surendra management thesis ii
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MANAGEMENT
THESIS II
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CONTENTS
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NO. TITLE
1 INDUSTRY OVERVIEW
2 COMPANY OVERVIEW
3 OBJECTIVE
4 LIMITATIONS
5 METHODOLOGY
6 DATA INTERPRETATION
7 FINDINGS
8 SUGGESTIONS
9 TIME ESSIMATE
10 CONCLUSION
11 QUESTIONNAIRE
12 REFERENCE
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CERTIFICATE
This is to certify that this Management Thesis titled RISK MANAGEMENTREGARDING WORKING OF A BROKING FIRM AND ITS INVESTORS
AT RELIGARE SECURITIES LTD In Nellore city is bonafied work done by
Mr.R.SURENDRA Enroll no: 8NBNL018 and carried out under my guidance and
supervision in partial fulfillment of the award of MASTER OF BUSSINESS
ADMINISTRATION from INC UNIVERSITY
FACULTY MEMBER
Mrs. R.INITHA RINA
ICFAI National College
Nellore.
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DECLARATION
I, Mr. R.SURENDRA a bonafied student of ICFAI NATIONAL COLLEGE,
NELLORE, Class of 2008-2010 hereby declare that the Management Thesis
entitled RISK MANAGEMENT REGARDING WORKING OF A
BROKING FIRM AND ITS INVESTORS AT RELIGARE SECURITIES
LTD In Nellore city, submitted in partial fulfillment of the requirements for
Master of Business Administration degree of ICFAI UNIVERSITY, is the
original work done.
PLACE: R.SURENDRA
DATE: (0801214624)
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ACKNOWLEDGEMENT
I would like to convey my sincere gratitude to the center head Ms.
S.JYOTHIRMAYE REDDY and my faculty supervisor Ms. R. INITHA
RINA for their kind assistance and supervision and giving me their worth
full suggestions at every stage of this Management Thesis report and this
will be helping me in building my career in future and will certainly stand in
positions good in my future academic pursuits.
I would like to thank my all friends and my well wishers for their
cooperation in sharing their views in this project.
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COMPANY OVERVIEW
RELIGARE Securities Ltd. (RSL) is a wholly owned subsidiary of RELIGARE
Financial Services Ltd. (RFSL), a Company promoted by the late Dr.Parvinder
Singh, Ex-CMD of Ranbaxy Laboratories Ltd.
The primary focus of Religare Securities Ltd. is to cater to services in Capital
Market Operations to Institutional Investors. The Company is a member of the
National Stock Exchange (NSE) and OTCEI. The growing list of financial
institutions with whom RSL is empanelled as approved Broker is a reflection of the
high levels of services maintained by the Company.
REL operates from seven domestic regional offices, 43 sub-regional offices, and
has a presence in 498* cities and towns controlling 1,837* business locations all
over India.
To make a mark in the global arena, REL acquired UK-based Hichens, Harrison &
Co. in 2008 which was subsequently re-named as Religare Hichens Harrison PLC
("RHH"). Hichens, Harrison & Co. was incorporated in London in the year 1803
and is believed to be one of the oldest firms of stockbrokers in the City of London.
Pursuant to expansion of REL's business, the company has grown from largely an
equity trading company into a diversified financial services company. With the
addition of RHH the REL group now operates out of multiple global locations,
other than India, (the UK, the USA, Brazil, South Africa, Dubai and Singapore).
RELIGARE was founded with the vision of providing integrated financial care
driven by the relationship of trust. The bouquet of services offered by RELIGARE
includes Broking (Stocks and Commodities), Depository Participant Service,
Advisory on Mutual Fund Investments and Portfolio Management Services.
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RELIGARE is a pioneer in the concept of partnership to reach multiple locations in
order to effectively service its large base of individual clients. Besides the reach of
RELIGARE, the clients of the company greatly benefit by its strong research
capability, which encompasses fundamentals as well as technical knowledge.
RELIGARE GROUP:
RELIGARE in recent years has expanded its reach in health care and financial
services wherein it has multiple specialty hospital and labs which provide health
care services and multiple financial services such as secondary market equity
services, portfolio management services, depository services etc.
