security analysis and investement management

A PROJECT REPORT ON SECURITY ANALYSIS AND INVESTMENT MANAGEMENT FOR ANGEL BROKING PVT.LTD

IN THE PARTIAL FULFILMENT OF THE TWO YEAR FULL TIME MBA PROGRAMME 2011-2013

Under the Guidance of: MR. Ashish.Anand Branch Manager

Submitted By: Sourabh Ajmera MBA:-2nd Sem.

Pacific Institute of Management, Udaipur (Affiliated to Rajasthan Technical University, Kota)

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CONTENT
S. No. 1. 2. 3. 4.

Particulars
Preface Acknowledgement Executive Summary Introduction 1. History of Industry profile 2. Company profile PROJECT PPROFILE:
i. ii. iii. iv.

3. 4. 5. 6. 6. 13. 18. 18. 18. 23.

5.

Title of the study Security Analysis Investment Management Investment Analysis 28. Research Methodology Limitation of the study 30.

v. vi.

29.

6. 7. 8. 9. 10.

Data Analysis & Interpretation Conclusion Suggestion Bibliography Annexure

31. 51. 52. 53. 54.

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PREFACE
The MBA curriculum is so designed that student get enough practical knowledge of
business world which helps them to explore their skills in the corporate world in future. The MBA training helps the students to understand and gain knowledge about the industry and market environment. It develops skills of analyzing and interpreting problems through application of concepts and techniques of management. The summer training of a management student plays an important role in developing him as a well-groomed professional. It allows a student to give theoretical concepts a practical stand in the field of application. It gives the candidate an idea of dynamic & versatile professional world as well as exposure to the intricacies and complexities of corporate world. Doing the summer training at Angel Broking Pvt. Ltd. was a great experience. An opening experience to the concepts of finance, which helped me a lot in understanding the concepts that are applied for in the organization. This organization since its inception has progressed a lot & is walking on the guidelines of success. As the organization is marching with the tenacious speed towards the horizon. During the MBA course we are taught dozen of subjects which if not applied properly are a simply waste of time. Implementing & learning the concepts of Finance in a work place having large number of professionals provides an opportunity to groom oneself to changing needs and increase the knowledge. In a period of 45 days exposure to the corporate environment, I got a learning of organizational structure, its protocols, etc. Real learning places its worth only when it gives sweet fruits in future. Summer training is one way to learn at work. I enjoyed the interesting experience and every part of it………

SOURABH AJMERA

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ACKNOWLEDGEMENT

I wish to express my sincere gratitude to innumerable number of people who have
been associated with me throughout this project. I feel blessed to have the opportunity of expressing my hearty gratitude to the following personalities, without the help of whom my project could not have been hatched. I would like to special acknowledgement my sincere thanks to Mr. Ashish. Anand (Branch Manager), for his consistent support and motivation. who gave me an opportunity to carry out this project and had been a constant inspiration. I Would like to thank MS. Disha Fattawat (ASST.PROF, Pacific Institute Of Management) faculty guide At Pacific Institute of Management. for the Summer Internship Project, for their regular guidance without which my project report would not have been completed. I am also thankful to the Sales Team And staff member of Angel Broking Pvt.Ltd. for giving their valuable time and for Sharing their Experience with and me continuous motivation throughout this program. And added many examples and ideas to improve it. which really helped me in completing this project. I have no words to express my indebtedness for the blessing and unfailing co-operation of my parents. I would like to express my appreciation towards my friends for their encouragement and support throughout this project.

SOURABH AJMERA

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EXECUTIVE SUMMARY
Angel Broking pvt. ltd. is India's premier stock broking company. it is the one-stop-shop for requirements of services in the areas of equity,derivatives,currency,commodity financial coverage and losses, mortality benefit, and health option etc. The project work is pursued as a part of MBA Curriculum at Pacific Institute Of

Management, UDAIPUR. It is undertaken as a traineeship at Angel Broking Pvt.Ltd.. The
Project is about the Security Analysis And investment Management also the efforts done to make improvements in the systematic for better results. At Angel Broking initially the trainees were imparted process and product knowledge. They were given sufficient time to know about the products. The main aim was to provide the better services to their client. Main objective was to make the better strategies to get maximum return. The project aims to help in understanding the best strategy to get maximum return towards various financial services like equity trading , derivatives, commodity and currency The report enhances the knowledge on how various Investment concepts learned in the classroom are implemented in a real life environment. The project required me to design a questionnaire and to do a primary survey on investor perception towards investment strategy. The target respondents of the primary survey were the clients of Angel Broking. The data gathered from the primary survey was then analyzed and interpreted. During my summer training I have learned much more about investment strategy . It’s a practical experience, which will be beneficial in my near professional life. In this training I got experience of both telecalling as well as cold calling. In telecalling you communicate with client’s through telephone and in cold calling you communicate with client’s by face to face. As per my training period experience cold calling is more effective method to convince the customer rather then telecalling.

SOURABH AJMERA

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INTRODUCTION
Industry profile :HISTORY OF STOCK EXCHANGE

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century :- East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum 1830's :- Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader 1947’s :- Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" During the war boom, a number of stock exchanges were organized even in Bombay, Ahmadabad and other centers, but they were not recognized. Soon after it became a central subject, central legislation was proposed and a committee headed by A.D.Gorwala went into the bill for securities regulation. On the basis of the committee's recommendations and public discussion, the securities contracts (regulation) Act became law in 1956

DEFINITION OF STOCK EXCHANGE:
Stock exchange means any body or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.” It is an association of member brokers for the purpose of self-regulation and protecting the interests of its members. It can operate only, If it is recognized by the Government under the securities contracts (regulation) Act,1956. The recognition is granted under section 3 of the by the central government, Ministry of Finance According To My Opinion Stock Exchanges are the organized securities markets regulating the trading in shares, debentures and other securities in the interest of the investors.

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Examples of Stock Exchange
Domestic and international stock exchanges • • Shares of the company were trading at $20 on the New York Stock Exchange. He works as a stockbroker on the floor of the New York Stock Exchange.

NATURE & FUNCTIONS OF STOCK EXCHANGE
There is an extraordinary amount of ignorance and of prejudice born out of ignorance with regard to nature and functions of Stock Exchange. As economic development proceeds, the scope for acquisition and ownership of capital by private individuals also grow. Along with it, the opportunity for Stock Exchange to render the service of stimulating private savings and challenging such savings into productive investment exists on a vastly great scale. These are services, which the Stock Exchange alone can render efficiently. The Stock Exchanges in India have an important role to play in the building of a real shareholders democracy. To protect the interest of the investing public, the authorities of the Stock Exchanges have been increasingly subjecting not only its members to a high degree of discipline, but also those who use its facilities-Joint Stock Companies and other bodies in whose stocks and shares it deals. The activities of the Stock Exchange are governed by a recognized code of conduct apart from statutory regulations. Investors both actual and potential are provided, through the daily Stock Exchange quotations. The job of the Stock Exchange and its members is to satisfy the need of market for investments to bring the buyers and sellers of investments together, and to make the 'Exchange' of Stock between them as simple and fair as possible.

