surendra management thesis ii

8/9/2019 Surendra Management Thesis II

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MANAGEMENT

THESIS II


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CONTENTS

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NO. TITLE

1 INDUSTRY OVERVIEW

2 COMPANY OVERVIEW

3 OBJECTIVE

4 LIMITATIONS

5 METHODOLOGY

6 DATA INTERPRETATION

7 FINDINGS

8 SUGGESTIONS

9 TIME ESSIMATE

10 CONCLUSION

11 QUESTIONNAIRE

12 REFERENCE


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CERTIFICATE

This is to certify that this Management Thesis titled RISK MANAGEMENTREGARDING WORKING OF A BROKING FIRM AND ITS INVESTORS

AT RELIGARE SECURITIES LTD In Nellore city is bonafied work done by

Mr.R.SURENDRA Enroll no: 8NBNL018 and carried out under my guidance and

supervision in partial fulfillment of the award of MASTER OF BUSSINESS

ADMINISTRATION from INC UNIVERSITY

FACULTY MEMBER

Mrs. R.INITHA RINA

ICFAI National College

Nellore.

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DECLARATION

I, Mr. R.SURENDRA a bonafied student of ICFAI NATIONAL COLLEGE,

NELLORE, Class of 2008-2010 hereby declare that the Management Thesis

entitled RISK MANAGEMENT REGARDING WORKING OF A

BROKING FIRM AND ITS INVESTORS AT RELIGARE SECURITIES

LTD In Nellore city, submitted in partial fulfillment of the requirements for

Master of Business Administration degree of ICFAI UNIVERSITY, is the

original work done.

PLACE: R.SURENDRA

DATE: (0801214624)

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ACKNOWLEDGEMENT

I would like to convey my sincere gratitude to the center head Ms.

S.JYOTHIRMAYE REDDY and my faculty supervisor Ms. R. INITHA

RINA for their kind assistance and supervision and giving me their worth

full suggestions at every stage of this Management Thesis report and this

will be helping me in building my career in future and will certainly stand in

positions good in my future academic pursuits.

I would like to thank my all friends and my well wishers for their

cooperation in sharing their views in this project.

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COMPANY OVERVIEW

RELIGARE Securities Ltd. (RSL) is a wholly owned subsidiary of RELIGARE

Financial Services Ltd. (RFSL), a Company promoted by the late Dr.Parvinder

Singh, Ex-CMD of Ranbaxy Laboratories Ltd.

The primary focus of Religare Securities Ltd. is to cater to services in Capital

Market Operations to Institutional Investors. The Company is a member of the

National Stock Exchange (NSE) and OTCEI. The growing list of financial

institutions with whom RSL is empanelled as approved Broker is a reflection of the

high levels of services maintained by the Company.

REL operates from seven domestic regional offices, 43 sub-regional offices, and

has a presence in 498* cities and towns controlling 1,837* business locations all

over India.

To make a mark in the global arena, REL acquired UK-based Hichens, Harrison &

Co. in 2008 which was subsequently re-named as Religare Hichens Harrison PLC

("RHH"). Hichens, Harrison & Co. was incorporated in London in the year 1803

and is believed to be one of the oldest firms of stockbrokers in the City of London.

Pursuant to expansion of REL's business, the company has grown from largely an

equity trading company into a diversified financial services company. With the

addition of RHH the REL group now operates out of multiple global locations,

other than India, (the UK, the USA, Brazil, South Africa, Dubai and Singapore).

RELIGARE was founded with the vision of providing integrated financial care

driven by the relationship of trust. The bouquet of services offered by RELIGARE

includes Broking (Stocks and Commodities), Depository Participant Service,

Advisory on Mutual Fund Investments and Portfolio Management Services.

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RELIGARE is a pioneer in the concept of partnership to reach multiple locations in

order to effectively service its large base of individual clients. Besides the reach of

RELIGARE, the clients of the company greatly benefit by its strong research

capability, which encompasses fundamentals as well as technical knowledge.

RELIGARE GROUP:

RELIGARE in recent years has expanded its reach in health care and financial

services wherein it has multiple specialty hospital and labs which provide health

care services and multiple financial services such as secondary market equity

services, portfolio management services, depository services etc.

