CHAPTER-1
INTRODUCTION
INTRODUCTION OF BONANZA :
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Bonanza is one of the leading retail brokerage firms in the country. It is the retail broking
firm of the Delhi, which has over eight decades of experience in the stock broking
business. Bonanza offers its customers a wide range of equity related services including
trade execution on B!, "!, Derivatives, investment services, online trading,
investment advice etc.
#ith more than $%& share shops in '& cities, and India(s premier portal www.Bonanza
online.in we reach out to customers like no one else. Bonanza offers you trade execution
facilities on the B! and the "!, for cash as well as derivatives, investment services
and most importantly, investment advice tempered by % years of research and broking
experience.
)he firm(s online trading and investment site www.Bonanza online. in was launched in
*&&+. )he site gives access to superior content and transaction facility to retail customers
across the country. ,nown for its -argon.free, investor friendly language and high quality
research, the site has a registered base of over one.laky customers. In Delhi /egion
approx. $&&& online share trading accounts per 0onth are opened.
)he content.rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best.of.breed technology and
superior market information. )he ob-ective has been to let customers make informed
decisions and to simplify the process of investing in stocks.
Bonanza has launched peed )rade in *&&+, a net.based executable application that
emulates the broker terminals along with host of other information relevant to the Day
)raders. )his was for the first time that a net.based trading station of this caliber was
offered to the traders. In the last six months peed )rade has become a de facto standard
for the Day )rading community over the net.Bonanza ground network includes over 1&&
centers in $+& cities in India, of which 21 are fully owned branches. Bonanza has always
believed in investing in technology to build its business. )he company has used some of
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the best.known names in the I) industry, like un 0icrosystems, 3racle, 0icrosoft,
4ambridge )echnologies, "exgenix, 5ignette, 5eri6sign 7inancial )echnologies India
8td, pider oftware 9vt 8td. to build its trading engine and content. #ith a legacy of
more than % years in the stock markets, the Bonanza group ventured into institutional
broking and corporate finance % years ago. 9resently, Bonanza is one of the leading
players in institutional broking and corporate finance activities. Bonanza holds a sizeable
portion of the market in each of these segments. It has 2& institutional clients spread over
India, 7ar !ast, :, and :. 7oreign Institutional Investors generate about 2%; of the
organization(s revenue, with a daily turnover of over :< * million. )he 4orporate
7inance section has a list of very prestigious clients and has many =firsts( to its credit, in
terms of the size of deal, sector tapped etc. )he group has placed over :< $ billion in
private equity deals. ome of the clients include B98 4ellular >olding, ?u-arat 9ipavav,
!ssar, >utchison, 9lanet @sia, and hopper(s t.
Bonanza is A
• @mong the top 2th branded retail service providers.
• "o. * player in online business.
• 8argest network of branded broking outlets in the country servicing $&&,&&& clients.
Bonanza is the retail broking firm organization with more than eight decades of trust B
credibility in the stock market. Bonanza is amongst pioneers of investment research in
the Indian market. In $C'+ it was ventured into Institutional Broking B 4orporate
7inance. Bonanza is a leading domestic player in Indian institutional business, which is
having over :< % billion of private equity deals.
MISSION:
)o create long term value by empowering individual investors through superior financial
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services supported by culture based on highest level of teamwork, efficiency and
integrity.
GOAL:
)o provide the most useful and ethical Investment olutions . guided by values driven
approach to growth, client service and employee development.
ORGANIZATION STRUCTURE :
Mr. Gajendra Naga! "7ounder B 4!3D
Mr. Ra# M G$%a "4o.7ounder B 9residentD
Mr. Sandee Ar&ra E4hief 3perating 3fficerD
Mr. '()a* Ma!!an "4hief 7inancial 3fficerD
Mr. +.P. Narang ,>eadF r. 5.9. . 7ixed Income EdebtD ?roupG
Mr. Tr(nad- .(ran Na%(&na! H>ead E!.BrokingDG
Mr. S$/-a*- Naga! EDirector . trategic 9lanning B DistributionD
M*. Anja!( M$)-(ja E443D
Mr.'(ja0 C-&ra Na%(&na! H>ead EBusiness @lliancesDG
Mr. An$rag Na0ar E4hief )echnology 3fficerD
M*. Deea M&-a#ed "5ice 9resident .>/ B )rainingD
F(nan1(a! Per2&r#an1e &2 B&nan3a :
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Bonanza is IndiaIs leading retail financial services company. )hey have over 22% share
shops across *$1 cities in India. #hile their size and strong balance sheet allow them to
provide customers with varied products and services at very attractive prices, their over
J%& 4lient /elationship 0anagers are dedicated to serving customers unique needs.
Bonanza is lead by a highly regarded management team that has invested crores of rupees
into a world class Infrastructure that provides clients with real.time service B *+FJ access
to all information and products. )heir flagship Bonanza 9rofessional "etwork offers
real.time prices, detailed data and news, intelligent analytics, and electronic trading
capabilities, right at your fingertips. )his powerful technology complemented by their
knowledgeable and customer focused /elationship 0anagers is creating a world of mart
Investor.
Bonanza offers a full range of financial services and products ranging from !quities to
Derivatives enhance your wealth and hence, achieve your financial goals.
Bonanza 4lient /elationship 0anagers are available to the customers to help with their
financial planning and investment needs. )o provide the highest possible quality of
service, bonanza provides full access to all our products and services through multi.
channels.
BONANZA PRODUCTS AND SER'ICES :
FACILITIES OFFERED B+ BONANZA :
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De-#a%er(a!(3a%(&n
Kou can submit your physical shares at the Bonanza branch for dematerialization into
electronic form.
Re-#a%er(a!(3a%(&n
Kou can also request for /e.materialization which enables you to convert the
dematerialized shares into physical form.
Tran*2er
Inter and intra investment services are available through which you can transfer shares.
IPO
Kou can apply for I93 using your demat account details and on allotment the securities
are transferred directly to your demat account.
C&r&ra%e A1%(&n
#hile holding your stock in demat account, in case you are eligible for any bonus and
rights issues the allotment would be transferred to your demat account.
Ea*0 r&1e**(ng
Kou can view your demat account over the Internet and avail a host of services. )his
facility empowers our clients to view, download, print updated holdings with respective
valuations.
BENEFITS OF IN'ESTING 4ITH BONANZA :
ACCESSIBILIT+
Bonanza provides @D5I4!, !D:4@)I3", )338 @"D !L!4
I3" services for
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investors. )hese services are accessible through our centers across the country E3ver *%&
locations in $*1 citiesD, over the internet as well as over the 5oice )ool.
CON'ENIENCE
Kou can call our Dial.n.)rade number E&$$.*11+*&***2D to get investment advice and
execute your transactions. #e have a dedicated call.center to provide this service via a
toll.free number from anywhere in India.
AD'ANTAGES
• ecure 3rder by 5oice )ool Dial.n.)rade.
• @utomated 9ortfolio to keep track of the value of your actual purchases.
• *+xJ 5oice )ool access to your trading account.
• 9ersonalized 9rice and @ccount @lerts delivered instantly to your 4ell 9hone B !.mail
address.
