CAPITAL MARKET

CHAPTER-1
INTRODUCTION:

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Introduction to Capital Markets
Capital markets in the United States provide the lifeblood of capitalism. Companies
turn to them to raise funds needed to finance the building of factories, office buildings,
airplanes, trains, ships, telephone lines, and other assets; to conduct research and
development; and to support a host of other essential corporate activities. Much of the
money comes from such major institutions as pension funds, insurance companies, banks ,
foundations, and colleges and universities. Increasingly, it comes from individuals as well.
As noted in chapter 3, more than 40 percent of U.S. families owned common stock in the
mid-1990s.
Very few investors would be willing to buy shares in a company unless they knew
they could sell them later if they needed the funds for some other purpose. The stock market
and other capital markets allow investors to buy and sell stocks continuously.
The markets play several other roles in the American economy as well. They are a
source of income for investors. When stocks or other financial assets rise in value, investors
become wealthier; often they spend some of this additional wealth, bolstering sales and
promoting economic growth. Moreover, because investors buy and sell shares daily on the
basis of their expectations for how profitable companies will be in the future, stock prices
provide instant feedback to corporate executives about how investors judge their
performance.
Stock values reflect investor reactions to government policy as we<,/ll. If the government
adopts policies that investors believe will hurt the economy and company profits, the market
declines; if investors believe policies will help the economy, the market rises. Critics have
sometimes suggested that American investors focus too much on short-term profits; often,
these analysts say, companies or policy-makers are discouraged from taking steps that will
prove beneficial in the long run because they may require short-term adjustments that will
depress stock prices. Because the market reflects the sum of millions of decisions by
millions of investors, there is no good way to test this theory.

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In any event, Americans pride themselves on the efficiency of their stock market and
other capital markets, which enable vast numbers of sellers and buyers to engage in millions
of transactions each day. These markets owe their success in part to computers, but they also
depend on tradition and trust -- the trust of one broker for another and the trust of both in the
good faith of the customers they represent to deliver securities after a sale or to pay for
purchases. Occasionally, this trust is abused. But during the last half century, the federal
government has played an increasingly important role in ensuring honest and equitable
dealing. As a result, markets have thrived as continuing sources of investment funds that
keep the economy growing and as devices for letting many Americans share in the nation's
wealth.
To work effectively, markets require the free flow of information. Without it, investors
cannot keep abreast of developments or gauge, to the best of their ability, the true value of
stocks. Numerous sources of information enable investors to follow the fortunes of the
market daily, hourly, or even minute-by-minute. Companies are required by law to issue
quarterly earnings reports, more elaborate annual reports, and proxy statements to tell
stockholders how they are doing. In addition, investors can read the market pages of daily
newspapers to find out the price at which particular stocks were traded during the previous
trading session. They can review a variety of indexes that measure the overall pace of
market activity; the most notable of these is the Dow Jones Industrial Average (DJIA),
which tracks 30 prominent stocks. Investors also can turn to magazines and newsletters
devoted to analyzing particular stocks and markets. Certain cable television programs
provide a constant flow of news about movements in stock prices. And now, investors can
use the Internet to get up-to-the-minute information about individual stocks and even to
arrange stock transactions.

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SCOPE OF THE STUDY
The present study involves an analysis of various Capital Market Instruments that are
available in the market, analysis of Dematerialization and limited lists of securities that
are available for trading in corporate

OBJECTIVE OF THE STUDY

This study is done to know about Primary and Secondary capital market (Stock
exchange) activities.
To know why the companies go to new issue market.
To know how the primary market intermediaries communicate companies and
investors.
To know how the primary market activities used by the companies in their new issue
shares.
To know how the companies listed in the stock exchanges.
To know how trading activity is to be done.
To know the complete awareness of secondary market (stock exchanges like NSE,
BSE).

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METHODOLOGY
The data collection methods include both the Primary and Secondary Collection methods.
1. Primary Collection Methods:
This method includes the data collected from the personal discussions with the
authorized clerks and members of the Exchange.
2. Secondary Collection Methods:
The Secondary Collection Methods includes the lectures of the superintend of
the Department of Market Operations, EDP etc, and also the data collected from the
News, Magazines of the NSE and different books issues of this study.

LIMITATIONS OF THE PROJECT

Time constraint was a major limiting factor. Forty five days were insufficient to even
grasp the theoretical concepts.

Several other strategies that could have been studied were not done.

Lack of knowledge with the brokers.

Difference of theory from practice.

Absence of required knowledge and technology.

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CHAPTER-2
REVIEW AND LITER

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Capital market:
A capital market is a market for securities (debt or equity), where business
enterprises (companies) and governments can raise long-term funds. It is defined as a market
in which money is provided for periods longer than a year, as the raising of short-term funds
takes place on other markets (e.g., the money market). The capital market includes the stock
market (equity securities) and the bond market (debt). Financial regulators, such as the UK's
Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC),
oversee the capital markets in their designated jurisdictions to ensure that investors are
protected against fraud, among other duties.
Capital markets may be classified as primary markets and secondary markets. In primary
markets, new stock or bond issues are sold to investors via a mechanism known as
underwriting. In the secondary markets, existing securities are sold and bought among
investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

INDIAN CAPITAL MARKET

The Indian Capital Market is one of the oldest capital markets in Asia which evolved
around 200 years ago.

Chronology of the Indian capital markets:

1830s: Trading of corporate shares and stocks in Bank and cotton Presses in Bombay.
1850s: Sharp increase in the capital market brokers owing to
development of commercial

the

rapid

enterprise.

1860-61: Outbreak of the American Civil War and ' Share Mania ' in India.
1894: Formation of the Ahmadabad Shares and Stock Brokers Association.
1908: Formation of the Calcutta Stock Exchange Association.

A market is any one of a variety of different systems, institutions, procedures, social

relations and infrastructures whereby persons trade, and goods and services are exchanged,
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forming part of the economy. It is an arrangement that allows buyers and sellers to exchange
things. Markets vary in size, range, geographic scale, location, types and variety of human
communities, as well as the types of goods and services traded. Some examples include
local farmers markets held in town squares or parking lots, shopping centers and shopping
malls, international currency and commodity markets, legally created markets such as for
pollution permits, and illegal markets such as the market for illicit drugs.
In mainstream economics, the concept of a market is any structure that allows buyers and
sellers to exchange any type of goods, services and information. The exchange of goods or
services for money is a transaction. Market participants consist of all the buyers and sellers
of a good who influence its price. This influence is a major study of economics and has
given rise to several theories and models concerning the basic market forces of supply and
demand. There are two roles in markets, buyers and sellers. The market facilitates trade and
enables the distribution and allocation of resources in a society. Markets allow any tradable
item to be evaluated and priced. A market emerges more or less spontaneously or is
constructed deliberately by human interaction in order to enable the exchange of rights (cf.
ownership) of services and goods.
Historically, markets originated in physical marketplaces which would often develop into
or from small communities, towns and cities.

