INDIAN STOCK MARKET

Journey of Indian stock market

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200

years ago. The earliest records of security dealings in India are meager and obscure.

The East India Company was the dominant institution in those days and business in its

loan securities used to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took

place in Bombay. Though the trading list was broader in 1839, there were only half a

dozen brokers recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage

business attracted many men into the field and by 1860 the number of brokers

increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of

Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers

increased to about 200 to 250. However, at the end of the American Civil War, in 1865,

a disastrous slump began (for example, Bank of Bombay Share which had touched Rs

2850 could only be sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,

found a place in a street (now appropriately called as Dalal Street) where they would

conveniently assemble and transact business. In 1887, they formally established in

Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively

known as "The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in

the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay

was consolidated.

Growth Pattern of the Indian Stock Market

Sr.No.

As on 31st

December1946 1961 1971 1975 1980 1985 1991 1995

1 No. ofStock Exchanges

7 7 8 8 9 14 20 22

2No. of Listed Cos.

1125 1203 1599 1552 2265 4344 6229 8593

3 No. of StockIssues of Listed Cos.

1506 2111 2838 3230 3697 6174 8967 11784

4

Capital of ListedCos. (Cr. Rs.)

270 753 1812 2614 3973 9723 32041 59583

5

Market value ofCapital of ListedCos. (Cr. Rs.)

971 1292 2675 3273 6750 25302 110279 478121

6

Capital perListed Cos. (4/2)(Lakh Rs.)

24 63 113 168 175 224 514 693

7

Market Value ofCapital per ListedCos. (Lakh Rs.)(5/2)

86 107 167 211 298 582 1770 5564

8

Appreciated value of Capital perListed Cos. (Lakh Rs.)

358 170 148 126 170 260 344 803

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited

(NSE) are the two primary exchanges in India. In addition, there are 24 Regional Stock

Exchanges. However, the BSE and NSE have established themselves as the two

leading exchanges and account for about 80% of the equity volume traded in India. The

NSE and BSE are equal in size in terms of daily traded volume. The average daily

turnover at the exchanges has increased from Rs851crore in 1997-98 to Rs1284crore in

1998-99 and further to Rs2273crore in 1999-2000. NSE has around 1500 shares listed

with the total market capitalization of around Rs9, 21,500crore.

The BSE has over 6000 stocks listed and has a market capitalization of around Rs9,

68,000crore. Most key stocks are traded on both the exchanges and hence the investor

could buy on either of the exchanges. Both exchanges have a different settlement cycle,

which allows investors to shift their position on the bourses. The primary index of BSE in

BSE Sensex comprises 30 stocks. NSE has the S&P NSE 50 Index (Nifty), which

consists of fifty stocks. The BSE Sensex is the older and most widely followed index.

Both these indices are calculated on the basis of market capitalization and contain the

heavily traded shares from key sectors.

The markets are closed on Saturdays and Sundays. Both the exchanges have switched

over from the open outcry trading system to a fully automated computerized mode of

trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange

Automated Trading) system. It facilitates more efficient processing, automatic order

matching, faster execution of trades and transparency.

The scrip traded on the BSE has been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’, and ‘Z’

groups. The ‘A’ group shares represent those, which are in the carry forward system

(Badla). The ‘F’ group represents the dept market (fixed income securities) segment.

The ‘Z’ group scrip is the blacklisted companies. The ‘C’ group covers the odd lot

securities in ‘A’, ‘B1’, & ‘B2’ groups and Rights renunciations. The key regulator

governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual

Funds, FIIs and other participants in Indian secondary and primary market is the

Securities and Exchange Board of India (SEBI) Limited.

Institutional Structure of the Indian Stock Market

Market Intermediaries Number of Intermediaries as on March

31,2008

Stock exchanges (cash Market) 19

Stock Exchanges (Derivative Market) 2

Brokers (Cash Segment) 9487

Corporate Brokers (Cash Segment) 4183

Sub Brokers (Cash Segment) 44073

Brokers (Derivatives) 1442

FII 1319

Custodians 15

Depositories 2

Merchant Bankers 155

Bankers to an Issue 50

Underwriters 35

Mutual Funds 40

Industry Insight

Majority of the broking firms entered the business post 1990. A majority of

members have memberships in more than one stock exchange and across

equities, equity derivatives and commodities futures in domestic and International

stock exchange.

On the back of growing equity culture broking activity is spreading in Tier II and

Tier III cities in India.

Deepening financial system and economic growth has provided growth and

expansion opportunities to broking firms. Access to public equity markets and

growing international investor’s interest has enabled them to raise resources.

Although there are more than 9000 brokers registered with SEBI 80% of the

turnover in NSE and BSE is accounted by about 100 brokers.

One of the oldest trading industries that have been around even before the

establishment of BSE is the Indian Broking Industry. Post liberalization there have been

number of changes, despite this the stock broking industry was at its pace and retained

its sustainable growth.

To study the trend in the stock broking industry, if we take the database of over 394

broking firms. All the data for the study was collected through responses received

directly from the broking firms. The insights have been arrived at through an analysis on

various parameters, pertinent to the equity broking industry, such as region, terminal,

market, branches, sub brokers, products and growth areas.

Some key characteristics of the sample 394 firms are:

On the basis of geographical concentration, the West region has the maximum

representation of 52%. Around 24% firms are located in the North, 13% in the

South and 10% in the East

3% firms started broking operations before 1950, 65% between 1950-1995 and

32% post 1995

On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in

Ahmedabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities

In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade

at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and

45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and

43% at both exchanges

Majority of branches are located in the North, i.e. around 40%. West has 31%,

24% are located in South and 5% in East

In terms of sub-brokers, around 55% are located in the South, 29% in West, 11%

in North and 4% in East

In terms of various areas of growth, 84% firms have expressed interest in

expanding their institutional clients, 66% firms intend to increase FII clients and

43% are interested in setting up JV in India and abroad

In terms of IT penetration, 62% firms have provided their website and around 94%

firms have email facility

ABOUT BSE (BOMBAY STOCK EXCHANGE)

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;

popularly called The Bombay Stock Exchange, or BSE) is located at Dalal Street,

Mumbai. Established in 1875, it is the oldest stock exchange in Asia. There are around

3,500 Indian companies listed with the stock exchange, and has a significant trading

volume. As of July 2005, the market capitalization of the BSE was about Rs. 20 trillion

(US $ 466 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a

widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock

exchanges in the world in terms of transactions volume. Along with the NSE, the

companies listed on the BSE have a combined market capitalization of US$ 125.5

billions.

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.

The risks covered under the basic cover of the policy are detailed as below.

- Loss to members on account of infidelity of employees

- Loss of member on account of fake/forged/ stolen shares being introduced by his

clients

- Direct financial losses suffered by the member broker on account of physical loss,

destruction, theft or damage to securities and cash.

- Loss on account of securities lost in transit

- Loss suffered on account of incomplete transaction

- Loss sustained as final receiving member on exchange on account of default of the

introducing member

- Loss on account of errors and omission

- Directors and officials liability cover

ABOUT NATIONAL STOCK EXCHANGE (NSE)

The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It

was set up in 1993 to encourage stock exchange reform through system modernization

and competition. It opened for trading in mid-1994. It was recently accorded recognition

as a stock exchange by the Department of Company Affairs. The instruments traded

are, treasury bills, government security and bonds issued by public sector companies.

The Organization: The National Stock Exchange of India Limited has genesis in the

report of the High Powered Study Group on Establishment of New Stock Exchanges,

which recommended promotion of a National Stock Exchange by financial institutions

(FIs) to provide access to investors from all across the country on an equal footing.

Based on the recommendations, NSE was promoted by leading Financial Institutions at

the behest of the Government of India and was incorporated in November 1992 as a

tax-paying company unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,

1956 The Capital Market (Equities) segment commenced operations in November 1994

and operations in Derivatives segment commenced in June 2000.

When India’s National Stock Exchange (NSE) was started in 1994, few believed it would

survive. How could a stock exchange run by a team of untested professionals headed

by a former development banker succeed against existing stock exchanges run by third

generation, savvy stockbrokers?

Critics even went to the extent of warning that NSE’s sophisticated systems would be a

misfit in an Indian capital market dominated by physical deliveries, arbitrary speculative

trade, and lengthy trade settlements.

Today, with number of trades touching 2.5 million a day and turnover touching turnover

touching Rs 100 billion in value terms, NSE towers over all the other stock exchanges in

the country.

In a ten-year period (NSE completed a decade on June 30, 2004) the National Stock

Exchange has tilted the market system in favor of investors and away from a significant

bias in favor of intermediaries. For a mass of investors across the country, the NSE is

now the focal point for trading in stocks, and futures and options.

The Stock Exchange, (NSE) came out with a stock index that subsequently became

another barometer of the Indian stock market known as NIFTY.