• pecial 9ersonal Inbox for order and trade confirmations.
• 3n.line 4ustomer ervice via #eb 4hat.
• @nytime 3rdering.
IN'ESTMENT S+STEM :
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@n investment is an entity where the securities of an investor are held in electronic form.
Depositories help in the settlement of the dematerialized securities. !ach
custodianFclearing member is required to maintain a clearing pool account with the
investment . >e is required to make available the required securities in the designated
account on settlement day. )he investment runs an electronic file to transfer the securities
from accounts of the custodiansFclearing member to that of 4learing 4orporation. @s per
the schedule of allocation of securities determined by the 4learing 4orporation, the
depositories transfer the securities on the payout day from the account of the 4learing
4orporation to those of membersFcustodians.
@ Investment can be compared to a bank for shares. Must as a bank holds cash in your
account and provides all services related to transaction of cash, the Investment holds
securities in electronic form and provides all services related to transaction of hares F
debt instruments. @ investment interacts with 4lients through a Investment 9articipant
ED9D with whom the client has to maintain a Demat @ccount. )hus an investor who
wishes to avail of all Investment ervices has to open a Demat @ccount with a D9. )he
first investment to commence operation is "ational ecurities Depository limited
E"D8D. @n investment to commence business must register with ecurity and !xchange
Board of India E!BID. 3nce !BI gives the certificate of commencement of business it
can start its operations. "D8 commenced its operation on "ovember ', $CC2.
!very investor who wants to hold securities in dematerialized form must open an account
with a investment participant ED9D of his choice. :sually this is done by your broker on
behalf of you. Depository 9articipants ED9sD hold accounts with depositories. Must as one
can hold funds in a bank account and transfer funds across accounts without actually
handling cashN one can hold securities in an investment account and transfer securities
across investment accounts without actually handling share certificates a place where
something of value is left for safekeeping.
BAN. IN'ESTMENT HOLDS :
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$. >olds funds in an account >old securities in an account.
*. )ransfers funds between accounts on the instruction of the account holder )ransfers
securities between accounts on the instruction of the account holder.
1. 7acilitates transfers without having to handle money facilitates transfers of ownership
without having to handle securities.
+. 7acilitates safekeeping of money 7acilitates safekeeping of shares.
IN'ESTMENT IN INDIA :
)here are two depositories in India, which provide dematerialization of securities. )he
"ational ecurities Depository 8imited E"D8D and 4entral ecurities Depository
8imited E4D8D. "D8 is the first and largest investment in India. It established in
@ugust $CC2. )he Basic functions of an investment are A
iD 0aintaining dematerialized accounts.
iiD )ransfer of shares across D9 accounts and inner.investment transfers.
iiiD 4rediting @ccounts in case of 4orporate @ctions like Dividend issue, /ights issue etc.
ivD ome other value added services like managing intermediary accounts for 8B Etock
8ending and BorrowingD, I93s, and "ational avings 4ertificates etc.
NEED FOR SETTING UP IN'ESTMENT IN INDIA :
$. 8arge scale irregularities in the securities scam of $CC* exposed the limitations of the
prevailing settlement system.
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*. @ lot of time was consumed in the process of allotment and transfer of share,
impeding the healthy growth of the capital market.
1. #ith the opening up of the Indian economy, there was a widespread equity cult which
resulted in an increased volume of transactions.
+. 0ounting fiscal deficit made the government realize that foreign investment was
essential for the growth of the economy and that was being restricted due to non
availability of depositories.
%. )here were various problems associated with dealing in physical share such as
aD 9roblems of theft fake and forget transfers.
bD hare transfer delays particularly due to signature mismatches.
cD @nd paper work involved in buying, selling, and transfer leading to cost of handling
torage, transportation, and other back office costs.
)o overcome these problems, the government of India, in $CC2, enacted the investment (s
act, $CC2 to start investment in India. Investment can be in two forms Odematerialized or
immobilized. In dematerialization, paper certificate are totally eliminated after
verification by the custodians. In immobilization, initial papers are frozen.
T-e (n5e*%#en% *0*%e# r&5(de* a 6(de range &2 *er5(1e*.
a. 9rimary market services by acting as link between the issuers and the prospective
shareholders.
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b. econdary market services, by acting as a link between the investors and the clearing
house of the exchange to facilitate the settlement of security transactions through book
keeping entries.
c. @ncillary services, by providing services such as collecting dividends and interest,
reporting corporate information, and crediting bonus, right, share and so on. )hese
services lead to a reduction in both time and cost which ultimately benefits the
investors, issuers, intermediaries, and the nation as a whole.
THE IN'ESTMENT PROCESS :
IN'ESTMENT POLIC+ :
)he first stage determines and involves personal financial affairs and ob-ectives before
making investments. It may also be called preparation of the investment policy stage. )he
investor has to see that he should be able to create an emergency fund, an element of
liquidity and quick convertibility of securities into cash. )his stage may be considered
appropriate for identifying investment assets and considering the various features of
investments.
IN'ESTMENT ANAL+SIS :
#hen an individual has arranged a logical order of the types of investments that he
requires on his portfolio, the next step is to analyse the securities available for
investment. >e must make a comparative analysis of the type of industry, kind of security
and fixed vs. variable securities. )he primary concerns at this stage would be to form
beliefs regarding future behavior or prices and stocks, the expected returns and associated
risk.
'ALUATION OF SECURITIES :
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)he third step is perhaps the most important consideration of the valuation of
investments. Investment value, in general, is taken to be the present worth to the
ownersof future benefits from investments. )he investor has to bear in mind the value of
these investments. @n appropriate set of weights have to be applied with the use of
forecasted benefits to estimate the value of the investment assets. 4omparison of the
value with the current market price of the asset allows a determination of the relative
attractiveness of the asset. !ach asset must be valued on its individual merit. 7inally, the
portfolio should be constructed.
PORTFOLIO CONSTRUCTION :
It requires a knowledge of the different aspects of securities. )hese are briefly
recapitulated here, consisting of safety and growth of principal, liquidity of assets after
taking into account the stage involving investment timing, selection of investment,
allocation of savings to different investments and feedback of portfolio as given in
table.#hile evaluating securities, the investor should realize that investments are made
under conditions of uncertainty. )hese cannot be a magic formula which will always
work. )he investor should be concerned with concepts and applications that will satisfy
his investment ob-ectives and constantly evaluate the performance of his investments. If
need be, the investor may consider switching over to alternate proposals.
In5e*%#en% P&!(10 :
De%er#(na%(&n &2 (n5e*%(/!e 6ea!%-
De%er#(na%(&n &2 &r%2&!(& &/je1%(5e*
Iden%(2(1a%(&n &2 &%en%(a! (n5e*%#en% a**e%*
C&n*(dera%(&n &2 a%%r(/$%e* &2 (n5e*%#en%
a**e%*
A!!&1a%(&n &2 6ea!%- %& a**e% 1a%eg&r(e*
In5e*%#en% 'a!$a%(&n :
'a!$a%(&n &2 *%&1)* 5aluation of debentures
B bonds
5aluation of other
assets
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In5e*%#en% Ana!0*(* :
E7$(%0 S%&1) Ana!0*(* Debentures B bond analysis 3ther asset analysis
Ana!0*(* &2 %-e E1&n�
S1reen(ng &2 Ind$*%r(e*
@nalysis of yield structure Pualitative analysis
Ana!0*(* &2 Ind$*%r(e* 4onsideration of debentures Puantitative analysis
8$an%(%a%(5e Ana!0*(* &2 S%&1)* Puantitative analysis of
debentures
P&r%2&!(& 1&n*%r$1%(&n :
De%er#(na%(&n &2 d(5er*(2(1a%(&n !e5e!
