with respect to BOOM/RECESSION

A report submitted towards the partial fulfillment of the requirements of the two years full-time Post Graduate Program in Management

SUBMITTED BY: RASHMI GUPTA 2K8 /PGPM/ A-45 POST GRADUATE PROGRAMME IN MANAGEMENT (PGPM) 2008-10

ASIA-PACIFIC

INSTITUTE OF

MANAGEMENT STUDIES

New Delhi

INDEX
1. Objective of the project 2. Company profile 3. Product & Services offered by the Sharekhan 4. SWOT Analysis of company 5. Introduction to stock market 6. Short term financial instrument 7. Long term financial instrument 8. Derivatives 9. Precautions taken before investing 10. Valuation of Share 11. Analyzing a Company 12. Ratio Analysis Type of research design used Data collection Result analysis Recommendation for the investors Hypothesis Testing

13. A problem analysis at sharekhan 14. Limitation of the research study 15. Recommendation / suggestions 16. Executive summary 17. Glossary 18. Bibliography 19. Questionnaire

ACKNOWLEDGEMENT
I take this opportunity to thank Sharekhan ltd for giving me the opportunity to work for this project and I would like to express my sincere thanks to, Mr. Amit Pal Singh (RSM) , Mr. Amit Sharma (AM) , Mrs. Meenakshi Pandey (Mentor) & Mr. Rajesh Verma (Profeesor) , who helped, inspired and mentored me and without his help this project report would not have taken its current shape. Under his brilliant untiring guidance I could complete the project being undertaken on the Comparative study of investment pattern Boom / Recession successfully in time. His meticulous attention and invaluable suggestions have helped me in simplifying the problem involved in the work. I would also like to thank the overwhelming support of all the people who gave me an opportunity to learn and gain knowledge about the various aspects of the industry. I once again express our heartfelt indebt ness to all-aforesaid. Any omission or error in acknowledgment is inadvertent. For such oversights and lapses, we tender unconditional apology.

PREFACE
The project has been initiated for the purpose of acquainting me with, right from the basics of the financial term used in the stock market, further up to gaining of in-depth knowledge of investment pattern in boom / recession phase, basically the study of human psychology. This work is a detailed study of stock market and about the way in which investors invest. The initial phase of the project explains what I have learned about the company, their products and the functioning of the stock market. I have tried to explain the entire cash and derivative market with examples. The next phase was about the study of investment pattern for which a questionnaire is developed and a survey is conducted between the retail investors. At the same time I have tried to find out as in which financial instrument investor invest during recession or boom phase.

INTRODUCTION
The time one talks about stock market, another word also clicks and that is risk. People have lost their millions in the stock market. This is a place of gambling for those who dont know where to invest. The market behaves differently to differently people. The speculators are one who loose most of the money. There are hedgers who keep risk in their mind but try to minimize it by using different strategies. Though hedging doesnt always give good returns but it helps one to take out his money with remarkable profits. Lot of analysis is required to decide in which instrument one should invest. Many people think that particular time is the best time to invest but the fact is that it depends on the investor and his capacity to take risk and invest not the time. Before stepping into investment process one should get the entire knowledge about the financial instrument options available in the market and the risk factor involved with the instrument and the estimated returns the investor would probably get. This project will help the people in getting lot of their answers related to investment options and the ways to analysis the market. The data in the project can also help the company in making the strategy for potential investors.

OBJECTIVE OF THE STUDY

MAIN OBJECTIVE
1. To know the investors preference in the financial instrument 2. To understand the human psychology of investment wrt Recession/Boom 3. To know which is the best instrument to invest in during Recession SPECIFIC OBJECTIVE 1. To know how many people are risk takers? 2. To know the capacity of the investors to invest 3. To know the stock market functioning 4. To know what factors effect the stock index 5. To understand the valuation of the shares and the company

SHAREKHAN PROFILE
Sharekhan is one of the leading retail broking House of SSKI Group which was running successfully since 1922 in the country. It is the retail broking arm of the Mumbai-based SSKI Group, which has over eight decades of experience in the stock broking business. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, Derivatives, depository services, online trading, investment advisory, Mutual Fund Advisory etc. The firms online trading and investment site - www.sharekhan.com - was launched on Feb 8, 2000. The site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the site has a registered base of over two lakh customers. The number of trading members currently stands More than 6 Lacs. While online trading currently accounts for just over 8 per cent of the daily trading in stocks in India, Sharekhan alone accounts for 32 per cent of the volumes traded online. The content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. The objective has been to let customers make informed decisions and to simplify the process of investing in stocks. On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable application that emulates the broker terminals along with host of other information relevant to the Day Traders. This was for the first time that a net-based trading station of this caliber was offered to the traders. In the last six months Speed Trade has become a de facto standard for the Day Trading community over the net. On October 01, 2007 Sharekhan again launched his another integrated Software based product Trade Tiger, a net-based executable application that emulates the broker terminals along with host of other information relevant to the Day Traders. It has another quality which differs it from other that IT HAS THE COMBINED TERMINAL FOR EQUITY AND COMMODITIES BOTH.

Share khans ground network includes over 1005 centers in 410 cities in India, of which 210 are fully-owned branches. Sharekhan has always believed in investing in technology to build its business. The company has used some of the best-known names in the IT industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. to build its trading engine and content. Previously the Morakiya family holds a majority stake in the company but now a world famous brand CITI GROUP has taken a majority stake in the company. HSBC, Intel & Carlyle are the other investors. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of the market in each of these segments. SSKIs institutional broking arm accounts for 7% of the market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional portfolio investment in the country. It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional Investors generate about 65% of the organizations revenue, with a daily turnover of over US$ 4 million. The Corporate Finance section has a list of very prestigious clients and has many firsts to its credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 1 billion in private equity deals. Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shoppers Stop. REASONS TO CHOOSE SHAREKHAN LIMITED Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutional-level research and broking services to individual investors.

Technology With our online trading account you can buy and sell shares in an instant from any PC with an internet connection. You will get access to our powerful online trading tools that will help you take complete control over your investment in shares. Accessibility Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION services for investors. These services are accessible through our centers across the country (Over 721 locations in 210 cities) over the internet (through the website www.sharekhan.com) as well as over the Voice Tool. Knowledge In a business where the right information at the right time can translate into direct profits, you get access to a wide range of information on our content-rich portal, Sharekhan. You will also get a useful set of knowledge-based tools that will empower you to take informed decisions. Convenience You can call our Dial-N-Trade number to get investment advice and execute your transactions. We have a dedicated call-centre to provide this service via a Toll Free Number 1800-22-7500, 1800-22-7050 from anywhere in India. Customer Service Our customer service team will assist you for any help that you need relating to transactions, billing, demat and other queries. Our customer service can be contracted via a toll-free number, email or live chat on www.sharekhan.com. Investment Advice Sharekhan has dedicated research teams of more than 30 people for fundamental and technical researches. Our analysts constantly track the pulse of the market and provide timely investment advice to you in the form of daily research emails, online chat, printed reports and SMS on your mobile phone.

BENEFITS
Free Depository A/c Secure Order by Voice Tool Dial-n-Trade. Automated Portfolio to keep track of the value of your actual purchases. 24x7 Voice Tool access to your trading account. Personalized Price and Account Alerts delivered instantly to your Cell Phone & Email address. Special Personal Inbox for order and trade confirmations. On-line Customer Service via Web Chat. Anytime Ordering. NSDL Account Instant Cash Tranferation. Multiple Bank Option. Enjoy Automated Portfolio. Buy or sell even single share.

