financial servises provided by anand rathi
TRANSCRIPT
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TRAINING REPORT
ON
“FINANCIAL SERVICES PROVIDED BY ANAND RATHI”
Submitted to
MAHARSHI DAYANAND UNIVERSITY, ROHTAK In partial fulfillment of the requirements
For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
(INDUSTRY INTEGRATED)
(IV Semester) Submitted by
Name: Varsha Wahane
Regn.No: 1073901755
Guru Gram Business School
ELC CODE: 151012055 Unnati Park Besa, Nagpur-440008
August 2012
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CERTIFICATE
This is to certify that VARSHA WAHANE, a student
of Maharishi Dayanand University, Rohtak, has
prepared his training report entitled “FINANCIAL
SERVICES PROVIDED BY ANAND RATHI”
“ANAND RATHI FINANCIAL SERVICES,
NAGPUR,” under my guidance. He has fulfilled all
requirements leading to award of the degree of
MBA (industry integrated). This report is the record
of bonafide training undertaken by him and no part
of it has been submitted to any other University or
Educational Institution for award of any other
degree/diploma/fellowship or similar titles or prizes.
I wish her all success in life.
PROF AJAY PATOLE
CO-ORDINATOR (MBA)
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DECLARATION
I hereby declare that the Training Report conducted at
ANAND RATHI FINANCIAL SERVICES
Under the guidance of
Prof. Ajay Patole
Submitted in Partial fulfillment of the requirements for the
Degree of
MASTER OF BUSINESS ADMINISTRATION
(Industry Integrated)
TO
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
is my original work and the same has not been submitted for the
award of any other Degree/Diploma/Fellowship or other similar
titles or prizes.
Place:-Nagpur
Date-___________
Regn.No: 1073901755
Roll no. : 1090210509
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CERTIFICATE
This is to certify that Miss Varsha Wahane who is
pursuing MBA (Industry Integrated) course of
Maharshi Dayanand University, Rohtak, at Guru
gram Business School, Nagpur has undergone
management training at our organization from
01-08-2011 to PRESENT.
His performance during the period was found to Be
very good.
We wish her success future endeavors.
(Assistant Branch Manager)
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ACKNOWLEGEMENT
Completing a task is never a one-man effort. It is
often the result of valuable contribution of
individuals in direct and indirect manner that helps
in achieving an objective.
It is the indeed a great pleasure and movement of
immense satisfaction for me to express my profound
gratitude towards my guide Prof. AJAY PATOLE of
GURUGRAM BUSINESS SCHOOL, BESA ROAD, NAGPUR , I
take pride to thank him for his able guidance and
time to time attention that was bestowed on me right
for the inception to the successful completion of the
project.
Also, my heartful thanks to all respondents and
friend who directly and indirectly helped me
completing this project report.
I am also thankful to all such people, the name of
who haven’t appeared hears but without their help
this project wouldn't have been completed.
Miss. Varsha Wahane
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CONTENTS
CHAPTER: 1
INTRODUCTION………………………………..1
1.1 General introduction about the sector………………….……
1.2 Industry
Profile………………………………………….…..
a) Origin and
development………………………………………
b) Growth and present status of the industry……………………
c) Future of the
industry…………………………………………
CHAPTER: 2 PROFILE OF THE
ORGANISATION……….....
2.1 Origin of the
organization………………………………………
2.2 Growth and development of the organization………………….
2.3 Present status of the
organization………………………………
2.4 Functional department of the
organization……………………..
2.5Organisational structure and chart………………………………
2.6 Service profile of the organization/competitors……………...
2.7 Market profile of the organization……………………………...
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CHAPTER: 3 DISCUSSIONS ON
TRAINING………………...
3.1 Students work profile…………………………………………
3.2 Key
learning ………………………………………………….
CHAPTER 4: STUDY OF SELECTED RESEARCH
PROBLEM...............
4.1 Statement of research
problem……………………………………
4.2 Statement of research objective…..………………………………
4.3 Research design and
methodology……………………………………
CHAPTER 5:
ANALYSIS………………………..………………...
5.1 Analysis of
data……………..……………………………………
5.2 Summary of Findings………..…..……………….
CHAPTER 6: SUMMARY AND
CONCLUSION..………………...
6.1 Summary of Learning
Experience…………………………………
6.2 Conclusion and Recommendations………….
APPENDICES
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CHAPTER 1
INTRODUCTION
1.1 General introduction about the sector.
1.2 Industry Profile
1.3 Origin and development.
1.4 Growth and present status of the industry
1.5 Future of the industry.
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CHAPTER 1
INTRODUCTION
ABOUT THE SERVICE SECTOR :
India stands out from other emerging economies because its growth has been led by the
service sector rather than labor-intensive manufactures. This column summarizes
recent research showing that India has a long history of strength in services, and its
service-led development may play to historical strengths rather than hindering its
progress.
India’s recent spectacular rate of economic growth, combined with the sheer size of its
population, means that it is beginning to take its place as one of the key players in the
global economy. One way in which India stands out from other Asian economies is in
the better performance of its service sector. Whereas other emerging Asian economies,
such as China, have experienced growth led by dynamic manufacturing performance,
India’s growth has been led by sectors such as business services.
This is sometimes used to portray India’s performance as fragile, focusing attention on
despite current economic slowdown in European countries and financial upheaval in
Greece, on the back of huge debt by Greece government, India scored well in its
domestic market in terms of service sector.
Only in services has there been an improvement in comparative India/UK labor
productivity, from around 15% in the late nineteenth century to around 30% by the end
of the twentieth century. Services have thus played a positive role in India’s
productivity performance throughout the period, limiting Indian relative decline before
1870 and leading the process of catching-up from the 1970s. The service sector
productivity growth is not confined to modern services such as finance – it is also
visible in trade and transport..
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INDUSTRY PROFILE
FINANCIAL SECTOR The Indian financial sector is in for an overhaul. Financial sector reforms have long
been regarded as an integral part of the overall policy reforms in India. India has
recognized that these reforms are imperative for increasing the efficiency of resource
mobilization and allocation in the real economy and for the overall macroeconomic
stability. The reforms have been driven by a thrust towards liberalization and several
initiatives such as liberalization in the interest rate and reserve requirements have been
taken on this front. At the same time,
The government has emphasized on stronger regulation aimed at strengthening
prudential norms, transparency and supervision to mitigate the prospects of systemic
risks. Today the Indian financial structure is inherently strong, functionally diverse,
efficient and globally competitive. During the last fifteen years, the Indian financial
system has been incrementally deregulated and exposed to international financial
markets along with the introduction of new instruments and products. Banking Sector
The banking sector is the most dominant sector of the financial system in India.