C&n*(dera%(&n &2 (n5e*%#en% %(#(ng
Se!e1%(&n &2 (n5e*%#en% a**e%*
A!!&1a%(&n &2 (n5e*%(/!e 6ea!%- %&
(n5e*%#en%* a**e%*
E5a!$a%(&n &2 &r%2&!(& 2&r 2eed/a1)
4HAT IS DEMAT 9
In India, a demat account, the abbreviation for dematerialised account, is a type of
banking account which dematerializes paper.based physical stock shares. 4onversion of
ecurities from 9hysical E9aperD 0ode into !lectronic 0ode is 4alled Dematerialisation.
)he 4lient opens Demat @ccount with any D9.
on Demat, the 4ertificates are
destroyed and credit entry of exactly equal number of ecurities is created in Depository
in !lectronic mode. )he B.3.Ebeneficial ownerD account of holder is credited and the
securities loose their identities. )he dematerialised account is used to avoid holding
physical sharesA the shares are bought and sold through a stock broker.
)his account is popular in India. )he market regulator, securities and exchange board of
India E!BID mandates a demat account for share trading above %&& shares. @s of @pril
*&&2, it became mandatory that any person holding a demat account should possess a
permanent account number E9@"D, and the deadline for submission of 9@" details to the
depository lapsed on Manuary *&&J.
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Dematerialisation is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited in the
investorIs account with its D9. In order to dematerialize certificatesN an investor will have
to first open an account with a D9 and then request for the dematerialisation of
certificates by filling up a dematerialisation request form HD/7G, which is available with
the D9 and submitting the same along with the physical certificates. )he investor has to
ensure that before the certificates are handed over to the D9 for demat, they are defaced
by marking Qurrendered for DematerialisationQ on the face of the certificates.
ACCOUNT OPENING
)o avail the services of a depository an investor is required to open an account with
a depository participant of any depository.
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PROCEDURE FOR OPENING AN ACCOUNT
@ demat account are opened on the same lines as that of a Bank @ccount. 9rescribed
@ccount opening forms are available with the D9, needs to be filled in. tandard
@greements are to be signed by the 4lient and the D9, which details the rights and
obligations of both parties
• )he D9 officials will make available the relevant account opening form
Edepending on whether the client is a retail investor or corporate clientFclearing
memberD 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.
• )he client will submit the duly filled in account opening form and client has to
visit personally for opening the account in D9. )he D9 officials have to do in
person verification and affix the RI" 9!/3" 5!/I7I4@)I3"S stamp on the
account opening form. It should also furnish such documents regarding references,
as specified by the D9, along with the account opening form. @fter executing the
agreement the client has to forward it to the D9.
• )he D9 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.
• 7or 4orporate 4lients, the D9 officials will verify if the board resolution for the
authorized signatories is enclosed.
• In case the documents are not proper, the D9 officials will re-ect the form and
intimate the client of the same, stating the reasons for doing so.
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• If the form is in orderN the D9 officials will accept the same and affix the stamp
Rverified with originalS on each and every proof after seeing the original proofs.
• @fter completion of all documentation, the D9 officials will verify the pan from
income tax website. @nd affix the stamp R9@" 5!/I7I!DS with date and sign on
the stamp.
• )he D9 officials will enter the client details as mentioned in the account opening
form in the D90 Esoftware provided by "D8 B 4D8 to the 9articipantD screen
provided for the purpose. In case of "D8 @Fc opening the /. @ssist will capture
all the details in the D90 and record the client(s signature Eon the formD as
specimen for authorizations in the future.
• @fter entering client details in the system, a client account number will be
generated by the D90. )he D9 officials will enter this in the account opening
form. @fter that the officers will verify the details in the D90 captured by the /.
@ssist. and activate the account.
• )he D9 officials are not allowed to give the demat aFc no to the clients until the aFc
is activate, this is applicable for both "D8 B 4D8.
• #hen the demat aFc is activated the D9 officials have to send the client master and
the copy of agreement between D9 and client at the client(s address
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BENEFICIAR+ ACCOUNT :
)he account holder is called Ibeneficial ownerI in a depository system and the account is
known as Ibeneficiary accountI.
Fea%$re* &2 Bene2(1ar0 A11&$n% A
$. "o minimum balance is required to be retained in a beneficiary account.
*.@n investor can close a beneficiary account with one D9 and open an account with
another D9.
1.)o dematerialise existing physical holdings, the beneficiary account must be opened in
the same ownership pattern in which the securities are held in the physical form e.g.,if
one certificate is in individual name and another certificate is -ointly held by L B K,
two different accounts should be opened. >owever, in case of -oint holders, securities
can be dematerialised in the same account even though share certificates are in different
sequence of names e.g., shares held in -oint names of L B K can also be dematerialised
in an account opened in the names of K B L as well by submitting an additional form
E)ransposition 7ormD alongwith Demat /equest 7orm to the D9.>owever, shares held
-ointly by L B K cannot be dematerialised in an account opened in the name of only L
or only K or any.
DOCUMENTS SHOULD BE RE8UIRED FOR DEMAT ACCOUNT
IDENTIT+ PROOF :
• 9assport
• 5oter ID card
• Driving license
• 9@" card with photograph
• Identity card with applicant(s photograph issued by
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$. 4entral or state government and its department
*. tatutoryFregulatory authorities
1. 9ublic sector undertakings
+. cheduled commercial banks
%. 9ublic financial institutions
2. 4ollege affiliated to universities
ADDRESS PROOF :
• /ation card
• 9assport
• 5oter ID card
• Driving 8icense
• Bank passbook
• 5erified copies of A
$.!lectricity bills Enot more than * months oldD.
*./esidence landline telephone bill Enot more than * months oldD.
1.8eave B license agreementFagreement to sell Eduly attestedD.
+.elf declaration by supreme courtFhigh court -udges, giving the new address in
respect of their own accounts.
%.Identity card with applicants photograph issued by A
a.4entral or state government and its department
b.tatutoryFregulatory authorities
c.9ublic sector undertakings
d.cheduled commercial banks
e.9ublic financial institutions
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f.4ollege affiliated to universities.
• 9assport.size photograph.
• 4opy of 9@" card along with original 9@" card for verification.
BENEFITS OF DEMATERIALISATION :
• "o stamp duty for transfer of securities in the Depository ystem. In the case of
physical shares, stamp duty of &.*%; of sale value is payable on transfer of shares.
• !limination of bad deliveries and all risks associated with physical certificates such as
loss in transit, theft, mutilation, damage, etc.
• 7acility for freezingFlocking of investor accounts to make it non.operational for
specified period.
