Dmat Report

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A

Project Study Report

On

COMPREHENSIVE ANALYSIS OF DMAT A/C

Of

A Report submitted to Apex Institute of Management

&Science, Jaipur In partial fulfillment of full-time MBA Course .

Submitted to, Submitted by

Nikita Mam. Navin

Goyal

[M.B.A

IVth SEMESTER]

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PrefaceIt is well evident that work experience is an indispensable part of every professional

course. Knowledge attains maturity and perfection through its application in practical

field. And professional study is incomplete without practical knowledge; no doubt, theory

provides the foundation stone for the guidance of practice, as practice examine the

element of truth lying in theory.

To achieve this purpose MBA participants are required to go for project involving

research based studies.

I had the privilege to do my project at JAIPUR CITY. I was assigned a project with

regard to Comprehensive Analysis of DMAT A/C of Reliance Money".

Entering the organization is like stepping into an entirely new world .At first everything

seemed strange and unheard of but as time passed I understood the concept and

working of the organization theyre by developed a professional relationship

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ACKNOWLEDGEMENT

I take a great pleasure in acknowledging the APEX INSTITUTE OF MANAGEMENT

&SCIENCE, (JAIPUR) for giving me an opportunity to carry on my project with Reliance

Money Ltd. I also offer my thanks and gratitude to the Marketing and Sales team of

Reliance Money for accepting me as a trainee.

I express my warm regards and obligations to our project guide,

Mr. KSHITIZ for the help and direction given by him during my project work.

I owe my gratitude to Mr.VIDHU MATHUR for giving me all the possible co-

ordination to accomplish this project.

I sincerely thank the employee of Reliance Money for the cooperation they have

extended & valuable information they have provided for the completion of this project.

I have no words to express adequately my deep sense of gratitude to each and

everyone who have directly or indirectly cooperated and helped me to complete this

project successfully.Last but not least researcher likes to express her thanks to friends

and family members without whose valuable support this project have not been a reality.

NAVIN GOYAL

S.NO. CONTENTS P. No.

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1 EXECUTIVE SUMMARY 5

2 OBJECTIVE OF STUDY 6

3 CHAPTER-1 INDUSTRY PROFILE 7-76

3.1 History of Stock Market in India 8-11

3.2 About SEBI ,NSDL,CDSL 12-27

3.3 Risk Involved in Stock Market 28-38

3.4 DMAT a/c 39-47

3.5 Indian brokerage industry 48-76

4 CHAPTER-4 COMPANY PROFILE 77-94

5 CHAPTER-5 RESEARCH METHOLOGY 95-102

6 CHAPTER-6 ANALYSIS AND INTERPRETATION 103-119

7 CHAPTER-7 SWOT ANALYSIS 120-122

8 CHAPTER-8 CONLUSION,FINDINGS AND SUGGESTIONS 123-124

9 RECOMMENDATIONS 125-126

10 CHAPTER-9 ANNEXURE 127-128

11 BIBLIOGRAPHY 129

EXECUTIVE SUMMARY

This project is based on a survey method; the study is based on

methodology of an investor in brokerage industry especially regarding DMAT account.

To execute the study researcher preferred to study the role and activities of all the

participants in the share trading and different features of DMAT account. It is

prerequisite to the researcher to understand the whole market including all components.4


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The first phase of the project is executed by availing the knowledge of the following in

detail.

1. Role of SEBI

2. The Depository System3. Role of BSE and NSE

4. Process of online trading

5. Activities of Reliance Money especially regarding DMAT account

Having the knowledge of the market and its operational features, the

researcher started exploring the product, contacted the prospective investor and got the

questionnaire filled regarding their need. For this purpose the researcher made a

questionnaire which contains both type of questions open ended and close ended. The

researcher used StratifiedRandom Sampling Technique to understand this study. The

researcher did convenient sampling. The research is Descriptive and Diagnostic in

nature as it dealt with describing the market and behavior of investor. The researcher

finds out some places near by some of brokerage houses where prospective investors

are used to come and get the questionnaire filled.

After getting all the data, researcher started analyzing the data and gave suggestions.

The researcher describes the behavior of an investor and tells the reasons behind his

various decisions. The researcher gives some suggestions to the company so that

company can attract new investor and retain the old one.

Objective of study: The objectives of my study are

1. Comprehensive analysis of DMAT A/c of Reliance Money

2. To understand the trading system of Reliance Money.

3. To understand the stock market and its components.

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4. To create awareness among market about Reliance Money

5. Help the company to attract new the investor.

6. Mapping up of potential customers for Reliance Money.

7. To understand what are the expectations and feedback of the customers.

8. To find out suggestions and improvements to be implemented in

Reliance Money offerings and service.

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CHAPTER 1

INDUSTRY PROFILE

History of stock market in India

The working of stock exchanges in India started in 1875. BSE is the oldest stock market

in India. The history of Indian stock trading starts with 318 persons taking membership in

Native Share and Stock Brokers Association, which we now know by the name Bombay

Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the

Government of India. National Stock Exchange comes second to BSE in terms of

popularity. BSE and NSE represent themselves as synonyms of Indian stock market.The history of Indian stock market is almost the same as the history of BSE.

The country's capital markets have passed through both good and bad periods. The

journey in the 20th century has not been an easy one. Till the decade of eighties, there

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was no scale to measure the ups and downs in the Indian stock market. The Stock

Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently

became the barometer of the Indian stock market.

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

construction and review methodology. First compiled in 1986, SENSEX is a basket of 30

constituent stocks representing a sample of large, liquid and representative companies.

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

reported in both domestic and international markets through print as well as electronic

media.

The Index was initially calculated based on the "Full Market Capitalization" methodology

but was shifted to the free-float methodology with effect from September 1, 2003. The

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

industry best practice globally.

Due to its wide acceptance amongst the Indian investors; SENSEX is regarded to be the

pulse of the Indian stock market. As the oldest index in the country, it provides the time

series data over a fairly long period of time (From 1979 onwards). Small wonder, the

SENSEX has over the years become one of the most prominent brands in the country.

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SENSEX Calculation Methodology

SENSEX is calculated using "Free-float Market Capitalization" methodology. As per this

methodology, the level of index at any point of time reflects the Free-float market value

of 30 component stocks relative to a base period. The market capitalization of a

company is determined by multiplying price of its stock by the number of shares issued

by company. This market capitalization is further multiplied by the free-float factor to

ssdetermine free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index points. This is

often indicated by the notation 1978-79=100. The calculation of SENSEX involvesdividing the Free-float market capitalization of 30 companies in the Index by a number

called the Index Divisor. The Divisor is the only link to the original base period value of

the SENSEX. It keeps the Index comparable over time and is the adjustment point for all

Index adjustments arising out of corporate actions, replacement of scripts etc. During

market hours, prices of the index scripts, at which latest trades are executed, are used

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by the trading system to calculate SENSEX every 15 seconds and disseminated in real

time.

The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock

exchange. It is the largest stock exchange in India in terms daily turnover and number of

trades, for both equities and derivative trading.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance

companies and other financial intermediaries in India but its ownership and

management operate as separate entities. As of 2006, the NSE VSAT terminals, 2799 in

total, cover more than 1500 cities across India.

In October 2007, the equity market capitalization of the companies listed on the NSE

was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is

the third largest Stock Exchange in the world in terms of the number of trades in

equities. It is the second fastest growing stock exchange in the world with a recorded

growth of 16.6%.