Branch - Head Office A-206, Phoenix House, 2nd Floor, Senapati Bapat Marg, Lower Parel, Mumbai- 400 013. Telephone No: 67482000 Email: myaccount@sharekhan.com

KEY OFFICIALS
1. Mr. Shripal Morakhia 2. Mr. Tarun Shah 3. Mr. Kaliyan Raman 4. Mr. Jason Pandey and Mr. Pradeep 5. Mr. Hemendra Aggarwal 6. Mr Amit pal Singh and Mr. Maneet Rastogi

DESIGNATION
Chairman CEO Online Sales Head DP Head Cluster Head Regional Sales Manager

PRODUCTS OF SHAREKHAN
CLASSIC ACCOUNT
This account allows the client to trade through the website and is suitable for the retail investor who is risk-averse and hence prefers to invest in stocks or who do not trade too frequently. It allows investor to buy and sell stocks online along with the following features like multiple watch lists, Integrated Banking, De-mat and Digital contracts, Real-time portfolio tracking with price alerts and Instant money transfer.

FEATURES
Online trading account for investing in Equity and Derivatives via www.sharekhan.com Live Terminal and Single terminal for NSE Cash, NSE F&O, BSE & Mutual Funds. Integration of On-line trading, Saving Bank and De-mat Accounts. Instant cash transfer facility against purchase & sale of shares. Competative transaction charges. Instant order and trade confirmation by E-mail. Streaming Quotes (Cash & Derivatives). Personlized market watch. Single screen interface for Cash and derivatives and more. Provision to enter price trigger and view the same online in market watch.

TRADE TIGER
TRADE TIGER is an internet-based software application which is the combination of EQUITY & COMMODITIES, that enables you to buy and sell share and well as commodities item instantly. It is ideal for every client of SHAREKHAN LTD.

FEATURES
Integration of EQUITY & COMMODITIES MARKET. Instant order Execution and Confirmation. Single screen trading terminal for NSE Cash, NSE F&O & BSE & Commodities. Technical Studies. Multiple Charting. Real-time streaming quotes, tic-by-tic charts. Market summary (Cost traded scrip, highest value etc.) Hot keys similar to brokers terminal. Alerts and reminders. Back-up facility to place trades on Direct Phone lines. Live market debts.

DIAL-N-TRADE
Along with enabling access for your trade online, the CLASSIC and TRADE TIGER ACCOUNT also gives you our Dial-n-trade services. With this service, all you have to do is dial our dedicated phone lines which are 1800-22-7500, 3970-7500.

PORTFOLIO MANAGEMENT SERVICES

Sharekhan is also having Portfolio Management Services for Exclusive clients.

1. PROPRIME

- Research & Fundamental Analysis.

Ideal for investors looking at steady and superior returns with low to medium risk appetite. This portfolio consists of a blend of quality blue-chip and growth stocks ensuring a balanced portfolio with relatively medium risk profile. The portfolio will mostly have large capitalization stocks based on sectors & themes that have medium to long term growth potential.

2. PROTECH

- Technical Analysis.

Protech uses the knowledge of technical analysis and the power of derivatives market to identify trading opportunities in the market. The Protech lines of products are designed around various risk/reward/ volatility profiles for different kinds of investment needs. THRIFTY NIFTY: Nifty futures are bought and sold on the basis of an
automated trading system that generates calls to go long/short. The exposure never exceeds value of portfolio i.e. there is no leveraging; but being short in Nifty allows you to earn even in falling markets and there by generates linear

BETA PORTFOLIO: Positional trading opportunities are identified in the futures segment based on technical analysis. Inflection points in the momentum cycles are identified to go long/short on stock/index futures with 1-2 month time horizon. The idea is to generate the best possible returns in the medium term irrespective of the direction of the market without really leveraging beyond the portfolio value. Risk protection is done based on stop losses on daily closing prices. STAR NIFTY: Trailing Stops Momentum trading techniques are used to spot short term momentum of 5-10 days in stocks and stocks/index futures. Trailing stop loss method of risk management or profit protection is used to lower the portfolio volatility and maximize returns. Trading opportunities are explored both on the long and the short side as the market demands to get the best of both upwards & downward trends.

3. PROARBITRAGE - Exploit price analysis

- ONLINE IPO'S AND MUTUAL FUNDS ADVISORY IS AVAILABLE. CHARGE STRUCTURE 1) Pre Paid Account: -Advance Amount which will be fully adjusted against your brokerage you paid in One year. Following Schemes Are Available: 2,000/- Scheme: 6,000/- Scheme: 18,000/- Scheme: 30,000/- Scheme: 60,000/- Scheme: 1,00,000/- Scheme: Brokerage will be charged 0.070 / 0.40 % 0.025 / 0.25 % 0.040 / 0.20 % 0.030 / 0.18 % 0.020 / 0.15 % 0.015 / 0.10 %

2) Normal Account: Cash Trading : - 0.50% or 10 Paisa per share. Min. Rs.16/- per script. Margin Trading : - 0.10% or 5 Paisa per share.

Future & Options : - 0.10% (First Leg) 0.02% (2nd Leg if square off same day) 0.10% (2nd Leg)

DEPOSITORY CHARGES
Account Opening Charges Annual Maintenance Charges Rs. 750 Rs. NIL first year Rs. 300 Per annum from second year onward

Minimum Brokerage Intra Day per Share: 5 Paisa each leg (buy or sell) for Intra-day Trades (For e.g. on Rs 20 Scrip, brokerage @ 0.10% = 2 paisa, but there is a min. chargeable amount of 5 paisa). Minimum Delivery Handling Charges: 10 Paisa for Delivery Trades (buy and sell) (For e.g. on a Rs 10 Scrip, brokerage @ 0.50% = 5 paisa, but there is a min. chargeable amount of 10 paisa). Rs 16/- per Scrip (brok. per Scrip will be charged for the selling of shares). (For e.g. if a customer sells 100 shares of SAIL, Delivery value = 2200, brokerage @ 0.5% = Rs 11, but the min chargeable amt per scrip per day = Rs 16), so additional Rs 5/- will be charged as Min delivery handling charges). Minimum Margin of Rs.5000/- is Required for Account Opening. Annual Maintenance Charges will NIL for 1st year and Rs. 300/- from 2nd year.

EXPOSURE:
It is the limit or turnover that a depository participant allows to its client to take positions at a time on margin money in his account. Sharekhan offers an Exposure of 4 to 6.6 times of margin money in cash. In Futures and Options it offers 10 times of margin money. Sharekhan also offers exposure of Trading+two days on delivery, it means that a client is not asked to deposit margin due on his account for next two days and thereafter if it again allows a client to hold order for additional 3 days and charges nominal interest @14%

p.a. on the same. On sixth day order will be squared off if margin money is not deposited.

TIE UPS: Tie up with eleven banks i.e. HDFC Bank Ltd, ICICI Bank, Oriental Bank
Of Commerce, IDBI Bank Ltd, Citi Bank, United Bank of India, Axis bank, Bank of India, Indusland Bank, Centurian Bank of Punjab for online money transfer. If you are having bank a/c in one of them, you can transfer the funds and withdraw the funds online from your trading a/c at anytime.

