ACKNOWLEDGEMENT

I am very thankful to Mr. Suresh Goel (Branch Manager) ICICI

direct.com for providing me the opportunity to undergo the practical

training in the ICICI direct.com branch in Hisar. He guided me from time

to time and gave me dynamic ideas and suggestions by which I am able to

complete my training successfully.

I am grateful to Mr. Harish Goel, Mr. Charan, Miss. Neelam, Miss..

Rajeshwari for enhancing my practical approach.

I also want to thank all the visible and non-visible hands, which helped me

to complete the practical training with great success.

Shilpi Singla

Master Of Finance& Control

(Kurukshetra University,Kurukshetra)

1

CONTENTS

PREFACE Page No. 3

SELF EVALUATION Page No. 4

INDUSTRY PROFILE Page No. 5-12

COMPANY PROFILE Page No. 13-33

PROJECT PROFILE Page No. 34-78

Content of Project Profile Page No. 35

RESEARCH METHDOLOGY

ANALYSIS & INTERPRETATION

FINDINGS

RECOMMENDATIONS

BIBLIOGRAPHY

QUESTIONAIRE

2

PREFACE

Summer training for 6-8 weeks in MBA course and study content of such

as practical knowledge. It makes the student confident and introduces them

about their hidden ability.

A Share trading company gives like ICICI direct.com offer their

services to the people so that they can trade in money market instruments

(like shares, Mutual funds etc.) easily without going from long processes

and all at one place.

To study the working a share trading company a research is

conducted in ICICI direct.com, which is among the largest private share

trading company.

For research data is collected from primary & secondary method

both.

3

SELF EVALUATION

This Six Weeks Industrial Summer Training has led me to understand the

various investments, Online Trading by ICICI direct.com, working

procedure and dealing with customers of ICICI direct.com.

It has also enhanced my knowledge about the functioning and management

of an industry, which I am sure, will be beneficial to me in my career.

Shilpi Singla

Master Of Finance&Control

(Kurukshetra University,Kurukshetra)

4

INDUSTRY PROFILE

5

INTRODUCTION to BSE  

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation)Act,1956.

The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redressal of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programmes and making available to them necessary informative inputs .

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the Exchange

6

and the Chief Operating Officer and other Heads of Departments assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member-brokers to the Exchange, etc.

Turnover on the Exchange

The average daily turnover of the Exchange during the financial year 2003-2004 and 2004-05 (April-March), wasRs. 1978.81 crores and Rs. 2050.26 crores respectively.

The average number of daily trades recorded during the above period was 7.98 lakhs and 9.38 lakhs respectively.

The ban on all deferral products like Borrowing & Lending of Securities Scheme (BLESS) and Automated Lending & Borrowing Mechanism (ALBM) in the Indian capital markets by SEBI w.e.f. July 2, 2001, abolition of account period settlements, introduction of Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f. December 31, 2001, etc. have adversely impacted the liquidity in the market and consequently there is a considerable decline in the average daily turnover at the Exchange as reflected in above statistics.

7

Introduction to NSE

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures.  

The National Stock Exchange was set up in 1995 as a first step in reforming the securities market through improved technology and introduction of best practices in management. It started with the concept of an independent governing body without any broker representation thus ensuring that the operators' interests were not allowed to dominate the governance of the exchange.

Before the NSE was set up, trading on the stock exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. The practice of physical trading imposed limits on trading volumes and, hence, the speed with which new information was incorporated into prices. To obviate this, the NSE introduced screen-based trading system (SBTS) where a member can punch into the computer the quantities of shares and the prices at which he wants to transact. The transaction is executed as soon as the quote punched by a trading member finds a matching sale or buy quote from counterparty. SBTS electronically matches the buyer and seller in an order-driven system or finds the customer the best price available. With SBTS, it becomes possible for market participants to see the full market, which helps to make the market more transparent, leading to increased investor confidence.

8

NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

9

Introduction to Financial Market

The function of the financial market is to facilitate the transfer of funds from surplus sectors (lenders) to deficit sectors (borrowers). Normally, households have investible funds or savings, which they lend to borrowers in the corporate and public sectors whose requirement of funds far exceeds their savings. A financial market consists of investors or buyers of securities, borrowers or sellers of securities, intermediaries and regulatory bodies. Financial market does not refer to a physical location. Formal trading rules, relationships and communication networks for originating and trading financial securities link the participants in the market.

Organized money market: Indian financial system consists of money market and capital market. The money market has two components - the organized and the unorganized. Theorganized market is dominated by commercial banks. The other major participants are the Reserve Bank of India, Life Insurance Corporation, General Insurance Corporation, Unit Trust of India, Securities Trading Corporation of India Ltd. and Discount and Finance House of India, other primary dealers, commercial banks and mutual funds. The core of the money market is the inter-bank call money market whereby short-term money borrowing/lending iseffected to manage temporary liquidity mismatches. The Reserve Bank of India occupies strategic position of managing market liquidity through open market operations of governmentsecurities, access to its accommodation, cost (interest rates), availability of credit and other monetary management tools. Normally, monetary assets of short-term nature, generally less than one year, are dealt in this market.

Un-organized money market: Despite rapid expansion of the organized money market througha large network of banking institutions that have extended their reach even to the rural areas,there is still an active unorganized market. It consists of indigenous bankers and moneylenders.

10

In the unorganized market, there is no clear demarcation between short-term and long-term finance and even between the purposes of finance. The unorganized sector continues to provide finance for trade as well as personal consumption. The inability of the poor to meet the "creditworthiness" requirements of the banking sector make them take recourse to the institutions that still remain outside the regulatory framework of banking. But this market is shrinking.

The capital market: Consists of primary and secondary markets. The primary market deals with the issue of new instruments by the corporate sector such as equity shares, preference shares and debt instruments. Central and State governments, various public sector industrial units (PSUs), statutory and other authorities such as state electricity boards and port trusts also issue bonds/debt instruments.The primary market in which public issue of securities is made through a prospectus is retail market and there is no physical location. Offer for subscription to securities is made to investing community. The secondary market or stock exchange is a market for trading and settlement of securities that have already been issued. The investors holding securities sell securities through registered brokers/sub-brokers of the stock exchange. Investors who are desirous of buying securities purchase securities through registered brokers/sub-brokers of the stock exchange. It may have a physical location like a stock exchange or a trading floor. Since 1995, trading in securities is screen-based and Internet-based trading has also made an appearance in India.

The secondary market consists of 23 stock exchanges including the National Stock Exchange, Over-the-Counter Exchange of India (OTCEI) and Inter Connected Stock Exchange of India Ltd. The secondary market provides a trading place for the securities already issued, to be bought and sold. It also provides liquidity to the initial buyers in the primary market to re offer the securities to any interested buyer at any price, if mutually accepted. An active secondary market actually promotes the growth of the primary market and capital formation because investors in the primary market are assured of a continuous market and they can liquidate their investments.

11

Capital Market Participants: There are several major players in the primary market. These include the merchant bankers, mutual funds, financial institutions, and foreign institutional investors (FIIs) and individual investors. In the secondary market, there are the stock brokers (who are members of the stock exchanges), the mutual funds, financial institutions, foreign institutional investors (FIIs), and individual investors. Registrars and Transfer Agents, Custodians and Depositories are capital market intermediaries that provide important infrastructure services for both primary and secondary markets. Market regulation: It is important to ensure smooth working of capital market, as it is the arena where the players in the economic growth of the country. Various laws have been passed from time to time to meet this objective.

12

COMPANY PROFILE

13

ICICI Limited (INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA) as founded by the Govt. of India, World Bank and representative of private industry on January 5, 1955 to encourage and asset industrial development and investment in India. The date of commencement of business was March 1, 1955. Over the years, ICICI has evolved in to a diversified financial institution.

The study integration of the Indian economy with the global markets has accelerated trends of increasing disinter mediation and growing competition from global players. ICICI has capitalized on the customer’s demand for efficient, high quality products and services to increase market share and insure a grater “share of the customer’s wallet”. The ICICI group, with its strong corporate franchise, in-depth knowledge of Indian industry and arguably the best pool of human talent in Indian financial sector, is uniquely positioned to take advantage of this opportunity.