Nifty been the focal point of investors, as it provides trading the shares as well as index

in futures and options. Before Nifty came into existence trading of index concept was

not present it was introduced by Nifty and is present in it only, till date.

SENSEX

SENSEX is not only scientifically designed but also based on globally accepted

construction and review methodology. First compiled in 1986, SENSEX is a basket of

30 constituent stocks representing a sample of large, liquid and representative

companies. The base year of SENSEX is 1978-79 and the base value is 100. The index

is widely reported in both domestic and international markets through print as well as

electronic media.

The index is calculated on the “Free-float Market Capitalization” methodology. The

"Free-float Market Capitalization" methodology of index construction is regarded as an

industry best practice globally. All major index providers like NIKKEI, NASDAQ and

DOW JONES use the free float methodology.

The growth of equity markets in India has been phenomenal in the decade gone by.

Right from early nineties the stock market witnessed heightened activity in terms of

various bull and bear runs. The SENSEX captured all these events in the most judicial

manner. One can identify the booms and busts of the Indian stock market through

SENSEX.

Distribution of SEBI registered sub-brokers affiliated to members of NSE

(as on June 30, 2006)

Constitution-wise

Corporate 1203

Firms 835

Individuals 9526

Total 11564

SEBI’s ROLE AS A REGULATOR

According to the preamble to the SEBI Act the objective of setting up SEBI was to

protect the interest of the investors. SEBI has thus three objectives cast upon it by the

Act.

Protect the investors in Securities Market

To promote the development of Securities Market

Regulate the Securities Market

Following powers have ban given to SEBI with the enactment of SEBI with

enactment of SEBI Act 1992:

Power to call for periodical returns from recognized Stock Exchanges.

Power to call any information or explanation from recognized stock exchanges or

its members.

Power to direct inquiries to be made in relation to affairs of stock exchanges or

OTS members.

Power to grant approval to byelaws of recognized exchanges.

Power to make or amend bye-laws of recognized exchanges.

Power to declare applicability of section 17 of the Securities Contract

(Regulation) Act in any State or area to grant licenses to dealers in securities.

Power to compel listing of securities by public companies.

Power to control and regulate stock exchanges.

Power to grant registration to market intermediaries.

Power to register and regulate working of collective investment schemes

including mutual fund.

Power to promote and regulate self-regulatory bodies.

Power to prohibit fraudulent and unfair trade practices relating to securities.

Power to prohibit inside trading.

Power to promote investor’s education and trading of intermediaries in capital.

Power to regulate substantial acquisition of shares and takeover of companies.

Power to levy fees.

Power to conduct research and other functions.

Recent Development steps taken by SEBI for Investor protection

1. Appointment of administrators to check bad deliveries

To get rid of bad deliveries, SEBI has decided to appoint administrator to

implement the signature guarantee and certificate authentication programs. The

administrators appointed by SEBI act on behalf regulator in resolving problems

arising out of signature mismatch

2. Streamlining Investor protection fund

The committee set up by SEBI to review the sources and utilization of investor

protection fund of stock exchanges has made following recommendations

- Funds should be on trust structure and set upon under Indian Trust Act,

1882 with independent trustees

- Regular contributions from active member brokers and stock exchanges

- Fund to be utilized only for investor claims and not broker claims.

- Trustees to ensure that fund is not deployed in risky instruments or for the

benefit of any member but only in prescribed avenues.

- Time schedule to be specified while setting investor claims.

3. Service centers for investors

SEBI has directed all stock exchanges to constitute service centers for investors to

enable the investors to have a form for recording and counseling of their

grievances as well as access financial and other information of companies on

government policies, rules, regulations, etc.

4. Compliance Officer

Each company is required to appoint compliance officer who would be able to

verify rumors and information floating in the market about the company to the

stock exchange. This will reduce motivated rumors about companies, which aids

in price manipulation.

5. Corporate Governance

SEBI has prescribed prudent corporate governance norms for all listed companies

to ensure transparency and better disclosure practices.

6. Investor Education

SEBI has taken steps to educate investors through various awareness programs

and publications

Depository System: -

Before the NSE was setup, securities (Shares) were in physical form. The transfer was

by physical movement of papers. There had to be a physical delivery of securities a

process fraught with delays and resultant risk. The second aspect of the settlement

relates to transfer of shares in favor of the purchaser by the company. The system of

transfer of ownership was grossly inefficient as every transfer involves physical

movement of paper securities to the issuer for registration, with the change of

ownership being evidenced by an endorsement on the security certificate in many cases

the process of transfer would much longer than the two months stipulated in the

Company Act, and a significance proportion of transaction would end up as bad delivery

due to faulty compliance of paper work, Theft, forgery, mutilation of certificates of a

security. All this added to cost and delays in settlement, restricted liquidity and made

investors grievance redresser time consuming and, at time, intractable.

To obviate these problems, the Depositories Act, 1996 was passed. It provide for the

establishment of depositories in securities with the objective of ensuring free

transferability of securities with speed, accuracy and security. It does so by

1. Making securities of public limited companies freely transferable, subject to

certain exception.

2. Dematerializing the securities in the depository mode.

3. Providing for maintenance of ownership records in a book entry form.

Two depositories, viz., NSDL and CDSL, have come up to provide instantaneous

electronic transfer of securities.

The NSE introduce screen based trading system (SBTS) where a member can punch in

to the computer the quantities of shares and the prices at which he wants to transact.

The transaction execute as soon as quote punched by a trading member finds a

matching sale or buys quote from counter party. SBTS electronically matches the buyer

and seller in an order driven system or finds the customer the best price available in a

quote driven system, and hence cuts down on time , cost and risk of errors as well as

on the chances of fraud.

ABOUT (CDSL) CENTRAL DIPOSITORY SERVICES LTD.

Bombay Stock Exchange Limited (BSE) promoted CDSL jointly with leading banks as

State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered

Bank, and Union Bank of India and Centurion Bank CDSL was set up with the objective

of providing convenient, dependable and secure depository services at affordable cost

to all market participants.

ABOUT (NSDL) NATIONAL SECURITIES DIPOSITORY LTD

NSDL, the first depository in India, established in August 1996 and promoted by

institutions of national stature responsible for economic development of the country has

since established a national infrastructure of international standard that handles most of

the settlement of securities in dematerialized form in Indian capital market.

ABOUT DEMAT ACCOUNT

Dematerialization of securities is a process by which physical share certificates are

converted into electronic form in a safe, secure and convenient manner and thus

investors can enter into buying and selling transactions without suffering paperwork and

delays. With a view to this objective, Insight Share Brokers Ltd., one of the premium

depository participants with the Central Depository Services (India) Limited (CDSL) for

trading and settlement of dematerialized shares floats a unique customized offer for

opening up demat account of all its new stock-broking investors willing to have their

securities converted into electronic mode.

Insight’s DP service is designed to offer customers an efficient way to manage their

securities (shares, bonds etc.) vis a vis keep a track the status of their holdings over a

period of time without the hassle of handling physical documents that may get mutilated

or lost in transit.

NEED OF DEMAT ACCOUNT

With SEBI making trading mandatory or more than 700 scrip’s, it is imperative that all

investors have a Demat account with a Depository Participant. This is because most

trades get settled electronically at the stock exchange. When you place a buy order, a

settler can deliver the Demat securities, which can only be credited to Demat account.

Trade Transaction: -

An Investor can get in two types of trade transaction i.e.

1. Intraday Trade

2. Delivery Trade

Intraday trade: - In this type of trading an investor can buy any share during the trading

session but he has to sell this share before 3 P.M. otherwise the software of India bulls

will sell it automatically.

Delivery Trade: - In delivery Trade Investor buy any share during the trading session

but he is no more bound sell it on same day. It is basically for investment purpose he

can sell his share whenever he wants.

IMPORATNCE OF STOCK MARKET

The stock market is one of the most important sources for companies to raise money.

This allows businesses to go public, or raise additional capital for expansion. The

liquidity that an exchange provides affords investors the ability to quickly and easily sell

securities. This is an attractive feature of investing in stocks, compared to other less

liquid investments such as real estate.

The term 'the stock market' is a concept for the mechanism that enables the trading of

company stocks (collective shares), other securities, and derivatives. Bonds are still

traditionally traded in an informal, over-the-counter market known as the bond market.

Commodities are traded in commodities markets, and derivatives are traded in a variety

of markets (but, like bonds, mostly 'over-the-counter').

The size of the worldwide 'bond market' is estimated at $45 trillion. The size of the 'stock

market' is estimated as about half that. The world derivatives market has been

estimated at about $300 trillion. The major U.S. Banks alone are said to account for

about $100 trillion. It must be noted though that the derivatives market, because it is

stated in terms of notional outstanding amounts, cannot be directly compared to a stock

or fixed income market, which refers to actual value.