DOCUMENTS REQUIRED FOR ACCOUNT OPENING: Photo ID Proof Pan Card (Mandatory) Passport Driving License Voter's ID MAPIN UIN Card Residence Proof (Permanent or Correspondence) Passport (valid) Voter's ID Driving License (valid) Letter verified by Bank Bank Statement & Bank Passbook (latest) Telephone Bill (latest) Electricity Bill (latest) Ration Card Rent Agreement (Noterised) Latest Insurance Policy with Bond Copy Letter from Employer (Only in case of Army People)

--2 Photographs (Passport size & front face) --1 Cheque of Rs. 750/- in the favor of SHAREKHAN LTD.

SWOT ANALYSIS OF SHAREKHAN (My observation)

STRENGTHS
1. Big client base 2. In-house research house 3. online as well as offline trading 4. Online IPO/ MF services 5. Share shops 6. Transparent 7. User friendly tie ups with 10 banks 8. Excellent order execution speed and reliability

WEAKNESS
1. Lack of awareness among customer 2. Less focus on customer retention 3. Less Exposure

OPPORTUNITIES
1. Diversification 2. Product modification 3. Improve Web based trading 4. Provide competitive brokerage 5. Concentrate on PMS 6. Focus on Institutional investors 7. Concentrate on HNIs (high net worth investor)

THREATS
1. Aggressive promotional strategies by close competitor like Religare, Angel Broking and India bulls. 2 More and more players are venturing into this domain, which can further reduce the earning of Share Khan. 3 Stock market is very volatile, risk involves is very high.

INTRODUCTION TO STOCK MARKET

STOCK MARKET
A stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy.

STOCK EXCHANGE
A stock exchange, (formerly a securities exchange) is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there.Companies that are not listed are sold as short for Over-The-Counter.

SHARE
A share is a unit of account for various financvial instrument including stocks, bonds and mutual funds. The total capital of a company may be divided into small units called shares. For example, if the required capital of a company is Rs. 5, 00,000 and is divided into 50,000 units of Rs. 10 each, each unit is called a share of face value Rs. 10. A share may be of any face value depending upon the capital required and the number of shares into which

it is divided. The holders of the shares are called share holders. The shares can be purchased or sold only in integral multiples. Share consists of Equity share and preference share. Preference shareholder entitled to dividend prior to equity holder.

STOCKS
The shares may be fully paid or partly paid. A company may consolidate and convert a number of its fully paid up shares to form a single stock. Stock being one lump amount can be purchased or sold even in fractional parts.

DEBENTURES
The term Debenture is derived from the Latin word debere which means to owe a debt. A debenture is a loan borrowed by a company from the public with a guarantee to pay a certain percentage of interest at stated intervals and to repay the loan at the end of a fixed period.

DIVIDEND
The profit of the company distributed among the share holders is called Dividend. Each share holder gets dividend proportionate to the face value of the shares held. Dividend is usually expressed as a percentage.

YIELD OR RETURN
Suppose a person invests Rs. 100 in the stock market for the purchase of a stock. The consequent annual income he gets from the company is called yield or return. It is usually expressed as a percentage.

BROKERAGE
The purchase or sale of stocks, shares and debentures is done through agents called Stock Brokers. The charge for their service is called brokerage. It is based on the face value and is usually expressed as a percentage. Both the buyer and seller pay the brokerage. When stock is purchased, brokerage is added to cost price. When stock is sold, brokerage is subtracted from the selling price.

DEPOSITORY
A depository is like a bank wherein the deposits are securities (viz. shares, debentures, bonds, government securities, units etc.) in electronic form. There are two type of depository: National Security Depository Ltd and Central Depository Services Ltd.

DEMATERIALIZATION

Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investors account with his Depository Participant (DP).

PRIMARY AND SECONDARY MARKET

PRIMARY MARKET
The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market.

SECONDARY MARKET
Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduitby facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.

PRODUCTS IN THE SECONDARY MARKETS

Following are the main financial products/instruments dealt in the Secondary market which may be divided broadly into Shares and Bonds: SHARES

Equity Shares: An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture. Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a

ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares for every 3 shares held at a price of Rs. 125 per share.

Bonus Shares: Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns. Preference shares: Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders/debenture holders. Cumulative Preference Shares: A type of preference shares on which dividend accumulates if remained unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company. BOND Bond is a negotiable certificate evidencing indebtedness. It is normally unsecured. A debt security is generally issued by a company, municipality or government agency. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the loan. The various types of Bonds are as follows: Zero Coupon Bond: Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond. Convertible Bond: A bond giving the investor the option to convert the bond into equity at a fixed conversion price.

Treasury Bills: Short-term (up to one year) bearer discount security issued by government as a means of financing their cash requirements.

SHORT-TERM FINANCIAL OPTIONS AVAILABLE FOR INVESTMENT

SAVINGS BANK ACCOUNT is often the first banking product people use, which offers low interest (4%-5% p.a.), making them only marginally better than fixed deposits. MONEY MARKET OR LIQUID FUNDS are a specialized form of mutual funds that invest in extremely short-term fixed income instruments and thereby provide easy liquidity. Unlike most mutual funds, money market funds are primarily oriented towards protecting your capital and then, aim to maximize returns. Money market funds usually yield better returns than savings accounts, but lower than bank fixed deposits. FIXED DEPOSITS WITH BANKS are also referred to as term deposits and minimum investment period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk appetite, and may be considered for 6-12 months investment period as normally interest on less than 6 months bank FDs is likely to be lower than money market fund returns.

LONG-TERM FINANCIAL OPTIONS AVAILABLE FOR INVESTMENT

POST OFFICE SAVINGS: Post Office Monthly Income Scheme is a low risk saving instrument, which can be availed through any post office. It provides an interest rate of 8% per annum, which is paid monthly. Minimum amount, which can be invested, is Rs. 1,000/- and additional investment in multiples of 1,000/-. Maximum amount is Rs. 3,00,000/- (if Single) or Rs. 6,00,000/- (if held Jointly) during a year. It has a maturity

period of 6 years. Premature withdrawal is permitted if deposit is more than one year old. A deduction of 5% is levied from the principal amount if withdrawn prematurely.

PUBLIC PROVIDENT FUND: A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum compounded annually. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the seventh financial year of the date of opening of the account and the amount of withdrawal will be limited to 50% of the balance at credit at the end of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year whichever is lower the amount of loan if any. COMPANY FIXED DEPOSITS: These are short-term (six months) to medium-term (three to five years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly, semiannually or annually. They can also be cumulative fixed deposits where the entire principal along with the interest is paid at the end of the loan period. The rate of interest varies between 6-9% per annum for company FDs. The interest received is after deduction of taxes. BONDS: It is a fixed income (debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest on a specified date, called the Maturity Date. MUTUAL FUNDS: These are funds operated by an investment company which raises money from the public and invests in a group of assets (shares, debentures etc.), in accordance with a stated set of objectives. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints. Benefits include professional money management, buying in small amounts and diversification. Mutual fund units are issued and redeemed by the Fund Management

Company based on the fund's net asset value (NAV), which is determined at the end of each trading session. NAV is calculated as the value of all the shares held by the fund, minus expenses, divided by the number of units issued. Mutual Funds are usually long term investment vehicle though there some categories of mutual funds, such as money market mutual funds which are short term instruments. Types of mutual funds are discussed below:

CLOSE END MUTUAL FUND A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. These funds have a stipulated maturity period generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. Once underwritten, closed-end funds are trade on stock exchanges like stocks or bonds. The market price of closed-end funds is determined by supply and demand and not by net-asset value (NAV), as is the case in open-end funds. Usually closed mutual funds are trade at discounts to their underlying asset value. OPEN END MUTUAL FUND Open-end funds raise money by selling shares of the fund to the public, in a manner similar to any other company, which sell its stock to raise the capital. An open-end mutual fund does not have a set number of shares. It continues to sell shares to investors and will buy back shares when investors wish to sell. Units are bought and sold at their current net asset value. Open-end funds are required to calculate their net asset value (NAV) daily. Since the NAV of an open-end fund is calculated daily, it serves as a useful measure of its fair market value on a per-share basis. The NAV of the fund is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. Open-end funds usually charge an entry or exit load from the investors. LARGE-CAP MUTUAL FUNDS

Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies with above-average prospects for earnings growth. MID-CAP MUTUAL FUNDS Mid cap funds are those mutual funds, which invest in small / medium sized companies. EQUITY MUTUAL FUND Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled amounts of money in the stocks of public companies.