Innovation has emerged as the vital ingredient for success in the information age, for the acquisition and retention of the customers. ICICI has successfully harnessed the INTERNET as a strategic tool, both to promote its financial services and to disseminate information. During the year, ICICI launched ICICI market.com a finance portal targeting our clientele in the wholesale banking, with a view to bringing all over products and services online.

The strategy of using ICICI’s client-centric relationship groups to actively cross self-the full range of their products and services to their client as has yielded desired results, as exemplified in the robust growth. They continued to restrict their exposure in corporate finance products segment, they have continued to focus on structure project finance in the infrastructure and oil, gas and petrochemical sectors. ICICI was able to offer range of experience and expertise for critical policy related matters in various sectors, thereby reinforcing its role in fostering the economic development of the nation.

14

Overview

ICICI Bank is India's second-largest bank with total assets of about Rs. 1, 67,659 crore at March 31, 2005 and profit after tax of Rs. 2,005crore for the year ended March 31, 2005 (Rs. 1,637crore in fiscal 2004). ICICI Bank has a network of about 560 branches and extension counters and over 1,900 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom and Canada, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa.

ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

As required by the stock exchanges, ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees.

15

At April 4, 2005, ICICI Bank, with free float market capitalization* of about Rs. 308.00 billion (US$ 7.00 billion) ranked third amongst all the companies listed on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate

16

relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. Shareholders of ICICI and ICICI BANK approved the merger in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

*Free float holding excludes all promoter holdings, strategic investments and cross holdings among    public sector entities.

17

ICICI Bank LimitedICICI Bank Towers

Bandra Kurla ComplexMumbai 400

051------------------------------------------------------------------------------------------

What is ICICI direct.com?

ICICI direct.com is the portal of ICICI Web Trade Limited that is the branch of ICICI Group and comes under the working of ICICI Bank. ICICI direct.com help the customers to trade\deal in the money market instruments like Equity, Mutual Funds, Insurance, Governments Bonds & Securities (NSC, KVP RBI Bonds etc.).

How a person can start trading through ICICI Direct.com

A person can start trading through ICICI direct.com by simply opening a 3 in 1 account (Saving a\c, Demat a\c, Trading a\c) of online trading in ICICI Bank or in ICICI direct.com branch. By trading through ICICI direct .com branch office like in Hisar a person has two options that is he can handle all his trading himself by opening a online account where he will get a User Id and a Password with the help of which he can login on the ICICI direct.com portal and can start doing his trading himself and by doing trading himself the person will not get any kind of help by the branch officers in his day-day trading except of any problem relating to his account which he has opened in that branch. On the other hand if a person is not able to work himself online and still he want to trade through the ICICI direst.com the he will be provided with the telephone trading. In telephone trading also a person has to fill the 3 in 1 account form for opening an account in the ICICI direct.com, in telephone trading a person is provided with a User Id (a nick name) and with this a person has to just call to branch of the ICICIdirect.com like in Hisar and has to give his identification (User Id-nick name) then he can place his

18

order like if he want to purchase some shares or want to sell his shares apply for an IPO etc.

For working with ICIC direct.com a person is required to have a saving account in the ICIC Bank through which all his money transaction will be done, all the money transactions which is to be debited and which is to be credited will be done automatically to his account by the bank, like if a person has purchased some shares then he has to made payment for that for that he is not required to make any Demand draft or issue any Cheques the amount payable by him will be debited to his account automatically and if he has sold some shares then the amount receivable by him will be credited to his account automatically.

ICICIdirect.com Events Calendar

Year Month Event

2000 JanuaryAprilOctoberDecember

Launch of ICICIdirectStarted Operation

Started Margin Trading Launch of Mutual Fund Plaza

2001 JulyJulyOctoberDecember

Qualities for KPMG’S first Web Seal in AsiaLaunch of Spot TradingLaunch of Call N TradeLaunch of Cash Trading on BSE

19

SAVING A/C

2002 JanuaryFebruaryMarch

April May June JulyOctober

Started investment in IPO onlineStarted investment in Bonds OnlineLaunched India’s first digitally signed Contract NotesLaunched Trading in FuturesLaunched BTST (Buy Today Sell Tomorrow)Launched Trading In OptionsLaunched Mobile AlertsCrossed 2lac customer base

2003 JulyDecember

Launched Margin PlusAwarded “Best E-Brokerage House” By Outlook Money

2004 FebruaryAprilNovember

December

Launched Wise InvestMoney Manager new letter launchedLaunched Investor Planning and Ideal PortfolioCrossed 5lac customer base

20

ICICI DIRECT.COM GROUPS

   

EMBED Word.Picture.8

 

21

ICICI GROUPS RETAIL FINANCIAL SERVICESICICIBONDSLOANSFIXED DEPOSITSDEMAT SERVICES

ICICI BANKRETAIL BANKING SERVICESINTERNET BANKING SERVICES

CORPORATE BANKING SERVICIESWORKING CAPITAL FINANCECASH MANAGEMENT SERVICES

ICICI PRUDENTIALLIFE INSURANCE

ICICI CAPITALMARKETING, DISTRIBUTION ANDSERVICING OF FINANCIAL PRODUCTS

ICICI INFOTECHSOFTWARE SOLUTIONIT ENABLED SERVICESSHAREHOLDER AND BONDHOLDERSERVICING

ICICI WEB TRADEONLINE SHARE TRADINGONLINE IPOTRADING IN DERIVATIVES (FUTURE AND OPTION)

22

ICICI HOMEHOUSING FINANCE

ICICI PERSONAL FINANCIAL SERVICESDISTRIBUTION AND SERVICING OFRETAIL LOAN PRODUCTS

CORPORATE FINANCIAL SERVICINGICICIPROJECT FINANCETRASURY SERVICES

ICICI SECURITIESINVESTMENT BANKINGPRIMARY DEALERSHIP

ICICI BROKERAGEEQUITY BROKINGEQUITY RESEARCH

ICICI LOMBOARDGERNAL INSURANCE

ICICI VENTUREOFFSHORE AND SOMESTICPRIVATE EQUITY

ICICI KINFRAINFRASTRUCTURE PROJECT DEVELOPMENT IN KERALA

23

ICICI WINFRAINFRASTRUCTURE PROJECT DEVELOPMENT IN WEST BENGAL

ICICI INTERNATIONALOFFSHORE INVESTMENTOFFSHORE FUND MANAGEMENT

ICICI KNOWLEDGE PARKINFRASTRUCTURE AND SUPPORT FACILITIES FOR BUISNESS DRIVEN RESEARCH

24

ICICI Bank Press releases 2006

24/07/2006 ICICI Bank bottomline rises 17% 24/07/2006 ICICI Bank sizzles on strong Q1 show 24/07/2006 SBI to issue hybrid capital instruments abroad 13/07/2006 Bigger cheques for bank bosses 11/07/2006 ICICI Bank gains Rs 403.24 cr from sale of securitised

assets 08/07/2006 Bajaj picks up 1.42% in ICICI 07/07/2006 ICICI Bank sells 5.4% stake in 3i Infotech 06/07/2006 ICICI Bank to speed up rural networking 03/07/2006 ICICI-Current Price: 500.35 Target Price : 530 10/06/2006 ICICI Bank moves up lending rates by 50 bps 07/06/2006 SIDBI buys Rs 450 crore SME credit portfolio from

ICICI Bank 02/06/2006 NRE, FCNR(B) RATES UP-Banks 10/05/2006 Banks feel IPO scam tremor 08/05/2006 IA, ICICI Bank ink $152 mn funding pact 06/05/2006 ICICI hikes home loan rates 06/05/2006 Rate hike 05/05/2006 ICICI Bank set for fresh round of rate hikes 05/05/2006 BRANCH IN BELGIUM-ICICI Bank UK 03/05/2006 ICICI Bank inflates on strong Q4 outcome, scales all-

time high 02/05/2006 ICICI `touch point' every 10 km 02/05/2006 ICICI Bank: Asset growth 01/05/2006 ICICI Bank net up 29% to Rs 790 crore 01/05/2006 IBP losses 26/04/2006 Soft selling 20/04/2006 NRE DEPOSIT RATES-BoI, ICICI 13/04/2006 The farm is no freeway 07/04/2006 RBI BARS FIIs-ICICI Bank 05/04/2006 ICICI Bank to launch white label credit card 31/03/2006 ICICI offloads Mysore Cements stake 30/03/2006 ICICI Bank to raise Rs 4000 cr 23/03/2006 ICICI offloads SIB stake for Rs 30 cr

