A

REPORT

On

“The problems faced by Demat account

holders and their expectations towards

Depository participants.”

MBA(2009-2011)

Under the Supervision of-

Ms Jyoti Sharma (Faculty, PCTE)

Mr. Sarbjit pal (ASM, HSBC Investdirect)

Submitted by-

Neelam Monga

Punjab College of Technical Education

Ludhiana

1

Acknowledgement

“Gratitude is not a thing of expression, it is more a matter of feeling”.

In this present world of competition there is a race of existence in which those who are having

will to come forward will succeed. Project is a bridge between practical and theoretical working,

with this will I have joined the project. I really wish to express my gratitude towards all those

people who have helped me.

I am really indebted to Mr. Sarbjit pal (ASM, HSBC Investdirect) Ludhiana, for his kind

hearted support and expert advice in the completion of the project.

I am also very thankful to Ms. Jyoti Sharma (Faculty, PCTE) for her timely guidance,

supervision & encouragement that have helped me to get this golden opportunity and who

provided me her expert advice, inspiration & moral support in spite of her busy schedule &

assignments, has mainly provided my understanding of this project.

Last , but not the least, I say only this much that all are not to be mentioned but none is forgotten

and I will like to extend my special thanks and gratitude to my parents who always encourage me

in pursuit of excellence.

2

Abstract

Earlier Investors used to hold shares in the paper format. Nowadays they are stored electronically in the Demat account. The document of shares that is in paper form is demated and is kept electronically in an account. A Demat account can be opened with no balance of shares and there is no minimum balance to be maintained either. One can have a Zero cash balance even in one’s Trading Account.

The Depository is the custodians of securities. It helps for shorter settlement cycles and immediate transfer of title of securities. Depository Participant is an agent of the depository through which it interfaces with the investor and provides depository services to the investors.

This research project is basically to analyze the problems faced by the Demat Account holders and their expectations towards Depository Participants. The research design that has been used is Descriptive and the Sample Size is 100. The convenience Sampling technique has been used. The research data is collected with the help of Questionnaire.

This Research project has helped to ascertain the problems faced by the demat account holders and the customer’s expectations from the depository participants in Ludhiana city. The Customer’s expectations are identified which will help in improving the quality of working of various DP’s in Ludhiana city. The customer’s satisfaction level from their share brokers was also revealed.

Ms. Jyoti Sharma Neelam Monga

(Faculty PCTE) (MBA 2C)

Certificate 1

3

This is to certify that report entitled ‘Study on the problems faced by dmat account holder and

their expectation from their DP services submitted for the degree of MBA in subject of summer

training report, is a bonifide research report carried out by Neelam Monga, PCTE student under

my supervision & no part of this has been submitted for any other degree.

The assistance and help received for the course of investigation have been fully acknowledged

Ms. Jyoti Sharma

(Faculty Advisor)

CONTENTS Page No.

4

Introduction 1-15

Company Profile 16-33

SWOT Analysis 34-36

Ratio Analysis 37-47

Demat Account 48-59

Need for the study 60

Review of Literature 61-66

Objectives 67-68

Research Methodology 69-71

Data Analysis and Interpretation 72-85

Observation and Findings 86-87

Suggestion 88

Conclusion and Limitation 89

Bibliography 90

ANNEXURE 91-94

List of Tables

5

Sr.No Tables Name Page No.

1 Number of Demat Account holder 73

2 Demat Account in Different companies 74

3 Source of information about the above company 75

4 The occupation of investors 76

5 Preference of Mode of Trade 77

6 The frequency of trading 78

7 Rank the preferrance while opening a demat

account

79

8 The problem faced after opening an Account 80

9 The Problems faced by you while holding the

Demat

81

10 The satisfaction level with services provided by

your DP’s

82

11 The loan availed against your DP 84

12 Factor considered by investors while selecting a

particular DP

85

6

List of Figures

Sr.No Figure Page No.

1 Number of Demat Account holder 73

2 Demat Account in Different companies 74

3 Source of information about the above company 75

4 The occupation of investors 76

5 Preference of Mode of Trade 77

6 The frequency of trading 78

7 Rank the preferrance while opening a demat account 79

8 The problem faced after opening an Account 80

9 The Problems faced by you while holding the Demat 81

10 The satisfaction level with services provided by your

DP’s

83

11 The loan availed against your DP 84

12 Factor considered by investors while selecting a

particular DP

85

7

Part A

Introduction to Corporate and briefing

about group companies

8

Historical background of the group :

The HSBC Group is named after its founding member, The Hongkong and Shanghai Banking

Corporation Limited, which was established in 1865 to finance the growing trade between

Europe, India and China.

The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who was then

working for the Peninsular and Oriental Steam Navigation Company. He realized that there

was considerable demand for local banking facilities in Hong Kong and on the China coast

and he helped to establish the bank, which opened in Hong Kong in March 1865 and in

Shanghai a month later.

Soon after its formation the bank opened agencies and branches around the world. Although that

network reached as far as Europe and North America, the emphasis was on building up

representation in China and the rest of the Asia-Pacific region. HSBC was a pioneer of modern

banking practices in a number of countries. In Japan, where a branch was established in 1866, the

bank acted as adviser to the government on banking and currency. In 1888, it was the first bank

to be established in Thailand, where it printed the country’s first banknotes.

From the outset trade finance was a strong feature of the local and international

business of the bank, an expertise that has been recognized throughout its history. Bullion,

exchange, merchant banking and note issuing also played an important part. By the 1880s, the

bank was acting as banker to the Hong Kong government and also participated in the management

of British government accounts in China, Japan, Penang and Singapore. In1874 the bank

handled China’s first public loan and thereafter issued most of China’s public loans.

What is HSBC?

We are the world’s local bank.

Headquarters in London, HSBC is one of the largest banking & financial services organization in

the world. HSBC’s international network comprises over 9500 offices in 76 countries & territories

in Europe, the Asia-Pacific region, the Americas, the Middle East & Africa. With listings on the

London, Hongkong, New York, Paris & Bermuda stock exchange shares in HSBC holdings

places are held by nearly 200,000 shareholders in some 100 countries & territories. The shares

are traded on the New York stock exchange in the form of American Depository Receipts.

Through an international network linked by advertisement techniques, including a

rapidly growing e-commerce capability, HSBC provides a comprehensive range of

9

financial services like-

1. Personal financial services

2. Commercial Banking

3. Corporate Banking

4. Investment Banking

Vision Statement

To become the preferred long term financial partner to a wide base of customers whilst

optimizing stakeholders value!

Mission Statement

To establish a base of 1 million satisfied customers by 2010. We will create this by being a

responsible and trustworthy partner!

Names and Location of group companies :

Latin America

 HSBC Mexico SA

 HSBC Bank Brazil SA, Banco Multiplo

 HSBC Bank Argentina SA

Asia Pacific

 The Hongkong and Shanghai Banking Corporation Ltd

   Hang Seng Bank Ltd

   HSBC Bank (China) Company Ltd

   HSBC Bank Malaysia Berhad

Middle East

10

 HSBC Bank Middle East Ltd

   HSBC Bank Egypt SAE

   The Saudi British Bank

North America

 HSBC Bank USA Inc

   HSBC Finance Corporation

   HSBC Bank Canada

Europe

 HSBC Bank plc

   HSBC France

   HSBC Trinkaus und Burkhardt AG

   HSBC Private Bank (UK) Ltd

Products/Services and brands :

Through an international network linked by advertisement techniques, rapidly growing

e-commerce capability, HSBC provides a comprehensive range of financial services like-

1. Personal financial services

2. Commercial Banking

3. Corporate Banking

4. Investment Banking

Personal Financial Services(PFS)

HSBC India offers a wide range of competitively priced services & products to over 1.75 million

individual resident Indians as well a Non-resident Indian customers across India, USA, UK,

Middle East & South East Asia. HSBC’s 150 year presence in India allows it to enjoy the

advantage of deep rooted knowledge of local markets & customs. This has lead to development of

products & services, which are attuned to the financial needs of Indians in the cities where HSBC

11

operatives. The HSBC brand is associated with core values such as transparency, trust & honesty.

These factors enable HSBC India to remain highly competitive & at the leading edge of the retail

& commercial banking market in the country.

The distribution network in India consists of 47 branches in 26 cities supported by 170 ATMs at

142 locations. In addition, self service banking channels, such as Internet Banking & a 24 hour

centralized all India Call Centre provide a strong backbone to the distribution capabilities. A

second load balancing Call Centre became operational in January 2005 at HSBC Operations &

Processing Enterprise (India) Private Limited, Chennai Customers can apply for all products

& services online at www.hsbc.co.in.

The bank offers a complete suite of products & services including HSBC Premier International,

HSBC Premier, Power Vantage, Savings & Current Accounts, International Debit Cards &

Term Deposits in addition to consumer loan products like International Credit Cards,

Mortgage, Personal Loans, Educational loans & Overdrafts. HSBC is the 6th largest credit card

issuer in India with over 1.3 million cards in force.

Premier & mid market customers have access to comprehensive Financial Planning & HSBC

is a market leader in the provision of Wealth Management services. In 2005, HSBC was

the largest distributor of Retail Mutual Funds in India, & the biggest sales channel for Banc

assurance partner TATA AIG.

Non-Resident Indians (NRI’s) constitute 56% of the Bank’s deposit base. The banking needs of

NRIs are fulfilled from branches in India & 11 NRI centers abroad. We have over 84,000 NRI

Customers, & have started referring customers to Financial Planning Managers & the Private

Bank in the host countries, to address their needs for investment products. A free remittance

service is offered between accounts held by NRIs with HSBC overseas & onshore. In 2006,

an International Banking Centre was established facilitate cross border business referrals.

In October 2005, HSBC launched an onshore Private Banking proposition branded HSBC

Private Banking. The proposition targets clients with minimum assets of INR 25 M &

encompasses asset classes such as Real Estate, Equity Derivatives & Commodities. This is an

addition to Fixed Income & Equities, which are already being offered. The proposition uses

“Active Advisory” as its cornerstone & key differentiator.

The Bank has sought RBI approval to establish a separate consumer finance branch network

under a non banking financial institution, which will distribute personal loans & ancillary

12

products to a broader segment of the Indian consumer base than is currently served by the Bank’s

existing product portfolio. The personal loan product is being piloted through the bank

branch network & initial results are promising.

Wealth Management & Branch Banking

HSBC has 47 branches Pan-India across 26 locations wealth Management services are

delivered to customers through qualified Wealth Management across each of these branches.

Wealth Management helps customers develop & execute a realistic & practical long

term savings, investments & protection plans by investing in mutual funds, bonds & purchase of

insurance products manufactured by TATA AIG.

Qualified, trained & accredited Wealth Management assist customers in charting a road map

to achieve their individual financial goals & protect their family from unforeseen eventualities

keeping in mind their available resources & based on each customers independent risk

profile. Wealth Management services is currently offered to HSBC Premier & Power

Vantage customers.

Commercial Banking

HSBC is a leading provider of financial services to small, medium-sized and middle-market

enterprises. The Group has over 43,000 such customers in proprietors India, including sole,

clubs and associations, incorporated businesses companies. Commercial and publicly quoted

Banking provides a full range of banking services to these customers including multi-currency

business accounts, payment and cash management, trade services, factoring and a range of

borrowing solutions.

In India, Commercial Banking has a presence in 47 branches covering 26 key cities and for the

convenience of our customers, a multi channel service including Internet and Phone banking. For

SME customers, HSBC offers the complete range of transaction baking services as well as

unsecured loans and loans for and against property. The services are supported by a large Sales

and Relationship Management team in key locations across the country India is the first country

in the HSBC Group where Commercial Banking lends to Microfinance Institutions, thus

providing indirect funding to hundreds of small business owned and run by members of

underprivileged sections of society. A dedicated unit has been formed to focus on

Microfinance and other Priority Sector institutions, with a view to further reach out to the

13

marginalized and under banked.