BALANCED FUND Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds GROWTH FUNDS Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. EXCHANGE TRADED FUNDS (ETFs) ETFs are listed on a recognized stock exchange and their units are directly traded on stock exchange during the trading hours. VALUE FUNDS Value funds are those mutual funds that tend to focus on safety rather than growth, and often choose investments providing dividends as well as capital appreciation. MONEY MARKET FUND A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid SECTOR FUND Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy. INDEX FUNDS

An index fund is a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market. FUND OF FUNDS A fund of funds (FoF) is an investment fund that holds a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.

DERIVATIVES
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset. Derivative products initially emerged as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products.

TYPES OF DERIVATIVES
FORWARDS: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at todays pre-agreed price. FUTURES: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts, such as futures of the Nifty index. OPTIONS: An Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price. While a buyer of an option pays the premium and buys the right to exercise his option, the writer of an option is the one

who receives the option premium and therefore obliged to sell/buy the asset if the buyer exercises it on him. Options are of two types - Calls and Puts options: Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the right, but not the obligation to sell a given quantity of underlying asset at a given price on or before a given future date. Presently, at NSE futures and options are traded on the Nifty, CNX IT, BANK Nifty and 116 single stocks. WARRANTS: Options generally have lives of up to one year. The majority of options traded on exchanges have maximum maturity of nine months. Longer dated options are called Warrants and are generally traded over-the counter.

SEBI AND ITS ROLE

The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) Protecting the interests of investors in securities (b) Promoting the development of the securities market and (c) 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 persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for: Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, subbrokers etc. Promoting and regulating self-regulatory organizations Prohibiting fraudulent and unfair trade practices Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self regulatory organizations, mutual funds and other persons associated with the securities market.

BSE
Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as

BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956.It migrated from the open outcry system to an online screen-based order driven trading system in 1995. BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more than 4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z groups.

NSE
NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

PRECAUTIONS ONE MUST TAKE BEFORE INVESTING IN THE STOCK MARKETS

Here are some useful pointers to bear in mind before you invest in the markets:

 Make sure your broker is registered with SEBI and the exchanges and do not deal with unregistered intermediaries. Ensure that you receive contract notes for all your transactions from your broker within one working day of execution of the trades. All investments carry risk of some kind. Investors should always know the risk that they are taking and invest in a manner that matches their risk tolerance. Do not be misled by market rumors, luring advertisement or hot tips of the day. Take informed decisions by studying the fundamentals of the company. Find out the business the company is into, its future prospects, quality of management, past track record etc Sources of knowing about a company are through annual reports, economic magazines, database available with vendors or your financial advisor. If your financial advisor or broker advises you to invest in a company you have never heard of, be cautious. Spend some time checking out about the company before investing. Do not be attracted by announcements of fantastic results/news reports, about a company. Do your own research before investing in any stock. Do not be attracted to stocks based on what an internet website promotes, unless you have done adequate study of the company. Be cautious about stocks which show a sudden spurt in price or trading activity. Any advice or tip that claims that there are huge returns expected, especially for

acting quickly, ma y be risky and may to lead to losing some, most, or all of your money.

VALUATION OF SHARES
BASES OF SHARE VALUATION Share valuation can either be in income or on asset values. There are two incomes receivable on share, namely:Dividend income Total income (earning attributable to each shareholder) Dividend income is payable out of the attributable earnings and the two will only be equal when the company has a 100% dividend payout ratio. The following gives bases used for share valuation Earnings Dividends Assets ABBREVIATIONS

Po = market price (present value) of the stock per share Di = expected dividend i periods hence (i = 1, 2, 3 . . . n) ke = the minimum required rate of return on the stock given its risk Pn = the anticipated selling price of the stock at time n g = expected growth rate of dividends

VALUATION OF SHARES
The commonly used model is the DISCOUNTED CASH FLOW MODEL gives as: Po = D1 / (1 + ke )1 + D2 / (1 + ke ) 2 + D3 / (1 + ke ) 3 +.. Dn / (1 + ke ) n In practice, the model is difficult to use in valuing common stock. Two problems associate with the model. 1) Determination of Dn i.e the eventual price when the share will be sold. 2) The formula does not give consideration to forecast all future dividends.

To overcome the ambiguities the (GORDON) CONSTANT GROWTH DIVIDEND MODEL was employed: Po = D1 / ( ke g ) Example:
D1 = Rs. 2 (next expected dividend per share)

ke = 14% g = 10% Po = Rs.2 / (0.14 0.10) = Rs. 50 per share

Note: The above equation can be re-written to give the divided yield on the common stock. ke = D1 / (Po + g) Example:
D1 = Rs. 2

Po = Rs. 50

g = 10%

ke = Rs. 2 / (50 + 0.10) = 0.14 or 14% Note: The term D1 / Po = dividend yield = Rs.2 / Rs.50 = 4 % Note: In this case, g is the Capital Gain yield.

THE PRICE/EARNINGS MODEL

Useful when a company's stock is not traded publicly and no market price exists Method: 1) Determine the P/E (Price by Earning ratio) ratio for the industry; 2) calculate the Earnings Per Share (EPS) of the company; 3) multiply the (P/E) industry times the EPS company

COMMON STOCK VALUATION (TOTAL COMMON EQUITY)

BOOK VALUE APPROACH

BV per Share = (Total Assets - Total Liabilities)/# com stock shares Example: Total Assets = $10 million; Total Liabilities = $4 million; number of common stock shares outstanding = 3 million BV per share = ($10million - $4million)/3 million = $2.00 per share

LIQUIDATION VALUE MODEL

Note: The liquidation model assumes assets are sold at below book value to reflect their poor or zero earning power. From the previous example, using the asset value of $10million, assume the assets can be sold at a discount of $2million. BV per share liquidation = ($8 - $4)/3 million = $1.33 per share Note: Liquidation value is a "worse case" scenario valuation assessment

PREFERRED STOCK VALUATION

Preferred stock is valued as a perpetuity. The preference shares differs from the ordinary shares in that they carry certain preferential rights. The common areas where the rights exist are:i) Dividend payment: Dividends are a fixed percent of par value Dividend right ii) Distribution in liquidation Capital right Diminishing importance of preference Shares. The combined effect of inflation on fixed interest investments and the unfavorable tax treatment of preference shares compared t debentures has caused the virtual disappearance of the new issues of this type of shares.