• Instead of filling up transfer deedEsD a simpler form is to be given Tto the D9.
• Must like a bank branch, the D9 will give a periodical statement of account of
holdings.In addition, investor can obtain a statement of holdings as and when
required for a fee.
• In case investor loses the statement of holdings, he can inform his D9 and obtain a
duplicate statement. InvestorIs statement of holdings cannot be used by anybody else
for trading in his account.
• #hen an investor opens an account with a D9, he signs an agreement with the D9 in
which the D9 will indemnify the investor for any misuse of his holdings. )he
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depository will also ensure that the interests of the investor are protected. ?rievances,
if any, against his D9 will be resolved by the Depository.
• !very transaction in investorIs account will have to be authorised by him, which
ensures total control of the investor over his investment.
• @ safe and convenient way to hold securities and there is immediate transfer of
securities.
• /eduction in paperwork involved in transfer of securities and /eduction in transaction
cost.
• @utomatic credit into demat account of shares, arising out of
bonusFsplitFconsolidationFmerger etc.
DEMAT PROCESS :
$. )he registered holder of the securities makes the request.
*. ecurities must be recognized by Depository as eligible.
1. 4lient submits D/7 B physical certificates to D9. D9 checks securities.
+. 4lient defaces certificates and D9 punches two holes on name of company.
%. D9 enters demat request in system for Depository.
2. D9 dispatches certificates along with D/7 to /B).
J. Depository records the details and sends to /B).
'. /B) agent verifies the details and confirms to Depository.
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C. Depository credits the demat securities to B3 aFc of client and intimates D9
electronically.
$&. D9 issues statement to client.
DEMAT -PROCESS
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INFORMATION NEEDED FOR DEMAT ACCOUNT
@n investor has to give his bank account details at the time of account opening. It is for
the protection of investor(s interest. )he bank account number will be mentioned on the
interest or dividend warrant, so that such warrant cannot be encashed by any one else.
7urther, cash corporate benefits such as dividend, interest will be credited to the investors
account directly through the !4 E!lectronic 4learing erviceD facility, wherever
available, by the company.
An (n5e*%&r 1an 1-ange %-e de%a(!* &2 -(* /an) a11&$n%. ince in the depository system
monetary benefits on the security balances are paid as per the bank account details
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Demat Process:
With Physical Certificate
Shareholders
Depository
Participants
Account Opening
Demat Request
Form (DRF)
Depository R!
Agent
Dematerialisation
Shareholder goes to DP "ith his
physical share certificates
Shareholder opens his account
"ith DP#
Shareholder fills DRF in duplicate$
defaces the shares and hands
o%er to DP
DP sends information
electronically to Depository
&pon confirmation of Demat 'y
R! Agent$ the Depository
Confirms Dematerialisation#
!he DP sends
Share certificates
to R! agent for
dematerialisation
Credit to the (O
A)c# of the *n%estor
provided by the investor at the time of account opening, the investor must ensure that any
subsequent change in bank account details is informed to the D9.
An In5e*%&r *-&$!d (##ed(a%e!0 (n2&r# -(*:-er DP (2 %-e addre** &2 %-e (n5e*%&r
1-ange*, who in turn will update the records. )his will obviate the need of informing
different companies.
An (n5e*%&r 1an &en #&re %-an &ne a11&$n% (n %-e *a#e na#e 6(%- %-e *a#e DP
and a!*& 6(%- d(22eren% DP*.
@n investor has not to keep any minimum balance of securities in hisFher accounts.
Depository F D9 can be chosen by investor as per convenience irrespective of the D9 of
the broker.
)he demat account must be opened in the same ownership pattern such as securities
owned individually in which the securities are held in the physical form. e. g. if one share
certificate is in the individual name and another certificate is -ointly with somebody, two
different accounts would have to be opened.
4HAT IS DEPOSITOR+ AND DEPOSITOR+ PARTICIPANT
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Depository can in many ways be compared to a bank. ecurities of the investors are held
in electronic F book entry form by the Depository. @part from holding the securities,
Depository also provides services related to transactions in securities.
In India, a Depository 9articipant ED9D is described as an agent of the depository. )hey
are the intermediaries between the depository and the investors. )he relationship between
the D9s and the depository is governed by an agreement made between the two under the
Depositories @ct. In a trictly legal sense, a D9 is an entity who is registered as such with
!BI under the provisions of the !BI @ct.
)hink of it like a bank. )he head office where all the technology rests and details of all
accounts held is like the depository. @nd the D9s are the branches that cater to
individuals.
@t present two Depositories viz. "ational ecurities Depository 8imited E"D8D and
4entral Depository ervices EID 8imited E4D8D are registered with !BI
Ser5(1e* r&5(ded /0 De&*(%&r0 *0*%e#
• Dematerialization Eusually known as dematD is converting physical certificates to
electronic form.
• /ematerialisation, known as remat, is reverse of demat, i.e. getting physical
certificates from the electronic securities.
• )ransfer of securities, change of beneficial ownership
• ettlement of trades done on exchange connected to the Depository
24 | P a g e
• 9ledge F >ypothecation of demat shares, viz. 8oan against shares
• !lectronic credit in public offering of the 4ompanies
• "on . 4ash corporate benefits, viz. Bonus F /ights . direct credit into electronic
form. Depository restrict the risk of fraud.
RE'IE4 OF LITERATURE
P*01-&!&g0 &2 In5e*%#en%* and In5e*%&r;* Pre2eren1e*
!very individual investor must follow three principles of investingA using a long.term
investing approach, following the right strategy to maximize the return on investment and
proper allocation of investible funds. #hile applying these three principles, an individual
investor has to confront hisFher demographics, lifestyle and investment psychology.
#hether the investorIs age or occupation or family income has a role of play in making
choice of investment avenuesU Is the investor choice affected by his overconfidence,
reference group and framing of the available alternativesU )he knowledge of all these
aspects is imperative for all progressive investors, researchers, financial consultants,
academicians, students and the marketer of the financial products.
@uthorA Dr. E0rs.D ushant "agpal
Ba*(1* O2 (n5e*%#en%.By [email protected], r.7aculty, 90I
In this paper 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. 7or the economy as a whole, aggregate investment
sanctioned in the current period is a ma-or factor in determining aggregate demand and,
hence, the level of employment. In the long term, current investment determines the
economy(s future productive capacity and, ultimately, a growth in the standard of living.
25 | P a g e
By increasing personal wealth, investing can contribute to higher overall economic
growth and prosperity.
An In5e*%&r*; re7$(re#en%* (n Ind(an *e1$r(%(e* #ar)e%
By.,.Balanaga ?urunathan 9ublished in Delhi Business review.
A re&r% &n 2(nan1(a! !anner* (n %-e gr&6(ng e1&n� !()e Ind(a
By. Indian Institute of 9lanning and 0anagement.*&&2
Ra%(&na!e:Need 2&r %-e *%$d0 :
? )o study the perception of the people about investment of their savings.
? )o understand basic requirement of the common man and their view towards
investment.
OB
INTRODUCTION
INTRODUCTION OF BONANZA :
1 | P a g e
Bonanza is one of the leading retail brokerage firms in the country. It is the retail broking
firm of the Delhi, which has over eight decades of experience in the stock broking
business. Bonanza offers its customers a wide range of equity related services including
trade execution on B!, "!, Derivatives, investment services, online trading,
investment advice etc.