Factoring

HSBC India offers a comprehensive range of Factoring and Supply Chain Finance Solutions,

which include the following products:

For Vendors/Suppliers/Purchase Channel of our corporate customers

Payables Financing

Purchase Order Financing

For the Sales Channel of our corporate customers

Factoring (With or Without Credit Protection)

Export Factoring (With or Without Credit Protection)

Portfolio Invoice Discounting (With partial credit protection)

Distributor Finance.

Payables Financing :-HSBC India’s Payable Financing product enables companies to

finance their payables to vendors. This helps companies to provide immediate liquidity to vendors

against their supplies at competitive rates and will enable the company to negotiate better pricing

terms with vendors.

It also enables the vendors to improve their cash flow by providing continuous

liquidity against their receivables. Our payables financing products can be structured either

against Bills of Exchange or Accepted Invoices.

Purchase Order Financing is a facility to suppliers of our Corporate Banking Clients to finance

their pre shipment working capital requirements Pre shipment working capital lines are sanctioned

to the supplier’s against Purchase Orders issued to the suppler

Factoring: -This is a service that covers the financing and collection of account receivables in

domestic trade. Receivables are factored, by HSBC with added service of credit protection,

collection and sales ledges administration. Thus the management of the company may

14

concentrate on production and sales and need not concern itself with non-core activities like

collection and sales ledger administration.

Export Factoring enables companies to finance their open account export sales at competitive

rates either in Rupees or Foreign Currency. Through a network of overseas based correspondent

factors, HSBC provides credit protection against buyer default and collection services.

Portfolio Invoice Discounting Essentially covers purchase of receivables with partial credit

protection based on a First Loss Deficiency Guarantee. The portfolio should be well spread with

acceptable levels of concentration and the debtors must have had a satisfactory track record with

the company. A field audit will be conducted to determine portfolio quality based on which a

First Loss Deficiency Guarantee percentage will be agreed Collection remains the

responsibility of the Corporate with repayments either on a pre-agreed schedule or based on

actual collections.

Distributor Finance is currently offered to the distribution channel of Large Corporate Banking

Clients and can be structured to suit the specific requirements of each corporate and its

distribution channel. Through the Distribute Finance Program, HSBC finances company’s

dealers, which will assist the company in providing steady, assured credit to its distribution

chain.

Payments and cash management

Integrated domestic and regional cash management solutions are provided to corporate and

institutional customers in India. The suite of offerings under the cash management umbrella

includes comprehensive Receivables Management solutions, with an endeavor to completely

integrate with the customer’s back-end operating systems and processes. HSBC is the leading

foreign bank in India in providing capital market solutions, which include Bankers to Issue,

Escrow account Services and Dividend payments solutions. Six Sigma measurement

practices are followed for our operational capabilities. HSBC net, the HSBC Group’s online real

time web-enabled corporate banking platform, allows customers to execute financial

transactions, obtain international financial market information and review details of their domestic

15

and international accounts form anywhere in the world, 24 hours a day.

Trade (international and domestic) service

HSBC offers a wide range of international and domestic Trade products. In India, we offer one of

the largest trade processing capabilities among peer banks, spread across 5 cities. Each of our

Trade processing centers is ISO 9001-2000 certified. We work closely with Group Offices

overseas and leverage our extensive global network to offer structured, tailor made

solutions to a wide range of customers. Our clients in India include large India and

multinational companies, Mid Market companies as well as customers in the Small and

Medium Enterprises segment.

Corporate And Institutional Banking

Corporate Banking (CB) is an integral part of the Global Banking structure which focuses on

offering a full range of service to multinationals, large domestic corporate and institutional clients

a wide range of banking and financial services provided to domestic and international

operations of large local corporate and local operations of multinationals corporations.

Services include access to commercial banking products, including working capital facilities

such as domestic and international trade operations and funding, channel/distributor financing,

and overdrafts, as well as domestic and international collections and payments, INR and Foreign

currency term loans (external commercial borrowing in foreign currency), letters of guarantee etc.

Institutional Banking drives the Group’s relationship with banks, financial institutions, securities

houses, insurance companies, and asset management companies and other non-banking

companies, non-government and development organizations operating in India. Market

leadership position based on strong relationships with major financial institutions.

Investment Banking and Markets brings together the advisory and financing, equity Securities,

equity linked transactions, asset management, treasury and capital markets, and private

equity activities of the Groups to complete the Global Banking structure and provide a complete

range of financial products to our clients.

Clients are serviced by sector based client service teams that combine relationship managers,

product specialists and industry specialists to develop customized financial solutions. These form

the relationship team along with the Investment Banking structure and provide a complete range

16

of financial products to our clients.

The Corporate Bank (CB) in India was top ranked (1st overall) in the 2005 Greenwich Survey with

a Greenwich Quality Index (GQI) of 647. Currently CB manages approx. 470 CB relationships

with total advances of approx USD 1.08Bn as at end of Dec05 and total deposits of USD .98Bn.

Sectoral account management- Improved industry knowledge andsector4 expertise. The CB

portfolio is largely spread within the following sectors divided as under.

CORPORATES INSTITUTES

Consumer Brands Banks

Industrials &Technology Financial Institutions

Energy and Utilities Securities

Telecommunications MutualFunds/AssetManagement Companies

Automotive Insurance

Healthcare Financial Sponsors

Transport and Logistics Business Process Outsourcing (BPO’s)

Media Broker and Dealers

Investment Banking

1. HSBC FIXED DEPOSITS

When it comes to assured returns, choosing the right type of savings scheme makes all the

difference. HSBC Fixed Deposits let you make the most of value-added benefits as you create

wealth at low risk.

Features & Benefits

The superior Fixed Deposit to invest in, for a secure future

You can now open a Fixed Deposit with Rs. 10,000 only

Enjoy high rate of returns on your HSBC Fixed Deposits

Choose from a wide range of tenors as per your Convenience

Avail of our special rates for select tenors

Certificate of Deposit

Earn interest for funds invested from 15 days to one year, with HSBC’s Certificate of Deposit

17

(CDs). CDs can be availed by individuals (other than minors), corporations banks, companies,

trusts, funds, associations etc. Non-Resident Indians (NRIs) may also subscribe to CDs on a non-

repatriable basis only.

Advantage

Tenure – A Certificate of Deposit is issued for a period not less than 15 days & not exceeding 1

year from the date of issue .

Transfer Mechanism – Certificate of Deposit held in a physical form are freely

transferable by endorsement & delivery. Those in demat form can be transferred as per the

procedure applicable to other demat securities.

Markets (Domestic & Export):

Group Service Centres

The HSBC Global Technology Centre in Pune, India develops software for the entire HSBC

group.As a cost saving measure HSBC is off shoring processing work to lower cost economies in

order to reduce the cost of providing services in developed countries. These locations take on

work such as data and customer service, but also internal software

engineering at Pune, Hyderabad(India), Vishakhapatnam (India), Kolkata (India), Guangzhou (C

hina), and Curitiba (Brazil).Chief Operating Officer Alan Jebson said in March 2005 that he

would be very surprised if fewer than 25,000 people were working in the centres over the next

three years: “I don’t have a precise target but I would be surprised if we had less than 15 (global

service centres) in three years’ time.” He went on to say that each centre cost the bank from

$20m to $30m to set up, but that for every job moved the bank saves about $20,000 (£10,400).

Trade unions, particularly in the US and UK, blame these centres for job losses in developed

countries, and also for the effective imposition of wage caps on their members.

HSBC Building, Shanghai

Currently, HSBC operates centres out of eight countries, including Brazil (Curitiba), The Czech

Republic (Ostrava), India (Kolkata, Hyderabad, Bangalore, Visakhapatnam, Mumbai, Gurgaon a

ndPune), China (Shanghai, Guangzhou and Shenzhen), Malaysia (Kuala

Lumpur), Poland (Krakow),Sri Lanka (Rajagiriya) and Philippines (Manila). The Malta trial for

a UK high value call centre has resulted in a growing operation that country. An option under

18

consideration is reported to be a processing centre in Vietnam to access the French skills of the

population and therefore cut costs in the bank’s French operations.

On June 27, 2006, HSBC reported that a "small number" of customers had suffered from fraud

totaling £233,000 after an employee at the Bangalore call centre supplied confidential customer

information to fraudsters.

HSBC Private Bank

HSBC Private Bank is the group's private banking operation, providing private banking and

trustee services to wealthy individuals and their families worldwide. The Private Bank has in

excess of 60 offices worldwide, with the major centres being Miami, New York, London,

Geneva and Hong Kong.

HSBC Premier

HSBC Premier is the group's premium financial services product. The exact benefits and

qualification criteria vary depending on country, but typically require deposits and investments

of at least $100,000, £50,000, or €100,000. Alternatively those who have an individual annual

income of at least £100,000 paid into their HSBC Premier Bank Account and are a customer of

the bank's Independent Financial Advisory Service. Customers have a dedicated Premier

Relationship Manager, global 24 hour access to call centres,free banking services and

preferential rates. A HSBC Premier customer receives the HSBC Premier services in all

countries that offer HSBC Premier, without having to meet that country's qualifying criteria.

HSBC Bank International

HSBC Bank International is the offshore banking arm of the HSBC Group, focusing on

providing offshore solutions and cross border services to expatriates andmigrants. It provides a

full range of multi-currency personal banking services to a range of customer segments,

including a full internet banking and telephone banking service. Sometimes referred to as

"HSBC Offshore", the business also offers independent financial planning, and has

representative offices all over the world, often working alongside local HSBC operations in those

regions.

HSBC Bank International originated from the business started by Midland Bank and is based in

the Channel Islands with further operations on the Isle of Man. Its operations in the Channel

19

Islands are centered around its registered headquarters on the seafront in St Helier, Jersey.

Named 'HSBC House', the building comprises departments such as Premier, Global Funds &

Investments, e-Business and a 24 hour 'Direct Banking Centre'.

HSBCnet

HSBCnet is a global service that caters to local business needs by offering specialised

functionality for different regions worldwide.

The system provides access to transaction banking functionality - ranging from payments and

cash management to trade services features - as well as to research and analytical content from

HSBC. It also includes foreign exchange and money markets trading functionality.

The system is used widely by HSBC's high-end corporate and institutional clients served

variously by the bank's global banking and markets, commercial banking and global transaction

banking divisions. HSBCnet is also the brand under which HSBC markets its global e-commerce

proposition to its corporate and institutional clients.

HFC Bank (UK Operation) is a wholly owned subsidiary, with 135 High Street branches in the

UK selling loans to the "sub-prime" market. During 2007 and 2008, has been trying to fend off a

union recognition campaign by the Trade Union Unite.

HSBC Direct

HSBC Direct is a telephone/online direct banking operation which attracts customers through

mortgages, accounts and savings. It was first launched in the USA in November 2005 and is now

available in Britain, Canada,Taiwan, South Korea and France. Poland is launching business

direct in September 2009.

Other relevant information :

Type Public

LSE: HSBA

SEHK: 005

NYSE: HBC

Euronext: HSB

BSX: 1077223879

20

Industry Banking

Financial services

Investment services

Founded Hong Kong   (1865)

Founder(s) Thomas Sutherland

Headquarters London,   United Kingdom [1]

Number of

locations

9,500 offices in 88 countries &

territories

Area served Worldwide

Key people Stephen Green

(Group Chairman)

Michael Geoghegan

(Group CEO)

Products Finance and insurance

Consumer Banking

Corporate Banking

Investment Banking

Investment Management

Global Wealth Management

Private Equity

Mortgages

Credit Cards

Revenue ▼   $103.74 billion   (2009)

Operating income ▼   $7.079 billion   (2009)

21

Profit ▼   $5.834 billion   (2009)

Total assets ▼   $2.364 trillion   (2009)

Total equity ▲   $128.299 billion   (2009)

Employees 302,000   (2009)

Subsidiaries HSBC Bank plc

HSBC GLT India

The Hongkong and Shanghai

Banking Corporation

HSBC Bank USA

HSBC Bank Middle East

HSBC Mexico

HSBC Bank Brazil

HSBC Finance

Website HSBC.com

22

Introduction to particular firm /division

23

PROFILE OF THE IL&FS INVESTSMART LTD.

Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India's leading

infrastructure development and finance companies IL&FS has a distinct mandate catalyzing the

development of infrastructure in the country. The organization has focused on the

commercialization and development of infrastructure projects and creation of value added

financial services. From concept to execution, IL&FS houses the expertise to provide the

complete array of services necessary for successful project completion: visioning,

documentation, finance, development, management, technology and execution. This company

was started in 1980 with a major objective of financing major infrastructure and leasing services.

Over the years, IL&FS has broad-based its shareholding, which today includes Life Insurance

Corporation of India, ORIX Corporation – Japan, Housing Development Corporation of India,

Abu Dhabi Investment Authority, State Bank of India, and Central Bank of India.

IL&FS Investsmart Securities Ltd (IISL) is one of India’s leading financial services

organizations. IISL, through its subsidiaries in India and Singapore, (Shown in Figure 1.1)

provides a wide range of investment products to its retail and institutional banking, insurance

broking & distribution, mutual funds distribution and related financing services. IISL’s 2,000

employees provide a complete range of investment solutions to over 138,000 customers in India

through its 88 branches and 19 franchised outlets from 133 cities and has been recognized as

“National Best Performing Financial Advisor – Retail” for two years in a row (06-07 & 07-08)

BY CNBC TV 18.

24

Fig.1(a) Subsidiaries of IL&FS Ltd.

IL&FS Investsmart Securities Limited

IL&FS Investsmart Securities Limited (IISL) is one of India’s leading financial services

organizations providing individuals and corporate with customized financial management

solutions.

At IISL, they believe in "Realizing customer goals together". One will find in them - a trusted

investment partner to help customer work towards achieving investor’s financial goals. IL&FS

institutional expertise, combined with a thorough understanding of the financial markets results

25

IL&FS LtdInfrastructure

ServicesIL&FS Infrastructrure Development Corp Ltd

IL&FS Transportation Networks Ltd

IL&FS Ecosmart Ltd

IL&FS Education &Technology Services Ltd

IL&FS Tripura Area Development Corp Ltd

Noida Toll Bridge Company Ltd

Financial Services

IL&FS Investment Managers Ltd

IL&FS Investsmart Ltd

IL&FS Trust Company Ltd

ORIX Auto Infrastructure Services Ltd

in appropriate investment solutions for investors. The strong team of Relationship Managers,

Customer Service Executives, Advisory Managers and Research Analysts, offers efficient

execution backed by in-depth research, knowledge and expertise to customers across the country.

With a pan-India presence of over 300 offices, IIL is geared to meet all the investment needs

through its branches.

IL&FS Investsmarts Limited is an initiative in the field of Financial Services started by

Infrastructure Leasing & Financial Services (IL&FS), an institution known for its innovative and

pioneering initiatives in the areas of Infrastructure, Corporate Finance and Investment Banking.

IISL was set up in October 1997 and began retail operations in September1998.

IL&FS Investsmart Securities Limited (IISL) was set up with the objective of becoming one of

the leading full service brokerage houses in the country with a strong expertise in web-based

technology as well as strengths in physical distribution. Today with a presence in more than 90

cities across India through more than 300 outlets, IISL has become one of the most prominent

players in the Financial Services Industry with service offerings across different categories. In

the year 2008 investsmarts securities received the Best Performing National Financial Advisor –

Retail Segment at the CNBC TV 18 National Financial Advisor Award.

The Retail Business Division at IISL is involved in dealing with a range of financial products

offered to customers across India through multiple locations. The retail business is further

categorized into various business divisions catering to varied needs of our customers. These

include divisions catering to customers for Investment options such as Equity Trading,

Derivatives Trading, IPO Investments, Fixed Income products, Mutual Fund Investments as well

as Insurance and Home Loans Advisory services.

In particular, IL&FS have always felt the need for a successful brokerage Group to have an

international capability. IL&FS believe that the strength of the HSBC Group provides a unique

opportunity for Investsmart to execute its strategic vision. It is IL&FS intention to retain a close

association with Investsmart through co-operation on a number of areas that will be mutually

beneficial and on an arm's length basis”

26

Mr.Ravi Parthasarathy added, “I believe that HSBC Group will provide Investsmart employees

significant opportunities to enhance the value proposition for their customers. Investsmart

employees will also benefit from the training and development infrastructure that arises from

being a part of one of the world’s leading banking organizations.”

Corporate Action

An approach to business that reflects responsibility, transparency and ethical behaviour. Respect

for employees, clients & stakeholder groups.ILL’s strong team of Relationship Managers,

Customer Service Executives, Advisory Managers and Research Analysts, offers efficient

execution backed by in-depth research, knowledge and expertise to customers across the country.

With a pan-India presence of over 300 offices, IIL is geared to meet all the customers’

investment needs through an office nearby. All the interested investors need to do is drop in at

the nearest branch or call and ILL will be happy to do the rest!

ILL says about its Customer

At IIL, we believe in "Realizing your goals together". Customer will find in IL&FS a trusted

investment partner to help work towards achieving financial goals of clients. IL&FS institutional

expertise, combined with a thorough understanding of the financial markets results in appropriate

investment solutions for clients.

Advantages Of IL&FS

Today, IL&FS Investsmart Limited is one of India’s leading financial services organization

delivering value and innovation to over 100,000 customers through more than 300 offices across

the India.

7 Reasons for investing with IL&FS Investsmart Limited is smarter.

Customization: They formulate investment plans based on investors’ individual

requirements.

Expertise: They bring within customer reach, IL&FS institutional expertise and their

valuable understanding of the financial markets.

One-stop-shop: They cater to all investors’ investment needs under one roof.

27

Trust: They enjoy the pedigree of IL&FS and share its expertise in financial

services.

Personalised Service: They help customer through the entire investment process,

step by step, with innovative and efficient services.

Unbiased & Objective Advise: They partner you in your investment process, with

our team of expert investment advisors.

Extensive Reach: Through a host of mediums:

- offline through more than 300 offices across India.

- Online through our website.

Retail Business: Retail offerings of IIL seek to cover all financial planning

requirements of individuals, which include providing personalised investment

management services including planning, advisory and execution and monitoring of

the full range of investment services. Broadly the retail services are divided into two

broad categories.

HSBC in India

The HSBC Group in India is represented by several entities including The Hong Kong and

Shanghai Banking Corporation Limited which offers a full range of banking and financial

services to its over 2 million customers in India through its 47 branches and 170 ATMs across 26

cities. HSBC is one of India’s leading financial services groups, with over 33,000 employees in

its banking, investment banking and capital markets, asset management, insurance broking, two

global IT development centres and six global resourcing operations in the country. The Bank is

the founding and a principal member of the HSBC Group which, with over 10,000 offices in 83

countries and territories and assets of US$2,354 billion at 31 December 2007, is one of the

world’s largest banking and financial services organisations.

Sale of Stake in Investsmart to HSBC

IL&FS agrees to sell its stake in Investsmart to HSBC. Infrastructure Leasing and Financial

Services Limited (IL&FS), is to sell its 29.36 percent stake in IL&FS Investsmart Limited

(Investsmart), a leading retail brokerage house in India, to HSBC. Under the terms of the

agreements, HSBC, through Group subsidiaries, proposes to acquire IL&FS’s 29.36 per cent

28

stake of Investsmart for a consideration of INR 410 crores (approximately US$ 96.9 million). In

addition, IL&FS will be paid INR 82 crores (approximately US$ 19.4 million) as part of a three–

year non-compete agreement. HSBC also proposes to acquire an additional 43.85 per cent stake

in Investsmart from E*TRADE Mauritius Limited, an indirectly wholly-owned subsidiary of

E*TRADE Financial Corporation.

Both IL&FS and E*TRADE Mauritius Limited will receive a price of INR200 per share for their

respective stakes. HSBC will also make an open offer to acquire up to 20 per cent of the

remaining shares in Investsmart. Details of the open offer to Investsmart shareholders will be

published in the Indian press and distributed to shareholders in accordance with local regulations.

Established in 1997 by IL&FS, Investsmart is a financial services firm with a strong presence in

retail broking. It has a national distribution network comprising 88 branches, 190 franchise

outlets and more than 660 terminals in 133 cities throughout India. Its 2,000 staff serves over

138,000 clients. While strong in retail broking, it also has businesses in Institutional broking,

investment banking, wealth management, insurance distribution and margin financing. Ravi

Parthasarathy, Chairman of IL&FS, said “IL&FS’s goal is to position IIL as a leader in the

brokerage sector.

In particular, IL&FS have always felt the need for a successful brokerage Group to have an

international capability. And believe that the strength of the HSBC Group provides a unique

opportunity for Investsmart to execute its strategic vision. It is IL&FS intention to retain a close

association with Investsmart through co-operation on a number of areas that will be mutually

beneficial and on an arm's length basis” Mr. Parthasarathy added, “I believe that HSBC Group

will provide Investsmart employees significant opportunities to enhance the value proposition for

their customers. Investsmart employees will also benefit from the training and development

infrastructure that arises from being a part of one of the world’s leading banking organizations.”

HSBC will be making the acquisition through Group subsidiaries, including HSBC Securities

and Capital Markets (India) Private Limited, the Group’s broking arm in India. The agreement

and open offer are subject to regulatory and other approvals. With a market capitalization of

approximately US$300 million, Investsmart is listed on the National Stock Exchange and the

Bombay Stock Exchange and its Global Depository Shares are listed on the Luxembourg Stock

Exchange ends/more.

29

PRODUCT PROFILE

All the products of ILFS can be broadly divided into the following two categories:

1. Online Trading Products

2. Advisory Services

3. Other services.

1. Online Trading Product of IL&FS Investsmart

Basically IL&FS Investsmart offers three types of products to its retail customers. They are:

a. SmartStart

b. SmartInvest

c. SmartTrade

a. SmartSTART:

SmartStart is a powerful browser based trading system for those who are relatively new to online

investing.  A unique integrated account, which integrates customer banking, broking, and demat

accounts of the clients. A comprehensive trading service, which allows customer to invest in

equities and derivatives.

SmartStart trading platform allows customer the flexibility of trading on any internet capable

system, with access to both the NSE and BSE

System Requirement

Browser Type: Microsoft Internet Explorer 6.0 or higher (Java enabled)

30

Internet Connection: Broadband/Dial-Up connection (Modem at a minimum of

28.8/33.6 Kbps)

System: Pentium 3 or 4 GHz or best available at market RAM (Physical) 128 MB

or better

Operating System: Windows 98/2000 or Windows XP.

Features of SmartStart

Freedom of information.

Control of investor’s money.

Access to market.

Ensure the best price for investors.

Offers greater transparency.

Live financial news and analysis.

Access to NSE and BSE

b. SmartINVEST

SmartInvest is a browser-based system designed for customers who transact occasionally. It is

ideal for investors who believe in the Buy and Hold Approach towards investment in equities.

SmartInvest's capability as a browser-based trading platform gives customer the benefit of real-

time streaming data with the flexibility of trading on any Internet capable system. With access to

both the NSE and BSE, customers are in the driver's seat when routing their order to the best

price on either of the exchanges. SmartInvest sophisticated yet easy to use point and click order

entry interface allows customer to react more quickly to the markets and make better decisions.

System Requirement

Browser Type: Microsoft Internet Explorer 6.0 or higher (Java enabled)

Internet Connection: Broadband/Dial-Up connection (Modem at a minimum of

28.8/33.6 Kbps)

31

System: Pentium 3 or 4 Ghz or best available at market RAM (Physical) 128 MB

or better

Operating System: Windows 98/2000 or Windows XP

Features of SmartInvest

Instant Loading: The browser- based applet system allows customer to instant access to

client’s account with no wait time, unlike other system that takes a few minutes to load.

Works behind a proxy: This platform can be accessed on any internet-enabled network.

They can be accessed even from costumer work place.