VALUATION MODEL

Vp = Dp / kp Where Vp = present (market) value of the preferred stock per share Dp = amount of dividend per year Kp = investors required return on the preference stock Example: Jambo Telecoms Ltd. Preference stocks pays an annual dividend of Rs 4 and has required rate of return of 10%. What is the price of the stock? Solution: Vp = Rs 4/ 0.10 = Rs. 40 per share Effect of inflation can be incorporated by considering inflation as a negative growth. The formulae would become Vp = Dp / (kp + r) Where r is the inflation rate Preference Share Yield formulae kp = Dp / Vp From previous example kp = 4 / 40 = 10 % = the current yield on the preference stock Investors compare the market yield to their required yield to make buy/sell decisions.

ABOUT SYSTEMATICALLY ANALYZING A COMPANY

One must look for the following to make the right analysis:

INDUSTRY ANALYSIS: Companies producing similar products are subset (form a

part) of an Industry/Sector. For example, National Hydroelectric Power Company (NHPC) Ltd., National Thermal Power Company (NTPC) Ltd., Tata Power Company (TPC) Ltd. etc. belong to the Power Sector/Industry of India. It is very important to see how the industry to which the company belongs is faring. Specifics like effect of Government policy, future demand of its products etc. need to be checked. At times prospects of an industry may change drastically by any alterations in business environment. For instance, devaluation of rupee may brighten prospects of all export

oriented companies. Investment analysts call this as Industry Analysis.

TECHNICAL ANALYSIS: Technical analysis is a security analysis discipline for

forecasting the future direction of prices through the study of past market data, primarily price and volume. In its purest form, technical analysis considers only the actual price and volume behavior of the market or instrument. Technical analysts may employ models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, cycles or, classically, through recognition of chart patterns. Technical analysis "ignores" the actual nature of the company, market, currency or commodity and is based solely on "the charts," that is to say price and volume information, whereas fundamental analysis does look at the actual facts of the company, market, currency or commodity.

FUNDAMENTAL ANALYSIS: Fundamental analysis of a business involves

analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives: to conduct a company stock valuation and predict its probable price evolution, to make a projection on its business performance, to evaluate its management and make internal business decisions, to calculate its credit risk.

CORPORATE ANALYSIS: How has the company been faring over the past few
years? Seek information on its current operations, managerial capabilities, growth plans, its past performance vis--vis its competitors etc. This is known as Corporate Analysis.

FINANCIAL ANALYSIS: If performance of an industry as well as of the company

seems good, then check if at the current price, the share is a good buy. For this look at the financial performance of the company and certain key financial parameters like Earnings Per Share (EPS), P/E ratio, current size of equity etc. for arriving at the estimated future price. This is termed as Financial Analysis. For that you need to understand financial statements of a company i.e. Balance Sheet and Profit and Loss Account contained in the Annual Report of a company.

RATIO ANALYSIS

Mere statistics/data presented in the different financial statements do not reveal the true picture of a financial position of a firm. Properly analyzed and interpreted financial statements can provide valuable insights into a firms performance. To extract the information from the financial statements, a number of tools are used to analyse such statements. The most popular tool is the Ratio Analysis. Financial ratios can be broadly classified into three groups: (I) Liquidity ratios, (II) Leverage/Capital structure ratio, and (III) Profitability ratios.

(I) LIQUIDITY RATIOS:

Liquidity refers to the ability of a firm to meet its financial obligations in the short-term which is less than a year. Certain ratios, which indicate the liquidity of a firm, are (i) Current Ratio, (ii) Acid Test Ratio, (iii) Turnover Ratios. It is based upon the relationship between current assets and current liabilities. (i) Current ratio = Current Liabilities / Current Assets The current ratio measures the ability of the firm to meet its current liabilities from the current assets. Higher the current ratio, greater the short-term solvency (i.e. larger is the amount of rupees available per rupee of liability). (ii) Acid-test Ratio = Current Liabilities / Quick Assets Quick assets are defined as current assets excluding inventories and prepaid expenses. The acid-test ratio is a measurement of firms ability to convert its current assets quickly into cash in order to meet its current liabilities. Generally speaking 1:1 ratio is considered to be satisfactory.

(iii) Turnover Ratios: Turnover ratios measure how quickly certain current assets are converted into cash or how efficiently the assets are employed by a firm. The important turnover ratios are: Inventory Turnover Ratio, Debtors Turnover Ratio, Average Collection Period, Fixed Assets Turnover and Total Assets Turnover Inventory Turnover Ratio =Cost of Good Sold/ Average Inventory Where, the cost of goods sold means sales minus gross profit. Average Inventory refers to simple average of opening and closing inventory. The inventory

turnover ratio tells the efficiency of inventory management. Higher the ratio, more efficient inventory management. Debtors Turnover Ratio =Net Credit Sale / Average Accounts Receivable (Debtors) The ratio shows how many times accounts receivable (debtors) turns over during the year. If the figure for net credit sales is not available, then net sales figure is to be used. Higher the debtors turnover, the greater the efficiency of credit management. Average Collection Period = Average Debtors / Average Daily Credit Sales Average Collection Period represents the number of days worth credit sales that is locked in debtors (accounts receivable). Please note that the Average Collection Period and the Accounts Receivable (Debtors) Turnover is related as follows: Average Collection Period =365 Days / Debtors Turnover Fixed Assets turnover ratio measures sales per rupee of investment in fixed assets. In other words, how efficiently fixed assets are employed. Higher ratio is preferred. It is calculated as follows: Fixed Assets turnover ratio = Net Sales / Net Fixed Assets Total Assets turnover ratio measures how efficiently all types of assets are employed.

Total Assets turnover ratio = Net Sales / Average Total Assets

(II) LEVERAGE/CAPITAL STRUCTURE RATIOS:

Long term financial strength or soundness of a firm is measured in terms of its ability to pay interest regularly or repay principal on due dates or at the time of maturity. Such long term solvency of a firm can be judged by using leverage or capital structure ratios. Broadly there are two sets of ratios: First, the ratios based on the relationship between borrowed funds and owners capital which are computed from the balance sheet. Some such ratios are: Debt to Equity and Debt to Asset ratios. The second set of ratios which are calculated from Profit and Loss Account is: The interest coverage ratio and debt service coverage ratio are coverage ratio

to leverage risk. (i) Debt-Equity ratio reflects relative contributions of creditors and owners to finance the business. Debt-Equity ratio = Total Debt / Total Equity The desirable/ideal proportion of the two components (high or low ratio) varies from industry to industry. (ii) Debt-Asset Ratio: Total debt comprises of long term debt plus current liabilities. The total assets comprise of permanent capital plus current liabilities. Debt-Asset Ratio = Total Debt / Total Assets The second set or the coverage ratios measure the relationship between proceeds from the operations of the firm and the claims of outsiders. (iii) Interest Coverage ratio = Earnings before Interest and Taxes / Interest Higher the interest coverage ratio better is the firms ability to meet its interest burden. The lenders use this ratio to assess debt servicing capacity of a firm. (iv) Debt Service Coverage Ratio (DSCR) is a more comprehensive and apt to compute debt service capacity of a firm. Financial institutions calculate the average DSCR for the period during which the term loan for the project is repayable. The Debt Service Coverage Ratio is defined as follows: Profit after tax + depreciation + other non cash expenditure + interest on term loan / Interest on term loan + repayment on term loan

(III) PROFITABILITY RATIOS:

Profitability and operating/management efficiency of a firm is judged mainly by the following profitability ratios: (i) Gross Profit Ratio (%) = Gross Profit / Net Sales * 100 (ii) Net Profit Ratio (%) = Net Profit / Net Sales * 100