RELIGARE financial services group comprises of Religare Securities Limited,
RELIGARE Comdex Limited and RELIGARE Finvest Limited which provide
services in Equity, Commodity and Financial Services business & Religare
Insurance Advisory Ltd.
RELIGARE SECURITIES LIMITED
1. Member of National Stock Exchange of India and Bombay Stock Exchange
of India.
2. Depository Participant with National Securities Depository Limited (NSDL)and Central Depository Services Limited (CDSL). A SEBI approved
Portfolio Manager.
RSL provides platform to all segments of the investor to leverage the immense
opportunity offered by equity investing in India either on their own or through
managed funds in Portfolio Management.
The ARN No. of the Religare Securities Ltd. is 33764. The ARN No. is required byto be available with the broker who deals on behalf of investors or sell the mutual
funds of the different companies present in the market.
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Religare Enterprises Limited
Religare Securities Limited
Equity Broking
Online Investment Portal
Portfolio Management Services
Depository Services
Religare Commodities Limited
Commodity Broking
Religare Capital Markets Limited
Investment Banking
Proposed Institutional Broking
Religare Realty Limited
In house Real Estate
Management Company
Religare Hichens Harrison**
Corporate Broking
Institutional Broking
Religare Finvest Limited
Lending and Distribution business
Proposed Custodial business
Religare Insurance Broking Limited
Life Insurance
General Insurance
Reinsurance
Religare Arts Initiative Limited
Business of Art
Gallery launched - arts-i
Religare Venture Capital Limited
Private Equity and
Investment Manager
Religare Asset Management*
Derivatives Sales
Corporate finance
OBJECTIVE:
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PRIMARY OBJECTIVE
TO Obtain risk management regarding working of a broking firm, and its
investors at Religare securities ltd.
SECONDARY OBJECTIVE
To get familiar with the working of a broking firm.
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LIMITATION
To understand the overall working of share market, the period of 60 days is
not enough.
Moreover, very few investor and agents have a detail knowledge of the
study.
The study was conducted in NELLORE only, which restricted the scope of
the study.
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METHODOLOGY
PRIMARY METHODOLOGY
1) Discussion with branch manager.
2) Discussion with experts.
3) Discussion with investors of the firm.
4) Live trading in the market.
5) Data collected from questionnaire.
SECONDARY METHODOLOGY
1) Various books related to stock market.
2) Books related to Financial Management.
3) Web sites were used as the vital information source.
SAMPLE SIZE
SIZE 50 CUSTOMERS RESPONDENTS + 4 EMPLOYEES
(DETAILED INTERVIEW)
SAMPLE TECHNIC
CONVENIENCE SAMPLE
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DATA INTERPRETATION
1) Preference of Investment:
GRAPH:
INTERPRETATION:
This shows that although the mutual funds market is on the rise yet, the most
favored investment continues to be in the Share Market. So, with a more
transparent system, investment in the Stock Market can definitely be increased.
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Financial Instruments No. Of Investors (50)
Shares 16
Mutual Funds 12
Others 22
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2) Awareness of online Share trading :
GRAPH:
INTERPRETATION:
With the increase in cyber education, the awareness towards online share trading
has increased by leaps and bounds. This awareness is expected to increase further
with the increase in Internet education.
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YES NO
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5) DEMAT Account Market :
GRAPH:
INTERPRETATION:
This shows that even with sufficiently high Brand Equity, Religare ranks only 3rd
amongst the Demat account providers. This is probably because of two main reasons:
1. Lack of promotion and unfocussed approach towards Product awareness
2. Non transparent marketing policies of the company
Hence, the company should crystallize its products and should indulge in aggressive
marketing and promotion.
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BROKING FIRMS INVESTORS
Religare Securities 6
ICICI Direct 15
Kotak Securities 4
India Bulls 12
Others 13
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6) Satisfaction level among Customers with current Broker :
YES NO
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GRAPH:
INTERPRETATION:
This pie chart accentuates the fact that Strategic marketing, today, has gone beyond only
meeting Sales targets and generating profit volumes. It shows that all the competitors are
striving hard not only to woo the customers but also to make them Brand loyal by
generating customer satisfaction.
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8) What is your percentage of investment in the following?
