CHAPTER-I

INTRODUCTION

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INTRODUCTION TO CAPITAL MARKETS

Capital markets in the United States provide the lifeblood of capitalism.

Companies turn to them to raise funds needed to finance the building of factories, office

buildings, airplanes, trains, ships, telephone lines, and other assets; to conduct research

and development; and to support a host of other essential corporate activities. Much of

the money comes from such major institutions as pension funds, insurance companies,

banks , foundations, and colleges and universities. Increasingly, it comes from

individuals as well. As noted in chapter 3, more than 40 percent of U.S. families owned

common stock in the mid-1990s.

Very few investors would be willing to buy shares in a company unless they

knew they could sell them later if they needed the funds for some other purpose. The

stock market and other capital markets allow investors to buy and sell stocks

continuously.

The markets play several other roles in the American economy as well. They are

a source of income for investors. When stocks or other financial assets rise in value,

investors become wealthier; often they spend some of this additional wealth, bolstering

sales and promoting economic growth. Moreover, because investors buy and sell shares

daily on the basis of their expectations for how profitable companies will be in the future,

stock prices provide instant feedback to corporate executives about how investors judge

their performance.

Stock values reflect investor reactions to government policy as we<,/ll. If the government

adopts policies that investors believe will hurt the economy and company profits, the

market declines; if investors believe policies will help the economy, the market rises.

Critics have sometimes suggested that American investors focus too much on short-term

profits; often, these analysts say, companies or policy-makers are discouraged from

taking steps that will prove beneficial in the long run because they may require short-term

adjustments that will depress stock prices. Because the market reflects the sum of

millions of decisions by millions of investors, there is no good way to test this theory.

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In any event, Americans pride themselves on the efficiency of their stock market

and other capital markets, which enable vast numbers of sellers and buyers to engage in

millions of transactions each day. These markets owe their success in part to computers,

but they also depend on tradition and trust -- the trust of one broker for another and the

trust of both in the good faith of the customers they represent to deliver securities after a

sale or to pay for purchases. Occasionally, this trust is abused. But during the last half

century, the federal government has played an increasingly important role in ensuring

honest and equitable dealing. As a result, markets have thrived as continuing sources of

investment funds that keep the economy growing and as devices for letting many

Americans share in the nation's wealth.

To work effectively, markets require the free flow of information. Without it,

investors cannot keep abreast of developments or gauge, to the best of their ability, the

true value of stocks. Numerous sources of information enable investors to follow the

fortunes of the market daily, hourly, or even minute-by-minute. Companies are required

by law to issue quarterly earnings reports, more elaborate annual reports, and proxy

statements to tell stockholders how they are doing. In addition, investors can read the

market pages of daily newspapers to find out the price at which particular stocks were

traded during the previous trading session. They can review a variety of indexes that

measure the overall pace of market activity; the most notable of these is the Dow Jones

Industrial Average (DJIA), which tracks 30 prominent stocks. Investors also can turn to

magazines and newsletters devoted to analyzing particular stocks and markets. Certain

cable television programs provide a constant flow of news about movements in stock

prices. And now, investors can use the Internet to get up-to-the-minute information about

individual stocks and even to arrange stock transactions.

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SCOPE OF THE STUDY

‘Investor can assess the company financial strength and factors that effect the

company Religare Enterprises Limited (REL). Scope of the study is limited.

We can say that 70% of the analysis is proved good for the investor, but the 30%

depends upon market sentiment.

The topic is selected to analyses the factors that affect the future EPS of a

company based on fundamentals of the company.

The market standing of the company studied in the order to give a better scope to

the Analysis is helpful to the investors, share holders, creditors for the rating of

the company.

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NEED AND IMPORTENCE OF STUDY

One of the single best things you can do to further your education in

trading commodities in Religare Enterprises Limited (REL)is to keep thorough

records of your trades. Maintaining good records requires discipline, just like

good trading. Unfortunately, many commodity traders don’t take the time to track

their trading history, which can offer a wealth of information to improve their

odds of success Most professional traders, and those who consistently make

money from trading commodities, keep diligent records of their trading activity.

The same cannot be said for the masses that consistently lose at trading

commodities.

Losing commodity traders are either too lazy to keep records or they can’t

stomach to look at their miserable results. You have to be able to face your

problems and start working on some solutions if you want to be a successful

commodities trader. If you can’t look at your mistakes and put in the work

necessary to learn from them, you probably shouldn’t be trading commodities.

5

OBJECTIVE OF THE STUDY

This study is done to know about Primary and Secondary capital market (Religare

Enterprises Limited (REL)) activities.

To know why the companies go to new issue market.

How the primary market intermediaries communicate companies and investors.

To know how the primary market activities used by the companies in their new

issue shares.

How the companies listed in the stock exchanges.

To know how trading activity is to be done.

To know the complete awareness of secondary market (stock exchanges like NSE,

BSE, Religare Enterprises Limited (REL)).

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RESEARCH METHODOLOGY

The data collection methods include both the Primary and Secondary Collection

methods.

1. Primary Collection Methods:

This method includes the data collected from the personal discussions with

the authorized clerks and members of the Exchange.

2. Secondary Collection Methods:

The Secondary Collection Methods includes the lectures of the

superintend of the Department of Market Operations, EDP etc, and also the data

collected from the News, Magazines of the NSE, HSE and different books issues of

this study

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LIMITATIONS OF THE PROJECT

- Time constraint was a major limiting factor. Forty five days were insufficient to

even grasp the theoretical concepts.

- Several other strategies that could have been studied were not done.

- Lack of knowledge with the brokers.

- Difference of theory from practice.

- Absence of required knowledge and technology.

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CHAPTER-II

INDUSTRY PROFILE

9

EVOLUTIONOF INDIAN STOCK MARKET

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

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

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

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

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

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

brokers recognized by banks and merchants during 1840 and 1850.

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

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

into 60.

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

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

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

disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850

could only be sold at Rs. 87).

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

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

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

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

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

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

consolidated.

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OTHER LEADING CITIES IN STOCK MARKET OPERATIONS

Ahmadabad gained importance next to Bombay with respect to cotton textile industry.

After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new

mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in

1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to

Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.

After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares,

which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom

between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta

Stock Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the way in

India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel

Company Limited in 1907, an important stage in industrial advancement under Indian

enterprise was reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies

generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange

functioning in its midst, under the name and style of "The Madras Stock Exchange" with

100 members. However, when boom faded, the number of members stood reduced from

100 to 3, by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a

rapid increase in the number of textile mills and many plantation companies were floated.

In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange

Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange

Limited).

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Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with

the Punjab Stock Exchange Limited, which was incorporated in 1936.

12

INDIAN STOCK EXCHANGES - AN UMBRELLA GROWTH

The Second World War broke out in 1939. It gave a sharp boom which was followed by a

slump. But, in 1943, the situation changed radically, when India was fully mobilized as a

supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities,

those dealing in them found in the stock market as the only outlet for their activities.

They were anxious to join the trade and their number was swelled by numerous others.

Many new associations were constituted for the purpose and Stock Exchanges in all parts

of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited

(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and

the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,

amalgamated into the Delhi Stock Exchnage Association Limited.

POST-INDEPENDENCE SCENARIO

Most of the exchanges suffered almost a total eclipse during depression. Lahore

Exchange was closed during partition of the country and later migrated to Delhi and

merged with Delhi Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central

Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only

Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well

established exchanges, were recognized under the Act. Some of the members of the other

Associations were required to be admitted by the recognized stock exchanges on a

concessional basis, but acting on the principle of unitary control, all these pseudo stock

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exchanges were refused recognition by the Government of India and they thereupon

ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India

(mentioned above). The number virtually remained unchanged, for nearly two decades.

During eighties, however, many stock exchanges were established: Cochin Stock

Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982),

and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association

Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange

Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986),

Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association

Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara

Stock Exchange Limited (at Baroda, 1990) and recently established exchanges -

Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock

exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI)

and the National Stock Exchange of India Limited (NSEIL).

The Table given below portrays the overall growth pattern of Indian stock markets since

independence. It is quite evident from the Table that Indian stock markets have not only

grown just in number of exchanges, but also in number of listed companies and in capital

of listed companies. The remarkable growth after 1985 can be clearly seen from the

Table, and this was due to the favouring government policies towards security market

industry.

TRADING PATTERN OF THE INDIAN STOCK MARKET

Trading in Indian stock exchanges are limited to listed securities of public limited

companies. They are broadly divided into two categories, namely, specified securities

(forward list) and non-specified securities (cash list). Equity shares of dividend paying,

growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market

capitalization of atleast Rs.100 million and having more than 20,000 shareholders are,

normally, put in the specified group and the balance in non-specified group.

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Two types of transactions can be carried out on the Indian stock exchanges: (a) spot

delivery transactions "for delivery and payment within the time or on the date stipulated

when entering into the contract which shall not be more than 14 days following the date

of the contract" : and (b) forward transactions "delivery and payment can be extended by

further period of 14 days each so that the overall period does not exceed 90 days from the

date of the contract". The latter is permitted only in the case of specified shares. The

brokers who carry over the outstandings pay carry over charges (cantango or

backwardation) which are usually determined by the rates of interest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell securities

for his clients on a commission basis and also can act as a trader or dealer as a principal,

buy and sell securities on his own account and risk, in contrast with the practice

prevailing on New York and London Stock Exchanges, where a member can act as a

jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of

face-to-face trading with bids and offers being made by open outcry. However, there is a

great amount of effort to modernize the Indian stock exchanges in the very recent times.

OVER THE COUNTER EXCHANGE OF INDIA (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to

many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly

long settlement periods and benami transactions, which affected the small investors to a

great extent. To provide improved services to investors, the country's first ringless,

scripless, electronic stock exchange - OTCEI - was created in 1992 by country's premier

financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation

of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance

Corporation of India, General Insurance Corporation and its subsidiaries and CanBank

Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on

the OTCEI are classified into:

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Listed Securities - The shares and debentures of the companies listed on the OTC

can be bought or sold at any OTC counter all over the country and they should not

be listed anywhere else

Permitted Securities - Certain shares and debentures listed on other exchanges and

units of mutual funds are allowed to be traded

Initiated debentures - Any equity holding atleast one lakh debentures of a

particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,

certificates of listed securities and initiated debentures are not traded at OTC. The

original certificate will be safely with the custodian. But, a counter receipt is generated

out at the counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange.

The difference is that the delivery and payment procedure will be completed within 14

days.

Compared to the traditional Exchanges, OTC Exchange network has the following

advantages:

OTCEI has widely dispersed trading mechanism across the country which

provides greater liquidity and lesser risk of intermediary charges.

Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

Since the exact price of the transaction is shown on the computer screen, the

investor gets to know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

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In the case of an OTC issue (new issue), the allotment procedure is completed in a

month and trading commences after a month of the issue closure, whereas it takes

a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency

investors are gradually becoming aware of the manifold advantages of the OTCEI.

NATIONAL STOCK EXCHANGE (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian

stock market trading system on par with the international standards. On the basis of the

recommendations of high powered Pherwani Committee, the National Stock Exchange

was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and

Investment Corporation of India, Industrial Finance Corporation of India, all Insurance

Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions

and corporate bodies enter into high value transactions in financial instruments such as

government securities, treasury bills, public sector unit bonds, commercial paper,

certificate of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.

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Recognized members of NSE are called trading members who trade on behalf of

themselves and their clients. Participants include trading members and large players like

banks who take direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism

which adopts the principle of an order-driven market. Trading members can stay at their

offices and execute the trading, since they are linked through a communication network.

The prices at which the buyer and seller are willing to transact will appear on the screen.

When the prices match the transaction will be completed and a confirmation slip will be

printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-

market operations are streamlined coupled with the countrywide access to the

securities.

Delays in communication, late payments and the malpractice’s prevailing in the

traditional trading mechanism can be done away with greater operational

efficiency and informational transparency in the stock market operations, with the

support of total computerized network.

Unless stock markets provide professionalized service, small investors and foreign

investors will not be interested in capital market operations. And capital market being one

of the major source of long-term finance for industrial projects, India cannot afford to

damage the capital market path. In this regard NSE gains vital importance in the Indian

capital market system.

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PREAMBLE

Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used

interchangeably. However, there is a difference. Economic growth refers to the sustained

increase in per capita or total income, while the term economic development implies

sustained structural change, including all the complex effects of economic growth. In

other words, growth is associated with free enterprise, where as development requires

some sort of control and regulation of the forces affecting development. Thus, economic

development is a process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like India

to take the country in the path of economic development to attain economic growth.

WHY ECONOMIC PLANNING FOR INDIA?

One of the major objective of planning in India is to increase the rate of economic

development, implying that increasing the rate of capital formation by raising the levels

of income, saving and investment. However, increasing the rate of capital formation in

India is beset with a number of difficulties. People are poverty ridden. Their capacity to

save is extremely low due to low levels of income and high propensity to consume.

Therefor, the rate of investment is low which leads to capital deficiency and low

productivity. Low productivity means low income and the vicious circle continues. Thus,

to break this vicious economic circle, planning is inevitable for India.

The market mechanism works imperfectly in developing nations due to the ignorance and

unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is

very vital. In India, a large portion of the economy is non-monitised; the product, factors

of production, money and capital markets is not organized properly. Thus the prevailing

price mechanism fails to bring about adjustments between aggregate demand and supply

of goods and services. Thus, to improve the economy, market imperfections has to be

removed; available resources has to be mobilized and utilized efficiently; and structural

rigidities has to be overcome. These can be attained only through planning.

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In India, capital is scarce; and unemployment and disguised unemployment is prevalent.

Thus, where capital was being scarce and labour being abundant, providing useful

employment opportunities to an increasing labour force is a difficult exercise. Only a

centralized planning model can solve this macro problem of India.

Further, in a country like India where agricultural dependence is very high, one cannot

ignore this segment in the process of economic development. Therefore, an economic

development model has to consider a balanced approach to link both agriculture and

industry and lead for a paralleled growth. Not to mention, both agriculture and industry

cannot develop without adequate infrastructural facilities which only the state can

provide and this is possible only through a well carved out planning strategy. The

government’s role in providing infrastructure is unavoidable due to the fact that the role

of private sector in infrastructural development of India is very minimal since these

infrastructure projects are considered as unprofitable by the private sector.

Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce

the prevailing income inequalities. This is possible only through planning.

PLANNING HISTORY OF INDIA

The development of planning in India began prior to the first Five Year Plan of

independent India, long before independence even. The idea of central directions of

resources to overcome persistent poverty gradually, because one of the main policies

advocated by nationalists early in the century. The Congress Party worked out a program

for economic advancement during the 1920’s, and 1930’s and by the 1938 they formed a

National Planning Committee under the chairmanship of future Prime Minister Nehru.

The Committee had little time to do anything but prepare programs and reports before the

Second World War which put an end to it. But it was already more than an academic

exercise remote from administration. Provisional government had been elected in 1938,

and the Congress Party leaders held positions of responsibility. After the war, the Interim

government of the pre-independence years appointed an Advisory Planning Board. The

20

Board produced a number of somewhat disconnected Plans itself. But, more important in

the long run, it recommended the appointment of a Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three

years of independent India, the state and economy scarcely had a stable structure at all,

while millions of refugees crossed the newly established borders of India and Pakistan,

and while ex-princely states (over 500 of them) were being merged into India or Pakistan.

The Planning Commission as it now exists, was not set up until the new India had

adopted its Constitution in January 1950.

OBJECTIVES OF INDIAN PLANNING

The Planning Commission was set up the following Directive principles :

To make an assessment of the material, capital and human resources of the

country, including technical personnel, and investigate the possibilities of

augmenting such of these resources as are found to be deficient in relation to the

nation’s requirement.

To formulate a plan for the most effective and balanced use of the country’s

resources.

Having determined the priorities, to define the stages in which the plan should be

carried out, and propose the allocation of resources for the completion of each

stage.

To indicate the factors which are tending to retard economic development, and

determine the conditions which, in view of the current social and political

situation, should be established for the successful execution of the Plan.

To determine the nature of the machinery this will be necessary for securing the

successful implementation of each stage of Plan in all its aspects.