Live streaming quotes: Keeps an eye on the stocks of customer’s choice with streaming

real time quotes and customizable market data. Color-coded price changes help them to

spot trends and in turn help the customer to react faster.

Multiple watch lists: The new watch list option allows the customer to create up to 10

groups of watch list with each group accommodating 15 scripts. Each watch list can be

personalized by the customers according to their choice of scripts.

NSE and BSE Access: Flexibility of trading on both NSE and BSE via a single screen.

Single order form for Cash and F & O: Single order form offers the customers the

convenience of transacting in various segments of the market without having to switch

between multiple windows.

Point and click order entry: Makes order entry quick and simple with a click on the

security, the same is inserted on the order form in the trade screen.

Hot key functions: Using a single keystroke (hotkey) function the customer can achieve

important task very similar to a broker’s terminal. Accessing important reports is also one

keystroke away.

Market depth window: It gives an immediate “at a glance” information about the stock

they are following. The view provides the best 5 bids and offers quotes and the

outstanding order quantities.

32

Back office access: View segment wise ledger bills and contract notes, trades, positions,

account balance, realized/unrealized profit and loss, and buying power all in real time.

c. SmartTRADE:

SmartTrade is an EXE based desktop software designed for active traders who transact

frequently to capture favourable short-term price movements. The platform offers active traders

the tools they need to make critical decisions with confidence.

SmartTrade is designed and built from the ground up to address the needs of active traders.

SmartTrade makes the most of state-of the-art technology to deliver power, speed and reliability.

Through an easy-to-use interface, users are provided with the same tools and advantages that the

professionals enjoy.

System Requirement

Browser Type: Microsoft Internet Explorer 6.0 or higher (Java enabled)

Internet Connection: Broadband/Dial-Up connection (Modem at a minimum of

28.8/33.6 Kbps)

System: Pentium 3 or 4 GHz or best available at market RAM (Physical) 128

MB or better

Operating System: Windows 98/2000 or Windows XP.

This account is an EXE based desktop software designed for active traders who transact

frequently to capture favourable short-term price movements. The platform offers active traders

the tools they need to make critical decisions with confidence.

Smart Trade is designed and built from the ground up to address the needs of active traders.

Smart Trade makes the most of state of the art technology to deliver power, speed and reliability.

Through an easy to use interface, users are provided with the same tools and advantages that the

professionals enjoy.

Features of SmartTrade

33

Fully customizable display: The save desktop option allows the clients to save their

created trade screen layout, so the next time they access the application the created layout

is not lost.

Dynamic charts with Indicators: Provides the clients a wealth of charting capabilities

and timing indicators, which allow them to go right into the action with real time daily

charts, and intra-day charts. Watch price movements by minutes, days or weeks.

EOD Charts: Smart Trade puts up to 5 years of in depth history at their command with

the power to instantly back-test any trading strategy they design, before risking one rupee

of their trading capital.

Real- Time market data: Get real time market data from both NSE and BSE, similar to

what a professional broker gets.

Advanced alert capabilities: Alert window allows the customer to be free from

watching every tick. Users can be notified once a security has reached the set parameters.

Multiple securities can be monitored using the set parameters. These alerts can be

triggered both visually and audibly.

Live order status: Tracking all their orders are made easy through the order status

screen. Further drill down into all details pertaining to an order is available in the order

detail sub report.

Track your orders real time: Track customer stock orders and trades in real time.

Real time position updates: All their positions are updated automatically and instantly.

The need of refresh button is avoided.

Dynamic buying power: It reflects their credits and debits instantly on every trade

execution. No need to refresh each statement to know their latest buying limits.

Derivative chain: This feature provides with a list of all derivative contracts available

for the selected security. To view derivative prices of a security just right click on the

symbol and click on derivative chain.

34

Lock terminal option: If the system is unattended, this function locks the trading

platform for the customers and can be accessed again only on providing the proper login

details.

Message window docking: This feature enables the customers to receive trading

messages, intraday trading calls and messages from both the exchanges flashed real time

onto their screens.

2. Advisory Services

Basically IL&FS Investsmart offers following types of services to its retail customers. They are:

a. Mutual fund advisory services.

b. Portfolio management services.

c. IPO Advisory and Distribution Services.

d. Insurance Advisory Services.

e. Investment Advisory services.

a. Mutual Fund Advisory Services

As a part of Mutual Fund Advisory Services, their team of experts across India helps investors in

selecting the right scheme from over 500 offerings, matching customer needs, goals and risks. In

addition to this, we also help you constantly monitor their MF portfolio, making changes

according to the changing needs as per the market scenario, in order to make customers money

work for investors.

At IL&FS Investsmart (IIL), their expert teams of relationship managers interact with investors

on a regular basis to discern customer changing needs, in tune with the changing environment.

Most of investors require some assistance in making selections appropriate to their individual

needs. Investors need sound advice from people who have expertise to decipher the financial

jargon of investment options available today. Their Investment Advisory Team helps customer

customize and execute plans, based on their individual needs towards wealth maximization.

b. Portfolio Management Services (PMS)

35

Financial markets today offer enormous growth potential. But managing investors own

investments can be an extremely challenging task. Anticipating market trends, assessing the

impact of socio-economic changes on customer investments, keeping abreast of latest corporate

developments and financial analysis all adds up. Managing one’s investments has become nearly

a full-time affair that requires considerable time and expertise.

At IL&FS Investsmart, they offer customer just the solution that allows clients to relax as IL&FS

put their money to work through the IIL-PMS, a Discretionary Portfolio Management Service.

c. IPO Advisory and Distribution Services

IL&FS Investsmart (IIL) is one of India's leading companies engaged in the activity IPO

Advisory and Distribution. IL&FS primary markets division does a comprehensive research

before recommending issues to clients. IL&FS pan India reach helps us in mobilising large

number of applications across India during public offerings, this has ensured that constantly

figure amongst the top ranking performers in the primary market distribution space.

As a part of their online offering, customers can invest in IPO's not only through IL&FS

branches but also through our website, which also provides customer with regular updates on the

IPO scenario, Open IPO's as well as all the forthcoming IPO's at any given point of time.

The primary markets distribution division works in conjunction with the retail and wholesale

distribution networks, as well as IL&FS private client group. In case there are not IL&FS

customers, but still want to invest in any particular IPO, IL&FS suggest client to visit any of

branch locations near clients or else call us for an application form and IL&FS would courier it to

customer.

d. Insurance Advisory Services

36

IL&FS Investsmart (IIL) is customer one stop shop for all Insurance & Retirement needs. They

have also been recognized as India’s Best Retail Financial Advisors at the CNBC TV18

Financial Advisory Awards 2006-07, 2007-08.

Their key service features include the following:

Risk management solutions for all

Comprehensive research for all policies available on a regular basis

Recommendations on a comprehensive insurance cover based on clients needs

Maintain proper records of client policies

e. Investment Advisory Services

The investment advisory team in the company helps customize plans, base on customer

individual needs.

3. Other services

Basically IL&FS Investsmart offers following types of other services to its retail customers.

They are:

a. Online services.

b. Research and Financial Analysis.

c. Value added services.

a. Online Services

The website offers unique features such as real time news and analysis, a personal portfolio

manager, research tools, corporate profiles, mutual fund and product options, IPO centres, stock

alerts, investment advisory services, query solving and much more.

b. Research and Financial Analysis

The research team in the company thoroughly studies each asset class-equity, mutual funds,

commodities and fixed income products. The qualified financial analysts in the company study

37

the market trends and make objective recommendations, so that customers can make well-

informed decisions.

c. Value Added Service

Smart update – Extensively researched monthly reports detailing the market performance

of various investment options.

Mutual fund Weekly updates – Analysis of the Mutual Fund industry, offering an

overview of Mutual Fund Schemes.

Flavour of Equity – Monthly reports on the change in exposure in the top 10 stocks,

churning of portfolios and the entry and exit of stocks by the respective fund managers of

select Mutual Fund companies.

Bond Fund Snapshot – Monthly reports on analysis of bond funds of select mutual fund

companies.

Rolling returns – Monthly reports on the fundamental and technical call for equities and

derivatives for short term.

Market wrap – Daily post market analysis.

Smart trader – Daily reports on the fundamental and technical call for equities and

derivatives for short term.

Equity Research reports – Sector and company wise reports on the fundamentals, along

with a recommendation of the stock.

Strategy note – Quarterly note on the broad equity market views, macro fundamentals and

top stock picks.

Result preview – Pre result quarterly reports on select companies.

Result update – Post result quarterly reports on select companies.

38

Event notes – Implications and analysis of major corporate events like mergers and

takeovers.

Visit notes – Notes on the company’s outlook and discussion during a corporate visit.

Deri Watch – Weekly, sock specific technical and derivatives statistics reports.

Deri Strat – Daily derivatives market strategy.

IPO Updates – Analysis on the current IPO with support for and against it.

Policy Updates – Updates and analysis of important announcements and policies like the

budget and monetary.

Morning coffee – Daily update on the Indian and International financial markets.

Morning Track – Monthly research reports on the debt and money markets.

Commodity reports – Daily and weekly commodity reports.

Depository & Custodial services - Company also offers dematerialization services as the

company is Depository Participant of NSDL.

Top Management

A committed and formidable management team anchors the company towards its goal and

provides direction in diverse areas of business strategy, operating management, regulatory

reporting, human resources development, product development etc. Equipped with excellent

domain knowledge and extensive experience, they drive IIL’s vision.

Mr. Manasije Mishra MD & CEO

Mr. Avdhoot Deshpande Head - Equity and Capital Markets

Mr. Vipul Shah Head - NBFC

Mr. Dharmen shah Vice President - Institutional Equity

Mr. B.S. Shashidhar Head - IAIFL and General Insurance

39

Mr. Jaideep Anand Senior Vice President - Institutional Sales & Dealing

Mr. C. Diwakar Chief Information Officer (CIO)

Mr. Bhuvnesh Khanna Head - Alternate Channels

Mr. K. Venkatesh Head – Distribution

Fig 2(a)Organization Chart of HSBC InvestDirect Ludhiana Branch

SWOT ANALYSIS

40

Branch ManagerMr. Saurabh Talwar

Offline

Opeartions (3 Persons)

Online

INTRODUCTION

SWOT Analysis is a strategic planning tool used to evaluate the strengths, weaknesses,

opportunities, and threats for a business entity. It involves specifying the objective of the

business venture or project and identifying the internal and external factors that are favourable

and unfavourable to achieving that objective. The technique is credited to Albert Humphrey, who

led a research project at Stanford University in the 1960s and 1970s using data from fortune

500companies

Strengths: Attributes of the organisation which are helpful to achieving the objective.

Weaknesses: Attributes of the organisation which are harmful to achieving the

objective.

Opportunities: External conditions which are helpful to achieving the objective.

Threats: External conditions which could damage the business’s performance.

SWOT ANALYSIS OF IL&FS INVESTSMART LTD.

Strengths

Customization: It understands the dreams, needs, aspirations, concerns and resources

are unique and this is reflected in every move they do for the sake of individual

customer. This is the greatest value it provide online trading products like Smart

Invest and Smart Trade.

Expertise: IIL brings within the customers reach their institutional expertise and the

ability to effectively combine an invaluable understanding of the financial markets,

with an intention of building a long-term partnership.

One-stop-shop for all the investment needs: IIL gives all the types of services and

products an individual investor can dream and think off. All the financial products

and services are under one-roof.

41

Unbiased and objective advice: The teams of expert investment advisors customize

plans to suit the needs of investors.

Extensive reach: IIL make sure that they are always accessible to customers through

a host of mediums. A customer can contact them either through website or through

their branches and channel partners of more than 300 offices across India.

Brand image: IIL as such is a well known brand in industry.

Competitive pricing: It charges less brokerage compared to its competitors.

Weaknesses

Expensive products: Some of the products like SmartTrade are quite expensive. An

annual charge for SmartTrade is Rs. 3000.

Tedious procedures: Tedious procedures and delays in processing the data and

documents of new customers.