STOCK EXCHANGES IN INDIA

S. No 1 2

NAME OF THE STOCK EXCHANGE Bombay Stock Exchange National Stock Exchange Limited

YEAR 1875 1992

NEED FOR A STOCK EXCHANGE
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As the business and industry expanded and economy became more complex in nature, a need for permanent finance arose. Entrepreneurs require money for long term needs, whereas investors demand liquidity. The solution to this problem gave way for the origin of 'stock exchange', which is a ready market for investment and liquidity. As per the Securities Contract Act, 1956, "STOCK EXCHANGE" means any body of individuals whether incorporated or not constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities".

Securities Contracts (Regulation) Act, 1956:
SC(R)A aims at preventing undesirable transactions in securities by regulating the business of dealing therein by providing for certain other matters connected therewith. This is the principal Act, which governs the trading of securities in India. The term "securities" has been defined In the SC(R)A. As per Section 2(h), the 'Securities' include: 1. Shares, scripts, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate 2. Derivative 3. Units or any other instrument issued by any collective investment scheme to the investors in such schemes. 4. Government securities 5. Such other instruments as may be declared by the Central Government to be securities.
6. Rights or interests in securities.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
Securities and Exchange Board of India (SEBI) setup as an autonomous regulatory authority by the Government of India in 1988 "to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto". It is empowered by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of protecting investor's rights and regulating the capital markers. Securities and Exchange Board of India (SEBI) regulatory reach has been extended to more areas and there is a considerable change in the capital market. SEBI's annual report for 8

1997-98 has stated that through out its six-year existence as a statutory body, it has sought to balance the twin objectives of investor protection and market development. It has formulated new rules and crafted regulations to foster development. Monitoring. and surveillance was put in place in the Stock Exchanges in 1996-97 and strengthened in 1997-98. SEBI was set up as an autonomous regulatory authority by the government of India in 1988 "to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto". It is empowered by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of protecting investor's rights and regulating the capital markets.

OBJECTIVES OF SEBI
The promulgation of the SEBI ordinance in the parliament gave statutory status to, SEBI in 1992. According to the preamble of the SEBI, the three main objectives are:• • • To protect the interests of the investors in securities To promote the development of securities market. To regulate the securities market.

FUNCTIONS OF SEBI
• Regulating the business in Stock Exchange and any other securities market. Registering and regulating the working of Stock Brokers, Sub-Brokers, Share Transfer Agents, Bankers to the issue, Trustees to trust deeds, Registrars to an issue, Merchant Bankers, Underwriters, Investment Managers, Investment Advisers and such other Intermediaries who may be associated with securities market in any manner. Registering and regulating the working of collective investment schemes including Mutual Funds. Promoting and regulating self-regulatory organizations. Prohibiting fraudulent and unfair trade practices in the securities market. Promoting investor's education and training of intermediaries in securities market. Prohibiting Insiders Trading in securities. Regulating substantial acquisition of shares and take-over of companies Calling for information, understanding inspection, conducting enquiries and audits of the Stock Exchanges, Intermediaries and Self-Regulatory organizations in the securities market.

• • • •

• •

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PROFILE OF NATIONAL STOCK EXCHANGE
NATIONAL STOCK EXCHANGE
The NSE was incorporated in November 1992 with an equity capital of Rs.25crs. The International Securities Consultancy (ISC) of Hong Kong helped in setting up NSE. ISC prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were Financial Institutions, Insurances Companies, Banks and SEBI Capital Market Ltd., Infrastructure Leasing and Financial Services Ltd. and Stock Holding Corporation Ltd. It has been set up to strengthen the move towards professionalization of the capital market as well as provide nation wide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A two tier administrative setup involving a company board and a governing board of the exchange is envisaged. NSE is a national market for shares of Public Sector Units Bonds, Debentures and Government securities, since infrastructure and trading facilities are provided.

NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new Index which replaces the existing NSE-100 Index is expected to serve as an appropriate Index for the new segment of futures and options. "Nifty" means National Index for Fifty Stocks. The NSE-50 comprises that represent 20 broad Industry groups with an aggregate market capitalization of around Rs.1,70,000 crs. All companies included in the Index have a market capitalization in excess of Rs.500 crs each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the index is the close of prices on Nov3, 1995 which makes one year of completion of operation of NSE's capital market segment. The base value of the Index has been set at 1000.

NSE-MIDCAP INDEX:

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The NSE midcap Index or the Junior Nifty comprises 50 stocks that represents 21 board Industry groups and will provide proper representation of the midcap segment of the Indian capital Market. All stocks in the Index should have market capitalization of greater than Rs.200 crs and should have traded 85% of the trading days at an impact cost of less 2.5%. The base period for the index is Nov 4, 1996 which signifies two years for completion of operations of the capital market segment of the operation. The base value of the Index has been set at 1000. Average daily turnover of the present scenario 258212 (Lacks) and number of average daily trades 2160 (Lacks). At present, there are 24 stock exchanges recognized under the Securities Contract (Regulation) Act, 1956. They are:

PROFILE OF BOMBAY STOCK EXCHANGE
BOMBAY STOCK EXCHANGE
This Stock Exchange, Mumbai, popularly known as "BOMBAY STOCK EXCHANGE (BSE)" was established in 1875 as ''The Native Share and Stock Brokers Association", as a voluntary non-profit making association. It has evolved over the years into its present status as the premiere Stock Exchange in the country. It may be noted that the Stock Exchange is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was founded in 1878. The exchange, while providing an efficient and transparent market for trading in securities, upholds the interests of the investors and ensures redressed of their grievances, whether against the companies or its own member brokers. It also strives to educate and enlighten the investors by making available necessary informative inputs and conducting investor education programmers. A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange. The Executive director as the chief executive officer is responsible for the day to day administration of the exchange.

