………………………………………

CHAPTER: 2 PROFILE OF THE

ORGANISATION……….....

2.1 Origin of the

organization………………………………………

2.2 Growth and development of the organization………………….

2.3 Present status of the

organization………………………………

2.4 Functional department of the

organization……………………..

2.5Organisational structure and chart………………………………

2.6 Service profile of the organization/competitors……………...

2.7 Market profile of the organization……………………………...

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CHAPTER: 3 DISCUSSIONS ON

TRAINING………………...

3.1 Students work profile…………………………………………

3.2 Key

learning ………………………………………………….

CHAPTER 4: STUDY OF SELECTED RESEARCH

PROBLEM...............

4.1 Statement of research

problem……………………………………

4.2 Statement of research objective…..………………………………

4.3 Research design and

methodology……………………………………

CHAPTER 5:

ANALYSIS………………………..………………...

5.1 Analysis of

data……………..……………………………………

5.2 Summary of Findings………..…..……………….

CHAPTER 6: SUMMARY AND

CONCLUSION..………………...

6.1 Summary of Learning

Experience…………………………………

6.2 Conclusion and Recommendations………….

APPENDICES

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CHAPTER 1

INTRODUCTION

1.1 General introduction about the sector.

1.2 Industry Profile

1.3 Origin and development.

1.4 Growth and present status of the industry

1.5 Future of the industry.

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CHAPTER 1

INTRODUCTION

ABOUT THE SERVICE SECTOR :

India stands out from other emerging economies because its growth has been led by the

service sector rather than labor-intensive manufactures. This column summarizes

recent research showing that India has a long history of strength in services, and its

service-led development may play to historical strengths rather than hindering its

progress.

India’s recent spectacular rate of economic growth, combined with the sheer size of its

population, means that it is beginning to take its place as one of the key players in the

global economy. One way in which India stands out from other Asian economies is in

the better performance of its service sector. Whereas other emerging Asian economies,

such as China, have experienced growth led by dynamic manufacturing performance,

India’s growth has been led by sectors such as business services.

This is sometimes used to portray India’s performance as fragile, focusing attention on

despite current economic slowdown in European countries and financial upheaval in

Greece, on the back of huge debt by Greece government, India scored well in its

domestic market in terms of service sector.

Only in services has there been an improvement in comparative India/UK labor

productivity, from around 15% in the late nineteenth century to around 30% by the end

of the twentieth century. Services have thus played a positive role in India’s

productivity performance throughout the period, limiting Indian relative decline before

1870 and leading the process of catching-up from the 1970s. The service sector

productivity growth is not confined to modern services such as finance – it is also

visible in trade and transport..

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INDUSTRY PROFILE

FINANCIAL SECTOR The Indian financial sector is in for an overhaul. Financial sector reforms have long

been regarded as an integral part of the overall policy reforms in India. India has

recognized that these reforms are imperative for increasing the efficiency of resource

mobilization and allocation in the real economy and for the overall macroeconomic

stability. The reforms have been driven by a thrust towards liberalization and several

initiatives such as liberalization in the interest rate and reserve requirements have been

taken on this front. At the same time,

The government has emphasized on stronger regulation aimed at strengthening

prudential norms, transparency and supervision to mitigate the prospects of systemic

risks. Today the Indian financial structure is inherently strong, functionally diverse,

efficient and globally competitive. During the last fifteen years, the Indian financial

system has been incrementally deregulated and exposed to international financial

markets along with the introduction of new instruments and products. Banking Sector

The banking sector is the most dominant sector of the financial system in India.

Significant progress has been made with respect to the banking sector in the post

liberalization period. The financial health of the commercial banks has improved

manifolds with respect to capital adequacy, profitability, and asset quality and risk

management. Further, deregulation has opened

New opportunities for banks to increase revenue by diversifying into investment

banking, insurance, credit cards, depository services, mortgage, securitization, etc.

Liberalization has created a more competitive environment in the banking sector. The

competition has increased within the banking sector (with the emergence of new

private banks and foreign banks) as well as from other segments of the financial sector

such as mutual funds, Non Banking Finance Companies, post offices and capital

markets.

Capital Market:

India has a long tradition of functioning capital markets. The Bombay stock exchange

is over a hundred years old and the volume of activity has increased in the recent years.

The process of reform of capital markets started in 1992 and aimed at removing direct

government control and replacing it by a regulatory framework based on transparency

and disclosure. The first step was taken in 1992 when SEBI was elevated to a

full-fledged capital market regulator. An important policy initiative in 1993 was the

opening of capital markets for foreign institutional investors and allowing Indian

companies to raise capital abroad. FII registrations

In the country have gone up significantly over the years. The number of registered FIIs

has

Gone up significantly. The FIIs have been rewarded well by attractive valuations and

increasing returns. The depository and share dematerialization systems have been

introduced to enhance the efficiency of the transaction cycle.

A number of significant reforms have been implemented in the spot equity and related

exchange traded derivatives markets since the early 1990s. For instance, spot prices are

mostly market-determined, trading volumes in the derivatives market exceed those in

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spot markets and market practices such as speed of settlement and dematerialization are

close to international best practices.

Insurance Sector:

There exists huge scope of investment in the insurance sector in India. India has an

enormous middle-class that can afford to buy life, health and disability and pension

plan products. Further, insurance is one of the most important taxes saving instrument

in the country. Insurance sector has been opened up for competition from Indian private

insurance companies with the enactment of Insurance Regulatory and Development

Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance

Regulatory and Development Authority

(IRDA) was established on 19th April 2000 to protect the interests of holder of

insurance policy and to regulate, promote and ensure orderly growth of the insurance

industry. IRDA Act 1999 paved the way for the entry of private players into the

insurance market, which was hitherto the exclusive privilege of public sector insurance

companies/ corporations. Under the new dispensation Indian insurance companies in

private sector were permitted to operate in India on the fulfillment of certain

prerequisites. A large number of public and private players are competing today in both

life and general insurance segments. The FDI cap/ Equity in the insurance sector is 26

percent under the automatic route subject to licensing by the insurance regulatory and

development authority.