#ith more than $%& share shops in '& cities, and India(s premier portal www.Bonanza
online.in we reach out to customers like no one else. Bonanza offers you trade execution
facilities on the B! and the "!, for cash as well as derivatives, investment services
and most importantly, investment advice tempered by % years of research and broking
experience.
)he firm(s online trading and investment site www.Bonanza online. in was launched in
*&&+. )he site gives access to superior content and transaction facility to retail customers
across the country. ,nown for its -argon.free, investor friendly language and high quality
research, the site has a registered base of over one.laky customers. In Delhi /egion
approx. $&&& online share trading accounts per 0onth are opened.
)he content.rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best.of.breed technology and
superior market information. )he ob-ective has been to let customers make informed
decisions and to simplify the process of investing in stocks.
Bonanza has launched peed )rade in *&&+, a net.based executable application that
emulates the broker terminals along with host of other information relevant to the Day
)raders. )his was for the first time that a net.based trading station of this caliber was
offered to the traders. In the last six months peed )rade has become a de facto standard
for the Day )rading community over the net.Bonanza ground network includes over 1&&
centers in $+& cities in India, of which 21 are fully owned branches. Bonanza has always
believed in investing in technology to build its business. )he company has used some of
2 | P a g e
the best.known names in the I) industry, like un 0icrosystems, 3racle, 0icrosoft,
4ambridge )echnologies, "exgenix, 5ignette, 5eri6sign 7inancial )echnologies India
8td, pider oftware 9vt 8td. to build its trading engine and content. #ith a legacy of
more than % years in the stock markets, the Bonanza group ventured into institutional
broking and corporate finance % years ago. 9resently, Bonanza is one of the leading
players in institutional broking and corporate finance activities. Bonanza holds a sizeable
portion of the market in each of these segments. It has 2& institutional clients spread over
India, 7ar !ast, :, and :. 7oreign Institutional Investors generate about 2%; of the
organization(s revenue, with a daily turnover of over :< * million. )he 4orporate
7inance section has a list of very prestigious clients and has many =firsts( to its credit, in
terms of the size of deal, sector tapped etc. )he group has placed over :< $ billion in
private equity deals. ome of the clients include B98 4ellular >olding, ?u-arat 9ipavav,
!ssar, >utchison, 9lanet @sia, and hopper(s t.
Bonanza is A
• @mong the top 2th branded retail service providers.
• "o. * player in online business.
• 8argest network of branded broking outlets in the country servicing $&&,&&& clients.
Bonanza is the retail broking firm organization with more than eight decades of trust B
credibility in the stock market. Bonanza is amongst pioneers of investment research in
the Indian market. In $C'+ it was ventured into Institutional Broking B 4orporate
7inance. Bonanza is a leading domestic player in Indian institutional business, which is
having over :< % billion of private equity deals.
MISSION:
)o create long term value by empowering individual investors through superior financial
3 | P a g e
services supported by culture based on highest level of teamwork, efficiency and
integrity.
GOAL:
)o provide the most useful and ethical Investment olutions . guided by values driven
approach to growth, client service and employee development.
ORGANIZATION STRUCTURE :
Mr. Gajendra Naga! "7ounder B 4!3D
Mr. Ra# M G$%a "4o.7ounder B 9residentD
Mr. Sandee Ar&ra E4hief 3perating 3fficerD
Mr. '()a* Ma!!an "4hief 7inancial 3fficerD
Mr. +.P. Narang ,>eadF r. 5.9. . 7ixed Income EdebtD ?roupG
Mr. Tr(nad- .(ran Na%(&na! H>ead E!.BrokingDG
Mr. S$/-a*- Naga! EDirector . trategic 9lanning B DistributionD
M*. Anja!( M$)-(ja E443D
Mr.'(ja0 C-&ra Na%(&na! H>ead EBusiness @lliancesDG
Mr. An$rag Na0ar E4hief )echnology 3fficerD
M*. Deea M&-a#ed "5ice 9resident .>/ B )rainingD
F(nan1(a! Per2&r#an1e &2 B&nan3a :
4 | P a g e
Bonanza is IndiaIs leading retail financial services company. )hey have over 22% share
shops across *$1 cities in India. #hile their size and strong balance sheet allow them to
provide customers with varied products and services at very attractive prices, their over
J%& 4lient /elationship 0anagers are dedicated to serving customers unique needs.
Bonanza is lead by a highly regarded management team that has invested crores of rupees
into a world class Infrastructure that provides clients with real.time service B *+FJ access
to all information and products. )heir flagship Bonanza 9rofessional "etwork offers
real.time prices, detailed data and news, intelligent analytics, and electronic trading
capabilities, right at your fingertips. )his powerful technology complemented by their
knowledgeable and customer focused /elationship 0anagers is creating a world of mart
Investor.
Bonanza offers a full range of financial services and products ranging from !quities to
Derivatives enhance your wealth and hence, achieve your financial goals.
Bonanza 4lient /elationship 0anagers are available to the customers to help with their
financial planning and investment needs. )o provide the highest possible quality of
service, bonanza provides full access to all our products and services through multi.
channels.
BONANZA PRODUCTS AND SER'ICES :
FACILITIES OFFERED B+ BONANZA :
5 | P a g e
De-#a%er(a!(3a%(&n
Kou can submit your physical shares at the Bonanza branch for dematerialization into
electronic form.
Re-#a%er(a!(3a%(&n
Kou can also request for /e.materialization which enables you to convert the
dematerialized shares into physical form.
Tran*2er
Inter and intra investment services are available through which you can transfer shares.
IPO
Kou can apply for I93 using your demat account details and on allotment the securities
are transferred directly to your demat account.
C&r&ra%e A1%(&n
#hile holding your stock in demat account, in case you are eligible for any bonus and
rights issues the allotment would be transferred to your demat account.
Ea*0 r&1e**(ng
Kou can view your demat account over the Internet and avail a host of services. )his
facility empowers our clients to view, download, print updated holdings with respective
valuations.
BENEFITS OF IN'ESTING 4ITH BONANZA :
ACCESSIBILIT+
Bonanza provides @D5I4!, !D:4@)I3", )338 @"D !L!4
I3" services for6 | P a g e
investors. )hese services are accessible through our centers across the country E3ver *%&
locations in $*1 citiesD, over the internet as well as over the 5oice )ool.
CON'ENIENCE
Kou can call our Dial.n.)rade number E&$$.*11+*&***2D to get investment advice and
execute your transactions. #e have a dedicated call.center to provide this service via a
toll.free number from anywhere in India.
AD'ANTAGES
• ecure 3rder by 5oice )ool Dial.n.)rade.
• @utomated 9ortfolio to keep track of the value of your actual purchases.
• *+xJ 5oice )ool access to your trading account.
• 9ersonalized 9rice and @ccount @lerts delivered instantly to your 4ell 9hone B !.mail
address.
• pecial 9ersonal Inbox for order and trade confirmations.
• 3n.line 4ustomer ervice via #eb 4hat.