BSE INDICES:
In order to enable the market participants, analysts etc., to track the various ups and downs in the Indian stock market, the Exchange introduced in 1986 an equity stock index called BSE-SENSEX that subsequently became the barometer of the moments of the share

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prices in the Indian stock market. It is a "Market capitalization-weighted" index of 30 component stocks representing a sample of large, well established and leading companies. The base year of SENSEX is 1978-79. The SENSEX is widely reported in both domestic and international markets through print as well as electronic media. SENSEX is calculated using a market capitalization weighted method. As per this methodology, the level of the index reflects the total market value of all 30 component stocks from different industries related to particular base period. The total market value of a company is determined by multiplying the price of its stock by the number of shares outstanding. Statisticians call an index of a set of combined variables (such as price and number of shares) a composite Index. An Indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over a time. It is much easier to graph a chart based on Indexed values than one based on actual values world over majority of the well known Indices are constructed using "Market capitalization weighted method". In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. The Divisor keeps the Index comparable over a period of time and it is the reference point for the entire Index maintenance adjustments. SENSEX is widely used to describe the mood in the Indian Stock markets. Base year average is changed as per the formula: Base year average is changed as per the formula

New base year average = old base year average *(new market value/old market value)

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COMPANY PROFILE
“ANGEL BROKING LTD”, BHILWARA” About the Group:
The Angel Group has emerged as one of the top 3 retail broking houses in India. Incorporated in 1987, it has memberships on BSE, NSE and the two leading commodity exchanges in India i.e. NCDEX & MCX. Angel is also registered as a depository participant with CDSL. Angel has always believed in offering the best of services to their customers. Be it in form of focused research or state of the art technology or customized product offering or person allied touch to our services. Angel is the only 100% retail stock broking house offering a gamut of retail centric services. • •
•

• •

E broking Investment Advisory Investment Management Services Wealth Management Services Commodities Trading

ANGEL GROUP COMPANIES:Angel Broking Ltd. Angel Capital & Debt Market Ltd. Angel Commodities Broking Ltd. Angel Securities Ltd. Member on the BSE and Depository Participant With CDSL Membership on the NSE Cash and Futures & Options Segment Member on the NCDEX & MCX Member on the BSE -

Vision
To Provide Best Value for Money to Investors Through Innovative Products, Trading/Investment Strategies, State-of-the-art Technology And Personalized Service.

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Business Philosophy
• • • • Ethical practices & transparency in all our dealings Customer interest above our own. Always deliver what we promise. Effective cost management

Quality Assurance Policy
They are committed to being the leader In providing World Class Product & Services Which exceed the expectations of their customers Achieved by teamwork and A process of continuous improvement.

CRM Policy
A Customer is the most Important Visitor On the Premises He is not Dependent on us but We are dependent on him He is not interruption in our work, But is the Purpose of it We are not doing him a favour by serving He is doing us a favour by giving us an Opportunity to do so.

Management: - The senior management of Angel Broking Ltd. is as
Follows:-

1. Mr. Dinesh Thakkar, Chairman and Managing Director 2. Mr. Lalit Thakkar, Director 3. Mr. Amit Majumdar, Executive Director - Operations & Risk Management 4. Mr. Rajiv Phadke, Executive Director - Business Development & HR 5. Mr. Vinay Agarwal, Executive Director - E-Commerce 6. Mr. Nikhil Daxini, Executive Director - Sales and Marketing 7. Mr. Ketan Shah, Associate Director – IT

Milestonesecember, 1997 Incorporation of Angel Broking Ltd. November, 1998 Incorporation of Angel Capital and Debt Market Ltd. March, 2007 Crossed the 200,000 mark in unique trading account.

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Services of Angel Broking:E – Broking
• • • • • • • E broking provides 4 different trading platforms suited to different individual Needs Multiple exchanges on a single screen Historical Charts & Technical Tools Intraday Calls & News Flash 24 X 7 web-enabled Back office Online Fund transfer facility Auto pay-in of shares

Investment Advisory
To derive optimum returns from equity as an asset class requires professional guidance and advice. Professional assistance will always be beneficial in wealth creation. Investment decisions without ex pert advice would be like treating ailment without the help of a doctor.

Research Department
Strong research has always been our forte. Our investment advisory department is backed by an experience research team. This team comprises of 12 sectorial special analysts and a Research Head. Their vast experience and expertise in spotting great investments opportunities has always been beneficial for our clients.

Benefits @ Angel
•

Expert Advice: Our expert investment advisors are based at various branches across India to provide assistance in designing and monitoring investments. Timely Entry & Exit: Our advisors will regularly monitor your investments and will guide you to book timely profits. They will also guide you in adopting switching techniques from one stock to another during various market conditions. De-Risking Investment: A diversified investment of stocks is always better than

•

•

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concentration in a single stock. Based on our research, we diversify the investment in growth oriented sectors and stocks to minimize the risk and optimize the returns.

Investment Management Services:
Successful investing in Capital Markets demands ever more time and expertise. Investment Management is an art and a science in itself. Professional Investment Management Services are no longer the privilege o f only large institutional investors. Investment Management Services (PMS) is one such service that is fast gaining eminence as an investment avenue of choice for High Net worth Investors like you. PMS is a sophisticated investment vehicle that offers a range of specialized investment strategies to capitalize on opportunities in the market . The Investment Management Service combined with competent fund management, dedicated research and technology, ensures a rewarding experience for its clients. Angel PMS brings with it years of experience, expertise, research and the backing of India's leading stock broking house. At Angel, experienced investment management is the difference. You will enjoy a relationship with a investment Manager equipped to design and implements a investment around your unique needs we will advise you on a suitable product based on factors such as your investment horizon, return expectations and risk tolerance. By entrusting the management of your Investments to Angel, you can enjoy convenience without compromising on quality.

Private Client Group
Angel offers personalized advisory services to affluent HNI investors and actively assists them in managing their investment. PCG can seek guidance on specific stocks in their investment and can get pro active advice for timely exit and fresh investments. Here we also design customized products and services for our clients based on their risk profile, returns need and time horizon. Our experienced research team, in-depth analysis and customized value added products and services give us an immense advantage in assisting you to generate wealth on a longer and consistent basis. Features 1.Minimum Investment size of Rs.1Cr. for residents and Rs.1.5Cr for NRIs is the eligibility for PCG. 2.Investments are customized after a due discussion with clients and our Research team. 3. Deployment of funds can be among various investing avenues available with Us including PMS, mutual fund, advisory. 4.Meetings and one to one discussion with our fund managers, chief investment officer and Research director. 5. Special Technical and Derivative strategies.

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Angel offers trading opportunities in commodities market through its vast chain of branches spread across the country & state of the art trading platform. • • • • • • • • • • • Trading on MCX and NCDEX Application based trading software Web based trading platform Online daily, weekly and monthly research reports Transparent and fair trade execution Individual client attention 24*7 online back office Training / education facilities / conduct of seminars Digital contract notes cu m bill: View your accounts from anywhere, Anytime Competitive brokerage rates Efficient risk management

Depository Participant
Angel Broking Ltd has started its depository services by registering with CDSL. There are various benefits of holding clients demat account with angel but the biggest advantage is that a client shall be ensured of a risk free, prompt and efficient depository process.

