risk management with hdfc securities by ajay khavale_new

7/31/2019 Risk Management With HDFC Securities by Ajay Khavale_new

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ABHISHEK GUPTA 10160

GIBM

A

PROJECT REPORT ON

Risk Management regarding working of a broking firms and itsinvestors

FOR

HDFC SECURITIES

BY

ABHISHEK GUPTA

MBA-II

2010-2012

UNDER THE GUIDANCE OF

PROF. MADHU ARORA

SUBMITTED TO

GENISIS INSTITUTE OF BUSINESS MANAGEMENT

GENESIS INSTITUTE OF BUSINESS MANAGEMENT Page 1


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ACKNOWLEDGMENT

Its a great privilege that I have done my project in such a well-

organized and diversified organization. I am great full to all those

who helped and supported me in completing the project.

First of all I would sincerely like to thank Mr. Rohit Rakibe

(Branch Manager,Nasik), for his valuable guidance and kind co-

operation during the project. I amhighly grateful to Mr. Dhirendra

Kapadi (Associates of HDFC SEC) for the help provided by them

in various forms.

I am also thankful to our directorDr. Sharad Joshi and my project

guide Prof.Mahesh Halale for helping me in completing the

project.

Last but not least, I am also thankful to all college staff and my

friends for helping me directly or indirectly in my project.


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ABHISHEK GUPTA 10160

GIBM

CONTENTS

Sr.No. Topic Page No.

1 Executive summary 1-1

2 Company Profile 2-4

3 Objective of Project 5-5

4 Research Methodology 6-6

Data Presentation

5 Introduction to capital 7-55

Working of a Broking Firm

Risks in a Broking Firm

6 Data Analysis & Interpretation 56-73Risk Management in a Broking Firm

7 Conclusion of the study 74-74

8 Suggestion & Recommendation 75-76

9 Scope for development 77-77

10 Limitation 78-78

11 Bibliography 79-79



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ABHISHEK GUPTA 10160 GIBM

SUMMARY :

A Capital Market deals in financial assets, excluding coins and currency. The

financial assets comprise of banking accounts, pension funds, provident fund,

mutual fund, insurance policy, shares, debentures, and other securities. The

secondary market is the market where scrips are traded. It is a market place,

which provides liquidity to the scrips issued in the primary market.

All investments are risky, whether in stock, capital market, banking, financial

sector, real estate, bullion, gold etc. The degree of risk however varies on the

basis of the features of the assets, investments instrument, the mode of

investment, time frame or the issuer of the security etc

Risk can be defined as Possibility of suffering lo sses

The chance of something happening that will have a n impact upon objectives. It

is measured in terms of consequences and likelihood.

Risk management in a Broking Industry is a new concept in India, since it

poses maximum risk in the financial market, managing it was felt most essential by

the regulatory bodies and exchanges.



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PROFILE OF THE ORGANIZATION

HDFC SECURITIES LTD.

Companys Mission

To create reputation synonymous with quality, comp etitiveness, fairnessand transparency dealings and be a responsible corporate citizen.

Business Objectives

The primary objective of HDFC is to enhance residential housing stock in the

country through the provision of housing finance in a systematic and professional

manner, and to promote home ownership. Another objective is to increase the flow

of resources to the housing sector by integrating the housing finance sector with

the overall domestic financial markets..

Organizational Goals

HDFCs main goals are to

a) develop close relationships with individuals,

b) maintain its position as the premier housing finance institution in the country

c) Providing ideas into viable and creative solutions

d) provide consistently high returns to shareholders,

e) to grow through diversification by leveraging off the existing client base.

History and Background :

HDFC was incorporated in 1977 with the primary objective of meeting a social need

that of promoting home ownership by providing long-term finance to households for

their housing needs. HDFC was promoted with an initial share capital of Rs. 100GENESIS INSTITUTE OF BUSINESS MANAGEMENT Page 7


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million.

HDFC Securities, a trusted financial service provider promoted by HDFC Bank

andJP Morgan Partners and their associates, is a leading stock broking company

in the country, serving a diverse customer base of institutional and retail investors.

HDFCsec.com provides investors a robust platform to trade in Equities in NSE and

BSE , and derivatives in NSE. Our website will support you with the highest

Standards ofservice, convenience and hassle-free trading tools.

Speed :

Our state-of-the art technology enables to instantly trade on the BSE and NSE.

Convenience :

We can trade with us online or on the phone from the convenience of your home

or office. Use the 3-in-1 Advantage account to seamlessly move funds and

securities across your bank, demat and trading account. This way, you do not

have to issue cheques or delivery instructions.