Types of markets
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Although many markets exist in the traditional sense such as a marketplace there are
various other types of markets and various organizational structures to assist their functions.
The nature of business transactions could define markets.

Financial markets
Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in
two markets, the stock markets and the bond markets. NYSE, AMEX, and the NASDAQ are
the most common stock markets in the US. Futures markets, where contracts are exchanged
regarding the future delivery of goods are often an outgrowth of general commodity
markets.
Currency markets are used to trade one currency for another, and are often used for
speculation on currency exchange rates.
The money market is the name for the global market for lending and borrowing.

Prediction markets
Prediction markets are a type of speculative market in which the goods exchanged are
futures on the occurrence of certain events. They apply the market dynamics to facilitate
information aggregation.

Organization of markets
A market can be organized as an auction, as a private electronic market, as a commodity
wholesale market, as a shopping center, as a complex institution such as a stock market, and
as an informal discussion between two individuals.
Markets of varying types can spontaneously arise whenever a party has interest in a good or
service that some other party can provide. Hence there can be a market for cigarettes in
correctional facilities, another for chewing gum in a playground, and yet another for
contracts for the future delivery of a commodity. There can be black markets, where a good
is exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not
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physically interact during negotiation. There can also be markets for goods under a
command economy despite pressure to repress them.

Mechanisms of markets
In economics, a market that runs under laissez-faire policies is a free market. It is "free" in
the sense that the government makes no attempt to intervene through taxes, subsidies,
minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers
with monopoly power, or a buyer with monophony power. Such price distortions can have
an adverse effect on market participant's welfare and reduce the efficiency of market
outcomes. Also, the level of organization or negotiation power of buyers, markedly affects
the functioning of the market. Markets where price negotiations meet equilibrium though
still do not arrive at desired outcomes for both sides are said to experience market failure.

Study of markets
The study of actual existing markets made up of persons interacting in space and place in
diverse ways is widely seen as an antidote to abstract and all-encompassing concepts of the
market and has historical precedent in the works of Fernand Braudel and Karl Polanyi. The
latter term is now generally used in two ways. First, to denote the abstract mechanisms
whereby supply and demand confront each other and deals are made. In its place, reference
to markets reflects ordinary experience and the places, processes and institutions in which
exchanges occurs. Second, the market is often used to signify an integrated, allencompassing and cohesive capitalist world economy. A widespread trend in economic
history and sociology is skeptical of the idea that it is possible to develop a theory to capture
an essence or unifying thread to markets.. For economic geographers, reference to regional,
local, or commodity specific markets can serve to undermine assumptions of global
integration, and highlight geographic variations in the structures, institutions, histories, path
dependencies, forms of interaction and modes of self-understanding of agents in different
spheres of market exchange Reference to actual markets can show capitalism not as a
totalizing force or completely encompassing mode of economic activity, but rather as a set

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of economic practices scattered over a landscape, rather than a systemic concentration of
power
C. B. Macpherson identifies an underlying model of the market underlying Anglo-American
liberal-democratic political economy and philosophy in the seventeenth and eighteenth
centuries: Persons are cast as self-interested individuals, who enter into contractual relations
with other such individuals, concerning the exchange of goods or personal capacities cast as
commodities, with the motive of maximizing pecuniary interest. The state and its
governance systems are cast as outside of this framework.). This model came to dominant
economic thinking in the later nineteenth century, as economists such as Ricardo, Mill,
Jevons, Walras and later neo-classical economics shifted from reference to geographically
located marketplaces to an abstract market. This tradition is continued in contemporary
neoliberalism, where the market is held up as optimal for wealth creation and human
freedom, and the states role imagined as minimal, reduced to that of upholding and keeping
stable property rights, contract, and money supply. This allowed for boilerplate economic
and institutional restructuring under structural adjustment and post-Communist
reconstruction.
Similar formalism occurs in a wide variety of social democratic and Marxist discourses that
situate political action as antagonistic to the market. In particular, commodification theorists
such as Georg Lukcs insist that market relations necessarily lead to undue exploitation of
labour and so need to be opposed in toto. ,). Pierre Bourdieu has suggested the market model
is becoming self-realizing, in virtue of its wide acceptance in national and international
institutions through the 1990s. ). The formalist conception faces a number of insuperable
difficulties, concerning the putatively global scope of the market to cover the entire Earth, in
terms of penetration of particular economies, and in terms of whether particular claims about
the subjects (individuals with pecuniary interest), objects (commodities), and modes of
exchange (transactions) apply to any actually existing markets.
A central theme of empirical analyses is the variation and proliferation of types of markets
since the rise of capitalism and global scale economies. The Regulation School stresses the
ways in which developed capitalist countries have implemented varying degrees and types
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of environmental, economic, and social regulation, taxation and public spending, fiscal
policy and government provisioning of goods, all of which have transformed markets in
uneven and geographical varied ways and created a variety of mixed economies. Drawing
on concepts of institutional variance and path dependency, varieties of capitalism theorists
(such as Hall and Soskice) identify two dominant modes of economic ordering in the
developed capitalist countries, coordinated market economies such as Germany and Japan,
and an Anglo-American liberal market economies. However, such approaches imply that
the Anglo-American liberal market economies in fact operate in a matter close to the
abstract notion of the market. While Anglo-American countries have seen increasing
introduction of neo-liberal forms of economic ordering, this has not lead to simple
convergence, but rather a variety of hybrid institutional orderings.. Rather, a variety of new
markets have emerged, such as for carbon trading or rights to pollute. In some cases, such as
emerging markets for water, different forms of privatization of different aspects of
previously state run infrastructure have created hybrid private-public formations and graded
degrees of commodification, commercialization and privatization
Problematic for market formalism is the relationship between formal capitalist economic
processes and a variety of alternative forms, ranging from semi-feudal and peasant
economies widely operative in many developing economies, to informal markets, barter
systems, worker cooperatives, or illegal trades that occur in most developed countries.
Practices of incorporation of non-Western peoples into global markets in the nineteenth and
twentieth century did not merely result in the quashing of former social economic
institutions. Rather, various modes of articulation arose between transformed and hybridized
local traditions and social practices and the emergence world economy. So called capitalist
markets in fact include and depend on a wide range of geographically situated economic
practices that do not follow the market model. Economies are thus hybrids of market and
non-market elements
Helpful here is J. K. Gibson-Grahams complex topology of the diversity of contemporary
market economies describing different types of transactions, labour, and economic agents.
Transactions can occur in underground markets (such as for marijuana) or be artificially
protected (such as for patents). They can cover the sale of public goods under privatization
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schemes to co-operative exchanges and occur under varying degrees of monopoly power
and state regulation. Likewise, there are a wide variety of economic agents, which engage in
different types of transactions on different terms: One cannot assume the practices of a
religious kindergarten, multinational corporation, state enterprise, or community-based
cooperative can be subsumed under the same logic of calculability (pp. 5378). This
emphasis on proliferation can also be contrasted with continuing scholarly attempts to show
underlying cohesive and structural similarities to different markets.
Equity
An equity security is a share of equity interest in an entity such as the capital stock of a
company, trust or partnership. The most common form of equity interest is common stock,
although preferred equity is also a form of capital stock. The holder of an equity is a
shareholder, owning a share, or fractional part of the issuer. Unlike debt securities, which
typically require regular payments (interest) to the holder, equity securities are not entitled to
any payment. In bankruptcy, they share only in the residual interest of the issuer after all
obligations have been paid out to creditors. However, equity generally entitles the holder to
a pro rata portion of control of the company, meaning that a holder of a majority of the
equity is usually entitled to control the issuer. Equity also enjoys the right to profits and
capital gain, whereas holders of debt securities receive only interest and repayment of
principal regardless of how well the issuer performs financially. Furthermore, debt securities
do not have voting rights outside of bankruptcy. In other words, equity holders are entitled to
the "upside" of the business and to control the business.
Hybrid
Hybrid securities combine some of the characteristics of both debt and equity securities.
Preference shares form an intermediate class of security between equities and debt. If the
issuer is liquidated, they carry the right to receive interest and/or a return of capital in
priority to ordinary shareholders. However, from a legal perspective, they are capital stock
and therefore may entitle holders to some degree of control depending on whether they
contain voting rights.