The stocks are listed and traded on stock exchanges which are entities (a corporation or

mutual organization) specialized in the business of bringing buyers and sellers of stocks

and securities together. The stock market in the United States includes the trading of all

securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional

exchanges, the OTCBB, and Pink Sheets European examples of stock.

DYNAMICS OF BROKING INDUSTRY

How is the future shaping for Indian brokers?

There is a new sense of confidence among the domestic brokers as the broking industry

is passing through the most exciting times. Those who have survived the earlier bear

phase have made their fortunes as the overall revenues have gone up multifold. Hence,

some of the leading domestic brokers are attracting talents even from the foreign

broking houses as domestic houses are now able to afford the same salary levels and

lure people by offering employee stock ownership plans (Esops).

Even the smaller brokers have changed their way of marketing and advertising that was

never the case earlier. Everyone is focusing on value-added services. Dynamics of

domestic stock broking industry is changing and the best is yet to come!

What are the challenges before the industry?

In coming days, shortage of skilled talent and proper infrastructure will be one of the

major challenges. Going forward, technology will play a key role and the domestic

broking houses have to upgrade it. Depth of multiple products is also a challenge for the

domestic houses.

Also on the regulatory front, domestic institutional investors can not give more than five

per cent business to any single broker. However, FIIs have no such restrictions resulting

in restriction of revenues. As the dynamics of the mutual fund (MF) industry has

changed in India, the current restriction also needs to be reconsidered.

How this direct market access (DMA) facility is will impact smaller brokers?

DMA is mainly for the investors who have large programme trades or arbitrage

business. This move will surely make the proprietary trading/arbitrage type businesses

more competitive and less attractive.

Will falling volumes in last few months affect the business of small brokers?

Brokers were painful for the last three months due to falling volumes, so their business

will be affected. But for the last two years, most of them have made good money.

Hence, there is headroom for survival. There is also a possibility of consolidation among

the retail brokerages.

Some more regulatory measures are expected, like 100 per cent payment along

with application for IPO. Will it affect IPO market?

Such measures are better for the system. What will happen is that genuine buyers will

apply and the ratio of oversubscription will come down resulting in better allocations to

the long-term investors. Hence, such move is needed for the long-term sustainability of

the IPO market. Good issues at an attractive price will in any case not find any difficulty

to raise funds in the new system too.

What is the view on the secondary market?

Though there is good liquidity globally, markets will be range-bound till monsoon and

based on that the markets will take further direction. Inflation, oil price and elections are

the major challenges for markets to have a strong sustainable rally.

Global issues have not settled down completely, hence, the volatility will continue. One

has to remain cautious. In terms of volumes, this year will not be in any case like last

year, there fore; the return expectations have to be toned down. In such uncertain

environment, the theme for investors is hard assets. Oil and gas, mining, manufacturing

and engineering are some of the sectors that are expected to outperform. One will see

stronger interest when power and real estate corrects as they are good long-term bets.

But they are currently very expensive.

CHAPTER IIPROFILE OF THE ORGANISATION

Religare Enterprises Ltd.

Religare Enterprises ltd (REL), incorporated in 1984 and promoted by RANBAXY (now

by Mr.Malvinder Singh and Mr. Shivinder Singh), is the holding company of 11

subsidiaries. It is among the leading integrated financial services group in the country

today. Religare is a diversified financial services group of India offering a multitude of

investment options. Each of its subsidiaries is engaged in a wide spectrum of financial

products and services targeted at retail, high-net worth individuals, corporate and

institutional clients.

The services offered by the group include Share Broking, Financing loans against

shares, IPO financing, distribution of Mutual funds, Insurance Broking, Commodity

broking, Wealth Management, Advisory Services, Private Equity, merchant banking and

trading in arts and art crafts. The major revenue drivers for the company are its retail

equity broking arm Religare Securities and Religare Finevest, which finances loans

against shares.

Religare has been constantly innovating in terms of product and services and to offer

such incisive services to specific user segments it has also started the NRI, FII, HNI and

Corporate Servicing groups. These groups take all the portfolio investment decisions

depending upon a client’s risk / return parameter.

Religare has a very credible Research and Analysis division, which not only caters to

the need of our Institutional clientele, but also gives their valuable inputs to investment

dealers.

RSL is a member of the National Stock Exchange of India, Bombay Stock Exchange of

India, Depository Participant with National Securities Depository Limited and Central

Depository Services (I) Limited, and is a SEBI approved Portfolio Manager.

Our Brand Identity

Name

Religare is a Latin word that translates as 'to bind together'. This name has been

Chosen to reflect the integrated nature of the financial services the company offers. The

name is intended to unite and bring together the phenomenon of money and wealth to

coexist and serve the interest of individuals and institutions, alike.

Symbol

The Religare name is paired with the symbol of a four-leaf clover. The four-leaf

Clover is used to define the rare quality of good fortune that is the aim of every financial

plan. It has traditionally been considered good fortune to find a single four leaf clover

considering that statistically one may need to search through over 10,000 three-leaf

clovers to even find one four leaf clover.

Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents H ope. The aspirations to succeed. The

dream of becoming. Of new possibilities. It is the beginning of every step and the

foundations on which a person reaches for the stars.

The second leaf of the clover represents T rust. The ability to place one’s own

faith in another. To have a relationship as partners in a team. To accomplish a given

goal with the balance that brings satisfaction to all not in the binding but in the bond

that is built.

The third leaf of the clover represents C are. The secret ingredient that is the

triumph of diligence in every aspect. From it springs true warmth of service and the

ability to adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents G ood F ortune. Signifying that

rare ability to meld opportunity and planning with circumstance to generate those often

looked for remunerative moments of success.

H opes, T rust, C are, G ood fortune. All elements perfectly combine in the

emblematic and rare, four-leaf clover to visually symbolize the values that bind together

and form the core of the Religare vision.

Company’s Vision –

“To build Religare as a globally trusted brand in the financial services domain and

present it as the ‘Investment Gateway of India”.

Company’s Mission –

“Providing complete financial care driven by the core values of diligence and

transparency”.

Brand Essence –

“Core brand essence is Diligence and Religare is driven by ethical and dynamic

processes for wealth creation”.

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 Finevest 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

by to be available with the broker who deals on behalf of investors or sell the mutual

funds of the different companies present in the market.

(Graph 4)Religare (“company”) is an integrated financial services institution offering a wide range of financial products and services to retail investors, high net worth individuals and corporate and institutional clients including equity and commodity broking, online trading, wealth advisory services, investment banking and insurance broking.

Religare has grown rapidly from what was largely an equity trading company into a diversified financial services company operating through its 11 subsidiaries.

As on June 30, 2008, Religare has operations at 1,575 locations across 465 cities and towns and a large management team leading group of over 9,500 employees

Recently acquired Hichens, Harrison & Co. (“Hichens”), one of the oldest broking firm in London, for a sum of GBP 55.5 million.

Acquisition to boost the institutional and investment banking operations of

Religare and extend its geographical reach to London, South Africa, Argentina, Brazil, Dubai, Qatar, Singapore, Malaysia and Indonesia.

Diversified Integrated Financial Services Platform

Recently growth and established business testimony of Religare’s commitment

towards becoming the investment gateway of India.

Diversified product portfolio with individually focused management teams to

create optimum balance and result.

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

SERVICES :-

Organization Structure:

Competititors of Religare:-

There are several financial security companies playing their roles in Indian equity

market. But Religare faces competitions from these few companies.

ICICI Direct

Share Khan (SSKI)

Kotak Securities

India Bulls

HDFC Securities

5paisa.com

Motilal Oswal

IL&FS

Karvy

India infoline ltd

In India Religare’s geographical distribution is shown as follows:

Religare Enterprises Ltd.

Religare’s Joint Ventures

AEGON RELIGARE LIFE INSURANCE COMPANY

Life insurance Business (AEGON as a partner)

RELIGARE MACQUARIE WEALTH

MANAGMENT LTD.

PrivateWealthBusiness (Macquarie, Australian

Financial Services major as a partner)

Vistaar Religare -The Film Fund

India’s first SEBI approved filmfund(Vistaar

as a partner)

Milestone Religare – Private equity Fund

Milestone, one of India’s premier independent

Fund houses and Religare have come together

and trough the JV have formed an entity,

Milestone Religare investment advisors pvt ltd.

Other Group Companies

Fortis Healthcare Limited, established in 1996 was founded on

the vision of creating an integrated healthcare delivery system.

With 22 hospitals in India, including multi-specialty & super

specialty centres, the management is aggressively working towards taking this number

to a significant level in the next few years to provide quality healthcare facilities and

services across the nation.

Super Religare Laboratories Limited (formerly SRL

Ranbaxy) within 11 years of inception has become the largest Pathological Laboratory

network in South Asia. It started a revolution in diagnostic services in India by ushering

in the most specialized technologies, backed by innovation and diligence. The current

footprint extends well beyond India in the Middle East and parts of Europe.