Some of the profitability ratios related to investments are: (iii) Return on Total Assets = profit before Interest and Tax / fixed asset + current asset (iv) Return on Capital Employed = Net Profit after Tax / Total Capital Employed (Here, Total Capital Employed = Total Fixed Assets + Current Assets Current Liabilities) (v) Return on Shareholders Equity = Net profit After Tax / Average Total Shareholders Equity or Net Worth (Net worth includes Shareholders equity capital plus reserves and surplus) A common (equity) shareholder has only a residual claim on profits and assets of a firm, i.e., only after claims of creditors and preference shareholders are fully met, the equity shareholders receive a distribution of profits or assets on liquidation. A measure of his well being is reflected by return on equity. There are several other measures to calculate return on shareholders equity of which the following are the stock market related ratios: (i) Earnings Per Share (EPS): EPS measures the profit available to the equity shareholders per share, that is, the amount that they can get on every share held. It is calculated by dividing the profits available to the shareholders by number of outstanding shares. The profits available to the ordinary shareholders are arrived at as net profits after taxes minus preference dividend. It indicates the value of equity in the market. EPS = Net Profit Available To The Shareholder / Number of Ordinary Shares Outstanding (ii) Price-earnings ratios = P/E Ratio = Market Pr ice per Share / EPS

RESEARCH DESIGN: In this case study I am using both Descriptive and Causal Research Design. Reasons re as follows:

DESCRIPTIVE RESEARCH DESIGN: It is used when one is interested in knowing the proportion of the people in a given population who have behaved in a particular manner, making projections of certain things. This will help me in knowing the Investment Pattern i.e. how many people are going in the same direction to invest their money. The objective of this study is to answer who, what, where and how of the subject under investigation. CAUSAL RESEARCH DESIGN: It investigates the cause and effect relationship between two variables. In this project this will help us in knowing how recession and boom phase of economy effects the investors decision of investment and how the capacity of taking risk in the market increases or decreases. DATA COLLECTION For this study, there was a need to collect PRIMARY DATA as the decision of the investor keeps on changing from time to time. Collection of primary data is reliable as it avoids self report bias and cannot record what can not be said. Due to time and financial constraint Marketing Research is done through Sampling. Sample offers various benefits as: 1) It saves time. 2) It helps in cutting expense. INSTRUMENT USED TO COLLECT DATA Data is colleted with the help of Questionnaire. For this study, the sample is taken from Cannaught Palace, Jhandewalan, Pitam Pura and Rajouri Garden. Sample of 300 is taken for this study.

RESULT ANALYSIS

There are certain questions which have been asked to the people for the completion of this project and find the result matching to the Objective.

PEOPLE WHO INVEST AND DONT INVEST

No 17% Yes No Yes 83%

Interpretation: This shows that though the slowdown has affected many people financially and mentally but then also there is large portion of population who invest their money in one or the other financial instrument in hope of getting some handsome return. The people who dont invest can be the client of the company as these people are the fresh market for the company and the challenge for the marketers to find out the reasons behind their decision and pull them towards the growing investment sector.

REASON FOR NOT INVESTING

Time Constraint 20% 8% Financial Constraint Lack of knowledge 54% Volatile Market

18%

Interpretation: This chart answers the why part of not investing the money. The company should concentrate on these reasons and try to solve the issues like imparting knowledge about the various investment options and the share market. Those having financial constraint can also be converted to the clients as the company should provide them the options which are in the client reach of investment. The people with time constraint and financially sound can be given an option of Portfolio Management Services.

TRADER OR INVESTOR

30%

S hort Term Trader Long Term Inves tor

70%

Interpretation: This chart shows that 70% of the people believe in short term trading i.e. investing their money for less than 1 year. These short term investors believe in getting their return quick as they dont want to park their money for longer time. The company can attract them towards the share market as this market give high return in short span combining with risk factor. The company should identify the risk taker and then play the role of increasing their client base by absorbing the clients in their company. For long term investors aspiring high return on their investment Portfolio Management Services can be a good options and attracting them towards the investment in blue chip companies in share market for more than a year.

PREFERENCE OF INVESTMENT

Share Market 4% 3% 31% 45% Mutual Fund Insurance Govt. Sec & Bonds Fixed Deposits

17%

Interpretation: In this chart we can see that the preference for Share Market is more but the preference for Insurance is not less. Insurance sector is an upcoming sector. The company should see this as an opportunity and should take a step towards diversification to Insurance sector. Mutual Fund is also a limited risky platform to invest in with good return and the company should step forward to tell more about this instrument.

WHAT MOVES THE SHARE MARKET

US econom y 12% 23% 18% 10% Govt.announcem e nt Market sentim ents company perform ance S peculation

37%

Interpretation: This helps in understanding the psychology of the investor and helps the company in making the research reports for the clients (this is a kind of additional service to retain the customer towards share market). The Company can provide the technical and fundamental analysis so that those reports help them in their analysis of share market and they can make their own company portfolio for investment purpose according to the market forecasting and their own analysis.

PERCENTAGE OF THE EARNING INVESTED BY THE PEOPLE

10% of earning 14% 19% 37% 30% 20% of earning 30% of earning m ore than 30% of earning

Interpretation: This statistical data is very important for the company as this is an estimation of how much business the company can get in their court. The company could categories the investors according to their capacity to invest and pitch them the right product to invest in. The investors who are ready to invest more than 30% of their earning should be treated under special category as they can be High Net worth Individual for the company.

APPETITE FOR RISK

17% 12%

17% 5% 10% 15% 20% 54%

Interpretation: This data shows the capacity of the investors to take risk. Those who are ready to take high risk seek high return on their investment from the market. These data will help the company to target the customer with right kind of product offering to them and categorize the client under different heads. This data will also cross check certain other data in the research whether client is true to the questionnaire or not.

RECESSION: THE BEST TIME TO PURCHASE SHARE

Yes 37% No 63%

Yes No

Interpretation: This chart shows that in recession phase also around 40% people do not loose hope to earn or invest. The company should take an initiative to hold the faith of these people in recession. The rest not having faith in the recession time should be provided with financial consultancy to do the right investment in the critical phase of economy.

BEST FINANCIAL INSTRUMENT TO INVEST DURING BOOM PHASE

Fixed Deposit 2% Share market(blue chip co.) Mutual Fund 8% 57% Insurance Govt. sec & Bonds PMS

7% 17%

9%

Interpretation: This chart shows the proportion of people investing in different financial instruments during boom phase. This helps the company in knowing the psychology of the investors as how they switch on their investing decision from boom phase to normal or stagnant phase to recession phase. It is expected during boom phase that there are more chance of high return from share market and sectors which invest their major portion of money in share market so 57% of people are tilted towards share market.

BEST FINANCIAL INSTRUMENT TO INVEST DURING RECESSION PHASE

Fixed Deposit Share market(blue chip co.) Mutual Fund Insurance Govt. sec & Bonds PM S

5%

8%

18% 9%

43% 17%

Interpretation: This chart shows the contrasting data from the earlier one. This is how the economical situation changes the decision of the investor. As we can see that during boom period, share market was the most liked one but in recession the people see the security and most of their investment goes to government securities and bonds as they are safer than any other instrument. In recession time people usually loose faith in the economic growth and their vision to get good return is very short and change their decision or some of them either dont invest and keep their money with them which give them zero in return. The people should be aware of the difference between recession and depression and this can be done by any company consultant to their clients.