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Project Profile
I.

Title of the study:-

“Security Analysis And investment Management” II.

Security Analysis

Definition: For making proper investment involving both risk and return, the investor has to make study of the alternative avenues of the investment-their risk and return characteristics, and make a proper projection or expectation of the risk and return of the alternative investments under consideration. He has to tune the expectations to this preference of the risk and return for making a proper investment choice. The process of analyzing the individual securities and the market as a whole and estimating the risk and return expected from each of the investments with a view to identify undervalues securities for buying and overvalues securities for selling is both an art and a science that is what called security analysis.

Security:
The security has inclusive of shares, scripts, bonds, debenture stock or any other marketable securities of like nature in or of any debentures of a company or body corporate, the government and semi government body etc. In the strict sense of the word, a security is an instrument of promissory note or a method of borrowing or lending or a source of contributing to the funds need by a corporate body or non-corporate body, private security for example is also a security as it is a promissory note of an individual or firm and gives rise to claim on money. But such private securities of private companies or promissory notes of individuals, partnership or firm to the intent that their marketability is poor or nil, are not part of the capital market and do not constitute part of the security analysis.

Analysis of securities:

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Security analysis in both traditional sense and modern sense involves the projection of future dividend or ensuring flows, forecast of the share price in the future and estimating the intrinsic value of a security based on the forecast of earnings or dividend. Security analysis in traditional sense is essentially on analysis of the fundamental value of shares and its forecast for the future through the calculation of its intrinsic worth of share. Modern security analysis relies on the fundamental analysis of the security, leading to its intrinsic worth and also rise-return analysis depending on the variability of the returns, covariance, safety of funds and the projection of the future returns. If the security analysis based on fundamental factors of the company, then the forecast of the share price has to take into account inevitably the trends and the scenario in the economy, in the industry to which the company belongs and finally the strengths and weaknesses of the company itself. Its management, promoters backward, financial results, projection of expansion, term planning etc.

Approaches to Security Analysis:
• • • Fundamental Analysis Technical Analysis Efficient Market Hypothesis

FUNDAMENTAL ANALYSIS
It's a logical and systematic approach to estimating the future dividends & share price as these two constitutes the return from investing in shares. According to this approach, the share price of a company is determined by the fundamental factors affecting the Economy/ Industry/ Company such as Earnings Per Share, DIP ratio, Competition, Market Share, Quality of Management etc. it calculates the true worth of the share based on it's present and future earning capacity and compares it with the current market price to identify the mispriced securities. Fundamental analysis involves a three-step examination, which calls for: 1. Understanding of the macro-economic environment and developments. 2. Analyzing the prospects of the 9ndustry to which the firm belongs 3. Assessing the projected performance of the company.

INDUSTRY ANALYSIS
The objective of this analysis is to assess the prospects of various industrial groupings. Admittedly, it is almost impossible to forecast exactly which industrial groupings will appreciate the most. Yet careful analysis can suggest which industries have a brighter future than others and which industries are plagued with problems that are likely to persist for while. Concerned with the basics of industry analysis, this section is divided into three parts: 19

• Industry life cycle analysis • Study of the structure and characteristics of an industry • Profit potential of industries: Porter model. STUDY THE STRUCTURE & CHARACTERISTICS OF AN INDUSTRY: Since each industry is unique, a systematic study of its specific features and characteristics must be an integral part of the investment decision process. Industry analysis should focus on the following: I. II. III. IV. Structure of the Industry and nature of Competition Nature and Prospect of Demand Cost, Efficiency, and Profitability Technology and Research

COMPANY ANALYSIS
Company analysis is the final stage of the fundamental analysis, which is to be done to decide the company in which the investor should invest. The Economy Analysis provides the investor a broad outline of the prospects of growth in the economy. The Industry Analysis helps the investor to select the industry in which the investment would be rewarding. Company Analysis deals with estimation of the Risks and Returns associated with individual shares. The stock price has been found on depend on the intrinsic value of the company's share to the extent of about 50% as per many research studies. Graharm and Dodd in their book on ' security analysis' have defined the intrinsic value as "that value which is justified by the fact of assets, earning and dividends". These facts are reflected in the earning potential if the company. The analyst has to project the expected future earnings per share and discount them to the present time, which gives the intrinsic value of share. Another method to use is taking the expected earnings per share and multiplying it by the industry average price earning multiple. By this method, the analyst estimate the intrinsic value or fair value of share and compare it with the market price to know whether the stock is overvalued or undervalued. The investment decision is to buy under valued stock and sell overvalued stock.

A. Financial analysis:
Share price depends partly on its intrinsic worth for which financial analysis for a company is necessary to help the investor to decide whether to buy or not the shares of the company. The soundness and intrinsic worth of a company is known only such analysis. An investor needs to know the performance of the company, its intrinsic worth as indicated by some parameters like book value, EPS, PIE multiple etc. and come to a conclusion whether

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the share is rightly priced for purchase or not. This, in short is short importance of financial analysis of a company to the investor. Financial analysis is analysis of financial statement of a company to assess its financial health and soundness of its management. "Financial statement analysis" involves a study of the financial statement of the company to ascertain its prevailing state of affairs and the reasons thereof. Such a study would enable the public and investors to ascertain whether one company is more profitable than the other and also to state the cause and factors that are probably responsible for this.

Method or Devices of Financial analysis
The term 'financial statement' as used in modern business refers to the balance sheet, or the statement of financial position of the company at a point of time and income and expenditure statement; or the profit and loss statement over a period. Interpret the financial statement; it is necessary to analyze them with the object of formation of opinion with respect to the financial condition of the company. The following methods of analysis are generally used. 1. Comparative statement. 2. Trend analysis 3. Common-size statement 4. Found flow analysis 5. Cash flow analysis 6. Ratio analysis The salient features of each of the above steps are discussed below.

TECHNICAL ANALYSIS
Technical analysis involves a study of market-generated data like prices and volumes to determine the future direction of price movement. Technical analysis analyses internal market data with the help of charts and graphs. Subscribing to the 'castles in the air' approach, they view the investment game as an excercise in anticipating the behaviour of market participants. They look at charts to understand what the market participants have been doing and believe that this provides a basis for predicting future behaviour.