Religare Wellness Limited (formerly Fortis

Healthworld) is one of the leadingplayers in the

wellness retail space with a footprint of over 100 stores across India. The group

envisages setting up a pan India world class retail network of wellness stores that would

provide comprehensive solutions under one roof.

Religare Technova Limited (formerly Fortis

Financial Services Limited)

Religare Enterprises Limited Key Data:

  Ticker: 532915 Country: INDIA

  Exchanges: BOM Major Industry: Financial

    Sub Industry: Securities Brokerage

  2010 Sales16,718,848,000

(Year Ending Jan 2011).Employees: N/A

  Currency: Indian Rupees Market Cap: 52,403,658,000

  Fiscal Yr Ends: March Shares Outstanding: 127,813,800

  Share Type: Ordinary Closely Held Shares: 42,765,660

Religare Finvest

Religare Finvest Limited (RFL), a Non Banking Finance Company (NBFC) is

aggressively making a name in the financial services arena in India. In a fast paced,

constantly changing dynamic business environment, RFL has delivered the most

competitive products and services. RFL is primarily engaged in the business of

providing finance against securities in the secondary market. It also provides finance for

application in Initial Public Offers to non-retail clients in the primary market.

RFL is also planning to initiate personal loan portfolio as fund based activity and mutual

fund distribution as fee based activities Along with this, the company also undertakes

non-fund based advisory operations in the field of Corporate Financing in the nature of

Credit Syndication which includes bills discounting, intercorporate deposit, working

capital loan syndication, placement of private equity and other structured products

Religare Insurance Advisory Ltd.

Religare has been taking care of financial services for long but there was a missing link.

Financial planning is incomplete without protective measure i.e. structured products to

take care of event of things that may go wrong consequently; Religare is soon coming

up with Religare Insurance Advisory Services Limited.

As composite insurance broker, we would deal in both insurance and reinsurance,

providing our clients risk transfer solutions on life and non-life sides.

This service will take benefit of Religare’s vast business empire spread throughout the

country -- providing our valued clients insurance services across India. We aim to have

a wide reach with our services – literally! That’s why we are catering the insurance

requirements of both retail and corporate segments with products of all the insurance

companies on life and non-life side Still, there is more in store. We also cater individuals

with a complete suite of insurance solutions, both life and general to mitigate risks to life

and assets through our existing network of over 150 branches – expected to reach 250

by the end of this year! For corporate clients, we will be offering value based

customized solutions to cover all risks which their business is exposed to. Our clients

will be supported by an operations team equipped with the best of technology support.

Religare Insurance Advisory aims to provide neutral, transparent and professional risk

transfer advice to become the first choice of India

Religare Securities ltd.

PRODUCT AND SERVICES

Religare customers have the advantage of trading in all the market segments together

in the same window, as we understand the need of transactions to be executed with

high speed and reduced time. At the same time, they have the advantage of having all

kind of insurance & Investment Advisory for Life insurance, General Insurance, Mutual

Funds.

Religare is a customer focused financial services organization providing a range of

investment solutions to our customers. We work with clients to meet their overall

investment objectives and achieve their financial goals. Our clients have the opportunity

to get personalized services depending on their investment profiles. Our personalized

approach enables clients to achieve their Total investment objectives.

Our key product offerings are as follows:

Equity Broking - BSE and NSE

Derivatives Futures and Options

Internet Broking- Online Trading

Commodities Trading - NCDEX & MCX

Institutional Broking

Depository Services - NSDL & CDSL

Portfolio Management Services

NRI Investments

Initial Public Offerings (IPO)

Mutual Fund Investment

Equity Trading

Trading in Equities with Religare truly empowers you for your investment needs. We

ensure you have superlative trading experience through –

A highly process driven, delight approach

Powerful Research & Analytics and

One of the “best-class” dealing rooms

Further, Religare also has one the largest retail networks, with its presence in more than

1800* locations across more than 490* cities and towns. This means, you can walk into

any of these branches and connect to our highly skilled and dedicated relationship

managers to get the best services.

Religare Enterprise Limited, through its subsidiaries, offers a range of integrated

financial products and services to retail inventors, high net worth individuals, and

corporate and institutional clients in India. It operates in three divisions: Retail

Spectrum, Wealth Spectrum, and Institutional Spectrum. The Retail Spectrum division

offers equity brokerage, commodities brokerage, personal financial services, including

insurance brokerage and mutual fund distribution; internet trading; loans against shares;

and personal loans. The Wealth Spectrum division provides portfolio management

services, wealth advisory services, and private client equity services, such as

international equity services. The company was formerly known as Religare Enterprises

Private Limited and changed its name to Religare Enterprises Limited in July 2006. The

company was incorporated in 1984 and is based in New Delhi, India.

About Religare Securities Limited (RSL)

One of the leading integrated financial services groups of India

Diverse range of offerings

Client base of more than 5000,000 and growing across the retail, wealth and

Institutional Spectrum.

Pan India and global footprint.

Width and depth of management leading a formidable employee base.

Best-in-class Research.

“Sweetly placed” to spot new opportunities and power ahead.

The Religare Edge

Diverse offerings

Dynamic Management Team

State-of-the art technology

Vast Distribution and Reach

Robust Brand Recognition

Synergistic partnerships

Innovative Initiatives

INVESTMENT

Investment is the activity, which is made with the objective of earning some

sort of positive returns in the future. It is the commitment of the funds to

earn future returns and it involves sacrificing the present investment for the

future return. Every person makes the investment so that the funds he has

increases as keeping cash with himself is not going to help as it will not

generate any returns and also with the passage of time the time value of

the money will come down. As the inflation will rise the purchasing power of

the money will come down and this will result that the investor who does

not invest will become more poor as he will not have any funds whose

value have been increased. Thus every person whether he is a

businessman or a common man will make the investment with the objective

of getting future returns.

The dictionary meaning of investment is to commit money in order to earn a financial

return or to make use of the money for future benefits or advantages. People commit

money to investments with an expectation to increase their future wealth by investing

money to spend in future years. For example, if you invest Rs. 1000 today and earn 10

%over the next year, you will have Rs.1100 one year from today.

An investment can be described as perfect if it satisfies all the needs of all investors.

So, the starting point in searching for the perfect investment would be to examine

investor needs. If all those needs are met by the investment, then that investment can

be termed the perfect investment. Most investors and advisors spend a great deal of

time understanding the merits of the thousands of investments available in India. Little

time, however, is spent understanding the needs of the investor and ensuring that the

most appropriate investments are selected for him.

The Investment Needs of an Investor

By and large, most investors have eight common needs from their investments:

1. Security of Original Capital;

2. Wealth Accumulation;

3. Comfort Factor;

4. Tax Efficiency;

5. Life Cover;

6. Income;

7. Simplicity;

8. Ease of Withdrawal;

Security of original capital: The chance of losing some capital has been a primary

need. This is perhaps the strongest need among investors in India, who have suffered

regularly due to failures of the financial system.

Wealth accumulation: This is largely a factor of investment performance, including

both short-term performance of an investment and long-term performance of a

portfolio. Wealth accumulation is the ultimate measure of the success of an investment

decision.

Comfort factor: This refers to the peace of mind associated with an investment.

Avoiding discomfort is probably a greater need than receiving comfort. Reputation

plays an important part in delivering the comfort factor.

Tax efficiency: Legitimate reduction in the amount of tax payable is an important part

of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.

Life Cover: Many investors look for investments that offer good return with adequate

life cover to manage the situations in case of any eventualities.

Income: This refers to money distributed at intervals by an investment, which are

usually used by the investor for meeting regular expenses. Income needs tend to be

fairly constant because they are related to lifestyle and are well understood by

investors.

Simplicity: Investment instruments are complex, but investors need to understand

what is being done with their money. A planner should also deliver simplicity to

investors.

Ease of withdrawal: This refers to the ability to invest long term but withdraw funds

when desired. This is strongly linked to a sense of ownership. It is normally triggered

by a need to spend capital, change investments or cater to changes in other needs.

Access to a long-term investment at short notice can only be had at a substantial cost.

Perfect investment would have been achieved if all the above-mentioned needs had

been met to satisfaction. But there is always a trade-off involved in making

investments. As long as the investment strategy matches the needs of investor

according to the priority assigned to them, he should be happy.

The Ideal Investment strategy should be a customized one for each investor

depending on his risk-return profile, his satisfaction level, his income, and his

expectations. Accurate planning gives accurate results. And for that there must be an

efficient and trustworthy roadmap to achieve the ultimate goal of wealth maximization.

TYPES OF INVESTMENT:-

There are basically three types of investments from which the investors can choose.

The three kinds of investment have their own risk and return profile and investor will

decide to invest taking into account his own risk appetite. The main types of

investments are: -

Economic investments:-

These investments refer to the net addition to the capital stock of the society. The

capital stock of the society refers to the investments made in plant, building, land and

machinery which are used for the further production of the goods. This type of

investments are very important for the development of the economy because if the

investment are not made in the plant and machinery the industrial production will come

down and which will bring down the overall growth of the economy.