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To appraise from time to time the progress achieved in the execution of each stage

of the Plan and recommend the adjustments of policy and measures that such

appraisals may show to be necessary.

To make such interim or auxiliary recommendations as appear to it to be

appropriate either for facilitating the discharge of the duties assigned to it or on a

consideration of the prevailing economic conditions, current policies, measures

and development programs; or on an examination of such specific problems as

may be referred to it for advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

Increasing National Income

Reducing inequalities in the distribution of income and wealth

Elimination of poverty

Providing additional employment; and

Alleviating bottlenecks in the areas of : agricultural production, manufacturing

capacity for producer’s goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.

Approximately, economic growth has been targeted at a rate of five per cent per annum.

High priority to economic growth in Indian Plans looks very much justified in view of

long period of stagnation during the British rule

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CHAPTER III

COMPANY PROFILE

23

COMPANY PROFILE

Religare is an emerging markets financial services group with a presence across Asia,

Africa, Middle East, Europe, and the Americas. In India, Religare’s largest market, the

group offers a wide array of products and services including broking, insurance, asset

management, lending solutions, investment banking and wealth management. With

10,000-plus employees across multiple geographies, Religare serves over a million

clients, including corporate and institutions, high net worth families and individuals, and

retail investors.

Vision

"To be the leading emerging markets financial services group driven by innovation,

delivering superior value for all stakeholders globally".

Religare is established in the January 30th 1984. It is one of the leading integrated

financial services institutions of India, backed by a blue chip promoter pedigree and a

proven track record. Religare’s businesses are broadly clubbed across 3 key verticals, the

retail, institutional and the wealth spectrum, catering to a diverse and wide base of clients

spread across the length and breadth of the country. Structurally, all business is operated

through various subsidiaries held through the holding company Religare Enterprises

Limited.

The company offers a diverse bouquet of services and through it’s consolidated network

reach, Religare is present in more than 1300 locations across more than 400 cities and

towns.

As part of its recent initiatives the group has also started expanding globally. Religare has

also successfully partnered with Aegon, one of the global leaders to launch Life

Insurance, Mutual Fund and Pension products in India and with Macquarie Bank, for a

wealth management joint venture.

The vision of the company is to build Religare as a globally trusted brand in the financial

services domain and present it as the ‘Investment Gateway of India’. All employees of

24

the group relentlessly strive to provide financial care, driven by the core values of

diligence and transparency

Mission - To provide financial care driven by the core values of diligence &

transparency

 Brand Essence – The company Core essence is diligence and ethical and dynamic

processes for wealth creation drive it.

BRAND IDENTITY

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

reflect the integrated nature of the financial services the company offers. The name is

intended to unite and bring together the phenomenon of money and wealth to co-exist and

serve the interest of individuals and institutions, alike.

SYMBOL

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

used to define the rare quality of good fortune that is the aim of every financial plan. It

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

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

clovers to even find one four leaf clover.

The first leaf of the clover represents Hope. The aspirations to succeed. The

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

the foundation on which a person reaches for the stars.

The second leaf of the clover represents Trust. The ability to place one’s own

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

given goal with the balance that brings satisfaction to all, not in the binding,

but in the bond that is built.

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

cement in every relationship. The truth of feeling that underlines sincerity and

25

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

and the ability to adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents Good Fortune. Signifying that

rare ability to meld opportunity and planning with circumstance to generate

those often looked for remunerative moments of success.

Hope. Trust. Care. Good Fortune. All elements perfectly combine in the

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

together and form the core of the Religare vision.

TOP MANAGEMENT TEAM

Mr. Sunil Godhwani - Chairman & Managing Director, Religare Enterprises

Limited

Mr. Shachindra Nath - Group Chief Executive Officer, Religare Enterprises

Limited

Mr. Anil Saxena- Group Chief Finance Officer, Religare Enterprises Limited

BOARD OF DIRECTORS - RELIGARE ENTERPRISES LIMITED

Mr. Sunil Godhwani - Chairman & Managing Director

Mr. Shivinder Mohan Singh - Non Executive Director

Mr. Harpal Singh - Non Executive Director

Mr.Deepak Ramchand Sabnani - Independent Director

Mr.Padam Bahl - Independent Director

Mr. Baldev Singh Johal - Independent Director

Mr. R. K. Shetty - Alternate to Mr. J. W. Balani

Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani

26

AWARDS & ACCOLADES

Religare Finvest Limited has been awarded the Finnoviti 2012 award in the

“Innovation in Process” category.

Religare Securities Limited has been awarded the "Best Investor Education &

Category Enhancement – Currency Broker" at the Bloomberg UTV Financial

Leadership Awards.

Religare Commodities Limited has been awarded the "Best Commodity Broker"

at the Bloomberg UTV Financial Leadership Awards.

Religare Broking TVC (archery creative) won Silver Abby in the Sound and

Design craft category at Goafest 2011.

Religare Capital Markets Limited has been awarded the coveted Starmine

award for the 'Best Brokerage Research House'.

Religare Commodities Ltd has been awarded the 'The Best Commodity Broker

of the year' at the Bloomberg UTV's financial Leadership awards.

Religare Enterprises Ltd presented the the Best Retail Marketing Campaign

of the Year 2010 at Asia Retail Congress.

Religare Enterprises Ltd received the coveted Master Brand Award for 2010

and Best Marketing Campaign of the year at World Brand Congress 2010.

RELIGARE SPECTUM1. Retail spectrum

Equity Trading

Commodities Trading

Online Investment Portal

Personal Financial Services

Personal Credit

2. Wealth Spectrum

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Wealth Advisory

Portfolio Management Services

Arts Initiative

Priority Client Equity Services

3. Institutional Spectrum

Institutional Broking Services

Investment Banking

Corporate Finance

Insurance Advisory

RETAIL SPECTRUM

Equity Trading

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

highly process driven, diligent approach backed by powerful Research & Analytics and

one of the “best in class” dealing rooms ensures that you have a superlative experience.

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

than 1,217 locations across more than 392 towns & cities. This means, you can walk into

any of these branches and connect toreligare’shighly skilled and dedicated relationship

managers to get the best services. You could also choose to enjoy the freedom to execute

your own trades through Religare’s online mechanism

COMMODITIES TRADING

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Religare Commodities Limited (RCL) was initiated to spearhead Exchange based

Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL is a trade

facilitator providing the platform to trade in commodities. Grounded in the Religare

philosophy, highly skilled and dedicated professionals strive to offer the client best

investment solutions across the country.

ONLINE INVESTMENT

Investing online will never be the same again withreligare’s360 degree portal

www.religareonline.com Now you can not just invest online in Equities, IPOs, Mutual

Funds, Commodities and much more but, also get TRADE REWARDS each time you

invest.

PERSONAL FINANCIAL SERVICES

Religare has recently entered into personal financial advisory services. It caters to the

financial needs of individuals by advising them on various financial plans. Religare’s

Personal financial advisors, also called financial planners or financial consultants, use

their knowledge of investments, tax laws, and insurance to recommend financial options

to individuals in accordance with the individual’s short-term and long-term goals. Some

of the issues that planners address are general investments, retirement and tax planning.

Product offerings

Mutual Funds

Insurance - Life & Non - Life

Bonds

Deposits

IPO’s

Small Savings Instruments

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PHILOSOPHYDefine… Refine…. Achieve

At Religare The Company believes “Our clients are people, not accounts” hence

successful investment management relationship begins with a clear understanding of each

client’s specific needs, concerns and long term objectives. Religare’s investment

philosophy applies a disciplined approach to building a customized strategy designed to

meet your individual financial goals and tolerance for risk.

PROCESS

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THE RELIGARE EDGE

Pan India foot print

Dedicated team of trained and skilled advisors

Strong pedigree driven by diligent processes and ethical business practices

Wide & varied platter of products & services to choose from

Backed by strong & Credible research

THEIR PROCESS

WEALTH SPECTRUM

Wealth Management @ Religare

To provide investment advisory and execution services

To work hand in hand with clients to identify and analyze their long-term goals,

risk tolerance and existing asset base

To Utilize Religare’s full-suite platform with an open architecture along with a

fully focused client centric approach to offer customized solutions for clients

Supported by dedicated team of highly skilled and qualified wealth managers and

research professionals.

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Critical Steps in Religare’s Client Centric Operating Process

Risk Profiling

Research & Asset Allocation

Product Recommendations

Review & Rebalancing

International Advisory Funds Management Services (AFMS) - A new horizon for

international investments Religare’s wealth clients is an opportunity to invest in

international financial instruments (currently limited to the US). Equities, Mutual Funds

and Debts are some the key instruments available and the clients have the option to

choose from various asset allocation modules.

PORTFOLIO MANAGEMENT SERVICE

Religare offers PMS to address varying investment preferences. As a focused service,

PMS pays attention to details, and portfolios are customized to suit the unique

requirements of investors.

Religare PMS currently extends five portfolio management schemes - Panther, Tortoise,

Elephant, Caterpillar and Leo. Each scheme is designed keeping in mind the varying

tastes, objectives and risk tolerance of Religare’s investors

INVESTMENT PHILOSOPHY

We believe that Religare’s investors are better served by a disciplined investment

approach, which combines an understanding of the goals and objectives of the investor

with a fine tuned strategy backed by research.

Stock specific selection procedure based on fundamental research for making

sound investment decisions.

Focus on minimizing investment risk by following rigorous valuation disciplines.

Capital preservation.

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Selling discipline and use of Derivatives to control volatility.

Overall to enhance absolute return for investors.

SCHEMES

Panther

The Panther portfolio aims to achieve higher returns by taking aggressive positions across

sectors and market capitalization. It is suitable for the “High Risk High Return” investor

with a strategy to invest across sectors and take advantage of various market conditions.

Tortoise

The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time

by way of careful and judicious investment in fundamentally sound companies having

good prospects. The scheme is suitable for the “Medium Risk Medium Return” investor

with a strategy to invest in companies, which have consistency in earnings, growth and

financial performance.

Elephant

The Elephant portfolio aims to generate steady returns over a longer period by investing

in Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the

“Low Risk Low Return” investor with a strategy to invest in blue chip companies, as

these companies have steady performance and reduce liquidity risk in the market.

Caterpillar

The Caterpillar portfolio aims to achieve capital appreciation over a long period of time

by investing in a diversified portfolio. This scheme is suitable for investors with a high-

risk appetite. The investment strategy would be to invest in scrips which are poised to get

a re-rating either because of change in business, potential fancy for a particular sector in

the coming years/months, business diversification leading to a better operating

performance, stocks in their early stages of an upturn or for those which are in sectors

currently ignored by the market.

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Leo

Leo is aimed at retail customers and structured to provide medium to long-term capital

appreciation by investing in stocks across the market capitalization range. This scheme is

a mix of moderate and aggressive investment strategies. Its aim is to have a balanced

portfolio comprising selected investments from both Tortoise and Panther. Exposure to

Derivatives is taken within permissible regulatory limits.

THE RELIGARE EDGE

We serve you with a diligent, transparent & process driven approach and ensure that your

money gets the care it deserves.

PMS brought to you by Religare with its solid reputation of an ethical and scientific

approach to financial management. While The Company offers you the services of a

Dedicated Relationship Manager who is at your service 24x7, The Company do not

depend on individual expertise alone. For you, this means lower risk, higher

dependability and unhindered continuity. Moreover, you are not limited by a particular

individual’s investment style.

The company ensures that a part of the broking at Religare Portfolio Management

Services is through external broking houses. This means that your portfolio is not

churned needlessly. Using more broking firms gives us access to a larger number of

reports and analysis, enabling us to make better, more informed decisions. Furthermore,

your portfolio is customized to suit your investment objectives.

Religare Portfolio Management Services gives you daily updates on your investment.

You can pinpoint where your money is being invested, 24x7, instead of waiting till the

end of the month to keep track.

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No charge till you profit*.So sure are The company of religare’s approach to Portfolio

Management that The company do not charge you for Religare’s services, until your

investments start showing profit. With customized investment options Religare Portfolio

Management Services invites you to invest across five broad portfolios to suit your

investment needs

INSTITUTIONAL BROKING SERVICES

The mission of this division is to institutionalize and implement a process driven

approach to cater to the needs of leading corporate houses and institutions.

The division would like to be seen as a one-stop investment gateway and knowledge

repository for its clients servicing their unique and sophisticated needs.

The division is structured as a separate SBU and is housed out of Mumbai, manned by a

small yet fleet footed and extremely skilled group of top-notch professionals drawn from

the best in the industry.

The key highlights of Religare’s service platter are:

Highly skilled, dedicated dealing, research and sales teams

Dealing capabilities on the NSE, BSE and in the cash and derivatives segment

In-depth, detailed and insightful coverage of more than 60 stocks across diverse

sectors. The sectors covered are FMCG, Hotels, Media, Pharma, Auto, Cement,

Steel pipes, Logistics, Telecom, Construction and much more.

Company’s Current clientele includes some major domestic mutual funds, insurance

companies, banks and FII’s We provide innovative, integrated and best-fit solutions to

Religare’s corporate customers. It is Religare’s continuous endeavor to provide value

enhancement through diverse financial solutions on an on-going basis, through offerings

like corporate debt, private equity, IPO, ECB, FCCB, GDR/ADR etc.

Religare's Investment Banking Division offers the following services:

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Corporate Finance

It focuses on finding partners for Religare’s clients, who not only help in adding value,

but also improve the future valuation of the organization. The company specializes in

structured financing and in providing advisory services related to financial planning,

modeling and advising on financial requirements.

Placement of Debt

Syndication of Domestic Loan / Foreign Currency Loan

Securitisation

Debt Swap & Loan Restructuring

Short Term Corporate Debt

Working Capital (Cash Credit & Short term Loan)

Capital Market Instruments

Overseas Acquisition

Placement of Equity (Private Equity)

Both for listed and unlisted companies

Merchant Banking

IPO/FPO/RIGHTS

Mergers & Acquisitions

Corporate Advisory Services

ADR/GDR/FCCB

Buy Back Of Shares

36

SERVICE OFFERINGS

RESEARCH SERVICES

We at Religare believe in providing independent research for clients to make investment

decisions, with strict emphasis on self-regulation, avoiding possible conflict of interest in

objectivity.

Varied research reports are prepared on different categories of Equities like

Fundamental research

Technical research

Daily reports

Intraday trading tech calls

Intraday Derivative call

Directional F&O calls

Structured products

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Index Arbitrage

– Arbitraging between Index (NIFTY) Futures and its constituents(Underlying

Stock Futures).

Volatility Trading

– Arbitrage between volatilities i.e. between implied volatility of Options and

forecasted volatility of underlying stock futures.

FINANCIAL DATA

Historically, we conducted business as separate companies. Their business was carried on

by Fortis.

Securities Limited, Fortis Comdex Limited and Fortis Finvest Limited, some of which

were subsidiaries of certain of our Promoter Group companies. In order to integrate our

financial services operations under the Religare name, the Company acquired a

controlling stake in Fortis Securities Limited, Fortis Comdex Limited and Fortis Finvest

Limited and subsequently, acquired a 100% stake in these entities and in Religare

Insurance Broking Limited and Religare Venture Capital Private Limited.

These entities are now our Company’s subsidiaries. For further details regarding our

acquisitions and subsidiaries, see the sectionistory and Certain Corporate Matters”

We have set forth in this Draft Red Herring Prospectus the following financial

statements:

· Stand-alone financial statements of Religare Enterprises Limited for Fiscal 2003, 2004,

2005, 2006 and

2007 prepared in accordance with Indian GAAP and restated in accordance with SEBI

Guidelines;

· Stand-alone financial statements of Religare Securities Limited for Fiscal 2003, 2004,

2005, 2006 and

38

2007 prepared in accordance with Indian GAAP and restated in accordance with SEBI

Guidelines;

· Stand-alone financial statements of Religare Finvest Limited for Fiscal 2003, 2004,

2005, 2006 and

2007 prepared in accordance with Indian GAAP and restated in accordance with SEBI

Guidelines;

· Stand-alone financial statements of Religare Commodities Limited for Fiscal 2004,

2005, 2006 and

2007 prepared in accordance with Indian GAAP and restated in accordance with SEBI

Guidelines;

· Stand-alone financial statements of Religare Insurance Broking Limited for Fiscal 2006

and 2007,

Prepared in accordance with Indian GAAP and restated in accordance with SEBI

Guidelines.