The National Stock Exchange of India was promoted by leading financial institutions at

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

tax-paying company. In April 1993, it was recognized as a stock exchange under the

Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the

Wholesale Debt Market (WDM) segment in June 1994.

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SECURITIES AND EXCHANGE BOARD OF INDIA

Major part of the liberalization process was the repeal of the Capital Issues (control) Act,

1947, in May 1992. With this, Governments control over issues of capital, pricing of the

issues, fixing of premium and rates of interest on debentures etc. ceased, and the office

which administered the Act was abolished: the market was allowed to allocate resources

to competing uses. However, to ensure effective regulation of the market, SEBI Act,

1992 was enacted to establish SEBI with statutory powers for:-

Protecting the interests of investors in securities.

Promoting the development of the securities market, and

Regulating the securities market

Its regulatory jurisdiction extends over corporate in the issuance of capital and transfer

of securities, in addition to all intermediaries and person associated with securities

market. SEBI can specify the matters to be discloser and the standards of disclosure

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required for the protection of investors in respect of issues; can issue directions to all

intermediaries and other person associated with the securities market in the interest of

investors or of orderly development of securities market and can conduct enquiries,

audits and inspections of all concern and adjudicate offences under the Act. In short, it

has been given necessary autonomy and authority to regulate and develop an orderly

securities market. All the intermediaries in the market, such as brokers and sub brokers,

underwriters, merchant bankers, bankers to the issue, share transfer agents and

registrars to the issue, are now required to register with SEBI and are governed by its

regulations.

FUNCTIONS OF SEBI

SEBI has been obligated to protect the interests of the investors securities

and to promote and development of, and to regulate the securities market by such

measures as it thinks fit.

SEBI in particular has powers for:-

(a) Regulating the business in stock exchanges and other securities markets

(b) Registering and regulating the working of stock brokers, sub brokers, share

transfer agents, bankers to an issue, trustees of trust deeds, registrars to an

issue, merchant bankers, underwriters, portfolio managers, investment advisers

and such other intermediaries who may be associated with securities markets in

any manner;

(c) Registering and regulating the working of depositories, participants, custodians

of securities, foreign institutional investors, credit rating agencies and such

other intermediaries as SEBI may, by notification, specify in this behalf;(d) Registering and regulating the working of venture capital funds and collective

investment schemes including mutual funds;

(e) Promoting and regulating self regulatory organizations;

(f) Prohibiting fraudulent and unfair trade practices relating to securities market;

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(g) Promoting investors education and training of intermediaries of securities

markets;

(h) Prohibiting insider trading in securities;

(i) Regulating substantial acquisition of shares and take over of companies;

(j) Calling for information from, undertaking inspection, conducting inquiries and

audits of the stock exchanges, mutual funds and other persons associated with

the securities market and self regulatory organizations in the securities market;

(k) Performing such functions and exercising according to securities contracts

(Regulation) Act, 1956, as may be delegated to it by the Central Government;

(l) Levying fees or other charges for carrying out the purpose of this section;

(m) Conducting research for the above purpose.

DEPOSITORY SYSTEM

Depository system is concerned with conversion of securities from physical

to electronic form, settlement of trades in electronic segment, transfer of ownership and

custody of securities.

In the depository system, the ownership and transfer of securities place by means of

electronic book entries. This Rids the Capital market of the dangers and risks related to

handling of paper. Its transaction costs are also less as compared to that of physical

transactions. While investors will continue to exercise the option of holding securities in

the physical form, those preferring Rematerialisation of scripts are permitted to withdraw

from the depository by requesting the issue of physical certificate again. Share

transaction costs in the depository shall be lower than the cost of buying and selling

physical shares.

Depository system is not mandatory as of now; it is optional and is left on the investor to

decide whether he wants the securities to be DMATerialized. Holding and handling of

securities in electronic form eliminates problems that are normally associated with

physical certificates and it facilitates faster settlement cycle.13


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s

Depository System Business Partners:

NSDL carries out its activities through various functionaries called

business partners who include Depository Participants (DPs), Issuing companies and

their Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of

Stock Exchanges.

NSDL is electronically linked to each of these business partners via a satellite link

through Very Small Aperture Terminals (VSATs) or through Leased land lines. The

entire integrated system (including the electronic links and the software at NSDL and

each business partners end) is called the NEST (National Electronic Settlement &

Transfer) system. Depository Participant (DP): The investor obtains Depository Services

trough a depository participant of NSDL. A DP can be a bank, financial institution, a

custodian, a broker, or any entity eligible as per SEBI (Depositories and Participants)

Regulations, 1996. The SEBI regulations and NSDL bye laws also lay down the criteria

for any of these categories to become a DP.

Benefits of Depository System:

In the depository system, the ownership and transfer of securities takes place by means

of electronic book entries. At the outset, this system rids the capital market of the

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dangers related to handling of paper. NSDL provides numerous direct and indirect

benefits, like:

Elimination of bad deliveries In the depository environment, once holdings of an

investor are DMATerialized, the question of bad delivery does not arise i.e. theycannot be held under objection. In the physical environment, buyer was required

to take the risk of transfer and face uncertainty of the quality of assets purchased.

In a depository environment good money certainly begets good quality of assets.

Elimination of all risks associated with physical certificates Dealing in physical

securities have associated security risks of theft of stocks, mutilation of

certificates, loss of certificates during movements through and from the registrars,

thus exposing the investor to the cost of obtaining duplicate certificates and

advertisements. Etc. This problem does not arise in the depository environment.

No stamp duty for transfer of any kind of securities in the depository. This waiver

extends to equity shares, debt instruments and units of mutual funds.

Immediate transfer and registration of securities In the depository environment, once

the securities are credited to the investors account on pay out, he becomes the legal

owner of the securities. There is no further need to send it to the companys registrar for

registration. Having purchased securities in the physical environment, the investor has

to send it to the companys registrar so that the change of ownership can be registered.

This process usually takes around three to four months and is rarely completed within

the statutory framework of two months thus exposing the investor to opportunity cost of

delay in transfer and to risk of loss in transit. To overcome this, the normally accepted

practice is to hold the securities in street names i.e. not to register the change of

ownership. However, if the investors miss a book closure the securities are not good for

delivery and the investor would also stand to loose his corporate entitlements

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Faster settlement cycle The exclusive DMAT segments follow rolling settlement

cycle of T+2 i.e. the settlement of trades will be on the 2nd working day fro the

trade day. This will enable faster turnover of stock and more liquidity with the

investor.

Faster disbursement of non cash corporate benefits like rights, bonus, etc.

NSDL provides for direct credit of non cash corporate entitlements to investors

accounts, thereby ensuring faster disbursement and avoiding risk of loss of

certificates in transit.

Reduction in brokerage by many brokers for trading in DMATerialized securities

Brokers provide this benefit to investors as dealing in DMATerialized securities

reduces their back office cost of handling paper and also eliminates the risk of

being the introducing broker.

Reduction in handling of huge volumes of paper.

Periodic status reports to investors on their holding and transactions, leading to

better control.

Elimination of problems related to change of address of investor, transmission

etc. In case of change of address or transmission of DMAT shares, investors

are saved from undergoing the entire change procedure with each company or

registrar. Investors have to only inform their DP with all relevant documents and

the required changes are effected in the database of all the companies, where

the investor is a registered holder of securities.