Significant progress has been made with respect to the banking sector in the post
liberalization period. The financial health of the commercial banks has improved
manifolds with respect to capital adequacy, profitability, and asset quality and risk
management. Further, deregulation has opened
New opportunities for banks to increase revenue by diversifying into investment
banking, insurance, credit cards, depository services, mortgage, securitization, etc.
Liberalization has created a more competitive environment in the banking sector. The
competition has increased within the banking sector (with the emergence of new
private banks and foreign banks) as well as from other segments of the financial sector
such as mutual funds, Non Banking Finance Companies, post offices and capital
markets.
Capital Market:
India has a long tradition of functioning capital markets. The Bombay stock exchange
is over a hundred years old and the volume of activity has increased in the recent years.
The process of reform of capital markets started in 1992 and aimed at removing direct
government control and replacing it by a regulatory framework based on transparency
and disclosure. The first step was taken in 1992 when SEBI was elevated to a
full-fledged capital market regulator. An important policy initiative in 1993 was the
opening of capital markets for foreign institutional investors and allowing Indian
companies to raise capital abroad. FII registrations
In the country have gone up significantly over the years. The number of registered FIIs
has
Gone up significantly. The FIIs have been rewarded well by attractive valuations and
increasing returns. The depository and share dematerialization systems have been
introduced to enhance the efficiency of the transaction cycle.
A number of significant reforms have been implemented in the spot equity and related
exchange traded derivatives markets since the early 1990s. For instance, spot prices are
mostly market-determined, trading volumes in the derivatives market exceed those in
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spot markets and market practices such as speed of settlement and dematerialization are
close to international best practices.
Insurance Sector:
There exists huge scope of investment in the insurance sector in India. India has an
enormous middle-class that can afford to buy life, health and disability and pension
plan products. Further, insurance is one of the most important taxes saving instrument
in the country. Insurance sector has been opened up for competition from Indian private
insurance companies with the enactment of Insurance Regulatory and Development
Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance
Regulatory and Development Authority
(IRDA) was established on 19th April 2000 to protect the interests of holder of
insurance policy and to regulate, promote and ensure orderly growth of the insurance
industry. IRDA Act 1999 paved the way for the entry of private players into the
insurance market, which was hitherto the exclusive privilege of public sector insurance
companies/ corporations. Under the new dispensation Indian insurance companies in
private sector were permitted to operate in India on the fulfillment of certain
prerequisites. A large number of public and private players are competing today in both
life and general insurance segments. The FDI cap/ Equity in the insurance sector is 26
percent under the automatic route subject to licensing by the insurance regulatory and
development authority.
Some of the major private players in the sector are:
In Life insurance Sector:
• Bajaj Allianz Life Insurance Corporation
• Birla Sun Life Insurance Co. Ltd. (BSLI)
• HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)
• ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)
• ING Vysya Life Insurance Co. Pvt. Ltd. (ING VYSYA)
• Max New York Life Insurance Co. Ltd. (MNYL)
• MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
• Kotak Mahindra Old Mutual Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. (SBI
LIFE)
• TATA AIG Life Insurance Co. Ltd. (TATA AIG)
• AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)
• Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)
• Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
• Shriram Life Insurance Co. Ltd
In General Insurance sector:
• Bajaj Allianz General Insurance Co. Ltd. (BAJAJ ALLIANZ)
• ICICI Lombard General Insurance Co. Ltd. (ICICI LOMBARD)
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• IFFCO Tokyo General Insurance Co. Ltd. (IFFCO TOKIO)
• Reliance General Insurance Co. Ltd. (RELIANCE)
• Royal Sundaram Alliance Insurance Co. Ltd.
• TATA AIG General Insurance Co. Ltd. (TATA AIG)
• Cholamandalam MS General Insurance Co. Ltd.
• HDFC Chubb General Insurance Co. Ltd. (HDFC CHUBB)
Venture Capital
India is prime target for venture capital and private equity today, owing to various
factors such as fast growing knowledge based industries, favorable investment
opportunities, cost competitive workforce, booming stock markets and supportive
regulatory environment among others. The sectors where the country attracts venture
capital are IT and ITES, software products, banking, PSU disinvestments,
entertainment and media, biotechnology, pharmaceuticals, contract manufacturing and
retail. An offshore venture capital company may contribute up to 100 percent of the
capital of a domestic venture capital fund and may also set up a domestic asset
management company to manage the fund. Venture capital funds (VCFs) and venture
capital companies (VCC) are permitted up to 40 percent of the paid up corpus of
domestic unlisted companies. This ceiling would be subject to relevant equity
investment limit in force in relation to areas reserved for SSI. Investment in a single
company by a VCF/VCC shall not exceed 5 percent of the paid up corpus of a domestic
VCF/VCC. The automatic route is not available.
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GROWTH AND PRESENT STATUS OF THE INDUSTRY
1. The National Statistical Commission (Chairman: Dr. C. Rangarajan) set up by the
Government of India, constituted various sub-groups and the sub-group on External
and Financial Sector Statistics was one of them. This sub-group decided in turn to set
up five committees, viz., i) Trade in Services, ii) E-Commerce and its regulatory
mechanism, iii) Insurance Sector Statistics, iv) Informal Financial Sector Statistics and
v) Fiscal Sector Statistics, with officials from Government, RBI, and academics as
members for an expert analysis of the statistical issues.
2. In pursuance of the above, the Reserve Bank of India had set up the Committee on
Informal Financial Sector Statistics with Prof. P. Venkataramiah as Chairman. The
main objective of the Committee was to critically examine the current status of
statistics on the informal financial sector and recommend a statistical system for
instituting/improving collection of statistics on the sector.
3. The terms of reference of the Committee were as under:
i) To assess the currently available sources of information in the informal
sector;
ii) To assess the current systems by which information is being identified and
collected in the informal sector both on a regular as well as ad-hoc basis;
iii) To assess methods by which the National Accounts Statistics incorporate
data relating to informal sector;
iv) To obtain information about other country experiences to assess the data
gaps in our system;
v) To evolve a statistical system for collection of regular or periodic and reliable
data on the informal sector.
4. The Committee deliberated on two interrelated issues: (i) the definition of
Informal Financial Sector Statistics and (ii) the type of institutions to be covered in this
sector. Although there is no accurate definition of ‘informal sector’, the UN System of
National Accounts (SNA) had broadly characterized the informal sector as consisting
of units engaged in production of goods and services with the primary objective of
generating employment and incomes to the persons concerned.
5. Broadly, the Committee identified two purposes for which data are to be collected
on various aspects of Informal Financial Sector, viz., (i) to measure the extent of
informal credit and to understand the dynamics of informal financial markets and (ii) to
facilitate generation of inputs for the compilation of National Accounts.