CURRENCY OF PRESENTATION

All references to “Rupees” or “Rs.” or “INR” are to Indian Rupees, the official currency

of the Republic of India. All references to “$”, “US$”, “USD”, “U.S. $”, “U.S. Dollar(s)”

or “U.S. Dollar(s)” are to United States Dollars, the official currency of the United States

of America.

This Draft Red Herring Prospectus contains translations of certain U.S. Dollar and other

currency amounts into Indian Rupees (and certain Indian Rupee amounts into U.S.

Dollars and other currency amounts).

These have been presented solely to comply with the requirements of Clause 6.9.7.1 of

the SEBI

Guidelines. These translations should not be construed as a representation that such

Indian Rupee or U.S.Dollar or other amounts could have been, or could be, converted

39

into Indian Rupees, at any particular rate, or at all. Unless otherwise specified, all

currency translations provided herein have been made based on the exchange rates

specified at www.oanda.com, a currency web site.

INDUSTRY AND MARKET DATA

Unless stated otherwise, industry data used throughout this Draft Red Herring Prospectus

has been obtained from industry publications. Industry publications generally state that

the information contained in those publications has been obtained from sources believed

to be reliable but that their accuracy and completeness are not guaranteed and their

reliability cannot be assured. Although the Company believes that the industry data used

in this Draft Red Herring Prospectus is reliable, it has not been verified by any

independent source.

Further, the extent to which the market data presented in this Draft Red Herring

Prospectus is meaningful depends on the reader’s familiarity with and understanding of

the methodologies used in compiling such data and methodologies and assumptions may

vary widely among different industry sources.

INTERNAL RISK FACTORS

1. There are certain criminal proceedings against one of our Promoters and

Directors.

Mr. Malvinder Mohan Singh, our Promoter and Director, is involved in a criminal

proceeding wherein a Mr. Tarsem Lal has claimed that Mr. Singh and others have

dishonestly received Rs. 0.40 million from him. The High Court of Punjab and Haryana

has stayed the proceedings before the concerned judicial authority. The defendants have

filed a petition in the High Court of Punjab and Haryana to quash the complaint. The

matter is currently pending. For further details, see the section

Titled “Outstanding Litigation and Material Developments” beginning on page 377.

40

2. We have been in the past and may in the future be barred by securities regulators

from dealing in the securities of certain Indian companies.

From time to time, we are subject to SEBI investigations or other regulatory scrutiny in

connection with our securities broking business. Typically, our equity broking business

involves trading on national stock exchanges. Our clients use our terminals to trade on

these stock exchanges and may engage in activities that result in price manipulation of

the securities in which they trade. While we believe that our business is conducted in

accordance with applicable regulations and market conduct norms, we cannot control

every trading activity of our clients apart from implementing the prescribed “Know Your

Client” norms. Share price manipulation by our clients may result in the SEBI or other

regulatory authority commencing investigations or imposing sanctions on us.

On January 17, 2007, the SEBI barred us along with five other day-traders from dealing

in the securities of Nissan Copper Limited (“Nissan Copper”). This prohibition has been

imposed on us as an interim measure pending SEBI investigations into allegations that

we and other entities may have Manipulated Nissan Copper’s share price following its

listing on the BSE and the NSE in December 2006. SEBI has not currently concluded that

we and other barred day-traders have manipulated Nissan Copper’s share price but the

role played by each of us in trading Nissan’s shares will be examined during the

investigation.

In the matter of Ind Tra Deco Limited, the SEBI observed a sharp increase in price and

trading volume in the scrip of Ind Tra Deco Limited and issued an interim order, dated

October 5, 2005, restraining RSL (along with other stockbrokers) and the promoters and

directors of Ind Tra Deco Limited from buying, selling or dealing in the securities of Ind

Tra Deco Limited, directly or indirectly, from October 5, 2005 until the receipt of further

orders. Subsequently, the SEBI confirmed its interim order on June 20, 2006.

The SEBI in the matters of IFSL Limited, Mega Corporation Limited, Karuna Cables

Limited and Millennium Cybertech Limited, issued orders restraining RSL, among other

stock brokers, from buying, selling or dealing in the shares of the companies mentioned

above, directly or indirectly, on behalf of certain promoters, directors and clients

41

specified by the SEBI from the date of the respective orders until the receipt of further

orders. SEBI is also investigating trading in the shares of Vijay Textile Limited, and has

directed RSL to explain its reasons for entering into transactions.

In these shares on behalf of certain clients, which allegedly resulted in artificial increases

in the Vijay Textiles’ share price? The SEBI has also directed RSL to provide reasons for

having undertaken certain transactions on behalf of its clients.

The BSE, the NSE and the NSCCL have, in the period from April 2004 till date, issued

various letters and show cause notices against RSL. An aggregate penalty/ fine of

approximately Rs. 3.15 million has been imposed upon RSL in these matters. In addition,

the National Securities Depositories Limited has levied penalties aggregating to Rs. 0.11

million on RSL.

We intend to cooperate fully with all SEBI, stock exchange and other regulatory

investigations and respond promptly to any notices. The outcome of any such

investigations cannot be predicted and could result in our being censured, fined,

deregistered, suspended or disqualified from dealing in the securities market, including as

an underwriter or an asset management company. Any such action would restrict our

trading activities and growth plans, severely impair our equity brokerage business, harm

our reputation and materially and adversely affect our business, financial condition and

results of operations. For details regarding other legal proceedings to which we are a

party, see the section titled “Outstanding Litigation and Material Developments”.

SUMMARY OF OUR BUSINESS, STRENGTHS AND STRATEGY

We are a financial services company in India, offering a wide range of financial products

and services targeted at retail investors, high net worth individuals and corporate and

institutional clients. We are promoted by the promotes of Ranbaxy Laboratories Limited.

We operate from six regional offices and 25 sub-regional offices and have a presence in

330 cities and towns controlling 979 locations managed by us and our Business

Associates all over India, as well as a representative office in London. While the majority

of our offices provide the full complement of our services, we also have dedicated offices

42

for our investment banking, institutional brokerage, portfolio management services and

priority client services.

Religare Enterprises Limited is the holding company for our subsidiaries. Our principal

subsidiaries include:

Retail Spectrum

covers equity brokerage services, commodity brokerage services, personal financial

services (financial planning for the retail investor, including the distribution of mutual

funds, savings products, life insurance and initial public offerings (“IPOs”) and personal

credit (personal loans services (“PLS”) and loans against shares (“LAS”). Historically,

the services offered in this spectrum have been the most substantial part of our business.

Our Retail Spectrum services in India are being offered through a network of 979

business locations spread across 330 cities and towns and also through our online

platform, www.religareonline.com,which is being developed as an integrated portal to

offer financial and other services. Our business locations include intermediaries, or our

“Business Associates”, who deliver a standard quality of service offering on the basis of a

pre-determined revenue sharing ratio for the business generated through them. Our Retail

Spectrum focuses on clients who keep less than Rs. 2.5 million on a continuing basis, in

the form of either equity trading account margin, mutual fund investment, portfolio

management investments or insurance premiums paid up.

We have also increased our local commodity locations (or “mandis”) to 42 as of March

31, 2007 in order to expand our retail commodity brokerage services.

WEALTH SPECTRUM

Covers products and services which are geared to service high net worth individuals and

Provide wealth advisory services (on an asset allocation model), PMS (discretionary

equity investments), priority client equity services (non-discretionary equity trading

services), art initiatives (an art fund which we intend shortly to launch as an investment

diversification product) and international equity investment advisory services. We have

entered into an exclusive arrangement with Wall Street Electronics, Inc., a New York

43

broker dealer, to give Indian clients access through us to U.S. markets. Our Wealth

Spectrum focuses on clients who keep at least Rs. 2.5 million on a continuing basis or

more in the form of equity trading account margins, mutual fund investments, portfolio

management investment or insurance premiums paid up.

INSTITUTIONAL SPECTRUM

Covers products and services which cater under one service offering to corporate and

institutional clients, including domestic mutual funds, FIIs, banks and corporate

customers. The Institutional Spectrum provides services to the institutional investor

community through institutional brokerage and

RISK FACTOR

· This is a public issue of 11,364,152 Equity Shares for cash at a price of Rs. per Equity

Share including a share premium of Rs. per Equity Share aggregating to Rs. million. The

Issue would constitute 15% of the post Issue paid-up capital of our Company. Our

Company is exploring the possibility of a Pre-IPO Placement. If the Pre-IPO Placement is

completed, the number of Equity Shares issued pursuant to the Pre-IPO Placement, will

be reduced from the Issue, subject to a minimum Issue size of 10% of the post-Issue

share capital.

· In terms of Rule 19 (2) (b) of the SCRR, this being an issue for less than 25% of the

post–Issue capital, the Issue is being made through the 100% Book Building Process

wherein at least 60% of the Issue will be allocated on a proportionate basis to Qualified

Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a

proportionate basis to Mutual Funds only.

The remainder shall be available for allocation on a proportionate basis to QIBs and

Mutual Funds, subject to valid Bids being received from them at or above the Issue Price.

If at least 60% of the Issue cannot be allocated to QIBs, then the entire application money

will be refunded forthwith.

44

Further, up to 10% of the Issue will be available for allocation on a proportionate basis to

Non-Institutional Bidders and up to 30% of the Issue will be available for allocation on a

proportionate basis to Retail Individual Bidders, subject to valid Bids being received at

or above the Issue Price.

· Under-subscription, if any, in the Non-Institutional Portion and Retail Individual

Portion would be met with spill over from other categories at the sole discretion of our

Company in consultation with the BRLMs. For more information, see the section titled

“Issue Procedure - Basis of Allotment” beginning on page 444.

· The average cost of acquisition of equity shares (on ‘first in first out’ basis) by each of

our Promoters, Mr. Malvinder Mohan Singh and Mr. Shivinder Mohan Singh is Rs.

17.33. For detail see the section titled “Capital Structure” beginning on page 24. The

average cost of acquisition of Equity Shares by our Promoters has been calculated by

taking the average of the amounts paid by them to acquire the Equity Shares currently

held by them.

· The net worth of our Company, on a consolidated basis, is Rs. 3,209.88 million as at

March 31, 2007, respectively, as per restated consolidated financial statements of our

Company under Indian GAAP in the section titled “Financial Statements” beginning on

page 132.

· The net asset value/book value per Equity Share of Rs. 10 each was Rs. 49.85 as at

March 31, 2007, as per restated consolidated financial statements of our Company

included in this Draft Red Herring Prospectus. For further information, see the section

titled “Capital Structure” beginning on page 24.

· Our Promoters, Directors and key managerial personnel are interested in our Company

to the extent of remuneration and the Equity Shares held by them or their relatives and

associates or held by the companies, firms and trusts in which they are interested as

directors, member, partner and/or trustee and to the extent of the benefits arising out of

such shareholding, if any, in our Company. For further details, see the sections titled

“Capital Structure”, “Our Promoters and Promoter Group” and “Our Management”

beginning on pages 24, 105 and 92, respectively.

45

· Other ventures promoted by our Promoters are interested to the extent of their

shareholding in our Company. For details, see the section titled “Capital Structure”

· Certain of our Promoter Group entities are engaged in similar businesses as ours,

resulting in a conflict of interest with respect to our business strategies. For further

details, see the sections titled “Risk Factors” and “Our Promoters and Promoter Group”

beginning on pages xii and 105, respectively.

· Except as disclosed in the section titled “Capital Structure” beginning on page 24, we

have not issued any Equity Shares for consideration other than cash.

INDUSTRY

Industry

:Finance - General

BSE

Code :532915

Book

Closure :11/08/2010

Group : Religare NSE

Code : RELIGARE

Market

Cap :Rs. 6,558.77 Cr.

ISIN No : INE621H01010Market

Lot :1

Face Value

:Rs. 10.00

 Registered & Corporate Office Registrar & Share Transfer Agent

D3, P3B, District Centre, Saket, New Delhi, Delhi - 110017

Tel : +91 11 39125000Fax : +91 11 39126050Email : info@religare.inWebsite: www.religare.in

D3, P3B, District Centre, Saket,New Delhi, Delhi - 110017 Tel : +91 11 39125000 Fax : +91 11 39126050 Email : info@religare.in

46

CHAPTER-IV

LITERATURE REVIEW

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CAPITAL MARKETS

The market where investment funds like bonds, equities and mortgages are traded is

known as the capital market. The primal role of the capital market is to channelize

investments from investors who have surplus funds to the ones who are running a

deficit. The capital market offers both long term and overnight funds. Capital market

is the barometer of the economy and represents the macroeconomic affairs of the

country. Capital market discounts the future and it is reflection of future of the

economy. In the long run it is a true measure of the health of any economy.

In the capitalistic economy, the capital market plays a pivotal role by bring

the common investor to invest in corporate securities. The global trend is that even

the socialist countries like China and Russia are moving towards capitalistic economy

by inviting the private investments into the industry.

Among the instruments, mutual funds, bonds and derivative instruments are more

active which have grasped a substantial share in resource mobilization giving a

challenge to traditional monetary assets such as bank deposits. Similarly, instruments

like deep discount bonds, zero coupon bonds and other bonds with very long maturity

period compete with traditional term saving instruments.

The Capital Markets are relatively for long-term (greater than one year maturity)

financial instruments (e.g. bonds and stocks). Their role can be summarized as

follows:

The Capital Market is the indicator of the inherent strength of the economy.

It is the largest source of funds with long and indefinite maturity for companies

and thereby enhanced the capital information in the country.

It helps in channeling the savings pool in the economy towards optimal allocation

of capital in the country.

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STRUCTURE AND SIZE OF THE MARKET:

Today India has two national exchanges, the Bombay Stock Exchanges (BSE) and the

National Stock Exchange (NSE). Each has fully electronic trading platforms with

around 9400 participating broking outfits. Foreign brokers account for 29 of these.

There are some 9600 companies listed on the respective exchanges with a combined

market capitalization near $125.5bn. Any market that has

experienced this sort of growth has an equally substantial demand for highly

efficient settlement procedures, In India 99.9% of the trades, according to the

National Securities Depository, are settled in dematerialized form in a T+2 rolling

settlement environment. In addition, trades are guaranteed by the National Clearing

Corporation of India Ltd (NSCCL) and Bank of India Shareholding Ltd (BOISL),

Clearing Corporation houses of NSE and BSE respectively.

GLOBALISATION IN CAPITAL MARKET:

With the sweeping economic changes witnessed globally towards more market-

oriented economies, the government of India too has embarked upon radical

economic policy measures to revitalize its economy. The Indian Capital Markets,

which have attained a remarkably high degree of growth in the last decade, are poised

for a further leap forward over the next ten years With the opening of the economy to

multinational and the adoption of more liberal economic policies, the economy is

more driven more towards the free market economy. Two major reasons why Indian

securities are now increasingly regarded as attractive to international investors are the

relatively high returns compared with more developed global markets as well as the

low correlation with world markets. However until the early 90s, the foreign

investor’s only way of accessing the Indian Capital markets was through listed

country funds. 498 Foreign Institutional Investors who hold 1325 sub-accounts with a

net investment of approximately $15bn.

At present the stock market consists of 23 regional stock exchanges and two National

Stock Exchanges known as NSE and OTCET (Over the Counter Exchange of India).

49

SCENARIO OF INDIA CAPITAL MARKET:

Reforms in the securities market, particularly the establishment and empowerment of

SEBI, market determined allocation of resources, screen based national wide trading,

dematerialization and electronic transfer of securities, rolling settlement and ban on

deferral products, sophisticated risk management and derivatives trading, have greatly

improved the regulatory frame work and efficiency of trading and settlement. Indian

market is now comparable to many developed market in terms of a number of

qualitative parameters.

Securities markets are markets in financial assets or instruments. Business

organizations, corporate units and the Governments, Central or state issues these

Public sector undertakings also issue these securities. These are thus sources of funds

to the issuers.