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CENTRAL DEPOSITORY SECURITIES LIMITED

(CDSL)

A Depository facilitates holding of securities in the electronic form and enables securities

transactions to be processed by book entry by a Depository Participant (DP), who as an

agent of the depository, offers depository services to investors. According to SEBI

guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act

as DPs. The investor who is known as beneficial owner (BO) has to open a DMAT

account through any DP for DMATerialisation of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be

obtained through the DP. The DP is required to provide the investor, at regular intervals,

a statement of account which gives the details of the securities holdings and

transactions. The depository system has effectively eliminated paper-based certificates

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which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers

an efficient and instantaneous transfer of securities.

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading

banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank,

Standard Chartered Bank, Union Bank of India and Centurion Bank

CDSL was set up with the objective of providing convenient, dependable and secure

depository services at affordable cost to all market participants. Some of the important

milestones of CDSL system are:

CDSL received the certificate of commencement of business from SEBI in

February, 1999. Honorable Union Finance Minister, Shri Yashwant Sinha flagged

off the operations of CDSL on July 15, 1999.

Settlement of trades in the DMAT mode through BOI Shareholding Limited, the

clearing house of BSE, started in July 1999.

All leading stock exchanges like the National Stock Exchange, Calcutta Stock

Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have

established connectivity with CDSL.

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As at the end of Dec 2005, over 5000 issuers have admitted their securities

(equities, bonds, debentures and commercial papers), units of mutual funds,

certificate of deposits etc. into the CDSL system.

Salient Features of CDSL

Convenience:

On-line DP Services: The DPs are directly connected to CDSL thereby providingon-line and efficient depository service to investors (This will have to be re-phrased as

we are not giving branches anymore.)

Wide Spectrum of Securities Available for DMAT:Over 5500 issuers have

admitted their securities in CDSL consisting of Public (listed & unlisted) Limited and

Private Limited companies. These securities include equities, bonds, units of mutual

funds, Govt. securities, Commercial papers, Certificate of deposits; etc thus an investor

can hold almost all his securities in one account with CDSL.

Competitive Fees Structure: CDSL has kept its tariffs very competitive to provide

affordable Depository services to investors.

Internet Access:A DP, which registers itself with CDSL for Internet access, can in

turn provide DMAT account holders with access to their account on the Internet.

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Dependability:

On-line Information to Users: CDSL's system is built on a centralised database

architecture and thus enables DPs to provide on-line depository services with the latest

status of the investor's account.

Convenient to DPs: The entire database of investors is stored centrally at CDSL. If

there is any system-related issues at DPs end, the investor is not affected, as the entire

data is available at CDSL.

Contingency Arrangements: CDSL has made provisions for contingency terminals,

which enables a DP to update transactions, in case of any system related problems at

the DP's office

Wide DP Network: CDSL has over 375 DPs spread across 124 cities/towns across the

country, offering convenience for an investor to select a DP based on his

locationAlthough India had a vibrant capital market which is more than a century old, the

paper-based settlement of trades caused substantial problems like bad delivery and

delayed transfer of title till recently. The enactment of Depositories Act in August 1996

paved the way for establishment of NSDL, the first depository in India. This depository

promoted by institutions of national stature responsible for economic development of the

country has since established a national infrastructure of international standards that

handles most of the securities held and settled in DMATerialised form in the Indian

capital market.

Using innovative and flexible technology systems, NSDL works to support the investors

and brokers in the capital market of the country. NSDL aims at ensuring the safety and

soundness of Indian marketplaces by developing settlement solutions that increase

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efficiency, minimise risk and reduce costs. At NSDL, we play a quiet but central role in

developing products and services that will continue to nurture the growing needs of the

financial services industry.

In the depository system, securities are held in depository accounts, which is more or

less similar to holding funds in bank accounts. Transfer of ownership of securities is

done through simple account transfers. This method does away with all the risks and

hassles normally associated with paperwork. Consequently, the cost of transacting in a

depository environment is considerably lower as compared to transacting in certificates.

Although India had a vibrant capital market which is more than a century old, the paper-

based settlement of trades caused substantial problems like bad delivery and delayed

transfer of title till recently. The enactment of Depositories Act in August 1996 paved the

way for establishment of NSDL, the first depository in India. This depository promoted by

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

since established a national infrastructure of international standards that handles most

of the securities held and settled in DMATerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support the investors

and brokers in the capital market of the country. NSDL aims at ensuring the safety and

soundness of Indian marketplaces by developing settlement solutions that increase

efficiency, minimise risk and reduce costs. At NSDL, we play a quiet but central role in

developing products and services that will continue to nurture the growing needs of the

financial services industry.

In the depository system, securities are held in depository accounts, which is more or

less similar to holding funds in bank accounts. Transfer of ownership of securities is

done through simple account transfers. This method does away with all the risks and

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hassles normally associated with paperwork. Consequently, the cost of transacting in a

depository environment is considerably lower as compared to transacting in certificates.

BENEFITS

Elimination of problems related to transmission of DMAT

shares - In case of DMATerialized holdings, the process of transmission

is more convenient as the securities the surviving joint holder(s)/legal

heirs/nominee has to correspond independently with each company in

which shares are held.

Elimination of problems related to selling securities on

behalf of a minor - A natural guardian is not required to take court

approval for selling DMAT securities transmission formalities for all

securities held in a DMAT account can be completed by submitting

documents to the DP whereas, in case of physical on behalf of a minor.

Elimination of problems related to change of address of

investor - In case of change of address, investors are saved from

undergoing the entire change procedure with each company or registrar.

Investors have to only inform their DP with all relevant documents and the

required changes are effected in the database of all the companies, where

the investor is a registered holder of securities

Elimination of bad deliveries: In the depository environment, once

holdings of an investor are DMATerialized, the question of bad delivery

does not arise i.e. they cannot be held "under objection". In the physical

environment, buyer was required to take the risk of transfer and face

uncertainty of the quality of assets purchased. In a depository environment

good money certainly begets good quality of assets.

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STOCK EXCHANGE

Stock Exchange organized market for buying and selling financial instruments known

as securities, which include stocks, bonds, options, and futures. Most stock exchanges

have specific locations where the trades are completed. For the stock of a company to

be traded at these exchanges, it must be listed, and to be listed, the company must

satisfy certain requirements. But not all stocks are bought and sold at a specific site.

Such stocks are referred to as unlisted. Many of these stocks are traded over the

counterthat is, by telephone or by computer.

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IMPORTANCE OF STOCK EXCHANGE

Stock exchanges perform important roles in national economies. Most importantly, they

encourage investment by providing places for buyers and sellers to trade securities. This

investment, in turn, enables corporations to obtain funds to expand their businesses.

Corporations issue new securities in what is known as the primary market, usually with

the help of investment bankers. The investment bank acquires the initial issue of the

new securities from the corporation at a negotiated price and then makes the securities

available for its clients and other investors in an initial public offering (IPO). In this

primary market, corporations receive the proceeds of security sales. After this initial

offering the securities are bought and sold in the secondary market. The corporation is

not usually involved in the trading of its stock in the secondary market. Stock exchanges

essentially function as secondary markets. By providing investors the opportunity totrade financial instruments, the stock exchanges support the performance of the primary

markets. This arrangement makes it easier for corporations to raise the funds that they

need to build and expand their businesses.

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STOCK TRADING

Stocks are shares of ownership in companies. People who buy a companys stock may

receive dividends (a portion of any profits). Stockholders are entitled to any capital gains

that arise through their trading activitythat is, to any gain obtained when the price atwhich the stock is sold is greater than the purchase price. But stockholders also face

risks. One risk is that the firm may experience losses and not be able to continue the

payment of dividends. Another risk involves capital losses when the stockholder sells

shares at a price below the purchase price.