Definition:
"The technical approach to investing is essentially a reflection of the idea that prices move in trends which are determined by the changing attitudes of investors toward a variety of economic, monetary, political and psychological forces. The art of technical analysis- for it

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is an art - is to identify trend changes at an early stage and to maintain an investment posture until the weight of the evidence indicates that the trend has been reversed." -Martin J. Pring

TECHNICAL INDICATORS:
In addition to charts, which form the mainstay of technical analysis, technicians also use certain indicators to gauge the overall market situation. They are: • Breadth indicators • Market sentiment indicators

BREADTH INDICATORS:
1. The Advance-Decline line: 2. New Highs and Lows:

MARKET SENTIMENT INDICATORS: 1. Short-Interest Ratio:
The short interest in a security is simply the number of shares that have been sold short but yet bought back. The short interest ratio is defined as follows: Short interest ratio = Total number of shares sold short Averagge daily trading volume

2. Put I Call Ratio: Another indicator monitored by contrary technical analysis is the put / call ratio. Speculators buy calls when they are bullish and buy puts when they are bearish. Since speculators are often wrong, some technical analysts consider the put / call ratio as a useful indicator. The put / call ratio is defined as: Numbers of puts purchased Put / Call ratio = Number of calls purchased

3. Mutual-Fund Liquidity:
If mutual fund liquidity is low, it means that mutual funds are bullish. So constrains argue that the market is at, or near, a peak and hence is likely to decline. Thus, low mutual fund liquidity is considered as a bearish indicator. Conversely when the mutual fund liquidity is high, it means that mutual funds are bearish. So constrains believe that the market is at, or near, a bottom and hence is poised to rise. Thus, high mutual fund liquidity is considered as a bullish indication.

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EFFICIENT MARKET HYPOTHESIS
This theory presupposes that the stock Markets are so competitive and efficient in processing all the available information about the securities that there is "immediate price adjustment" to the changes in the economy, industry and company. The Efficient Market Hypothesis model is actually concerned with the speed with which information is incorporated into the security prices. The Efficient Market Hypothesis has three Sub-hypothesis:-

1.Weakly Efficient 2.Semi-Strongly Efficient 3.Strongly Efficient

III.

Investment Management

INVESTMENT MANAGEMENT Concept of Investment:Investment is the collection of financial or real assets such as equity shares, debentures, bonds, treasury bills and property etc. investment is a combination of assets or it consists of collection of securities. These holdings are the result of individual preferences, decisions of the holders regarding risk, return and a host of other considerations.

Investment management :An investor considering investment in securities is faced with the problem of choosing. from among a large number of securities. His choice depends upon the risk return characteristics of individual securities. He would attempt to choose the most desirable securities and like to allocate his funds over his group of securities. Again he is faced with the problem of deciding which securities to hold and how much to invest in each. The investor faces an infinite number of possible investment or group of securities. The risk and return characteristics of investments differ from those of individual securities

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combining to form a investment. The investor tries to choose the optimal investment taking into consideration the risk-return characteristics of all possible investments. As the economic and financial environment keeps the changing the risk return characteristics of individual securities as well as investment also change. An investor invests his funds in a investment expecting to get a good return with less risk to bear. Investment management concerns the construction & maintenance of a collection of investment. It is investment of funds in different securities in which the total risk of the Investment is minimized while expecting maximum return from it. It primarily involves reducing risk rather that increasing return. Return is obviously important though, and the ultimate objective of investment manager is to achieve a chosen level of return by incurring the least possible risk.

FEATURES OF INVESTMENT MANAGEMENT
The objective of investment management is to invest in securities in such a way that one maximizes one's return and minimizes risks in order to achieve one's investment objective. 1. Safety of the investment: the first important objective investment safety or minimization of risks is of the important objective of investment management. There are many types of risks. Which are associated with investment in equity stocks, including super stock. There is no such thing called Zero-risk investment. Moreover relatively low - risk investment gives corresponding lower returns. 2. Stable current returns: Once investment safety is guaranteed, the investment should yield a steady current income. The current returns should at least match the opportunity cost of the funds of the investor. What we are referring to here is current income by of interest or dividends, not capital gains. 3. Appreciation in the value of capital: A good investment should appreciate in value in order to protect the investor from erosion in purchasing power due to inflation. In other words, a balance investment must consist if certain investment, which tends to appreciate in real value after adjusting for inflation. 4. Marketability: A good investment consists of investment, which can be marketed without difficulty. If there are too many unlisted or inactive share in your investment, you will face problems in enchasing them, and switching from one investment to another. It is desirable to invest in companies listed on major stock exchanges, which are actively traded. 5. Liquidity: The investment should ensure that there are enough funds available at the short notice to take of the investor's liquidity requirements. 6. Tax Planning: Since taxation is an important variable in total planning, a good investment should let its owner enjoy favorable tax shelter. The investment should be developed considering income tax, but capital gains, gift tax too. What a good investment aims at is tax planning, not tax evasion or tax avoidance. 24

Functions of Investment Manager
The main functions of investment manager are Advisory role He advises new investments, review of existing ones, identification of objectives, recommending high yield securities etc,. Conducting Market and Economic Surveys There is essential for recommending high yielding securities, they have to study the current physical properties, budget proposals, industrial policies etc,. Further investment manager should take into account the credit policy, industrial growth, foreign exchange position, changes in corporate laws etc,. Financial Analysis He should evaluate the financial statements of a company in order to understand their net worth, future earnings, prospects and strengths. Study of Stock Market He should see the trends of at various stock exchanges and analyse scripts, so that he is able to identify the right securities for investments. Study of Industry To know its future prospects, technological changes etc,. required for investment proposals he should also foresee the problems of the industry.

INVESTMENT MANAGEMENT PROCESS
Investment management IS a complex activity, which may be broken down into the following steps: 1. Specification of investment Objectives and Constraints:The first step in the investment management process is to specify one's investment objectives and constraints. The commonly stated investment goals are: a) Income b) Growth c) Stability 2. Choice of Asset mix:

25

The most important decision in investment management is the asset mix decision. Very broadly, this is concerned with the proportions of 'stocks' and 'bonds' in the investment. 3. Formulation Of Investment Strategy: Once a certain asset mix is chosen, an appropriate investment strategy has to be hammered out. Two broad choices are available an active investment strategy or a passive investment strategy. An active investment strategy strives to earn superior riskkadjusted returns by resorting to market timing, or sector rotation, or security selection, or some combination of these. A passive investment strategy, on the other hand, involves holding a broadly diversified investment and maintaining a pre-determined level of risk exposure. 4. Selection of Securities Generally, investors pursue an active stance with respect to security selection. For stock selection, investors commonly go by fundamental analysis and / or technical analysis. The factors that are considered in selecting bonds are yield to maturity, credit rating, term to maturity, tax shelter and liquidity. 5. Investment Execution This is the phase of investment management which is concerned with implementing the investment plan by buying and / or selling specified securities in given amounts. 6. Investment Revision. The value of a investment as well as its composition - the relative proportions of stock and bond components - may change as stocks and bonds fluctuate. In response to such changes, periodic rebalancing of the investment is required. This primarily involves a shift from stocks to bonds or vice versa. In addition, it may call for sector rotation as well as security switches. 7. Performance Evaluation: The performance of a investment should be evaluated periodically. The key dimensions of investment performance evaluation are risk and return and the key issue is whether the investment return is commensurate with its risk exposure.