• @nytime 3rdering.
IN'ESTMENT S+STEM :
7 | P a g e
@n investment is an entity where the securities of an investor are held in electronic form.
Depositories help in the settlement of the dematerialized securities. !ach
custodianFclearing member is required to maintain a clearing pool account with the
investment . >e is required to make available the required securities in the designated
account on settlement day. )he investment runs an electronic file to transfer the securities
from accounts of the custodiansFclearing member to that of 4learing 4orporation. @s per
the schedule of allocation of securities determined by the 4learing 4orporation, the
depositories transfer the securities on the payout day from the account of the 4learing
4orporation to those of membersFcustodians.
@ Investment can be compared to a bank for shares. Must as a bank holds cash in your
account and provides all services related to transaction of cash, the Investment holds
securities in electronic form and provides all services related to transaction of hares F
debt instruments. @ investment interacts with 4lients through a Investment 9articipant
ED9D with whom the client has to maintain a Demat @ccount. )hus an investor who
wishes to avail of all Investment ervices has to open a Demat @ccount with a D9. )he
first investment to commence operation is "ational ecurities Depository limited
E"D8D. @n investment to commence business must register with ecurity and !xchange
Board of India E!BID. 3nce !BI gives the certificate of commencement of business it
can start its operations. "D8 commenced its operation on "ovember ', $CC2.
!very investor who wants to hold securities in dematerialized form must open an account
with a investment participant ED9D of his choice. :sually this is done by your broker on
behalf of you. Depository 9articipants ED9sD hold accounts with depositories. Must as one
can hold funds in a bank account and transfer funds across accounts without actually
handling cashN one can hold securities in an investment account and transfer securities
across investment accounts without actually handling share certificates a place where
something of value is left for safekeeping.
BAN. IN'ESTMENT HOLDS :
8 | P a g e
$. >olds funds in an account >old securities in an account.
*. )ransfers funds between accounts on the instruction of the account holder )ransfers
securities between accounts on the instruction of the account holder.
1. 7acilitates transfers without having to handle money facilitates transfers of ownership
without having to handle securities.
+. 7acilitates safekeeping of money 7acilitates safekeeping of shares.
IN'ESTMENT IN INDIA :
)here are two depositories in India, which provide dematerialization of securities. )he
"ational ecurities Depository 8imited E"D8D and 4entral ecurities Depository
8imited E4D8D. "D8 is the first and largest investment in India. It established in
@ugust $CC2. )he Basic functions of an investment are A
iD 0aintaining dematerialized accounts.
iiD )ransfer of shares across D9 accounts and inner.investment transfers.
iiiD 4rediting @ccounts in case of 4orporate @ctions like Dividend issue, /ights issue etc.
ivD ome other value added services like managing intermediary accounts for 8B Etock
8ending and BorrowingD, I93s, and "ational avings 4ertificates etc.
NEED FOR SETTING UP IN'ESTMENT IN INDIA :
$. 8arge scale irregularities in the securities scam of $CC* exposed the limitations of the
prevailing settlement system.
9 | P a g e
*. @ lot of time was consumed in the process of allotment and transfer of share,
impeding the healthy growth of the capital market.
1. #ith the opening up of the Indian economy, there was a widespread equity cult which
resulted in an increased volume of transactions.
+. 0ounting fiscal deficit made the government realize that foreign investment was
essential for the growth of the economy and that was being restricted due to non
availability of depositories.
%. )here were various problems associated with dealing in physical share such as
aD 9roblems of theft fake and forget transfers.
bD hare transfer delays particularly due to signature mismatches.
cD @nd paper work involved in buying, selling, and transfer leading to cost of handling
torage, transportation, and other back office costs.
)o overcome these problems, the government of India, in $CC2, enacted the investment (s
act, $CC2 to start investment in India. Investment can be in two forms Odematerialized or
immobilized. In dematerialization, paper certificate are totally eliminated after
verification by the custodians. In immobilization, initial papers are frozen.
T-e (n5e*%#en% *0*%e# r&5(de* a 6(de range &2 *er5(1e*.
a. 9rimary market services by acting as link between the issuers and the prospective
shareholders.
10 | P a g e
b. econdary market services, by acting as a link between the investors and the clearing
house of the exchange to facilitate the settlement of security transactions through book
keeping entries.
c. @ncillary services, by providing services such as collecting dividends and interest,
reporting corporate information, and crediting bonus, right, share and so on. )hese
services lead to a reduction in both time and cost which ultimately benefits the
investors, issuers, intermediaries, and the nation as a whole.
THE IN'ESTMENT PROCESS :
IN'ESTMENT POLIC+ :
)he first stage determines and involves personal financial affairs and ob-ectives before
making investments. It may also be called preparation of the investment policy stage. )he
investor has to see that he should be able to create an emergency fund, an element of
liquidity and quick convertibility of securities into cash. )his stage may be considered
appropriate for identifying investment assets and considering the various features of
investments.
IN'ESTMENT ANAL+SIS :
#hen an individual has arranged a logical order of the types of investments that he
requires on his portfolio, the next step is to analyse the securities available for
investment. >e must make a comparative analysis of the type of industry, kind of security
and fixed vs. variable securities. )he primary concerns at this stage would be to form
beliefs regarding future behavior or prices and stocks, the expected returns and associated
risk.
'ALUATION OF SECURITIES :
11 | P a g e
)he third step is perhaps the most important consideration of the valuation of
investments. Investment value, in general, is taken to be the present worth to the
ownersof future benefits from investments. )he investor has to bear in mind the value of
these investments. @n appropriate set of weights have to be applied with the use of
forecasted benefits to estimate the value of the investment assets. 4omparison of the
value with the current market price of the asset allows a determination of the relative
attractiveness of the asset. !ach asset must be valued on its individual merit. 7inally, the
portfolio should be constructed.
PORTFOLIO CONSTRUCTION :
It requires a knowledge of the different aspects of securities. )hese are briefly
recapitulated here, consisting of safety and growth of principal, liquidity of assets after
taking into account the stage involving investment timing, selection of investment,
allocation of savings to different investments and feedback of portfolio as given in
table.#hile evaluating securities, the investor should realize that investments are made
under conditions of uncertainty. )hese cannot be a magic formula which will always
work. )he investor should be concerned with concepts and applications that will satisfy
his investment ob-ectives and constantly evaluate the performance of his investments. If
need be, the investor may consider switching over to alternate proposals.
In5e*%#en% P&!(10 :
De%er#(na%(&n &2 (n5e*%(/!e 6ea!%-
De%er#(na%(&n &2 &r%2&!(& &/je1%(5e*
Iden%(2(1a%(&n &2 &%en%(a! (n5e*%#en% a**e%*
C&n*(dera%(&n &2 a%%r(/$%e* &2 (n5e*%#en%
a**e%*
A!!&1a%(&n &2 6ea!%- %& a**e% 1a%eg&r(e*
In5e*%#en% 'a!$a%(&n :
'a!$a%(&n &2 *%&1)* 5aluation of debentures
B bonds
5aluation of other
assets
12 | P a g e
In5e*%#en% Ana!0*(* :
E7$(%0 S%&1) Ana!0*(* Debentures B bond analysis 3ther asset analysis
Ana!0*(* &2 %-e E1&n�
S1reen(ng &2 Ind$*%r(e*
@nalysis of yield structure Pualitative analysis
Ana!0*(* &2 Ind$*%r(e* 4onsideration of debentures Puantitative analysis
8$an%(%a%(5e Ana!0*(* &2 S%&1)* Puantitative analysis of
debentures
P&r%2&!(& 1&n*%r$1%(&n :
De%er#(na%(&n &2 d(5er*(2(1a%(&n !e5e!