Some of the major private players in the sector are:

In Life insurance Sector:

• Bajaj Allianz Life Insurance Corporation

• Birla Sun Life Insurance Co. Ltd. (BSLI)

• HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)

• ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)

• ING Vysya Life Insurance Co. Pvt. Ltd. (ING VYSYA)

• Max New York Life Insurance Co. Ltd. (MNYL)

• MetLife India Insurance Co. Pvt. Ltd. (METLIFE)

• Kotak Mahindra Old Mutual Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. (SBI

LIFE)

• TATA AIG Life Insurance Co. Ltd. (TATA AIG)

• AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)

• Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)

• Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)

• Shriram Life Insurance Co. Ltd

In General Insurance sector:

• Bajaj Allianz General Insurance Co. Ltd. (BAJAJ ALLIANZ)

• ICICI Lombard General Insurance Co. Ltd. (ICICI LOMBARD)

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• IFFCO Tokyo General Insurance Co. Ltd. (IFFCO TOKIO)

• Reliance General Insurance Co. Ltd. (RELIANCE)

• Royal Sundaram Alliance Insurance Co. Ltd.

• TATA AIG General Insurance Co. Ltd. (TATA AIG)

• Cholamandalam MS General Insurance Co. Ltd.

• HDFC Chubb General Insurance Co. Ltd. (HDFC CHUBB)

Venture Capital

India is prime target for venture capital and private equity today, owing to various

factors such as fast growing knowledge based industries, favorable investment

opportunities, cost competitive workforce, booming stock markets and supportive

regulatory environment among others. The sectors where the country attracts venture

capital are IT and ITES, software products, banking, PSU disinvestments,

entertainment and media, biotechnology, pharmaceuticals, contract manufacturing and

retail. An offshore venture capital company may contribute up to 100 percent of the

capital of a domestic venture capital fund and may also set up a domestic asset

management company to manage the fund. Venture capital funds (VCFs) and venture

capital companies (VCC) are permitted up to 40 percent of the paid up corpus of

domestic unlisted companies. This ceiling would be subject to relevant equity

investment limit in force in relation to areas reserved for SSI. Investment in a single

company by a VCF/VCC shall not exceed 5 percent of the paid up corpus of a domestic

VCF/VCC. The automatic route is not available.

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GROWTH AND PRESENT STATUS OF THE INDUSTRY

1. The National Statistical Commission (Chairman: Dr. C. Rangarajan) set up by the

Government of India, constituted various sub-groups and the sub-group on External

and Financial Sector Statistics was one of them. This sub-group decided in turn to set

up five committees, viz., i) Trade in Services, ii) E-Commerce and its regulatory

mechanism, iii) Insurance Sector Statistics, iv) Informal Financial Sector Statistics and

v) Fiscal Sector Statistics, with officials from Government, RBI, and academics as

members for an expert analysis of the statistical issues.

2. In pursuance of the above, the Reserve Bank of India had set up the Committee on

Informal Financial Sector Statistics with Prof. P. Venkataramiah as Chairman. The

main objective of the Committee was to critically examine the current status of

statistics on the informal financial sector and recommend a statistical system for

instituting/improving collection of statistics on the sector.

3. The terms of reference of the Committee were as under:

i) To assess the currently available sources of information in the informal

sector;

ii) To assess the current systems by which information is being identified and

collected in the informal sector both on a regular as well as ad-hoc basis;

iii) To assess methods by which the National Accounts Statistics incorporate

data relating to informal sector;

iv) To obtain information about other country experiences to assess the data

gaps in our system;

v) To evolve a statistical system for collection of regular or periodic and reliable

data on the informal sector.

4. The Committee deliberated on two interrelated issues: (i) the definition of

Informal Financial Sector Statistics and (ii) the type of institutions to be covered in this

sector. Although there is no accurate definition of ‘informal sector’, the UN System of

National Accounts (SNA) had broadly characterized the informal sector as consisting

of units engaged in production of goods and services with the primary objective of

generating employment and incomes to the persons concerned.

5. Broadly, the Committee identified two purposes for which data are to be collected

on various aspects of Informal Financial Sector, viz., (i) to measure the extent of

informal credit and to understand the dynamics of informal financial markets and (ii) to

facilitate generation of inputs for the compilation of National Accounts.

6. For the purpose of identifying the informal financial sector enterprise, the

Committee adopted the criterion of ‘incorporation’ as a guiding factor. That is, those

that are so ‘incorporated’ constitute the formal financial sector and those that are not so

incorporated constitute the informal financial sector.

7. As per the terms of reference given to the Committee, they deliberated on the

status of availability of data in respect of two components, viz., (a) that part of the

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formal financial sector consisting of incorporated enterprises for which complete data

are not collected in the existing statistical system taking note on the institutions covered

by the Sub-Group on External and Financial Sector Statistics and (b) the informal

financial sector, consisting of ‘unincorporated financial enterprises’, and made

recommendations for instituting/ improving collection of statistics on the two

components.

8. Before assessing the current status of the availability of data and making

recommendations for collection of data from informal financial sector, the Committee

made an overview of the studies undertaken in India on Informal sector (Chapter III)

and also on the international practices followed on concepts, methods of collection, etc.

(Chapter VI); and presented in its report different concepts followed internationally.

FUTURE OF THE INDUSTRY

(a) Formal Financial Sector

Under formal financial sector, major data gaps were observed in respect of Non-

Banking Financial Companies (NBFCs) and capital market related institutions like the

Securities & Exchange Board of India (SEBI), the National Stock Exchange (NSE), the

Discount and Finance House of India (DFHI), etc.

10. The Non-Banking Financial Companies, a segment of the formal financial sector,

covers companies engaged in activities like Equipment Leasing, Hire Purchase

Finance, Loans, Investments, Mutual Benefit Finances (Nidhis), Miscellaneous

Non-banking (Chit funds), Housing Finance and Residuary Non-banking.

11. Studies on Financial & Investment Companies published annually by RBI in its

monthly Bulletin form one source of data. The source provides the statistics on

liabilities and assets, income, expenditure and appropriation accounts based on a

sample of about 700 companies belonging to different categories of NBFCs stated

above. These data relate to annual accounts and are available with a lag of one to one

and half years. These data are used to obtain the estimates of saving and investment of

NBFCs and these are worked out for the entire segment of the NBFCs sector, through

blowing-up procedure, based on the coverage of sample in the population of

companies, in terms of paid-up capital.

12. The second source of data is the survey on ‘Growth of deposits with non-banking

companies’ conducted by RBI. The survey results are also published annually. The

survey collects data on public deposits accepted by them, exempted deposits, net

15

owned funds and other borrowings, from the above category of NBFCs. A few

additional details are collected from 1997-98 onwards. These data are utilized to derive

the estimates of financial saving of households in the form of deposits with

non-banking financial companies. According to the survey for March 1999, total public

deposits held with 1547 NBFCs amounted to Rs.20, 429 crore as at the end of March

1999 while their total assets stood at Rs.47, 048 crore.