Securities are the claims on money and are like promissory notes. Securities are

sources of fund for companies, Govt. etc. The external sources of funds of the

companies are as follows:

Long term funds:

Ownership capital-equity and preference capital.

Debt capital-debentures and long term borrowings in the form of

deposits from public or credit limits or advances from banks and

financial institutions.

Short term funds:

Borrowings from banks.

Trade credits and supplier’s credits.

The Securities Market can again be classified into:

PRIMARY MARKET: A primary market is a market is a where securities

are issued to the public for the first time. New issues are dealt within this market. The

50

new issues has three functions to perform origination, underwriting and distribution.

There are three ways by which a company may raise capital in primary market.

Public issue

Right issue

Private Placement

Intermediate in the Primary market are merchant bankers, collecting bankers,

registrants and transfer agents, broker underwriters, advertising agencies, printers,

stock-brokers and solicitors and mailing agents.

SECONDARY MARKET: Secondary market is a market where securities,

which have already issued in the primary market, are traded. This market consists of

all stock exchanges recognized by the Govt. of India, and is regulated under the

securities contract(regulation) act1956.The BSE is principal stock exchange in India,

which sets the other stock markets.

Intermediate in the Secondary market are brokers, jobbers, dealers, arbitrators,

investment advisors, portfolio managers and sub-brokers.

EVOLUTION OF INDIAN SECURITIES MARKET:The origination of the Indian Securities Market may be traced back to 1875, when

22enterprising brokers under a Banyan tree established the Bombay Stock Exchange

(BSE). Over the last 125years, the Indian securities markets in Asia. Today, India

markets conform to international standards both in terms of structure and in terms of

operating efficiency.

TRADITIONAL TRADING SYSTEM:The traditional system of trading involved lots of hue and cry. The traders

of the share used to shout in the trading arena and the buyer used to shout and quote

his rates. If the rates matched the deal was prepared for the buyer and the seller and

one for the exchange. By the end of the day the broker gets the daily volume sheet

consisting of the list of all the transactions entered into by member. Any

discrepancies were reported to the exchange. The client did the confirmation at the

end of the day. The whole scene made a common man scared of the stock market and

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due to its uncertainties it was considered as highly risky and high-risk takers only

used to invest their money in the share bazaar.

PRESENT TRADING MECHANISM:The National Stock Market System provides single, nationwide securities.

It enables an investor in one part of the country to trade at the best quotes with an

investor located in other part of the country through the members of the stock

exchanges and subsequently clear and settle the trade in an efficient and cost effective

manner. The primary objective of the stock market is to provide clear opportunity to

the investors throughout the country to trade any security irrespective of the size of

the order or the broker through whom the order is routed. This provides the facility to

execute the buy order at the lowest price in the stock market located anywhere in the

country without any-extra cost to the investors.

There will be no trading floor in the exchange. Instead, each trading member will

have a computer at his own office anywhere in India which will be connected to the

central computer system at the NSE through leased lines or VSATS(Very small

Aperture Terminals), for an interim transition period of six months and subsequently

by satellite link. VSAT s are very relatively smaller dishes similar to dish antenna for

cable TV and have the benefit of not being very expensive. This mode of trading is

known as “ONLINE TRADING “.

OBJECTIVES OF PRESENT TRADING SYSTEM:To reduce and eliminate operational inefficiencies inherent in manual

systems to increased trading capacity in stock exchange. Improve market

transparency, eliminate unmatched trades and delayed reporting. Provide for on line

& off-line monitoring, control & surveillance of the market.

Promote fairness & speedy matching.

Smooth market operations using technology while retaining the flexibility of

conventional trading practices.

Set up various limitations, rules and controls centrally.

Consolidate the trade’s data on electronic media to interface with the brokers back

office system. Provide public information on scrip prices, indices for all users of the

system. Provide analytical data for use of stock exchange.

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THE MECHANISM:The broker of stock trading gets the membership at the stock exchange

after full filling a set of conditions. The broker is connected on line with the stock

exchange. On the system he constantly gets the real quotes in the market, there

position, the demand and supply rates, number of buyers and sellers at various rates.

The customer drops in the office of the broker or gives him a call regarding the sale

or purchase of the particular number of shares. The broker takes his order and inputs

that in his online system. If a proper match regarding that price is available in the

market that is if both the buy and sale rates match, then it implies that the deal is

stuck. If the suitable match is not found the order gets stacked in the system till a

suitable counter order emerges and the transaction is closed at that point of time.

RECOGNIZED STOCK EXCHANGES:There are 22 stock exchanges in India. These were founded at different

times, in different places, under different laws. However, all of them have been

recognized and regulated under single law, namely the securities contracts

(Regulation) Act, 1956. No person is, in principle, allowed to organized stock

exchanges other than the recognized once [section 19(1) of the SC(R) Act, 1956].

INDIAN CAPITAL MARKETThe Indian Capital Market is one of the oldest capital markets in Asia which

evolved around 200 years ago.

Chronology of the Indian capital markets:

1830s: Trading of corporate shares and stocks in Bank and cotton Presses in Bombay.

1850s: Sharp increase in the capital market brokers owing to the rapid development of commercial enterprise.

1860-61: Outbreak of the American Civil War and ' Share Mania ' in India.

1894: Formation of the Ahmadabad Shares and Stock Brokers Association.

1908: Formation of the Calcutta Stock Exchange Association.

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CAPITAL MARKET INSTRUMENTSThe capital markets are relatively for long term (greater than one year

maturity) financial instruments e.g bonds and stocks). It is the largest source of funds

with long and indefinite maturity for companies are there by enhances the capital

formation in the country. It offers a investment avenues to investors. The capital

market instruments are the vehicles between the companies and the investors. The

financial instruments that have short or medium term maturity periods are dealt in the

money market whereas the financial instruments that have long maturity periods are

dealt in the capital market. The different types of financial instruments that are traded

in the capital markets are equity instruments, credit market instruments, insurance

instruments, foreign exchange instruments, hybrid instruments and derivative

instrument Stock market is the capital and SEBI is the driver. These instruments are

of two types

Primary market

Secondary market

A part from derivative instruments, the following is the major mediums of

Approaching capital markets:

Equity shares

Preference shares

Debentures/ bonds

American Depository Receipts (ADR)

Global Depository Receipts (GDR)

Derivatives

Employee stock option plan.

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[A] EQUITY SHARES: They are also called as common stock. The common stock holders of a

company are its real owners, the own the company and assume the ultimate risk

associate with ownership. Their liability, however is restricted to the amount of their

investment in the event of liquidation, these stock holders have a residual claim on

the assets of the company after the claims of all creditors and preferred stock

holders,are settled in full. Common stock like preferred stock, as no maturity

date.NSE started trading in the equities segment (Capital Market segment) on

November 3, 1994 and within a short span of 1 year became the largest exchange in

India in terms of volumes transacted. Trading volumes in the equity segment have

grown rapidly with average daily turnover increasing from Rs.17 crores during 1994-

95 to Rs.14,148 corers during FY 2007-08. During the year 2007- o8,NSE reported a

turnover of Rs.3,551,038 crores in the equities segment. The Equities section

provides you with an insight into the equities segment of NSE and also provides real-

time quotes and statistics of the equities market. In-depth information regarding

listing of securities, trading systems & processes, clearing and settlement, risk

management, trading statistics etc are available here.

AUTHORIZED, ISSUED AND OUTSTANDING SHARES:An authorized shares is the maximum no. of shares that the articles of association

(AOA) of the company permit it to issue in the market. A company can however

amend its AOA to increase the number. The number of shares that the company has

actually issued out these authorized shares is called as issued shares. A company

usually likes to have a number of shares that a authorized but un-issued. These un-

issued allow flexibility in granting stock options, pursuing merger targets and

splitting the stock. Outstanding shares refer to the number of shares issued and

actually held by public. The corporation can buy back part of its issued stock and hold

it as a treasury stock. Par value , book value and liquidating value :The par value of a

share of stock is merely a recorded figure in the corporate charter and is of little

economic significance. A company should not, however, issue common stock at a

price less than par value, because any discount from par value ( amount by which the

issuing price is less than the par value) is considered a contingent liability of the

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own wrest to the creditors of the company. In the event of liquidation, the share

holders would be legally liable to creditors of any discount from par value.

Example: suppose that xyz inc. is ready to start business for the first time and sold

10000 shares rupees 10 each. the shareholders equity portion of the balance sheet

would be common stock @ 10 each at par value: 10000 shares issued and outstanding

RS100000 Total shares holders equity RS100000.The book value per share of

common stock is the shareholders equity – total assets minus liabilities and preferred

stocks as listed on the balance sheet- dividing by the number of shares

outstanding .suppose that xyz is now 1 year old has generated RS 500000 after- tax

profits, but pays number dividing. Thus, retained earnings are RS 50000. the share

holders equity is now RS 100000+ RS 50000 =150000 and the book value per share

is rs 1500000/10000=RS 25.Although one might expect the book value per share of

stock to correspond to the liquidating value (per share) of the company, most

frequently does not. Often assts are sold for less than their values, particularly when

liquidating costs are involved.

Market valueMarket value per share is the current price at which the stock is traded. For actively

traded stocks, market price quotations are readily available. For the many in active

stocks that have thin markets, price is difficult to obtain. Even when obtainable, the

information may reflect only the sale of a few shares of stock of common stock and

not typify the market value of the firm as the whole. The market value of a share of

common stock will usually differs from its book value and its liquidating value.

Market value per share of common stock is a function of the current and expected

future dividends of the company and the perceived risk of the stock on the part of

investors.

Rights of common share holders:

1. Rights of income:

If the company fails to pay contractual interest and principle and

payments to creditors, the creditors are able to take legal action to insure that

principle payments are made of company is liquidated. Common share holders, on the

other hand, have legal recourse to a company for not distributing profits. Only if

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management, the board of directors, or both engaged in fraud may share holders take

their case to court and possibly force the company to pay dividends.

1. Voting rights:

The common shares of a company are its owners and they are entitled to

elect a board of directors. In a large corporations shares holders usually exercise only

indirect control through the board of directors they elect. The board, in turn, select the

management, and the management actually controls the operations of the company. In

a sole proprietorship, partnership, or small corporation, the owners usually control the

operation of the business directly.

2. Proxies and proxy contests:

Common share holders are entitled to one vote for each share of stock that

they own. It is usually difficult, both physically and financially, for the most share

holders to attend corporation annual meetings. Because of this, many share holders

vote of means of a proxy, a legal document by which share holders assign their right

to vote to another person.

3. Voting procedures:

Depending on the corporate charter, the board of directors is elected

under either majority rule voting system or a cumulative voting system. Under the

majority rule system, stock holders have one for each share of stock that they own,

and they must vote for each director position that is open. Under cumulating voting

system, a stock holder is able to accumulate votes and cast them for less than the total

number of directors being elected. The total number of votes of each share holders is

equal to the number of shares the stock holder times the number of directors being

elected.

ISSUE MECHNISM :

The success of an issue depends, partly, on the Issue Mechanism. The methods by,

which new issues are made of

Public issue through prospectus.

Offer for sale.

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Placement.

Rights issue.

1. Public Issue Through Prospectus :

Under this method, the issuing companies themselves offer directly to general

public a fixed number of shares at a stated price, which in the case of new companies

is invariably the face value of the securities, and in the case of existing companies, it

may something include a underwritten to ensure arising out of unsatisfactory public

response. Transparency and wide distributions of shares are its important and

advantages.

The foundation of the public issue method is a prospectus, the minimum

contents of which are prescribed by the Companies Act 1956. It also provides both

civil and criminal liability for any misstatement in the prospectus. Additional

disclosure requirements are also mandated by the SEBI.

The content of the prospectus, inter aria, include:

Name and registered office of the issuing company.

Existing and proposed activities.

Board of directors.

Location of the industry.

Authorized, subscribed and proposed issued of capital to public.

Dates of opening and closing of subscription list.

Names of broker, underwriter, and other from whom application forms along with copies of

Prospectus can be obtained.

Minimum subscription.

Names of underwriter , if any, along with a statement that in the opinion of the directors, the

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Resources of the underwriter are sufficient to meet the underwriting obligation.

A statement that the company will make an application stock exchange for the permission to deal in or for a quotation of its and so on.

2. Offer for sale:

Broker to their own client of securities which have been previously purchased

or subscribed”. Under this method, securities are acquired by the issue houses, as in

offer for sale method, but instead of being subsequently offered to the public, they are

placed with the client of the issue houses, both individual and institutional investors.

Each issue house has a prepared to subscribe to any securities which are issued in this

manner. Its procedure is the same with the only difference of ultimate investors.

In this method, no formal underwriting of the issue is required as the placement itself

Amount to underwriting since the houses agree to place the issue with their clients.

The main advantages of placing, as a method issuing new securities, is its relative

cheapness. There is a cost cutting on account of underwriting commission, expense

relating to applications, allotment of shares and the stock exchange requirements

relating to contents of the prospectus and its advertisement. This method is generally

adopted by small companies with unsatisfactory financial performances.

Its weakness arises from the point of distribution of securities. As the

securities are offered only to a select group of investors, it may lead to the

concentration of shares in to a few hands that may create artificial scarcity of scripts

in times of hectic dealings in such shares in the market.

3. Rights Issue :

Only the existing companies can use this method. In the case of companies

whose shares are already listed and widely-held, shares can be offered to the existing

shareholders. This is called right issue. Under this method, the existing shareholders.

Are offered the right to subscribed to new shares in proportion to the number of

shares they already hold. This is made by circular to existing shareholders only.

In India, section 81 of the companies act 1956 provides that where a

company increases its subscribed capital by the issue of new shares, either after

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two years of its formation or after one year of first issue of shares whichever is

earlier, these have to be first offered to the existing shareholders with this requirement

by passing a special resolution to the same effect. The chief merit of rights issues is

that it is an inexpensive method.

SWEAT EQUITY SHARES: Under section 9Aof the companies Act , 1956, a company can issue

sweat equity shares to its employees or directors at discount or for consideration other

than cash for providing know-how making available rights in the nature of intellectual

property rights or value additions etc on the following.

CONDITIONS:

1. The issue of sweat equity share is authorized by a special resolution passed by

the company in the general meeting.

2. The resolution specifies the number of shares, current market,

Price, resolution, if any, and the class or classes of directors Or employees to

whom such equity shares are to be issued.

3. The company is entitled to issue sweat equity shares after completion of one year from the date of Commencement Of business.

4. The equity shares of the company must be listed on a recognized stock exchange.

5. The issue of sweat equity shares must be listed on a accordance with the regulations made by the SEBI in the behalf.

6. An unlisted company can issue sweat equity shares in accordance with the prescribed guidelines made for this purpose. 7. All the limitations, restrictions and provision relating to equity shares shall be applicable to sweat equity shares.

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[B] PREFERENCE SHARES:

Preference shares are a hybrid security because it has both ordinary shares and

bonds. Preference shareholders have preferential rights in respect of assets and

dividends. In the event of winding up the preference shareholders have a claim on

available assets before the ordinary shareholders. In addition, preference

shareholders get their stated dividend before equity shareholders can receive any

dividends.

TYPES OF PREFERENCE SHARES:

1. Cumulative and Non-cumulative preference shares:

The cumulative preference gives rights to demand the unpaid dividends of

any year, during the subsequent ears when the profits and ample. All preference

dividends arrears must be paid before any dividends can be paid to equity

shareholders. The non-cumulative preference share carries a right to a fixed dividend

out of the profits to any year. In case profits are not available in a year, the holders get

nothing, nor can they claim unpaid dividends in subsequent years.

2. Cumulative convertible preference shares:The cumulative convertible preference (CCP) share is an instrument that

embraces features of both equity shares and shares and preference shares, but which

essentially is a preference shares. Since the CCP shares capital would constitute a

class of shares, distinct from purely equity and purely preferences share capital, the

rights of the instrument holders must be stated either in a general body resolution or

in the articles or in the terms of issues inhe offer documents viz., prospectus /letter of

offer.