6. For the purpose of identifying the informal financial sector enterprise, the
Committee adopted the criterion of ‘incorporation’ as a guiding factor. That is, those
that are so ‘incorporated’ constitute the formal financial sector and those that are not so
incorporated constitute the informal financial sector.
7. As per the terms of reference given to the Committee, they deliberated on the
status of availability of data in respect of two components, viz., (a) that part of the
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formal financial sector consisting of incorporated enterprises for which complete data
are not collected in the existing statistical system taking note on the institutions covered
by the Sub-Group on External and Financial Sector Statistics and (b) the informal
financial sector, consisting of ‘unincorporated financial enterprises’, and made
recommendations for instituting/ improving collection of statistics on the two
components.
8. Before assessing the current status of the availability of data and making
recommendations for collection of data from informal financial sector, the Committee
made an overview of the studies undertaken in India on Informal sector (Chapter III)
and also on the international practices followed on concepts, methods of collection, etc.
(Chapter VI); and presented in its report different concepts followed internationally.
FUTURE OF THE INDUSTRY
(a) Formal Financial Sector
Under formal financial sector, major data gaps were observed in respect of Non-
Banking Financial Companies (NBFCs) and capital market related institutions like the
Securities & Exchange Board of India (SEBI), the National Stock Exchange (NSE), the
Discount and Finance House of India (DFHI), etc.
10. The Non-Banking Financial Companies, a segment of the formal financial sector,
covers companies engaged in activities like Equipment Leasing, Hire Purchase
Finance, Loans, Investments, Mutual Benefit Finances (Nidhis), Miscellaneous
Non-banking (Chit funds), Housing Finance and Residuary Non-banking.
11. Studies on Financial & Investment Companies published annually by RBI in its
monthly Bulletin form one source of data. The source provides the statistics on
liabilities and assets, income, expenditure and appropriation accounts based on a
sample of about 700 companies belonging to different categories of NBFCs stated
above. These data relate to annual accounts and are available with a lag of one to one
and half years. These data are used to obtain the estimates of saving and investment of
NBFCs and these are worked out for the entire segment of the NBFCs sector, through
blowing-up procedure, based on the coverage of sample in the population of
companies, in terms of paid-up capital.
12. The second source of data is the survey on ‘Growth of deposits with non-banking
companies’ conducted by RBI. The survey results are also published annually. The
survey collects data on public deposits accepted by them, exempted deposits, net
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owned funds and other borrowings, from the above category of NBFCs. A few
additional details are collected from 1997-98 onwards. These data are utilized to derive
the estimates of financial saving of households in the form of deposits with
non-banking financial companies. According to the survey for March 1999, total public
deposits held with 1547 NBFCs amounted to Rs.20, 429 crore as at the end of March
1999 while their total assets stood at Rs.47, 048 crore.
13. According to the Department of Company Affairs (DCA), there were 65,382
non-banking financial companies as on March 31, 1999. The Reserve Bank made the
registration of companies with it compulsory for all non-banking financial companies,
in January 1997. As many as 37,274 NBFCs conducting financial business applied for
Certificate of Registration (CoR) with RBI as on June 2000. Of these, 14,986 NBFCs
were rejected for issue of CoR while the remaining was either issued the CoR or at
different stages of scrutiny for registration with RBI.
The Reserve Bank had set out certain norms for registration, such as net owned funds of
Rs.25 lakh as on January 9, 1997, which had been revised upwards to Rs.2 crore
effective from April 21, 1999 for new applicants. The companies, which comply with
these norms, are registered with RBI with provision to accept public deposits or to
function as finance companies without accepting deposits. The companies, which do
not comply with the prescription within a stipulated period, including the extension
period, have to close down their business activity. This category of companies is
referred to as “rejected” companies.
14. Besides, many companies have been exempted from registration with RBI, which
are: (i) engaged in micro-financing activity, (ii) not accepting public deposits, (iii)
licensed under Section 25 of the Companies Act and (iv) mutual benefit companies
having net owned funds of Rs.10 lakh. Thus, these companies conduct the financial
activity without CoR of RBI.
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CHAPTER 2
Profile OF THE ORGANISATION
2.1 Origin of the organization
2.2 Growth and development of the organization
2.3 Present status of the organization.
2.4 Functional department of the organization
2.5 Organizational structure and chart.
2.6 Service profile of the organization/competitors.
2.7 Market profile of the organization.
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CHAPTER: 2
PROFILE OF THE ORGANISATION Anand Rathi is a leading full service investment bank providing a wide range of
financial services to institutions, corporations, wealthy families and
individuals. Founded in 1994 by Mr. Anand Rathi and Mr. Pradeep Gupta, the
group employees close to 7,000 professionals across India and its international
offices. Citigroup Venture Capital currently holds 20% of the group’s equity.
VISION:-
“To Provide Best Value for Money to Investors
Through Innovative Products,
Trading /Investment Strategies
State of the Art Technology And
Personalized Service.”
BUSINESS PHILOSOPHY:-
“Ethical Practices & Transparency In All Our Dealings
Customer Interest above Our Own
Always Deliver What We Promise
Effective Cost Management.”
To be a shining example as a leader in innovation, and the first choice for clients &
employees.
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About Anand Rathi:
Mr. Anand Rathi - Group Chairman
Chartered Accountant
Past President, BSE
Held several Senior Management positions with one of India's largest industrial groups
Anand Rathi (AR) set up in 1994, is one of India’s fastest growing full-service
securities firm with a presence in more than 350 locations across India and has offices
in Dubai & Bangkok. AR provides wealth management services, investment banking,
brokerage & distribution services in the areas of equities, commodities, mutual funds
and insurance. The group caters to the financial needs of diversified group of clients,
which include the well-reputed Corporate Groups, Institutions, Foreign Investors,
Individuals as well as wealthy families and was recently ranked by an Asia Money
2006 poll amongst South Asia’s top 5 wealth managers for the ultra-rich.
The firm's philosophy is entirely client centric, with a clear focus on providing long
term value addition to clients, while maintaining the highest standards of excellence,
ethics and professionalism. The entire firm activities are divided across distinct client
groups: Individuals, Private Clients, Corporate and Institutions. Milestones
1994: Started activities in consulting and Institutional equity sales with staff of 15
1995: Set up a research desk and empanelled with major institutional investors
1997: Introduced investment banking businesses
Retail brokerage services launched
1999: Lead managed first IPO and executed first M & A deal
2001: Initiated Wealth Management Services
2002: Retail business expansion recommences with ownership model
2003: Wealth Management assets cross Rs1500 crores
Insurance broking launched
Launch of Wealth Management services in Dubai
Retail Branch network exceeds 50
2004: Commodities brokerage and real estate services introduced
Wealth Management assets cross Rs3000crores
Institutional equities business relaunched and senior research team put in place
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Retail Branch network expands across 100 locations within India
2005: Real Estate Private Equity Fund Launched
Retail Branch network expands across 200 locations within India
2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity
Exchange (DGCX)
Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money
2006 poll
Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the
High Net worth Individuals (HNI) Category
Ranked 9th in the Retail Category having more than 5% market share
Completes its presence in all States across the country with offices at 300+ locations
within India
2007: Citigroup Venture Capital International picks up 19.9% equity stake.