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Convertibles are bonds or preferred stock which can be converted, at the election of the
holder of the convertibles, into the common stock of the issuing company. The
convertibility, however, may be forced if the convertible is a callable bond, and the issuer
calls the bond. The bondholder has about 1 month to convert it, or the company will call the
bond by giving the holder the call price, which may be less than the value of the converted
stock. This is referred to as a forced conversion.
Equity warrants are options issued by the company that allow the holder of the warrant to
purchase a specific number of shares at a specified price within a specified time. They are
often issued together with bonds or existing equities, and are, sometimes, detachable from
them and separately tradable. When the holder of the warrant exercises it, he pays the money
directly to the company, and the company issues new shares to the holder.
Warrants, like other convertible securities, increases the number of shares outstanding, and
are always accounted for in financial reports as fully diluted earnings per share, which
assumes that all warrants and convertibles will be exercised.

The securities markets

Primary and secondary market
In the U.S., the public securities markets can be divided into primary and secondary
markets. The distinguishing difference between the two markets is that in the primary
market, the money for the securities is received by the issuer of those securities from
investors, typically in an initial public offering transaction, whereas in the secondary market,
the securities are simply assets held by one investor selling them to another investor (money
goes from one investor to the other). An initial public offering is when a company issues
public stock newly to investors, called an "IPO" for short. A company can later issue more
new shares, or issue shares that have been previously registered in a shelf registration. These
later new issues are also sold in the primary market, but they are not considered to be an IPO
but are often called a "secondary offering". Issuers usually retain investment banks to assist
them in administering the IPO, obtaining SEC (or other regulatory body) approval of the
offering filing, and selling the new issue. When the investment bank buys the entire new
issue from the issuer at a discount to resell it at a markup, it is called a firm commitment
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underwriting. However, if the investment bank considers the risk too great for an
underwriting, it may only assent to a best effort agreement, where the investment bank will
simply do its best to sell the new issue.
In order for the primary market to thrive, there must be a secondary market, or aftermarket
which provides liquidity for the investment security, where holders of securities can sell
them to other investors for cash. Otherwise, few people would purchase primary issues, and,
thus, companies and governments would be restricted in raising equity capital (money) for
their operations. Organized exchanges constitute the main secondary markets. Many smaller
issues and most debt securities trade in the decentralized, dealer-based over-the-counter
markets.
In Europe, the principal trade organization for securities dealers is the International Capital
Market Association. In the U.S., the principal trade organization for securities dealers is the
Securities Industry and Financial Markets Association, which is the result of the merger of
the Securities Industry Association and the Bond Market Association. The Financial
Information Services Division of the Software and Information Industry Association
(FISD/SIIA) represents a round-table of market data industry firms, referring to them as
Consumers, Exchanges, and Vendors.

Public offer and private placement

In the primary markets, securities may be offered to the public in a public offer.
Alternatively, they may be offered privately to a limited number of qualified persons in a
private placement. Sometimes a combination of the two is used. The distinction between the
two is important to securities regulation and company law. Privately placed securities are
not publicly tradable and may only be bought and sold by sophisticated qualified investors.
As a result, the secondary market is not nearly as liquid as it is for public (registered)
securities.
Another category, sovereign bonds, is generally sold by auction to a specialized class of
dealers.

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Listing and OTC dealing
Securities are often listed in a stock exchange, an organized and officially recognized market
on which securities can be bought and sold. Issuers may seek listings for their securities in
order to attract investors, by ensuring that there is a liquid and regulated market in which
investors will be able to buy and sell securities.
Growth in informal electronic trading systems has challenged the traditional business of
stock exchanges. Large volumes of securities are also bought and sold "over the counter"
(OTC). OTC dealing involves buyers and sellers dealing with each other by telephone or
electronically on the basis of prices that are displayed electronically, usually by commercial
information vendors such as Reuters and Bloomberg.
There are also euro securities, which are securities that are issued outside their domestic
market into more than one jurisdiction. They are generally listed on the Luxembourg Stock
Exchange or admitted to listing in London. The reasons for listing euro bonds include
regulatory and tax considerations, as well as the investment restrictions.
Market
London is the centre of the euro securities markets. There was a huge rise in the euro
securities market in London in the early 1980s. Settlement of trades in eurosecurities is
currently effected through two European computerized clearing/depositories called
Euroclear (in Belgium) and Clearstream (formerly Cedelbank) in Luxembourg.
The main market for Eurobonds is the EuroMTS, owned by Borsa Italiana and Euronext.
There are ramp up market in Emergent countries, but it is growing slowly.

Physical nature of securities

Certificated securities
Securities that are represented in paper (physical) form are called certificated securities.
They may be bearer or registered.

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Bearer securities

Bearer securities are completely negotiable and entitle the holder to the rights under the
security (e.g. to payment if it is a debt security, and voting if it is an equity security). They
are transferred by delivering the instrument from person to person. In some cases, transfer is
by endorsement, or signing the back of the instrument, and delivery.
Regulatory and fiscal authorities sometimes regard bearer securities negatively, as they may
be used to facilitate the evasion of regulatory restrictions and tax. In the United Kingdom,
for example, the issue of bearer securities was heavily restricted firstly by the Exchange
Control Act 1947 until 1953. Bearer securities are very rare in the United States because of
the negative tax implications they may have to the issuer and holder.
Registered securities

In the case of registered securities, certificates bearing the name of the holder are issued, but
these merely represent the securities. A person does not automatically acquire legal
ownership by having possession of the certificate. Instead, the issuer (or its appointed agent)
maintains a register in which details of the holder of the securities are entered and updated
as appropriate. A transfer of registered securities is effected by amending the register.