A Investment Management Has Been Characterized
1.Tradition investment theory 2.Modern investment theory

26

CAPITAL MARKET THEORY
The CAPM was developed in mid-1960, the model has generally been attributed to William Sharpe, but John Linter and Jan Mossin made similar independent derivations. Consequently, the model is often referred to as Sharpe-Linter-Mossin (SLM) Capital Asset Pricing Model. The CAPM explains the relationship that should exist between securities expected returns and their risks in terms of the means and standard deviations about security returns. Because of this focus on the mean and standard deviation the CAPM is a direct extension of the investment models developed by Markowitz and Sharpe. Capital Market Theory is an extension of the investment theory of Markowitz. This is an economic model describes how securities are priced in the market place. The investment theory explains how rational investors should build efficient investment based on their risk return preferences. Capital Asset Pricing Model (CAPM) incorporates a relationship, explaining how assets should be priced in the capital market.

ASSUMPTIONS OF CAPITAL MARKET THEORY
The CAPM rests on eight assumptions. The first 5 assumptions are those that underlie the efficient market hypothesis and thus underlie both modern investment theory (MPT) and the CAPM. The last 3 assumptions are necessary to create the CAPM from MPT. The eight assumptions are the following: 1) 2) 3) 4) 5) 6) 7) 8) The Investor's objective is to maximize the utility of terminal wealth. Investors make choices on the basis of risk and return. Investors have homogeneous expectations of risk and return. Investors have identical time horizon. Information is freely and simultaneously available to investors. There is a risk-free asset, and investors can borrow and lend unlimited amounts at the risk-free rate. There are no taxes, transaction costs, restrictions on short rates or other market imperfections. Total asset quantity is fixed, and all assets are marketable and divisible.

27

IV.

INVESTMENT ANALYSIS

INVESTMENT ANALYSIS
A Investment is a group of securities held together as investment. Investors invest their funds in a investment of securities rather than in a single security because they are risk averse. By constructing a investment, investors attempts to spread risk by not putting all their eggs into one basket. Investment phase of investment management consists of identifying the range of possible investments that can be constituted from a given set of securities and calculating their return and risk for further analysis. Individual securities in a investment are associated with certain amount of Risk & Returns. Once a set of securities, that are to be invested in, are identified based on RiskReturn characteristics, investment analysis is to be done as next step as the Risk & Return of the investment is not a simple aggregation of Risk & Returns of individual securities but, somewhat less or more than that. Investment analysis considers the determination of future Risk & Return in holding various blends of individual securities so that right combinations giving higher returns at lower risk, called Efficient Investments, can be identified so as to select an optimum one out of these efficient investments can be selected in the next step. Expected Return of a Investment :It is the weighted average of the expected returns of the individual securities held in the investment. These weights are the proportions of total investable funds in each security. Rp = ? x i R i
I =1 n

RP = N = XI = Ri =

Expected return of investment No. of Securities in Investment Proportion of Investment in Security Expected Return on security

Risk Measurement:The statistical tool often used to measure and used as a proxy for risk is the standard deviation.
N

? = ? p (ri - E(r)) 2
i =1

28

Variance (? 2 ) = ? p( ri - E(r)) 2 Here ? = Variance (? 2 ) P = is the probability of security N = Number of securities in investment Ri = Expected return on security

N

RESEARCH METHODOLOGY:The type of study “SECURITY ANALYSIS AND INVESTMENT MANAGEMENT” was descriptive in nature and was done to produce descriptive actual state of affair regarding capital market investors in Bhilwara city.

Data Collection Methods:
The task of data collection began after the research problem had been formulated. It is based on “PRIMARY DATA”. For the collection of primary data a structured schedule containing several question both closed and open ended type was framed but most of them objective type. Data collection instrument was structured schedule.

Contact methods

:

Schedule
Reservation filled in data by asking question from respondents. Share market investors of Bhilwara city. 200

Sampling Universe Sampling Size

:
:

Objectives of the study:• • • • To study investors perception and investment behavior of capital market investors To identify the problems faced by the investors while on market through Brokers. To study the investors satisfaction level for the various services provided by the broker relationship. To get a brief knowledge of trading system in securities

Scope of the study:-

29

The study was conducted at “ANGEL BROKING PVT. LTD, BHILWARA”. The study was conducted for a period of 45 days (1 June to 15 July 2012)

Tools for analysis:
Weighted Average Calculation.

V.

LIMITATION OF THE STUDY1) (2) The study was restricted to bhilwara city so it is difficult to generalize the interpretation made out of the findings. This research is dependent on the information provided by the respondents and sometimes the respondents are very reluctant in providing right information and often provide it carelessly and the result drawn out by only this information, so sometimes all efforts might not find direction and results. This conclusion and recommendations made are based on a very less experience of researcher in this field. Time was the biggest constraint as the study was limited for a period of 45 days only as per the curriculum of researcher, which means that any relevant market phenomenon before and after this duration of time might have been skipped in the study. Many respondents did not reply and didn’t gave accurate answer.

(3) (4)

(5)

Justification of the Project:
The company was interested to find out the investor perception and the problems faced by the general investor while dealing with the brokers. The company was also interested to find out the common problems as faced by general investor while in share market and the satisfaction level for the services provided by the brokers to the investors

30

6.Data Analysis and Interpretation
? Job Profile and Investment Proportion
• Out of 94 service class investors, about 40% invest 10-25% of their total income in shares and securities, 22% invest 5-10%,28% invest up to 5% where as only 10% invest more than 25%.
graph of 94 service class investors
45 % 40 n i s 35 r o t 30 s e v 25 n i f 20 o o n15 10 5 0 10-25% 5-10% less than 5 more than 25 % of income invested in shares & securites

• Out of 80
Series1 Series2

investors belonging to business class, 26% invest more than 25% of their income in shares and securities where as 30.15% invest 10-25% and rest invest 5-10%.

31

50 45 40 35 30 25 20 15 10 5 0 more than 25%

graph of 80 investors

Series1 Series2

r t s e v i f o n

10-25%

5-10%

% of income invested in shares & securities

•

Out of 26 respondents having job or other profession, 73% invest up to 5% where as rest invest 5-10% of the total income/earning in shares & securities.

Annual Income & Investment Proportion
•

Out of 57 respondents having annual income more than 5 lacs, 45% invest more than 25% of their income in shares and securities, 34% invest 10-25% and rest invest 5-10% in shares and securities.