Financial Investments:-

This type of investments refers to the investments made in the marketable securities

which are of tradable nature. It includes the shares, debentures, bonds and units of the

mutual funds and any other securities which is covered under the ambit of the Securities

Contract Regulations Act definition of the word security. The investments made in the

capital market instruments are of vital important for the country economic growth as the

stock market index is called as the barometer of the economy.

General Investments:-

These investments refer to the investments made by the common investor in his own

small assets like the television, car, house, motor cycle. These types of investments are

termed as the household investments. Such types of investment are important for the

domestic economy of the country. When the demand in the domestic economy boost

the over all productions and the manufacturing in the industrial sectors also goes up and

this causes rise in the employment activity and thus boost up the GDP growth rate of

the country. The organizations like the Central Statistical Organization (CSO) regularly

takes the study of the investments made in the household sector which shows that the

level of consumptions in the domestic markets.

CHARACTERISICS OF INVESTMENT

Certain features characterize all investments. The following are the main characteristic

features if investments: -

1. Return: -

All investments are characterized by the expectation of a return. In fact, investments are

made with the primary objective of deriving a return. The return may be received in the

form of yield plus capital appreciation. The difference between the sale price & the

purchase price is capital appreciation. The dividend or interest received from the

investment is the yield. Different types of investments promise different rates of return.

The return from an investment depends upon the nature of investment, the maturity

period & a host of other factors.

2. Risk: -

Risk is inherent in any investment. The risk may relate to loss of capital, delay in

repayment of capital, nonpayment of interest, or variability of returns. While some

investments like government securities & bank deposits are almost risk less, others are

more risky. The risk of an investment depends on the following factors.

The longer the maturity period, the longer is the risk.

The lower the credit worthiness of the borrower, the higher is the risk.

The risk varies with the nature of investment. Investments in ownership securities like

equity share carry higher risk compared to investments in debt instrument like

debentures & bonds.

3. Safety: -

The safety of an investment implies the certainty of return of capital without loss of

money or time. Safety is another features which an investors desire for his investments.

Every investor expects to get back his capital on maturity without loss & without delay.

4. Liquidity: -

An investment, which is easily saleable, or marketable without loss of money & without

loss of time is said to possess liquidity. Some investments like company deposits, bank

deposits, P.O. deposits, NSC, NSS etc. are not marketable. Some investment

instrument like preference shares & debentures are marketable, but there are no buyers

in many cases & hence their liquidity is negligible. Equity shares of companies listed on

stock exchanges are easily marketable through the stock exchanges.

An investor generally prefers liquidity for his investment, safety of his funds, a good

return with minimum risk or minimization of risk & maximization of return.

IMPORTANCE OF INVESTMENT

In the current situation, investment is becomes necessary for everyone & it is important

& useful in the following ways:

1. Retirement planning: -

Investment decision has become significant as people retire between the ages of 55 &

60. Also, the trend shows longer life expectancy. The earning from employment should,

therefore, be calculated in such a manner that a portion should be put away as a

savings. Savings by themselves do not increase wealth; these must be invested in such

a way that the principal & income will be adequate for a greater number of retirement

years. Increase in working population, proper planning for life span & longevity have

ensured the need for balanced investments.

2. Increasing rates of taxation: -

Taxation is one of the crucial factors in any country, which introduce an element of

compulsion, in a person’s saving. In the form investments, there are various forms of

saving outlets in our country, which help in bringing down the tax level by offering

deductions in personal income.

For examples: -

Unit linked insurance plan,

Life insurance,

National saving certificates,

Development bonds,

Post office cumulative deposit schemes etc.

3. Rates of interest: -

It is also an important aspect for sound investment plan. It varies between investment &

another. This may vary between risky & safe investment, they may also differ due

different benefits schemes offered by the investments. These aspects must be

considered before actually investing. The investor has to include in his portfolio several

kinds of investments stability of interest is as important as receiving high rate of interest.

4. Inflation: -

Since the last decade, now a day’s inflation becomes a continuous problem. In these

years of rising prices, several problems are associated coupled with a falling standard of

living. Before funds are invested, erosion of the resource will have to be carefully

considered in order to make the right choice of investments. The investor will try &

search outlets, which gives him a high rate of return in form of interest to cover any

decrease due to inflation. He will also have to judge whether the interest or return will be

continuous or there is a likelihood of irregularity. Coupled with high rate of interest, he

will have to find an outlet, which will ensure safety of principal. Beside high rate of

interest & safety of principal an investor also has to always bear in mind the taxation

angle, the interest earned through investment should not unduly increase his taxation

burden otherwise; the benefit derived from interest will be compensated by an increase

in taxation.

5. Income: -

For increasing in employment opportunities in India., investment decisions have

assumed importance. After independence with the stage of development in the country

a number of organization & services came into being.

For example: -

The Indian administrative services,

Banking recruitment services,

Expansion in private corporate sector,

Public sector enterprises,

Establishing of financial institutions, tourism, hotels, and education.

More avenues for investment have led to the ability & willingness of working people to

save & invest their funds.

6. Investment channels: -

The growth & development of country leading to greater economic activity has led to the

introduction of a vast array of investment outlays. Apart from putting aside saving in

savings banks where interest is low, investor have the choice of a variety of

instruments. The question to reason out is which is the most suitable channel? Which

media will give a balanced growth & stability of return? The investor in his choice of

investment will give a balanced growth & stability of return? The investor in his choice of

investment will have try & achieve a proper mix between high rates of return to reap the

benefits of both.

For example: -

Fixed deposit in corporate sector

Unit trust schemes.

INVESTMENTS AVENUES:-

There are various investments avenues provided by a country to its people depending

upon the development of the country itself. The developed countries like the USA and

the Japan provide variety of investments as compared to our country. In India before the

post liberalization era there were limited investments avenues available to the people in

which they could invest. With the opening up of the economy the number of

investments avenues have also increased and the quality of the investments have also

improved due to the use of the professional activity of the players involved in this

segment. Today investment is no longer a process of trial and error and it has become a

systematized process, which involves the use of the professional investment solution

provider to play a greater role in the investment process.

Earlier the investments were made without any analysis as the complexity involved the

investment process were not there and also there was no availability of variety of

instruments. But today as the number of investment options have increased and with

the variety of investments options available the investor has to take decision according

to his own risk and return analysis.

An investor has a wide array of Investment Avenue. They are as under:

Investment

Fixed Incomesecurities

Deposits

Life Insurance

PreciousObjects

Tax ShelteredSchemes

Real Estate

Financial Derivatives

Mutual FundSchemes

EquityShares

Types of Equity Instruments:

Ordinary Shares

Ordinary shareholders are the owners of a company, and each share entitles the holder

to ownership privileges such as dividends declared by the company and voting rights at

meetings. Losses as well as profits are shared by the equity shareholders. Without any

guaranteed income or security, equity shares are a risk investment, bringing with them the

potential for capital appreciation in return for the additional risk that the investor undertakes

in comparison to debt instruments with guaranteed income.

Preference Shares

Unlike equity shares, preference shares entitle the holder to dividends at fixed rates subject

to availability of profits after tax. If preference shares are cumulative, unpaid dividends for

years of inadequate profits are paid in subsequent years. Preference shares do not

entitle the holder to ownership privileges such as voting rights at meetings.

Equity Warrants

These are long term rights that offer holders the right to purchase equity shares in a

company at a fixed price (usually higher than the current market price) within a specified

period. Warrants are in the nature of options on stocks.

EQUITY SHARES: -

Classification in terms of Market Capitalization

Market capitalization is equivalent to the current value of a company i.e. current market

price per share times the number of outstanding shares. There are Large Capitalization

companies, Mid-Cap companies and Small-Cap companies. Different schemes of a fund

may define their fund objective as a preference for Large or Mid or Small-Cap

companies' shares. Large Cap shares are more liquid and hence easily tradable. Mid or

Small Cap shares may be thought of as having greater growth potential. The stock

markets generally have different indices available to track these different classes of

shares.

Classification in terms of Anticipated Earnings

In terms of the anticipated earnings of the companies, shares are generally classified

on the basis of their market price in relation to one of the following measures:

* Price/Earnings Ratio is the price of a share divided by the earnings per share, and

indicates what the investors are willing to pay for the company's earning potential.

Young and/or fast growing companies usually have high P/E ratios. Established

companies in mature industries may have lower P/E ratios. The P/E analysis is

sometimes supplemented with ratios such as Market Price to Book Value and Market

Price to Cash Flow per share.

• Dividend Yield for a stock is the ratio of dividend paid per share to current market

price. Low P/E stocks usually have high dividend yields. In India, at least in the past,

investors have indicated a preference for the high dividend paying shares. What matters

to fund managers is the potential dividend yields based on earnings prospects.