Fund transfer: It has tie-ups with only 5 banks for online fund transfer, where as

other competitors have more tie-ups.

Attrition: High attrition rates in trainees category.

Unattractive offers: Some offers of the company like Advance Subscription Plan

with a deposit of Rs.50,000 to avail low brokerage charges. The low brokerage

charges will be effective for the clients for a minimum turnover of Rs. 50 Crore p.a.

Opportunities

Indian economy seems to be out of recession. This is the right time for inventers to re-

enter the market. The company should adopt some strategies to increase the business

through existing clients.

The increasing number of management graduates helps to get sales force at trainee levels

at less salaries or commission basis. It reduces the salaries and commissions expenses of

the company. The company can tie up with reputed B Schools for trainees.

42

Huge untapped market in rural areas, Tier2 and Tier 3 cities and towns of India can be

concentrated to increase the business.

Many a banks are offering fund transfer services. The company can increase the tie-ups

for fund transfers at attract customers of different banks.

Threats

Stiff competition from existing players in the market and there is also a threat of new

entrants. It has lead to cut throat competition in terms of brokerage charges and exposure.

Increasing awareness of mutual funds and ULIPs created by Domestic Institutional

Investors has reduced the direct investment in to stock market to some extent. This

automatically reduces the business of stock brokers.

Changing economic scenario in India and changes in government policies will have great

impact on the revenue of this company

Many a investors burnt their figures during the bearish market conditions. It has turned

many a trading accounts inoperative.

43

FINANCIAL STATEMENT ANALYSIS

Ratio Analysis: -

A Ratio is a simple arithmetical expression of the relationship of one number to another. The

Ratio Analysis is one of the most powerful tools of financial analysis. It is with the help of ratios

that the financial statements can be analyse more clearly and decisions made from such analysis.

Ratio Analysis is the process of establishing & interpreting various ratios for helping in making

certain decisions.

Liquidity Ratio: -

Liquidity refers to the ability of a concern to meet its current obligations as and when these

become due. The short-term obligations are met by realising amounts from current, floating or

circulating assets. The current assets should either be liquid or near liquidity. These should be

convertible into cash for paying obligations of short-term nature.

1) Current Ratio : - The current ratio is the ratio of total current assets to current liabilities.

The current ratio indicates the firm’s ability to pay its current liabilities. By using this ratio

the extent of the soundness of current financial position of an undertaking and the degree

of safety provided to the creditors. Greater the current ratio the larger amount of rupee

available to the firm per rupee of current liabilities.

Current Ratio = Current Assets

Current Liabilities

Table 2(a) Current Ratio

2009 200

8

2007

Current Ratio 1.90 2.30 2.20

44

2007 2008 2009

Current Ratio 2.2 2.3 1.9

0.25

0.75

1.25

1.75

2.25

Current Ratio

Fig 3(a) Current Ratio

Interpretation: - From the above data it can be clearly interpreted that the current ratio for

the march 2009 is less as compared to previous year. For the last year it was good and it was

depicting that the short term financial position of the company was very good and for this year

current ratio is good but not as per the previous standards.

Quick Ratio: -

Quick ratio also called as Acid test ratio. The quick ratio is a fairly stringent measure of liquidity. It is

based on those current assets, which are highly liquid – inventories are excluded from the numerator of

this ratio because inventories are deemed to be the least liquid component of current assets. Quick ratio

can be calculated by dividing the quick assets by current liabilities. Quick ratio is a liquidity ratio or 1:1

ratio this ratio indicates liquid financial position of an enterprise.

Quick Ratio = Quick Assets

Current liabilities

Table 3 (a):- Quick Ratio

45

2009 2008 2007

Quick Ratio 1.10 1.10 1.00

2007 2008 2009

Quick Ratio 1 1.1 1.1

0.95

0.97

0.99

1.01

1.03

1.05

1.07

1.09

1.11

Quick Ratio

Fig 4(a):- Quick Ratio

Interpretation: - From the above data we can see that the quick ratio of the bank is good and

satisfying the thumb rule of 1:1 also. For the last two years it is same i.e. 1.10:1 that means bank

is well enough to pay off its creditors.

Return on Total Assets: -

It refers to a ratio that measures a company's earnings before interest and taxes (EBIT) against its

total net assets. The ratio is considered an indicator of how effectively a company is using its

assets to generate earnings before contractual obligations must be paid.

To calculate ROTA: = EBIT Total Net AssetsTable 4(a):- Return on total asset

2009 2008 2007

46

Return on Total

Assets

9.90 12.00 12.50

2007 2008 2009

Return on Total Assets 12.5 12 9.9

1

3

5

7

9

11

13

Return on Total Assets

Fig 5(a) :- Return on total asset

Interpretation: - It can be observed from the above data that return on total assets is

decreasing from the previous years. However it doesn’t mean that net profit of the bank has been

decreased it is basically due to increase in total assets which is much higher than the net profit.

Gross Profit Ratio: -

Gross profit ratio is defined as the difference between net sales and cost of good sold. This ratio

shows the margin left after the meeting manufacturing costs. It measures the efficiency of

production as well as pricing. To analyze the factors underlying the variation in gross profit

margin the proportion of various element of cost to sales is studied. The gross profit ratio is

computed by dividing gross profit by sales

Gross profit

Gross Profit Ratio = *100 Sales Table 5(a):- Gross profit Ratio

47

2009 2008 2007

Gross Profit Ratio 30.2

0

30.80 31.50

2007 2008 2009

Gross Profit Ratio 31.5 30.8 30.2

29.75

30.25

30.75

31.25

31.75

Gross Profit Ratio

Fig 6(a):- Gross profit Ratio

Interpretation: -

G/p ratio of the company is ranging from 30-31 for the last three years and there is

however a little bit change in the ratio for the last years. There is not any standard

thumb rule to compare this ratio but as per market trend this percentage is good.

Net Profit Ratio: -

This ratio indicates the earning left for shareholder as a percentage of net sales. It

measures the overall efficiency of production, administration, selling, financing

pricing, and tax management. Jointly considered, the gross and net profit margin

ratios provide a valuable understanding of the cost and profit structure of the firm

and enable the analyst to identify the sources of business efficiency. Net profit ratio

is computed by dividing net profit by sales.

Net Profit Ratio = Net profit

48

Sales

Table 6(a):- Net profit Ratio

2009 2008 2007

Net Profit Ratio 6.60 5.50 6.10

2007 2008 2009

Net Profit Ratio 6.1 5.5 6.6

4.9

5.1

5.3

5.5

5.7

5.9

6.1

6.3

6.5

6.7

Net Profit Ratio

Fig 7(a):- Net profit Ratio

Interpretation: - Net profit ratio of the company has increased from the

previous year and this shows the company is performing well and the main reason

for increase in the net profit is increase in sales which is more than the increase in

expenses of the company.

Debt Equity Ratio: -

It is calculated to measure the relative claims of outsiders and the owners against the firm’s

assets. This ratio indicates the relationship between the external equities or the outsiders funds

and the internal equities or the shareholders’ funds.

Debt-Equity Ratio = Outsiders Funds

Shareholders’ Funds

49

Table 7(a) Debt Equity Ratio

2009 2008 2007

Debt-Equity Ratio 2.59 1.42 1.44

2007 2008 2009

Debt-Equity Ratio 1.44 1.42 2.59

0.25

0.75

1.25

1.75

2.25

2.75

Debt-Equity Ratio

Graph 8(a) Debt Equity Ratio

Interpretation: - Debt equity ratio of the company has been improved from the last year and

this shows that the company has increased its debts but however more increase in debt will

increase the risk from the equity shareholder’s point of view.

Total Debt to Total Assets Ratio: -

The ratio indicates the relationship between the total liabilities to outsiders to total assets of a

firm and can be calculated as follows:-

= Total Liabilities to Outsiders

Total Assets

Table 8(a):- Total debt to total asset

2009 2008 2007

50

Total Debt to Total

Assets ratio

0.69 0.55 0.54

2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Total Debt to Total Assets Ratio

Total Debt to Total Assets Ratio

Fig 9(a):- Total debt to total asset

Interpretation: - In above data we can see that the total debt to total assets for last three years

is continuously increasing that Shows Company is now increasing the share of debts in assets.

But on the other hand it is also enlarging the risk profile for the creditors.

Trend Analysis: -

An aspect of technical analysis that tries to predict the future movement of a stock based on past

data. Trend analysis is based on the idea that what has happened in the past gives traders an idea

of what will happen in the future. Trend analysis tries to predict a trend like a bull market run

and ride that trend until data suggests a trend reversal (e.g. bull to bear market). Trend analysis is

helpful because moving with trends, and not against them, will lead to profit for an investor.

Table 9(a):-Trend Analysis of Net Sales: -

51

Years Sales Percentage

2006-2007 4777.64 100

2007-2008 5208.38 109.02

2008-2009 6106.43 127.81

2006-07 2007-08 2008-09

Series 1 100 109.02 127.81

10

30

50

70

90

110

130

Trend Analysis of Net Sales

Pe

rce

nta

ge

(%

)

Fig 10(a):-Trend Analysis of Net Sales

Interpretation : -From the above data we can observe that the net sales of the company is

increasing which may tends to increase in the net profit of the company and also will lead to

increase in the net-worth.

Table 10(a):- Trend Analysis of Expenses (Administrative Selling & Distribution): -

52

Years Expenses Percentage

2006-2007 720.32 100

2007-2008 792.62 110.04

2008-2009 809.66 112.40

2006-2007 2007-2008 2008-2009

Series1 100 110.04 112.4

92.5

97.5

102.5

107.5

112.5

Trend analysis of ExpensesP

erc

en

tage

(%

)

Fig 11(a):- Trend Analysis of Expenses (Administrative Selling & Distribution):

Interpretation: - From the above data we can observe that the expenses from the last years are

increasing but their percentage change is not as much as in the sales which will tend to increase

in the Net profit. But increase in expenses from 2006-07 to 2007-08 is more than the net sales

which may tend to decreases in profit.

Table 11(a):-Trend Analysis of Net Profit

Fig 12(a):- Trends analysis of Net Profit

Interpretation: - As from the above trend it can be analyzed that Net profit for the company is

continuously increasing. But however increase N/P from 2006-07 to 2007-08 was decreased due

to increase in expenses as compared to previous years.

53

Years Net Profit Percentage

2006-2007 291.12 100

2007-2008 286.50 98.41

2008-2009 401.52 137.92

PART B

Chapter 1

DEMAT ACCOUNT

54

Meaning Demat Account

Demat is the abbreviation of Demateriazation .A Demat account which is needed for buying or

selling shares of a company or stocks and other equities in electronic form. Just as bank accounts

hold money, Demat accounts hold equities. Earlier investors used to hold shares in paper format.

Nowadays they are stored electronically in the Demat account. The document of shares that is in

paper form is demated and is kept electronically in an account. Demat Account dematerializes

paper-based physical stock shares. The dematerialized account is used to avoid holding physical

shares The market regulator, the Securities and Exchange Board of India (SEBI), has allowed

trades of upto 500 shares to be settled in physical for m, nobody wants physical shares any more

as it is time taking procedure. So a Demat account is a must for trading and investing. As it is

more convenient to trade electronically.

Number of shares needed to open a Demat Account

When one opens a Bank Account, one needs to have a minimum balance. But not so with a Demat

account. A Demat account can be opened with no balance of shares And there is no minimum

balance to be maintained either. One can have a zero cash balance even in one's Trading

Account.

Depository Participant (DP):

Depository

They are the custodians of securities. It helps for shorter settlement cycles and immediate transfer

of title of securities.

The main work of Depositor y is of keeping stocks of investors in electronics form. A depository

is an organisation which holds securities like shares, debentures, bonds, government securities,

mutual fund units etc. of the investors in electronic form at the request of the investors through a

registered Depository Participant Services related to transactions in securities are also provided by

the Depository There are two main depositories in India namely:

1. NSDL (National Securities Depository Ltd) and

2. CDSL (Central Depository Services Ltd).

55

Depository Participant (DP) is an agent of the depository through which it interfaces with the

investor and provides depository services to the investors. As per the requirements prescribed by

SEBI the following can also be registered as DP; Public financial institutions, scheduled

commercial banks, foreign banks operating in India with the approval of the Reserve Bank of

India, state financial corporations, custodians, stock-brokers, clearing corporations /clearing

houses, NBFCs and Registrar to an Issue or Share Transfer Agent.