32

income invested in shares & securities

5-10%

10-25%

Series2 Series1

more than 25% 0 10 20 30 40 50

no of investors

•

In 1-5 lacs annual income category 63% invest in 10-25%, 12% more than 25% and rest invest 5-10% of their earnings in shares and securities. income

investment of income

5-10% more than 25% 10-25% 0 20 40 no of investors in% 60 80

Series1

•

Respondents having annual income up to1lacs, mostly invest only up to 5-10% of the total income in shares & securities.

? Age Group and Motives of Trading
While trading in cash segment, the main motive of the respondents of the age group of 51-65 years and above 65 years was regular income in the form of dividend / interest. About 81% of the total respondents invest for capital gain & 2nd important motive was regular income in the form of dividend / interest followed by Tax planning. 64% respondents in the age group of 36-50 years have given priority to regular income, followed by capital gain & Tax planning. 33

Demographic Findings

AGE GROUP
Age Group ( years)
Below 20 20-35 36-50 51-65 Above 65

No of Respondents
0 31 78 59 32

s t n e d n o p s e R f o o N

90 80 70 60 50 40 30 20 10 0

Age
78 59 31 0 32

No of…

Age Group 34

Out of total 200 respondents, below 20 years of age were none, 39% of the respondents’ falls in the age group of 36-50 years where as 29% were in the age group of 51-65 years and next 16% falls in the age group of more than 65 years.

? Job Profile

Category Service Business others

No of Respondents 94 80 26

Out of total 200 respondents, most of respondents were from service class and 40% were doing business and rest of the respondents includes retired persons, other people, other professional’s students etc.

35

Annual Income ( in Lacs )
Income Group No of Respondents Less than 1 Lac 50 1-5 Lacs 93 More than 5 Lacs 57

Most of the respondents belong to the income group of 1-5 lacs followed by the respondents belongs to income group of more than 5 lacs which is 28% of total respondents and rest of respondents belonging to the income group below 1 lacs.

36

Educational Breakup
Qualification Under Graduate (UG) Graduate Post Graduate (PG) Others (O) No of Respondents 53 79 55 13

Most of the respondents were graduate and 26% were postgraduate and rest 6% belongs to others category.

37

? When the respondents were asked about the proportion of income they invest in shares & securities, the following responses were obtained.

Investment Proportion up to 5% 5-10% 10-25% more than 25%

No of Respondents 47 59 63 31

When the respondents were asked about the proportion of income they invest in shares & securities, it was found that most of the (32%) respondents invest 10-25% of their income, 30% of respondents invest 5-10%, 24% of them invest up to 5% and rest more than 25%.

38

? When the respondents were asked their preference of investment, is cash market,

derivatives market or both, the following respondents were obtained.

Options Only Cash / Capital Market Only Derivatives Market Both

No of Respondents 76 21 103

Out of 200 respondents amount 52% respondents their funds both in cash and derivative market, 38% invest is only cash market and rest is derivative market.

39

? When the respondents were asked about the time period for which they are

investing, the following responses were obtained.

Time period Less Than 1 year 1-5 years More than 5 years

No of Respondents 25 97 78

Time Periods
120 100 80 60 40 20 0 97 78
No of Respondents

25

t d n p s e R f o N

Less Than 1 1-5 years More than 5 year years
Time periods

Out of total 200 respondents 12% respondents were new investors, 48% were investing for 15 years and rests were for more than 5 years.

? When the respondents were asked trading frequency, the following responses were obtained.

Options Daily Weekly Monthly According to the market

40

No of Respondents 49 13 7 131

On analyzing the trading practices it was found that majority, 65% of the investor’s trade according to the market, 25% trade daily followed by weekly traders 7%.

? When the respondents were asked about the decision where/what amount to invest or not, is taken by……., , the following responses were obtained.

Options On your own idea Expert's Opinion On friends advice Brokers Advice Others

No of Respondents 98 37 19 35 11

41

Regarding the decision of amount and investment area, 98 out of 200 takes the idea on their own and 37 on experts opinion, 35 on brokers advice, and 19 on friend advice.

? When the respondents were asked about the motives for making investment in capital market, following respondents were obtained.
Options Regular income in the form of dividend/interest Rank l 113 Rank 2 16 Rank 3 50

Tax Planning Capital gain

55 120

15 14

109 45

Calculation of weight, (Rank 1=3, Rank 2=2, Rank 3=1)

Options

Rank 1

Rank 2

Rank 3

Regular income in the form of dividend/interest

339

32

50

42

Tax Planning Capital gain

165 360

28 26

109 45

RANKINGS

400

360 339

NO. OF RESPONDENT

350 300 250 200 150 100 50 0 Regular income in the form of dividend/interest Tax Planning Capital gain 32 50 28 165 109 26 45

OPTIONS
Regular income in the form of dividend/interest Tax Planning Capital gain

On analyzing of motives for making investment in capital market it was found that capital gain was the most important factor that influences investment decision followed by regular income and tax-planning. ? When the respondents asked whether any professional advice is available to them when required the following responses were obtained.

Options Yes No Some times

No of Respondents 19 108 73

43

Out of 200, 108 respondents said that they don’t and professional advice, 73 said they get it sometimes, and 19 of them get advice when needed

•

When the respondents were asked about the factors they consider while selecting a broker, the following respondents were obtained.

44

Option Brokerage Frequent payment & transfer of security Less advances margin Credit limits Personal relation

Rank1 129 112 59 65 79

Rank2 59 43 79 46 24

Rank3 12 45 62 89 97

140 120 100

NO. OF RESPONDENT

80 60 40 20 0 Brokerage Frequent paym ent & trans fer of s ecurity Less advances margin Credit lim its Pers onal relation

OPTION
Rank1 Rank 2 Rank 3

As per the 200 respondents, frequent payment and transfer of securities was most important factor for selection of broker.

.

When the respondents were asked about the difference they feel between Rings trading

(Older form of Trading) and online, the following responses were obtained.

45

Difference

No of Respondent s

The later is more easier than the former The later is more transparent than the former The later is faster than the more former The later is more accurate than the former Others

59 106 15 18 2

About 53% respondents said that online trading is more transparent than the older ring trading system where as 30% investors feel online trading is more easier understanding the mechanism of trading, 7.67% respondents feel the later is more faster, 8.66% feel it is more accurate.

•

When the respondents were asked whether they are aware of different charges by their broker, the following responses were obtained.

Charges

No of Respondents

46

Turnover / Transaction Demat Charges Service Tax

197 184 179

Out of 300 respondents, 98% were aware of service tax, 92% were aware of demat charges, and 89% were aware of transaction charges

•

When the respondents were asked whether they are Satisfied with the different charges charged by their brokerage, the following responses were obtained.