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STOCK BROKERS

A stockbroker is an employee of a brokerage firm. The individual investor contacts his or

her stockbroker and provides the stockbroker with the details of the transaction the

investor wants to complete. Stockbrokers, however, are more than order takers or sales

representatives for their firms; they frequently provide advice to the investor. They mayhave their own client list and call clients when they see transactions that will fit the

clients investment objectives. Stockbrokers almost always have certification from, or

registration with, a state government agency or an exchange or both. For this reason

they are sometimes referred to as registered representatives.

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Risk involved while investing in Stock Market

Risk is a complex, multidimensional concept that manifests itself in various ways. Risk isomnipresent and includes stock market crashes, corporate bankruptcies and currency

devaluations, changes in sentiment, in inflation and interest rates, and even major

changes in the tax code.

Risk is generally defined as return volatility, or the degree of ups and downs of returns.

But there's more to risk than volatility. Risk and long-term reward are generally related.

Risk is the chance that your actual return will be less than you expected.

People sometimes think that a good return can be achieved with little or no risk.

Unfortunately, that's impossible. To achieve your objectives, you need to assume certain

risks and avoid others.

Thoughtful investment selections that meet your goals and risk profile keep individual

stock and bond risks at an acceptable level.

However, other risks are inherent to investing you have no control over. Most of theserisks affect the market or the economy and require investors to adjust portfolios or ride

out the storm.

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Major types of such risks are:

Economic Risks

One of the most obvious risks of investing is that the economy can go bad. Following the

market bust in 2000 and the terrorists attacks in 2001, the economy settled into a sour

spell.

A combination of factors saw the market indexes lose significant percentages. It has

taken years to return to levels close to pre-9/11 marks.

For young investors, the best strategy is often to just hunker down and ride out these

downturns. If you can increase your position in good solid companies, these troughs are

often good times to do so.

Foreign stocks can be a bright spot when the domestic market is in the dumps if you do

your homework. Thanks to globalization, some U.S. companies earn a majority of their

profits overseas.

Older investors are in a tighter bind. If you are in or near retirement, a major downturn in

stocks can be devastating if you havent shifted significant assets to bonds or fixed

income securities.

Inflation

Inflation is the tax on everyone. It destroys value and creates recessions.

Although we believe inflation is under our control, the cure of higher interest rates may

at some point be as bad as the problem. Investors historically have retreated to hard

assets such as real estate and precious metals, especially gold, in times of inflation.

Inflation hurts investors on fixed incomes the most, since it erodes the value of their

income stream. Stocks are the best protection against inflation since companies have

the ability to adjust prices to the rate of inflation. It is not a perfect solution, but that is

why even retired investors should maintain some of their assets in stocks.

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Market Value Risk

Market value risk refers to what happens when the market turns against or ignores your

investment. This happens when the market goes off chasing the next hot thing and

leaves many good, but unexciting companies behind. Some investors find this a goodthing and view it as an opportunity to load up on great stocks at a time when the market

isnt bidding up the price.

On the other hand, it doesnt advance your cause to watch your investment flat-line

month after month while other parts of the market are going up.

The lesson is dont get caught with all you investments in one sector of the economy. By

spreading your investments across several sectors, you have a better chance of

participating in growth of some of your stocks at any one time.

How to evaluate a company before Investing

For stock investors that favor companies with good fundamentals, a "strong" balance

sheet is an important consideration for investing in a company's stock. The strength of a

company's balance sheet can be evaluated by three broad categories of investment-

quality measurements: working capital adequacy, asset performance and capital

structure.

A company's capitalization describes the composition of a company's permanent or

long-term capital, which consists of a combination of debt and equity. A healthy

proportion of equity capital, as opposed to debt capital, in a company's capital structure

is an indication of financial fitness.

Optimal Debt-Equity Relationship

In financial terms, debt is a good example of the proverbial two-edged sword. The use of

leverage (debt) increases the amount of financial resources available to a company for

growth and expansion. The assumption is that management can earn more on borrowed

funds than it pays in interest expense and fees on these funds. However, as successful

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as this formula may seem, it does require that a company maintain a solid record of

complying with its various borrowing commitments.

A company considered too highly leveraged (too much debt versus equity) may find its

freedom of action restricted by its creditors and/or may have its profitability hurt as aresult of paying high interest costs. Of course, the worst-case scenario would be having

trouble meeting operating and debt liabilities during periods of adverse economic

conditions.

Unfortunately, there is no magic proportion of debt that a company can take on. The

debt-equity relationship varies according to industries involved, a company's line of

business and its stage of development. However, because investors are better off

putting their money into companies with strong balance sheets, common sense tells usthat these companies should have, generally speaking, lower debt and higher equity

levels.

Capital Ratios and Indicators

In general, analysts use three different ratios to assess the financial strength of a

company's capitalization structure. The first two, the so-called debt and debt/equityratios, are popular measurements; however, it's the capitalization ratio that delivers the

key insights to evaluating a companys capital position.

The debt ratio compares total liabilities to total assets. Obviously, more of the former

means less equity and, therefore, indicates a more leveraged position. The problem with

this measurement is that it is too broad in scope, which, as a consequence, gives equal

weight to operational and debt liabilities. The same criticism can be applied to the

debt/equity ratio, which compares total liabilities to total shareholders' equity. Current

and non-current operational liabilities, particularly the latter, represent obligations that

will be with the company forever. Also, unlike debt, there are no fixed payments of

principal or interest attached to operational liabilities.

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The capitalization ratio (total debt/total capitalization) compares the debt component of a

company's capital structure (the sum of obligations categorized as debt + total

shareholders' equity) to the equity component. Expressed as a percentage, a low

number is indicative of a healthy equity cushion, which is always more desirable than a

high percentage of debt.

BalanceSheetStrength

For stock investors, the balance sheet is an important consideration for investing in a

company's stock because it is a reflection of what the company owns and owes. The

strength of a company's balance sheet can be evaluated by three broad categories of

investment-quality measurements: working capital adequacy, asset performance and

capitalization structure.

FixedAssetTurnoverRatio

Property, plant and equipment (PP&E), or fixed assets, is another of the "big" numbers

in a company's balance sheet. In fact, it often represents the single largest component of

a company's total assets

A company's investment in fixed assets is dependent, to a large degree, on its line of

business. Some businesses are more capital intensive than others. Natural resource

and large capital equipment producers require a large amount of fixed-asset investment.

Service companies and computer software producers need a relatively small amount of

fixed assets. Mainstream manufacturers generally have around 30-40% of their assets

in PP&E. Accordingly, fixed asset turnover ratios will vary among different industries.

The fixed asset turnover ratio is calculated as:

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This fixed asset turnover ratio indicator, looked at over time and compared to that of

competitors, gives the investor an idea of how effectively a company's management is

using this large and important asset. It is a rough measure of the productivity of a

company's fixed assets with respect to generating sales. The higher the number of times

PP&E turns over, the better. Obviously, investors should look for consistency or

increasing fixed asset turnover rates as positive balance sheet investment qualities.

Return on Assets Ratio

Return on assets (ROA) is considered to be a profitability ratio - it shows how much a

company is earning on its total assets. Nevertheless, it is worthwhile to view the ROA

ratio as an indicator of asset performance.