Based on companies' anticipated earnings and in the light of the investment

management experience the world over, stocks are classified in the following groups:

Cyclical Stocks are shares of companies whose earnings are correlated with the

state of the economy. Their earnings (and therefore, their share prices) tend to go

up during upward economic cycles and vice versa. Cement or Aluminum

producers fall into this category, just as an example. These companies may

command relatively lower P/E ratios, and have higher dividend pay-outs.

Growth Stocks are shares of companies whose earnings are expected to increase at

rates that exceed normal market levels. They tend to reinvest earnings and usually have

high P/E ratios and low dividend yields. Software or information technology company

shares are an example of this type. Fund managers try to identify the sectors or

companies that have a high growth potential.

Value Stocks are shares of companies in mature industries and are expected to

yield low growth in earnings. These companies may, however, have assets whose

values have not been recognized by investors in general. Fund managers try to

identify such currently under-valued stocks that in their opinion can yield superior

returns later. A cement company with a lot of real estate and a company with good

brand names are examples of potential value shares.

FIXED INCOME SECURITIES

Many instruments give regular income. Debt instruments may be secured by the assets of

the borrowers as generally in case of Corporate Debentures, or be unsecured as is the

case with Indian Financial Institution Bonds.

A debt security is issued by a borrower and is often known by the issuer category, thus

giving us Government Securities and Corporate Securities or FI bonds. Debt instruments

are also distinguished by their maturity profile. Thus, instruments issued with short-term

maturities, typically under one year, are classified as Money Market Securities.

Instruments carrying longer than one-year maturities are generally called Debt Securities.

Most debt securities are interest-bearing. However, there are securities that are

discounted securities or zero-coupon bonds that do not pay regular interest at intervals

but are bought at a discount to their face value. A large part of the interest-bearing

securities are generally Fixed Income-paying, while there are also securities that pay

interest on a Floating Rate basis.

A Review of the Indian Debt Market

The Wholesale Debt Market segment deals in fixed income securities and is fast gaining

ground in an environment that has largely focused on equities.

The Wholesale Debt Market (WDM) segment of the Exchange commenced operations

on June 30, 1994. This provided the first formal screen-based trading facility for the debt

market in the country.

This segment provides trading facilities for a variety of debt instruments including

Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/

Corporate/ Banks like Floating Rate Bonds, Zero Coupon Bonds, Commercial Papers,

Certificate of Deposits, Corporate Debentures, State Government loans, SLR and Non-

SLR Bonds issued by Financial Institutions, Units of Mutual Funds and Securitized debt

by banks, financial institutions, corporate bodies, trusts and others.

Large investors and a high average trade value characterize this segment. Till recently,

the market was purely an informal market with most of the trades directly negotiated

and struck between various participants. The commencement of this segment by NSE

has brought about transparency and efficiency to the debt market, along with effective

monitoring and surveillance to the market.

Instruments in the Indian Debt Market

Certificate of Deposit

Certificates of Deposit (CD) are issued by scheduled commercial banks excluding

regional rural banks. These are unsecured negotiable promissory notes. Bank CDs have

a maturity period of 91 days to one year, while those issued by FIs have maturities

between one and three years.

Commercial Paper

Commercial paper (CP) is a short term, unsecured instrument issued by corporate

bodies (public & private) to meet short-term working capital requirements. Maturity varies

between 3 months and 1 year. This instrument can be issued to individuals, banks,

companies and other corporate bodies registered or incorporated in India. CPs can be

issued to NRIs on non-repairable and non-transferable basis.

Corporate Debentures

The debentures are usually issued by manufacturing companies with physical assets, as

secured instruments, in the form of certificates They are assigned a credit rating by rating

agencies. Trading in debentures is generally based on the current yield and market values

are based on yield-to-maturity. All publicly issued debentures are listed on exchanges.

Floating Rate Bonds (FRB)

These are short to medium term interest bearing instruments issued by financial

intermediaries and corporate. The typical maturity of these bonds is 3 to 5 years. FRBs

issued by financial institutions are generally unsecured while those from private corporate

are secured. The FRBs are pegged to different reference rates such as T-bills or bank

deposit rates. The FRBs issued by the Government of India are in the form of Stock

Certificates or issued by credit to SGL accounts maintained by the RBI.

Government Securities

These are medium to long term interest-bearing obligations issued through the RBI by the

Government of India and state governments. The RBI decides the cut-off coupon on the

basis of bids received during auctions. There are issues where the rate is pre-specified

and the investor only bids for the quantity. In most cases the coupon is paid semi-

annually with bullet redemption features.

Treasury Bills

T-bills are short-term obligations issued through the RBI by the Government of India at a

discount. The RBI issues T-bills for different tenures: now 91 -days and 364-days. These

treasury bills are issued through an auction procedure. The yield is determined on the

basis of bids tendered and accepted.

Bank/FI Bonds

Most of the institutional bonds are in the form of promissory notes transferable by

endorsement and delivery. These are negotiable certificates, issued by the Financial

Institutions such as the IDBI/ICICI/ IFCI or by commercial banks. These instruments

have been issued both as regular income bonds and as discounted long-term

instruments (deep discount bonds).

Public Sector Undertakings (PSU) Bonds

PSU Bonds are medium and long term obligations issued by public sector companies

in which the government share holding is generally greater than 51%. Some PSU bonds

carry tax exemptions. The minimum maturity is 5 years for taxable bonds and 7 years for

tax-free bonds. PSU bonds are generally not guaranteed by the government and are in the

form of promissory notes transferable by endorsement and delivery. PSU bonds in

electronic form (demat) are eligible for repo transactions.

An investor can participant in various schemes floated by mutual fund instead of buying

equity shares. In mutual funds invest in equity shares & fixed income securities. There

are three broad types of mutual fund schemes.

Growth schemes

Income schemes

Balanced schemes

It is just like fixed income securities earn a fixed return. However, unlike fixed income

securities, deposits are negotiable or transferable. The important types of deposits in

India are:

Bank deposits

Company deposits

Postal deposits.

It provides benefits to those who participate in them. The most important tax sheltered

saving schemes in India is:

Employee provident fund scheme

Public provident fund schemes

National saving certificate

In a broad sense, life insurance may be viewed as an investment. Insurance premiums

represent the sacrifice & the assured sum the benefit. In India, the important types of

insurance polices are:

Endowment assurance policy

Money back policy

Whole life policy

Premium back term assurance policy

LIFE INSURANCE

TAX-SHELTERED SAVING SCHEMES

MUTUAL FUND SCHEMES

For the bilk of the investors the most important asset in their portfolio is a residential

house. In addition to a residential house, the more affluent investors are likely to be

interested in the following types of real estate:

Agricultural land

Semi-urban land

It is highly valuable in monetary terms but generally they are small in size. The

important precious objects are:

Gold & silver

Precious stones

Art objects

FINANCIAL DERIVATIVES: -

A financial derivative is an instrument whose value is derived from the value of

underlying asset. It may be viewed as a side bet on the asset. The most import financial

derivatives from the point of view of investors are:

Options

Futures.

REAL ESTATE

PRECIOUS OBJECTS

FINANCIAL DERIVATIVES

RISK – RETURN OF VARIOUS INVESTMENT AVENUES

Every investment is characterized by return & risk. Investors intuitively understand the

concept of risk. A person making an investment expects to get some return from the

investment in the future. But, as future is uncertain, so is the future expected return. It is

this uncertainty associated with the returns from an investment that introduces risk into

an investment. Risk arises where there is a possibility of variation between expectation

and realization with regard to an investment.

Meaning of Risk

Risk & uncertainty are an integrate part of an investment decision. Technically ‘risk’ can

be defined as situation where the possible consequences of the decision that is to be

taken are known. ‘Uncertainty’ is generally defined to apply to situations where the

probabilities cannot be estimated. However, risk & uncertainty are used

interchangeably.

Types of risks

1. Systematic risk: -

Systematic risk is non diversifiable & is associated with the securities market as well as

the economic, sociological, political, & legal considerations of prices of all securities in

the economy. The affect of these factors is to put pressure on all securities in such a

way that the prices of all stocks will more in the same direction.

Example: -

During a boom period prices of all securities will rise & indicate that the economy is

moving towards prosperity. Market risk, interest rate risk & purchasing power risk are

grouped under systematic risk.

RISKS

SYSTAMATIC UNSYSTAMATIC

Market Risk Business Risk

Interest Rate Risk Financial Risk

Purchasing power Risk

1. Systematic Risk

(A) Market risk

Market risk is referred to as stock variability due to changes in investor’s attitudes &

expectations. The investor reaction towards tangible and intangible events is the chief

cause affecting ‘market risk’.