Function
Secondary marketing is vital to an efficient and modern capital market. In the secondary
market, securities are sold by and transferred from one investor or speculator to another. It
is therefore important that the secondary market be highly liquid (originally, the only way to
create this liquidity was for investors and speculators to meet at a fixed place regularly; this
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is how stock exchanges originated, see History of the Stock Exchange). As a general rule,
the greater the number of investors that participate in a given marketplace, and the greater
the centralization of that marketplace, the more liquid the market.
Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the
investor's desire not to tie up his or her money for a long period of time, in case the investor
needs it to deal with unforeseen circumstances) with the capital user's preference to be able
to use the capital for an extended period of time.
Accurate share price allocates scarce capital more efficiently when new projects are financed
through a new primary market offering, but accuracy may also matter in the secondary
market because: 1) price accuracy can reduce the agency costs of management, and make
hostile takeover a less risky proposition and thus move capital into the hands of better
managers, and 2) accurate share price aids the efficient allocation of debt finance whether
debt offerings or institutional borrowing.

Related usage
The term may refer to markets in things of value other than securities. For example, the
ability to buy and sell intellectual property such as patents, or rights to musical
compositions, is considered a secondary market because it allows the owner to freely resell
property entitlements issued by the government. Similarly, secondary markets can be said to
exist in some real estate contexts as well (e.g. ownership shares of time-share vacation
homes are bought and sold outside of the official exchange set up by the time-share issuers).
These have very similar functions as secondary stock and bond markets in allowing for
speculation, providing liquidity, and financing through securitization.

Private Secondary Markets

Partially due to increased compliance and reporting obligations enacted in the SarbanesOxley Act of 2002, private secondary markets began to emerge. These markets are generally
only available to institutional or accredited investors and allow trading of unregistered and
private company securities.
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In private equity, the secondary market (also often called private equity secondarys or
secondarys) refers to the buying and selling of pre-existing investor commitments to private
equity funds. Sellers of private equity investments sell not only the investments in the fund
but also their remaining unfunded commitments to the funds.

EQUITY SHARES:
They are also called as common stock. The common stock holders of a company are its
real owners, the own the company and assume the ultimate risk associate with
ownership. Their liability, how ever is restricted to the amount of their investment in the
event of liquidation, these stock holders have a residual claim on the assets of the
company after the claims of all creditors and preferred stock holders,are settled in full.
Common stock like preferred stock, as no maturity date.NSE started trading in the
equities segment (Capital Market segment) on November 3, 1994 and within a short
span of 1 year became the largest exchange in India in terms of volumes
transacted.Trading volumes in the equity segment have grown rapidly with average daily
turnover increasing from Rs.17 crores during 1994-95 to Rs.14,148 corers during FY
2007-08. During the year 2007- o8,NSE reported a turnover of Rs.3,551,038 crores in
the equities segment.The Equities section provides you with an insight into the equities
segment of NSE and also provides real-time quotes and statistics of the equities market.
In-depth information regarding listing of securities, trading systems & processes,clearing
and settlement, risk management, trading statistics etc are available here.
AUTHORIZED, ISSUED AND OUTSTANDING SHARES:

An authorized shares is the maximum no. of shares that the articles of association (AOA)
of
thecompany permit it to issue in the market. A company can however amend its AOA to
increase the number. The number of shares that the company has actually issued out
these authorized shares is called as issued shares. A company usually likes to have a
number of shares that a authorized but un-issued. These un-issued allow flexibility in
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granting stock options, pursuing merger targets andsplitting the stock. Outstanding
shares refer to the number of shares issued and actually held by public. The corporation
can buy back part of its issued stock and hold it as a treasury stock.Par value , book
value and liquidating value :The par value of a share of stock is merely a recorded figure
in the corporate charter and is of little economic significance. A company should not,
however, issue common stock at a price less than par value, because any discount from
par value ( amount by which the issuing price is less than the par value) is considered a
contingent liability of the own wrest to the creditors of the company. In the event of
liquidation, the share holders would be legally liable to creditors of any discount from
par value.
Example: suppose that xyz inc. is ready to start business for the first time and sold
10000 shares rupees 10 each . the share holders equity portion of the balance sheet
would be common stock @ 10 each at par value:10000 shares issued and outstanding
RS100000 Total shares holders equity RS100000.The book value per share of common
stock is the shareholders equity total assets minus liabilities and preferred stocks as
listed on the balance sheet- dividing by the number of shares outstanding .suppose that
xyz is now 1 year old has generated RS 500000 after- tax profits, but pays number
dividing. Thus, retained earnings are RS 50000. the share holders equity is now RS
100000+ RS 50000 =150000 and the book value per share is rs 1500000/10000=RS
25.Although one might expect the book value per share of stock to correspond to the
liquidating value (per share) of the company, most frequently does not. Often assts are
sold for less than their values, particularly when liquidating costs are involved.

Market value
Market value per share is the current price at which the stock is traded. For actively
traded stocks, market price quotations are readily available. For the many in active
stocks that have thin markets, price are difficult to obtain. Even when obtainable, the
information may reflect only the sale of a few shares of stock of common stock and not
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typify the market value of the firm as the whole. The market value of a share of common
stock will usually differs from its book value and its liquidating value. Market value per
share of common stock is a function of the current and expected future dividends of the
company and the perceived risk of the stock on the part of investors.

Rights of common share holders:

1.Rights of income:
If the company fails to pay contractual interest and principle and payments
to creditors, the creditors are able to take legal action to insure that principle payments
are made of company is liquidated. Common share holders, on the other hand, have legal
recourse to a company for not distributing profits. only if management, the board of
directors, or both engaged in fraud may share holders take their case to court and
possibly force the company to pay dividends.
1. VOTING RIGHTS:
2.
The common shares of a company are its owners and they are entitled
to elect a board of directors. In a large corporations shares holders
usually exercise only indirect control through the board of directors they
elect. The board, in turn, select the management, and the management
actually controls the operations of the company. In a sole proprietorship,
partnership, or small corporation, the owners usually control the
operation of the business directly.

2. Proxies and proxy contests:

Common share holders are entitled to one vote for each share of stock that they
own . it is usually difficult, both physically and financially, for the most share holders to
attend a corporations annual meetings. Because of this, many share holders vote of
means of a proxy, a legal document by which share holders assign their right to vote to
another person.
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3. Voting procedures:
Depending on the corporate charter, the board of directors is elected under
either
Majority rule voting system or a cumulative voting system. Under the majority rule
system, stock holders have one for each share of stock that they own, and they must vote
for each director position that is open. Under cumulating voting system, a stock holder is
able to accumulate votes and cast them for less than the total number of directors being
elected. The total number of votes of each share holders is equal to the number of shares
the stock holder times the number of directors being elected.
ISSUE MECHNISM:
The success of an issue depends, partly, on the Issue Mechanism.
The methods by, which new issues are made of
1. public issue through prospectus.
2. Offer for sale.
3. Placement.
4. Rights issue.
1.