Retail customer base crosses 200 thousand
Establishes presence in over 450 locations.
Services provided by Anand Rathi to customers
1. Mr. Anand Rathi - Group Chairman, Chartered Accountant, Past President, BSE; Held several
Senior Management positions with one of India's largest industrial groups.
2. Mr. Pradeep Gupta - Vice Chairman; Plus 17 years of experience in Financial Services.
3. Mr. Amit Rathi - Managing Director; Chartered Accountant & MBA; Plus 11 years of experience
in Financial Service.
Equity &Derivatives Brokerage:
Anand Rathi provides end-to-end equity solutions to institutional and individual
investors. Consistent delivery of high quality advice on individual stocks, sector trends
and investment strategy has established a competent and reliable research unit across
the country.
Clients can trade through online on BSE and NSE for both equities and derivatives.
They are supported by dedicated sales & trading teams in trading desks across the
country. Research and investment ideas can be accessed by clients either through their
designated dealers, email, web or SMS.
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Mutual Funds:
AR is one of India's top mutual fund distribution houses. Their success lies in their
philosophy of providing consistently superior, independent and unbiased advice to their
clients backed by in-depth research. They firmly believe in the importance of selecting
appropriate asset allocations based on the client's risk profile.
AR have a dedicated mutual fund research cell for mutual funds that consistently
churns out superior investment ideas, picking best performing funds across asset
classes and providing insights into performances of select funds.
Depository Services:
AR Depository Services provides with a secure and convenient way for holding your
securities on both CDSL and NSDL.
AR depository services include settlement, clearing and custody of securities,
registration of shares and dematerialization. Also offer daily updated internet access to
holding statement and transaction summary.
Commodities:
AR commodities broking services include online futures trading through NCDEX and
MCX and depository services through CDSL. Commodities broking is supported by a
dedicated research cell that provides both technical as well as fundamental research.
Our research covers a broad range of traded commodities including precious and base
metals, Oils and Oilseeds, agri-commodities such as wheat, chana, guar, guar gum and
spices such as sugar, jeera and cotton.
In addition to transaction execution, we provide our clients customized advice on
hedging strategies, investment ideas and arbitrage opportunities.
Insurance Broking:
As an insurance broker, AR provide to his clients comprehensive risk management
techniques, both within the business as well as on the personal front. Risk management
includes identification, measurement and assessment of the risk and handling of the
risk, of which insurance is an integral part. The firm deals with both life insurance and
general insurance products across all insurance companies.
Our services :
Risk Management
Due diligence and research on policies available
Recommendation on a comprehensive insurance cover based on clients needs
Maintain proper records of client policies
Assist client in paying premiums
Continuous monitoring of client account
Assist client in claim negotiation and settlement
IPO’s:
AR is a leading primary market distributor across the country. Our strong performance
in IPOs has been a result of our vast experience in the Primary Market, a wide network
of branches across India, strong distribution capabilities and a dedicated research
team. Our IPO research team provides clients with in-depth overviews of forthcoming
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IPOs as well as investment recommendations. Online filling of forms is also available.
Major Departments
Equity
Commodity
Life Insurance
General Insurance
Mutual Fund
Depository
Internet Broking
Information Technology
Client Acquisition
Finance
Compliance
Settlement
Accounts
Operations
HR/Administration
Clients of Anand Rathi
Corporate and Institutional treasuries need ever more sophisticated advice that is
backed by serious and credible research. AR IWM provides its institutional clients
integrated wealth management solutions across global markets, which are backed
by proprietary global economic & investment research. We understand that your
needs could range from finding short-term surplus management strategies to higher
yielding and long term investments. The IWM team brings together the
highly-rated AR research across fixed income, currencies and equities markets to
provide investment solutions that meet your complex needs - from simple
money-market mutual funds to complex arbitrage strategy ACC.
Bayer
Century Textiles
Clariant
CRISIL
Crompton Greaves
Dabur
Datamatics
GE Shipping
Godrej
Good lass Nerolac
Grasim
Gujarat Abuja Cements
Gujarat Pipavav Port
Heinz India
Hindalco
Hindustan Lever
H&R Johnson
IDFC
Indian Rayon
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2.2 GROWTH AND DEVELOPMENT OF THE ORGANISATION
Jindal Group
Larsen & Toubro
Mastek
Mahindra & Mahindra
Raymonds
Sterlite Group
Syngenta
Tata Iron & Steel
Trent
VSNL
Wartsila
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2.3 PRESENT STATUS OF THE ORGANISATION
Client Testimony
We have been ranked thrice in a row as the #1 Private Bank - Domestic and #2 Private
Bank - Overall BY OUR CLIENTS in an international Private Banking Poll (2009,
2010 & 2011) conducted by the Asia money publication. Asia money Polls is a unique
survey run by Asia's regional financial publication that surveys the end-user i.e. our
clients. It is the leading and definitive industry survey in the region. We believe that this
honor would not have come our way without the goodwill, support and patronage of our
clients and the trust they placed in us and our advisory.
Client-centric Ethos Our belief is that there is a spark in every person that distinguishes him as an individual,
and defines his aspirations and goals. A Wealth Management solution for every
individual is therefore unique.
You deserve a customized solution for managing your wealth that is specific to your
needs and not a generic template – based offering.
Strong Research Capabilities
Our Advisory process is rooted in the strength of our research team, giving us expertise
across various asset classes. Our Economic Research team has been ranked among the
top 20 in Asia by Institutional Investor and is one among the only 2 teams from India to
feature in this list.
Philosophy--Wealth Management needs to be far more holistic than just investment
advisory
We believe that separation of advisory from product manufacturing is critical to
offering a conflict-free and truly objective advice to our clients. We therefore offer only
third-party products and do not manufacture any in-house products. As an extension to
this philosophy, we do not hold any proprietary stake in the markets
2.4 FUNCTIONAL DEPARTMENT OF ANAND RATHI
CLIENT RALATION DEPARTMENT
The client relation department assists the client or customer top open an account in
Hedge equity (p) Ltd securities. This department is also known as the front office. A
client has to open two types of accounts to trade and own securities in the NSE & BSE.
They are:
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FINANCE DEPARTMENT
Thus a department, to organize financial activities may be created under the direct
controlof the board of directors. Finance manager will decide the major financial policy
methods. Lower levels can delegate the other routine activities.