3. Participating and non participating preference shares:

Participating preference shares are those shares which are entitled to a fixed

Preferential dividend and. in addition, carry a right to participate in the surplus profits

along with equity shares holders after dividend at a certain rate has been paid to

equity share holders. Again in the event of winding up, if after paying back both

preference and equity share holders, there is still any surplus left, then the

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participating preference share holders get additional shares in the surplus assets of

the company. Unless expressly provided, preference share holders get only the

fixed preference dividends and return on capital in the event of winding up out of

realized values of assets after meeting all external liabilities and nothing more. The

rights to participate may be given either in the memorandum or articles or by virtue of

terms of issue.

4. Redeemable and Irredeemable preference shares:

Subjects to an authority in the articles of association, a public limited

company may issue redeemable preference shares to be redeemed either at a fixed date

or after a certain period of time during the life time of the company. The companies

act, 1956 prohibits the issue of any preference share which is irredeemable or is

redeemable after the expiry of a period of twenty years from the date issue.

POWER TO ISSUE REDEEMABLE PREFERENCE SHARES:Section 80 of the companies act 1956 permits a company to issue

Redeemable preference shares if:

The company is limited by shares.

Its article of association authoriese the issue of redeemable preference shares.

Those shares are redeemable at the option of the company.

A company is allowed to issue redeemable preference shares in the following circumstances:

Such preference shares shall be redeemed only out of profits of the company,

which would otherwise be available for dividend.

Such redemption can also be made out of the proceeded of fresh issues of

shares made of the purpose of redemption.

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Before redemption, such shares must be fully paid up. The premium on

redemption shall be provided out of profits of the company or out of

securities premium account, before the share are redeemed.

Where shares are redeemed out of profits to a separate account called ‘capital

The redemption of preference shares under this section shall not be taken as

reducing the authorized capital of the company.

The capital redemption reserve account may used for issue of fully paid

bonus shares. Companies are not allowed to issued irredeemable preference

shares or preference shares which are redeemable after the expire of a period

of 20 years from the date of its issue. In case of default, the company and

every officer of the company who is in default shall be punishable with a fine

which may extend to Rs 10000.

DEFERRED/ FOUNDERS SHARES:

A private company any issue what are known as deferred or founder’s

shares. Such shares are normally held by promoters and directors of the company.

That is why they are usually called of a smaller denomination, say on rupee each.

How ever they are generally given. Equal voting rights with equity shares, which

may be of higher denomination, say Rs10 each. Thus, by investing relatively lower

amounts, the promoter may gain control over the management of the company. As

regards the payment of dividends have been declared on the preference and equity

shares. It is because of this deferment of the dividend payment that these Shares are

also called deferred shares. The promoters, founders and directors tend to have direct

interest in the success of the company they will receive dividends on these shares

only if the profits are high enough to leave a balance of after paying dividends to

preference an equity shareholders. Besides greater the profits of the company, the

higher will be dividends paid on these shares.

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ISSUED SHARE AT A PREMIUM: When a company issues shares at a premium, whether or cash or

consideration other than cash, the premium collected on those shares shall be

transferred to a separate account called ‘securities premium account’.The provision

of the act relating reduction of shares capital shall also apply to the securities

premium account may be applied by the company in the following ways:

In paying up un issued shares of the company to be issued to members of the

company as fully paid up shares.

1. In writing off the preliminary expenses of the company.

2. In writing off the expenses of, or the commission paid or discount allowed on,

any issue of shares debentures of the company.

3. In providing for the premium payable on redemption of any preference shares or

debentures.

ISSUED SHARE AT A DISCOUNT:

The issued of shares at a discount must be of a class of shares issued by the

company.

1. The issue of shares at a discount must be authorized by a resolution passed in

the general meeting and sanctioned by the central government.

2. The resolution shall specify the maximum rate of Discount at which the

shares are to be issued.

3. The maximum rate of discount must not exceed 10% unless the central

government is of the opinion that higher percentage of discount may be

allowed in special circumstances.

4. The shares must be issued within two months from the date of sanction by the

or within such extended time as the central government may allow.

5. The issue of shares at a discount can be done by a company only a year after

the commencement of the business by the company.

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6. In case of revival and rehabilitation of sick industry companies under chapter

VIA, the issue of shares at discount shall be sanctioned by the ‘Tribunal’

instead of ‘central government’.

7. Every prospectus relating to issue of shares shall contain the details of

discount allowed on the issue of shares or the unwritten off amount f discount

at the date of issue of prospectus.

8. In case of default, the company and every officer of the company who is in

default shall be punishable with fine which may extend to Rs.500.Shares

issued for consideration other than cash

9. To the underwriters of shares and promoters by way of payment

remuneration or for expenses incurred.

10. To the vendor from whom the running business is purchased, as purchase

price or consideration.

11. Issued of bonus shares out of the reserves to the existing shareholders of the

company

[C] DEBENTURES:

“Acknowledge of debt, given under the seal of the company and containing a contract

for the repayment of the principal sum at a specified date and for repayment of the

principal sum at a specified date and for the payment of interest at fixed rate percent

until the principal sum is repaid, and it may or may not give the charge on the assets

to the company as security of the loan”.

KIND OF DEBENTURES:

1. Bearer debentures: Bearer debentures are similar to share warrants in that too

are negotiable instruments, transferable by delivery. The interest on bearer

debentures is paid by the means of attached coupons. On maturity, the principal

sum is paid to the bearers.

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2. Registered debentures: These are debentures which are payable to the registered

Holders i.e.. Persons whose names appear in the register of debenture holders.

Such debentures are transferable in the same way as shares.

3. Perpetual or Irredeemable debentures: A debenture which contains no clause

as to payment or which contains a clause that it shall not be paid back is called a

perpetual or : irredeemable debenture. These debentures are redeemable only on

the happening of a contingency on the expiration of a period, however long. It

follows that debentures can be made perpetual, i.e.. The loan is repayable only on

winding up or after a long period of time.

4. Redeemable debentures: These debentures are issued for a specified period of

time. On the expiry of the specified time the company has the right to pay back

the debenture holders and have its properties released from the mortgage or

charge. Generally, debentures are redeemable.

5. Debentures Issued as Collateral Security for a Loan: The term collateral

security or secondary security means, a security which can be realized by the

party holding it in the event of the loan being not paid at the proper time or

according to the agreement of the parties. At times, the lenders of money are

given debentures as a collateral security for loan. The nominal value of such

debentures is always more than the loan. In case the loan is repaid, The

debentures issued as collateral security are automatically redeemed.

1. Naked debentures: Normally debentures are secured by a mortgage or a

Charge on the company’s assets. However debentures may be issued without any

charge on the assets of the company. Such debentures are naked or unsecured

debentures. They are mere acknowledgment of a debt due from the company,

creating no rights beyond those secured creditors.

2. Secured debentures: when any particular or specified property of the company

is offered as security to the debenture holders and when the company can deal

with it only subject to the prior right of the debenture holders, fixed charge on the

undertaking of the company i.e.. Whole of the property of the company, both

present and future, an when it can deal with the property in the ordinary course of

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business until the charge crystallized i.e.. When the company goes in to liquidation

or when a receive is appointed, the charge is said to be floating charge. When the

floating charge crystallizes, the debentures holder have right to be paid out of the

assets subjects to the right of the preferential creditor but prior to making any

payment to unsecured creditors.

METHODS OF REDEMPTION OF DEBENTURES:A company may issue redeemable as well as irredeemable debentures. There

are two important ways of redeeming the debentures according to the terms of the

issue.

Redemption of debentures on a fixed date:

In this method payment to the debenture holders is made at the expiry of

the stated period. A ‘sinking fund account’ is created by debiting the profits and loss

appropriation account’. The amount so credited in the sinking fund account is

invested in the gilt edged securities. The securities are sold at the date of redemption

of debentures.

Redemption of debentures by periodical drawings:

In this method, payment is made year after of a certain portion of the total

debentures by drawing. As such the revenue account is debited with the annual

drawings and the “redemption fund account” are credited.

Convertible debentures (CDs): A company may also issue CDs in which case an option is given to the

debenture holders to covert them in to equity or preference shares at stated rates of

exchange, after a certain period. Such debentures once converted in to shares cannot

be reconverted in to debentures. CDs may be fully or partly convertible. In case of

fully convertible debentures, the inter face values converted in to shares at the expiry

of specified period(S). In case of partly Convertible debenture only convertible

portion is redeemed at the end of specified period. Non convertible debenture does

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not confer any option on the holder to the debenture in to shares and are Redeemed at

the expiry of specified period (s).CDs, whether fully or partly convertible, may be

converted in to shares at the end of specified periods in one or more stages. The

company should get a credit rating of debenture done by credit rating agency. CDs

are listed on stock exchanges. The partly convertible debenture (PCDs) offers more

flexibility to both companies and investors. It has been claimed to be better than fully

convertible debenture as it does not automatically entail large equity base, particularly

in case of new companies. Experience shows that servicing of large base of capital is

not easy in case of new projects, especially if the company runs in to rough weather

due to marketing difficulties. As such, the non-convertible portion of the debenture

keeps the equity of a company within manageable limits.

[D] American Depository Receipts (ADR):

An American depository receipt (ADR) is a negotiable receipt which

represents one or more depository shares held by a US custodian bank, which in turn

represent underlying shares of non- issuer held by a custodian in the home country.

ADR is an attractive investment to US investors willing to invest in securities of non

US issuers for following reasons:

ADR provide a means to US investors to trade the non US company shares in US

dollars ADR \ negotiable receipt (which represents the non US share) issued in

US capital market and is traded in dollars. The trading in ADR effectively means

trading in underlying shares.

ADR facilitates share transfers. ADRs are negotiable and can be easily transferred

Among the investors like any other negotiable instrument. The transfer of ADRs

automatically transfers the underlying share.

The transfer of ADRs does not involve any stamp duty and hence the transfer of

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Underlying share does not require any stamp duty. The dividends are paid to the

holders of ADRs in US dollars.

ADR OFFERINGS:

A public offering provides access to the broadest US investor base and

most liquid US securities market. The compliance requirements in public offerings

are the strictest and comprise of Registration of underlying security under the Act

(From F1) Registration of ADR under the 1993Act (From F6) Registration under the

1934 Act (if the company is not already Regulation act under the 1934 Act).

[E] Global Depository Receipt (GDR):

With the growth in international equity issuance, together with growth in

the underlying secondary market investment, an increasing need has been felt for

better fungibility. The investors demand stocks that trade freely on an international

basis without restrictions. The depository receipts have be used as a partial solution to

this problem. American depository receipts have been the favored forms of

investments by US investors in foreign equities. A number of international equity

offers, particularly some Asian markets have increasingly used global depository

receipts (GDR),particularly where legal restrictions and closed markets have

prevented the world wide circulation of underlying security on a freely trade basis.

The GDRs continue to have value in liquid or restricted markets and are frequently

used by project companies to raise equity funds.

CHARACTERISTICS OF A GDR:

Depository receipts are negotiable certificates with publicly traded equity of the

issuer as underlying security.

An issue of depository receipts would involve the issuer, issuing agent to a foreign

depository.

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The depository, in turn, issues GDRs evidencing their rights as share holders.

Depository receipts are denominated in foreign currency and are listed of

international exchange such as London or Luxembourg.

GDRs enable investors trade a dollar denominated instrument on an international

stock exchange and yet have rights in foreign shares.

The principle purpose of the GDR is to provide international investors with local

settlement.

The issuer issuing the shares has to pay dividends to the depository in the domestic

currency.

The depository has to then convert the domestic currency into dollars for onward

payment to receipt holders. GDRs bear no risk of capital repayment.

[F] DERIVATIVES:

It is a contract whose value depends on or value depends on or derives

from the value of an underlying asset [say a share, forex, commodity or an index]. In

its broadest sense a derivative attempts to hedge against the variability of any

economic variable. Thus exposures or perceived risks to a firm arising from the

variation in interest rates, exchange rates, commodity prices and equity prices can be

hedged through an appropriate derivative structure. Such a derivative structure covers

a wide variety of financial contracts viz. futures, forwards, options, swaps and

different variations thereof. These contracts can be traded on the various exchanges in

a standardized manner or by custom designed for individual requirements. The

history of derivatives can be traced to the Middle Ages when farmers and traders in

grains and other agricultural products used certain specific types of futures and

forwards to hedge, the risks. Essentially the farmer wants to ensure that he receives a

reasonable price for the grain that he would harvest [say] three to four months later.

An over supply hurt him badly. For the grain merchant, the opposite is true. A fall in

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the agricultural product will push up the prices. It made sense therefore both of them

to fix a price for the future. These was how the future market first developed in

agricultural commodities such as cotton, coffee, petroleum, soya bean, sugar and then

to financial products such at interest rates, foreign exchange and shares. In 1995 the

Chicago board of trade commenced trading derivatives. For the derivatives market to

develop three kinds of participants are necessary .They are the hedgers, the

speculators and the arbitrageurs. All three must co-exist.

PARTICIPATION HEDGER:

A hedger is a risk averse. Typically in India he may be a treasurer in

a public sector company who wants to know with certainty his interest costs for the

year 2002. Therefore based on current information he would enter into a future

contracts and lock up his interest rate four years hence But in doing so he consciously

ignores what is called the upside potential-here the possibility that the interest rate

may be lower in the year 2002 than what he had contract four years earlier. A hedger

plays it safe. For a hedging transaction to be completed there must be another person

willing to take advantage of the price movements. That is the speculator.

SPECULATORS:

Contrary to the hedger who avoids uncertainties the speculator thrives

on them. The Speculator may lose plenty of money if his forecast goes wrong but

stands to gain enormously if he is proved correct. The risk taking associated with

speculation is an integral part of derivatives market.

ARBITRAGEUR:

The third category of participant is the arbitrageur, who looks at risk less

profit by simultaneously buying and selling the same or similar financial products in

different markets. Markets are seldom perfect and there is a possibility to take

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advantage of time or space differentials that exits. Arbitrage evens out the price

variation with the government of India permitting futures trading in several

commodities and with futures trading have arrived in the stock markets, index based

derivative trading has finally arrived in India. For smooth functioning of derivative

trading the government of India has commenced the process of dematerialization of

shares, short sale facility, electronic fund transfer facility and rolling settlements in

stock markets. This will hopefully bring transparency in the process of price

discovery of the derivative and also attract a board spectrum of the hedgers and

speculators from out of professionally managed corporate that not only must have a

good balance sheet but also significant trading and risk management skills. The stock

holding corporation of India has commenced discussions with the premier stock

exchanges of India about setting up a clearing house for derivatives transactions.

FUTURES:

A futures contract is an exchange – traded agreements between two parties

to buy or sell an asset at a specified time in the futures at the agreed price. In the case

of stock index futures contracts the underlying asset is the specified stock index. To

facilitate n the futures contracts, the exchange specifies certain standard features of

the contracts the standards contracts once bought can be sold at any time to square off

the position till the date of expiry of the contract. Similarly, once a futures contract is

sold, it can be bought back at any time to square off the position. Thus a futures

contract may be offset prior to maturity by entering into an equal and opposite

transaction. More than 99% of futures transactions are off set this way.

FURTURE TERMINOLOGY:

SPOT PRICE: The price at which an asset trades in the spot market.

FURTURE PRICE: The price at which the future contract trades in –the futures

market.

CONTRACT CYCLE: The period over which a contract trades. The index futures

contracts on the NSE as well as BSE have one-month and two-month and three-

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months expiry cycles, which expire on last Thursday of the month. Thus a July

expiration contract would expire on the last Thursday of July. On the Friday

following the last Thursday, a new contract having a three - months expiry would be

introduced for trading. More generally we can say, on the first trading day after the

day of the expiry of the month’s future contract a new contract having a three -

months expiry would be introduced for trading.

EXPIRY DATE: It is the date specified in the future contract. This is the last day on

which the contract will be traded. I will cease to exist by the end of that day.

CONTRACT SIZE: The amount of asset that has to be delivered under one contract.

The contract size of the stock index futures on NSE nifty is 200 and the contract size

of the stock index futures on BSE Sensex is 50.

BASIS: Basis is usually defined as the spot price minus the futures price. There will

be a different basis for each delivery month for same asset at any point in time. On

19th June 2001 nifty closed at 1096.65. August 2001 nifty futures closed at 1098.90.

Therefore the basis for the August nifty futures is -2.25 index points. In a normal

market, basis will be negative. This reflects the fact that the underlying asset is to be

carried at a cost for delivery in the future.