RELIGARE financial services group comprises of Religare Securities Limited,

RELIGARE Comdex Limited and RELIGARE Finvest Limited which provide

services in Equity, Commodity and Financial Services business & Religare

Insurance Advisory Ltd.

RELIGARE SECURITIES LIMITED

1. Member of National Stock Exchange of India and Bombay Stock Exchange

of India.

2. Depository Participant with National Securities Depository Limited (NSDL)and Central Depository Services Limited (CDSL). A SEBI approved

Portfolio Manager.

RSL provides platform to all segments of the investor to leverage the immense

opportunity offered by equity investing in India either on their own or through

managed funds in Portfolio Management.

The ARN No. of the Religare Securities Ltd. is 33764. The ARN No. is required byto be available with the broker who deals on behalf of investors or sell the mutual

funds of the different companies present in the market.

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Religare Enterprises Limited

Religare Securities Limited

Equity Broking

Online Investment Portal

Portfolio Management Services

Depository Services

Religare Commodities Limited

Commodity Broking

Religare Capital Markets Limited

Investment Banking

Proposed Institutional Broking

Religare Realty Limited

In house Real Estate

Management Company

Religare Hichens Harrison**

Corporate Broking

Institutional Broking

Religare Finvest Limited

Lending and Distribution business

Proposed Custodial business

Religare Insurance Broking Limited

Life Insurance

General Insurance

Reinsurance

Religare Arts Initiative Limited

Business of Art

Gallery launched - arts-i

Religare Venture Capital Limited

Private Equity and

Investment Manager

Religare Asset Management*

Derivatives Sales

Corporate finance

OBJECTIVE:

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PRIMARY OBJECTIVE

TO Obtain risk management regarding working of a broking firm, and its

investors at Religare securities ltd.

SECONDARY OBJECTIVE

To get familiar with the working of a broking firm.

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LIMITATION

To understand the overall working of share market, the period of 60 days is

not enough.

Moreover, very few investor and agents have a detail knowledge of the

study.

The study was conducted in NELLORE only, which restricted the scope of

the study.

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METHODOLOGY

PRIMARY METHODOLOGY

1) Discussion with branch manager.

2) Discussion with experts.

3) Discussion with investors of the firm.

4) Live trading in the market.

5) Data collected from questionnaire.

SECONDARY METHODOLOGY

1) Various books related to stock market.

2) Books related to Financial Management.

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

SAMPLE SIZE

SIZE 50 CUSTOMERS RESPONDENTS + 4 EMPLOYEES

(DETAILED INTERVIEW)

SAMPLE TECHNIC

CONVENIENCE SAMPLE

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DATA INTERPRETATION

1) Preference of Investment:

GRAPH:

INTERPRETATION:

This shows that although the mutual funds market is on the rise yet, the most

favored investment continues to be in the Share Market. So, with a more

transparent system, investment in the Stock Market can definitely be increased.

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Financial Instruments No. Of Investors (50)

Shares 16

Mutual Funds 12

Others 22


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2) Awareness of online Share trading :

GRAPH:

INTERPRETATION:

With the increase in cyber education, the awareness towards online share trading

has increased by leaps and bounds. This awareness is expected to increase further

with the increase in Internet education.

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YES NO

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5) DEMAT Account Market :

GRAPH:

INTERPRETATION:

This shows that even with sufficiently high Brand Equity, Religare ranks only 3rd

amongst the Demat account providers. This is probably because of two main reasons:

1. Lack of promotion and unfocussed approach towards Product awareness

2. Non transparent marketing policies of the company

Hence, the company should crystallize its products and should indulge in aggressive

marketing and promotion.

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BROKING FIRMS INVESTORS

Religare Securities 6

ICICI Direct 15

Kotak Securities 4

India Bulls 12

Others 13


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6) Satisfaction level among Customers with current Broker :

YES NO

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GRAPH:

INTERPRETATION:

This pie chart accentuates the fact that Strategic marketing, today, has gone beyond only

meeting Sales targets and generating profit volumes. It shows that all the competitors are

striving hard not only to woo the customers but also to make them Brand loyal by

generating customer satisfaction.