25

20/03/2006 ICICI Bank plans to rejig assets portfolio 17/03/2006 Liquidity expected to keep rates stable in near term 16/03/2006 ICICI Bank to cover 60 districts by year end 14/03/2006 ICICI Bank hikes PLR for corporates by 100 bps 14/03/2006 ICICI Bank sells Fed Bank shares to IFC 13/03/2006 ICICI BANKING CORP-Current Price: 614-Target

Price : 630 09/03/2006 Intel, ICICI Bank tie up to finance SME tech needs 07/03/2006 ICICI Bank to jack up PLR afresh 03/03/2006 MOSCOW BRANCH-ICICI Bank 28/02/2006 ICICI Bank strikes form 21/02/2006 ICICI Bank ties up with BayernLB 20/02/2006 ICICI Bank, Bayern LB, Germany, to co-operate 20/02/2006 ICICI Bank, Bayern LB, Germany, to co-operate 20/02/2006 ICICI Bank, Bayern LB, Germany, to co-operate 15/02/2006 ICICI Bank ups corporate lending rate by 50 bps 09/02/2006 ICICI, SBI to hike home loan rates 08/02/2006 Allied Digital bags ICICI Bank deal 30/01/2006 ICICI-Current price: 619.55 -Target price : 660 25/01/2006 RBI to probe controls of IPO-tainted banks 23/01/2006 UTI - Growth & Value Fund - (G) buys ICICI Bank in

December 2005 21/01/2006 ICICI Bank net up at Rs 640 cr 20/01/2006 ICICI Bank Q3 net at Rs 640.08 crore 17/01/2006 IPO scam derails banks' US plans 14/01/2006 ICICI Bank the first to go mobile in UK 14/01/2006 ICICI Bank hikes interest rate for corporate loans 13/01/2006 ICICI Bank hikes PLR by 25 bps 05/01/2006 ICICI Bank multiple-asset pool gets first AAA rating 03/01/2006 REVISES RATES-ICICI Bank

ICICI Bank Press Release| 2005 |

26

PROJECT PROFILE

27

CONTENTS

TRADING PROCEDURE Page No.32

TRADING MECHANISM Page No. 33-40

EQUITY SHARES Page No. 41-43

PREFERENCE SHARES Page No. 44-46

TRADING IN SHARES Page No. 47

DERIVATIVES (FUTURES & OPTIONS) Page No. 48-53

MUTUAL FUNDS Page No. 54-68

INVESTING IN MUTUAL FUNDS Page No. 69

IPO’S & BONDS Page No.70

FEATURES OF ICICI DIRECT. COM Page No. 70-71

ADVANTAGES OF ICICI DIRECT.COM Page No. 72

28

TRADING A/C DEMAT A/C

TRADING

DBC

OWN TRADIN

G BY NET

PASSWORD & ID

SELF TRADING

NICKNAME BY DBC

SELF PRESENT

PLACING AN ORDER

TRADING

ORDER PLACED TO DBC BY TELE

PLACING AN ORDER

TRADING

CUSTOMER

SAVING A/C

29

1. Select Account :- First we have to select account in which the trading is to be done. Insert account number in the select a/c no., column.Then select go to, column various options of trading will be opened & than click on in which the trading is to be done.For eg. Equity Mutual funds Commodities Derivatives Ipo’s Insurance

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Thursday, August 03, 2006,12:20 IST

Customer service Home Trading News Market Commodity Derivatives Charts Research Mutual funds Personal finance

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Minimum Browser Requirement: You must have Internet Explorer 5.5 & above or Netscape Communicator 4.7 & above.

Copyright© 2006.All rights Reserved. ICICI Web Trade Limited

® trademark registration in respect of the concerned mark has been applied for by ICICI Bank Limited

NSE SEBI Registration Number Capital Market :- INB 231147639 | BSE SEBI Registration Number Capital Market :- INB 011147635

Select Account Help

 

Search e-Invest Account :

Select e-Invest Account :

Go To :

   

30

NSE SEBI Registration Number Derivatives :- INF 231147639

2. Modify Allocation:- After opening the account for which the trading is to be done, we will choose the investment alternatives in which the trading is to be done like equity, derivatives etc. If an investor want to buy than we will allocate the money from saving account through modify allocation infront of column side to investment alternatives. For eg. If we want to buy equity shares in that case allocate money from saving account in front of equity column. If we want to invest in derivatives, mutual funds, ipo’s same procedure as explained in equity will be applied.

MODIFY ALLOCATION

Account : 8500325406 Bank Account

No.: 017201502189

Total Bank Balance

: Rs. 20,725.22

Block For Current Allocation Blocked for

TradeAdd / Reduce Amount

Secondary Market Equity 0.00 0.00

Futures & Options 0.00 0.00

Commodity 0.00 0.00

Postal Savings,MFs,IPO & Others 0.00  

Gross Allocation 0.00      

Net Withdrawal Balance 20,725.22   SUBMIT

31

3. DEMAT ALLOCATION:-

You can see details of the stocks in the demat accounts linked with your E-brokerage account on this page. The current market value of each of the stocks can also be seen. Each stock has an associated ISIN no. It is possible that a stock is associated with more than one ISINnos.

Against each stock, the total balance and the available balance is displayed. The available balance indicates the number of shares that can be sold. The available balance is less than the total balance when some shares have been sold. Such quantity is indicated as blocked or under TIFD and cannot be sold. The quantity remains blocked till the Securities pay -in -date for the Settlement. After tjat the quantity is shifted to the TIFD(Transfer Instrution For Debit) column which indicates that the quantity is in the process of being debited from the account on settlement.

Please note that no separate instructions need to be issued to the depository participant(DP) for debiting the account in case of a net sell obligation. The shares get automatically debited from the DP account in case of a net sell obligation and credited in the event of a buy sell obligation.

32

DEMAT BALANCE

Account :

IN300183-11520437-8500215946

Stock Code:

Find Symbol

ALLOCATED SECURITIES Help

Stock

Total Dema

t Balan

ce

Allocated Qty

Blocked for Trade

Block For Marg

in

Current

Market Price

Market Value

Allocate/DeAllocate

Qty

Buy / Sell

ALKSPI

  1500 0 0 0.53 795.00Buy

Sell

COMWI

  100 0 0 NA NABuy

Sell

DYNSYS

  8250 0 0 0.322,640.0

0Buy

Sell

ESSSTE

  120 0 0 34.904,188.0

0Buy

Sell

GAMIND

  15 0 0325.0

54,875.7

5Buy

Sell

HUGTEL

  300 0 0 18.605,580.0

0Buy

Sell

INDGAS

  50 0 0112.0

05,600.0

0Buy

Sell

KARBAN

  100 0 0 99.359,935.0

0Buy

Sell

MIRELE

  200 0 0 15.753,150.0

0Buy

Sell

MRPL   300 0 0 35.9010,770.

00Buy

Sell

NATSTE

  100 0 0 21.052,105.0

0Buy

Sell

NORT   100 0 0 4.10 410.00 Bu Se

33

EA y ll

RALIND

  30 0 0263.5

07,905.0

0Buy

Sell

RELPET

  200 0 0 60.7512,150.

00Buy

Sell

TELDAT

  200 0 0 10.602,120.0

0Buy

Sell

 TOTAL

72,223.75

 

4. ORDER BOOK:- The page represents the current status and other details of buy/sell orders placed by you. The details are updated on real-time basis and the latest status can be verified by refreshing the page. Each order has an Order Ref. No. which is an internal no. assigned by ICICI Direct.Com.