COST OF CARRY: The relationship between futures prices can be summarized in

terms of what is known as the cost of carry. These measures the Storage cost plus the

interest that is paid to finance the asset less the income earned on the asset. In the case

of stocks, dividend will be the income earned on the asset. The storage cost will be

negligible.

INITIAL MARGIN: The amount that must be deposited in the margin account kept

with the broker at the time futures contract is first entered into is known as initial

margin. Margins are to be strictly collected in the future and options markets by

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brokers as per the exchange regulations. Otherwise the exchange cannot guarantee the

trades to all participants in the market.

MARKING TO MARKET

In the futures market, at the end of each trading day, the margin account is

a adjusted to reflect the investor’s gain or loss depending upon the futures closing

price or settlement price. This is called Marking-to-Market.

MAINTENANCE MARGIN:

If the balance in the margin account falls below the maintenance margin,

the investor receives a margin call and is expected to top up the margin account to the

initial margin level before trading commences on the next day.

BETA : Beta is a concept to be used futures and options for hedging. Beta measures

the sensitivity of a share or a portfolio to that of the index. Beta of a share is found

out by relating the daily price changes of a share to the daily changes in a stock price

index. If a graph is drawn with daily changes of the share price on y axis and daily

changes in the index on x axis the slope of the straight line fitted will be the value of

beta. mathematically it is found by regression method. If the beta of Tisco is found to

bel.23,it implies if the index increases by 10% in a period, price of Tisco will increase

by 12.3%. Beta of the portfolios is found by weighted average of the betas of the

shares in the portfolios. For example, an investor’s portfolio has equal value in Tisco

and Infosys. Tisco has a beta of 1.23 and Infosys has a beta 1.37. the portfolio beta is

the average of 1.23 and 1.37 which is 1.3.NSE website is providing values of beta for

a large number of shares.

SPECULATORS AND HEDGERS IN FUTURES:

Speculators buy and sell derivatives to make profit, while hedgers buy and

sell derivatives to reduce risk. Speculators are vital to derivatives markets. They

facilitate hedging and provide liquidity. It is highly unlikely that hedger wishing to

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buy futures will precisely match hedgers selling futures in terms of contracts to be

traded. If hedgers are net sellers there will be tendency for futures prices to fall.

Speculators will buy such under period futures. Such purchases by speculators allow

net sales on the part of hedgers. In so doing, they tend to maintain price stability since

they are buying into a falling market. Proper speculation thus provides stability to

prices in markets.In a liquid market, hedgers can make their transactions with ease

and with little impact costs. Speculative transactions add to market liquidity.

speculators by definition do a lot of information search and processing to forecast

future behavior of prices. Therefore they make markets more information ally

efficient. In the stock index futures markets speculators have two alternative

strategies. If they are bullish on the index they can go long on index Futures. If the

spot prices go up, future prices follow them along with their carry premiums and the

speculators make the profits. If the speculator is bearish he can go short on the index

futures. If the spot Index goes down, futures price also will go down and speculator

makes a profit. The two speculative strategies can be summarized as:

Bullish market, long index futures

Bearish market, short index futures

ARBITRAGE IN FUTURE AND SPOT MARKET:

Future prices and spot prices are tightly linked by the fair price formula. Also on the

day of the expiry, the final settlement price of the future is made equal to the spot

index price. thus at the end , the spot and futures prices converge. Any deviation

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between the fair price and actual price of a future can be utilized for earning risk less

profits by agents who are willing to buy in the spot market and deliver in future at

expiry. Such operations are called as arbitrage operations. Buying in the spot and

delivering in the future market is resorted to when actual futures price in the market is

higher than the fair price. if the actual future price is lower than the fair, then futures

are bought and shares are sold in the spot market to carry out the arbitrage operations.

INTRODUCTION TO OPTIONS:

Options give the holder or buyer of the option the right to do something. If the option

is called option, the buyer or holder has the right to buy the number of shares

mentioned in the contract at the agreed strike price. if the option is a put option, the

buyer of the option has the right to sell the number of shares mentioned in the

contract at the agreed strike price. the holder or the buyer does not have to exercise

this right. Thus on the expiry of day of the contract the option may or may not be

exercised by the buyer. In the contrast, in a futures contract, the two parties to the

contract have committed themselves to doing something at future date. To have this

privilege of doing the transaction at a future only if it is profitable, the buyer of

options has to a premium to the seller of options.

HISTORY OF OPTIONS:

In 1983 trading on stock index options contracts started. Since 1983, trading on

options of individual options decreased as most of the trading shifted to index

options. One of the reasons is that volatilities of the individual scripts is high and

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therefore premiums on individual scripts is also high. In India stock index options

were introduced in june 2001.

OPTION TERMINOLOGY :

INDEX OPTION: An option having the index as the underlying asset. Like index

futures contracts, index option contract are also called cash settled.

STOCK OPTIONS: Stock options are options on individual stocks. A contract gives

the holder the right to buy or sell shares at the specified price.

AMERICAN OPTIONS: American options are options that can be exercised any

time up to the expiration date. This name is only a classification and does not imply

that they are available only in America.

EUROPEAN OPTIONS: European options are options that can be exercised only on

the expiration date. European options are easier to analyze than American options,

and properties of American options are frequently deducted from those of its

European counterpart.

CALL OPTIONS:A call option gives the holder the right but not the obligation to

buy an asset by a certain date for a certain price.

PUT OPTIONS:A put option gives the holder the right but not the obligation to sell

an asset by a certain date for a certain price.

BUYER OF OPTIONS: The buyer of the option, either call or put, pay the premium

and buys the right but not the obligation to exercise his option on the seller/writer.

WRITER OF AN OPTION: The writer of a call/put option is the one who receives

the option premium and is thereby obliged to sell/buy the asset if the buyer exercises

on him. Option writer is the seller of the option contract.

STRIKE PRICE: The price specified in the option contract at which buying or

selling will take place is known as the strike price or the exercise price.

OPTIONS PRICE: Option price is the premium, which the option buyer pays to the

option seller or writer. Black and scholes formula is widely used for determining the

fair value of share.

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EXPIRATION DATE: It is the date on which the European option is exercised. It is

also called as exercise date, strike date or maturity date.

INTRINSIC VALUE OF AN OPTION: The option premium cab be broken down

into two components- intrinsic value and time value. The intrinsic value of an option

is the amount, which the holder will get by exercising his option and immediately

selling or buying the acquired shares in the spot market. For example, if the strike

price of a call option on Reliance shares is Rs.325 and current market price is Rs.350.

The holder of the option can buy the Reliance share at Rs.325 by exercising the

option and can make a profit of Rs.25 by immediately selling them in the market. In

this case the intrinsic value of the call option is Rs.25.

TIME VALUE OF THE OPTIONS: The time value of an option is the difference

between its premium and its intrinsic value.

AT-THE-MONEY: An option is called at-the-money option when the strike price

equals, or nearly equals, the spot price of the share. For example, if the strike price of

stock index option on Nifty index is also at 1080, the option is called at-the-money

option.

SPOT PRICE > STRIKE PRICE

IN-THE-MONEY: A call option is in the money when the underlying asset price is

greater than the strike price. for example, if the strike price in the case of Nifty stock

index option is 1050 and Nifty is at 1080, the option is in-the-money option.

SPOT PRICE = STRIKE PRICE

OUT-OF-THE-MONEY: A call option is out-of-the-money if the strike price is

greater than the underlying asset price. For example, if the strike price in the case of

Nifty stock index option is 1100 and Nifty is at 1080, the option is out-of-the-money

option.

SPOT PRICE < STRIKE PRICE

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USES OF OPTIONS: Like futures options are also used for hedging and

speculations. Arbitrageurs can look for miss Pricing between spot, option and futures

markets and do transactions whenever they find miss pricing.

TRADING OR SPECULATING WITH OPTIONS:

Options provide multiple opportunities for trading. Options premiums are determined

by volatility of the underlying asset, time to expiration of the option and the risk free

interest rate .Changes in any of these variables changes option premiums even though

the price of the underlying asset remains constant. Thus a speculator who analyses

multiple dimensions has a lot more opportunity in options to strategize and act.

ARBITRAGE WITH OPTIONS: Arbitrage involves making risk less profits from miss pricing; relatively

under priced options are bought and relatively overpriced are sold. Pure arbitrage

requires that none of the arbitragers own capital is used. He should be able to borrow

all the capital required. If the arbitrager uses his own capital, the process is called

quasi-arbitrage. There will be number of situations providing arbitrage opportunity as

three markets, spot, futures and options are involved

SUMMING UP: Options are used by hedgers and speculators. Options provide a

variety of ways in which they can be used to attain the hedging and speculative

objectives. Thus trading interest comes from different participants with different

motives. Arbitrageurs will have opportunities whenever option premiums are out of

line with the fair prices. A fully developed option market provides a good market for

traders to display their trading expertise and hedgers an alternative-hedging medium.

FORWARD CONTRACTS: In order to avoid this risk one way could be that the

farmer may sell his crop at an agreed-upon rate now with a promise to deliver the

asset, i.e., crop at a pre-determined date in future. This will at least ensure to the

farmer the input cost and a reasonable profit. Thus, the farmer would sell wheat

forward to secure himself against a possible loss in future. It is true that by this way

he is also foreclosing upon him the possibility of a bumper profit in the event of

wheat prices going up steeply. But the, more important is that the farmer has played

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safe and insured himself against any eventuality of closing down his source of

livelihood altogether. The transaction which the farmer has entered into is called a

forward transaction and the contract which covers such a transaction is called a

forward contract.

QUICK AND LOW COST TRANSACTIONS:

Futures contracts can be created quickly at low cost to facilitate exchange of money

for goods be delivered at future date. Since these low cost instruments lead to a

specified delivery of goods at a specified price on a specified date, it becomes easy

for the finance managers to take optimal decisions in regard to production,

consumption and inventory. The costs involved in entering into future contracts in

significant as compared to the value of commodities being traded underlying these

contracts.

Price discovery function: The price of futures contracts incorporates a set of

information based on which the producers and the consumers can get a fair idea of the

future demand and supply position of the commodity and consequently the futures

spot price. This is known as the ‘price discovery’ function of futures.

Advantage of informed individuals: Individuals who have superior information in

regard to factors like commodity demand supply, market behavior, technology

changes etc., can operate in futures markets and impart efficiency to the commodity’s

price determination process. This in turn leads to a more efficient allocation of

resources.

Hedging Advantage:

Adverse price changes, which may lead to losses, can be adequately and

efficiently hedged against through futures contracts. An individual who is exposed to

the risk of an adverse change while holding a position, either long or short a

commodity will need to enter into a transaction which could protect him in the event

of such an adverse change. For example a trader who has imported a consignment of

copper and the shipment is to reach within a fortnight may sell copper futures if he

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foresees fall in copper prices. In case copper prices actually fall, the trader will lose

on sale of copper but will recoup through futures. On the contrary if copper prices

rise, the trader will honour the delivery of the futures contract through the imported

copper stocks already available with him.

[G] Employee stock option plans:

“Employees stock options means the options given to the whole-time directors,

officers or employees of a company, which gives such directors, officers or

employees the benefit or right to purchase or subscribe at a future date, the securities

offered by the company at a pre-determined price”. Stock option is defined as the

“right to buy a designated stock at an option of the holder at any time within a

specified period at a determinable price. it can also represents the right to sell

designated stock within an agreed period at a determinable price.

Benefits of ESOPs:

The ESOPs will benefit the organization in the following ways:

It is used as a HRD tool by the management in connection with restriction of

higher turnover of the employees and retaining the best talents with the

organization.

The plan is used as a technique of corporate financing modernization, expansion,

spin-off a division, acquisition etc.

Issuing share, alternative to cash, have no immediate effect until they are

converted into cash affecting new monetary supply into the real company.

Employees stock ownership plans in USA is used to avoid hostile takeover.

Without any financial strains the employees are rewarded by printing of share

certificated only.

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Studies undertaken in USA on ESOPs suggest that they tend to out

perform their traditionally organized counterparts in variety of ways, better survival

rates, higher productivity, a better employment and sales growth and higher net

operating margins.

List of Bond:

1. Zero Interest Bond:

It refers to those bonds which are sold at a discount from their eventually

maturity value and have zero interest rate. These certificates are sold to the investors

for discount the difference between the face value of the certificates and the

acquisition cost is the gain to the investors. The investors are not entitled to any

interest and are entitled to only repayment of principle sum of the maturity period.

The individual prefers ZIB because of lower investment cost and low rate of

conversion to equity if ZIBs are fully or partly convertible bonds. This is also a means

of tax planning because the bond doesn’t carry any interest, which otherwise taxable.

Company also find ZIB quite attractive because there is no immediate commitment.

On maturity the bond can be converted into equity share or convertible debentures

depending on the requirement of capital structure of a company.

2. Deep Discount Bond( DDB):

The IDBI for the first time issued DDB for a deep discount price of

Rs 2700/- an investor gets bond with a face value of Rs 100000/-. The DDB

appreciates to its face value over the maturity period of 25 Years. The unique

advantage of DDB is the elimination of investment risk. It allows an investor to lock

in the yield to maturity or keep on withdrawing from the scheme periodically after 5

years by returning the certificate. The main advantage of DDB is that the difference

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between the sell price and the original cost of acquisition will be treated as Capital

gain, if the investor sends the bonds on stock exchange. The DDB is safe, solid and

liquid instrument. Investors can take advantage of these new instruments in balancing

their mix of securities to minimize the risk and maximize returns.

3. Callable Bonds:

A callable bonds is a bond which the issuer has the right to call in and

payoff at a price stipulated in the bond contract. The price the issuer must pay to

retire a callable bond when it is called is termed as call price. The main advantage in

callable bond is the issuers have an incentive to call their existing bonds if the current

interest rate in the market is sufficiently lower than the bonds coupon rate. Usually

the issuer cannot call the bond for a certain period after issue.

4. Option tender bonds:

The option tender bonds are bonds with put option which give the bond

holders the right to sell back their bonds to the issuers normally at par. Issuers with

put are aimed both at investors who are pessimistic about the ability of interest rates

to decline over the long term and at those who simply prefer to take cautious

approach to their bond buying.

5. Guaranteed Debentures:

Some businesses are able to raise long term money because their debts are

guaranteed, usually by their parents companies. In some instances the state

governments guaranteed the bonds issued by the state government undertaking and

corporation like electricity supply board, irrigation corporation etc.

6. subordinated debentures:

A subordinated debenture is an unsecured debt, which is junior to

all other debts i.e.. Other debt holders must be fully paid before the subordinated

debenture holders receive anything. This type of debt will have a higher interest rate

than more senior debt and will frequently have rights of conversion into ordinary

shares. Subordinated debt is often called mezzanine finance because it ranks between

equity and standard debt.

7. Floating rate bond:

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The interest paid to the floating Rate bondholders changes periodically

depending on the market rate of Interest payable on thegilt-edged securities these

bonds are called adjustable interest

bond or variable rate bonds.

8. Junk bond:Junk bonds are a high yield security which because a widely used source

of finance in take overs and leveraged buyouts. Firms with low credit ratings willing

to pay 3 to 5 % more than the high grade corporate debt to compensate for the greater

risk.

9. Indexed bonds;

Fixed income are fixed sum repayments are uneconomic in times of rapid

inflation. Indexed bond is financial instrument which retain the security and fixed

income of the debenture but which also provides some safeguard against inflation.

10. Inflation adjusted bond:

IABs are bonds which promise to repay both the principal and interest, by

floating both these amounts upwards in line with the movements in the value of the

specific index of commodity prices.

DEMATERIALISATION

Indian capital market has been witnessing rapid growth in the recent past, which has

been indicated by the key factor on the capital markets. However, this growth has not

matched with supporting infrastructure to handle the growing volume of paper that

has flooded the market. So there emerged the need for a better system to ensure that

the supporting infrastructure available is on par with such market growth. And also

the foreign investors seeking to invest in India also were apprehensive about the

reliability of the post trade settlement mechanism used in India. The biggest deterrent

or bottleneck in Indian capital market is largely manual and paper based settlement

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system which is obsolete for a rapidly growing market since 1992, decade old trading

system in India stock exchanges have been under constant review.