MARKETING DEPARTMENT
The major functions of marketing department are:
Business associate development:
The company takes up the marketing activities of the various branches. It ensures an
efficient marketing arena at its various branches. The company encourages better
relations in its branches and promotes for the development of various marketing
strategies.
Brand promotion:
An important function of marketing department is to promote the name of the company.
HEDGE EQUITIES (P) LTD does it through the different promotional activities. The
name of HEDGE EQUITIES (P) LTD as a stock broking firm is made known to the
outside world.
Investment promotion:
The main clients of HEDGE EQUITIES (P) LTD were its investors. Hence the
marketing department tries to capture as many investors as possible to encourage them
to invest.
Delivery promotion:
Intraday trading is not always profitable and might involve a lot of risk hence HEDGE
EQUITIES (P) LTD promotes for delivery were the shares are kept to be sold for a later
date analyzing the profitability factors.
SYSTEMS DEPARTMENT
The systems department is playing a vital role in the day operations of the company. It
is through the systems department that the clients can avail the facilities of Internet
trading. Optic fiber cables and high bandwidth connections from the HEDGE
EQUITIES (P) LTD office to the ISP,a dedicated server and back-up ISDN connections
were maintained directly by the systems department. For the purpose of trading they
have made use of two software namely ODIN (Open Dealers Integrated Network)
HUMAN RESOURCES DEPARTMENT
Human resource is often considered as the back bone of an organization even in this age
of advanced automation and mechanization. Since virtual organizations are not very
much popular in our part of the world, it is very important to any organization to have a
HR department. The presence of an excellent HR department increases the efficiency
of an organization considerably. Human resource management is defined as asset of
practices, policies and programmers designed to maximize both personal and
organizational goals.
a. Training and induction
The selected employees will undergo three days continuous induction. During this
period, he willundergo training with all the department of HEDGE EQUITIES (P) LTD
Securities (India) Pvt. Ltd. There will also be classroom induction also within 3
months.
b. Wages and Salary Administration
25
The wages and salaries of the employees were fixed and granted by the HR department
with consent of the finance department.
c. Performance Appraisal
It was human resources department which gives the promotion to all employees,
making transfers and taking disciplinary actions if needed.
d. Grievance Handling
The grievance of employees were received only through proper channels i.e., through
the particular department heads. The HR department will make solutions to th
complaints as per the rules and regulations of the company.
TRADING DEPARTMENT
The department deals with the trading related activities of the company. The trading
refers to the buying and selling of shares. This department is the most important part of
the organization. There are two types of trading.
Online Trading:
These are the trading terminal of the organization. The each computer of the
department is termed as the trading terminal. The each terminal is assigned with NCFM
certified dealers; who is in charge of each portal will do the trade according to the client
request. The terminal is managed by either NEAT (National Exchange for Automated
Trading) software or ODIN (Open Dealers Integrated Network) software. The client
can also place his through written request or through the telephone, in this the order will
be place d by the dealer.
InternetTrading:
The internet trading is a facility provides by the company in order to trade the securities
from his convenient place like his office, home etc. the order will be placed by the client
itself, and he can make changes before the trade is done for changing the price,
cancellation of the order.
DELIVERY AND DEPOSITORY DEPARTMENT
Delivery refers to the share that bought on particular day are not sold on that day itself
and holding of the share for an appreciation in the value of the security and to trade it on
a future date. Deliver Instruction Slip: it is a slip the client should fill and gave to the
dealer regarding the purchase of the share. There are two procedures to move the share
namely
Power of attorney
this is which the client signs at the time of opening a trading account and depository
participant account. If the client has given the power of attorney, HEDGE EQUITIES
(P) LTD will have the power to transact the clients stock without pay ±in slips.
b. Easiest
It is secured internet enabled service which means Electronic Access to Securities
information and Execution of Secured Transaction. This is facility wherein the clients
can give delivery instructions via internet. Easiest is a facility provided by CDSL. The
activities related with the depository department.
26
Depository function
Dematerialization
Pledging
EQUITY RESEARCH DEPARTMENT
The function of the department is to study the details regarding the share or securities
and to make prediction regarding the future performance of the company. The
following types of approaches done through this department:
a) Fundamental analysis
b) Technical analysis
2.5 Structure and chart of Anand Rathi
A Mutual Fund is a trust that pools the savings of a number of
Investors who share a common financial goal. The money thus
Collected is then invested in capital market instruments such as
Shares, debentures and other securities. The income earned through
These investments and the capital appreciation realized is shared by
Its unit holders in proportion to the number of units owned by
Them. Thus a Mutual Fund is the most suitable investment for the
Common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual
Fund.
The structure of Mutual Funds in India is governed by SEBI (Mutual
Fund) Regulations, 1996.
It is mandatory to have a three tier structure of Sponsor – Trustee – Asset
Management Company.
The trust is established by a Sponsor or more than one sponsor who is like
a promoter of a company. He appoints the Trustees who are responsible to
the investors of the fund.
The Trustees of the mutual fund hold its property for the benefit of the
unit holders.
Asset Management Company (AMC) approved by SEBI is the business
face of the mutual fund as it manages all the affairs of the fund by making
The structure of Mutual Funds in India is governed by SEBI (Mutual
Fund) Regulations, 1996.
It is mandatory to have a three tier structure of Sponsor – Trustee – Asset
Management Company.
The trust is established by a Sponsor or more than one sponsor who is like
a promoter of a company. He appoints the Trustees who are responsible to
the investors of the fund.
The Trustees of the mutual fund hold its property for the benefit of the
unit holders.
Asset Management Company (AMC) approved by SEBI is the business
face of the mutual fund as it manages all the affairs of the fund by making
investments in various types of securities.
27
2.5 ORGANISATIONAL STRUCTURE AND ORGANISATION
CHART ORGANISATION FLOW CHART:-
2.5 Structure and chart of AnandRathi
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
These investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual Fund.
Raising capital
Mobilizing resources
Company growth Redistribution of wealth
Investment opportunities
Corporate governance
Barometer of economy
Govt. project development
Role of stock exchanges
28
2.6 PRODUCT AND SERVICE PROFILE
Commodities
Equity
Insurance Services
Products
Equities I Bonds I Mutual Funds I Derivatives
Managed Investment Services / PMS
Commodities
FX Trading
Life Insurance
General Insurance
Alternative Assets
- Private Equity Funds
- Structured Products
- Real Estate Opportunities Fund
Special Situation Opportunities
Offshore Structures & Global Investments
Services
Creation of a customized financial strategy
Diversification of assets based on a formal process of asset allocation
Active tracking, monitoring and review of portfolios
Creation of private trusts
Tax planning
Estate planning
Structuring of family wealth
Online Trading
29
Equity & Derivatives Brokerage:
Anand Rathi provides end-to-end equity solutions to institutional and individual
investors. Consistent delivery of high quality advice on individual stocks, sector trends
and investment strategy has established a competent and reliable research unit across
the country.