Online Trading Account

When a share trader opens a De-mat Account in any Company an Online Trading Account is also

opened at the same time, as Demat Account contains all the Shares of a customer similarly a

Trading Account is maintained to keep cash which assist in buying of shares and other charges.

The online mode of investing largely eliminates all the major difficulties of investing:

It provides relevant of information, analysis and tools that enables the investors to take more

informed decisions, virtually no paperwork involved as all transaction records are online and

statements available in digital for m, as such an investor can invest anytime and from anywhere at

his time and convenience.

To begin investing online one needs to register as a member for an integrated 3-in-1 online

trading account with any of the service providers.

Annual Maintenance Charges are taken from the customers for maintaining their Demat Account,

Trading Account and for providing other services. Every Broking Firm now specifies for opening

of three accounts by their investor or the Share Trader. These are

Trading account

, which enables the trader to transact online.

bank account

, which is Internet enabled, for online money transfers through Internet and

56

demat account

where the shares are to be deposited.

There are certain factors which are to be considered while opening an Online Trading

Account, these are:

Credibility and credentials:

There should be the backing of a reputed bank or financial institution, which provides that

additional safety

Which investments can be made online:

The investor has to find out whether he is allowed to invest in equity shares, mutual funds and

IPOs fully through the online route or in only one of them?

Quality of information and content:

Ensure that one is getting the best of information, research support and tools, which is provided

to investor or trader in an easy and reader friendly manner.

Speed of order execution

Are the share traders able to place their equity orders and receive quick order confirmations

during peak hours?

Choice of products to choose from:

Some service providers provide a choice of products - from the basic (classic) account to more

advanced trading platforms with live and streaming market information on equity markets.

Safety:

Check for the security features inbuilt into the system to ensure

security in transaction.

Customer care:

57

to ensure whether the service provider have a dedicated customer care cell to take care of the

queries and problem of the customers.

Besides the above, many additional features offered may be looked into, like

_ Ability to sell shares next day before receiving delivery,

_ SMS alerts,

_ Intraday trading in equities, etc based on the investing needs

Types of Trading Account

There are to things one can do with the shares or stock or equities that one buys:

Intraday Trading:

The trader can sell the shares on the same day itself such buying and selling

Of shares on the same days is called intraday trading.

The brokerage of the intraday trading is always lower than the delivery trading

Intraday trading is typically completed within a day that means you have sell the stocks that you

have purchased that day before the even if you do not sell the stocks yourself, they will

automatically square off before the closing of the exchange.

One of the disadvantages of Intraday Trading is that the trader has to sell the shares within a day

even when the share price is down.

58

INTRADAY

TRADING DELIVERY

FUTURES OPTIONS

MARGINS

Delivery Trading:

The trader can choose to keep some shares in their Demat account to be sold at

a later date in their discretion. Such a trade would be called " Delivery Trading”

The brokerage charged for delivery trades is usually more than that charged for

Intraday trades.

With Delivery Trading the trader can hold Shares till it reaches its expected price, as long term

investment can always reap good dividend. The trader can also benefit from Split Shares, Bonus

Shares and other benefits that the company announces for the share holders.

T+2 rule

It is a rule in Delivery Trading that once a delivery order is placed for shares with the broker or on

one is Online Trading Account they are not immediately deposited in the Demat account of the

trader. They will only be deposited on the 3rd business day. T in T+2 refers to trade or the day on

which trade has taken place.

But in HSBC, T+4 rule is applied.

Futures

Futures on individual stock were launched in November 2001. They are transferable specific

delivery forward contracts .They are agreement between two counterparties to fix the terms of

exchange or lock-in the price today of an exchange that will take place between them at some

fixed future date. The future trading has effective safeguards against defaults in the form of

clearing corporation guarantees for trades and the daily cash adjustment to the accounts of trading

members, based on daily price change.

Options

Options are the contract that gives the holder the right to buy or sell securities at a predetermined

price within or at the end of specific period. There can be options on commodities, currencies,

securities, stock index, and individual stocks and even on futures. In order to acquire the right of

option, the option buyer pays the option seller an option premium, which is the price paid for the

right.

59

CONSIDERATIONS FOR OPENING A DEMAT ACCOUNT:

The following are the points that one should consider before choosing or opening a DEMAT

Accounts are:

Price:

One may incur the following costs while operating a Demat Account. Though there are many

charges but these matter the most:

• Demat Account Opening Charges

• Demat Account Maintenance Charges

Charges for Buy/Sell Trades.

• Quality

• Ease of Access of the Demat Account: It means to access Demat Account

• Information online.

• Customer Service: This would play a role if one decides to buy/sell shares directly

through the Depository Participant/DP or if one likes to keep shares in paper form.

Benefits of Demat Account:

• It is safe and convenient way to hold securities or shares.

• It reduces paperwork that is involved in transfer of securities.

• Reduction in transaction cost while trading

• Nomination facility is also available.

• The transmission of securities/ shares is done by DP (Depository Participant) eliminating

correspondence with companies.

• It enables holding investments in equity and debt instruments in a single account.

ACCOUNT OPENING

To avail the services of a depository an investor is required to open an account with a

depository participant of any depository.

PROCEDURE FOR OPENING AN ACCOUNT

60

A demat account are opened on the same lines as that of a Bank Account. Prescribed Account

opening forms are available with the DP, needs to be filled in. Standard Agreements are to be

signed by the Client and the DP which details the rights and obligations of both parties

The DP officials will make available the relevant account opening form (depending on

whether the client is a retail investor or corporate client/clearing member) and

specify the list of documents regarding references that should be submitted along

with the form. It will also give a copy of the relevant agreement to be entered with the

client, in duplicate.

The client will submit the duly filled in account opening form and client has to visit

personally for opening the account in DP. The DP officials have to do in person

verification and affix the “IN PERSON VERIFICATION” stamp on the account opening

form. It should also furnish such documents regarding references, as specified by the DP,

along with the account opening form. After executing the agreement the client has to

forward it to the DP.

DP officials will verify that the account opening form is duly filled in. It will also verify

the enclosed documents, if any. Incomplete forms will be forwarded to the client for

rectification.

For Corporate Clients, the DP officials will verify if the board resolution for the

authorized signatories is enclosed

In case the documents are not proper, the DP officials will reject the form and intimate the

client of the same, stating the reasons for doing so.

If the form is in order; the DP officials will accept the same and affix the stamp “verified

with original” on each and every proof after seeing the original proofs

After completion of all documentation, the DP officials will verify the pan from income

tax website. And affix the stamp “PAN VERIFIED” with date and sign on the stamp.

The DP officials will enter the client details as mentioned in the account opening form in

the DPM (software provided by NSDL & CDSL to the Participant) screen provided for the

purpose. In case of NSDL A/c opening the SR. Assist will capture all the details in the

DPM and record the client’s signature (on the form) as specimen for

authorizations in the future. After entering client details in the system, a client account

number will be generated by the DPM. The DP officials will enter this in details in the

61

DPM captured by the SR. Assist and activate the account.

The DP officials are not allowed to give the demat a/c no to the clients until the a/c is

activate, this is applicable for both NSDL & CDSL.

When the demat a/c is activated the DP officials have to send the client master and the

copy of agreement between DP and client at the client’s address

The account holder is called 'beneficial owner' in a depository system and the account is known as

'beneficiary account'

DOCUMENTS SHOULD BE REQUIRED FOR DEMAT ACCOUNT

Proof of Identity (POI):

Passport

Voter ID card

Driving license

PAN card with photograph

Proof of Address (POA):

Ration card

Passport

Voter ID card

Driving License

Bank passbook

Verified copies of :

its department Electricity bills (not 2 months old)

Residence landline telephone bill (not more than 2 months old)

Leave & license agreement/agreement to sell (duly attested)

62

Self declaration by supreme court/high court judges, giving the new address in respect of

their own accounts.

Passport-size photograph

Copy of PAN card along with original PAN card for verification

In case of NRI

Foreign address and RBI approval date attested copy of RBi approval

NRO-Indian address alonwith proofs

Bank account details

In case of joint holdings

In case of joint holdings, POI and POA documents alongwith PAN card must be submitted in

respect of all account holders. Original documents must be taken to the DP for verification.

The DP will also provide a copy of the DP-Client agreement.

Account opening form require the applicants to give the following

details:

(a) Name(s) of account holder(s) -

The investor should ensure that the name is identical to that which appears on the certificate(s) to

be dematerialized. In case of joint holdings, account may be opened in any one combination,

irrespective of the sequence in which names are appearing on share certificates. Investors are

advised to open their account in their fully expanded name, i.e., to spell to the first name as well

as the middle name. This would obviate any doubts about the veracity of the information.

(b) Mailing and communication address(es) -

The veracity of the applicant's address is determined through the documents submitted for

verification like ration card, passport, voter ID, PAN card driving license, bank passbook, etc.

For NRI accounts, proof is required for both addresses - that of the account holder as well as the

63

constituted attorney. For corporate accounts, a copy of Memorandum of Association, Articles

of Association, Board resolution permitting opening of account, the registered address of the

company have to be furnished.

(c) Details of guardian in case account holder is a minor

Only a guardian can open a depository account for a minor. The guardian is required to sign the

application form, and details of his name and address need to be given in addition to the details of

the minor.

(d) Details of bank account

Details of bank account of the account holder, including the nine digit code number of the

bank and branch appearing on the MICR cheques issued by the bank have to be filled in the

application form. Companies use this information for printing them on dividend/interest warrants

etc.

(e) Nomination declaration -

A beneficial owner can make a nomination of his account in favour of any person by filing the

nomination form with his DP. Such nomination is considered to be conclusive evidence of the

account holder'(s) disposition in respect of all the securities in the account for which the

nomination is made.

The demat account cannot be operated on "either or survivor" basis like the bank account. In case

of the joint account for the beneficial owners, all the joint holders have to sign the account

opening form.

The investor will submit to his DP the duly filled in account opening form & DP-client agreement

along with the documents.

On successful opening of the account, the DP will give:

Client Id - an eight digit number to be used along with DP Id for any future transactions.

Delivery Instruction slip book

64

A copy of the report listing the client details captured in the DPM database to the client.

The report will be generated by the DPM.

Services provided by Depository system

Dematerialization (usually known as demat) is converting physical certificates to

electronic form

Rematerialisation, known as remat, is reverse of demat, i.e. getting physical certificates

from the electronic securities

Transfer of securities, change of beneficial ownership

Settlement of trades done on exchange connected to the Depository

Pledge / Hypothecation of demat shares, viz. Loan against shares

Electronic credit in public offering of the Companies

Non - Cash corporate benefits, viz. Bonus / Rights – direct into electronic form

Depository restrict the risk of fraud

Buying and Selling of Dematerialization

INTRODUCTION

The procedure for buying and selling dematerialized securities is similar to the procedure for

buying and selling physical securities. The difference lies in the process of delivery (in case of

sale) and receipt (in case of purchase) of securities.

In case of purchase:-

The broker will receive the securities in his account on the payout day.The broker will give

instruction to its DP to debit his account and credit investor’s account.Investor will give ‘Receipt

Instruction to DP for receiving credit by filling appropriate form. However one can give standing

instruction for credit in to ones accounts that will obviate the need of giving Receipt Instruction

every time.

In case of sale:-

The investor will give delivery instruction to DP to debit his account and credit the broker’s

account. Such instruction should reach the DP’s office at least 24 hours before the pay-in as

otherwise DP will accept the instruction only at the investor’srisk.