Transparency :

With our trusted pedigree, you can be assured that you get the best services in a

transparent manner. By broking with us, you are in total control of your funds and

stocks.

Expertise :

Our Group has decades of experience in providing financial services to customers

in a transparent and trusted manner. We have a dedicated, motivated and

experienced team of professionals to provide you top class service.

Our Group has decades of experience in providing financial services to customers

in a transparent and trusted manner. We have a dedicated, motivated and

experienced team of professionals to provide you top class service.

Timely and Relevant Information :

We realise the importance of making information available to you as it happens.

Empowered with the latest news, developments and research, you will be able to

take informed decisions.

ConsumerInterest :


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For us, our interest comes first. We endeavour to provide high quality investment

services, in a simple, direct and cost-effective way to help you achieve your

financial goals.

OBJECTIVE OF THE PROJECT

Introduction to capital market.

To get familiar with the working of a broking firm.

To identify various risks involved in the broking firm.

To identify various risk for the investors of the broking firm.

To manage and reduce the identified risks.

RESEARCH METHODLOGY

During my project, I collected data through various sources primary & secondary.



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Primary source includes :-

1) Discussion with branch manager

2) Discussion with experts

3) Discussion with investors of the firm.

4) Live trading in the market

Secondary source includes :-

1) Various books related to stock market

2) Books related to Financial Management

3) Web sites were used as the vital information source.


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DATA PRESENTATION

Introduction to Capital Markets

Financial System

The financial system of every economy consists of various constituents such a

Financial Institutions

Financial Companies

Financial Markets

Financial Instruments

Financial Services

Financial regulations

The financial market in India comprised of capital market and money market

whereas the financial system of the country comprised of institutions, which

operate the financial markets and the financial instruments with which the financial

system is put into operation.

Tax anomy of financial markets can be understood on functional, sectoral and

institutional basis. On a functional basis we can divide financial markets into

1 Money market (short term)

2 Capital market (long term)

The institutional classification can be made into



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1 Organized financial market

2 Non-Organized financial market


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Capital Market Scenario

The stock market in India dates back to the 18th century when the East India

Company was ruling the roost in the country and was perhaps the most dominant and

powerful institution and its securities were traded. The securities trading were done in

an unorganized form at Bombay and Calcutta in early 19th century.

The decade of 90s has witnessed several changes in reformation of capital

market. Automation, transparency,. Strict surveillance, depository system, on linetrading, investors protection, new rules and regulations, etc. are some of the

activities which only reflect the growth of Indian capital market. By any reckoning

Indian corporate sector has grown very significantly in the last couple of decades

whether to look at it in terms of public and private limited companies, their share

capitalization, their sales turnover or their contribution to capital formation with this

came the legislation of SEBI to act as a regulatory body to protect investors

Capital Market :

A Capital Market deals in financial assets, excluding coins and currency. Thefinancial assets comprise of banking accounts, pension funds, provident fund,

mutual fund, insurance policy, shares, debentures, and other securities. If the

stock exchanges are well regulated and function smoothly, then it is an indication

of healthy capital market. Stock exchange provide a good leverage of the capital

market and their relationship is directly proportional. India has multi-stock

exchange system with 24 stock exchanges functioning across the country. In our

country, capital markets are generally also known as security/stock market. The

Indian capital market currently provides excellent investment opportunities to

domestic and foreign investors in both equity and fixed income Segments.



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The Indian Capital Markets can be broadly classified into three types of markets.

1 Money market

2 Primary market

3 Secondary market

Money market

The money market is part of overall financial system and securities or capital

market. It deals in short term financial assets whish can be readily converted into

cash. Money market is a place for trading in money and short tern financial assets

that are as liquid as money. It provides a platform for short term surplus funds of

lenders or investors and short term requirements of borrowers, the instruments

can be traded at low cost and are highly liquid.

Primary market

Primary market is generally referred to the market of issues or market for new

mobilization of resources by the companies and the government undertakings, for

new projects as also for expansion, modernization, addition, and diversification

and up gradation. Primary market operations include new issues of shares by new

and existing companies, further and right issues to existing share holders, public

offers, and issue of debt instruments such as debentures, bonds, etc. Raising

money from capital market is cheap for the company and involves a low servicingcost. The investors benefit by way of dividend and or capital appreciation. The

following are the market intermediaries associated with the primary market

1 Merchant banker/book building lead manager

2 Registrar and transfer agent


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3 Underwriter/broker to the issue