The main deficiencies have been identified in two broad areas:

1. The clearing and settlement system in stock exchange where by delivery of shares

by seller and payment by the purchaser is made.

2. Procedure for transfer of shares in the name of the purchaser current procedure

result in excessive paper work, in clearing and settlement, work duplication, bad

delivery, non-transparency in costs and Prices at which customers orders are

executed have prompted setting up of depositories.

BASICS OF DEMATERILISATION:

Dematerialization is a process by which physical shares of investors are converted to

an equivalent number of securities in electronic form and are credited in the investors

account with his depository participated. Dematerialization trading is now

compulsory for all investor. Beginning of first week of January 1999, investor can

trade in specific scripts in the dematerializations form. They can provide and receive

delivery only in a dematerializations form and share certificates will not be changed

for these scripts. A depository is an organization where securities of shareholder

through depository participants (DPs). The system is comparable to that in a bank. If

an investor wants services offered by a depository, he would have to open an account

with it through a DP-similar to opening an account with any other branches of the

bank in order to avail of its services. Dematerialization is a process by which physical

certificates of an investor are taken back by the company/ registrar and actually

destroyed and an equivalent number of securities are credited in the depository

account of that investor. A depository participant is investors’ agent in this system.

He maintain investors’ securities account and intimated the status of holdings from

time to the investor.

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PROCESS OF DEMATERIALIZATION:

In order to dematerialize his certificates an investor will have to first open an account

with a depository participant (DP)and then dematerialization of his certificates by

filling up ‘DEMATERIALIZATION REQUEST FORM’ (DRF) which will be

available with any DP. The ISIN name and number should be mentioned. This is to

ensure that the security mentioned in the demat request form is same as the one the

client intended to dematerialize.

STEPS:

An investor has to submit the request from long with the share certificate, which are

to be dematerialized to depository participant, the depository participant gives the

demat order to NSDL through the system.

The depository participant submit the share certificates, DRF,

DRN, the issuer/RTA.

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NSDL sends the demat request to the issuer/RTA.

The issuer/RTA sends confirmation / rejection statement after checking the validity.

NSDL in turn sends the status intimation to the DP.

The issuer /RTA sends the objection memo to DP.

DP gives the statement of holding to the client.

This takes about 15 days from the date of request. Electronic holdings can be

converted back in to certificates, if so desired, in a similar fashion as that for

dematerializations.

ADVANTAGES OF DEMAT:

Transaction the depository way has several advantages over the traditional system of share certificates:

Trading in demat segment completely eliminates the risk of bad deliveries,

which in turn all cost and wastage of time associated with follow up for

rectification. This reduction in risk associated with bad delivery has lead to

reduction in clearing member age to the extent of 0.5% by many clearing

member age firms.

Cost of delay/ courier/ neutralization/ the need for further follow up with the

clearing member for shares returned for company’s objection, which happens

only in case of physical securities can be avoided.

The investor can also the expense of applying for duplicated certificates in case

of loss/mutilation of certificates. The investor can also receive your bonuses and

right in to your depository account as a direct credit, thus eliminating risk of loss

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in transit.

RBI has increased the limit of loans against dematerialized securities as collateral to Rs 20 lakh borrower against Rs10 lakh per borrower in case of loan against physical securities.

RBI also reduced the minimum margin to 25% for loan against dematerialized securities as against 50% for loan against physical securities.

Facilitation of cash corporate action such as dividends.

NSDL provides details of beneficial owners as on a given day (the record date) to the issuer company/ registrar so as to enable the company to calculate the benefits arising out of these holdings. The company’s registrar and transfer agent forward the cash benefits to the investor directly.

Lending and borrowing of securities. A client having a beneficiary account with

the DP can lend or borrow securities in electronic form through an approval

intermediary, who has opened a special intermediary account with DP.

Transmission of securities NSDL facilities transmission of securities balance

of any client due to death, lunacy, bankruptcy, insolvency or by any other

lawful means other transfer. in case where the deceased was one of the joint

holders in the client account. In case where the deceased was a sole holder of

the client account, his legal heirs, or the legal representatives shall be the only

person recognized by NSDL as having any title to the security balance in that

sole client account.

TRADING, CLEARING AND SETTLEMENT OF DEMATERILISED SECURITIES. 1. TRADING:

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Trading of dematerialized securities is currently available at national stock

exchange (NSE),the Mumbai stock exchange (BSE)and Calcutta stock exchange

(CSE). At NSE, dematerialization securities are traded two separate segments called

“AE segment” and :BE segment” which are in addition to the segment for trading in

securities in the physical form called “ EQ segment”. In case of AE segment,

dematerialized securities are traded only in the market lot, where as in BE segment

these can be traded in multiples of one share. At BSE and CSE, dematerialized are

traded in a separate segment called Demat segment and physical securities are traded

in unified segment. For trading in physical securities, the sub-brokers collect the

orders from their client and place these order with the main brokers for execution in

the market. The main broker enters the details of each trade against each sub-broker

in a separate kept for each sub-broker. After execution of the trade, the main broker

issues the contract note in the name of sub-broker who in turn issues separate

purchases /sale note to his clients. There are only few cases in which the main broker

issues the contract note in the name of the clients directly. Even in the case of

dematerialized securities the same system can be followed. However in this case

since the fear of bad delivery is less, the brokers directly issue the contract note in the

name of clients, who is in edition t, facilitate the cost effective settlement with a clean

audit trail. Trading in dematerialized securities is very similar to trading in physical

securities except that physical segment follows account period settlements and demat

segment follow rolling settlement. In rolling settlement, all trades executed on a

particular day will be settled on the following 3rd working day. This means trades

executed on Monday will be settled on Thursday.

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2. TRADES:

All the traders executed at the exchanges are settled by the clearing

members(CM), as in the case of securities in the physical form. To settle traders in

demat segment each CM should open one clearing a/c with any of the DP.

The procedures for opening clearing accounts are: Approach a DP.

Fill up an account opening form.

Sign on an agreement with the DP.

Application is forwarded NSDL by DP.

NSDL allots a number identified as CM – BP – ID.

DP opens account and an account number is provided along with CM – BP – ID to the clearing member.

The clearing account consists of three parts:

Pool account

Delivery account

Receipt account

Clearing account (CC/HH):

90

Pool Account:

It has two roles to play in clearing of securities. Before pay in the selling client of

the CM transfers securities from his client account to the CM pool Account. The

CM transfers the securities from his pool Account to the account of the buying client.

Delivery Account:

The CM transfers the securities in, from the pool Account to the delivery

Account before pay in at the time of pay-in NSDL flushes out the securities in the

delivery Account and transfers the same to the CC/HH.

Receipt Account:

On pay- out day, the CC/HH transfers securities to the pool account through the

receipt account. CM has to ensure that before book closure or record date of any

company the securities are moved from CM pool Account to a beneficiary account as

holding in pool Account for longer period is not allowed.

3. SETTLEMENT:

Delivery Pool account Receipt Account

Selling client Buying

client

91

In the depository system, any trade that is cleared and settled through the clearing corporation (CC/HH) is called market trade.

Procedures for pay-in of securities:

Give receipt instruction to the DP for transfer of securities from client

Account to the pool account or give a standing instruction for the same.

Delivery to CC/HH instruction for the transfer of securities from pool

Account to delivery account for pay-in.

Both pay-in and pay-out happens to be on 5th working day after the trading and the

instructions to transfer the securities from the pool account to delivery account must

be given before pay-in such that this transfer is effected before pay-in. the transfer

instruction is taken as an authority to transfer the security irrespective of when the

client gives the delivery instruction, the securities will be parked in the delivery

CM

clientclientclientClient

DP1 DP2 NSDL

ClientB A/C

ClientD A/C

ClientC A/C

PoolA/C

ClientA A/C

clearing Delivery Account

pool Account

92

account till final pay-in and the facility of multiple instructions from the pool account

to the delivery account is also provided to the investors. In case of excess transfer of

shares to the delivery account or excess delivery to CC/HH. The instruction slip can

be cancelled and issued new one or the CC/HH will return the securities at the time of

payout respectively.

Procedure for payout of securities:

Transfer of securities from CC/HH to pool account through receipt in account

Delivery instruction to transfer from pool account to client account on pay-out Client

on the delivery of the instruction form the client’s name, client’s Dp ID and DP name

of the client must be mentioned and ensure that receipt instruction given by client to

Clearing Receipt Pool

CM

clientclientclientclient

DP1 DP2 NSDL

ClientBA/C

ClientDA/C AA/C

ClientCA/C A/C

PoolA/C

ClientAA/C

93

receive the securities bears the same execution date as given in the delivery

instruction. However, the broker can hold the securities in the pool account until the

client meets his obligation but before the closure of books, the balances must be

transferred as the balances in the pool account which are not entitled for any

corporate benefits.

INTER DEPOSITORY TRANSFERS:

Transfer of securities from an account in one depository to an account in another

depository is termed as an a inter depository transfer. This facility is quite similar to

the account transfer with in NSDL. It can be done only for securities that are available

for dematerialization on both the depositories. The account in NSDL of can be either

a clearing account or a beneficiary account. For debiting the clearing account or the

beneficial account with NSDL, the form for “ Inter depository delivery instructions ”

is required to be submitted by the clearing member/beneficial owner to its DP. For

crediting the clearing account or the beneficial account, the standing instruction given

for automatically crediting the account is applicable. In case the standing instruction

are not given, then the form for “ Inter Depository Receipt Instruction “ is required to

be submitted by the clearing member/ beneficial owner to its DP.As both the

depositories are connected to each another, the batches to effect inter depository

transfers are presently exchanged twice on each working day. The issuer/registrar

and transfers agent is informed about the transfer by both the depositories and it

amends its accordingly. Government securities cannot be transferred from one

depository to another using this facility.

REMATERIALIZATION OF SHARES:

Rematerialization is the term used for converting electronic holdings back into

physical certificates. The DP will forward the investors request NSDL after verifying

that the investors have the handle certificates. necessary balances NSDL in turn will

intimate the registrar who will print the certificates and dispatch the sale to investors.

In this process NSDL doesn’t directly

MATERIALIZATION OF SHARES:

94

Materialization is the term used for converting electronic holdings back into physical

certificates. The DP will forward the investors request to NSDL after verifying that

the investors have the necessary balance NSDL in turn will intimate the registrar who

will print the certificates and dispatch the same to investors in this process NSDL

doesn’t directly handle certificates.

Steps involved in materialization:

Clients send RRF (Remat request form) to DP 1. DP sends the remat order to NSDL through system. 2. DP sends the RRF and RRN to the issuer/RTA.

3. NSDL then sends the remat request to issuer/ RTA.

4. The issuer/ RTA intimates the confirmation /rejection status to NSDL.

5. The NSDL in turn intimates this to DP.

6. The issuer/ RTA sends the printed certificates to the client.

NATIONAL SECURITIES DEPOSITORY LIMITED:

NSDL was inaugurated in November 1996, as the first depository in the

country to avoid the myriad problems in settlement. In depository system, securities

are held in securities accounts. Which more or less similar to holding funds in bank

accounts. Transfer of ownership is done through simple account transfer. This method

does away with all the risks and hassles normally associated with paper work.

95

Consequently, the cost of transaction in depository environment lower as compared to

transaction in physical certificates. Trading in dematerialized securities is quit similar

to trading in physical securities. The major difference is that at the time of settlement,

instead of delivery/receipt of securities in the physical form, the same is effected

through account transfer. Currently dematerialized trading is available at NSE, BSE,

CSE. Exclusive demat segment follow rolling settlement (T+3) cycle and the unified

segment follows account period settlement cycle. All investors, other than the

institutional investors, can deliver securities either in the physical or dematerialized

form in the market. From January 4, 1999, all categories of investors ran deliver only

in dematerialized form with respect to a select list of securities. However, initially

this was applicable only at those exchanges, which have joined the depository, but

SEBI has also specified that this list is to be expanded in a phased manner. The

settlement of trades in the stock exchanges is undertaken by the clearing corporation

(CC)/ clearinghouse (CH) of the corresponding stock exchanges. While settlement of

dematerialized securities are effected through NSDL, the funds settlement is effected

through the clearing banks. The physical securities are settled by the clearing

members directly with the CC/CH.

CHAPTER-IV

96

DATA ANALYSES AND INTERPRETATION

STOCK MARKET

Company :ICICI BANK LTD. 532174 Period: 14-Dec-2012 to 25-Jan-2013

Date Open High Low Close WAP No. of Shares

No. of

Trades

Total Turnover

25/01/13

1,167.00

1,180.65

1,164.25

1,172.75

1,173.79

1,21,309 3,717 14,23,91,62

3

24/01/13

1,178.10

1,186.55

1,159.40

1,163.85

1,172.31

1,84,778 5,295 21,66,16,45

2

23/01/13

1,178.00

1,190.90

1,161.45

1,180.50

1,170.45

2,00,258 4,537 23,43,92,24

6

22/01/13

1,177.70

1,194.50

1,164.00

1,170.60

1,185.08

2,33,739 5,534 27,70,00,47

9

21/01/1 1,178.0 1,181.0 1,165.1 1,176.5 1,173.5 96,369 3,303 11,30,96,86

97

3 0 0 0 0 8 1

18/01/13

1,168.90

1,185.00

1,166.00

1,175.20

1,177.92

3,82,025 8,536 44,99,93,04

1

17/01/13

1,179.00

1,186.60

1,158.80

1,162.65

1,171.84

1,59,500 6,043 18,69,08,33

7

16/01/13

1,200.00

1,200.05

1,175.20

1,179.05

1,189.34

1,81,506 6,244 21,58,72,01

9

15/01/13

1,184.80

1,209.70

1,174.95

1,202.85

1,193.55

3,81,474 9,401 45,53,09,95

6

14/01/13

1,160.00

1,191.95

1,160.00

1,184.70

1,184.40

4,16,828 6,721 49,36,91,87

5

11/01/13

1,181.00

1,184.00

1,161.10

1,165.30

1,168.69

1,23,740 4,060 14,46,13,37

0

10/01/13

1,185.00

1,187.80

1,161.50

1,179.15

1,173.11

1,60,834 6,038 18,86,76,18

7

9/01/13 1,178.00

1,188.00

1,173.55

1,179.90

1,180.71

7,43,030 4,388 87,73,03,50

3

8/01/13 1,179.00

1,182.15

1,170.10

1,179.30

1,176.55

1,04,908 3,466 12,34,29,09

7

7/01/13 1,185.20

1,188.00

1,177.10

1,181.60

1,182.00

1,45,610 5,835 17,21,10,91

2

4/01/13 1,168.00

1,184.75

1,164.45

1,182.20

1,176.63

1,62,667 5,198 19,13,99,21

9

3/01/13 1,177.05

1,178.60

1,165.10

1,172.00

1,170.53

1,06,377 3,616 12,45,17,99

0

2/01/13 1,170.00

1,176.00

1,165.50

1,172.95

1,171.16

1,77,510 5,864 20,78,92,66

9

1/01/13 1,147.00

1,162.00

1,143.05

1,159.15

1,153.14

1,55,653 6,084 17,94,90,17

6

31/12/12

1,140.00

1,143.80

1,134.00

1,137.30

1,138.32 88,501 2,768 10,07,42,76

9

28/12/12

1,140.00

1,147.00

1,129.30

1,142.25

1,137.62

1,31,552 3,892 14,96,55,94

0

27/12/12

1,152.80

1,154.00

1,133.30

1,137.45

1,142.72

1,64,595 5,093 18,80,86,46

3

26/12/12

1,123.60

1,149.80

1,121.50

1,147.95

1,140.87

1,60,800 4,987 18,34,51,40

4

98

24/12/12

1,124.00

1,129.40

1,113.50

1,121.25

1,120.44

1,27,297 4,850 14,26,28,16

5

21/12/12

1,135.00

1,138.00

1,119.30

1,122.70

1,130.73

1,15,587 4,057 13,06,97,33

8

20/12/12

1,144.00

1,144.55

1,129.40

1,138.15

1,138.45

1,27,908 4,576 14,56,17,07

3

19/12/12

1,154.00

1,159.00

1,132.65

1,138.50

1,141.25

1,50,856 5,219 17,21,64,39

6

18/12/12

1,148.00

1,153.05

1,117.30

1,148.75

1,140.81

3,79,488 9,414 43,29,21,93

4

17/12/12

1,131.55

1,149.00

1,131.50

1,143.60

1,145.26

1,62,265 4,601 18,58,35,50

7

14/12/12

1,115.00

1,139.00

1,113.55

1,136.30

1,124.13

5,34,353 7,479 60,06,81,42

7

INTERPRETATION:

On open value has increased from 1115.00 to 1200.00. Then compare to higher value

of EPS 1129.40 to 1209.70. Then coming to lower price from 1113.50 to 1177.10.