13. According to the Department of Company Affairs (DCA), there were 65,382

non-banking financial companies as on March 31, 1999. The Reserve Bank made the

registration of companies with it compulsory for all non-banking financial companies,

in January 1997. As many as 37,274 NBFCs conducting financial business applied for

Certificate of Registration (CoR) with RBI as on June 2000. Of these, 14,986 NBFCs

were rejected for issue of CoR while the remaining was either issued the CoR or at

different stages of scrutiny for registration with RBI.

The Reserve Bank had set out certain norms for registration, such as net owned funds of

Rs.25 lakh as on January 9, 1997, which had been revised upwards to Rs.2 crore

effective from April 21, 1999 for new applicants. The companies, which comply with

these norms, are registered with RBI with provision to accept public deposits or to

function as finance companies without accepting deposits. The companies, which do

not comply with the prescription within a stipulated period, including the extension

period, have to close down their business activity. This category of companies is

referred to as “rejected” companies.

14. Besides, many companies have been exempted from registration with RBI, which

are: (i) engaged in micro-financing activity, (ii) not accepting public deposits, (iii)

licensed under Section 25 of the Companies Act and (iv) mutual benefit companies

having net owned funds of Rs.10 lakh. Thus, these companies conduct the financial

activity without CoR of RBI.

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CHAPTER 2

Profile OF THE ORGANISATION

2.1 Origin of the organization

2.2 Growth and development of the organization

2.3 Present status of the organization.

2.4 Functional department of the organization

2.5 Organizational structure and chart.

2.6 Service profile of the organization/competitors.

2.7 Market profile of the organization.

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CHAPTER: 2

PROFILE OF THE ORGANISATION Anand Rathi is a leading full service investment bank providing a wide range of

financial services to institutions, corporations, wealthy families and

individuals. Founded in 1994 by Mr. Anand Rathi and Mr. Pradeep Gupta, the

group employees close to 7,000 professionals across India and its international

offices. Citigroup Venture Capital currently holds 20% of the group’s equity.

VISION:-

“To Provide Best Value for Money to Investors

Through Innovative Products,

Trading /Investment Strategies

State of the Art Technology And

Personalized Service.”

BUSINESS PHILOSOPHY:-

“Ethical Practices & Transparency In All Our Dealings

Customer Interest above Our Own

Always Deliver What We Promise

Effective Cost Management.”

To be a shining example as a leader in innovation, and the first choice for clients &

employees.

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About Anand Rathi:

Mr. Anand Rathi - Group Chairman

Chartered Accountant

Past President, BSE

Held several Senior Management positions with one of India's largest industrial groups

Anand Rathi (AR) set up in 1994, is one of India’s fastest growing full-service

securities firm with a presence in more than 350 locations across India and has offices

in Dubai & Bangkok. AR provides wealth management services, investment banking,

brokerage & distribution services in the areas of equities, commodities, mutual funds

and insurance. The group caters to the financial needs of diversified group of clients,

which include the well-reputed Corporate Groups, Institutions, Foreign Investors,

Individuals as well as wealthy families and was recently ranked by an Asia Money

2006 poll amongst South Asia’s top 5 wealth managers for the ultra-rich.

The firm's philosophy is entirely client centric, with a clear focus on providing long

term value addition to clients, while maintaining the highest standards of excellence,

ethics and professionalism. The entire firm activities are divided across distinct client

groups: Individuals, Private Clients, Corporate and Institutions. Milestones

1994: Started activities in consulting and Institutional equity sales with staff of 15

1995: Set up a research desk and empanelled with major institutional investors

1997: Introduced investment banking businesses

Retail brokerage services launched

1999: Lead managed first IPO and executed first M & A deal

2001: Initiated Wealth Management Services

2002: Retail business expansion recommences with ownership model

2003: Wealth Management assets cross Rs1500 crores

Insurance broking launched

Launch of Wealth Management services in Dubai

Retail Branch network exceeds 50

2004: Commodities brokerage and real estate services introduced

Wealth Management assets cross Rs3000crores

Institutional equities business relaunched and senior research team put in place

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Retail Branch network expands across 100 locations within India

2005: Real Estate Private Equity Fund Launched

Retail Branch network expands across 200 locations within India

2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity

Exchange (DGCX)

Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money

2006 poll

Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the

High Net worth Individuals (HNI) Category

Ranked 9th in the Retail Category having more than 5% market share

Completes its presence in all States across the country with offices at 300+ locations

within India

2007: Citigroup Venture Capital International picks up 19.9% equity stake.

Retail customer base crosses 200 thousand

Establishes presence in over 450 locations.

Services provided by Anand Rathi to customers

1. Mr. Anand Rathi - Group Chairman, Chartered Accountant, Past President, BSE; Held several

Senior Management positions with one of India's largest industrial groups.

2. Mr. Pradeep Gupta - Vice Chairman; Plus 17 years of experience in Financial Services.

3. Mr. Amit Rathi - Managing Director; Chartered Accountant & MBA; Plus 11 years of experience

in Financial Service.

Equity &Derivatives Brokerage:

Anand Rathi provides end-to-end equity solutions to institutional and individual

investors. Consistent delivery of high quality advice on individual stocks, sector trends

and investment strategy has established a competent and reliable research unit across

the country.

Clients can trade through online on BSE and NSE for both equities and derivatives.

They are supported by dedicated sales & trading teams in trading desks across the

country. Research and investment ideas can be accessed by clients either through their

designated dealers, email, web or SMS.

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Mutual Funds:

AR is one of India's top mutual fund distribution houses. Their success lies in their

philosophy of providing consistently superior, independent and unbiased advice to their

clients backed by in-depth research. They firmly believe in the importance of selecting

appropriate asset allocations based on the client's risk profile.

AR have a dedicated mutual fund research cell for mutual funds that consistently

churns out superior investment ideas, picking best performing funds across asset

classes and providing insights into performances of select funds.

Depository Services:

AR Depository Services provides with a secure and convenient way for holding your

securities on both CDSL and NSDL.

AR depository services include settlement, clearing and custody of securities,

registration of shares and dematerialization. Also offer daily updated internet access to

holding statement and transaction summary.