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8) What is your percentage of investment in the following?

PARTICULARS PERCENTAGES

Shares 16

Mutual funds 12

Debentures 00

Government securities 02

Deposits in banks 04

Land and buildings 14

Bullions 02

Art and antiques 00

GRAPH:

INTERPRETATION:

Most of the people prefer the shares, because of getting low rate of price to

purchase shares compare to others. And getting more returns from the shares within the short time.

9) Percentage of earnings invested in Share Trading :

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GRAPH:

INTERPRETATION:

This shows that people invest only up to 10% of their earnings in the stock market,

again reiterating the volatile and non-transparent structure of the Indian stockmarket. Hence, effective and efficient steps should be undertaken to woo the

customers to invest more in the lucrative stock market.

10) Is broking firm risk free?

YES NO

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% of Earning

Invested

No. of Investors

0% to 10 % 35

11% to 25 % 9

26% to 50 % 4

Above 50 % 2


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GRAPH:

INTERPRETATION:

Most of the people are says that broking firms are risk free, because they play

mediator in between the investors and trading. So the investors are feel free risk in

the broking firms and easy to trade in single place. Some of the people could not

feel free risk, because of entering numeric values and analyze raising companyshares etc...

11) Percentage of risk is you ready to take while investing?

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Percentages Responds

0% to 5% 11

6% to 10% 16

11% to 15% 19

16% to 20% 04

more than 20% 00

GRAPH:

INTERPRETATION:

Most of the investors are selected 15% of risk, because of moderate risk and

moderate return in this point. And no one had selected more than 20%.

12) Do you think more risk will give more return?

YES NO

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GRAPH:

INTERPRETATION:

Most of the investors are believed more risk will give more retune. But, most of the

investors are not ready to take more risk.

RISK MANAGEMENT IN A BROKING FIRM

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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. Therefore NSE introduced for the first time in

India, risk containment measures that were common internationally but were absent

from the Indian Securities Market. NSCCL has put in place a comprehensive risk

management system, which is constantly upgraded to pre-empt market failures.

These measures were taken to reduce the brokers risks. Whereas SEBI has given

some guidelines under Investors Protection to protect investors risks. NSE has

given the following risk management measures

MARGINS:

NSE has specified Different margins for different instruments like stocks futures

and options etc. Margins depend upon the volatility and market conditions, It vary

from stock to stock and instrument to instrument

Categorization of stocks for imposition of margins

Daily margins payable by members consists of the following:

1. Value at Risk Margins

2. Mark to Market Margins

Daily margin, comprising of the sum of VaR margin and mark to market margin is

payable.

Value at Risk Margin

VaR margin is applicable for all securities in rolling settlement. All securities are

classified into three groups for the purpose of VaR margin.

The VaR based margin would be rounded off to the next higher integer (For E.g.: if

the VaR based Margin rate is 10. 01, it would be rounded off to 11. 00) and capped

at 100%.

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The VaR margin rate computed as mentioned above will be charged on the net

outstanding position (buy value-sell value) of the respective clients on the

respective securities across all open settlements. The net positions at a client level

for a member are arrived at and thereafter, it is grossed across all the clients for a

member to compute gross exposure for margin calculation.

For example, in case of a member, if client A has a buy position of 1000 in a

security and client B has a sell position of 1000 in the same security, the net

position of the member in the security would be taken as 2000. The buy position of

client A and sell position of client B in the same security would not be netted. It

would be summed up to arrive at the member's exposure for the purpose of margincalculation. VaR margin rate & Security category.

Mark-to-Market Margin

Mark to market margin is computed on the basis of mark to market loss of a

member. Mark to market loss is the notional loss which the member would incur in

case the cumulative net outstanding position of the member in all securities, at the

end of the relevant day were closed out at the closing price of the securities as

announced at the end of the day by the NSE. Mark to market margin is calculated

by marking each transaction in scrip to the closing price of the scrip at the end of

trading. In case the security has not been traded on a particular day, the latest

available closing price at the NSE is considered as the closing price.

In the event of the net outstanding position of a member in any security being nil,

the difference between the buy and sell values would be considered as notional loss

for the purpose of calculating the mark to market margin payable.