Order book can be explained:- Buy order Sell order

Buy order:-This order book is used when an investor want to place the order in equity or derivatives. For purchasing equity shares order has to be placed in equity order book. If investor want to invest in derivatives than order is placed in derivative order book.

BUY STOCKS  

Account : IN302679-32836794-8500325406

Exchange : NSE BSE Product :

Stock : Find Stock Code

Quantity : Get Quote

Order Type : Market    Limit Best 5 Bids/Offers

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Limit Price :Protection

%:  Explain

Disclosed Quantity :    

Stop Loss Trigger Price

: Explain

 

Nickname :  

Sell order:-This sell order book is used when an investor want to sell the stocks which are available in the investors demat account. For selling the investor has to equity sell order book. If investor want to sell the derivatives than order is placed in derivatives sell order book.

SELL STOCKS  

Account : IN302679-32836794-8500325406

Exchange : NSE BSE Product :

Stock : Find Stock Code

Quantity : Get Quote

Order Type : Market    Limit Best 5 Bids/Offers

Limit Price :Protection

%:  Explain

Disclosed Quantity :    

Stop Loss Trigger Price

: Explain

 

Nickname :  

5. Trade Book:- The Trade book shows details of the trades executed for you. The details are updated on a real time basis and the latest status can be verified by refreshing the page.

Further trades can be selected either on the basis of Settlement No or Date From and Date To

1. All the Trades for the same order are shown together. Multiple trades for the same Order Ref. No. to be aggregated and shown as a single entry in the Trade

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Book. Clicking the Order Ref, No. will show you the details of the trades for that particular Order Reference Number.

2. Clicking on the DP ID-DP client id will show you the Security projection for that particular selection of exchange, segment and settlement.

3. Clicking the settlement will show the cash projections for the particular selection of exchange, segment and settlement. This page will also give you the display of the date and the amount of cash Pay In/ Cash Pay out debited credited to your bank account with date and time.

4. In case stock code is blank or has been selected as ALL than Net Value to be shown at the bottom of the table.

5. On clicking on the update portfolio button. All the selected trade’s will be updated in the portfolio page. The updation of trade’s from the trade book to portfolio can be done only once. In case the customer want to update his portfolio again from the trade book he will have to write to helpdesk@icicidirect.com

EQUITY - TRADE BOOK: Orders executed on previous trading days can be viewed during non-trading hours and trading holidays only.

Account : 8500508229 Date From : Date To :

Stock Code

: Exchange : Product :

    

Date

Stock

Action

Qty.

Price#

Trade Value

Brokerage incl.

taxes

Order Ref. Settlem

entSegm

ent

DP Id - Client DP Id

Exchange

U / P

04-Aug-2006

BHEL

Buy 52,148.

0010,740.

000.00

20060804N300000581

2006147

Rolling

IN300183-

11570506

NSE

Total (10,740.00)

0.00 UPDATE PORTFOLIO

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6. Security projection:- The page gives details of date-wise net future security inflows /outflows due to/from you and the resultant balances. All transactions executed on your account for each stock are aggregated for each settlement to arrive at the net quantity of stock receivable by or payable to you for the settlement. This quantity is credited (in case of a net buy position) or debited (in case of a net sell position) to your Demat Account on the date specified as the Securities pay-in/pay-out date of clients for the settlement. Security projections provides the quantity of such debit or credit will take place. Details of all transactions relating to that particular stock can be viewed by clicking the on the link ‘Stock’.You can place a Buy Today Sell Tomorrow (BTST) order against a buy position through the Security Projections page by using the hyperlink “BTST sell.” The Security Projection also gives the following additional information.

Weighted average price: This will show the weighted average price of that particular position.

Maximum sell quantity permitted: This is the maximum quantity allowed to be sold in BTST for the particular position.

Blocked Quantity: On successful order placement the order quantity is shown in the blocked quantity of the Security Projections.

Available quantity. The available quantity is the Maximum order quantity allowed to be placed after considering the BTST orders already placed. This is equal to:

Available Quantity= Maximum Sell Quantity Permitted-Blocked QuantityFor stocks which are not permitted to be traded in BTST the columns of Maximum Sell Qty. permitted. Blocked Qty and Available quantity show NA and the BTST Sell Hyperlink does not appear in the Security Projections. Sale in BTST is permitted only till on T+1 and T+2 days (and not on T+3 i.e. pay –in/pay-out of the Exchange). In other words , BTST shall be permitted only up to the day prior to the scheduled payout of shares from the Exchange.

SECURITY PROJECTION & BTST®Account : 8500325063

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Security ProjectionsBuy Today Sell Tomorrow®

(BTST®)

Date

Position

StockQuantit

yExchang

eSegment

. Settlemen

t No.

Weighted

Average Price

Max Sell Qty

Permitted

Blocked Qty

Available Qty

BTST® Sell

09-Aug-2006

BUY PETLNG 300 NSE Rolling 2006147 46.20 300 0 300BTST®

Sell

09-Aug-2006

BUY PRAIN 200 NSE Rolling 2006147 161.99 200 0 200BTST®

Sell

09-Aug-2006

BUYSUBRO

S200 NSE Rolling 2006147 194.18 NA NA NA

7. Calculation Of Business:- Lastly after 3.30pm for calculating he business the Trade done in a particular period is calculated after adding all the trades done in a particular day. Through viewing the trade book we can know the trades done for any particular date, week or month.

Trading is done in following;-

EQUITY SHARES

Equity shares are commonly referred to common stock or ordinary share. Even though the words shares and stocks are interchangeably used, there is a difference between them. Share capital of a company is divided into a number of small units of equal value called shares. The term stock is the aggregate of a member’s fully paid up shares of equal value merged into one fund. It is a set of shares put together in a bundle. The “stock” is expressed in terms of money and not as many shares. Stock can be divided into fractions of any amount and such fractions may be transferred like shares.

Share certificate means a certificate under the common seal of the company specifying the number of shares held by any member. Share certificate provides the prima facie evidence of title of the members to such shares. This gives the shareholder the facility of dealing more easily with his share in the market. It enables him to sell his shares by showing marketable title.

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Rights of equity shareholders according to section 85(2) of companies Act 1956.

Right to vote at the general body meetings of the company. Right to control the management of the company. Right to share in the profits in the form of dividends and

bonus shares. Right to claim on the residual after repayment of all the

claims in the case of winding up of the company. Right of pre-emption in the matter of issue of new capital. Right to apply to court if there is any discrepancy in the

rights set aside. Right to receive a copy of statutory report, copies of

annual accounts along with audited report. Right to apply the central government to call an annual

meeting when a company fails to call such a meeting. Right to apply the Company law Board for calling an

extraordinary general meeting.

In a limited company the equity shareholders are liable to pay the company’s debt only to the extent of their share in the paid up capital. The equity shares have certain advantages.

Trading In Equity

The use of fixed charges sources of funds such as debt and preference capital alongwith owner’s equity in the capital structure is described as trading on equity or financial leverage. Under it, management can increase income for the equity shareholders by using less amount of ordinary share capital.

“When a person or a corporation uses borrowed capital as well as owned capital in the regular conduct of business he or it is said to be trading on equity.”

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“The use of borrowed funds, at a fixed cost of financing a firm is known as trading on equity.”

The main objective of trading on equity is to increase earnings per share for equity shareholders by issuing low dividend preferred stock and low interest debts. Company uses trading on equity in the circumstances when the rate of profit earned on the borrowed funds will be greater than the rate of interest payable on them. Greater the rate of earnings on the total capitalization as compared to the rate of interest payable on and other debts, grater will be the rate of dividend on equity shares. For eg: if a company borrows Rs. 100 @8% and earns 12% on this amount, it will be able to save Rs. 4 for the equity shareholder after paying the interest. It is called trading on equity because owned capital is considered as basis of issue of preference share capital and debt capital. Debt holders have limited share in the profits of the business, therefore, they want safety from the side of owned capital.

Objectives of Trading on Equity

To increase the rate of dividend on ordinary share capital. To control more financial resources by using more loaned capital on

the basis of owned capital. To centralize the right of voting in a few hands.

Types of Trading on Equity

Trading on Thin Equity:- When a company the amount of equity share capital is less as compared to debentures and preference share capital, it is called trading on thin equity.