Clients can trade through online on BSE and NSE for both equities and derivatives.
They are supported by dedicated sales & trading teams in trading desks across the
country. Research and investment ideas can be accessed by clients either through their
designated dealers, email, web or Sms.
Mutual Funds:
AR is one of India's top mutual fund distribution houses. Their success lies in their
philosophy of providing consistently superior, independent and unbiased advice to their
clients backed by in-depth research. They firmly believe in the importance of selecting
appropriate asset allocations based on the client's risk profile.
AR have a dedicated mutual fund research cell for mutual funds that consistently
churns out superior investment ideas, picking best performing funds across asset
classes and providing insights into performances of select funds.
Depository Services:
AR Depository Services provides with a secure and convenient way for holding your
securities on both CDSL and NSDL.
AR depository services include settlement, clearing and custody of securities,
registration of shares and dematerialization. Also offer daily updated internet access to
holding statement and transaction summary.
Commodities:
AR commodities broking services include online futures trading through NCDEX and
MCX and depository services through CDSL. Commodities broking is supported by a
dedicated research cell that provides both technical as well as fundamental research.
Our research covers a broad range of traded commodities including precious and base
metals, Oils and Oilseeds, agri-commodities such as wheat, chana, guar, guar gum and
spices such as sugar, jeera and cotton.
In addition to transaction execution, we provide our clients customized advice on
hedging strategies, investment ideas and arbitrage opportunities.
Insurance Broking:
As an insurance broker, AR provide to his clients comprehensive risk management
techniques, both within the business as well as on the personal front. Risk management
includes identification, measurement and assessment of the risk and handling of the
risk, of which insurance is an integral part. The firm deals with both life insurance and
general insurance products across all insurance companies.
Their guiding philosophy is to manage the clients' entire risk set by providing the optimal
level of cover at the least possible cost. The entire sales process and product selection is
research oriented and customized to the client's needs. They lay strong emphasis on
timely claim settlement and post sales services.
30
OUR SERVICES
Risk Management
Due diligence and research on policies available
Recommendation on a comprehensive insurance cover based on clients needs
Maintain proper records of client policies
Assist client in paying premiums
Continuous monitoring of client account
Assist client in claim negotiation and settlement
IPO’s:
AR is a leading primary market distributor across the country. Our strong performance
in IPOs has been a result of our vast experience in the Primary Market, a wide network
of branches across India, strong distribution capabilities and a dedicated research team.
Our IPO research team provides clients with in-depth overviews of forthcoming IPOs.
31
2.3 SERVICES:-
Top quality Research & Advisory Services
Fundamental Research Services
Technical Research Services
Investment Advisory Desk
Portfolio Management Services
Mutual Fund And IPO Advisory
Online Trading
Commodities
DP Services
Funding
32
MARKET PROFILE OF THE ORGANISATION
CLIENTS
Individual
Institutional
NRIs
Retail Investors
All segments are available in Anand Rathi:
Equity
a) BSE/NSE
Commodities
a) MCX/NCDEX
CDS
a) USD
b) EURO
c) YEN
d) GBP (Global Britain Pound)
33
CHAPTER 3
DISCUSSION ON TRAINING
MY WORK PROFILE;-
Fill up the different types of financial forms.
Tele calling to the clients.
Sales coordination.
Counseling to the client for different financial products.
Follow up the customer.
Lead generation.
Login the form in the system.
As a sales co-ordinator.
All work handled in daily transaction with financial product and services.
Proper reporting with client details.
Portfolio management.
Demat entry with CRM format log in process.
Mutual fund/FD/SIP/BONDs/NCDs entry.
Activate account opening with clients.
Maintaining of party's ledgers.
Verification of bills and documentation.
Maintaining of bank accounts with reconciliation.
Branch accounts and profitability statements.
KEY LEARNINGS:
Knew about different financial product and services.
Improved communication skill
Understood working in organizational environment.
Learned about call generation.
Effective way of motivating clients. To learn the tactics to control the cost.
To apply my theoretical knowledge into real world environment and how to
behave in professional manner.
To increase analytical skill.
To handle the different type of parties and how should we behave in different
situations.
To know what is the role of finance department in the organization.
34
CHAPTER 4
Study of selected research problem
4.1 Statement of research problem
4.2 Statement of research objectives
4.3 Research design and methodology
35
STATEMENT OF RESEARCH PROBLEM
STUDY BEHIND EVERY SUCCESSFUL INVESTORS :
BSE/NSE
COMMODITIES
DEMAT SERVICES
IPO’s
INSURANCE
MUTUAL FUNDs
BSE/NSE
A bit about history of stock exchange they say it was under a tree that it all
started in 1875.Bombay Stock Exchange (BSE) was the major exchange in
India till 1994.National Stock Exchange (NSE) started operations in 1994.
NSE was floated by major banks and financial institutions. It came as a result of
Harshad Mehta scam of 1992.
NSE was the first to introduce electronic screen based trading. BSE was forced
to follow suit. The present day trading platform is transparent and gives
investors prices on a real time basis. With the introduction of depository and
36
mandatory dematerialization of shares chances of fraud reduced further. The
trading screen gives you top 5 buy and sell quotes on every scrip.
A typical trading day starts at 10 ending at 3.30. Monday to Friday. BSE has 30
stocks which make up the Sensex .NSE has 50 stocks in its index called Nifty.
FII s Banks, financial institutions mutual funds are biggest players in the
market. Then there are the retail investors and speculators.
COMMODITIES
AR commodities broking services include online futures trading through
NCDEX and MCX and depository services through CDSL. Commodities broking is
supported by a dedicated research cell that provides both technical as well as
fundamental research. Our research covers a broad range of traded commodities
including precious and base metals, Oils and Oilseeds, agri-commodities such as
wheat, chana, guar, guar gum and spices such as sugar, jeera and cotton.
In addition to transaction execution, we provide our clients customized advice on
hedging strategies, investment ideas and arbitrage opportunities.
Commodity Futures are contracts to buy specific quantity of a particular
commodity at a future date. It is similar to the index futures and stock futures but the
underlying happens to be commodities instead of stocks and indices.
Participants of Commodities Market:
The participants who trade in the commodity derivatives markets can be
classified as follows;
(a) Hedgers:
37
Hedgers are the traders who wish to eliminate the risk of price change to which
they are already exposed. It is a mechanism by which the participants in the physical/
cash markets can cover their price risk. Hedgers are those persons who don’t want to
take the risk therefore they hedge their risk while taking position in the contract.
(b) Speculators :
Speculators are participants who bet on future movements in the price of
an asset i.e. I commodity to make short term gain from the price movements.