C&n*(dera%(&n &2 (n5e*%#en% %(#(ng
Se!e1%(&n &2 (n5e*%#en% a**e%*
A!!&1a%(&n &2 (n5e*%(/!e 6ea!%- %&
(n5e*%#en%* a**e%*
E5a!$a%(&n &2 &r%2&!(& 2&r 2eed/a1)
4HAT IS DEMAT 9
In India, a demat account, the abbreviation for dematerialised account, is a type of
banking account which dematerializes paper.based physical stock shares. 4onversion of
ecurities from 9hysical E9aperD 0ode into !lectronic 0ode is 4alled Dematerialisation.
)he 4lient opens Demat @ccount with any D9.
on Demat, the 4ertificates aredestroyed and credit entry of exactly equal number of ecurities is created in Depository
in !lectronic mode. )he B.3.Ebeneficial ownerD account of holder is credited and the
securities loose their identities. )he dematerialised account is used to avoid holding
physical sharesA the shares are bought and sold through a stock broker.
)his account is popular in India. )he market regulator, securities and exchange board of
India E!BID mandates a demat account for share trading above %&& shares. @s of @pril
*&&2, it became mandatory that any person holding a demat account should possess a
permanent account number E9@"D, and the deadline for submission of 9@" details to the
depository lapsed on Manuary *&&J.
13 | P a g e
Dematerialisation is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited in the
investorIs account with its D9. In order to dematerialize certificatesN an investor will have
to first open an account with a D9 and then request for the dematerialisation of
certificates by filling up a dematerialisation request form HD/7G, which is available with
the D9 and submitting the same along with the physical certificates. )he investor has to
ensure that before the certificates are handed over to the D9 for demat, they are defaced
by marking Qurrendered for DematerialisationQ on the face of the certificates.
ACCOUNT OPENING
)o avail the services of a depository an investor is required to open an account with
a depository participant of any depository.
14 | P a g e
PROCEDURE FOR OPENING AN ACCOUNT
@ demat account are opened on the same lines as that of a Bank @ccount. 9rescribed
@ccount opening forms are available with the D9, needs to be filled in. tandard
@greements are to be signed by the 4lient and the D9, which details the rights and
obligations of both parties
• )he D9 officials will make available the relevant account opening form
Edepending on whether the client is a retail investor or corporate clientFclearing
memberD 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.
• )he client will submit the duly filled in account opening form and client has to
visit personally for opening the account in D9. )he D9 officials have to do in
person verification and affix the RI" 9!/3" 5!/I7I4@)I3"S stamp on the
account opening form. It should also furnish such documents regarding references,
as specified by the D9, along with the account opening form. @fter executing the
agreement the client has to forward it to the D9.
• )he D9 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.
• 7or 4orporate 4lients, the D9 officials will verify if the board resolution for the
authorized signatories is enclosed.
• In case the documents are not proper, the D9 officials will re-ect the form and
intimate the client of the same, stating the reasons for doing so.
15 | P a g e
• If the form is in orderN the D9 officials will accept the same and affix the stamp
Rverified with originalS on each and every proof after seeing the original proofs.
• @fter completion of all documentation, the D9 officials will verify the pan from
income tax website. @nd affix the stamp R9@" 5!/I7I!DS with date and sign on
the stamp.
• )he D9 officials will enter the client details as mentioned in the account opening
form in the D90 Esoftware provided by "D8 B 4D8 to the 9articipantD screen
provided for the purpose. In case of "D8 @Fc opening the /. @ssist will capture
all the details in the D90 and record the client(s signature Eon the formD as
specimen for authorizations in the future.
• @fter entering client details in the system, a client account number will be
generated by the D90. )he D9 officials will enter this in the account opening
form. @fter that the officers will verify the details in the D90 captured by the /.
@ssist. and activate the account.
• )he D9 officials are not allowed to give the demat aFc no to the clients until the aFc
is activate, this is applicable for both "D8 B 4D8.
• #hen the demat aFc is activated the D9 officials have to send the client master and
the copy of agreement between D9 and client at the client(s address
16 | P a g e
BENEFICIAR+ ACCOUNT :
)he account holder is called Ibeneficial ownerI in a depository system and the account is
known as Ibeneficiary accountI.
Fea%$re* &2 Bene2(1ar0 A11&$n% A
$. "o minimum balance is required to be retained in a beneficiary account.
*.@n investor can close a beneficiary account with one D9 and open an account with
another D9.
1.)o dematerialise existing physical holdings, the beneficiary account must be opened in
the same ownership pattern in which the securities are held in the physical form e.g.,if
one certificate is in individual name and another certificate is -ointly held by L B K,
two different accounts should be opened. >owever, in case of -oint holders, securities
can be dematerialised in the same account even though share certificates are in different
sequence of names e.g., shares held in -oint names of L B K can also be dematerialised
in an account opened in the names of K B L as well by submitting an additional form
E)ransposition 7ormD alongwith Demat /equest 7orm to the D9.>owever, shares held
-ointly by L B K cannot be dematerialised in an account opened in the name of only L
or only K or any.
DOCUMENTS SHOULD BE RE8UIRED FOR DEMAT ACCOUNT
IDENTIT+ PROOF :
• 9assport
• 5oter ID card
• Driving license
• 9@" card with photograph
• Identity card with applicant(s photograph issued by
17 | P a g e
$. 4entral or state government and its department
*. tatutoryFregulatory authorities
1. 9ublic sector undertakings
+. cheduled commercial banks
%. 9ublic financial institutions
2. 4ollege affiliated to universities
ADDRESS PROOF :
• /ation card
• 9assport
• 5oter ID card
• Driving 8icense
• Bank passbook
• 5erified copies of A
$.!lectricity bills Enot more than * months oldD.
*./esidence landline telephone bill Enot more than * months oldD.
1.8eave B license agreementFagreement to sell Eduly attestedD.
+.elf declaration by supreme courtFhigh court -udges, giving the new address in
respect of their own accounts.
%.Identity card with applicants photograph issued by A
a.4entral or state government and its department
b.tatutoryFregulatory authorities
c.9ublic sector undertakings
d.cheduled commercial banks
e.9ublic financial institutions
18 | P a g e
f.4ollege affiliated to universities.
• 9assport.size photograph.
• 4opy of 9@" card along with original 9@" card for verification.
BENEFITS OF DEMATERIALISATION :
• "o stamp duty for transfer of securities in the Depository ystem. In the case of
physical shares, stamp duty of &.*%; of sale value is payable on transfer of shares.
• !limination of bad deliveries and all risks associated with physical certificates such as
loss in transit, theft, mutilation, damage, etc.