Trading on Thick Equity:- When in total capitalistion the amount of loan capital and preference share capital are low as compared to equity share capital, it is called trading on thick equity.

Significance of Trading on Equity

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By following the policy of trading on equity, financial management can form a fair capital structure. While determining the capital structure it is necessary to consider the effects of debt on cost of capital and financial risk. By analyzing the policy of trading on equity, management can acknowledge this effect. By financial risk we mean the inability of the firm to meet fixed financial cost. In addition, management can make profit planning with the help of policy of trading on equity.

Limitations of Trading on Equity

The policy of trading on equity is used for increasing the income of ordinary shareholders. But it has following limitations:-

If the income is irregular and uncertain, this policy is not good for such business because in the years of low income, the burden of interest rises.

If the rate of income earned is less than the rate of interest payable, the policy of trading on equity will reduce the income for equity shareholders rather than increasing it. Similarly, if the income of the company before paying interest and taxes is equal to the interest payable on loans, shareholders will not get any dividend, and it can reduce the market price of shares.

By taking more loans, the interference of debt holders increases. It can cause difficulty to raise additional capital in future.

Sometimes, loan capital is profitable but due to the limitations imposed by the Articles and Memorandum or by the prevailing laws of a country, it is not possible to raise debt beyond a certain limit.

Preference Shares

Preference shares are those shares which get preferential treatment while receiving dividend as compared to equity shares. Like bonds, their claims on the company’s income are limited and they receive fixed dividend. In the event of liquidation of the company their claims on the assets of the firm are also fixed. The decision to pay dividend to the preferred

41

stock is at the discretion of the Board of Directors. In the case of bonds, payment of interest rate is mandatory.

The dividend received by the preferred stock is treated on par with the dividend received from the equity share for the tax purpose. These shareholders do not enjoy any of the voting powers except when any resolution affects their rights.

Types of preference shares

Cumulativpeference shares: The cumulative total of all unpaid preferred dividends must be paid before dividends are paid on common equity. The arrearages do not earn interest. The non payment of dividend only continues to grow. The arrearages accrue only for a limited number of years and not indefinitely. Generally three years of arrears accrue and accumulative feature ceases after three years. But the dividends in arrears continue if there is no such provision in the Articles of Association. In the case of liquidation, no arrears of dividends are payable unless there is a provision for them in the Articles of Association.

Non-Cumulative preference shares: The dividend does not accumulate. If there is no profit or inadequate profit in the company in a particular year, the company does not pay it. In the winding up of the company if preference and equity shares are fully paid, they have no further rights to have claims in the surplus. If there is a provision in the Articles of Association for such claims, then they have the rights to claim.

Convertible preference shares: The convertibility feature makes the preference share a more attractive investment security. The conversion feature is almost identical with that of the bonds, these preference shares are convertible as equity shares at the end of the specifies period and are quasi-equity shares. This gives the additional privilege of sharing the potential increase

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in the equity value, along with the security and stability of income.

Redeemable preference shares: If there is a provision in the Articles of Association, redeemable preference share can be issued. But redemption of the shares can be done only when

a) The partly paid up shares are made fully paid up. b) The fund for redemption is created from the profits, which would otherwise be available for distribution of dividends of out of the proceeds of fresh issue of shares for the purpose. c) If any premium has to be paid on redemption, it should be paid out of the profits of out of the company’s share premium account.

RIGHT SHARES

Shares offered to existing shareholders at a price by the company are called right shares. They are offered to the shareholders as a matter of legal right. If a public company wants to increase its subscribed capital by way of issuing shares after two years from its formation date or one year from the date of first allotment, whichever is earlier, such shares should be offered first to the existing shareholders in proportion to the capital paid up on the shares held by them at the date of such offer. This pre-emptive right can be forfeited by the shareholders through a special resolution. The shareholder can renounce the right shares in favour of his nominee. He may renounce all or part of the shares offered to him. The right shares may be partly paid. Minimum subscription limit is prescribed for right issues. In the event of company failing to receive 90% subscription, the company shall have to return the entire money received. At present, SEBI has removed this limit.

BONUS SHARES

Bonus share is the distribution of shares in addition to the cash dividends to the existing shareholders. Bonus shares are issued

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to the existing shareholders without any payment of cash. The bonus issue is made out of free reserves built out of genuine profit or share premium collected in cash only. The bonus issue could be made only when all the partly paid shares, if any, existing are made fully paid up. The declaration of the bonus issue used to have favorable impact on the psychology of the shareholders. Bonus shares are declared by the directors only when they expect a rise in the profitability. The issue shares of bonus shares enables the shareholders to sell the shares and get capital gains while retaining their original.

Trading in shares:

ICICIdirect.com offers you various options while trading in shares.

Cash Trading : This is a delivery based trading system, which is generally done with the intention of taking delivery of shares or monies.

Margin Trading : You can also do an intra-settlement trading upto 3 to 4 times your available funds, wherein you take long buy/ short sell positions in stocks with the intention of squaring off the position within the same day settlement cycle.

MarginPLUS Trading : Through MarginPLUS you can do an intra-settlement trading upto 25 times your available funds, wherein you take long buy/ short sell positions in stocks with the intention of squaring off the position within the same day settlement cycle. MarginPLUS will give a much higher leverage in your account against your limits.

Spot Trading : This facility can be used only for selling your demat stocks which are already existing in your demat account. When you are looking at an immediate liquidity option, 'Cash on Spot' may work the best for you, On selling shares through "cash on spot", money is credited to your bank a/c the same evening & not on the exchange payout date.

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This money can then be withdrawn from any of the ICICIBank ATMs.

BTST : Buy Today Sell Tomorrow (BTST) is a facility that allows you to sell shares even on 1st and 2nd day after the buy order date, without you having to wait for the receipt of shares into your demat account.

DERIVATIVES (FUTURES & OPTIONS)

Derivatives:-

The term "Derivative" indicates that it has no independent value, i.e. its

value is entirely "derived" from the value of the underlying asset. The

underlying asset can be securities, commodities, bullion, currency, live

stock or anything else. In other words, Derivative means a forward, future,

option or any other hybrid contract of pre determined fixed duration,

linked for the purpose of contract fulfillment to the value of a specified real

or financial asset or to an index of securities.

With Securities Laws (Second Amendment) Act, 1999, Derivatives has

been included in the definition of Securities. The term Derivative has been

defined in Securities Contracts (Regulations) Act, as:-

Derivative includes: -

a. A security derived from a debt instrument, share, loan, whether

secured or unsecured, risk instrument or contract for differences or

any other form of security;

b. A contract which derives its value from the prices, or index of

prices, of underlying securities;

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In a nutshell, Derivatives is a product whose value is derived from

the value of one or more basic variables, called bases (underlying asset,

index, or reference rate), in a contractual manner. The underlying asset can

be equity, foreign exchange, commodity or any other asset.

For example, wheat farmers may wish to sell their harvest at a future

date to eliminate the risk of a change in prices by that date. Such a

transaction is an example of a derivative. The price of this derivative is

driven by the spot price of wheat which is the “underlying”.

Derivatives

Most common derivative instruments traded at any stock exchange are : -

1) Futures:- A futures contract is an agreement between two parties to

buy or sell an asset at a certain time in the future at a certain price. Futures

contracts are special type of forward contracts in the sense that the former

are standardized exchange-traded contracts.

2) Options:- Options are of two types- 1. Calls

2. Puts

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

quantity of the underlying asset, at a given price on or before a given future

date.

Puts: give the buyer the right, but not the obligation to sell a given quantity

of the underlying asset at a given price on or before a given date.

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Future Contract

Futures Contract means a legally binding agreement to buy or sell the

underlying security on a future date. Future contracts are the

organized/standardized contracts in terms of quantity, quality (in case of

commodities), delivery time and place for settlement on any date in future.

The contract expires on a pre-specified date which is called the expiry date

of the contract. On expiry, futures can be settled by delivery of the

underlying asset or cash. Cash settlement entails paying/receiving the

difference between the price at which the contract was entered and the

price of the underlying asset at the time of expiry of the contract.

