CHAPTER

1.1 Introduction of the study

The stock market has been a part of people's lives throughout the twentieth century. Millions of people around the world have money invested in their countries own respective markets. Since the coming of age of online trading, more people have been investing their money in stocks than ever before because of the advantages it offers. Online trading allows people to trade stocks quickly without the help of a broker, letting the investors have more control over their transactions. The competition between companies has helped decrease the cost of making the transactions. In addition to that, ordinary people now have access to information that could only be seen by broke`. Overall, online trading saves time, money and gives power to the investor rather than the broker. The securities can invest in shares, government securities, Derivative products, commodities

In financial markets, stock is the capital raised by a corporation through the issuance and distribution of shares. A person or organization which holds shares of stocks is called a shareholder. The aggregate value of a corporation's issued shares is its market capitalization. When one buys a share of a company he becomes a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides the portfolio with the growth necessary to reach the long-term investment goals. Research studies have proved that the equities have outperformed than most other forms of investments in the long term. Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similar high returns. Equities are high-risk investments. One needs to study them carefully before investing. Since 1990 till date, Indian stock market has returned about 17% to investors on an average in terms of Increase in share prices or capital appreciation annually. Besides that on average stocks have paid 1.5 % dividend annually. Dividend is a percentage of the face value of a share that a company returns to its shareholders from its annual profits. Compared to most other forms of investments, investing in equity shares offers the highest rate of return, if invested over a longer duration. The first company to issue shares of stock was the Dutch East India Company, in 1602. The innovation of joint ownership made a great deal of Europe's economic growth possible following the Middle Ages.STRUCTURE OF THE CAPITAL MARKET

1.2 Need for the study:The need of the study is to describe the techniques and planning in present investment environment. Apart from this, the objective of this study is to keenly understand issues, examines all the essential analysis

and techniques as to how to apply them successfully. It incorporates sections on fundamental analysis in the contexts of various companies in the stock markets.

The purpose of the study is to supply, inform suitable guidance to retail investors. For the purpose of study the volatility in the banking industries stock prices for certain period are considered. For this study the data collected are return and risk of investing an industrial stock. Equity analysis and market price of shares of INFOSYS, TCS, WIPRO, HDFC BANK, ICICI BANK, AXIS BANK are considered for the study.

1.3 Objectives of the study:

To understand what Equity markets are.

To understand the performance of few Indian industry sectors viz. Software & Banking.

To understand the performance of SIX Indian companies of the above two sectors.

To make comparative analysis of inter and intra sectors, basing on past 5 years data (April 1st 2007 to 31st -March 2013). And to analyze short term performance with factors from period September 1st 2012 to 31st January 2013.

To evaluate the investment prospects of these companies.

1.4 Scope of the Study:This study cover introduction to capital market and trading to serve as basic material for capital market operations. However basic fundamentals have been brought out which can be also helpful for the study in large scale studies.

1.5 Research Methodology METHODOLOGY OF THE STUDY

All information related to the topic needs to be carefully scrutinized to avoid the risk of biased analysis. Having once identified which information is relevant and need to be collected, we will have to define how this will be done.

The Method employed in the investigation depends on the purpose and scope of the study.

Research Design:

Research design is some statement or specification of procedures for collecting and analyzing the information required for the solution of some specific problem. Here, the exploratory research is used as investigation and is mainly concerned with determining the trends and returns in Mutual Funds and Bank returns.

Sources of Information:

Data available in marketing research are either primary or secondary. Primary and Secondary Data is included in this study

Method of data collection:-

PRIMARY DATA: The primary data that has been collected through personnel interview with various heads and individual traders in Sharekhan Limited.

SECONDARY DATA: It is the data which has already been collected by someone or an organization for some other purpose or research study .The data for study has been collected from various sources:

Books

Journals

News pares & electronic media

Internet sources

BSE

NSE

1.6 Limitations:

Duration of the project is only 45 days, so not possible to evaluate other sector performance also.

There is a time frame for every company, like not taken historical daily records into consideration.

Analysis based on only correlation to one sector stocks to other stocks and shown impact of financial results impact only and not applied any research.

The information which I am going to mention is completely secondary data.

REVIEW OF LITERATURE

Definition of 'Equity '

A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed.1. A stock or any other security representing an ownership interest.