Options

No of Responde nts 25 51 124

Satisfied Somehow satisfied Dissatisfied

47

124 Out of 200 respondents were dissatisfied with the various charges charged by their brokerage, 51 were somehow satisfied and only 25 were satisfied.

•

When the respondents were asked to rate the service provided by their broker, the following responses were obtained.

48

Service Phone service Brokerage Conformation of traders Professional advice Relaxation in advance margin Payment / delivering of securities Staff behaviour

Good 33 122 53 28 26 50 31

Fair 50 67 23 60 85 42 124

Poor 117 11 124 112 89 108 45

140 120

NO. OF RESPONDENT

100 80 60 40 20 0 Phone service Brokerage Conformation of traders Professional advice Relaxation in advance margin Payment / delivering of securities Staff behaviour

SERVICE
Good Fair Poor

A remarkably high dissatisfaction was there among the investors for the brokerage charged by their broker, most of them are dissatisfied with the staff and relation in advance margins.

•

When the respondents were asked about the problems faced by them (in general) while investment, the following responses were obtained.

49

Problems Deciding the initial amount of investment (A) Do decide where to invest (B) To complete paper work (C) Broker do not deal all the investors in same respect (D) Lack of knowledge about rules & regulation of SEBI (E)

Total
60 40 30 50 20

TO TA L

70 60 50
60

50 40

NO. OF RESPONDENTS (TOTAL)

40 30 20 10 0
30 20

D ec iding the initial am o unt o f D o de c ide whe re to inves t (b) T o c o m p lete p aper work (c ) B ro ker do not d eal all the Lac k o f kno wled ge abo ut rules & inves tm e nt (a) inve s tors in s am e res p ec t (d) re gulatio n o f S E B I (e )

PR O BLEM S

50

INTERPERATION
From the above figures, it is clear that in total there is a on investor perception in Angel broking compared with other companies. But at the same time if we compare the risk it is clear that risk is less for companies in investment angel broking when compared with investment other companies. As per the Markowitz an efficient investment is one with “Minimum risk, maximum profit” therefore, it is advisable for an investor to work out his investment in such a way where he can optimize his returns by evaluating and revising his investment on a continuous basis.

7. CONCLUSIONS
CONCLUSIONS
Investment is collection of different securities and assets by which we can satisfy the basic objective "Maximize yield minimize risk. Further' we have to remember some important investing rules. • • • • • • • • • • • Investing rules to be remembered. Don't speculate unless it's full-time job Beware of barbers, beauticians, waiters-of anyone -bringing gifts of inside information or tips. Before buying a security, its better to find out everything one can about the company, its management and competitors, its earning sand possibilities for growth. Don't try to buy at the bottom and sell at the top. This can't be done-except by liars. Learn how to take your losses and cleanly. Don't expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible Don't buy too many different securities. Better have only a few investments that can be watched. Make a periodic reappraisal of all your investments to see whether changing developments have altered prospects. Study your tax position to known when you sell to greatest advantages. Always keep a good part of your capital in a cash reserve. Never invest all your funds. Don't try to be jack-off-all-investments. Stick to field you known best. 51

• • •

Purchasing stocks you do not understand if you can't explain it to a ten year old, just don't invest in it. Over diversifying: This is the most oversold, overused, logic-defying concept among stockbrokers and registered investment advisors. Not recognizing difference between value and price: This goes along with the failure to compute the intrinsic value of a stock, which are simply the discounted future earnings of the business enterprise. Failure to understand Mr. Market: Just because the market has put a price on a business does not mean it is worth it. Only an individual can determine the value of an investment and then determine if the market price is rational. Failure to understand the impact of taxes: Also known as the sorrows of compounding, just as compounding works to the investor's long-term advantage, the burden of taxes because pf excessive trading works against building wealth Too much focus on the market whether or not an individual investment has merit and value has nothing to do with that the overall market is doing ...

•

•

•

8. SUGGESTION
? ? ? ? Professional advice should be made available in the city. Brokers should transfer the deliveries/ payments to the investors in time. Brokers should deal all the investors in same respect. The phone service should be made prompt

52

9.BIBILOGRAPHY

Investment Management ? By V.K. Bhalla. Security Analysis & Investment Management ? By E. Fischer & J. Jordan.

Books
? Kothari, C.R., Research Methodology, New Delhi, Vikas Publishing House, 1999. ? D.K.Khatri, Investment Management and Securities Analysis, New Delhi, Macmillan India Ltd., 2006. ? S.P. Gupta, Statistics, New Delhi, Sultan Chand & Sons, 2002.

Magazines
? Business Week ? Business World ? Business today

Www.Bseindia.Com. Www.Nseindia.Com. Www.Moneycontrol.Com . Dalal Street Magnazine. Business Today Magazine. Financial Express. Business Line .

53

10. ANNEXURE QUESTIONNAIRE:1. What proportion of income is invested by you in shares & securities: (a) Up to 5% (c) 5-10% (b) 10-25% (d) more than 25%

2. What is your preference of investment whether cash market, derivative market or both

…………………………………………………………………………………………….

3. What is your time period of investment: (a) Less than 1 year (c) 1-5 year (b) 1-5 year (d) more than 5 year

4. Trading frequency: (a) Daily (c) Monthly (b) weekly (d) According to market

5. The decision where/what amount to invest or not is taken by ….. (a) On your own idea (c) On friend advice (e) Others (b) Expert opinion (d) Broker advice

6.

What are your motives for making investment in capital market: (a) Regular income in the form of dividend /interest (b) Tax planning (c) Capital gain

7. Is there any professional advice given to you: (a) Yes (b) No (c) Some times

54

8. What factor you will consider while selecting a broker: (a) Brokerage (b) Frequent payment & transfers of securities (c) Less advance margin (d) Credit limit (e) Personal relation 9. Is there any difference feeled by you between ring trading (older form of Trading) & online: (a) The later is more easier than the former (b) The later is more transparent than the former. (c) The later is faster than the former (d) The later is more accurate than the former (e) Others 10. Are you aware of different charges charged by your brokers? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………….. 11. Are you satisfied with the different charges charged by your brokers? (a) Satisfied (b) Somewhat satisfied (c) Dissatisfied

12. What problems were faced by you (in general) while investment: (a) Deciding the initial amount of investment (b) To decide where to invest (c) To complete paper work] (d) Broker do not deal with all the investors in same respect
(e) Lack of knowledge about rules & regulation of SEBI.

55

13. Rate the service provided by your broker

SNO 1. 2. 3.

SERVICE PHONE BROKERAG CONFORMATION OF TRADERS

GOOD

FAIR

POOR

4.

PROESSIONAL ADVICE RELAXATION IN ADVACE MARGIN PAYMENT/DELIVERY OF SECURITIES SELF BEHAVIOUR

5.

6.

7.

56



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