Option Contract

Options Contract is a type of Derivatives Contract which gives the

buyer/holder of the contract the right (but not the obligation) to buy/sell the

underlying asset at a predetermined price within or at end of a specified

period. The buyer / holder of the option purchases the right from the

seller/writer for a consideration which is called the premium. The

seller/writer of an option is obligated to settle the option as per the terms of

the contract when the buyer/holder exercises his right. The underlying

asset could include securities, an index of prices of securities etc.

Under Securities Contracts (Regulations) Act, 1956 options on

securities has been defined as "option in securities" means a contract for

the purchase or sale of a right to buy or sell, or a right to buy and sell,

securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put,

a call or a put and call in securities;

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An Option to buy is called Call option and option to sell is called Put

option. Further, if an option that is in case of securities but not in index is

called American option and one that is on the basis of index only is called

European option. The price at which the option is to be exercised is called

Strike price or Exercise price.

Therefore, in the case of American options the buyer has the right to

exercise the option at anytime on or before the expiry date. This request for

exercise is submitted to the Exchange, which randomly assigns the

exercise request to the sellers of the options, who are obligated to settle the

terms of the contract within a specified time frame.

As in the case of futures contracts, option contracts can be also be

settled by delivery of the underlying asset or cash. However, unlike futures

cash settlement in option contract entails paying/receiving the difference

between the strike price/exercise price and the price of the underlying asset

either at the time of expiry of the contract or at the time of

exercise/assignment of the option contract.

Index Futures and Index Option Contracts

Futures contract based on an index i.e. the underlying asset is the

index, are known as Index Futures Contracts. For example, futures contract

on NIFTY Index and BSE-30 Index. These contracts derive their value

from the value of the underlying index.

Similarly, the options contracts, which are based on some index, are

known as Index option contracts. However, unlike Index Futures, the buyer

of Index Option Contracts has only the right but not the obligation to

buy/sell the underlying index on expiry. Index Option Contracts are

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generally European Style options i.e. they can be exercised/assigned only

on the expiry date.

An index, in turn derives its value from the prices of securities that

constitute the index and is created to represent the sentiments of the market

as a whole or of a particular sector of the economy (Sectoral Index).

By its very nature, index cannot be delivered on maturity of the

Index futures or Index option contracts therefore, these contracts are

essentially cash settled on Expiry.

Derivatives: Minimum Contract Size

The Standing Committee on Finance, a Parliamentary Committee, at the

time of recommending amendment to Securities Contract (Regulation) Act,

1956 had recommended that the minimum contract size of derivative

contracts traded in the Indian Markets should be pegged not below Rs. 2

Lacs. Based on this recommendation SEBI has specified that the value of a

derivative contract should not be less than Rs. 2 Lacs at the time of

introducing the contract in the market.

Derivatives: Lot Size of a Contract

Lot size refers to number of underlying securities in one contract.

Additionally, for stock specific derivative contracts SEBI has specified that

the lot size of the underlying individual security should be in multiples of

100 and fractions, if any, should be rounded of to the next higher multiple

of 100. This requirement of SEBI coupled with the requirement of

minimum contract size forms the basis of arriving at the lot size of a

contract.

For example, if shares of XYZ Ltd are quoted at Rs.1000 each and

the minimum contract size is Rs.2 lacs, then the lot size for that particular

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scripts stands to be 200000/1000 = 200 shares i.e. one contract in

XYZ Ltd. covers 200 shares.

Derivative Markets in India

Derivative trading in India takes can place either on a

separate and independent Derivative Exchange or on a separate

segment of an existing Stock Exchange. Derivative

Exchange/Segment function as a Self-Regulatory Organization

(SRO) and SEBI acts as the oversight regulator. The clearing &

settlement of all trades on the Derivative Exchange/Segment

would have to be through a Clearing Corporation/House, which is

independent in governance and membership from the Derivative

Exchange/Segment.

TRADE IN DERIVATIVES:

FUTURES

Through ICICI direct.com, you can now trade in index and stock futures on the NSE. In futures trading, you take buy/sell positions in index or stock(s) contracts having a longer contract period of up to 3 months.

Trading in FUTURES is simple! If, during the course of the contract life, the price moves in your favour (i.e. rises in case you have a buy position or falls in case you have a sell position), you make a profit.

Presently only selected stocks, which meet the criteria on liquidity and volume, have been enabled for futures trading.

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Calculate Index and Know your Margin are tools to help you in calculating your margin requirements and also the index & stock price movements. The ICICIDIRECT UNIVERSITY on the HOME page is a comprehensive guide on futures and options trading.

MUTUAL FUND

Like most developed and developing countries the mutual fund cult has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation.

A Mutual Fund is a professionally managed collective investment fund formed with the objective of raising money from large number of investors. An assets management company manages and monitors this investment in order to maximize benefits to the investors. Mutual Funds mainly cater to small investor and manage portfolio in a manner that provides regular income, safety and liquidity.

And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investor, providing an opportunity for financial success that was once available only to a select few.

For the individual investor, mutual funds provide the benefit of aving someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment

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requirements on many funds are low enough that even the smallest investor can get started in mutual funds.

Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a company that pools the money of many investors -- its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well.

A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify.

The Mutual Fund Industry

The Government of India can trace the genesis of the mutual fund industry in India back to 1964 with the setting up of the Unit Trust of India (UTI). Since then UTI has grown to be a dominant player in the industry. UTI is governed by a special legislation, the Unit Trust of India Act, 1963.

The industry was opened up for wider participation in 1987 when public sector banks and insurance companies were permitted to set up mutual funds. Since then, 6 public sector banks have set up mutual funds. Also the two Insurance companies LIC and GIC have established mutual funds. Securities Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since then several mutual funds have been set up by the private and joint sectors.

Growth of Mutual Funds

The Indian Mutual fund industry has passed through three phases. The first phase was between 1964 and 1987 when Unit Trust of India was the only

52

player. By the end of 1988, UTI had total asset of Rs 6,700crores. The second phase was between 1987 and 1993 during which period 8 funds were established (6 by banks and one each by LIC and GIC). This resulted in the total assets under management to grow to Rs 61,028crores at the end of 1994 and the numbers of schemes were 167.

The third phase began with the entry of private and foreign sectors in the Mutual fund industry in 1993. Several private sectors Mutual Funds were launched in 1993 and 1994. The share of the private players has risen rapidly since then. Currently there are 34 Mutual Fund organizations in India. Kothari Pioneer Mutual fund was the first fund to be established by the private sector in association with a foreign fund.

This signaled a growth phase in the industry and at the end of financial year 2000, 32 funds were functioning with Rs. 1,13,005 crores as total assets under management. As on August end 2000, there were 33 funds with 391 schemes and assets under management with Rs. 1,02,849 crores. The Securities and Exchange Board of India (SEBI) came out with comprehensive regulation in 1993, which defined the structure of Mutual Fund and Asset Management Companies for the first time.

ICICIdirect.com brings you the same convenience while investing in Mutual funds also - Hassle free and Paperless Investing. With the inclusion of Standard Chartered MF, you can now invest on-line in 10 mutual Funds through ICICIdirect.com. Prudential ICICI MF, JM MF, Alliance MF, Franklin Templeton MF, Sundaram MF, Birla Sun Life MF, HDFC MF, Principal MF and IL & FS MF are the Mutual Funds available for investment. You can invest in mutual funds without the hassles of filling application forms or any other paperwork. You need no signatures or proof of identity for investing.

Once you place a request for investing in a particular fund, there are no manual processes involved. Your bank funds are automatically debited or credited while simultaneously crediting or debiting your unit holdings. You also get control over your investments with online order confirmations and

53

order status tracking. Get to know the performance of your investments through online updation of MF portfolio with current NAV.

ICICIdirect.com offers you various options while investing in Mutual Funds:

Purchase: You may invest/purchase Prudential ICICI MF, JM MF, Alliance MF, Franklin Templeton MF, Sundaram MF, Birla Sun Life MF, HDFC MF, Principal MF, IL & FS MF and Standard Chartered MF without the hassles of filling application forms.