PARTICULARS PERCENTAGES
Shares 16
Mutual funds 12
Debentures 00
Government securities 02
Deposits in banks 04
Land and buildings 14
Bullions 02
Art and antiques 00
GRAPH:
INTERPRETATION:
Most of the people prefer the shares, because of getting low rate of price to
purchase shares compare to others. And getting more returns from the shares within the short time.
9) Percentage of earnings invested in Share Trading :
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GRAPH:
INTERPRETATION:
This shows that people invest only up to 10% of their earnings in the stock market,
again reiterating the volatile and non-transparent structure of the Indian stockmarket. Hence, effective and efficient steps should be undertaken to woo the
customers to invest more in the lucrative stock market.
10) Is broking firm risk free?
YES NO
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% of Earning
Invested
No. of Investors
0% to 10 % 35
11% to 25 % 9
26% to 50 % 4
Above 50 % 2
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GRAPH:
INTERPRETATION:
Most of the people are says that broking firms are risk free, because they play
mediator in between the investors and trading. So the investors are feel free risk in
the broking firms and easy to trade in single place. Some of the people could not
feel free risk, because of entering numeric values and analyze raising companyshares etc...
11) Percentage of risk is you ready to take while investing?
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Percentages Responds
0% to 5% 11
6% to 10% 16
11% to 15% 19
16% to 20% 04
more than 20% 00
GRAPH:
INTERPRETATION:
Most of the investors are selected 15% of risk, because of moderate risk and
moderate return in this point. And no one had selected more than 20%.
12) Do you think more risk will give more return?
YES NO
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GRAPH:
INTERPRETATION:
Most of the investors are believed more risk will give more retune. But, most of the
investors are not ready to take more risk.
RISK MANAGEMENT IN A BROKING FIRM
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Risk management in a Broking Industry is a new concept in India, since it poses
maximum risk in the financial market, managing it was felt most essential by the
regulatory bodies and exchanges. Therefore NSE introduced for the first time in
India, risk containment measures that were common internationally but were absent
from the Indian Securities Market. NSCCL has put in place a comprehensive risk
management system, which is constantly upgraded to pre-empt market failures.
These measures were taken to reduce the brokers risks. Whereas SEBI has given
some guidelines under Investors Protection to protect investors risks. NSE has
given the following risk management measures
MARGINS:
NSE has specified Different margins for different instruments like stocks futures
and options etc. Margins depend upon the volatility and market conditions, It vary
from stock to stock and instrument to instrument
Categorization of stocks for imposition of margins
Daily margins payable by members consists of the following:
1. Value at Risk Margins
2. Mark to Market Margins
Daily margin, comprising of the sum of VaR margin and mark to market margin is
payable.
Value at Risk Margin
VaR margin is applicable for all securities in rolling settlement. All securities are
classified into three groups for the purpose of VaR margin.
The VaR based margin would be rounded off to the next higher integer (For E.g.: if
the VaR based Margin rate is 10. 01, it would be rounded off to 11. 00) and capped
at 100%.
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The VaR margin rate computed as mentioned above will be charged on the net
outstanding position (buy value-sell value) of the respective clients on the
respective securities across all open settlements. The net positions at a client level
for a member are arrived at and thereafter, it is grossed across all the clients for a
member to compute gross exposure for margin calculation.
For example, in case of a member, if client A has a buy position of 1000 in a
security and client B has a sell position of 1000 in the same security, the net
position of the member in the security would be taken as 2000. The buy position of
client A and sell position of client B in the same security would not be netted. It
would be summed up to arrive at the member's exposure for the purpose of margincalculation. VaR margin rate & Security category.
Mark-to-Market Margin
Mark to market margin is computed on the basis of mark to market loss of a
member. Mark to market loss is the notional loss which the member would incur in
case the cumulative net outstanding position of the member in all securities, at the
end of the relevant day were closed out at the closing price of the securities as
announced at the end of the day by the NSE. Mark to market margin is calculated
by marking each transaction in scrip to the closing price of the scrip at the end of
trading. In case the security has not been traded on a particular day, the latest
available closing price at the NSE is considered as the closing price.