Commodities:

AR commodities broking services include online futures trading through NCDEX and

MCX and depository services through CDSL. Commodities broking is supported by a

dedicated research cell that provides both technical as well as fundamental research.

Our research covers a broad range of traded commodities including precious and base

metals, Oils and Oilseeds, agri-commodities such as wheat, chana, guar, guar gum and

spices such as sugar, jeera and cotton.

In addition to transaction execution, we provide our clients customized advice on

hedging strategies, investment ideas and arbitrage opportunities.

Insurance Broking:

As an insurance broker, AR provide to his clients comprehensive risk management

techniques, both within the business as well as on the personal front. Risk management

includes identification, measurement and assessment of the risk and handling of the

risk, of which insurance is an integral part. The firm deals with both life insurance and

general insurance products across all insurance companies.

Our services :

Risk Management

Due diligence and research on policies available

Recommendation on a comprehensive insurance cover based on clients needs

Maintain proper records of client policies

Assist client in paying premiums

Continuous monitoring of client account

Assist client in claim negotiation and settlement

IPO’s:

AR is a leading primary market distributor across the country. Our strong performance

in IPOs has been a result of our vast experience in the Primary Market, a wide network

of branches across India, strong distribution capabilities and a dedicated research

team. Our IPO research team provides clients with in-depth overviews of forthcoming

21

IPOs as well as investment recommendations. Online filling of forms is also available.

Major Departments

Equity

Commodity

Life Insurance

General Insurance

Mutual Fund

Depository

Internet Broking

Information Technology

Client Acquisition

Finance

Compliance

Settlement

Accounts

Operations

HR/Administration

Clients of Anand Rathi

Corporate and Institutional treasuries need ever more sophisticated advice that is

backed by serious and credible research. AR IWM provides its institutional clients

integrated wealth management solutions across global markets, which are backed

by proprietary global economic & investment research. We understand that your

needs could range from finding short-term surplus management strategies to higher

yielding and long term investments. The IWM team brings together the

highly-rated AR research across fixed income, currencies and equities markets to

provide investment solutions that meet your complex needs - from simple

money-market mutual funds to complex arbitrage strategy ACC.

Bayer

Century Textiles

Clariant

CRISIL

Crompton Greaves

Dabur

Datamatics

GE Shipping

Godrej

Good lass Nerolac

Grasim

Gujarat Abuja Cements

Gujarat Pipavav Port

Heinz India

Hindalco

Hindustan Lever

H&R Johnson

IDFC

Indian Rayon

22

2.2 GROWTH AND DEVELOPMENT OF THE ORGANISATION

Jindal Group

Larsen & Toubro

Mastek

Mahindra & Mahindra

Raymonds

Sterlite Group

Syngenta

Tata Iron & Steel

Trent

VSNL

Wartsila

23

2.3 PRESENT STATUS OF THE ORGANISATION

Client Testimony

We have been ranked thrice in a row as the #1 Private Bank - Domestic and #2 Private

Bank - Overall BY OUR CLIENTS in an international Private Banking Poll (2009,

2010 & 2011) conducted by the Asia money publication. Asia money Polls is a unique

survey run by Asia's regional financial publication that surveys the end-user i.e. our

clients. It is the leading and definitive industry survey in the region. We believe that this

honor would not have come our way without the goodwill, support and patronage of our

clients and the trust they placed in us and our advisory.

Client-centric Ethos Our belief is that there is a spark in every person that distinguishes him as an individual,

and defines his aspirations and goals. A Wealth Management solution for every

individual is therefore unique.

You deserve a customized solution for managing your wealth that is specific to your

needs and not a generic template – based offering.

Strong Research Capabilities

Our Advisory process is rooted in the strength of our research team, giving us expertise

across various asset classes. Our Economic Research team has been ranked among the

top 20 in Asia by Institutional Investor and is one among the only 2 teams from India to

feature in this list.

Philosophy--Wealth Management needs to be far more holistic than just investment

advisory

We believe that separation of advisory from product manufacturing is critical to

offering a conflict-free and truly objective advice to our clients. We therefore offer only

third-party products and do not manufacture any in-house products. As an extension to

this philosophy, we do not hold any proprietary stake in the markets

2.4 FUNCTIONAL DEPARTMENT OF ANAND RATHI

CLIENT RALATION DEPARTMENT

The client relation department assists the client or customer top open an account in

Hedge equity (p) Ltd securities. This department is also known as the front office. A

client has to open two types of accounts to trade and own securities in the NSE & BSE.

They are:

24

FINANCE DEPARTMENT

Thus a department, to organize financial activities may be created under the direct

controlof the board of directors. Finance manager will decide the major financial policy

methods. Lower levels can delegate the other routine activities.

MARKETING DEPARTMENT

The major functions of marketing department are:

Business associate development:

The company takes up the marketing activities of the various branches. It ensures an

efficient marketing arena at its various branches. The company encourages better

relations in its branches and promotes for the development of various marketing

strategies.

Brand promotion:

An important function of marketing department is to promote the name of the company.

HEDGE EQUITIES (P) LTD does it through the different promotional activities. The

name of HEDGE EQUITIES (P) LTD as a stock broking firm is made known to the

outside world.

Investment promotion:

The main clients of HEDGE EQUITIES (P) LTD were its investors. Hence the

marketing department tries to capture as many investors as possible to encourage them

to invest.

Delivery promotion:

Intraday trading is not always profitable and might involve a lot of risk hence HEDGE

EQUITIES (P) LTD promotes for delivery were the shares are kept to be sold for a later

date analyzing the profitability factors.

SYSTEMS DEPARTMENT

The systems department is playing a vital role in the day operations of the company. It

is through the systems department that the clients can avail the facilities of Internet

trading. Optic fiber cables and high bandwidth connections from the HEDGE

EQUITIES (P) LTD office to the ISP,a dedicated server and back-up ISDN connections

were maintained directly by the systems department. For the purpose of trading they

have made use of two software namely ODIN (Open Dealers Integrated Network)

HUMAN RESOURCES DEPARTMENT

Human resource is often considered as the back bone of an organization even in this age

of advanced automation and mechanization. Since virtual organizations are not very

much popular in our part of the world, it is very important to any organization to have a

HR department. The presence of an excellent HR department increases the efficiency

of an organization considerably. Human resource management is defined as asset of

practices, policies and programmers designed to maximize both personal and

organizational goals.

a. Training and induction

The selected employees will undergo three days continuous induction. During this

period, he willundergo training with all the department of HEDGE EQUITIES (P) LTD

Securities (India) Pvt. Ltd. There will also be classroom induction also within 3

months.

b. Wages and Salary Administration

25

The wages and salaries of the employees were fixed and granted by the HR department

with consent of the finance department.

c. Performance Appraisal

It was human resources department which gives the promotion to all employees,

making transfers and taking disciplinary actions if needed.

d. Grievance Handling

The grievance of employees were received only through proper channels i.e., through

the particular department heads. The HR department will make solutions to th

complaints as per the rules and regulations of the company.