Redemption: In addition to giving hassle-free paperless redemption, ICICIdirect.com offers faster liquidity. You can redeem the mutual fund units through ICICIdirect.com. The money will be credited to your bank account automatically 3 days after the order placement date.

Switch: To suit your changing needs you may wish to shift monies between different schemes. You can switch your monies online from one scheme to another in the same fund family without any hassles.

Systematic Investment plans (SIP): SIP allows you to invest a certain sum of money over a period of time periodically. Just fill in the investment amount, the period of investment and the frequency of investing and submit. ICICIdirect.com will do the rest for you automatically investing periodically for you.

Systematic withdrawal plan: This allows you to withdraw a certain sum of money over a period of time periodically.

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Transfer-in: You can convert your existing Mutual funds into electronic mode through a transfer-in request.

ADVANTAGES OF MUTUAL FUNDOR

WHY INVEST IN MUTUAL FUND

Professional investment management

One of the primary benefits of mutual funds is that an investor has access to professional management. A good investment manager is certainly worth the fees you will pay. Good mutual fund managers with an excellent research team can do a better job of monitoring the companies they have chosen to invest in than you can, unless you have time to spend on researching the companies you select for your portfolio. That is because Mutual funds hire full-time, high-level investment professionals. Funds can afford to do so as they manage large pools of money. The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale. When you buy a mutual fund, the primary asset you are buying is the manager, who will be controlling which assets are chosen to meet the funds' stated investment objectives.

Diversification

A crucial element in investing is asset allocation. It plays a very big part in the success of any portfolio. However, small investors do not have enough money to properly allocate their assets. By pooling your funds with others, you can quickly benefit from greater diversification. Mutual funds invest in a broad range of securities. This limits investment risk by reducing the

55

effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities.

Convenience and Flexibility

Investing in mutual funds has it’s own convenience. While you own just one security rather than many, you still enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It also uses the services of a high quality custodian and registrar. Another big advantage is that you can move your funds easily from one fund to another within a mutual fund family. This allows you to easily rebalance your portfolio to respond to significant fund management or economic changes.

Liquidity

In open-ended schemes, you can get your money back promptly at net asset value related prices from the mutual fund itself.

Transparency

Regulations for mutual funds have made the industry very transparent. You can track the investments that have been made on you behalf and the specific investments made by the mutual fund scheme to see where your money is going. In addition to this, you get regular information on the value of your investment.

Variety

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There is no shortage of variety when investing in mutual funds. You can find a mutual fund that matches just about any investing strategy you select. There are funds that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest challenge can be sorting through the variety and picking the best for you.

TAX BENEFITS

There are tax benefits to be delivered from investing in Mutual Fund. Income distribution of equity-oriented funds are exempt from taxed consessional rates of tax are applicable on capital gains from unit of Mutual Fund

RETURN POTENTIAL

Over a medium to long-term, Mutual Fund have potential to provide aHigher return as they invest in a diversified basket of selected securities.

WELL REGULATED

All Mutual Fund are registered with SEBI (Stock Exchange Board Of India)

And they function with inThe provision of strict regulation designed to protect the interest of investors.

LOW INVESTMENT

It is possible to invest in small amount as and when the investors have surplus funds to invest.

LIMITATION OF MUTUAL FUND

1. NATURE OF THE SCHEME AND MARKET RISK:

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Investing money in share is more risky then in debentures. Thus a scheme investing mainly in shares and partly in e.g. equity schemes is more risky than a scheme, which invests partly in shares and partly in debentures (Balanced Scheme). Balanced Scheme is more risky than a scheme which invests mainly in debentures i.e. income scheme.

Equity scheme provides higher returns in the form of capital appreciation and carries more risk as risk and return go together. Unsystematic risk can be reduced through a well-diversified portfolio but systematic risk remains there. Where as pure income scheme provides lower returns and risk. Thus, investor has to choose which scheme is better and meets his objective.

2. INVESTOR:

In case of Mutual Fund, the investor has no control over the securities bought and sold. An individual can revise his portfolio immediately according to his expectation but in case of Mutual Fund he has no control.

3. HIGH CHARGES:

Mutual Fund charges regular expenses like custodian fee, registrar fee, and the asset management fee. These expenses have a ceiling limit of 3 percent of the net assets in the respective scheme per year.

Types of Mutual Funds

Getting a handle on what's under the hood helps you become a better investor and put together a more successful portfolio. To do this one must know the different types of funds that cater to investor needs, whatever the age, financial position, risk tolerance and return expectations. The mutual fund schemes can be classified according to both their investment objective (like income, growth, tax saving) as well as the number of units (if these are unlimited then the fund is an open-ended one while if there are limited units then the fund is close-ended).

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A. BY STRUCTURE

OPEN-ENDED SCHEMES

CLOSE-ENDED SCHEMES

INTERVAL SCHEMES

Open-ended schemes

Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at NAV-related prices from and to the mutual fund on any business day. These schemes have unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange.

Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem units any time during the life of a scheme. Hence, unit capital of open-ended funds can fluctuate on a daily basis. The advantages of open-ended funds over close-ended are as follows:

Any time exit option, the issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. Any time entry option, an open-ended fund allows one to enter the fund at any time and even to invest at regular intervals.

Close-ended schemes

Close-ended schemes have fixed maturity periods. Investors can buy into these funds during the period when these funds are open in the initial issue. After that such schemes cannot issue new units except in case of bonus or rights issue. However, after the initial issue, you can buy or sell units of the scheme on the stock exchanges where they are listed. The market price of

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the units could vary from the NAV of the scheme due to demand and supply factors, investors’ expectations and other market factors

Schemes that have stipulated maturity period (ranging from 2 to 5 years) are called close-ended schemes. You can directly invest in the scheme at the time of initial issue and thereafter you can buy sell the units of the scheme on he stock externs in which they are listed. The market price at the stock exchange could vary foam the scheme’s NAV (Net Asset Value) on account of demand and supply situation, unit holder’s expectation and other market factors. Some close-ended schemes give you additional option of selling your units directly to the Mutual Fund through periodic repurchase Aetna related prices. SEBI regulations ensure that at least one of the exit routes is provided to the investors.

INTERVAL SCHEMES

These combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.

B. BY INVESTMENT OBJECTIVE

GROWTH SCHEME

FIXED INCOME SCHEMES

BALANCED SCHEMES

MONEY MARKET SCHEMES

GROWTH SCHEME

Growth funds primarily look for growth of capital with secondary emphasis on dividend. Such funds invest in shares with a potential for

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growth and capital appreciation. They invest in well-established companies where the company itself and the industry in which it operates are thought to have good long-term growth potential, and hence growth funds provide low current income. Growth funds generally incur higher risks than income funds in an effort to secure more pronounced growth.

Some growth funds concentrate on one or more industry sectors and also invest in a broad range of industries. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income.

Aim to provide capital appreciation over medium to long term. These scheme normally invest majority of there funds in equities and are willing to bear short-term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in short term.

Idea for: Investor in their prime earning years. Investors seeking growth over long-term.

FIXED INCOME SCHEME

Fixed income funds primarily look to provide current income consistent with the preservation of capital. These funds invest in corporate bonds or government-backed mortgage securities that have a fixed rate of return. Within the fixed-income category, funds vary greatly in their stability of principal and in their dividend yields. High-yield funds, which seek to maximize yield by investing in lower-rated bonds of longer maturities, entail less stability of principal than fixed-income funds that invest in higher-rated but lower-yielding securities.

Some fixed-income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the Indian Government. Fixed-income funds are

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suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so.

Idea for: Retired people and others with a need for capital stability and

regular income. Investors who need some income to supplement their earning.

BALANCED SCHEMES

Aim to provide both growth and income by periodically distributing a part of income and capital gain they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when he market falls.

Idea for: Investor looking for a combination of income and moderate

growth.

MONEY MARKET SCHEME

For the cautious investor, these funds provide a very high stability of principal while seeking a moderate to high current income. They invest in highly liquid, virtually risk-free, short-term debt securities of agencies of the Indian Government, banks and corporations and Treasury Bills. Because of their short-term investments, money market mutual funds are able to keep a virtually constant unit price; only the yield fluctuates.

Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with - and usually higher than -- yields on bank savings account, they offer several advantages. Money can be withdrawn any time without penalty. Although not insured, money market funds invest only in highly liquid, short-term, top-rated money market

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instruments. Money market funds are suitable for investors who want high stability of principal and current income with immediate liquidity.

Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments as treasury bills, certificates of deposits, commercial paper and inter-bank call money. Return on these schemes may fluctuate, depending upon the interest rates prevailing

C. OTHER SCHEMES

TAX SAVING SCHEME

Specialty/Sector Funds

GILT FUND

LIQUID (CASH) FUND

TAX SAVING SCHEMES

These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is made possible because the government offer tax incentives for investment in specified avenues. For example: Pension Scheme

Recent amendments to the Income Tax Act provide further opportunities to the investors to save capital gains by investing in Mutual Funds.

Idea for: Investors seeking tax rebates.

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Specialty/Sector Funds

These funds invest in securities of a specific industry or sector of the economy such as health care, technology, leisure, utilities or precious metals. The funds enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company.

Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various market averages.

Index funds generally buy shares in all the companies composing the BSE Sensex or NSE Nifty or other broad stock market indices. They are not suitable for investors who must conserve their principal or maximize current income.

This category includes index schemes that attempt to replicate the performance of a particular index such as BSE (Bombay Stock Exchange)

Sensex or the NSE (National Stock Exchange) 50, or industry specific schemes (which invest in specific industries) or sectoral scheme (which invest exclusively in segments such as “A” Group shares.)

Keep in mind that any one scheme may not meet all your requirements for all time. You need to place your money judiciously in different schemes to be able to get the combination of growth, income and stability that is right for you.

GILT SCHEMES

The funds are invested only in Central/Government securities. No principal risk on the product. Best suited for medium-long term investors who are averse to risk.

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LIQUID (CASH) FUNDS

These funds invest in very short-term instruments. Ideal for corporate, institutional investors, and business houses. Period of investment may as low as one day.

The structure and organization of Mutual Funds as per SEBI guidelines is as follows: -

(a) Sponsor

Sponsor is the company which sets up the Mutual Fund e.g. Kothari Pioneer Mutual Fund have sponsor Pioneer Investment Management, Inc., USA and the Investment Trust Of India Ltd. (ITI). The Investment Trust Of India (Pvt.) Ltd. was established in 1946 and is one of the India well known Financial Services Companies. To promote the Mutual Fund, the sponsor has to meet the criteria laid down by SEBI. The criteria broadly deal with sufficient experience, net worth, and past record in terms of fair dealing & integrity. Those who qualify these criteria are permitted by SEBI to setup Mutual Funds.

(b)Asset Management Company (AMC)

AMC manages the funds of various Schemes: AMC employs a large number of professional for investment and research. It plays a key role in the running of a Mutual Fund and it operates under the supervision and guidance of the trustee. For example, Kothari Pioneer AMC Ltd. has been appointed as the investment manages Kothari Pioneer Mutual Fund and operates its various schemes under the provisions of the investment Management Agreement entered into with Kothari Pioneer Mutual Fund on July 29,1993. The AMC can be a private or public limited company either listed or not. The AMC may be a new or existing, should have a

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minimum 40 percent stake paid up in the paid-up equity of the AMC to be set up the sponsor. The minimum net worth of the AMC is stipulated at Rs. 5 crore. The Memorandum and Articles Of Association of the AMC Company should have the approval of SEBI. AMC is authorised to do business, if the following condition of SEBI are fulfilled.

(1) AMC, which are already existing, should have a sound track record, general reputation and fairness in all other business transactions.

(2) The directors of AMC should be persons of high repute and standing having at least 10 years of professional experience in the relevant fields such as portfolio management, investment analysis, and in financial administrator.

(3) At least 50 percent of the Board of AMC should be independent director not connected with sponsoring organization.

(4) The AMC should at all times have a minimum net worth of Rs. 5 crore.

Except in the case of Bank sponsored AMC where the Prior concurrence of RBI is required. SEBI may withdraw the authorization granted to any AMC, if it is not serving in the intrest of incestors. The board of trustees, of a Mutual Fund, will appoint another AMC or liquidate the Mutual Fund as may be necessary with in there months of withdrawal.

(c) Trustee

The trustees are an important link in the working of a Mutual Fund. Trustees are people with long experience and who have earned a name for themselves for integrity and excellence in their fields. It is the responsibility of the trustees to see that AMC always act in the best interest in the investors. Thus they carry the crucial responsibility of safe guarding the interest pf investors. They do this by constant monitoring of the

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operations of the scheme. AMC supplies all information demanded by trustees on a regular basis i.e. quarterly.

Establishing a separate trust company should carry out trusteeship functions. At least 50 percent of the Board of Trustee shall be independent and should not have any affiliation with the sponsoring institution or any of its subsidiaries. The trustees have to submit a six monthly report to the SEBI and an annual report to the investors in the fund.

(d) Custodian

The SEBI while granting the authorization for setting up of a Mutual Fund, would also approve the custodian as part of the package. The custodian should be different from the AMC. The sponsor and trustee companies cannot act as custodian. If the sponsor has a custodian division, it can act for other Mutual Fund not set up by the sponsor. The approval of any agency as custodian would depend upon its track record, experience, qualify of service, computerisation and other infrastructure facilities. The approval of Mutual Fund involves the approval of sponsor, AMC, trustee and custodian all together, who are responsible for the management of fund. Each scheme floated by Mutual Fund should have prior registration with SEBI. The AMC should prepare a proportion/letter of offer foe each to decide the propsal within 30 days of its receipt, failing within SEBI before inviting public. SEBI has to decide the proposal within 30 days of its receipt, failing which SEBI clearance is presumed. Mutual Funds are allowed to start and operate both open-ended and close-ended schemes.

IMPLICATION OF LOAD FOR THE MUTUAL FUND INVESTOR

Every investment incurs some cost, which is generally borne by the investor. This might be usually in the form of transaction cost incurred in the buying/selling of investments. However the transaction cost varies among different instrument, depending on the nature of the investment.

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However investors investing in the Mutual Fund incurs a cost popularly known as “LOAD” This load is a charge by the fund to recover the expenses incurred by the fund on brokerage, marketing or selling the scheme, investor communication expenses etc.

TYPES OF LOAD: -

Loads are the different on the basis of Investment. These are

ENTRY LOAD: -

The load charged at the time of Investment is known as entry load. It is meant to cover the cost that the AMC spends in the process of subscribers – commission payable to brokers, advertisement, registrar, etc. the load is recovered by way of charging sale rice higher than the prevailing NAV. For example, if he loads is 5%, and the NAV is Rs10 per unit, the selling price if the fresh units can be calculated as follows:Selling price per unit = 10/(1-.05) = 10/ .95 = 10.526

EXIT LOAD: -

Some AMC do not charge Entry load but they charge an exit loads, they deduct a load before paying out the redemption proceeds. Psychologically, investors are much more willing to pay exit loads as compared to entry loads, because they are paying after they are paying the service.

NET ASSET VALUE

The most important financial indicator in case of Mutual Funds is Net Asset Value (NAV).

The Net Asset Value of the scheme (s) will be calculated on a daily basis as shown below:

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Market value of the scheme’s Investment+NAV per unit = Other current Assets + Deposits – All liabilities except

reserve & profits & loss Account

______________________________________________

No. Of unit Outstanding

The calculation and the periodicity of the publication of the NAV, repurchase and sale prices would be the SEBI regulation or any modifications there too as may be issued by SEBI from time to time.

Net Asset Value shall be calculated as of the close of every business day. (See the annexure – for NAV’s)

HOW TO INVEST IN MUTUAL FUNDS.

1) Identify your investment needs.

2) Choose the right Mutual Fund

3) Select the ideal mix of the schemes.

4) Invest regularly.

5) Keep your taxes in mind.

6) Start early.

Investing in Mutual funds:

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You can invest in mutual funds without the hassles of filling application forms or any other paperwork. You need no signatures or proof of identity for investing.

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