(B) Interest rate risk

There are four types of movements in prices of stocks in the markets. These may term

as (1) long term, (2) cyclical (bull and bear markets), (3) intermediate or within the cycle,

and (4) short term. The prices of all securities rise or fall depending on the change in

interest rates. The longer the maturity period of a security the higher the yield on an

investment & lower the fluctuations in prices.

(C) Purchasing Power risk

Purchasing power risk is also known as inflation risk. This risk arises out of change in

the prices of goods & services and technically it covers both inflation and deflation

periods. During the last two decades it has been seen that inflationary pressures have

been continuously affecting the Indian economy. Therefore, in India purchasing power

risk is associated with inflation and rising prices in the economy.

2. Unsystematic Risk: -

The importance of unsystematic risk arises out of the uncertainty surrounding of

particular firm or industry due to factors like labor strike, consumer preferences and

management policies. These uncertainties directly affect the financing and operating

environment of the firm. Unsystematic risks can owing to these considerations be said

to complement the systematic risk forces.

(A) Business risk

Every corporate organization has its own objectives and goals and aims at a particular

gross profit & operating income & also accepts to provide a certain level of dividend

income to its shareholders. It also hopes to plough back some profits. Once it identifies

its operating level of earnings, the degree of variation from this operating level would

measure business risk.

Example:-

If operating income is expected to be 15% in a year, business risk will be low if the

operating income varies between 14% and 16%. If the operating income were as low as

10% or as high as 18% it would be said that the business risk is high.

(B) Financial Risk: -

Financial risk in a company is associated with the method through which it plans its

financial structure. If the capital structure of a company tends to make earning unstable,

the company may fail financially. How a company raises funds to finance its needs and

growth will have an impact on its future earnings and consequently on the stability of

earnings. Debt financing provides a low cost source of funds to a company, at the same

time providing financial leverage for the common stock holders. As long as the earnings

of the company are higher than the cost of borrowed funds, the earning per share of

common stock is increased. Unfortunately, a large amount of debt financing also

increases the variability of the returns of the common stock holder & thus increases

their risk. It is found that variation in returns for shareholders in levered firms (borrowed

funds company) is higher than in unlevered firms. The variance in returns is the financial

risk.

Risk Return of Various Investment Alternatives

Management

Decision

Required

Investment

Market

RiskBusiness

Risk

Interest

Risk

Purchasing

Power

Risk

H Growth stock H H L L

HSpeculative

common stockH H L L

M Blue chips M M L L

MConvertible

referred stockM M L L

LConvertible

debenturesM M L L

L Corporate bonds L L H H

LGovernment

bondsL L H H

L Short-term bonds L L L H

LMoney market

fundsL L L H

O Life insurance L L L H

OCommercial

banksL L L H

O Unit trusts L L L M-H

O Saving a/c L L L H

O Cash L L L H

So, there are so many investment options & the different option have different benefits

& limitations in the sense risk associated with it. So it is difficult for them to chose

option, which give maximum return at minimum risk.

Portfolio

A combination of securities with different risk & return characteristics will constitute the

portfolio of the investor. Thus, a portfolio is the combination of various assets and/or

instruments of investments. The combination may have different features of risk &

return, separate from those of the components. The portfolio is also built up out of the

wealth or income of the investor over a period of time, with a view to suit his risk and

return preference to that of the portfolio that he holds. The portfolio analysis of the risk

and return characteristics of individual securities in the portfolio and changes that may

take place in combination with other securities due to interaction among themselves and

impact of each one of them on others.

An investor considering investments in securities is faced with the problem of choosing

from among a large number of securities. His choice depends upon the risk and return

characteristics of individual securities. He would attempt to choose the most desirable

securities and like to allocate is funds over this group of securities. Again he is faced

with the problem of deciding which securities to hold and how much to invest in each.

The investor faces an infinite number of possible portfolios or groups of securities. The

risk and return characteristics of portfolio differ from those of individual securities

combining to form a portfolio. The investor tries to choose the optimal portfolio taking in

to consideration the risk return characteristics of all possible portfolios.

As the economy and the financial environment keep changing the risk return

characteristics of individual securities as well as portfolios also change. This calls for

periodical review and revision of investment portfolios of investors. . The return realized

from the portfolio has to be measured and the performance of the portfolio has to be

evaluated.

It is evident that rational investment activity involves creation of an investment portfolio.

Portfolio management comprises all the processes involved in the creation and

maintenance of an investment portfolio. It deals specifically with the security analysis,

portfolio analysis, portfolio selection, portfolio revision and portfolio evaluation. Portfolio

management makes use of analytical techniques of analysis and conceptual theories

regarding rational allocation of funds. Portfolio management is a complex process which

tries to make investment activity more rewarding and less risky.

Before designing a portfolio one will have to know the intention of the investor or the

returns that the investor is expecting from his investment. This will help in adjusting the

amount of risk. This becomes an important point from the point of view of the portfolio

designer because if the investor will be ready to take more risk at the same time he will

also get more returns. This can be more appropriately understood from the figure drawn

below.

R1

Expected ReturnsExpected Returns

R2

Risk less Investment M1 M2

Risk

From the above figure we can see that when the investor is ready to take risk of M1,

he is likely to get expected return of R1, and if the investor is taking the risk of M2, he

will be getting more returns i.e. R2. So we can conclude that risk and returns are

directly related with each other. As one increases the other will also increase in same

of different proportion and same if one decreases the other will also decrease.

PORTFOLIO DESIGN

From the above discussion we can conclude that the investors can be of the

following three types:

1. Investors willing to take minimum risk and at the same time are also expecting

minimum returns.

2. Investors willing to take moderate risk and at the same time are also expecting

moderate returns.

3. Investors willing to take maximum risk and at the same time are also expecting

maximum returns.

Your age will help you determine what a good mix is / portfolio is

Age Portfolio

below 30 80% in stocks or mutual funds 10% in cash10% in fixed income

30 t0 4070% in stocks or mutual funds 10% in cash20% in fixed income

40 to 5060% in stocks or mutual funds 10% in cash 30% in fixed income

50 to 6050% in stocks or mutual funds10% in cash40% in fixed income

above 60 40% in stocks or mutual funds 10% in cash 50% in fixed income

These aren't hard and fast allocations, just guidelines to get you thinking about how

your portfolio should look. Your risk profile will give you more equities or more fixed

income depending on your aggressive or conservative bias. However, it's important to

always have some equities in your portfolio (or equity funds) no matter what your age. If

PORTFOLIO – AGE RELATIONSHIP

inflation roars back, this will be the portion of your investments that protects you from

the damage, not your fixed income.

Also, the fixed income of your portfolio should be diversified. If you buy bonds and

debentures directly or if you invest in FDs, then make sure you have at least five

different maturities to spread out the interest rate risk.

Diversifying in equities and bonds means more than buying a number of positions. Each

position needs to be scrutinized as to how it fits into the stocks or bonds that already are

in your portfolio, and how they might be affected by the same event such as higher

interest rates, lower fuel prices, etc. Put your portfolio together like a puzzle, adding a

piece at a time, each one a little different from the other but achieving a uniform whole

once the portfolio is complete.

INVESTMENT FACTOR

The motive behind our investments is to make money and increase our monetary

wealth. With so many factors involved, investment decision is a complex one. Small

investors often go with their gut feelings when trying to choose among numerous

alternatives to invest. Big investors use various analyzing techniques. Globalization and

the growth of internet have introduced many new opportunities and threats to ponder

upon. When investing, you are committing your assets for sometime, that is why you

need to cover all aspects before making an investment decision.

Expected Return:

The most basic investment decisions revolve around the comparison of expected return

and risk involved. No investor will take on higher risk if there is no chance of equally

higher returns. Investors strive to reach on the best trade-off point between risk and

return which go well with their financial requirements. These expected returns are not

always equal to what an investor actually gets after some time. The possibility that

actual return will not be the same what they expect is called risk.

Risk factor:

There is hardly some form of investment which doesn't involve risk. Government

securities come close to be called risk free; but even they have some risks attached to

them. Risk actually is the balancing factor of the financial markets. Various types of

investment risk exist, such as financial risk, currency risk, inflation risk or capital risk are

the most common one. Different investors react differently to these risks. While majority

of the investors are risk averse, there are some investors who are seeking more risky

ones with expectations of higher yields.

Investor’s Hunch:

Every investor will finish off with a different conclusion although the market, economy

and all statistical facts and figures are same for everyone. This difference comes from

the investor's intuition. Some will start from research; by collecting lots of information

and then analyzing to decide, others start from defining their objectives and then going

for opportunities that suit their needs.

Globalization factor:

Investors have slowly started to realize the advantages of international investments.

Some emerging markets present better returns while other stable markets provide

lesser risks. Investors have often conquered risk by diversification, and an international

market provides more opportunities to achieve portfolio diversification as compared to a

local market. Ignoring global markets for investment is turning your back on a whole

new world of opportunities.