Public Issue Through Prospectus :

Under this method, the issuing companies themselves offer directly to general
public a fixed number of shares at a stated price, which in the case of new companies is
invariably the face value of the securities, and in the case of existing companies, it may
something include a underwritten to ensure arising out of unsatisfactory public
response. Transparency and wide distributions of shares are its important and
advantages. The foundation of the public issue method is a prospectus, the minimum
contents of which are prescribed by the Companies Act 1956. It also provides both civil
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and criminal liabilityfor any misstatement in the prospectus. Additional disclosure
requirements are also mandated by the SEBI.

The content of the prospectus, inter aria, include:

Name and registered office of the issuing company.

Existing and proposed activities.

Board of directors.

Location of the industry.

Authorized, subscribed and proposed issued of capital to public.

Dates of opening and closing of subscription list.

Names of broker, underwriter, and other from whom application forms along with
copies

prospectus can be obtained.

Minimum subscription.

Names of underwriter , if any, along with a statement that in the opinion of the
directors,

resources of the underwriter are sufficient to meet the underwriting obligation.

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A statement that the company will make an application stock exchange for the
permission to deal in or for a quotation of its and so on.
2. offer for sale:
Broker to their own client of securities which have been previously purchased or
subscribed. Under this method, securities are acquired by the issue houses, as in offer
for sale method, but instead of being subsequently offered to the public, they are placed
with the client of the issue houses, both individual and institutional investors. Each issue
house has a prepared to subscribe to any securities which are issued in this manner. Its
procedure is the same with the only Difference of ultimate investors. In this method, no
formal underwriting of the issue is required as the placement itself Amount to
underwriting since the houses agree to place the issue with their clients. The main
Advantages of placing, as a method issuing new securities, are its relative cheapness.
There is a cost cutting on account of underwriting commission, expense relating to
applications, allotment of shares and the stock exchange requirements relating to
contents of the prospectus and its advertisement. This method is generally adopted by
small companies with unsatisfactory financial performances. Its weakness arises from
the point of distribution of securities. As the securities are offered only to a select group
of investors, it may lead to the concentration of shares in to a few hands that may create
artificial scarcity of scripts in times of hectic dealings in such shares in the market.
3.Rights Issue :
Only the existing companies can use this method. In the case of companies
whose shares are already listed and widely-held , shares can be offered to the existing
shareholders. This is called right issue. Under this method, the existing shareholders. Are
offered the right to subscribed to new shares in proportion to the number of shares they
already hold. This is made by circular to existing shareholders only.

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In India, section 81 of the companies act 1956 provides that where a
company increases its subscribed capital by the issue of new shares, either after two
years of its formation or after one year of first issue of shares whichever is earlier,
these have to be first offered to the existing shareholders with this requirement by
passing a special resolution to the same effect. The chief merit of rights issues is that it
is an inexpensive method.

Sweat equity shares :

Under section 9Aof the companies Act , 1956, a company can issue sweat equity shares
to its employees or directors at discount or for consideration other than cash for
providing know-how making available rights in the nature of intellectual property rights
or value additions etc on the following.

Conditions:
1.

The issue of sweat equity share is authorized by a special resolution passed by the
company in the general meeting.
2. The resolution specifies the number of shares, current market, Price, resolution, if
any, and the class or classes of directors Or employees to whom such equity shares are
to be issued.
3. The company is entitled to issue sweat equity shares after completion of one year
from the date of Commencement Of business.
4. The equity shares of the company must be listed on a recognized stock exchange.
5. The issue of sweat equity shares must be listed on a accordance with the regulations
made by the SEBI in the behalf.
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6. An unlisted company can issue sweat equity shares in accordance with the
prescribed
guidelines made for this purpose.
7. All the limitations, restrictions and provision relating to equity shares shall be
applicable to sweat equity shares.

PREFERENCE SHARES:
Preference shares are a hybrid security because it has both ordinary shares and
bonds. Preference shareholders have preferential rights in respect of assets and
dividends. In the event of winding up the preference share holders have a claim on
available assets before the ordinary shareholders. In addition, preference shareholders
get their stated dividend before equity shareholders can

receive any dividends.

TYPES OF PREFERENCE SHARES:

1. Cumulative and Non-cumulative preference shares:
The cumulative preference gives rights to demand the unpaid dividends of
any year, during the subsequent ears when the profits and ample. All preference
dividends arrears must be paid before any dividends can be paid to equity shareholders.
The non cumulative preference share carry a right to a fixed dividend out of the profits
to any year. In case profits are not available in a year, the holders get nothing, nor can
they claim unpaid dividends in subsequent years.

2. Cumulative convertible preference shares:

The cumulative convertible preference (CCP) share is an instruments that embraces
features of both equity shares and shares and preference shares, but which essentially is a
preference shares. Since the CCP shares capital would constitute a class of shares,
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distinct from purely equity and purely preferences share capital, the rights of the
instrument holders must be stated either in a general body resolution or in the articles or
in the terms of issues in the offer documents viz., prospectus /letter of offer.
3. Participating and non participating preference shares:
Participating preference shares are those shares which are entitled to
a fixed preferential dividend and. in addition, carry a right to participate in the surplus
profits along with equity shares holders after dividend at a certain rate has been paid to
equity share holders. Again in the event of winding up, if after paying back both
preference and equity share holders, there is still any surplus left, then the participating
preference share holders get additional shares in the surplus assets of the company.
Unless expressly provided, preference share holders get only the fixed preference
dividends and return on capital in the event of winding up out of realized values of assets
after meeting all external liabilities and nothing more. The rights to participate may be
given either in the memorandum or articles or by virtue of terms of issue.

4. Redeemable and Irredeemable preference shares:

Subjects to an authority in the articles of association, a public
limited
company may issue redeemable preference shares to be redeemed either at a fixed date
or after a certain period of time during the life time of the company. The companies act,
1956 prohibits the issue of any preference share which is irredeemable or is redeemable
after the expiry of a period of twenty years from the date issue.

Power to Issue Redeemable Preference Shares:

Section 80 of the companies act 1956 permits a company to
issue
Redeemable preference shares if:

The company is limited by shares.

Its article of association authoriese the issue of redeemable preference shares.

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Those shares are redeemable at the option of the company.

A company is allowed to issue redeemable preference shares in the following
circumstances:

Such preference shares shall be redeemed only out of profits of the company,
which would otherwise be available for dividend.

Such redemption can also be made out of the proceeded of fresh issues of shares
made of the purpose of redemption.

Before redemption, such shares must be fully paid up.The premium on

redemption shall be provided out of profits of the company or out of securities
premium account, before the share are redeemed.

Where shares are redeemed out of profits to a separate account called capital

The redemption of preference shares under this section shall not be taken as
reducing the authorized capital of the company.