The ROA ratio (percentage) is calculated as:

The ROA ratio is expressed as a percentage return by comparing net income, the

bottom line of the statement of income, to average total assets. A high percentage return

implies well-managed assets. Here again, the ROA ratio is best employed as a

comparative analysis of a companys own historical performance and with companies in

a similar line of business.

Bullish and Bearish Market

Origin of the term

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One common myth is that the terms "bull market" and "bear market" are derived from

the way those animals attack a foe, because bears attack by swiping their paws

downward and bulls toss their horns upward.

This is a useful mnemonic, but is not the true origin of the terms.

Long ago, "bear skin jobbers" were known for selling bear skins that they did not own;

i.e., the bears had not yet been caught. This was the original source of the term "bear."

This term eventually was used to describe short sellers, speculators who sold shares

that they did not own, bought after a price drop, and then delivered the shares.

Because bull and bear baiting were once popular sports, "bulls" was understood as theopposite of "bears." I.e., the bulls were those people who bought in the expectation that

a stock price would rise, not fall.

A stock market bull is someone who has a very optimistic view of the market; they may

be stock-holders or maybe investors who aggressively buy and sell stocks quickly.A

bear investor, on the other hand, is pessimistic about the market .

What Drives Bear and Bull Markets?

The stock market is affected by many economic factors. High employment levels, strong

economy, and stable social and economic conditions generally build investor confidence

and encourage investors to put their money in the stock market. Often, this can bolster

bull markets. Also, new technologies and companies that encourage investors to put

their money in stocks can create bull markets. For example, in the 1990s, the dot com

craze encouraged many investors to put their money in stocks that they felt would keep

increasing. In some cases, a bullish market is simply self-perpetuating. Since the marketis doing well, it only encourages investors to invest more money or to start investing.

On the other hand, discouraging economic or social political changes in a society can

push the market down. Sudden instability or unemployment -- or even fears of

unemployment caused by wars and other problems -- can start to make investors more

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conservative and therefore lead to bear markets. Of course, again this becomes a self-

perpetuating trend. As the economy slows down, companies begin downsizing.

Increased unemployment makes people far less willing to gamble on the stock market.

Sometimes, a panic caused by dire predictions about the market can also create bearish

conditions.

Investing During Bear and Bull Markets

New investors often assume that they need to avoid investing during bear markets, and

invest heavily during bull markets. This is not the case. Experienced investors know that

you need to be able to invest in any sort of market condition, provided that you do so

wisely. Each investor has a different strategy for dealing with a bull market or bearish

markets. Many investors try to take advantage of bull markets by buying stocks as soon

as the market gets bullish, and then starting to sell when prices seem to have reached

their peak. The difficulty, of course, is that it is almost impossible to tell when the trend is

beginning and when it will peak. In general, investors can take more chances with the

market during a bullish phase. Since overall prices will rise, the chances of making a

profit are good.

In bearish market conditions, prices are falling and the possibility of loss is pretty good.

What is worse, it is not always possible to tell when bearish conditions will end.

Therefore, if you invest during such market conditions, you may have to suffer some

losses before bullish times return and you're able to realize a profit. For this reason,

many investors decide on short selling or fixed income securities and other more

conservative types of investment. Defensive stocks are another good option that

remains stable during bearish conditions. On the other hand, some investors see

bearish market conditions as an ideal time to invest in more stocks. Since many people

are selling off their stocks -- including valuable blue-chip stocks -- at low prices, it is

possible to set up long-term investments that will prove valuable during bullish times.

Our job in was to get such clients for the company, who not only wish to open a DMAT

account but also willing to trade regularly. As the company earns through brokerage

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charged per transactions (i.e. when a client buys or sells shares) and to earn this

brokerage, they need such clients, who trade on regular basis.

This is been done by various methods like

Cold Calls Here I collect the details of people from corporate databases, yellow

pages, internet and references and try to fix an appointment with these people by

calling them.

Personal Network I also tried to make some clients based on my personal

network. I tried to contact my friends and family to give me prospective leads of

people who all are interested in share market.

Going on the field I also tried to get some clients by directly approaching to big

offices, multiplexes and some complexes.

Apart from this our job in Reliance Money was to also look at such clients who were not

been trading in recent times. We tried and fixed an appointment with such clients and

tried to help them out if could be done with the help of company so that these clients can

trade with ease in future.

Important things one needs to keep in mind while opening a DMAT

account

Zero balance: Unlike a normal bank account, one doesnt need to deposit any

shares or cash for opening a DMAT account. Even after opening the account,

there is no need to hold any securities in that account. If and when you buy any

share, this share will be shown in your account electronically. The account will be

adjusted to the extent of any sale/purchase of any securities as and when the

transaction takes place. One ID: The DP will open the account in the system and give an account number,

which is also called BOID (Beneficiary Owner Identification number). This account

is enough to hold all kinds of securities like shares, debentures and other debt

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instruments like bonds and G-secs. However, there is no restriction on the

number of DMAT accounts that can be held by a person.

One can open any number of DMAT accounts with different DPs. Even post office

instruments like Kisan Vikas Patra and National Savings Certificates can be held

in DMAT form. However, at present, the facility is available only in 35 nominated

post offices in Mumbai.

Two documents: PAN has been made compulsory for all DMAT accounts with

effect from April 2006. Anyone opening a DMAT account needs to produce his

PAN card at the time of opening it. The PAN card also doubles as a proof of

identity document, which is mandatory.

The other important document is proof of address. Passport, driving license,

voters ID card, bank statement and electricity bills are among the various

documents accepted as identity proofs.

Three accounts: A DMAT account will be fully operational only if its

accompanied by two other accounts trading account and bank account. While

the former is optional, the latter is a pre-requisite as it is needed for crediting any

dividend warrants.

Trading account is necessary to buy/ sell securities in the market and can be

opened with a broker. If one does not intend to trade but only to convert existing

physical instruments into DMAT form, the trading account is not necessary. Since

many banks these days have broking and DP arms, you can open all three

accounts at one place itself.

Four types of charges: There are four fees usually levied on a DMAT account:

conversion fee, annual maintenance fee, custodian fee and transaction fee. All

the charges vary from DP to DP.

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Conversion fees: The DP charges a fee for converting shares from the

physical to the electronic form or vice-versa. This fee varies for both DMAT

and Remat requests. For DMAT, some DPs charge a flat fee per request in

addition to the variable fee per certificate, while others charge only the

variable fee.

Annual maintenance fees: This is generally charged in advance.

Custodian fee: This is charged monthly and depends on the number of

securities held in the account. Each security is identified by a unique

international securities identification number (ISIN). Custodian fee is linked

to this numbers and ranges between Rs 0.5 to Rs 1 per ISIN per month.

DPs will not charge custodian fee for ISIN on which the firms have paid

one-time custody charges to the depository.

Transaction fee: Transaction fee is charged for crediting/debiting

securities to and from the account on a monthly basis. While some DPs

charge a flat fee per transaction, others peg the fee to the transaction

value, subject to a minimum amount. For example, while SBI charges Rs 3

per transaction, ICICI Bank does not charge buy trades, but charges

0.04% of the transaction value in case of sell trades, subject to a minimum

of Rs 10.

The fee also differs on the kind of transaction (buying or selling). Some

DPs charge only for debiting the securities while others charge for both.

The DPs also charge if your instruction to buy/sell fails or is rejected. In

addition, service tax is also charged by the DPs.

SEBI has removed account opening charges, transaction charges for credit of

securities, and custody charges vide circular .