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Some Risk management are also taken by BSE they are as follows

1. Know your client scheme

Under the procedure the member brokers of the exchange are compulsory

required to obtain detailed information of clients prior to commencement of

any transactions with new clients. A similar procedure is also to be followed

for existing clients. This information is to be made available to the exchange

authorities whenever called for. In case the member broker fails to furnish

the same it is viewed seriously.

2. Verification of shares at members office

The exchange has outlined the process i.e. in case the transaction in a script

with one particular client in a settlement exceeds Rs 10 laks then the member

are to send the photocopies of the transfer deeds and the share certificates to

the company/ registrar for verification of the material particulars. The basic

idea behind the introduction of this procedure is to prevent

fake/forged/stolen shares from being introduced in the market.

3. Inspection

The department is carrying out inspection of the member brokers records as

regards compliance of the risk management procedures

4. Insurance

The exchange presently has in place insurance policies to protect itself in the

event of losses on account of fire, damage to computer systems and a

comprehensive policy that covers risks faced by the exchange, its member

brokers and the clearinghouse.

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FINDINGS

Working with a broking firm especially was really a great experience.

The researcher found that the working of a broking firm is a very risky job

because risk is involved in each and every activity of the business.

The risk prevailing in the business is recognized therefore an efficient risk

management department is essential in every broking firm.

Capital Market is growing very fast, turnover wise as well as area of

operation wise. The activities have reached through lengths and breadth ofthe country. All these necessitated in the introduction of latest technology in

the form of advanced softwares.

Broking business is a client-based business. The recent trend of voluminous

increase in investors has also increased the risk involved in it. There is need

of continuous up gradation of internal control measures

Staff in a broking firm is continuous busy and due to which they are always

under stress.

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SUGGESTIONS

An Organization should have a risk management function that is independent

of its trading staff i.e. personnel responsible for the risk management

function should be separate from trading floor personnel.

Senior management should regularly evaluate the risk management

procedure in place to ensure they are appropriate and sound.

Senior management should also foster and participate in active discussions

with the board of directors, sub brokers, franchisee, staff of risk management

function and investors regarding procedures for measuring and managing

risk.

Highly qualified staff not only in front office positions such as trading desk,

relationship officer and sales but also all back office functions responsible

for risk management and internal control.

Risk management or control function should be able to produce a risk

management report that highlights positions, limits and excess on a basis

commensurate with trading activity. This report should be sent to senior

management, reviewed, signed and returned to control staff.

Auditors should perform a comprehensive review of risk management

annually, emphasizing segregation of duties and validation of data integrity.

The designated compliance officer should perform a review of trading

Practices annually.

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QUESTIONNAIRE

Q1. In which of these Financial Instruments do you invest into?

Shares Mutual Funds Bonds Derivatives others

Q2. Are you aware of online Share trading?

Yes No

Q3. Heard about Religare?

Yes No

Q4. Do you know about the facilities provided by Religare?

Yes No

Q5. With which company do you have your DEMAT account?

Religare ICICI Direct Kotak Mahindra India Bulls

Others (please specify) __________

Q6. Are you currently satisfied with your Share trading company?

Yes No

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Q7. How often do you trade?

Daily Weekly Monthly Yearly

Q8. What is your percentage of investment in the following?

PARTICULARS PERCENTAGES

Shares

Mutual funds

Debentures

Government securities

Deposits in banks

Land and buildings

Bullions

Art and antiques

Q9. What percentage of your earnings do you invest in share trading?

Up to 10% Up to 25% Up to 50% Above 50%

Q10. Is broking firms are always risk free?

Yes No

Q11. If No, why?

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Q12. What percentage of risk are you ready to take while investing?

Up to 5% Up to 10% Up to 15% Up to 20% more than 20%

Q13. Do you think more risk will give more return?

Yes No

Q14.What more facilities do you think you require with your DEMAT account?

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Additional Information (optional)

Name:

Age:

Phone No:

Occupation:

BIBLIOGRAPHY

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Bibliography:

Websites:

www.religare.in

www.bseindia.com

www.nseindia.com

www.google.co.in

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