The capital redemption reserve account may used for issue of fully paid bonus
shares.Companies are not allowed to issued irredeemable preference shares or
preference shares which are redeemable after the expire of a period of 20 years from the
date of its issue.In case of default, the company and every officer of the company who is
indefault shall be punishable with a fine which may extend to Rs 10000.

Deferred/ Founders shares:

A private company any issue what are known as deferred or
founders shares. Such shares are normally held by promoters and directors of the
company. That is why they are usually called of a smaller denomination, say on rupee
each. How ever they are generally given. equal voting rights with equity shares, which
may be of higher denomination, say Rs10 each. Thus, by investing relatively lower
amounts, the promoter may gain control over the management of the company. As
regards the payment of dividends have been declared on the preference and equity
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shares. It is because of this deferment of the dividend payment that these shares are also
called deferred shares. The promoters, founders and directors tend to have direct interest
in the success of the company they will receive dividends on these shares only if the
profits are high enough to leave a balance of after paying dividends to preference an
equity shareholders. Besides greater the profits of the company , the higher will be
dividends paid on these shares.

Issued share at a premium:

When a company issues shares at a premium, whether or cash or
consideration other than cash, the premium collected on those shares shall be transferred
to a separate account called securities premium account. The provision of the act
relating reduction of shares capital shall also apply to the securities premium account
may be applied by the company in the following ways:
In paying up un issued shares of the company to be issued to members of the
company as fully paid up shares.
1.

In writing off the preliminary expenses of the company.

2.

In writing off the expenses of, or the commission paid or discount allowed on, any
issue of

3.

shares debentures of the company.

In providing for the premium payable on redemption of any preference shares or

debentures.
Issued share at a Discount:
The issue of shares at a discount must be of a class of shares issued by the
Company.
1. The issue of shares at a discount must be authorized by a resolution passed in the
general meeting and sanctioned by the central government.

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2. The resolution shall specify the maximum rate of Discount at which the shares
are to be issued.
3. The maximum rate of discount must not exceed 10% unless the central
government is of the Opinion that higher percentage of discount may be allowed in
special circumstances.
4. The shares must be issued within two months from the date of sanction by the or
within such extended time as the central government may allow.
5. The issue of shares at a discount can be done by a company only a year after the
Commencement of the business by the company.

DEBENTURES:
Acknowledge of debt , given under the seal of the company and containing a contract
for the
repayment of the principal sum at a specified date and for repayment of the principal
sum at a specified date and for the payment of interest at fixed rate percent until the
principal sum is
repaid,and it may or may not give the charge on the assets to the company as security
of the
loan.

Kinds of debentures:
1. Bearer debentures: Bearer debentures are similar to share warrants in that
too are negotiable instruments, transferable by delivery. The interest on bearer
debentures is paid by the means of attached coupons. On maturity, the principal sum is
paid to the bearers.

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2. Registered debentures: These are debentures which are payable to the registered
holders i.e.. persons whose names appear in the register of debenture holders. Such
debentures are transferable in the same way as shares.
3. Perpetual or Irredeemable debentures: A debenture which contains no clause as
to payment or which contains a clause that it shall not be paid back is called a perpetual
or : irredeemable debenture. These debentures are redeemable only on the happening of
a contingency on the expiration of a period, however long. It follows that debentures can
be made perpetual, i.e. the loan is repayable only on winding up or after a long period of
time.
4. Redeemable debentures : These debentures are issued for a specified period of
time. On the expiry of the specified time the company has the right to pay back the
debenture holders and have its properties released from the mortgage or charge.
Generally, debentures are redeemable.
5. Debentures Issued as Collateral Security for a Loan: The term collateral security
or secondary security means, a security which can be realized by the party holding it in
the event of the loan being not paid at the proper time or according to the agreement of
the parties. At times, the lenders of money are given debentures as a collateral security
for loan. The nominal value of such debentures is always more than the loan. In case the
loan is repaid, The debentures issued as collateral security are automatically redeemed.

Convertible debentures (CDs):

A company may also issue CDs in which case an option is given to the
debenture holders to covert them in to equity or preference shares at stated rates of
exchange, after a certain period. Such debentures once converted in to shares cannot be
reconverted in to debentures. CDs may be fully or partly convertible. In case of fully
convertible debentures, the inter face values converted in to shares at the expiry of
specified period(S). In case of partly convertible debenture only convertible portion is
redeemed at the end of specified period. Non convertible debenture do not confer any
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option on the holder to the debenture in to shares and are redeemed at the expiry of
specified period (s).CDs, whether fully or partly convertible, may be converted in to
shares at the end of specified periods in one or more stages. The company should get a
credit rating of debenture done by credit rating agency. CDs are listed on stock
exchanges. The partly convertible debenture (PCDs) offer more flexibility to both
companies and investors. It has been claimed to be better than fully convertible
debenture as it does not automatically entail large equity base, particularly in case of
new companies. Experience shows that servicing of large base of capital is not easy in
case of new projects, especially if the company runs in to rough weather due to
marketing difficulties. As such, the non-convertible portion of the debenture keeps the
equity of a company within manageable limits.

American Depository Receipts (ADR):

An American depository receipt (ADR) is a negotiable receipt which represents one or
more
depository shares held by a US custodian bank, which in turn represent underlying
shares of
non- issuer held by a custodian in the home country. ADR is an attractive investment to
US
investors willing to invest in securities of non US issuers for following reasons:

ADR provide a means to US investors to trade the non US company shares in US

dollars ADR

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ADR OFFERINGS:
A public offering provides access to the broadest US investor base and most
liquid US securities market. The compliance requirements in public offerings are the
strictest and comprise of Registration of underlying security under the Act (From F1)
Registration of ADR under the 1993Act (From F6) Registration under the 1934 Act (if
the company is not already Regulation act under the 1934 Act).

Global Depository Receipt (GDR):

With the growth in international equity issuance, together with growth in the
underlying
secondary market investment, an increasing need has been felt for better fungibility. The
investors demand stocks that trade freely on an international basis without restrictions.
The depository receipts have be used as a partial solution to this problem. American
depository receipts have been the favored forms of investments by US investors in
foreign equities. A number of international equity offers, particularly some Asian
markets have increasingly used global depository receipts (GDR),particularly where
legal restrictions and closed markets have prevented the world wide circulation of
underlying security on a freely trade basis. The GDRs continue to have value in liquid
or restricted markets and are frequently used by project companies to raise equity
funds.

CHARACTERISTICS OF A GDR:

Depository receipts are negotiable certificates with publicly traded equity of the issuer as

underlying security.

An issue of depository receipts would involve the issuer, issuing agent to a foreign

depository.

The depository, in turn, issues GDRs evidencing their rights as share holders.
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Depository receipts are denominated in foreign currency and are listed of international

exchange such as London or Luxembourg.

GDRs enable investors trade a dollar denominated instrument on an international stock

exchange and yet have rights in foreign shares.

The principle purpose of the GDR is to provide international investors with local

settlement.