Wholly the conclusion is 1121.25 to 1202.85 increased.

Then coming to the volume on the same dates or days volumes are

increased. Because totally this session ICICI BANK. EPS value is increased i.e.

percentage of 12.57%.

99

Company :ITC LTD. 500875 Period: 18-Dec-2012 to 29-Jan-2013

Date Open High Low Close WAP No. of Shares

No. of Trades Total Turnover

29/01/13 300.00 306.75 299.10 305.60 303.07 7,36,141 4,492 22,30,99,156

28/01/13 300.00 300.80 299.00 300.40 299.66 5,37,750 1,885 16,11,42,968

25/01/13 298.80 300.40 297.10 299.45 299.42 3,18,314 4,074 9,53,08,230

24/01/13 293.00 298.50 293.00 297.40 296.56 8,48,165 6,632 25,15,30,582

23/01/13 290.00 293.20 289.00 292.60 292.10 2,97,182 3,776 8,68,07,403

22/01/13 292.90 292.90 287.75 288.65 289.29 2,39,345 2,649 6,92,39,861

21/01/13 288.20 291.80 286.30 290.65 290.00 4,51,005 4,422 13,07,93,243

18/01/13 287.00 289.70 284.45 287.05 287.34 13,62,227 13,497 39,14,22,005

17/01/13 283.00 286.75 281.50 285.15 285.25 3,34,183 3,047 9,53,25,266

16/01/13 284.50 285.50 282.50 283.65 284.22 2,16,394 3,037 6,15,02,581

15/01/13 279.40 284.80 274.85 283.40 281.15 4,38,478 5,767 12,32,80,004

14/01/13 275.10 278.30 274.15 277.90 276.76 2,64,570 2,705 7,32,23,584

11/01/13 280.00 282.00 272.20 273.50 275.34 9,80,396 9,556 26,99,38,993

10/01/13 280.70 281.75 278.60 280.90 280.27 2,83,033 3,754 7,93,24,346

9/01/13 284.50 285.60 279.15 279.80 281.25 3,56,452 4,333 10,02,53,837

8/01/13 280.00 285.90 279.00 285.30 283.38 3,64,966 3,996 10,34,25,851

7/01/13 283.60 284.95 278.60 279.20 281.21 3,84,557 4,507 10,81,41,687

4/01/13 285.00 285.00 280.45 282.40 281.86 2,94,435 3,620 8,29,90,215

3/01/13 286.00 286.90 283.00 283.50 283.91 2,74,022 3,300 7,77,96,731

2/01/13 288.90 289.25 284.75 285.50 286.54 3,34,355 3,236 9,58,05,499

1/01/13 287.25 289.25 286.60 287.25 287.74 1,44,654 2,090 4,16,22,108

31/12/12 289.00 289.25 286.10 286.80 287.02 1,71,445 2,327 4,92,07,521

100

28/12/12 288.70 290.00 287.10 289.15 288.76 3,49,907 2,340 10,10,37,871

27/12/12 291.80 292.25 287.60 288.70 289.28 7,49,243 2,558 21,67,42,634

26/12/12 288.95 291.20 285.70 290.05 288.65 2,46,768 2,656 7,12,28,968

24/12/12 289.90 290.40 286.25 287.00 287.51 3,57,126 2,482 10,26,77,891

21/12/12 286.00 291.80 282.00 287.80 285.69 4,91,455 5,766 14,04,02,213

20/12/12 290.00 290.35 286.05 287.70 287.82 4,27,247 3,324 12,29,72,290

19/12/12 293.00 295.20 289.00 290.10 291.00 13,96,579 4,454 40,64,06,693

18/12/12 294.75 295.85 290.10 293.55 293.62 2,61,940 2,624 7,69,10,395

INTERPRETATION:

On open value has risen from 275.10 to 300.00 than compare to higher value

of EPS 278.30 to 300.80. Then coming to lower price from 272.20 to 299.00. Wholly

the conclusion is 273.50 to 300.40 increased.

The comings to the volume on the same dates or days volumes are

increased. Because on this session ITC value is increased i.e. percentage of 7.04%.

101

Company :DLF LTD. 532868 Period: 14-Dec-2012 to 25-Jan-2013

Date Open High Low Close WAP No. of Shares

No. of Trades Total Turnover

25/01/13 247.50 261.80 245.60 259.80 254.55 14,25,801 13,877 36,29,42,597

24/01/13 252.00 257.00 244.00 251.20 251.15 12,08,386 14,034 30,34,84,421

23/01/13 255.20 258.35 247.35 251.45 253.61 8,39,937 10,472 21,30,18,451

22/01/13 256.75 258.70 249.75 253.30 254.31 6,39,893 6,928 16,27,28,984

21/01/13 260.30 262.00 254.40 256.75 257.71 7,20,476 7,943 18,56,70,783

18/01/13 258.80 263.20 253.95 262.15 259.21 13,56,105 14,669 35,15,19,631

17/01/13 249.00 259.25 248.40 257.35 255.57 12,64,618 14,356 32,32,04,319

16/01/13 252.00 253.30 247.70 248.60 250.26 12,09,752 15,257 30,27,46,489

15/01/13 248.80 254.40 246.65 252.50 250.65 13,89,200 15,942 34,81,96,851

14/01/13 229.70 249.30 229.70 247.80 242.13 14,75,562 16,871 35,72,73,820

11/01/13 233.50 234.75 229.00 230.05 231.90 4,58,980 4,794 10,64,38,591

10/01/13 235.00 236.30 231.90 233.35 234.11 5,24,850 5,075 12,28,74,896

9/01/13 237.00 239.50 233.00 233.90 236.62 5,52,357 5,826 13,06,99,418

8/01/13 234.40 237.35 232.65 236.65 235.31 4,87,307 5,023 11,46,68,426

7/01/13 235.20 238.75 233.10 234.90 236.40 4,71,020 5,099 11,13,50,280

4/01/13 235.00 238.60 233.10 237.75 235.97 7,44,611 7,407 17,57,05,472

3/01/13 237.15 240.00 233.55 238.60 237.32 7,17,202 7,839 17,02,03,398

2/01/13 236.15 238.90 234.50 235.20 236.67 4,76,373 5,071 11,27,45,002

1/01/13 233.50 235.90 231.85 235.25 234.04 6,79,778 8,498 15,90,97,936

31/12/12 224.50 232.40 224.50 230.50 230.58 8,94,728 9,588 20,63,07,194

28/12/12 226.50 226.70 223.60 224.60 224.89 3,01,207 3,402 6,77,39,220

27/12/12 225.50 227.05 222.80 225.00 224.74 6,04,534 4,962 13,58,63,331

26/12/12 224.30 226.80 223.90 225.60 225.66 5,84,238 5,424 13,18,38,750

24/12/12 221.00 224.30 220.00 223.40 222.65 4,78,973 5,292 10,66,41,033

102

21/12/12 224.40 227.70 218.85 219.55 223.09 10,90,512 9,787 24,32,83,897

20/12/12 224.65 227.60 220.30 225.75 224.91 8,94,482 9,074 20,11,74,658

19/12/12 225.35 228.50 223.40 225.55 225.87 11,15,000 11,887 25,18,46,535

18/12/12 218.20 224.00 215.60 223.55 220.57 8,46,032 8,671 18,66,06,475

17/12/12 218.65 219.70 216.80 218.20 218.36 4,80,096 4,868 10,48,31,748

14/12/12 216.50 219.35 215.30 217.75 217.39 6,09,493 6,322 13,24,95,513

INTERPRETATION:

On open value has raising to 216.50 to 260.30 than compare to higher value

of EPS 219.35 to 263.20. Then coming to lower price from 215.30 to 254.40. Wholly

the conclusion is 217.75 to 262.15 raised.

The comings to the volume on the same dates or days volumes are

decreased. Because on this session DLF LTD value is risen i.e. percentage of 6.37%.

103

Company :HCL TECHNOLOGIES LTD. 532281 Period: 14-Dec-2012 to 25-Jan-2013

Date Open High Low Close WAP No. of Shares

No. of Trades Total Turnover

25/01/13 668.05 684.15 664.60 680.20 676.08 39,500 1,368 2,67,05,189

24/01/13 677.00 682.60 663.60 666.35 672.73 64,283 1,851 4,32,44,841

23/01/13 699.90 704.00 664.65 676.65 679.76 1,13,566 2,785 7,71,97,987

22/01/13 715.00 715.00 695.05 698.80 704.22 1,12,122 1,241 7,89,58,724

21/01/13 702.30 720.00 696.10 714.10 709.96 1,85,107 2,670 13,14,18,458

18/01/13 703.25 716.00 700.00 704.40 706.85 1,57,434 4,234 11,12,82,356

17/01/13 701.00 720.90 690.00 703.30 706.03 8,42,672 22,206 59,49,53,078

16/01/13 665.15 680.50 661.05 674.25 672.70 4,46,400 5,613 30,02,92,128

15/01/13 676.00 681.40 662.05 664.65 667.80 1,35,844 2,262 9,07,16,477

14/01/13 648.00 675.85 648.00 671.80 665.91 1,31,085 4,038 8,72,91,205

11/01/13 651.10 657.85 643.50 644.95 648.56 1,58,215 2,555 10,26,12,375

10/01/13 639.00 651.50 637.00 641.40 645.14 53,965 1,619 3,48,15,183

9/01/13 636.00 641.80 632.85 634.25 637.12 29,032 843 1,84,96,923

8/01/13 630.00 636.25 624.75 634.65 632.78 16,969 661 1,07,37,588

7/01/13 639.00 639.00 626.15 628.35 631.44 16,615 712 1,04,91,362

4/01/13 630.00 636.00 628.00 633.85 632.83 33,239 1,042 2,10,34,681

3/01/13 630.00 632.00 624.35 625.40 627.05 23,031 647 1,44,41,699

2/01/13 624.00 627.40 620.90 626.85 626.15 59,058 1,136 3,69,79,292

1/01/13 623.50 626.60 620.25 622.35 623.55 17,238 463 1,07,48,672

31/12/12 629.00 629.00 615.30 619.25 619.57 44,678 1,401 2,76,81,167

28/12/12 629.00 634.85 622.50 625.95 627.75 12,709 709 79,78,052

27/12/12 636.00 636.40 621.90 625.25 629.27 15,656 1,028 98,51,831

26/12/12 636.50 642.00 632.85 635.15 637.11 17,966 2,019 1,14,46,395

24/12/12 631.00 640.00 625.15 635.05 635.72 18,113 649 1,15,14,803

104

21/12/12 635.30 636.90 626.20 629.40 630.37 15,947 457 1,00,52,558

20/12/12 643.00 647.00 635.00 638.25 641.36 22,015 603 1,41,19,556

19/12/12 635.00 642.50 634.25 641.30 639.78 33,981 1,049 2,17,40,493

18/12/12 636.90 637.00 624.10 632.45 630.60 13,710 760 86,45,574

17/12/12 628.50 636.75 628.50 631.90 633.69 31,080 1,212 1,96,94,998

14/12/12 624.00 631.70 622.50 629.65 626.66 27,111 1,095 1,69,89,445

INTERPRETATION:

On open value has risen from 623.50 to 715.00 than compare to higher value

of EPS 626.60 to 720.90. Then coming to lower price from 615.30 to 700.00. Wholly

the conclusion is 619.25 to 714.10 rise.

The comings to the volume on the same dates or days volumes are

increased. Because on this session HCL TECHNOLOGIES value is raised i.e.

percentage of 11.27%.

105

CHAPTER-VI FINDINGS

SUGGESSIONS

CONCLUSIONS

BIBLIOGRAPHY

FINDINGS

106

Coming to lower price from 1113.50 to 1177.10. Wholly the conclusion is

1121.25 to 1202.85 increased. Then coming to the volume on the same dates

or days volumes are increased. Because totally this session ICICI BANK. EPS

value is increased i.e. percentage of 12.57%.

Coming to lower price from 272.20 to 299.00. Wholly the conclusion is

273.50 to 300.40 increased. The comings to the volume on the same dates or

days volumes are increased. Because on this session ITC value is increased

i.e. percentage of 7.04%.

Coming to lower price from 615.30 to 700.00. Wholly the conclusion is

619.25 to 714.10 rise. The comings to the volume on the same dates or days

volumes are increased. Because on this session HCL TECHNOLOGIES value

is raised i.e. percentage of 11.27%.

Coming to lower price from 215.30 to 254.40. Wholly the conclusion is

217.75 to 262.15 raised. The comings to the volume on the same dates or days

volumes are decreased. Because on this session DLF LTD value is risen i.e.

percentage of 6.37%.

107

CONCLUSION

The comprehensive study of capital market instrument at Inter Connected stock

exchange has been an enlightening experience stressing on the positive aspects

on Dematerialization. And settlement of shares, derivative market and capital

instruments has done in whole lot of good to the issuer, investor companies and

country.

The depository systems has reduced the lag in delivery and settlement of

securities but also supported the cause of providing more liquidity to the security

holder, the need for setting up of a depository paper less trading.Through online

trading system and settlement became inevitable and unavoidable for the smooth

and the efficient functioning of the capital market. This system has proved its

worthiness by increasing in the speed of transactions within T+3 days which are

earlier T+5 days.

Now there is a proposal that the settlement will be done within T+1days in near

future which is in it an indication of a boon in the system of demat and capital

market instruments. It has been fairly long since derivative trading started off on

the Indian Indexes.

Actively has failed to really take off with low figures being transacted in terms of

value and volumes. The introduction of derivative trading was hailed by the

punters in the capital markets but has not really brought about a wave so as to

speak.

There are several factors, which impede the growth of the derivative markets in

India.

108

Of these factors the absence of clear guidelines on tax-related issues and the high

cost of transactions are the most prominent.

SUGGESTIONS

I recommend the exchange authorities to take steps to educate Investors about

their rights and duties. I suggest to the exchange authorities to increase the

investors’ confidences.

I recommend the exchange authorities to be vigilant to curb wide fluctuations of

prices.

The speculative pressures are responsible for the wide changes in the price, not

attracting the genuine investors to the greater extent towards the market.

Genuine investors are not at all interested in the speculative gain as their

investment is based on the future profits, therefore the authorities of the exchange

should be more vigilant to curb the speculation.

Necessary steps should be taken by the exchange to deal with the situations

arising due to break down in online trading.

109

BIBLIOGRAPHY

BOOKS:

V.K. Bhalla investment management

Securities analysis and portfolio management, 4th edition 2008, S.Chand Ltd

Preethi singh investment management, fundamental of financial management 14th

edition, Himalaya publishing house 2006

V.A Avadhani of Security analysis and portfolio management, Himalaya

publishing house,9th edition 2009

V.A Avadhani marketing of financial services and markets, Himalaya publishing

house 1999

M.Y. Khan Indian Financial system 6th edition 2004 Tata mc-graw Hill.

Include few foreign authors’ books

WEBSITES:

www.religare.com

www.bseindia.com

www.sebi.com

www.moneycontrol.com

www.economictimes.com

www.nseindia.com

www.investopedia.com

110

MARKET WATCH WINDOWS:

BLUE COLOUR INDICATE SHARE VALUE INCREASE

RED COLOUR INDICATE SHARE VALUE DECREASE

NSE Scrip’s

NSE & BSE Scrip’s

111

(BUY Order Form)

(Sell Order Form)

112

(Market Depth)

(Order Book)

113

Client Margin

Trade Book

114

Client Activity Report

Exercise Report

115