• 7acility for freezingFlocking of investor accounts to make it non.operational for
specified period.
• Instead of filling up transfer deedEsD a simpler form is to be given Tto the D9.
• Must like a bank branch, the D9 will give a periodical statement of account of
holdings.In addition, investor can obtain a statement of holdings as and when
required for a fee.
• In case investor loses the statement of holdings, he can inform his D9 and obtain a
duplicate statement. InvestorIs statement of holdings cannot be used by anybody else
for trading in his account.
• #hen an investor opens an account with a D9, he signs an agreement with the D9 in
which the D9 will indemnify the investor for any misuse of his holdings. )he
19 | P a g e
depository will also ensure that the interests of the investor are protected. ?rievances,
if any, against his D9 will be resolved by the Depository.
• !very transaction in investorIs account will have to be authorised by him, which
ensures total control of the investor over his investment.
• @ safe and convenient way to hold securities and there is immediate transfer of
securities.
• /eduction in paperwork involved in transfer of securities and /eduction in transaction
cost.
• @utomatic credit into demat account of shares, arising out of
bonusFsplitFconsolidationFmerger etc.
DEMAT PROCESS :
$. )he registered holder of the securities makes the request.
*. ecurities must be recognized by Depository as eligible.
1. 4lient submits D/7 B physical certificates to D9. D9 checks securities.
+. 4lient defaces certificates and D9 punches two holes on name of company.
%. D9 enters demat request in system for Depository.
2. D9 dispatches certificates along with D/7 to /B).
J. Depository records the details and sends to /B).
'. /B) agent verifies the details and confirms to Depository.
20 | P a g e
C. Depository credits the demat securities to B3 aFc of client and intimates D9
electronically.
$&. D9 issues statement to client.
DEMAT -PROCESS
21 | P a g e
INFORMATION NEEDED FOR DEMAT ACCOUNT
@n investor has to give his bank account details at the time of account opening. It is for
the protection of investor(s interest. )he bank account number will be mentioned on the
interest or dividend warrant, so that such warrant cannot be encashed by any one else.
7urther, cash corporate benefits such as dividend, interest will be credited to the investors
account directly through the !4 E!lectronic 4learing erviceD facility, wherever
available, by the company.
An (n5e*%&r 1an 1-ange %-e de%a(!* &2 -(* /an) a11&$n%. ince in the depository system
monetary benefits on the security balances are paid as per the bank account details
22 | P a g e
Demat Process:
With Physical Certificate
Shareholders
Depository
Participants
Account Opening
Demat Request
Form (DRF)
Depository R!
Agent
Dematerialisation
Shareholder goes to DP "ith his
physical share certificates
Shareholder opens his account
"ith DP#
Shareholder fills DRF in duplicate$
defaces the shares and hands
o%er to DP
DP sends information
electronically to Depository
&pon confirmation of Demat 'y
R! Agent$ the Depository
Confirms Dematerialisation#
!he DP sends
Share certificates
to R! agent for
dematerialisation
Credit to the (O
A)c# of the *n%estor
provided by the investor at the time of account opening, the investor must ensure that any
subsequent change in bank account details is informed to the D9.
An In5e*%&r *-&$!d (##ed(a%e!0 (n2&r# -(*:-er DP (2 %-e addre** &2 %-e (n5e*%&r
1-ange*, who in turn will update the records. )his will obviate the need of informing
different companies.
An (n5e*%&r 1an &en #&re %-an &ne a11&$n% (n %-e *a#e na#e 6(%- %-e *a#e DP
and a!*& 6(%- d(22eren% DP*.
@n investor has not to keep any minimum balance of securities in hisFher accounts.
Depository F D9 can be chosen by investor as per convenience irrespective of the D9 of
the broker.
)he demat account must be opened in the same ownership pattern such as securities
owned individually in which the securities are held in the physical form. e. g. if one share
certificate is in the individual name and another certificate is -ointly with somebody, two
different accounts would have to be opened.
4HAT IS DEPOSITOR+ AND DEPOSITOR+ PARTICIPANT
23 | P a g e
Depository can in many ways be compared to a bank. ecurities of the investors are held
in electronic F book entry form by the Depository. @part from holding the securities,
Depository also provides services related to transactions in securities.
In India, a Depository 9articipant ED9D is described as an agent of the depository. )hey
are the intermediaries between the depository and the investors. )he relationship between
the D9s and the depository is governed by an agreement made between the two under the
Depositories @ct. In a trictly legal sense, a D9 is an entity who is registered as such with
!BI under the provisions of the !BI @ct.
)hink of it like a bank. )he head office where all the technology rests and details of all
accounts held is like the depository. @nd the D9s are the branches that cater to
individuals.
@t present two Depositories viz. "ational ecurities Depository 8imited E"D8D and
4entral Depository ervices EID 8imited E4D8D are registered with !BI
Ser5(1e* r&5(ded /0 De&*(%&r0 *0*%e#
• Dematerialization Eusually known as dematD is converting physical certificates to
electronic form.
• /ematerialisation, known as remat, is reverse of demat, i.e. getting physical
certificates from the electronic securities.
• )ransfer of securities, change of beneficial ownership
• ettlement of trades done on exchange connected to the Depository
24 | P a g e
• 9ledge F >ypothecation of demat shares, viz. 8oan against shares
• !lectronic credit in public offering of the 4ompanies
• "on . 4ash corporate benefits, viz. Bonus F /ights . direct credit into electronic
form. Depository restrict the risk of fraud.
RE'IE4 OF LITERATURE
P*01-&!&g0 &2 In5e*%#en%* and In5e*%&r;* Pre2eren1e*
!very individual investor must follow three principles of investingA using a long.term
investing approach, following the right strategy to maximize the return on investment and
proper allocation of investible funds. #hile applying these three principles, an individual
investor has to confront hisFher demographics, lifestyle and investment psychology.
#hether the investorIs age or occupation or family income has a role of play in making
choice of investment avenuesU Is the investor choice affected by his overconfidence,
reference group and framing of the available alternativesU )he knowledge of all these
aspects is imperative for all progressive investors, researchers, financial consultants,
academicians, students and the marketer of the financial products.
@uthorA Dr. E0rs.D ushant "agpal
Ba*(1* O2 (n5e*%#en%.By [email protected], r.7aculty, 90I
In this paper 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. 7or the economy as a whole, aggregate investment
sanctioned in the current period is a ma-or factor in determining aggregate demand and,
hence, the level of employment. In the long term, current investment determines the
economy(s future productive capacity and, ultimately, a growth in the standard of living.
25 | P a g e
By increasing personal wealth, investing can contribute to higher overall economic
growth and prosperity.
An In5e*%&r*; re7$(re#en%* (n Ind(an *e1$r(%(e* #ar)e%
By.,.Balanaga ?urunathan 9ublished in Delhi Business review.
A re&r% &n 2(nan1(a! !anner* (n %-e gr&6(ng e1&n� !()e Ind(a
By. Indian Institute of 9lanning and 0anagement.*&&2
Ra%(&na!e:Need 2&r %-e *%$d0 :
? )o study the perception of the people about investment of their savings.
? )o understand basic requirement of the common man and their view towards
investment.
OB