2. On a company's balance sheet, the amount of the funds contributed by the wners (the stockholders) plus the retained earnings (or losses). Also referred to as shareholders' equity".

3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.

4. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.

5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.

Investopedia explains 'Equity '

The term's meaning depends very much on the context. In finance, in general, you can think of equity as ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity because he or she can readily sell the item for cash. Stocks are equity because they represent ownership in a company.

-www.investopedia.com/terms/e/equityEquity: The portion of a company's assets that the shareholders own, as opposed to what they've borrowed: equal to totalassetsminusliabilities. Also called "owners' equity" or "shareholders' equity".Equity is detailed on thebalance sheet.

"Equity" is also used as an adjective, to describe mutual funds that invest in stocks, rather than bonds.

-http://www.moneychimp.com/glossary/equity.htm

Inaccountingandfinance,equityis the residual claim or interest of the most junior class of investors inassets, after allliabilitiesare paid. If liability exceeds assets,negative equityexists. In an accounting context,Shareholders' equity(or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individualshareholdersofcommonorpreferred stock.

At the start of abusiness,ownersput some funding into the business to financeoperations. This creates a liability on the business in the shape ofcapitalas the business is a separate entity from its owners. Businesses can be considered, foraccountingpurposes, sums ofliabilitiesandassets; this is theaccounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business.

This definition is helpful in understanding theliquidationprocess in case ofbankruptcy. At first, all the securedcreditorsare paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last orresidual claimagainst assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital.

- en.wikipedia.org/wiki/Equity_(finance)Infinancial accounting, owner's equity consists of thenet assetsof an entity. Net assets is the difference between the totalassetsof the entity and all itsliabilities.[1]Equity appears on thebalance sheet/statement of financial position, one of the four primaryfinancial statements.

The assets of an entity includes both tangible and intangible items, such as brand names and reputation or goodwill. The types of accounts and their description that comprise the owner's equity depend on the nature of the entity and may include:

Share capital(common stock)

Preferred stock Capital surplus Retained earnings Treasury stock Stock options --en.wikipedia.org/wiki/Equity_(finance)

The concept of capital market is in a way 130 years old. Capital market was known as share bazaar it was also treated as a satta bazaar starting of capital market concept in India took place with the birth of Bombay Stock Exchange.

A securities contract (Regulation) Act of 1956 of India was first major step to recognize capital market. Bombay Stock Exchange got first recognition in 1956 under this act.

Bombay Stock Exchange, which was the major stock exchange, in way had monopoly in the Indian capital market till the birth of National Stock Exchange. Bombay Stock Exchange celebrated its 125th jubilee year in the 2000. The capital market, the stock exchange, the Equity concept was baby till 1960. And the concept of mutual fund was introduced by the government with the formation of Unit Trust of India in 1963-64.

Capital market in India is a new development compared to the western world. India was known as under developed country from the view point of economic and industrial growth. After getting freedom in 1947, India started thinking about planned development in 1948. The first industrial policy development statement was made on April 6th 1948.

The concept of capital market is directly linked with industrial development of country. It is also treated as barometer of economic growth. Industrial development started in India in 19th century, there were very few entrepreneurs known as Tatas, Birlas, etc. who started industries in their own country i.e. India. In the 20th century first quarter, this group started big industries in major metropolitan cities.

Stock exchanges have a very important function to fulfill in the countrys economy. Its main function is to liquefy capital by enabling a person who has invested money in.

The stock exchange is really an essential pillar of the private sector corporate economy.

The stock exchange provides a market place for purchase and sale of securities i.e. shares, bonds, debentures, etc

The stock exchange provides the linkage between the saving in the house hold sector and the investment in corporate economy.

By providing a market quotation of the prices of shares and bonds a sort of collective judgment simultaneously reached by many buyers and sellers in the market. The stock exchanges serve the role of barometer. Exchanges serve the role of barometer, not only the state of health of individual companies, but also of the nations economy as a whole.

Another important function that the stock exchange in India discharge is of providing market for gilt-edged securities i.e. securities issued by the government sectors, municipalities, improvement trust, and other public bodies.