Commodity future s give theme the leverage so to take risks on nominal margin
payments and thereby increasing for bigger gains or losses.
38
(c) Arbitrageurs:
Arbitrageurs work at making profits by taking advantaged of existence
of difference in prices of the same product across different markets (MCX and
NCDEX).
(d) Investors: Investors are participants having a longer term view as compared to speculators
when they enter into trade in the commodities market. Eg. Farmers, Producers,
consumers etc.
Commodity Derivatives:
A commodity derivative derives its value from an underlying asset which is
necessarily a commodity. To understand the commodity derivatives markets it’s
necessary to clear about ‘commodities’.
Commodities, in simple words are any goods that are common and unbranded.
Gold, silver, rubber, pepper, jute, wheat, sugar, cotton etc., are some of the common
commodities. For e.g. apple juice can be a commodity whereas the ‘Real’ apple juice
cannot be called a commodity. You may be surprised to know that in the US
commodities markets there are futures available even on cattle. Another feature of
commodities is that they are commonly available.
Commodity markets represent the formal system for the interplay of demand for
and supply of commodities. These markets can be broadly classified into spot market
and futures market. Commodities for immediate delivery are traded through the spot
market. The players in the spot market are the actual producers and the consumers of
the commodities.
Investors are those who participate in the market for profits and are ready to
face the risk involved in the market. An investor can be anyone from an individual who
has a small surplus income to the treasury desks of banks and corporate.
Most commonly traded derivatives around the world are futures, options and
option futures. Some of the most popular commodity exchanges in the world are listed
below:
London Metals Exchange, London
New York Mercantile Exchange, New York
Chicago Mercantile Exchange, Chicago
Chicago Board of Trade, Chicago
London International Financial Futures and Options Exchange (LIFFE),
London
Tokyo Commodity Exchange, Tokyo
Winnipeg Commodity Exchange, Canada
Major Commodity Exchanges:
The Government of India permitted establishment of National-level
Multi-Commodity exchanges in the year 2002 and accordingly three exchanges have
come into picture.
Multi-Commodity Exchange of India Ltd, Mumbai.(MCX).
National Commodity and Derivative Exchange of India, Mumbai(NCDEX).
39
National Multi Commodity Exchange, Ahemdabad(NMCE).
However there are regional commodity exchanges functioning all over the
country. AR commodities Broking Pvt. Ltd has got membership of both the premier
commodity exchanges i.e. MCX and NCDEX.
The two exchanges (NCEDX&MCX) have seen tremendous growth in less than
two years. The daily average on these two exchanges put together has now grown to a
healthy Rs.7800 Crores. It has been believed by experts that the volumes on these
exchanges would the stock market in the days to come.
Commodity exchanges are regulated by Forwards Market Commission (FMC);
Forwards Market Commission works under the purview of the ministry of Food,
Agriculture and Public Distribution.
At NCDEX the contracts expire on 20th
day of each month .if 20th happens to be
a holiday the expiry day will be the previous working day.
Commodities traded in MCX.
Gold, Gold M, Gold HNI, Silver, Silver M, Silver HNI
Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal, RBD
Palmolein, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed
Oil, Cottonseed Oilcake, Cottonseed
Pepper, Red Chilli, Jeera, Turmeric
Steel Long, Steel Flat, Copper, Nickel, Tin
Kapas, Long Staple Cotton, Medium Staple Cotton
Chana, Urad, Yellow Peas, Tur
Rice, Basmati Rice, Wheat, Maize, Sarbati Rice
Crude Oil
Rubber, Guar Seed, Gur, Guargum Bandhani, Guargum, Cashew Kernel,
Guarseed Bandhani
Commodities traded in NCDEX.
Agro Products
Arabica Coffee Cashew
Castor Seed Chana
Chilli Common Raw Rice
Common Parboiled Rice Crude Palm Oil
Cotton Seed Oilcake Expeller Mustard Oil
Grade A Parboiled Rice Grade A Raw Rice
Guar gum Guar Seeds
Gur Jeera
Jute sacking bags Lemon Tur
Long Staple Cotton Maharashtra Lal Tur
Medium Staple Cotton Mulberry Green Cocoons
Mulberry Raw Silk Mustard Seed
Pepper Raw Jute
RBD Palmolein Refined Soy Oil
40
Robusta Coffee Rubber
Sesame Seeds Soyabean
Yellow Soybean Meal Sugar
Turmeric Urad
Wheat Yellow Peas
Yellow Red Maize
Base Metals
Mild Steel Ingots
Precious Metals
Gold
Silver
IPO’s:
AR is a leading primary market distributor across the country. Our strong
performance in IPOs has been a result of our vast experience in the Primary
Market, a wide network of branches across India, strong distribution
capabilities and a dedicated research team.
Our IPO research team provides clients with in-depth overviews of
forthcoming IPOs as well as investment recommendations. Online filling of
forms is also available.
As an insurance broker, AR provide to his clients comprehensive risk
management techniques, both within the business as well as on the personal
front. Risk management includes identification, measurement and assessment
of the risk and handling of the risk, of which insurance is an integral part. The
firm deals with both life insurance and general insurance products across all
insurance companies.
INSURANCE
Their guiding philosophy is to manage the clients' entire risk set by providing the optimal
level of cover at the least possible cost. The entire sales process and product selection is
research oriented and customized to the client's needs. They lay strong emphasis on
timely claim settlement and post sales services.
Our services :
Risk Management
Due diligence and research on policies available
Recommendation on a comprehensive insurance cover based on clients needs
Maintain proper records of client policies
Assist client in paying premiums
Continuous monitoring of client account
Assist client in claim negotiation and settlement
41
Mutual Funds:
AR is one of India's top mutual fund distribution houses. Their success lies in
their philosophy of providing consistently superior, independent and unbiased
advice to their clients backed by in-depth research. They firmly believe in the
importance of selecting appropriate asset allocations based on the client's risk
profile.
AR have a dedicated mutual fund research cell for mutual funds that
consistently churns out superior investment ideas, picking best performing
funds across asset classes and providing insights into performances of select
funds.
4.1 Statement of every successful investor problem:
Investors are those who participate in the market for profits and are ready to
face the risk involved in the market. An investor can be anyone from an individual who
has a small surplus income to the treasury desks of banks and corporate.
Most commonly traded derivatives around the world are futures, options and
option futures. Some of the most popular commodity exchanges in the world are listed
below:
London Metals Exchange, London
New York Mercantile Exchange, New York
Chicago Mercantile Exchange, Chicago
Chicago Board of Trade, Chicago
London International Financial Futures and Options Exchange (LIFFE),
London
Tokyo Commodity Exchange, Tokyo
Winnipeg Commodity Exchange, Canada
Statement of every successful investor objectives:
Primary Objectives To construct portfolio and analyses the risk return relationship.