Age Factor:

It will be wrong if I say age is an important factor when it comes to insurance or

investments because age is the most important factor. Every investor has his or her

own strategy, style and risk tolerance. Obviously no one investment will be appropriate

for everyone. Have you ever considered that certain investments may be more or less

suitable for your portfolio based on your age? Below is an overview to help you identify

investment opportunities according to your stage in life.

Risk

When we talk about investments and consider the age factor, it all boils down to risk.

We’ve all heard the old clinch? About greater risk bringing greater rewards. On the other

hand, it can also result in greater loss. So as we define which types of investments are

appropriate at each stage of the human life cycle, we do it within the framework of risk

level involved.

Age18-35

Ah, to be young! Early-life investors have one tremendous weapon against the

downside of risk? Time People in this age group can and should invest is speculative

stocks and other high-risk (and possibly high-reward) investment. The reasoning is that

if the high-risk stocks result in loss, the investor has plenty of time in which to make up

for that loss.

Age 36 - 55

As an investor enters the early-midlife stage, he or she must start building a strong

portfolio base. In order to do so, a widely recommended strategy is to start adding more

growth-oriented stocks to your mix of speculative investments. The percentage of

growth stocks to risky stocks will depend greatly on the individuals comfort with risk as

well as his or her investment history and experience.

Age 56 -65

The later midlife stage naturally produces greater risk intolerance. This age group of

investors should be focused on growth and income investment opportunities more than

high-risk speculative stocks. The strategy here is to protect and grow a solid portfolio.

Investors who have done well in the past and are comfortable with risk may still choose

to engage in speculative opportunities, especially if they have keen instincts.

Age 65 and Up

Investment opportunities that are most appropriate for this age group include income

driven stocks and safe investments that will generate interest that the individual can live

off. Most people spend a lifetime building up a nest egg. Though retirement is seen by

many as the time to finally enjoy the rewards of a lifetime of investment, it is also

important to secure some regular, ongoing income by way of interest and/or dividends.

Diversification

No matter what age group you fall into, you must know that the only way to grow a

portfolio while minimizing risk and volatility is to diversify. Spreading your assets among

various different types of investments will balance your portfolio and minimize downside.

Some of the asset classes you should include are stocks, bonds and short-term

investments. You should also aim to diversify your investments within each asset class.

By doing so, you minimize risk further because you are less likely to take a big hit when

a single investment performs poorly.

Whether you’re dealing with Trinidad and Tobago money, Jamaica bank, or Bahamas

money, merchant banking operations offers a variety of finance services for both

personal and business purposes.

All your investment and insurance needs changes based on what stage of life you are

in. Say your age is 55 years, it means you are nearing retirement and hopefully you will

have provident funds, and lot of other savings which you did throughout your career,

which means you have money but possibility of earning more is kind of less. So it will

not be wise for you to invest in high risk areas whereas for a young guy who has just

started his career there is not much to loose and in fact he has lot more years left to

earn so it might make sense for him to invest in relatively high risk / high returns

investments.

Age and priorities:

Furthermore at the age of 25 your priorities will be like getting married, helping your

parents whereas at 30 it may switch to buying a home, at the age of 35 it maybe your

children education and at around 45 or 50 years priority maybe your children higher

education, or daughter’s marriage or may be supporting children in their ambitions or

you may want to take time for a world tour which you were never able to! So accordingly

your portfolio should change.

You cannot think of children higher education when your age is 45 and your children

already reached point where they need your support for higher education, it means you

should think/plan/act at least 10 years beforehand.

Age and insurance needs:

Also you should know what age is correct for taking life insurance and at what age what

amount sum assured you will need. Let me tell you, when you are young and just

started your career you will need higher amount as sum assured and as you grow older

and kind of well settled you may not need big sum assured amount. This is because if

someone dies in young age most probably the guy may not have much savings it

means the dependents are in trouble and they will need lot of money to survive whereas

if the death happens late we can assume that the person would have made enough

assets and savings and dependents need not worry much at least at the financial side.

Data Analysis and interpretatrion:-

Age of the respondent:-

Age % Of respondent

20-30 25

31-40 36

41-50 27

50 and above 12

Total 100

Income Group of the Respondent

20-30 31-40 41-50 50 and above

Income Group of the Respondent

Income group % of Respondent

Bellow 1 lac 32

1-5 lac 61

5-10 lac 7

10 lac and above -

Fig-5.4

According to survey most of the Respondent income group is above 1 lacks to

5 lacs.

Qualification of the respondents:-

0- 1 32%

1-561%

5-107%

0- 1 1-55-10

Qualification

Qualification Investor (%)

High School 3

Graduate 48

Post Graduate 14

Professional 26

Others 9

Different Investment Avenues:-

High School3%

Graduate48%

Post Graduate14%

Professional 26%

Others9%

High School

Graduate

Post Graduate

Professional

Others

8%

17%

29%

28%

18%

Share market mutual fund Insurance bank Property

Individual preference in the investment avenues

Categories Highly Preferred (%)

Share market 8

Mutual fund 17

Insurance 29

Bank 28

Property 18

Total 100

Analysis:-The survey result shows that individual does not chose equity as highly

preferred investment tool. Only 8% people have preference on other investment tool.

Investment Horizon

Type of investment preferred

Term Investment (%)

SHORT TERM 31

LONG TERM 40

BOTH 29

Total 100

Analysis: The survey result shows that most of the people invest in the market

for long term horizon.

31

40

29

SHORT TERM LONG TERM BOTH

Respondent who have invested in equity market

Invested in the equity market

yes No

19 81

Analysis:- According to survey largely population is untouched with equity

investment only 19% respondent has invested in the equity market.

Respondent first source of awareness

Percentage of Respondent first source of awareness

Medium/ channel Investor (%)

Investor friends and relative 37

Advertisement and hoardings 26

Brokerage firm 16

Banks 21

Analysis:- According to survey most of the people aware about equity market through

the investor friends and relative.

Income invested in equity

Percentage of income invest in equity shares

Percentage of income Percentage of investor

Below 5% 22

5 to 10% 44

10 to 20% 27

20 to 30% 6

22

44

27

6

0

5

10

15

20

25

30

35

40

45

50

Below 5% 5 to 10% 10 to 20% 20 to 30%

Percentage of investor

Analysis :- The survey result shows that most of the people invest in the equity

market 5-10% of income.

Preference of Investment:

Financial Instruments No. Of Investors (50)

Shares 37

Mutual Funds 8

Bonds 4

Derivatives 1

75%

16% 7% 2%

Preference of Investment

Only sharesMutual fundsBondsDerivatives

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.

Awareness of Religare as a Brand.

YES NO

29 21

AWARENESS OF RELIGARE AS A BRAND

43%

57%

YES

NO

Interpretation: This pie chart shows that Religare has a reasonable amount of Brand

awareness in terms of a premier Retail stock broking company. The company to increase

its market share over its competitors should further leverage this brand image.

How often do you trade:

FREQUENCY OF

TRADING

NO. OF INVESTORS

Daily 5

Weekly 13

Monthly 26

Yearly 6

Frequency of Trading

Daily- 9%

Weekly- 27%

Monthly-53%

Yearly-11%

Interpretation: In spite of the huge returns that the share market promises, we see that

there is still a dearth of active traders and investors. This is because of the non –

transparent structure of the Indian share market and the skepticism of the target audience

that is generated by the volatility of the stock market. It requires efficient bureaucratic

intervention on the part of the Government.

Percentage of earnings invested in Share Trading:

% of Earning

Invested

No. of Investors

Up to 10 % 35

Up to 25 % 9

Up to 50 % 4

Above 50 % 2

Percentage of earnings invested in Share trading

Upto 10%--71%

Upto 25%--19%

Upto 50%-- 7%

Above 50%--3%

s

Interpretation: This shows that people invest only upto 10% of their earnings in the

stock market, again reiterating the volatile and non-transparent structure of the Indian

stock market. Hence, effective and efficient steps should be undertaken to woo the

customers to invest more in the lucrative stock market.

SUMMARY OF FINDINGS:

From Correlation test, it is found there exist a positive correlation between

the income percentage on investment and the participation in cash market.

From One Way ANOVA it is found that there is significant difference

between the annual income and the income percentage towards investment.

From the Multiple Response test, it is found that the investors who invest

around 5-10% of their investment mostly considers the market risk(18%) as

the major risk which prevails in the market.

From the Multiple Response test, it is found that the investors whose

investment is around 10% of their income, consider that the affordable

margin amount for investment in Derivatives is up to Rs10000/-.

Most of the aggressive investors are in 21-40 yr. age group. They should be

concentrated as prospective clients.

CONCLUSION

In the current scenario, investing is very important and investing in stock markets

is a major challenge ever for professionals.

The young people should start investing earlier so that they can reap the benefits

of investing in future.

People should keep their eye open and keep updating themselves about various

investment avenues so that they can get safe returns.