4 Advisor to the issue

5 Banker to the issue

6 Depository

7 Depository participant

Defects in Indian Primary Market

1 Aggressive pricing and over pricing.

2 Price rigging before and during issues.

3 Poor, wrong and vague disclosures in offer documents.

4 Poor information accessibility.

5 Misleading projections subject to vague assumptions.

6 Delay in penal actions against the erring market intermediaries.

7 SEBI not assuming any responsibility for disclosure/offer documents.

8 Bunching of issues.

9 Existence of grey or unofficial market.

10 Lack of transparency

11 Uninformed and uneducated investors.

12 Delay in listing and trading permission.


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Secondary Market

The secondary market is the market where scrips are traded. It is a market place,

which provides liquidity to the scrips issued in the primary market. Thus, the growth of

secondary market is dependent upon primary market. More the number of companies

entering the primary market, the greater is the volume at the secondary market.

Trading activities in the secondary market are done through recognized stock

exchanges, which are 24 in number including Over the Counter Exchange of India,

National Stock Exchange of India, and Inter-connected Stock Exchange of India.

Secondary market operations involves buying and selling of securities on the stock

exchange through its members. The following intermediaries are involved in the

secondary marker.

1 Broker/member of Stock Exchange- buyer broker and selling broker

2 Portfolio manager

3 Investment advisor

4 Share transfer agent

5 Depository

6 Depository participant



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WORKING OF A BROKING FIRM

Stock Broker

According to SEBI Stock Broker is a member of a recognized stock exchange(s)

and is engaged in buying, selling and dealing in securities. In other words broker is

an intermediary who arranges to buy and sell securities on behalf of clients i.e. the

buyer and the seller. A broker can deal in securities only after getting registered

with SEBI.through stock exchanges. The constitution of a broking firm may be a

Proprietary Concern, a Partnership firm or a Corporate.

COMPLIANCE DEPARTMENT

The functions carried out by Compliance Department are as follows

COMPLIANCE DEPARTMENT

Reg. of Sub-Broker Reg. Of Client Reg. Of Franchisee



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Individual Non Individual

Limited Company Partnership Sole Proprietorship


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Registration of Client

Documentation required for individual client as per SEBIs guidelines are as follows

Individual

1 Client Registration Application Form.

2 Broker Client Agreement on stamp paper of value as applicable in the

respective state.

3 Identity Proof like

-Copy of Passport

- Copy of ration card

- Copy of Driving Licenses

- Copy of Voters Identity Card

- Copy of Pan card

-Letter from bank certifying account number and period

from which the same is in operation

2 Letter of Running account



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Non-Individual

Limited Company

1 Client Registration Application Form.

2 Broker client Agreement on stamp paper.

3 Certified copy of Memorandum and Articles of Association.

4 Certified copy of resolution authorizing the company to open account

with HDFC SEC and appointing persons authorized to operate upon

said account on behalf of company.

5 Proof of identity in respect of authorized director

6 Letter from the bank certifying account number and period from which

the same is in operation.

Partnership Firm

1 Application Form

2 Broker client agreement on stamp paper.

3 Partnership Deed

4 Partnership letter signed by all the partners authorizing the firm to open

account with HDFC SEC and appoint one or more partners to operate the

said account on behalf of the firm.

5 Identity Proof

6 Bank Certifying Letter

Proprietorship Concern

1 Client Registration Application Form

2 Broker Client Agreement

3 Identity Proof


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4 Bank Certifying Letter

REGISTRATION OF SUB-BROKER

SEBI rules for application for registration of Sub Broker

- An application by a sub broker for the grant of a certificate shall be

made in Form B

- The Application shall be accompanied by a recommendation letter

from a stock broker of a recognized stock exchange with whom he is

to affiliated along with two references including one from his banker

- The application form shall be submitted to the stock exchange of which the

stock broker with whom he is affiliated as a member.

-

-The stock exchange on receipt of an application shall verify the

information contained and then shall also certify that the applicant iseligible for registration.

The eligibility criteria is as follows

- The applicant should not be less than 21 years of age

- The applicant has not been convicted to any offence involving

fraud or dishonesty

-The applicant should have at least passed 12

th

STD

- The applicant should be fit and proper person

DEALING DEPARTMENT



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Dealing department is a very important department in the broking firm as it

carries out most important activities of Buying and Selling of securities. The

people doing dealing are called as Dealers. He is the person dealing on behalf

of the investor, therefore when the investor wants to trade in some scrips he

must inform the dealer first and then the dealer deals in the market. The

following are the activities carried out in a dealing department.

DEALING DEPARTMENT

BuyingSelling

Securities Securitie

s

EnteringOrder Order Order

Orders Modification CancellationMatching


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risk management with hdfc securities by ajay khavale_new

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