The issuer issuing the shares has to pay dividends to the depository in the domestic

currency.

The depository has to then convert the domestic currency into dollars for onward

payment to receipt holders. GDRs bear no risk of capital repayment

MARKING TO MARKET
In the futures market, at the end of each trading day, the margin account is a adjusted to
reflect the investors gain or loss depending upon the futures closing price or settlement
price. This is called Marking-to-Market.
MAINTENANCE MARGIN:
If the balance in the margin account falls below the maintenance margin, the investor
receives a margin call and is expected to top up the margin account to the initial margin
level before trading commences on the next day.
BETA:
Beta is a concept to be used futures and options for hedging. Beta measures the
sensitivity of a share or a portfolio to that of the index. Beta of a share is found out by
relating the daily price changes of a share to the daily changes in a stock price index. If a
graph is drawn with daily changes of the share price on y axis and daily changes in the
index on x axis the slope of the straight line fitted will be the value of beta.
mathematically it is found by regression method. If the beta of Tisco is found to bel.23,it
implies if the index increases by 10% in a period, price of Tisco will increase by 12.3%.
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Beta of the portfolios is found by weighted average of the betas of the shares in the
portfolios. For example, an investors portfolio has equal value in Tisco and Infosys.
Tisco has a beta of 1.23 and Infosys has a beta 1.37.
SPECULATORS AND HEDGERS IN FUTURES:
Speculators buy and sell derivatives to make profit, while hedgers buy and sell
derivatives to reduce risk. Speculators are vital to derivatives markets. They facilitate
hedging and provide liquidity. It is highly unlikely that hedger wishing to buy futures
will precisely match hedgers selling futures in terms of contracts to be traded. If hedgers
are net sellers there will be tendency for futures prices to fall. Speculators will buy such
under period futures. Such purchases by speculators allow net sales on the part of
hedgers. In so doing, they tend to maintain price stability since they are buying into a
falling market. Proper speculation thus provides stability to prices in markets.In a liquid
market, hedgers can make their transactions with ease and with little impact costs.
Speculative transactions add to market liquidity. speculators by definition do a lot of
information search and processing to forecast future behavior of prices. Therefore they
make markets more information ally efficient. In the stock index futures markets
speculators have two alternative strategies. If they are bullish on the index they can go
long on index Futures. If the spot prices go up, future prices follow them along with their
carry premiums and the speculators make the profits.If the speculator is bearish he can
go short on the index futures. If the spot Index goes down, futures price also will go
down and speculator makes a profit. The two speculative strategies can be summarized
as:
Bullish market,

long

index

futures

Bearish market,

short

index

futures

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ARBITRAGE IN FUTURE AND SPOT MARKET:

Future prices and spot prices are tightly linked by the fair price formula. Also on the day
of the expiry, the final settlement price of the future is made equal to the spot index
price. thus at the end , the spot and futures prices converge. Any deviation between the
fair price and actual price of a future can be utilized for earning risk less profits by
agents who are willing to buy in the spot market and deliver in future at expiry. Such
operations are called as arbitrage operations. Buying in the spot and delivering in the
future market is resorted to when actual futures price in the market is higher than the fair
price.

Introduction to options:
Options give the holder or buyer of the option the right to do something. If the option is
called option, the buyer or holder has the right to buy the number of shares mentioned in
the contract at the agreed strike price. if the option is a put option, the buyer of the
option has the right to sell the number of shares mentioned in the contract at the agreed
strike price. the holder or the buyer does not have to exercise this right. Thus on the
expiry of day of the contract the option may or may not be exercised by the buyer. In the
contrast, in a futures contract, the two parties to the contract have committed themselves
to doing something at future date. To have this privilege of doing the transaction at a
future only if it is profitable, the buyer of options has to a premium to the seller of
options.

HISTORY OF OPTIONS:
In 1983 trading on stock index options contracts started. Since 1983, trading on options
of
individual options decreased as most of the trading shifted to index options. One of the
reasons is that volatilities of the individual scripts is high and therefore premiums on
individual scripts is also high. In India stock index options were introduced in june 2001.

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OPTION TERMINOLOGY:
INDEX OPTION:
An option having the index as the underlying asset. Like index futures contracts, index
option contract are also called cash settled.
STOCK OPTIONS:
Stock options are options on individual stocks. A contract gives the holder the right to
buy or sell shares at the specified price.
AMERICAN OPTIONS:
American options are options that can be exercised any time up to the expiration date.
This name is only a classification and does not imply that they are available only in
America.
EUROPEAN OPTIONS:
European options are options that can be exercised only on the expiration date. European
options are easier to analyze than American options, and properties of American options
are frequently deducted from those of its European counterpart.
CALL OPTIONS:
A call option gives the holder the right but not the obligation to buy an asset by a certain
date for a certain price.
PUT OPTIONS:
A put option gives the holder the right but not the obligation to sell an asset by a certain
date for a certain price.

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BUYER OF OPTIONS:
The buyer of the option, calls or put, pays the premium and buys the right but not the
obligation to exercise his option on the seller/writer.
WRITER OF AN OPTION:
The writer of a call/put option is the one who receives the option premium and is thereby
obliged to sell/buy the asset if the buyer exercises on him. Option writer is the seller of
the option contract.

STRIKE PRICE:
The price specified in the option contract at which buying or selling will take place is
known as the strike price or the exercise price.
OPTIONS PRICE:
Option price is the premium, which the option buyer pays to the option seller or writer.
Black and schools formula is widely used for determining the fair value of share.
EXPIRATION DATE:
It is the date on which the European option is exercised. It is also called as exercise date,
strike date or maturity date.
INTRINSIC VALUE OF AN OPTION:
The option premium cab be broken down into two components- intrinsic value and time
value.The intrinsic value of an option is the amount, which the holder will get by
exercising his option and immediately selling or buying the acquired shares in the spot
market. For example, if the strike price of a call option on Reliance shares is Rs.325 and
current market price is Rs.350. The holder of the option can buy the Reliance share at
Rs.325 by exercising the option and can make a profit of Rs.25 by immediately selling
them in the market. In this case the intrinsic value of the call option is Rs.25.

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TIME VALUE OF THE OPTIONS:
The time value of an option is the difference between its premium and its intrinsic value.
AT-THE-MONEY:
An option is called at-the-money option when the strike price equals, or nearly equals,
the spot price of the share. For example, if the strike price of stock index option on Nifty
index is also at 1080, the option is called at-the-money option.

SPOT PRICE > STRIKE PRICE IN-THE-MONEY:

A call option is in the money when the underlying asset price is greater than the strike price.
For example, if the strike price in the case of Nifty stock index option is 1050 and Nifty is at
1080, the option is in-the-money option.
SPOT PRICE = STRIKE PRICE
OUT-OF-THE-MONEY:
A call option is out-of-the-money if the strike price is greater than the underlying asset
price. For example, if the strike price in the case of Nifty stock index option is 1100 and
Nifty is at 1080, the option is out-of-the-money option.
SPOT PRICE < STRIKE PRICE
USES OF OPTIONS:
Like futures options are also used for hedging and speculations. Arbitrageurs can look
for Mispricing between spot, option and futures markets and do transactions whenever
they find miss pricing.