TRADING DEPARTMENT

The department deals with the trading related activities of the company. The trading

refers to the buying and selling of shares. This department is the most important part of

the organization. There are two types of trading.

Online Trading:

These are the trading terminal of the organization. The each computer of the

department is termed as the trading terminal. The each terminal is assigned with NCFM

certified dealers; who is in charge of each portal will do the trade according to the client

request. The terminal is managed by either NEAT (National Exchange for Automated

Trading) software or ODIN (Open Dealers Integrated Network) software. The client

can also place his through written request or through the telephone, in this the order will

be place d by the dealer.

InternetTrading:

The internet trading is a facility provides by the company in order to trade the securities

from his convenient place like his office, home etc. the order will be placed by the client

itself, and he can make changes before the trade is done for changing the price,

cancellation of the order.

DELIVERY AND DEPOSITORY DEPARTMENT

Delivery refers to the share that bought on particular day are not sold on that day itself

and holding of the share for an appreciation in the value of the security and to trade it on

a future date. Deliver Instruction Slip: it is a slip the client should fill and gave to the

dealer regarding the purchase of the share. There are two procedures to move the share

namely

Power of attorney

this is which the client signs at the time of opening a trading account and depository

participant account. If the client has given the power of attorney, HEDGE EQUITIES

(P) LTD will have the power to transact the clients stock without pay ±in slips.

b. Easiest

It is secured internet enabled service which means Electronic Access to Securities

information and Execution of Secured Transaction. This is facility wherein the clients

can give delivery instructions via internet. Easiest is a facility provided by CDSL. The

activities related with the depository department.

26

Depository function

Dematerialization

Pledging

EQUITY RESEARCH DEPARTMENT

The function of the department is to study the details regarding the share or securities

and to make prediction regarding the future performance of the company. The

following types of approaches done through this department:

a) Fundamental analysis

b) Technical analysis

2.5 Structure and chart of Anand Rathi

A Mutual Fund is a trust that pools the savings of a number of

Investors who share a common financial goal. The money thus

Collected is then invested in capital market instruments such as

Shares, debentures and other securities. The income earned through

These investments and the capital appreciation realized is shared by

Its unit holders in proportion to the number of units owned by

Them. Thus a Mutual Fund is the most suitable investment for the

Common man as it offers an opportunity to invest in a diversified,

professionally managed basket of securities at a relatively low cost.

The flow chart below describes broadly the working of a mutual

Fund.

The structure of Mutual Funds in India is governed by SEBI (Mutual

Fund) Regulations, 1996.

It is mandatory to have a three tier structure of Sponsor – Trustee – Asset

Management Company.

The trust is established by a Sponsor or more than one sponsor who is like

a promoter of a company. He appoints the Trustees who are responsible to

the investors of the fund.

The Trustees of the mutual fund hold its property for the benefit of the

unit holders.

Asset Management Company (AMC) approved by SEBI is the business

face of the mutual fund as it manages all the affairs of the fund by making

The structure of Mutual Funds in India is governed by SEBI (Mutual

Fund) Regulations, 1996.

It is mandatory to have a three tier structure of Sponsor – Trustee – Asset

Management Company.

The trust is established by a Sponsor or more than one sponsor who is like

a promoter of a company. He appoints the Trustees who are responsible to

the investors of the fund.

The Trustees of the mutual fund hold its property for the benefit of the

unit holders.

Asset Management Company (AMC) approved by SEBI is the business

face of the mutual fund as it manages all the affairs of the fund by making

investments in various types of securities.

27

2.5 ORGANISATIONAL STRUCTURE AND ORGANISATION

CHART ORGANISATION FLOW CHART:-

2.5 Structure and chart of AnandRathi

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned through

These investments and the capital appreciation realized is shared by its unit holders in

proportion to the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost.

The flow chart below describes broadly the working of a mutual Fund.

Raising capital

Mobilizing resources

Company growth Redistribution of wealth

Investment opportunities

Corporate governance

Barometer of economy

Govt. project development

Role of stock exchanges

28

2.6 PRODUCT AND SERVICE PROFILE

Commodities

Equity

Insurance Services

Products

Equities I Bonds I Mutual Funds I Derivatives

Managed Investment Services / PMS

Commodities

FX Trading

Life Insurance

General Insurance

Alternative Assets

- Private Equity Funds

- Structured Products

- Real Estate Opportunities Fund

Special Situation Opportunities

Offshore Structures & Global Investments

Services

Creation of a customized financial strategy

Diversification of assets based on a formal process of asset allocation

Active tracking, monitoring and review of portfolios

Creation of private trusts

Tax planning

Estate planning

Structuring of family wealth

Online Trading

29

Equity & Derivatives Brokerage:

Anand Rathi provides end-to-end equity solutions to institutional and individual

investors. Consistent delivery of high quality advice on individual stocks, sector trends

and investment strategy has established a competent and reliable research unit across

the country.

Clients can trade through online on BSE and NSE for both equities and derivatives.

They are supported by dedicated sales & trading teams in trading desks across the

country. Research and investment ideas can be accessed by clients either through their

designated dealers, email, web or Sms.

Mutual Funds:

AR is one of India's top mutual fund distribution houses. Their success lies in their

philosophy of providing consistently superior, independent and unbiased advice to their

clients backed by in-depth research. They firmly believe in the importance of selecting

appropriate asset allocations based on the client's risk profile.

AR have a dedicated mutual fund research cell for mutual funds that consistently

churns out superior investment ideas, picking best performing funds across asset

classes and providing insights into performances of select funds.

Depository Services:

AR Depository Services provides with a secure and convenient way for holding your

securities on both CDSL and NSDL.

AR depository services include settlement, clearing and custody of securities,

registration of shares and dematerialization. Also offer daily updated internet access to

holding statement and transaction summary.