RECOMMENDATION FOR THE INVESTORS

WHERE ONE SHOULD PARK THE MONEY DURING FINANCIAL CRUNCH

The main factors to consider when investing ones money in bad times and good times are the same. It depends on what kind of investor you are. Are you a conservative or risk-averse investor or is your appetite for risk high? Since every individual has a different ability and willingness to take on risk, some instruments may be suitable for some, yet inappropriate for others. As in every project, the first step in investing ones money is to sit down and think about ones goals in life, both in the short-term and the long-term. This is what investment companies do before they take your money and invest it for you. For ordinary people who are just starting out, or who have limited funds or little experience in investing, it is recommended to put emphasis on priority and truly worthwhile investments and expenditures, and generally adopting a wait and see perspective.

MONEY IN THE BANK

When it comes to keeping the money, most people automatically turn to banks. One cant choose just any bank. Some of the smaller banks have a greater risk of collapsing, but I think banks like Standard charted, SBI etc. are large and solid enough.

INVESTING IN GOVERNMENT
For people who wish to protect their money from being chipped away by the inflation rate but who are averse to risk, it is recommended investing in government securities bonds, treasury bills (which mature in less than one year), treasury bonds (government bonds that mature beyond one year), and the like. While the rates of return on government securities are lower than those of higher-risk instruments, they are considered virtually risk-free as they are backed by the national government. They can also be considered short-term investments, and can be easily liquidated. One can usually buy government securities through banks. Investing in government securities might be

more advantageous than investing in certain mutual funds, whose value fluctuates depending on the interest rates, whether they are fixed-income or not.

PLAYING THE MARKET

For the savvier investorone who has the experience, resources, and cast-iron stomach for investing in high-risk instruments such as stocksthe economic and financial doldrums can actually be a gold mine of opportunity. The prices of stocks have gone downrock-bottom isnt much lowerbut when the economy has recovered and one is patient and far-sighted enough, the upside potential for these stocks is unbelievably high. The thing is, you have to be very selective when it comes to the stocks you buy. There are variables to consider in choosing what stocks to invest. These variables include a companys balance sheet and track record. The companys profitability and the stability of its earnings would enable it to provide substantial amounts of cash dividends periodically. The companys management and their track record, and the companys size, would increase its likelihood of surviving a hit. The knowledge of how the stock market reacts to news also helps. The market has a tendency to overreact both to good news and bad news, and normally the drop in the market following bad news is an opportunity to buy. But you dont buy stocks just because a company is good. And you dont buy all at once. Timing is also important. You must be willing to wait and you must be willing to see the worth of your stocks fall below the amount you bought them for and not get discouraged. You need to learn how to buy and sell your stocks knowing that what goes down will, given enough time, go up again. The problem is, some people invest in the market just because a friend told them it was a good buy. You have to know what youre getting into. You have to learn how to invest in the stock market and you have to know the companies youre investing in, because the best person who can protect your investments is you. The time of crisis is actually a good time for an interested person to learn how the stock market works. If there ever was a time to get in, that time is now.

LAND REFORM
Other avenues for investments, such as real estate, also come with their own risks and downsides. The same principles apply. Know your objectives. Consider the timing. Know what youre getting into.

RISK-RETURN INVESTING
When considering the range of investment instrumentsfrom stocks to government securities to savings deposits to piggy banksit is vital to keep the risk-return relationship in mind. Never compare investment alternatives by simply ranking them based on their promised returns. Investments should always be evaluated based on their return and risk characteristics. An instrument that promises a 25 percent return is not automatically better than one that promises only five percent. The greater the return, the greater the risk involved; the lower the risk, the lower the return. An understanding of the risks involved in investing in a certain product is always mandatory. Before committing your money, you must carefully assess the features of the product and how certain actions issued by the issuersuch as a change in business strategy or an increase in leverage and changes in the economic conditions affect the value of your investment. The most important point to note is that never pour all your money into one purchase. Always try to diversify your investment in different financial instrument so that you money is not in trap. Take overall knowledge of the instrument from risk factor to returns to the future prospects so that it will help you in making final decision about the investment.

HYPOTHESIS TESTING In order to verify the statistics got from the survey, a HYPOTHESIS TESTING is required. The analysis is on whether every financial instrument has same weightage during recession and normal phase or not. In other words does the recession phase changes the investors decision or it remains the same like in normal slow growth. Chi-square Test: For this kind of data chi square testing is required (non-parametric test).Chi-square is used in determining whether the number of observations or responses fall into various categories differ or not. A sample of 250 investors is taken and their preference during recession and normal phase of economy is as follows:
RECESSION PHASE NO. OF INVESTOR NORMAL PHASE NO. OF INVESTOR

Fixed Deposit Share Market Mutual Fund Insurance Govt.sec & Bonds PMS*

19 44 23 42 110 12

Fixed Deposit Share Market Mutual Fund Insurance Govt.sec & Bonds PMS

9 87 30 40 69 15

PMS is Portfolio Management services

Null Hypothesis H0 = Instruments have same weightage in recession as it is during normal phase Alternative Hypothesis H1 = Instruments not having same weightage in recession as it is having during normal phase If the calculated value falls in the rejection region then we reject the null hypothesis and accept the alternative hypothesis. This a not the full proof verification as the data is small and scientific skills are also used while doing these king of researches

Instrument Fixed Deposit Share Market Mutual Fund Insurance Govt.sec & Bonds PMS Total

Observed frequency (O) 19 44 23 42 110 12 250

Expected frequency (E) 9 87 30 40 69 15 250

O-E 10 -43 -7 2 41 -3

(O E ) 2
100 1849 49 4 1681 9

(O E ) 2 / E
11.11 21.25 1.63 0.10 24.36 0.60 = 59.05
2

2 =

2 is Chi-Square

Degree of freedom = n-1, where n is the number of instruments which is 6 in this case So, Degree of freedom is 6-1 = 5 At 5% level o significance the critical value of 2 for 5 degree of freedom is 11.070. Since the calculated value of 2 , it falls in the rejection region. We therefore reject the null hypothesis that the preference for the instruments is similar in recession as it is in

normal phase. In orther words, the investment pattern in recession differs from that of normal phase.

A PROBLEM ANALYSIS AT SHAREKHAN

Sharekhan is having a Lead Management System, which is used by the Assistant Manager and the Executive to maintain and update the status of the leads they get from the company. The problem in the company is that the call ratio of the Sharekhan Delhi is less than the other city branch. I have taken the sample of 32 employees. The following two reasons came out while analyzing the reason behind the issue: 1) Updating the leads daily with handling the field work is bit difficult. 2) Fake updating of leads as updating the system daily is compulsory otherwise come in violation. Motivation to work with honesty lacks in employees. According, if every employee which is 60 in number updates the system daily with honesty then the call ratio of Delhi Sharekhan must be equal to other city branch. A sample of 32 is taken and the mean for the honestly updating the leads came out to be 42 and standard deviation 18. The sample is large and therefore Z-test is applied to verify the situation. Null Hypothesis Ho = call ratio is similar to that of other city branch Alternative Hypothesis H1 = call ratio is not similar to other city branch Z= Where = 42 (sample mean) = 60 (population mean) = 18 (standard deviation) n = 32 (sample size)
x

- /

Z= 42-60 / 18/ 32 Z= -18 / 3.18 Z = -5.66 At 5% level of significance the critical value of Z in table is -1.64, which falls in the rejection region. Therefore we reject the null hypothesis that Delhi has similar call ratio as of other city branch. In other words, the company should look into the matter and concentrate on the reasons as why this ratio is low as if this becomes high the company can earn more business from Delhi as this city is full of young generation to invest and take risk.