65

NEED OF THE STUDY

The need of the study arises because of the reason that a trainee must understand the company,

its achievements and tasks, products and services and also to collect information about its

competitors, its products and services offered. So that, after understanding and collecting

information about the organization and its competitors, a trainee will be able to work well for the

organization.

From the study I have learned very much, about the company as well as the strategy of the

customers, which helps me a lot at my working days.

66

Chapter2

Review

Of

Literature

67

Review of Literature

This chapter deals with the empirical work done at National and international level by various

management scholars in the area. A literature review is a body of text that aim to review the

critical point of current knowledge on a particular topic .Its ultimate goal is to bring the reader

up to date with current literature on the topic and forms the basis for another goal such as the

justification for future area of research.

Shah (2009) examined in his book “emergence of securities depositories in India”.

Acc. to him Dematerialization of securities has ended the days of bad deliveries, payment

delays, paper movement and slower settlement.

Sofat and Hiro (2009) revealed that the customer’s satisfaction level from their share

brokers. It was identify the customers expectations and to improve the quality of working

of various DP’s.It was found from the study that LSE securities is a new star in DP

market.

Arora, Singh & jain(2009) in their research “Exploring customer preference for

mutual fund” has remarked that Past performance, core product features, expense ratio,

risk-return trade off and liquidity are the five most important factors in a mutual fund.

Hence investor prefer benefit for the cost given, flexible return, additional facilities,

proper performance delivery, service quality and focus of service provided beside the

core product facilities offered. A prudent product design, by adding the features expected

by the investors that are spelt out in this research will make the mutual fund scheme more

attractive to the investors.

Manjunatha (2009) in his study titled “Risk-Return Analysis of BSE Sensex

Companies” analyzed that the study of the relationship between risks & returns is

required for the investment in securities.There is direct relationship between returns &

Beta.It shows Investment in Equity market presupposes the existence of risk for which

higher returns are expected. Further, investors in equities & market Index expect higher

returns than risk-free returns in the long-run.

Kumar (2009) in his study titled “Do Investors Behave Rationally in Stock Markets-

A Behavioral Finance Perspective” remarked that A new perspective came into

68

existence which is referred to Behavioral Finance that is an explanation of the various

Puzzles of Finance and these Puzzles are : Stock Price, Under- & Overreactions,

Excessive trading & the gender puzzle, financial hypes & panic, the Equity premium

Puzzle & the winner/loser Puzzle. This perspective based on the alternative notion that

Investors, or at least significant majority of them are subject to Behavioral biases that

mean their financial decisions can be less than fully rational.Confidence amongst

Investors as a whole is the key factor in determining how market behaves.

Aggarwal & Nayak (2009) in their study titled “A Study of Investors’ expected

rate of return on their Investment” analyzed that In particular, this study aims at

understanding & interpreting the behavior of working employees of Private & Public

sector on their Investment decisions. The study shows how an Investment is chosen on

the basis of expected rate of return gets affected by demographic variables, which helps

to advise the clients better. The result shows that 68% of the Investors reveal that

maximum Investors are likely to invest in Stock market & Mutual fund. The data

suggests people those mostly invest in the market are Service class Investors who don’t

have enough time to keep continuous watch on the market Fluctuation; they need regular

assistance from their relationship manager who is assigned to them.

Prasad (2009) in his study on “ULIP- The Tasters Perception on the Mixed Bag of

Fruits” concluded that Majority of investors prefer insurance as an investment for

mitigating the future risk. They are interested in ULIPs as they offer fund o options and

flexibility. The variables affecting the choice for ULIP products are correlated and they

are fund management charges, reliability of insurer, insurance coverage charges.

Demographic factors also have significant impact over the level of investment in ULIPs.

Also, agents are the most preferred channels of distribution of insurance policies.

Jha (2009) in his article “ELSS – Save tax and create wealth” has remarked that

Insurance scheme seeks to build a diversified portfolio comprising of stocks of

companies with strong fundamental that is available. It tries to develop a portfolio

wherein stock is selected on the basis of intrinsic value of the company. The best way to

select the ELSS is through systematic investment plan.

69

Choudhary (2008) in his study titled “ The Components of Investments

Performance of Fund Managers: Evidences from Indian Capital Market” remarked

that The Investment Performance of the Investment Managers can be judged on the

various components such as Market Timing, Stock Selection, Risk Bearing &

Diversification.This shows that Investment managers’ stock selection, risk bearing &

diversification performance was not affected by choice of Benchmark Indices but market

timing performance was quite sensitive to choice of market proxies.

Sinha (2008) in his study titled “Human Behavior & Investments” found that

People’s emotions, biases and misadjustments affect their Investment decisions most

even if it is assumed that human beings are rational.Most Financial theories are based on

the idea that everyone takes careful account of all available information before making

Investment decisions.

Kumar (2008) in his article “Bancassurance in India: Issues & Implications” has

remarked that With the opening up of insurance sector and so many players entering in the

insurance industry it is required by the insurance company to come up with well established

infrastructure facilities with good call centre service to attract and provide information to

customers regarding different good policies and their premium pay scheme.The size of country,

a diverse set of people combined with problems of connectivity in the rural areas, Makes

insurance selling in India is a very difficult task. Life insurance companies require good

distribution strength and tremendous man power to reach out such a huge customer base.

Dala (2008) gives overview on the Dematerialization costs, insurance and other

issues. She has founded that although high dematerialization costs may have retarded the

growth of India investor population, things are beginning to change. Acc. to her opinion

it is now p to Govt. to encourage the investors and DP's the market manipulators.

Fischer (2007) in his study titled “Do Investors in Structured products act

rationally” analyzed the strategies Individual Investors pursue when purchasing

structured products. However, a considerable part shows Inconsistent strategies.Higher

Risk attitude & Investment activity are connected with this Irrational Behaviour.

Financial advice has a positive effect on Investment strategies of Individual Investors.

Gupta (2006) the requirement of having a PAN has been made mandatory by the

Securities and Exchange Board of India .In accordance with SEBI guidelines,

70

Depositories NSDL and CSDL requirements state that PAN card is now compulsory

documents for all categories of demat account holders.If the account holders fails to

produce the PAN Card within the stipulated period of six months DP’s will freeze the

account.

Oommen (2004) this article has discussed about NSDL’s success in depository

services.Today all custodian operating in India .Major stock

exchanges,brokers,institutional and retail investors are extensively using the infrasture

and more than 99% of settlements are taking place in dematerialized form.

Gupta and jain (2003) in a paper on ‘India Securities Depository System:What has

gone wrong?’ stated that unknowingly and unintentionly,the share depository system is

adversely affecting millions of small Investors and also hurting the equity markets growth

by causing such investors to gradually withdraw from the market. This paper attempts to

explain how this has come about and what corrective action is needed.

Dash (2001), his paper titled ‘Basics Of investment’ he discusses The basic of

investment and need for investment. Investment benefits both economy and the society. It

is an outgrowth of economic development and the maturation of modern capitalism. For

the economy as a whole, aggregate investment sanctioned in the current period is a major

factor in determining aggregate demand and, hence, the level of employment.  In   the  

long  term,  current investment  determines  theeconomy’s futureproductive

capacity and, ultimately,  a growth in  the standard of living. By increasing personal

wealth, investing can contribute to higher overall economic growth and prosperity.

Nagpal (2000) in his paper titled “Psychology of Investments and Investor’s

Preferences” founded that Every individual investor must follow three principles of

investing.Using a long-term investing approach, following the right strategy to maximize

the return on   investment   and proper   allocation   of   investible   funds.   While

applying these three principles, an individual investor has to confront his/her

demographics, lifestyle and investment psychology. The knowledge of all these

aspects is imperative for all  progressive investors, researchers, financial   consultants,  

academicians,   students   and  the   marketer   of   the financial products.

Rao(2000) in his white paper on Dematerialization defined that Dematerialization as a

process by which company through the depository takes share certificates of shareholders

71

participants credits equal number of share to account holder as electronic holding. The

article explains the step by step process involved in depository systems with particular

reference to Dematerialization process. Depository in an organization where the

securities of an investor are held in electronic form through the medium of DP’s.It

enables surrender and withdrawal of securities to and from the depository through the

process of dematerialization.

Sung & Hanna (1996) in their study titled “ Factors Related to Risk Tolerance” ,

analyzed that Education is also a factor that is thought to increase a person’s capacity to

evaluate risks inherent to the Investment Process & therefore endow them with a higher

financial risk tolerance.However, he derives a model that suggests an element of

circularity in this argument, as the relative risk aversion of an Individual is shown to

determine the rate of human capital acquisition.

Yoo (1994) in his study titled “Behavioral factors affecting Investment Decisions”

found that The change in the risky asset holdings were not uniform. He found individuals

to increase their investments in risky assets throughout their working life time, and

decrease their risk exposure once they retire. While identifying the systematic patterns of

investment behavior exhibited by individuals found age and expressed risk taking

propensities to be inversely related with major shifts taking place at age 55 and beyond.

Gap in the Research: -

These all studies that have been used as a review of literature are showing some Gap in the

researches.

1) The very first Gap is that none of the research had been done with the problems faced by

Demat Account holders.

2) No research has studied their Expectations towards their DP’s.

3) PAN is mandatory for the opening of Demat Account.

4) Loans are availed on DP’s.

So, these all are the gaps for which this research study has been conducted by me.

72

Objectives

73

Objectives

1. To find out the most preferred broking firm among the firms.

2. To understand the customers’ expectations from depository participants.

3. To understand the satisfaction level of the customers.

4. To find the choice of customer for improvement in DP services.

74

Chapter 3

Research Methodology

75

Research can be defined as logical and systematized application of the fundamental science to

the general and overall question of study and scientific techniques which provide precise tools,

specific procedures and technical, rather than philosophical means for getting and ordering

the data prior to their logical and manipulations.

Research methodology is a way to systematically solve the research problem .It may be

understood as a science of studying how research is done scientifically. In it we study the

various steps that are generally adopted by a researcher in studying his research problem

along with the logic behind them

Descriptive Research Design:- Descriptive Research studies are those, which are concerned

with describing the characteristics of a particular individual, or of a group. In descriptive studies

the researcher must be able to define clearly, what he wants to measure and must find adequate

methods for measuring it along with a clear cut definition of ‘population’ he wants to study.

Size of sample-100

Area of research study-Ludhiana (Ferozegandhi market)

Sampling procedure- Convenience sampling

Convenience sampling (sometimes known as grab or opportunity sampling) is a type of non-

probability sampling which involves the sample being drawn from that part of the population

which is close to hand. That is, a sample population selected because it is readily available and

convenient. The researcher using such a sample cannot scientifically make generalizations about

the total population from this sample because it would not be representative enough.

76

RESEARCH METHODOLOGY

METHOD FOR DATA COLLECTION

Primary Data - The primary data are those, which are collected a fresh and for the first time,

and thus happened to be original in character. We can obtain primary data either through

observation or through direct communication with respondent in one form or another or through

personal interview

Procedure of data collection- Survey

Tools for data collection- Questionnaires

Secondary Data- The secondary data on the other hand, are those which have already been

collected by someone else and which have already been passed through the statistical processes.

When the researcher utilizes secondary data then he has to look into various sources from where

he can obtain them. For e.g. Books, magazine, newspaper, Internet, publications and reports. In

the present study I have made use of secondary data collected from their website and from their

records.Data has been collected from secondary source. The secondary data as it has always been

important for the completion of any report provides a reliable, suitable, adequate and specific

knowledge.

77

Chapter 4

DATA ANALYSIS

AND

INTERPRETATION

78

Table4.1

Number of Demat Account holder

Option No. of responses Percentage

Yes 100 100

No 0 0

Fig.4.1 Number of Demat Account holder

Analysis and Interpretation: Almost all the peoples are having demat account so

we can say that demat account are quite popular now a days. The another reason

may be is that because of the population which is chosen for the research.