There are 22 stock exchange in India, the first being the Bombay Stock Exchange (BSE),which began formal trading in 1875, making it one of the oldest in Asia. Over the last few years, there has been a rapid change in the Indian securities market, especially in the secondary market. Advanced technology and online-based transactions have modernized the stock exchanges. In terms of the number of companies listed and total market capitalization, the Indian equity market is considered large relative to the countrys stage of economic development. The number of listed companies increased from 5,968 in March 1990 to about 10,000 by May 1998 and market capitalization has grown almost 11 times during the same period. The debt market, however, is almost nonexistent in India even though there has been a large volume of Government bonds traded. Banks and financial institutions have been holding a substantial part of these bonds as statutory liquidity requirement. The portfolio restrictions on financial institutions statutory liquidity requirement are still in place.

A primary auction market for Government securities has been created and a primary dealer system was introduced in 1995. There are six authorized primary dealers. Currently, there are 31 mutual funds, out of which 21 are in the private sector. Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks were allowed to enter this business, breaking the monopoly of the Unit Trust of India (UTI), which maintains a dominant position. Before 1992, many factors obstructed the expansion of equity trading. Fresh capital issues were controlled through the Capital Issues Control Act. Trading practices were not transparent, and there was a large amount of insider trading. Recognizing the importance of increasing investor protection, several measures were enacted to improve the fairness of the capital market. The Securities and Exchange Board of India (SEBI) was established in 1988. Despite the rules it set, problems continued to exist, including those relating to disclosure criteria, lack of broker capital adequacy, and poor regulation of merchant bankers and underwriters.

There have been significant reforms in the regulation of the securities market since 1992 in conjunction with overall economic and financial reforms.

In 1992, the SEBI Act was enacted giving SEBI statutory as an apex regulatory body. And a series of reforms was introduced to improve investor protection.

Automation of stock trading, integration of national markets, and efficiency of market operations. India has seen a tremendous change in the secondary market for equity. Its equity market will most likely be comparable with the worlds most advanced secondary markets within a year or two. The key ingredients that underlie market quality in Indias equity market are:

Exchange based on open electronic limit order book;

Nationwide integrated market with a large number of informed traders and fluency of short or long positions; and

No counter party risk.

1 INDUSTRY PROFILE

NATIONAL STOCK EXCHANGEThe National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most advanced exchange with 1016 companies listed and 726 trading members. Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the incorporation of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999).

The NSE is owned by the group of leading financial institutions such as Indian Bank or Life Insurance Corporation of India. However, in the totally de-mutualised Exchange, the ownership as well as the management does not have a right to trade on the Exchange. Only qualified traders can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a single platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market.

Each segment has experienced a significant growth throughout a few years of their launch. While the WDM segment has accumulated the annual growth of over 36% since its opening in 1994, the CM segment has increased by even 61% during the same period. The National Stock Exchange of India has stringent requirements and criteria for the companies listed on the Exchange. Minimum capital requirements, project appraisal, and company's track record are just a few of the criteria. In addition, listed companies pay variable listing fees based on their corporate capital size.

The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enable up to 6 million trades to be operated daily on the NSE trading platform.

NSE Nifty:The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for large companies on the National Stock Exchange of India. S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later on, it came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.

NSE other indices: S&P CNX Nifty

CNX Nifty Junior

CNX 100

S&P CNX 500

CNX Midcap

S&P CNX Defty

CNX Midcap 200

BOMBAY STOCK EXCHANGE:The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600 Indian companies listed with the stock exchange, and has a significant trading volume. As of October2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 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.

History:An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as the Bombay Stock Exchange (BSE).In January 1899, the stock exchange moved into the Brokers Hall after it was inaugurated by James M MacLean. After the First World War, the BSE was shifted to an old building near the Town Hall. In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts (Regulation) Act.1995, when it was replaced by an electronic (eTrading) system named BOLT, or the BSE Online Trading system. In 2005, the status of the exchange changed from an Association of Persons (AoP) to a full fledged corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and its name was changed to The Bombay Stock Exchange Limited).

BSE Sensex:The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scrips, with the base April 1979 = 100. The set of companies which make up the index has been changed only a few times in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing a sample of large, well-established and financially sound companies. The base year of SENSEX is 1978-79. The index is widely reported in both domestic and international markets through print as well as electronic media. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. From September 2003, the SENSEX is calculated on a free-float market capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is a widely followed index construction methodology on which majority of global equity benchmarks are based.

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. More recently, the bourses in India witnessed a similar frenzy in the 'TMT' sectors. The SENSEX captured all these happenings in the most judicial manner. One can identify the booms and bust of the Indian equity market through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news wire agencies.