LIMITATION OF THE RESEARCH STUDY

1) For performing these king of research large data base is required. The data collected for this study is not sufficient to analyze the investment pattern of retail investors in India. 2) There may be many variables which influences the result but this analysis reveals only few variables. 3) There can be some deviations in the data as the human psychology changes from time to time. 4) The feedback we got may not be correct as the respondent might have filled in the information with no interest or in hurry. 5) Scientific research on the part of research is also required. 6) Accuracy level may be effected when data is subjected to weighing. 7) Time was the biggest constraint as these studies cannot be completed with accuracy in two month.

8) Understanding the psychology of human is not the cup of every one tea so, might be some interpretations go wrong. 9) Some respondents might have taken the question in different sense which can change the data collected. 10) Cost was also the constraint as collection of Primary data required huge amount of spending.

RECOMMENDATIONS/SUGGESTIONS
1) The company should look into the low call ratio problem and sort this out at the earliest as these potential clients can be a customer of the company. 2) The company should go through the entire data collected about the investors risk appetite, their preference for financial instrument and investment capacity etc. to diversify their business in other sectors also. 3) Apart from retail investors, the company can also focus on institutional sector as institutions, banks and corporate have their own unique investment needs. 4) The company can also go for business tie-ups to upgrade their services or to widen the product line and width. 5) The company can adopt corporate level strategy like merger or acquisition to increase their client base and geographical dominance. 6) Keep on improving the Information Technology section of the company so as to keep themselves ahead from others in terms of quality and speed. 7) Marketing strategy for the promotion of the company is required.

8) Identify the core competencies of the company as well as the loose ends so as to maintain the core competency and work on the weakness. 9) Quarterly review of the employee performance to maintain the hard working employee in the company otherwise they can be a liability on the company. 10) Review the pay system of the company to keep the motivation of the employee as employees are the one who convert the commitments of the company into reality.

EXECUTIVE SUMMARY

To keep the pace with other competitors, Sharekhan need to target the potential customer as it will increase their customer base. The company needs to enter into new sectors so that it can offer wide options to the investor. The project is undertaken to provide the knowledge about the company and the products they offer. This project focuses on how the recession/ boom phase affects the decision of investors. This also guides you as where one should park their money during recession and also how to judge yourself to make investment decision. This also tells you what points one should keep in mind before making an investment and also how to evaluate the shares to buy or not. The project is divided into 5 parts:-

1. COMPANY PROFILE: This section provides the information about the

company and the products they offer with the charges required to pay at the time of opening the account and for its maintenance.

2. INTRODUCTION TO SHARE MARKET: This section tells you about the

entire functioning of the share market. It also gives you the information about the IPO, mutual funds etc. This section serves with the options for short term financial instrument and long term financial instrument. It will also provide you the information on derivative market. 3. VALUATION OF SHARE: This part tells you how valuation of share is done and different methods for different kind of shares. This valuation helps the investor to choose which share to buy and which are going to give high return on investment. The methods used are very simple to understand and use so that a common man who can not perform hard calculations can also learn to valuate the shares.

4. ANALYSIS REQUIRED: To review the position of the company there are certain rations required to calculate with the analysis of the profit and loss and balance sheet of the company. These instruments help the investor in analyzing the companies performance and position in the market. This also tells you about the requirement of the Technical analysis as how the Share market moves. 5. RESEARCH ANALYSIS: This part analyzes the data collected for the purpose to know the investment pattern and the investors psychology. This part helps the company in knowing where to target the client and helps in categorizing the client so as to offer them with the right kind of product. This section also helps in parking the investors money at right place and at the right time. It will guide one for how to go for the investment. This study will help them in planning the future targets and the strategies to

grab the opportunities. This will also tell about the importance of planning in order to keep pace with the opponents.

GLOSSARY
Bear Someone who thinks that the price of a share or stock market prices in general are about to fall. Bid price The price you sell your stocks or shares. Blue chip The shares of large well established companies. The expression is thought to have been derived from blue chips, the highest denomination of chips used in casinos. Bull Someone who thinks that the price of a share or the market in general is about to rise.

Call A further instalment due on shares which are only partly paid. For example, there were two calls on British Telecom shares of 40p each. Coupon is the amount of interest payable on a fixed interest stock. Dividend The part of a company's profits distributed to shareholders, usually on a regular basis. An interim dividend is paid at the half-year stage and a final dividend at the end of the full year. Earnings per share A company's profits (after payment of interest and preference share dividends) dividend by the number of shares issued. Flotation When a company's shares are offered on the market for the first time. Futures Contracts which give the holder the right to buy or sell the FT-SE 100 Share Index for an agreed price at a future date. Hedge A means of insuring the risk. Limit order An order to a stockbroker specifying a price limit so that the deal can only be done at that price or better. Net asset value The value of a company after all debts have been paid expressed in pence per share. New issue A company coming to the market for the first time.

Nominal value The face value of a share or stock as opposed to its market value, also called par value. Offer price The price at which you can buy stocks and shares. Options The right to buy (call option) or sell (put option) a specified share at a specified price within a specified period. For this privilege you pay option money. There is no obligation for you to buy or sell the shares. You can let the option lapse if you wish. Over the counter market (OTC) A market outside the stock exchange in which small companies are able to raise money by issuing shares to the public.

Par The nominal value of a stock or share. Portfolio A selection of shares held by an individual or a fund. Scrip issue Same as Bonus issue. Securities A general term for stocks and shares. Share certificate An official document issued by the company stating the name of the shareholder and the number of shares owned. Sweetener A high-yielding stock or share included in a portfolio to raise the average yield overall Underwriter Someone, usually a city institution, who agrees to buy any shares in a new issue not purchased by the public. Unit trust A portfolio of various investments divided into units and managed by professionals. The value of the units does not depend on supply and demand but on the underlying value of the portfolio. Yield The gross dividend expressed as a percentage of the share price.

BIBLIOGRAPHY
www.wikipedia.org www.textbooksonline.tn.nic www.beginnersinvest.about.com www.library.thinkquest.org

www.globusz.com www.Nseindia.com www.bseindia.com www.cbdd.wsu.edu www.investmentguide.co.uk

BOOK:
Financial Management IM Pandey An Introduction to Accountancy SN Maheswari and SK Maheshwari Marketing Research GC Beri

QUESTIONNAIRE
Ques 1 Do you invest? a) Yes Ques 2 What is the reason for not investing? a) Time constraint b) Financial constraint b) No

c) Lack of knowledge d) Volatile market Ques 3 Are you a short term trader / long term investor? a) Trader b) Investor Ques 4 Where do you invest? a) Share Market b) Mutual Fund c) Insurance d) Govt. securities n Bonds e) Fixed deposits Ques 5 What according to you is the reasons of market volatility? a) US economy b) Govt. announcements c) Market sentiments d) Companies performance e) Speculation Ques 6 How much %age of your salary you invest? a) 10% b) 20% c) 30 % d) more than 30% Ques 7 Your appetite for risk a) 05% b) 10% c) 15% d) 20%

Ques 8 Do you think investing in recession phase is more profitable as you can buy at lower rates? a) Yes b) No Ques 9 Which is the best instrument to invest in during Boom period? a) Fixed deposits b) Blue chip companies c) Mutual funds d) Insurance

e) Govt. securities n bonds f) Portfolio Management Services (PMS) Ques 10 Which is the best instrument to invest in during Recession period? a) Fixed deposits b) Blue chip companies c) Mutual funds d) Insurance e) Govt. securities n bonds f) Portfolio Management Services (PMS)