Table 4.2 Demat Account in Different companies

Opinion Number of Responses Percentage

HSBC 28 28%

LSE 32 32%

KRAVY 13 13%

Others 27 27%

Total 100 100%

79

HSBC LSE KRAVY OTHERS0

5

10

15

20

25

30

35

28

32

13

27

Fig.4.2 Demat Account in Different companies

Analysis and Interpretation:

As shown in the above graph that LSE is more popular in Ludhiana. The reason may behind that

it is older Stock Exchange in Ludhiana. HSBC is providing more facilities and competitive

charges. But it is not very popular to market because as it is new to the market.

Table4.3

Source of information about the above company

OPTION NO.OF RESPONSES PECENTAGE

T.V. 7 7%

NEWSPAPER 28 28%

PERSONAL CONTACT 35 35%

BROKER/AGENT 30 30%

Total 100 100%

.

80

Television Newspaper Personal Contact Broker/Agent0

5

10

15

20

25

30

35

40

Fig 4.3 Source of information about the above company

Analysis and Interpretation:

As it clear from the above table that most of the people preferring the personal contact because

of the convenience and friendly advice. Therefore personal contact scoring 35% for the source of

information. After personal contact people prefer broker and agents which constitute 30%for the

source of information.

Table 4.4

The occupation of investors

OPTION No of Responses Percentage

BUSINESS 44 44%

GOVT 31 31%

STUDENT 14 14%

HOME MAKER 11 11%

Total 100 100%

81

Businesman Govt. Student Home maker0

5

10

15

20

25

30

35

40

45

50

44

31

1411

Fig.4.4 The occupation of investors

Analysis and Interpretation: It is interpreted from the graph that most of the

investors are from the business class as it is 44%are belong to business class.About

31%investors are the govt. employee. And about 11% are the homemaker, It may

because of less knowledge of trading.

Table4.5

Preference of Mode of Trade

Option No of Responses Percentage

Online 44 44%

Offline 56 56%

Total 100 100%

82

44

56

online

offline

Fig.4.5 Preference of Mode of Trade

Analysis and Interpretation:

As we know that the online trading is more convenient and it provide more facility and less

brokerage charges. After that more of the people prefer offline trading.The reason behind that

may be lack of knowledge or we can say that most of the traders are less techno-free.

Table4.6.The frequency of trading

Option No of Responses Percentage

Daily 29 29%

Weekly 41 41%

Monthly 25 25%

Yearly 5 5%

Total 100 100%

83

Daily weekly Monthly Yearly0

5

10

15

20

25

30

35

40

45

Fig.4.6.The frequency of trading

Analysis and Interpretation:

From the above it is shown that most of the individual who are investing in the market in weekly

basis. It is clear from the graph that 41% are trading on the weekly basis. And a few are investing

on the yearly basis, it may be because of they have extra money to invest or they want high risk

and high profit.

Table4.7 Rank the preference while opening a demat account

Option No of responses Mean

Brokerage 375 3.75

Opening Charges 390 3.90

Customer service 150 1.50

Security 315 3.15

Convenient 255 2.55

84

Opening charges brokerage Customer Service security Convenience0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

3.75 3.9

1.5

3.152.55

Fig.4.7 Rank the preference while opening a demat account

Anaysis and Interpretation:

Above graph and table shows the factor that is most considered by the investors while

opening the demat account is opening charges and after that another factor which is

considered by the investors is the brokerage charges.

Table4.8.

The problem faced after opening an Account

Opinion Number of responses Percentage

Yes 72 72%

No 18 18%

Total 100 100%

85

Preferance while opening a demat account

72

18

yesno

Fig.4.8 The problem faced after opening an Account

Analysis and Interpretation:

It is clear from the above table that most of the demat account holders are facing the different

types of problems. Therefore, 72% people are facing the problem of different type after opening

the demat account. Only 18% demat account holders are said that they are not facing any

problem, they may not be an active traders.

Table4.9

The Problems faced by you while holding the Demat

Options No of responses Percentage

Log in problem 45 30%

Difficulty in Operating account 34 23%

Delay in order execution 32 22%

Incorrect Entry of trade orders 23 16%

Lack of proper customer Service 13 9%

86

LOG IN

PROBLEM

DIFF.IN

OPER

ATING

DELAY I

N ORDER

INCORRECT E

NTRY

LACK O

F CUST

OMER CARE

0

5

10

15

20

25

30

30

23 22

16

9

Fig.4.9 The Problems faced by you while holding the Demat

Interpretation:As seen in above maximum respondents are facing the log in

problem followed by difficulty in operating and delay in order.

Table 4.10.

Highly

satisfied

+2

satisfied

+1

Neutral

0

Dissatisfied

-1

Highly

Dissatisfied

-2

Total Mean

Online

Facility

15

30

19

19

9

0

11

-11

14

-28

10 0.10

Brokerage 29 11 49 7

4 47 0.47

87

58 11 0 -14

-8

Customer

care

25

50

19

19

44

0

7

-7

5

-10

52 0.52

Research

Analyst

31

62

16

16

45

0

5

-5

3

-6

67 0.67

The satisfaction level with services provided by your DP’s

Fig.4.10 The satisfaction level with services provided by your DP’s

Analysis and Interpretation:

It is analyzed that most of respondents satisfied by the research facility provided to them.After

that the second factor on which the respondents are satisfied is the customer care and most of the

respondents are not satisfied with online facilities due to lack of knowledge regarding online

trading.

88

Table 11

The loan availed against your DP

Option No of responses Percentage

Yes 86 86%

No 14 14%

89

online facility brokerage Research Analsts customer care0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.1

0.470.52

0.670000000000005

mean

Fig 4.11 The loan availed against your DP

Interpretation:

It can be easily analysed from the graph that almost all investors are getting the facility of loan

against their DP’s. So we can say that almost every firm is providing this loan facility.

Table4.12

Factor considered by investors while selecting a particular DP

Option No of responses Percentage

Convenience 26 26%

Safety 18 18%

min.processing time 14 14%

90

YESNO

Better analysts 29 29%

Less maintenance 23 23%

Total 100 100

Fig.4.12 Factor considered by investors while selecting a particular DP

Analysis and Interpretation:As shown in above graph, most of the respondents

prefer better Analystic factor is first parameter for selecting their depository

participant and then they consider convenience factor more while others get

minimum percentage.

Chapter 5

91

Convenience Safety min.processing time

Better analysts less maintenance0

5

10

15

20

25

30

35

26

18

14

29

23

Findings

And

Suggestions

92

Findings

LSE securities have done the wonders in just 5 years and they have a very good

customer base. Actually it is only because of LSESL, which created a shock wave

among the others players and customers are satisfied with DP’ services.

HSBC is new to market and it is also growing with great speed.

It is found from the analysis that dematerialization of the securities is the most favorable

among respondents.

It is found from the analysis that almost all respondents have rated their DP services as

either good or average.

It is found from the analysis that 70% of the respondents want to remain with their

existing DP and only very few want to shift to a new DP.

It is found from the the analysis that 29% of the respondents prefer better analyst and

convenience as the first parameter for selecting their depository participant. Processing

time and safety factors have minimum criteria of all.

Almost all of Companies availed loan on their DP’s.

93

Suggestions

It is being recommended that DP Should increase the manpower so that the quality of

services can be improved.

All the DP should have a uniform price structure. Some of the DP are charging very

high rates and they should reduce their charges so that more number of customers can be

attracted.

The time taken for confirmation in trades is very long and it should be reduced.

The DP should provide the facility of online checking of the account.

The DP should send the statement of holdings to their clients on time.

DP should try to open their branches in every city so that volume of trade should

increase.

94

Conclusion

The project has helped to ascertain the problems faced by the demat account holders and the

customer’s expectations from the depository participants in Ludhiana city. In particular, the

survey is conducted to identify the customer’s expectations and to improve the quality of

working of various DP’s in Ludhiana city. The customer’s satisfaction level from their share

brokers was also revealed. It was found from the study that LSE securities is a new star in the DP

market and will emerge as an undisputed leader in the coming year.

Limitations of the Study: -

1) For doing this research, the sample size of 100 was small. A sample size cannot always

represent the whole population.

2) The data collected consisted of survey of Investor’s opinions in Ludhiana only. Hence,

the study is geographically limited to Ludhiana only.

3) Most of the respondents were not interested to provide their responses.

4) There is also a Time Constraint because it is only of 6weeks training so I was unable to

cover the other companies in my research.

95

Bibliography

Shah,Ravi(2009),book on ‘Emergence of Securities Depositories in India’

Sofat and Hiro,Rajni and Preeti(2009) article in Indian Journal of Finance,Nov.2009.

Kumar (2009), “Do Investors behave rationally in Stock Market: A Behavioural Finance

Perspective”, “Investors India”, Oct.2009, Pg.16-20.

Aggarwal & Nayak (2009), “A Study of Investors’ expected rate of return on their

Investment”, “Journal of Management & IT”, Vol.7, No.2, May-August 2009, Pg.103-

107.

Choudhary (2008), “The components of Investments Performance of Fund Managers:

Evidence from Indian Capital Market”, “The Global Journal of Finance & Economics”,

Vol.5, No.1 (2008), Pg.1-17.

Sinha (2008), “Human Behaviour & Investments”, “Indian Journal of Finance”, Vol.4,

Nov. (2008), Pg.13-19.

Kumar Amit,” Bancassurance in India: Issues & Implications(2008)

Dala,Sucheta (2008),article on Costs, insurance and other issues.

Gupta,Ashish(2006),Indian journal of Finance, article on PAN has made mandatory by

SEBI.

Ninan, Oommen A.(2004),article on NSDL’s success in Depository Services.

Gupta and jain, L.C and Naveen (2003),paper on ‘India Securities Depository

System :What has Gone Wrong?’

Rao, P. Mohana(2000),white paper on Dematerialization.

Rao Hanumantha & Mishra Vijay “Mutual fund: A resource mobilizer in financial

market” Vidya sagar journal of commerce March 2007 vol 12 page 109-115.

Sung & Hanna (1996), “Factors related to Risk Tolerance”, “Global Journal of Finance &

Management”, Vol.3, June (1996), Pg.11-17.

www.hsbcinvestdirect.com

www.sebi.com

www.economictimes.com

www.investorsguide.com

96

www.nseindia.com

ANNEXURE

97

Questionnaire

Ques1. Do you have Demat Account?

Yes No

Ques2. Which of following do you have your Demat Account in?

a) HSBC

b) LSE

c) KARVY

d) Others

Please Specify --------------

Ques3. How did you come to know about above company?

a) Television

b) Newspaper

c) Personal Contact

d) Broker/Agents

Ques4. What is your occupation?

a) Businessman

b) Govt.

c) Student

d) Home maker

Ques5. Which type of Demat mode are you dealing with?

a) Online b) Offline

Ques6. How frequently do you trade?

a) Daily b) Weekly

c) Monthly d) Yearly

98

Ques7. From the following, Please rank the most preferred while opening a demat account?

a) Brokerage

b) Opening Charges

c) Customer service

d) Security

e) Convenient

Ques8. Are you facing any problem after opening an Account?

Yes No

Ques9. Which are the Problems faced by you while holding the Demat?(checklist)

a) Log in problem

b) Difficulty in Operating account

c) Delay in order execution

d) Incorrect Entry of trade orders

e) Lack of proper customer Service

Ques10. How much are you satisfied with services provided by your DP’s?

a)Online facility

Highly Dissatisfied Neutral Satisfied Highly

Dissatisfied Satisfied

b)brokerage

Highly Dissatisfied Neutral Satisfied Highly

Dissatisfied Satisfied

99

c)Research Analyst

Highly Dissatisfied Neutral Satisfied Highly

Dissatisfied Satisfied

d) Customer Care

Highly Dissatisfied Neutral Satisfied Highly

Dissatisfied Satisfied

Ques11. Have you availed loan against your DPs?

Yes No

If Yes from where and at what rate of interest----------------

Ques12. What are your opinion regarding selecting a particular DP?

a) Convenience

b) Safety

c) Min.processing time

d) Better analysts

e) Less maintance

Ques14. What suggestions will you like to give to improve the existing system?

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

Name-------------------------------------

Contact No.------------------------------

100