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D MAT

The term DMAT, in India, refers to a DMA Trailside account. For individual Indian

citizens to trade in listed stocks or debentures the Securities Exchange Board of

India (SEBI) requires the investor to maintain a DMAT account. In a DMAT

account shares and securities are held in electronic form instead of taking actual

possession of certificates. A DMAT Account is opened by the investor while

registering with an investment broker (or sub broker). The DMAT account number

which is quoted for all transactions to enable electronic settlements of trades to

take place.

Access to the DMAT account requires an internet password and a transaction

password as well as initiating and confirming transfers or purchases of securities.

Purchases and sales of securities on the DMAT account are automatically made

once transactions are executed and complted.

Advantages of DMAT

The DMAT account reduces brokerage charges, makes pledging/hypothecation

of shares easier, enables quick ownership of securities on settlement resulting inincreased liquidity, avoids confusion in the ownership title of securities, and

provides easy receipt of public issue allotments.

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It also helps you avoid bad deliveries caused by signature mismatch, postal

delays and loss of certificates in transit. Further, it eliminates risks associated with

forgery, counterfeiting and loss due to fire, theft or mutilation. DMAT account

holders can also avoid stamp duty (as against 0.5 per cent payable on physical

shares), avoid filling up of transfer deeds, and obtain quick receipt of such

benefits as stock splits and bonuses.

Indian Market Scenario

Indian capital market has seen unprecedented boom in its activity in the last 15

years in terms of number of stock exchanges, listed companies, trade volumes,

market intermediaries, investor population, etc. However, this surge in activity has

brought with it numerous problems that threaten the very survival of the capital

markets in the long run, most of which are due to the large volume of paper work

involved and paper based trading, clearing and settlement. Until the late eighties,

the common man kept away from capital market and thus the quantum of fundsmobilized through the market was meager. A major problem, however, continued

to plague the market. The Indian markets were drowned in shares in the form of

paper and hence it was problematic to handle them. Fake and stolen shares, fake

signatures and signature mismatch, duplication and mutilation of shares, transfer

problems, etc. The investors were scared and were under compensated for the

risk borne by them. The century old system of trading and settlement requires

handling of huge volumes of paper work. This has made the investors, both retail

and institutional, wary of entering the capital market.

However, lack of modernization become a hindrance to growth and resulted in

creation of cumbersome procedures and paper work. However, the real growth

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and change occurred from mid-eighties in the wake of liberalization initiatives of

the Government. The reforms in the financial sector were envisaged in the

banking sector, capital market, securities market regulation, mutual funds, foreign

investments and Government control. These institutions and stock exchanges

experienced that the certificates are the main cause of investors` disputes and

arbitration cases. Since the paper work was not matching the rapid growth so

there was a need for a better system to ensure removal of these impediments.

Government of India decided to set up a fully automated and high technology

based model exchange that could offer screen-based trading and depositories as

the ultimate answer to all such reforms and eliminate various bottlenecks in the

capital market, particularly, the clearing and settlement system in stock

exchanges.[1] A depository in very simple terms is a pool of pre-verified shares

held in electronic mode which offers settlement of transactions in an efficient and

effective way.

Object Of DMAT System

India has adopted this system in which book entry is done electronically. It is the

system where no paper is involved. Physical form is extinguished and shares orsecurities are held in electronic mode. Before the introduction of the depository

system by the Depository Act, 1996, the process of sale, purchase and transfer of

shares was a huge problem and the safety perspective was zero.

DMAT Benefits

The benefits are enumerated as follows:

Its a safe and convenient way to hold securities

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Immediate transfer of securities is there

There is no stamp duty on transfer of securities

Elimination of risks associated with physical certificates such as bad

delivery, fake securities, delays, thefts etc

There is a major reduction in paperwork involved in transfer of

securities,reduction in transaction cost etc

.No odd lot problem, even one share can be sold thus there is an

advantage

Change in address recorded with DP gets registered with all companies

in which investor holds securities electronically eliminating the need to

correspond with each of them separately

Transmission of securities is done by DP eliminating correspondence

with companies.

Automatic credit into DMAT account of shares, arising out of

bonus/split/consolidation/merger etc.

Holding investments in equity and debt instruments in a single account.

Benefit to the Company

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The depository system helps in reducing the cost of new issues due to less

printing and distribution cost. It increases the efficiency of the registrars and

transfer agents and the Secretarial Department of the company. It provides better

facilities for communication and timely services with shareholders, investor etc.

Benefit to the Investor The depository system reduces risks involved in holdingphysical certificated, e.g., loss, theft, mutilation, forgery, etc.It ensures transfer

settlements and reduces delay in registration of shares. It ensures faster

communication to investors. It helps avoid bad delivery problem due to signature

differences, etc.It ensures faster payment on sale of shares. No stamp duty is

paid on transfer of shares. It provides more acceptability and liquidity of

securities.

Benefit to Brokers

The depository system reduces risk of delayed settlement. It ensures greater

profit due to increase in volume of trading. It eliminates chances of forgery bad

delivery. It increases overall of trading and profitability.It increases confidence in

investors.

DMAT conversion

Converting physical holding into electronic holding (DMATerialising securities) In

order to DMATerialise physical securities one has to fill in a DRF (DMAT Request

Form) which is available with the DP and submit the same along with physical

certificates one wishes to DMATerialise. Separate DRF has to be filled for eachISIN Number. The complete process of DMATerialisation is outlined below:

Surrender certificates for DMATerialisation to your depository participant.

Depository participant intimates Depository of the request through the system.

Depository participant submits the certificates to the registrar of the Issuer

Company. Registrar confirms the DMATerialisation request from depository.

After DMATerialising the certificates, Registrar updates accounts and informs

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depository of the completion of DMATerialisation. Depository updates its

accounts and informs the depository participant. Depository participant updates

the DMAT account of the investor.

DMAT Options

Banks score over others Around 200 depository participants (DPs) offer the

DMAT account facility. A comparison of the fees charged by different DPs is

detailed below. But there are three distinct advantages of having a DMAT

account with a bank quick processing, accessibility and online transaction.

Generally, banks credit your DMAT account with shares in case of purchase, orcredit your savings accounts with the proceeds of a sale on the third day. Banks

are also advantageous because of the number of branches they have. Some

banks give the option of opening a DMAT account in any branch, while others

restrict themselves to a select set of branches. Some private banks also provide

online access to the DMAT account. So, you can check on your holdings,

transactions and status of requests through the net banking facility. A broker who

acts as a DP may not be able to provide these services.

Fees Involved

There are four major charges usually levied on a DMAT account: Account

opening fee, annual maintenance fee, custodian fee and transaction fee. All the

charges vary from DP to DP. Account-opening fee Depending on the DP, there

may or may not be an opening account fee. Private banks, such as ICICI Bank,

HDFC Bank and UTI Bank, do not have one. However, players such as Karvy

Consultants and the State Bank of India do so. But most players levy this when

you re-open a DMAT account, though the Stock Holding Corporation offers alifetime account opening fee, which allows you to hold on to your DMAT account

over a long period. This fee is refundable. Annual maintenance fee This is also

known as folio maintenance charges, and is generally levied in advance.

Custodian fee: This fee is charged monthly and depends on the number of

securities (international securities identification numbers ISIN) held in the

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account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will

not charge custody fee for ISIN on which the companies have paid one-time

custody charges to the depository. Transaction fee: The transaction fee is

charged for crediting/debiting securities to and from the account on a monthly

basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC

Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum

amount. The fee also differs based on the kind of transaction (buying or selling).