Commodities:

AR commodities broking services include online futures trading through NCDEX and

MCX and depository services through CDSL. Commodities broking is supported by a

dedicated research cell that provides both technical as well as fundamental research.

Our research covers a broad range of traded commodities including precious and base

metals, Oils and Oilseeds, agri-commodities such as wheat, chana, guar, guar gum and

spices such as sugar, jeera and cotton.

In addition to transaction execution, we provide our clients customized advice on

hedging strategies, investment ideas and arbitrage opportunities.

Insurance Broking:

As an insurance broker, AR provide to his clients comprehensive risk management

techniques, both within the business as well as on the personal front. Risk management

includes identification, measurement and assessment of the risk and handling of the

risk, of which insurance is an integral part. The firm deals with both life insurance and

general insurance products across all insurance companies.

Their guiding philosophy is to manage the clients' entire risk set by providing the optimal

level of cover at the least possible cost. The entire sales process and product selection is

research oriented and customized to the client's needs. They lay strong emphasis on

timely claim settlement and post sales services.

30

OUR SERVICES

Risk Management

Due diligence and research on policies available

Recommendation on a comprehensive insurance cover based on clients needs

Maintain proper records of client policies

Assist client in paying premiums

Continuous monitoring of client account

Assist client in claim negotiation and settlement

IPO’s:

AR is a leading primary market distributor across the country. Our strong performance

in IPOs has been a result of our vast experience in the Primary Market, a wide network

of branches across India, strong distribution capabilities and a dedicated research team.

Our IPO research team provides clients with in-depth overviews of forthcoming IPOs.

31

2.3 SERVICES:-

Top quality Research & Advisory Services

Fundamental Research Services

Technical Research Services

Investment Advisory Desk

Portfolio Management Services

Mutual Fund And IPO Advisory

Online Trading

Commodities

DP Services

Funding

32

MARKET PROFILE OF THE ORGANISATION

CLIENTS

Individual

Institutional

NRIs

Retail Investors

All segments are available in Anand Rathi:

Equity

a) BSE/NSE

Commodities

a) MCX/NCDEX

CDS

a) USD

b) EURO

c) YEN

d) GBP (Global Britain Pound)

33

CHAPTER 3

DISCUSSION ON TRAINING

MY WORK PROFILE;-

Fill up the different types of financial forms.

Tele calling to the clients.

Sales coordination.

Counseling to the client for different financial products.

Follow up the customer.

Lead generation.

Login the form in the system.

As a sales co-ordinator.

All work handled in daily transaction with financial product and services.

Proper reporting with client details.

Portfolio management.

Demat entry with CRM format log in process.

Mutual fund/FD/SIP/BONDs/NCDs entry.

Activate account opening with clients.

Maintaining of party's ledgers.

Verification of bills and documentation.

Maintaining of bank accounts with reconciliation.

Branch accounts and profitability statements.

KEY LEARNINGS:

Knew about different financial product and services.

Improved communication skill

Understood working in organizational environment.

Learned about call generation.

Effective way of motivating clients. To learn the tactics to control the cost.

To apply my theoretical knowledge into real world environment and how to

behave in professional manner.

To increase analytical skill.

To handle the different type of parties and how should we behave in different

situations.

To know what is the role of finance department in the organization.

34

CHAPTER 4

Study of selected research problem

4.1 Statement of research problem

4.2 Statement of research objectives

4.3 Research design and methodology

35

STATEMENT OF RESEARCH PROBLEM

STUDY BEHIND EVERY SUCCESSFUL INVESTORS :

BSE/NSE

COMMODITIES

DEMAT SERVICES

IPO’s

INSURANCE

MUTUAL FUNDs

BSE/NSE

A bit about history of stock exchange they say it was under a tree that it all

started in 1875.Bombay Stock Exchange (BSE) was the major exchange in

India till 1994.National Stock Exchange (NSE) started operations in 1994.

NSE was floated by major banks and financial institutions. It came as a result of

Harshad Mehta scam of 1992.

NSE was the first to introduce electronic screen based trading. BSE was forced

to follow suit. The present day trading platform is transparent and gives

investors prices on a real time basis. With the introduction of depository and

36

mandatory dematerialization of shares chances of fraud reduced further. The

trading screen gives you top 5 buy and sell quotes on every scrip.

A typical trading day starts at 10 ending at 3.30. Monday to Friday. BSE has 30

stocks which make up the Sensex .NSE has 50 stocks in its index called Nifty.

FII s Banks, financial institutions mutual funds are biggest players in the

market. Then there are the retail investors and speculators.

COMMODITIES

AR commodities broking services include online futures trading through

NCDEX and MCX and depository services through CDSL. Commodities broking is

supported by a dedicated research cell that provides both technical as well as

fundamental research. Our research covers a broad range of traded commodities

including precious and base metals, Oils and Oilseeds, agri-commodities such as

wheat, chana, guar, guar gum and spices such as sugar, jeera and cotton.

In addition to transaction execution, we provide our clients customized advice on

hedging strategies, investment ideas and arbitrage opportunities.

Commodity Futures are contracts to buy specific quantity of a particular

commodity at a future date. It is similar to the index futures and stock futures but the

underlying happens to be commodities instead of stocks and indices.

Participants of Commodities Market:

The participants who trade in the commodity derivatives markets can be

classified as follows;

(a) Hedgers:

37

Hedgers are the traders who wish to eliminate the risk of price change to which

they are already exposed. It is a mechanism by which the participants in the physical/

cash markets can cover their price risk. Hedgers are those persons who don’t want to

take the risk therefore they hedge their risk while taking position in the contract.

(b) Speculators :

Speculators are participants who bet on future movements in the price of

an asset i.e. I commodity to make short term gain from the price movements.

Commodity future s give theme the leverage so to take risks on nominal margin

payments and thereby increasing for bigger gains or losses.

38

(c) Arbitrageurs:

Arbitrageurs work at making profits by taking advantaged of existence

of difference in prices of the same product across different markets (MCX and

NCDEX).

(d) Investors: Investors are participants having a longer term view as compared to speculators

when they enter into trade in the commodities market. Eg. Farmers, Producers,

consumers etc.

Commodity Derivatives:

A commodity derivative derives its value from an underlying asset which is

necessarily a commodity. To understand the commodity derivatives markets it’s

necessary to clear about ‘commodities’.

Commodities, in simple words are any goods that are common and unbranded.