SENSEX calculation: SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. (The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company). An index of a set of combined variables (such as price and number of shares) is commonly referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. It is much easier to graph a chart based on indexed values than one based on actual values. The base period of SENSEX is 1978-79. The actual total market value of the stocks in the Index during the base period has been set equal to an indexed value of 100. This is often indicated by the notation 1978-79=100. The formula used to calculate the Index is fairly straightforward. However, the calculation of the adjustments to the Index (commonly called Index maintenance) is more complex.The calculation of SENSEX involves dividing the total market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index maintenance adjustments. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.BSE - other Indices:Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock indices as well:

BSE 500

BSE PSU

BSE MIDCAP

BSE SMLCAP

BSE BANKEX

COMPANY PROFILE

ABOUT SHAREKHAN LIMITED:

Sharekhan Limited is one of the fastest growing financial services providers with a focus on equities, derivatives and commodities brokerage execution on the National Stock Exchange of India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). Sharekhan provides trade execution services through multiple channels - an Internet platform, telephone and retail outlets and is present in 280 cities through a network of 704 locations. The company was awarded the 2006 Most Preferred Stock Broking Brand by Awwaz Consumer Vote.

ORIGIN: Sharekhan traces its lineage to SSKI, an organization with more than decades of trust and credibility in the stock market.

Pioneers of online trading in India- Sharekhan.com was launched in 2000 and is now the second most visited broking site in India.

Has one of the largest networks of Share shops in the country.

SHAREHOLDING PATTERN:

SHAREHOLDERSHOLDINGS

CITI Venture Capital and other Private Equity Firm81%

IDFC9%

Employees10%

MANAGEMENT TEAM CONSISTS OF:NAMEPOST

Tarun ShahChief Executive Officer

Mr. Pathik GandotraHead Of Research

Mr. Rishi KohliVice President Of Equity Derivative

Jaideep AroraDirector- Products And Technology

Shankar VailayaDirector- Operation

Sharekhan Limited offers blend of tradition and technology like Share shops, dial-n-trade and online trading- where there is choice of three trading interfaces which are speed trade for active trader, web based classic interface for investor, web based applet- fast trade for investor. Sharekhan Limited was formerly known as SSKI Investor Services Private Limited. The company is based in Mumbai, India and its address is- A-206 Phoenix House, 2nd Floor

Senapati Bapat Marg, Lower Parel

Mumbai, 400 013. India.

Phone: 91 22 24982000

Fax: 91 22 24982626

www.sharekhan.com ADVANCED TECHNOLOGY USED BY SHAREKHAN:

Sharekhan has selected Aspect EnsemblePro from the Aspect Software Unified IP Contact Center product line, a unified contact centre solution delivering advanced multichannel contact capabilities, because it provided the best total value over other solutions evaluated. It enabled Sharekhan to meet customer service needs for inbound call handling, voice self service, predictive outbound dialing, call blending, call monitoring and recording, and creating outbound marketing campaigns, among other capabilities. This helps them to

Increased agent efficiency and productivity.

Enabled company to execute proactive customer service calls and expand services offered to customers.

Enhanced call monitoring for improved service quality

Financial services are a highly competitive and volume-driven industry which demands high standards of customer service, effective consultation and quick deliverables. This is something Sharekhan Limited, a financial services provider based in India, understands. The company offers several user-friendly services for customers to manage their stock portfolios, including online capabilities linked to an information database to help customers confidently invest, and inbound customer services using voice self-service technology and customer service agents handling telephone orders from clients.

With a customer base of more than 500000, and a employee of 3100 Sharekhan continues to grow at a fast pace. Customer satisfaction is a top priority in Sharekhans agenda.

Its primary objective

To help and support its customers in managing their portfolio in the best possible manner through quality advice, innovative product and superior service.Scheme which are provided by Sharekhan cover almost every segment of the customer-

SCHEMEINVESTOR

First StepNew Comer

ClassicTrade Occasionally

Speed TradeDay Trader

Platinum CircleHigh Net Worth Individuals

Share khan is the retail broking arm of SSKI, securities pvt ltd. SSKI owns 56% in share khan, balance ownership is HSBC, first caryle, and Intel pacific.

Focused on providing equity solutions to every segment.