Some DPs charge only for debiting the securities while others charge for both.

The DPs also charge if your instruction to buy/sell fails or is rejected. In addition,

service tax is also charged by the DPs. In addition to the other fees , the DP also

charges a fee for converting the shares from the physical to the electronic form or

vice-versa. This fee varies for both DMAT and remat requests. For DMAT, some

DPs charge a flat fee per request in addition to the variable fee per certificate,

while others charge only the variable fee. For instance, Stock Holding Corporation

charges Rs 25 as the request fee and Rs 3 per certificate as the variable fee.However, SBI charges only the variable fee, which is Rs 3 per certificate. Remat

requests also have charges akin to that of DMAT. However, variable charges for

remat are generally higher than DMAT. Some of the additional features (usually

offered by banks) are as follows.Some DPs offer a frequent trader account, where

they charge frequent traders at lower rates than the standard charges.DMAT

account holders are generally required to pay the DP an advance fee for each

account which will be adjusted against the various service charges. The account

holder needs to raise the balance when it falls below a certain amount prescribed

by the DP. However, if you also hold a savings account with the DP you can

provide a debit authorisation to the DP for paying this charge.Finally, once youchoose your DP, it will be prudent to keep all your accounts with that DP, so that

tracking your capital gains liability is easier. This is because, for calculating

capital gains tax, the period of holding will be determined by the DP and different

DPs follow different methods. For instance, ICICI Bank uses the first in first out

(FIFO) method to compute the period of holding. The proof of the cost of

acquisition will be the contract note. The computation of capital gains is done

account-wise.

Opening an account

Steps involved in opening a DMAT account First an investor has to approach a

DP and fill up an account opening form. The account opening form must be

supported by copies of any one of the approved documents to serve as proof of

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identity (POI) and proof of address (POA) as specified by SEBI. Besides,

production of PAN card in original at the time of opening of account has been

made mandatory effective from April 1, 2006.

All applicants should carry original documents for verification by an authorized

official of the depository participant, under his signature. Further, the investor hasto sign an agreement with DP in a depository prescribed standard format, which

details rights and duties of investor and DP. DP should provide the investor with a

copy of the agreement and schedule of charges for their future reference. The DP

will open the account in the system and give an account number, which is also

called BO ID (Beneficiary Owner Identification number). The DP may revise the

charges by giving 30 days notice in advance. SEBI has rationalised the cost

structure for DMATerialisation by removing account opening charges, transaction

charges for credit of securities, and custody charges vide circular dated January

28, 2005. Further, SEBI has vide circular dated November 9, 2005 advised that

with effect from January 9, 2006, no charges shall be levied by a depository onDP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers

all the securities lying in his account to another branch of the same DP or to

another DP of the same depository or another depository, provided the BO

Account/s at transferee DP and at transferor DP are one and the same, i.e.

identical in all respects. In case the BO Account at transferor DP is a joint

account, the BO Account at transferee DP should also be a joint account in the

same sequence of ownership.

Disadvantages of DMAT

The disadvantages of DMATerialization of securities can be summarised as

follows:

Trading in securities may become uncontrolled in case of DMATerialized

securities.

It is incumbent upon the capital market regulator to keep a close watch onthe trading in DMATerialized securities and see to it that trading does not

act as a detriment to investors.

The role of key market players in case of DMATerialized securities, such

as stock-brokers, needs to be supervised as they have the capability of

manipulating the market.

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Multiple regulatory frameworks have to be confirmed to, including the

Depositories Act, Regulations and the various By-Laws of various

depositories.

Additionally, agreements are entered at various levels in the process of

DMATerialization. These may cause anxiety to the investor desirous ofsimplicity in terms of transactions in DMATerialized securities.

However, the advantages of DMATerialization outweigh its disadvantages and

the changes ushered in by SEBI and the Central Government in terms of

compulsory DMATerialization of securities is important for developing the

securities market to a degree of advancement. Freely traded securities are an

essential component of such an advanced market and DMATerializationaddresses such issues and is a step towards the advancement of the market.

Transfer of Shares between DPs

To transfer shares, we need to fill the Depository Instruction Slip Book (DIS).

Firstly we need to check, whether both DMAT account's Depository Participant is

same or not(CDSL or NSDL) If both of them are different, then we need an

INTER Depository Slip (Inter DIS). If they are same, then we need INTRADepository Slip (Intra DIS).

For example: If we have one DMAT account with CDSL and other DMAT account

with NSDL, then we need an Inter DIS.

Generally, brokers issue Intra DIS, so do check with broker.

Once we identify the correct DIS, fill the relevant information like

scrip name

INE number

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quantity in words and figures and

submit that DIS for the transfer to the broker with signatures. The transferor

broker shall accept that DIS in duplicate and acknowledge receipt of DIS on

duplicate copy.

Do try to submit that DIS when market is on. Accordingly, date of submission of

DIS and date of execution of DIS can be same or a difference of one day is also

acceptable.

For transfer, you shall also pay the broker some charges.

A COMPARISON OF INVESTMENT IN SECURITIES IN PHYSICAL AND

DEPOSITORY MODES

IN PHYSICAL FORM IN DMAT FORM

Space required for storage and safety No space required

Exclusive manpower to be allocated This function can be clubbed with

functions. No Exclusive manpower is

required

Insurance is required No insurance required

Laborious inventory verification during

internal stock taking and audits

Periodic statement of holding is made

available by the Dps Easy verification

of audits

Risk of theft /Forgery No risk of Theft/ Forgery

Pledging of shares is cumbersome Pledging is safe and easy

Receipt of Corporate benefits need

monitoring and risks of loss in transit

Faster and hassle free receipt of

corporate benefits

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not ruled out

Inconvenience in portfolio shuffling and

transactions within the group

Convenient portfolio shuffling and

adjustment within the group since

delivery is through a single

instrument,registration &

instantaneous.

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Indian

Brokerage

industry

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The Indian broking industry is one of the oldest trading industries that has been around

even before the establishment of the BSE in 1875. Despite passing through a number of

changes in the post liberalisation period, the industry has found its way towards

sustainable growth.

The equity broking industry in India is growing in terms of scope and scale of business.

With the Indian securities markets experiencing rapid growth and with financial

integration gaining speed, the role of intermediation is further going to strengthen.

However in the long term, quality and maturity of service will determine the success and

sustainability of the firms in this segment. Key factors driving growth and success in the

broking industry would be distribution networks, diversification of services, expertise and

research, transparency and disclosure, compliance and market integrity.

Both the number of broking firms and the scope of the business have increased

significantly in the last one and a half decades. A majority of the members now have

memberships in more than one stock exchange, enabling them to expand the business

into a number of products. A large number of broking firms today have membershipsacross equities, equity derivatives and commodities futures in domestic and international

stock exchanges. Increase in the scale of business led top notch broking firms enhances

their enterprise value.

The equity broking industry showed exceptional growth in last few years. The surge in

business in terms of new customer accounts and value of share trading was evident

across the entire spectrum of the equity broking industry. Major equity broking houses

reported impressive gains in opening new customer accounts. The range of servicesprovided by the broking firms transformed frombeing simple trading services to number

of financial services in the realm of primary and secondary markets as also fund

management and wealth management services. As it can be seen from the Table 1.

below IndiaBulls and Reliance Money is leading the race of acquiring new accounts.