To hedge the most profitable portfolio.
To construct a diversified portfolio and risk reduction by using index futures.
Secondary objective To find out extent to which loss can be reduced by applying hedging strategies.
To determine whether the hedger enjoys better returns from the use of hedgers.
42
To identify how much reduction in risk is possible.
To find out the extend of loss due to misjudgment on index movements.
4.3 Commodity Market design with all products and methodology:
The methodology of data collection pertains to information to how the data is
collected i.e. either from primary sources or secondary sources. It explains the
methods utilized and the instruments used in data collection.
SOURCES OF DATA
The sources of data can be classified in two categories:
Primary sources
Secondary sources
PRIMARY SOURCES
The primary data are collected by the detailed discussion was
conducted with the Branch Manager of AR Ltd and Intractions was carried with
the Commodities investors (customers).And the discussion was carried out with
the college internal guide, who helped in developing the objectives and validating
their conformance to the ethical framework of the project.
SECONDARY SOURCES I used secondary sources also for collecting the data. They are:
Information from the text sources
Information from the internet sources
Information from the materials provided by the concern
SAMPLING DESIGN
Sampling unit :Questionnaire
Sampling Size :50 units
Sampling procedure : Direct
STATISTICAL TOOLS AND TECHNIQUES
To analysis the data we used bar graphs periodically.
43
CHAPTER 5
ANALYSIS
5.1 Analysis of data
5.2 Summary of findings
CHAPTER 5
ANALYSIS OF DATA
Securities analysts determine a company's profitability by looking at its
returns. A return is the amount an investment earns as a percentage of the
price paid to own it. It is the sum of income an investment makes over time,
plus its capital gains. Analysts not only look at the securities historical
market returns, they also look at a company’s return on investment
(income divided by stock and debt), return on assets (income divided by
total assets) and return on equity (additional earnings made from
reinvesting profits).
5.2 FINDINGS The following findings are made on the basis of data analysis from the previous
Chapter.
The study reveals the effectiveness of risk reduction using hedging strategies. It
has found out that risk cannot be avoided. But can only be minimized.
44
Through the study. it has found out that, the hedging provides a safe position on
an underlying security. The loss gets shifted to a counter party. Thus the
hedging covers the loss and risk. Sometimes, the market performs against the
expectation. This will trigger losses. so the hedger should be a strategic and
positive thinker.
The anticipation of the hedger regarding the trend of the movement in the prices
of the underlying security plays a key role in the result of the strategy applied.
It has been found that, all the strategies applied on historical data of the period
of the study were able to reduce the loss that arose from price risk substantially.
If the trader is not sure about the direction of the movement of the profits of the
current position, he can counter position in the future contract and reduces the
level of risks.
The trader can effectively use the strategy for return enhancement provided he
has the correct market anticipation.
In general, the anticipation of the strategies purely for return enhancement is a
risky affair, because, if the anticipation about the performance of the market and
the underlying goes wrong, the position taker would end up in higher losses.
45
CHAPTER 6
SUMMARY OF LEARNING EXPERIENCE
The International College of Financial Planning has equipped me with necessary
education and confidence to face my next career challenge. When graduating from
International College of Financial Planning, you are not walking away with just another
program but also the experiences of an established network of exceptional educators
and a network of 7500 professionals
Lack of Investor Awareness about the Derivatives Market & its Trading.
Strategies are basically more applicable for HNI Clients whose margin Amount is
more.
Derivatives Market basically trades depending upon the Underlying Securities. So
small fluctuations in the security results in changes in strategies for that particular
Derivative.
For arbitrageurs
· Take positions in the cash and derivatives market simultaneously.
· Take short position in the market, which is overvalued.
· Take long position in the market, which is undervalue
46
CONCLUSIONS AND RECOMMENDATION
Cost Efficiency:-
Options have great leveraging power. An investor can obtain an option position
that will mimic a stock position almost identically, but at a huge cost savings. For
example, in order to purchase 200 shares of an $80 stock, an investor must pay out
$16,000. However, if the investor were to purchase two $20 calls (with each
contract representing 100 shares), the total outlay would be only $4,000 (2
contracts X 100 shares/contract X $20 market price). The investor would then
have an additional $12,000 to use at his or her discretion. Obviously, it is not quite
as simple as that. However, this strategy, known as stock replacement, is not only
viable but also practical and cost efficient.
Less Risky - Depending on How You Use Them
There are situations in which buying options is riskier than owning equities, but
there are also times when options can be used to reduce risk. It really depends on
how you use them. Options can be less risky for investors because they require less
financial commitment than equities, and they can also be less risky due to their
relative imperviousness to the potentially catastrophic effects of gap openings.
Options are the most dependable form of hedge, and this also makes them safer
than stocks. When an investor purchases stock, a stop-loss order is frequently
placed to protect the position. The stop order is designed to "stop" losses below a
predetermined price identified by the investor. The problem with these orders lies
in the nature of the order itself.
Higher Potential Returns:-
You don't need a calculator to figure out that if you spend much less money and
make almost the same profit, then you have a higher percentage return. When they
pay off, that's what options typically offer to investors.
More Strategic Alternatives:-
The final major advantage of options is that they offer more investment
alternatives. Options are a very flexible tool. There are many ways to use options
to recreate other positions. We call these positions synthetics.
Synthetic positions present investors with multiple ways to attain the same
investment goals, and this can be very, very useful. While synthetic positions are
considered an advanced option topic, there are many other examples of how
options offer strategic alternatives. For example, many investors use brokers that
charge a margin when an investor wants to short a stock. The cost of this margin
requirement can be quite prohibitive. Other investors use brokers that simply do
47
not allow for the shorting of stocks, period. The inability to play the downside
when needed virtually handcuffs investors and forces them into a black and white
world while the market trades in color.
Recommendations:-
Avoiding wrong perception of the investors
Investors think that, Derivative trading is more risky than equity trading; it is a
betting etc. their views are not cleared about derivative market. These wrong
perceptions of the investors should be avoided by giving proper suggestions to
the clients.
Suggest the Derivatives trading to the investors on the basis of – Income, Risk
Suggest the derivative trading to their clients who has currently invested in
equity market. On the basis of their income capacity, risk bearing capacity of
the investor.
Introducing strategies to the Investors
Introducing derivative strategies to the existing clients who are already invested
in derivative segment.
Diversify the portfolio of investors
Diversify the investment portfolio of the clients who do not want to take a more
risk in derivative market trading.
48
APPENDICES
BIBLIOGRAPHY
1. INTERNET
2. AGENCY SOURCES
3. GOOGLE
4. NEWS PAPERS
5. COMPANY WEBSITES.