In the event of the net outstanding position of a member in any security being nil,
the difference between the buy and sell values would be considered as notional loss
for the purpose of calculating the mark to market margin payable.
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Some Risk management are also taken by BSE they are as follows
1. Know your client scheme
Under the procedure the member brokers of the exchange are compulsory
required to obtain detailed information of clients prior to commencement of
any transactions with new clients. A similar procedure is also to be followed
for existing clients. This information is to be made available to the exchange
authorities whenever called for. In case the member broker fails to furnish
the same it is viewed seriously.
2. Verification of shares at members office
The exchange has outlined the process i.e. in case the transaction in a script
with one particular client in a settlement exceeds Rs 10 laks then the member
are to send the photocopies of the transfer deeds and the share certificates to
the company/ registrar for verification of the material particulars. The basic
idea behind the introduction of this procedure is to prevent
fake/forged/stolen shares from being introduced in the market.
3. Inspection
The department is carrying out inspection of the member brokers records as
regards compliance of the risk management procedures
4. Insurance
The exchange presently has in place insurance policies to protect itself in the
event of losses on account of fire, damage to computer systems and a
comprehensive policy that covers risks faced by the exchange, its member
brokers and the clearinghouse.
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FINDINGS
Working with a broking firm especially was really a great experience.
The researcher found that the working of a broking firm is a very risky job
because risk is involved in each and every activity of the business.
The risk prevailing in the business is recognized therefore an efficient risk
management department is essential in every broking firm.
Capital Market is growing very fast, turnover wise as well as area of
operation wise. The activities have reached through lengths and breadth ofthe country. All these necessitated in the introduction of latest technology in
the form of advanced softwares.
Broking business is a client-based business. The recent trend of voluminous
increase in investors has also increased the risk involved in it. There is need
of continuous up gradation of internal control measures
Staff in a broking firm is continuous busy and due to which they are always
under stress.
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SUGGESTIONS
An Organization should have a risk management function that is independent
of its trading staff i.e. personnel responsible for the risk management
function should be separate from trading floor personnel.
Senior management should regularly evaluate the risk management
procedure in place to ensure they are appropriate and sound.
Senior management should also foster and participate in active discussions
with the board of directors, sub brokers, franchisee, staff of risk management
function and investors regarding procedures for measuring and managing
risk.
Highly qualified staff not only in front office positions such as trading desk,
relationship officer and sales but also all back office functions responsible
for risk management and internal control.
Risk management or control function should be able to produce a risk
management report that highlights positions, limits and excess on a basis
commensurate with trading activity. This report should be sent to senior
management, reviewed, signed and returned to control staff.
Auditors should perform a comprehensive review of risk management
annually, emphasizing segregation of duties and validation of data integrity.
The designated compliance officer should perform a review of trading
Practices annually.
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QUESTIONNAIRE
Q1. In which of these Financial Instruments do you invest into?
Shares Mutual Funds Bonds Derivatives others
Q2. Are you aware of online Share trading?
Yes No
Q3. Heard about Religare?
Yes No
Q4. Do you know about the facilities provided by Religare?
Yes No
Q5. With which company do you have your DEMAT account?
Religare ICICI Direct Kotak Mahindra India Bulls
Others (please specify) __________
Q6. Are you currently satisfied with your Share trading company?
Yes No
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Q7. How often do you trade?
Daily Weekly Monthly Yearly
Q8. What is your percentage of investment in the following?
PARTICULARS PERCENTAGES
Shares
Mutual funds
Debentures
Government securities
Deposits in banks
Land and buildings
Bullions
Art and antiques
Q9. What percentage of your earnings do you invest in share trading?
Up to 10% Up to 25% Up to 50% Above 50%
Q10. Is broking firms are always risk free?
Yes No
Q11. If No, why?
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Q12. What percentage of risk are you ready to take while investing?
Up to 5% Up to 10% Up to 15% Up to 20% more than 20%
Q13. Do you think more risk will give more return?
Yes No
Q14.What more facilities do you think you require with your DEMAT account?
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Additional Information (optional)
Name:
Age:
Phone No:
Occupation:
BIBLIOGRAPHY
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Bibliography:
Websites:
www.religare.in
www.bseindia.com
www.nseindia.com
www.google.co.in