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table 1. number of accounts added in 2010

Source: Research report, Indias leading broking houses, 2008. By Dun &

Bradstreet, India

Equity broking firms which reported significant rise in their trading terminals during the

first 10 months of 2007 included Motilal Oswal (3,744), Reliance Money (905), Master

Capital (505), Inventure (529), Adroit Financial (438), Indiabulls (287), Emkay (281),

Techno Shares (217), Sushil Finance (294), Jhaveri Securities (169), KRC (147), SKI

Capital (155) and Mansukh (125).

Firms with significant increase in the branches/offices during the first 10 months of CY07

included Bonanza (335), Arcadia (285), Master Capital (202), Khandwala Integrated(195), Reliance Money (107), Anand Rathi (93), Microsec Capital (90), Kunvarji Finstock

(77), SKI Capital (55), Indiabulls (45) and Networth Stock Broking (34).

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Major developments in equity brokerage industry in India

i) Corporate memberships

There is a growing surge of corporate memberships (92% in NSE and 75% in BSE), andthe scope of functioning of the brokerage firms has transformed from that of being a

family run business to that of professional organised function that lays greater emphasis

on observance of market principles and best practices. With proliferation of new markets

and products, corporate nature of the memberships is enabling broking firms to expand

the realm of their operations into other exchanges as also other product offerings.

Memberships range from cash market to derivatives to commodities and a few broking

firms are making forays into obtaining memberships in exchanges outside the country

subject to their availability and eligibility.

ii) Wider product offerings

The product offerings of brokerage firms today go much beyond the traditional trading of

equities. A typical brokerage firm today offers trading in equities and derivatives, most

probably commodities futures, exchange traded funds, distributes mutual funds and

insurance and also offers personal loans for housing, consumptions and other related

loans, offers portfolio management services, and some even go to the extent of creating

niche services such as a brokerage firm offering art advisory services. In the background

of growing opportunities for Investors to invest in India as also abroad, the range of

products and services will widen further. In the offerings will be interesting opportunities

that might arise in the exchange enabled corporate bond trading, soon after its

commencement and futures trading that might be introduced in the near future in the

areas of interest rates and Indian currency.

Also there has been a growing trend of separating the services offered into various

subsidiaries so that each subsidiary can concentrate better on a particular service. For

E.g. India Infoline ahs segregated its services into various subsidiaries:

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iii) Greater reliance on research

Client advising in India has graduated from personal insights, market tips to becoming

extensively research oriented and governed by fundamentals and technical factors. Vast

progress has been made in developing company research and refining methods in

technical and fundamental analysis. The research and advice are made online giving

ready and real time access to market research for investors and clients, thus making

research important brand equity for the brokerage firms.

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iv) Accessing equity capital markets

Access to reliable financial resources has been one of the major constraints faced bythe equity brokerage industry in India since long. Since the banking system is not fully

integrated with the securities markets, brokerage firms face limitations in raising financial

resources for business and expansion. With buoyancy of the stock markets and the

rising prospects of several well organized broking firms, important opportunity to access

capital markets for resource mobilization has become available. The recent past

witnessed several leading brokerage firms accessing capital markets for financial

resources with success.

v) Foreign collaborations and joint ventures

The way the brokerage industry is run and the manner in which several of them pursued

growth and development attracted foreign financial institutions and investment banks to

buy stakes in domestic brokerage firms, paving the way for stronger brokerage entities

and possible scope for consolidation in the future. Foreign firms picked up stake in some

of the leading brokerage firms, which might lead to creating of greater interest in

investing in brokerage firms by entities in India and abroad.

vi) Specialised services/niche broking

While supermarkets approach are adopted in general by broking firms, there are some

which are creating niche services that attract a particular client group such as daytraders, arbitrage trading, investing in small cap stocks etc, and providing complete

range of research and other support to back up this function.

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vii) Online broking

Several brokers are extending benefits of online trading through creation of separate

windows. Some others have dedicated online broking portals. Emergence of online

broking enabled reduction in transaction costs and costs of trading. Keen competition

has emerged in online broking services, with some of these offering trading services at

the cost of a few basis points or costs which are fixed in nature irrespective of the

volume of trading conducted. A wide range of incentives are being created and offered

by online brokerage firms to attract larger number of clients.

viii) Compliance oriented

With stringent regulatory norms in operation, broking industry is giving greater emphasis

on regulatory compliance and observance of market principles and codes of conduct.

Many brokerage firms are investing time, money and resources to create efficient and

effective compliance and reporting systems that will help them in avoiding costly

mistakes and possible market abuses. Brokerage firms now have a compliance officer

who is responsible for all compliance related aspects and for interacting with clients and

other stake holders on aspects of regulation and compliance.

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ix) Focus on training and skill sets

Brokerage firms are giving importance and significance to aspects such as training on

skill sets that could prove to be beneficial in the long run. With the nature of markets and

products becoming more complex, it becomes imperative for the broking firms to keep

their staff continuously updated with latest development in practices and procedures.

Moreover, it is mandated for certain types of dealers/brokers to seek specific certification

and examinations that will make them eligible to carry business or trade. Greater

emphasis on aspects such as research and analysis is giving scope for in-depth training

and skills sets on topics such as trading programs, valuations, economic and financial

forecasting and company research.

x) From owners to traders

A fundamental change that has taken place in the equity brokerage industry, which is a

global trend as well, is the transformation of broking from owners of the stock exchange

to traders of the stock market. Demutualization and corporatisation of stock exchangesbifurcated the ownership and trading rights with brokers vested only with the later and

ownership being widely distributed. Demutualization is providing balanced welfare gains

to both the stock exchanges and the members with the former being able to run as

corporations and the latter being able to avoid conflict of interests that sometimes came

as a major deterrent for the long term growth of the industry.

Opportunities

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Growing Equity Culture

Theres a growing tendency amoung the people in the country to invest their

savings in the equity market instead of other less riskier areas like government

bonds, post office deposit etc.. The main reasons behind this transformation

could be many like increase in awareness amoung peole about the equity market

increase of coverage in newspapers and news channels, increase in overall

education in the nation, increase in risk taking appetite for people etc.

Dynamic markets

The dynamic equity market has given the brokerage to increase the number of

their revenue streams. Now along with revenue through equity trading the other

source of revenue generation streans are derivatives trading, arbitrage, margin

financing, e-broking etc. These are now major revenues streams for many players

in this market.

Institutional investing: domestic/foreign

One of the very biggest opportunities of Indian broekrage firms comes with the

increase investment by institutional investors both domestic and foreign. There

number has been increased heavily in last few years.

Expanding product range

Because of requirement of giving better services to their clients new product and

services are been generated. Now every brokearge firm is providing whole lot of

services to their clients like equity trading, portfolio management services, equity

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research, commodities research, mortgages services, online trading services,

SMS tips, insurance plans, wealth management services, newsletters etc.

Key Drivers for Growth of the Industry

The major growth drivers for brokerage revenue and trading volume are:

Continuous fall in brokerage fees due to increase in volumes and also

due to increase in competition has been a major factor to attract more and more

towards investment in stock market,

Adoption of technology like screen-based trading, electronic matching, and

paperless securities has make it more convenient for people to undersatnd and

perform various activities involved. And due to this increase in convenient more

and more volumes are been generated

Centralized operations, effective risk management, and control

on large interconnected operations spanning multiple locations,

which is enabled by telecom connectivity and low costs has icreased the

investors confident while working in this sector.

Increasing access to capital and the ability to provide margin

finance has helped is removal of monetary restraints upto a very large extent

and this has played a major role in driving the volumes t

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