Gold, silver, rubber, pepper, jute, wheat, sugar, cotton etc., are some of the common

commodities. For e.g. apple juice can be a commodity whereas the ‘Real’ apple juice

cannot be called a commodity. You may be surprised to know that in the US

commodities markets there are futures available even on cattle. Another feature of

commodities is that they are commonly available.

Commodity markets represent the formal system for the interplay of demand for

and supply of commodities. These markets can be broadly classified into spot market

and futures market. Commodities for immediate delivery are traded through the spot

market. The players in the spot market are the actual producers and the consumers of

the commodities.

Investors are those who participate in the market for profits and are ready to

face the risk involved in the market. An investor can be anyone from an individual who

has a small surplus income to the treasury desks of banks and corporate.

Most commonly traded derivatives around the world are futures, options and

option futures. Some of the most popular commodity exchanges in the world are listed

below:

London Metals Exchange, London

New York Mercantile Exchange, New York

Chicago Mercantile Exchange, Chicago

Chicago Board of Trade, Chicago

London International Financial Futures and Options Exchange (LIFFE),

London

Tokyo Commodity Exchange, Tokyo

Winnipeg Commodity Exchange, Canada

Major Commodity Exchanges:

The Government of India permitted establishment of National-level

Multi-Commodity exchanges in the year 2002 and accordingly three exchanges have

come into picture.

Multi-Commodity Exchange of India Ltd, Mumbai.(MCX).

National Commodity and Derivative Exchange of India, Mumbai(NCDEX).

39

National Multi Commodity Exchange, Ahemdabad(NMCE).

However there are regional commodity exchanges functioning all over the

country. AR commodities Broking Pvt. Ltd has got membership of both the premier

commodity exchanges i.e. MCX and NCDEX.

The two exchanges (NCEDX&MCX) have seen tremendous growth in less than

two years. The daily average on these two exchanges put together has now grown to a

healthy Rs.7800 Crores. It has been believed by experts that the volumes on these

exchanges would the stock market in the days to come.

Commodity exchanges are regulated by Forwards Market Commission (FMC);

Forwards Market Commission works under the purview of the ministry of Food,

Agriculture and Public Distribution.

At NCDEX the contracts expire on 20th

day of each month .if 20th happens to be

a holiday the expiry day will be the previous working day.

Commodities traded in MCX.

Gold, Gold M, Gold HNI, Silver, Silver M, Silver HNI

Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal, RBD

Palmolein, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed

Oil, Cottonseed Oilcake, Cottonseed

Pepper, Red Chilli, Jeera, Turmeric

Steel Long, Steel Flat, Copper, Nickel, Tin

Kapas, Long Staple Cotton, Medium Staple Cotton

Chana, Urad, Yellow Peas, Tur

Rice, Basmati Rice, Wheat, Maize, Sarbati Rice

Crude Oil

Rubber, Guar Seed, Gur, Guargum Bandhani, Guargum, Cashew Kernel,

Guarseed Bandhani

Commodities traded in NCDEX.

Agro Products

Arabica Coffee Cashew

Castor Seed Chana

Chilli Common Raw Rice

Common Parboiled Rice Crude Palm Oil

Cotton Seed Oilcake Expeller Mustard Oil

Grade A Parboiled Rice Grade A Raw Rice

Guar gum Guar Seeds

Gur Jeera

Jute sacking bags Lemon Tur

Long Staple Cotton Maharashtra Lal Tur

Medium Staple Cotton Mulberry Green Cocoons

Mulberry Raw Silk Mustard Seed

Pepper Raw Jute

RBD Palmolein Refined Soy Oil

40

Robusta Coffee Rubber

Sesame Seeds Soyabean

Yellow Soybean Meal Sugar

Turmeric Urad

Wheat Yellow Peas

Yellow Red Maize

Base Metals

Mild Steel Ingots

Precious Metals

Gold

Silver

IPO’s:

AR is a leading primary market distributor across the country. Our strong

performance in IPOs has been a result of our vast experience in the Primary

Market, a wide network of branches across India, strong distribution

capabilities and a dedicated research team.

Our IPO research team provides clients with in-depth overviews of

forthcoming IPOs as well as investment recommendations. Online filling of

forms is also available.

As an insurance broker, AR provide to his clients comprehensive risk

management techniques, both within the business as well as on the personal

front. Risk management includes identification, measurement and assessment

of the risk and handling of the risk, of which insurance is an integral part. The

firm deals with both life insurance and general insurance products across all

insurance companies.

INSURANCE

Their guiding philosophy is to manage the clients' entire risk set by providing the optimal

level of cover at the least possible cost. The entire sales process and product selection is

research oriented and customized to the client's needs. They lay strong emphasis on

timely claim settlement and post sales services.

Our services :

Risk Management

Due diligence and research on policies available

Recommendation on a comprehensive insurance cover based on clients needs

Maintain proper records of client policies

Assist client in paying premiums

Continuous monitoring of client account

Assist client in claim negotiation and settlement

41

Mutual Funds:

AR is one of India's top mutual fund distribution houses. Their success lies in

their philosophy of providing consistently superior, independent and unbiased

advice to their clients backed by in-depth research. They firmly believe in the

importance of selecting appropriate asset allocations based on the client's risk

profile.

AR have a dedicated mutual fund research cell for mutual funds that

consistently churns out superior investment ideas, picking best performing

funds across asset classes and providing insights into performances of select

funds.

4.1 Statement of every successful investor problem:

Investors are those who participate in the market for profits and are ready to

face the risk involved in the market. An investor can be anyone from an individual who

has a small surplus income to the treasury desks of banks and corporate.

Most commonly traded derivatives around the world are futures, options and

option futures. Some of the most popular commodity exchanges in the world are listed

below:

London Metals Exchange, London

New York Mercantile Exchange, New York

Chicago Mercantile Exchange, Chicago

Chicago Board of Trade, Chicago

London International Financial Futures and Options Exchange (LIFFE),

London

Tokyo Commodity Exchange, Tokyo

Winnipeg Commodity Exchange, Canada

Statement of every successful investor objectives:

Primary Objectives To construct portfolio and analyses the risk return relationship.

To hedge the most profitable portfolio.

To construct a diversified portfolio and risk reduction by using index futures.

Secondary objective To find out extent to which loss can be reduced by applying hedging strategies.

To determine whether the hedger enjoys better returns from the use of hedgers.

42

To identify how much reduction in risk is possible.

To find out the extend of loss due to misjudgment on index movements.

4.3 Commodity Market design with all products and methodology:

The methodology of data collection pertains to information to how the data is

collected i.e. either from primary sources or secondary sources. It explains the

methods utilized and the instruments used in data collection.

SOURCES OF DATA

The sources of data can be classified in two categories:

Primary sources

Secondary sources

PRIMARY SOURCES

The primary data are collected by the detailed discussion was

conducted with the Branch Manager of AR Ltd and Intractions was carried with

the Commodities investors (customers).And the discussion was carried out with

the college internal guide, who helped in developing the objectives and validating

their conformance to the ethical framework of the project.

SECONDARY SOURCES I used secondary sources also for collecting the data. They are:

Information from the text sources

Information from the internet sources

Information from the materials provided by the concern

SAMPLING DESIGN

Sampling unit :Questionnaire

Sampling Size :50 units

Sampling procedure : Direct

STATISTICAL TOOLS AND TECHNIQUES

To analysis the data we used bar graphs periodically.

43

CHAPTER 5

ANALYSIS

5.1 Analysis of data

5.2 Summary of findings

CHAPTER 5

ANALYSIS OF DATA

Securities analysts determine a company's profitability by looking at its

returns. A return is the amount an investment earns as a percentage of the

price paid to own it. It is the sum of income an investment makes over time,

plus its capital gains. Analysts not only look at the securities historical

market returns, they also look at a company’s return on investment

(income divided by stock and debt), return on assets (income divided by

total assets) and return on equity (additional earnings made from

reinvesting profits).

5.2 FINDINGS The following findings are made on the basis of data analysis from the previous

Chapter.

The study reveals the effectiveness of risk reduction using hedging strategies. It

has found out that risk cannot be avoided. But can only be minimized.

44

Through the study. it has found out that, the hedging provides a safe position on

an underlying security. The loss gets shifted to a counter party. Thus the

hedging covers the loss and risk. Sometimes, the market performs against the

expectation. This will trigger losses. so the hedger should be a strategic and

positive thinker.

The anticipation of the hedger regarding the trend of the movement in the prices

of the underlying security plays a key role in the result of the strategy applied.

It has been found that, all the strategies applied on historical data of the period

of the study were able to reduce the loss that arose from price risk substantially.

If the trader is not sure about the direction of the movement of the profits of the

current position, he can counter position in the future contract and reduces the

level of risks.

The trader can effectively use the strategy for return enhancement provided he

has the correct market anticipation.

In general, the anticipation of the strategies purely for return enhancement is a

risky affair, because, if the anticipation about the performance of the market and

the underlying goes wrong, the position taker would end up in higher losses.

45

CHAPTER 6

SUMMARY OF LEARNING EXPERIENCE

The International College of Financial Planning has equipped me with necessary

education and confidence to face my next career challenge. When graduating from

International College of Financial Planning, you are not walking away with just another

program but also the experiences of an established network of exceptional educators

and a network of 7500 professionals

Lack of Investor Awareness about the Derivatives Market & its Trading.

Strategies are basically more applicable for HNI Clients whose margin Amount is

more.

Derivatives Market basically trades depending upon the Underlying Securities. So

small fluctuations in the security results in changes in strategies for that particular

Derivative.

For arbitrageurs

· Take positions in the cash and derivatives market simultaneously.

· Take short position in the market, which is overvalued.

· Take long position in the market, which is undervalue

46

CONCLUSIONS AND RECOMMENDATION

Cost Efficiency:-

Options have great leveraging power. An investor can obtain an option position

that will mimic a stock position almost identically, but at a huge cost savings. For

example, in order to purchase 200 shares of an $80 stock, an investor must pay out

$16,000. However, if the investor were to purchase two $20 calls (with each

contract representing 100 shares), the total outlay would be only $4,000 (2

contracts X 100 shares/contract X $20 market price). The investor would then

have an additional $12,000 to use at his or her discretion. Obviously, it is not quite

as simple as that. However, this strategy, known as stock replacement, is not only

viable but also practical and cost efficient.

Less Risky - Depending on How You Use Them

There are situations in which buying options is riskier than owning equities, but

there are also times when options can be used to reduce risk. It really depends on

how you use them. Options can be less risky for investors because they require less

financial commitment than equities, and they can also be less risky due to their

relative imperviousness to the potentially catastrophic effects of gap openings.

Options are the most dependable form of hedge, and this also makes them safer

than stocks. When an investor purchases stock, a stop-loss order is frequently

placed to protect the position. The stop order is designed to "stop" losses below a

predetermined price identified by the investor. The problem with these orders lies

in the nature of the order itself.

Higher Potential Returns:-

You don't need a calculator to figure out that if you spend much less money and

make almost the same profit, then you have a higher percentage return. When they

pay off, that's what options typically offer to investors.

More Strategic Alternatives:-

The final major advantage of options is that they offer more investment

alternatives. Options are a very flexible tool. There are many ways to use options

to recreate other positions. We call these positions synthetics.

Synthetic positions present investors with multiple ways to attain the same

investment goals, and this can be very, very useful. While synthetic positions are

considered an advanced option topic, there are many other examples of how

options offer strategic alternatives. For example, many investors use brokers that

charge a margin when an investor wants to short a stock. The cost of this margin

requirement can be quite prohibitive. Other investors use brokers that simply do

47

not allow for the shorting of stocks, period. The inability to play the downside

when needed virtually handcuffs investors and forces them into a black and white

world while the market trades in color.

Recommendations:-

Avoiding wrong perception of the investors

Investors think that, Derivative trading is more risky than equity trading; it is a

betting etc. their views are not cleared about derivative market. These wrong

perceptions of the investors should be avoided by giving proper suggestions to

the clients.

Suggest the Derivatives trading to the investors on the basis of – Income, Risk

Suggest the derivative trading to their clients who has currently invested in

equity market. On the basis of their income capacity, risk bearing capacity of

the investor.

Introducing strategies to the Investors

Introducing derivative strategies to the existing clients who are already invested

in derivative segment.

Diversify the portfolio of investors

Diversify the investment portfolio of the clients who do not want to take a more

risk in derivative market trading.

48

APPENDICES

BIBLIOGRAPHY

1. INTERNET

2. AGENCY SOURCES

3. GOOGLE

4. NEWS PAPERS

5. COMPANY WEBSITES.