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TRADING OR SPECULATING WITH OPTIONS:

Options provide multiple opportunities for trading. Options premiums are determined by
volatility of the underlying asset, time to expiration of the option and the risk free
interest rate .Changes in any of these variables changes option premiums even though
the price of the underlying asset remains constant. Thus a speculator who analyses
multiple dimensions has a lot more opportunity in options to strategize and act.
ARBITRAGE WITH OPTIONS:
Arbitrage involves making risk less profits from miss pricing; relatively under priced
options are bought and relatively overpriced are sold. Pure arbitrage requires that none
of the arbitragers own capital is used. He should be able to borrow all the capital
required. If the arbitrager uses his own capital, the process is called quasi-arbitrage.
There will be number of situations providing arbitrage opportunity as three markets,
spot, futures and options are involved
SUMMING UP:
Options are used by hedgers and speculators. Options provide a variety of ways in which
they can be used to attain the hedging and speculative objectives. Thus trading interest
comes from different participants with different motives. Arbitrageurs will have
opportunities whenever option premiums are out of line with the fair prices. A fully
developed option market provides a good market for traders to display their trading
expertise and hedgers an alternative-hedging medium.
FORWARD CONTRACTS:
In order to avoid this risk one way could be that the farmer may sell his crop at an
agreed-upon rate now with a promise to deliver the asset, i.e., crop at a pre-determined
date in future. This will at least ensure to the farmer the input cost and a reasonable
profit. Thus, the farmer would sell wheat forward to secure himself against a possible
loss in future. It is true that by this way he is also foreclosing upon him the possibility of
a bumper profit in the event of wheat prices going up steeply. But the, more important is
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that the farmer has played safe and insured himself against any eventuality of closing
down his source of livelihood altogether. The transaction which the farmer has entered
into is called a forward transaction and the contract which covers such a transaction is
called a forward contract.
QUICK AND LOW COST TRANSACTIONS:
Futures contracts can be created quickly at low cost to facilitate exchange of money for
goods be delivered at future date. Since these low cost instruments lead to a specified
delivery of goods at a specified price on a specified date, it becomes easy for the finance
managers to take optimal decisions in regard to production, consumption and inventory.
The costs involved in entering into future contracts in significant as compared to the
value of commodities being traded underlying these contracts.
Price discovery function:
The price of futures contracts incorporates a set of information based on which the
producers and the consumers can get a fair idea of the future demand and supply position
of the commodity and consequently the futures spot price. This is known as the price
discovery function of futures.
Advantage of informed individuals:
Individuals, who have superior information in regard to factors like commodity demand
supply, market behavior, technology changes etc., can operate in futures markets and
impart efficiency to the commoditys price determination process. This in turn leads to a
more efficient allocation of resources.
Hedging Advantage:
Adverse price changes, which may lead to losses, can be adequately and efficiently
hedged against through futures contracts. An individual who is exposed to the risk of an
adverse change while holding a position, either long or short a commodity will need to
enter into a transaction which could protect him in the event of such an adverse change.
For example a trader who has imported a consignment of copper and the shipment is to
reach within a fortnight may sell copper futures if he foresees fall in copper prices. In
case copper prices actually fall, the trader will lose on sale of copper but will recoup
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through futures. On the contrary if copper prices rise, the trader will honour the delivery
of the futures contract through the imported copper stocks already available with him.

Employee stock option plans:

Employees stock options means the options given to the whole-time directors, officers
or employees of acompany, which gives such directors, officers or employees the benefit
or right to purchase or subscribe at a future date, the securities offered by the company at
a pre-determined price. Stock option is defined as the right to buy a designated stock
at an option of the holder at any time within a specified period at a determinable price. it
can also represents the right to sell designated stock within an agreed period at a
determinable price.
Benefits of ESOPs:
The ESOPs will benefit the organization in the following ways:

It is used as a HRD tool by the management in connection with restriction of higher

turnover of the employees and retaining the best talents with the organization.

The plan is used as a technique of corporate financing modernization, expansion,

spin-off a division, acquisition etc.

Issuing share, alternative to cash, have no immediate effect until they are converted
into cash Affecting new monetary supply into the real company.

Employees stock ownership plans in USA is used to avoid hostile takeover.

Without any financial strains the employees are rewarded by

printing of share certificated only.
Studies undertaken in USA on ESOPs suggest that they tend to out perform their
traditionally organized counterparts in variety of ways, better survival rates, higher
productivity, a better employment and sales growth and higher net operating margins.

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CHAPTER-3
COMPANY PROFILE

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CAPITAL MARKET

Ov e rv i ew
S M C G ro up , fo un de d i n 19 90 , is I nd i a s be s t Eq ui t y B ro ki ng H o us e an d
t he La rge s t D is tr ib u t io n N e tw or k, p ro vi d in g a w id e r an ge of f in an c i al
s er vi c es
a nd in v es t me nt s o lu t i on s .A bl e nd of ex t en s i v ee xp e ri e nc e ;
d iv er s e t a le n t an dc l i en t fo cu s h as ma d eu s a ch i ev e t hi s l a nd ma r k. O v er
t he
ye a rs , S M C h as e xp an d ed it s op er a t io ns d o mes t ic a l l y as w el l a s
i nt e rn a t io na l l y. E xi s t i ng n et w o rk in c lu d es re gi on a l offi c es at M u mb a i,
K o lk a t a,
Ch en na i,
A h ma d ab a d, J a ip u r,an dH yd e r ab a d, ba ng a lo r ep l us ag ro w i ng ne t w o rk of 25 00+ o
ffi ce s s pr ea d ac ro s s 50 0+ c i t ie s / t ow ns i nI nd i a.
We offer a di ve rs e r an ge of f in an c i a l s er vi ce s w h ic h i nc l ud es in s t i tu t io n al
a nd re ta i l br ok er ag e o f eq ui t y , cu rr en c y, co m mo di t i es , de ri v at i v es , on li n e
t ra d in g , d ep os it or y s e rv ic e s , fi xe d D e pos i ts , I P O s a nd mu t u al f un ds
d is tr ib u t io n , d ed i ca t ed d es k f or N R I a nd i ns ti t u ti on a l c li e n ts , i ns ur an c e
b ro ki ng , c l ea r in g s er vi ce s , ma rgi n f un di ng , i nv es t me n t b an ki ng , p or tf ol i o
ma n a ge men t , w ea l th ad vi s o r y & r es ea rc h . We ha ve a h ig hl y e ffic i e nt
w o rk fo rc e of ov er 3 ,3 50+ e mp lo ye es a nd o ve r 1 65 00 fi n an c ia l a dv is or s
s er vi ng th e f in an c i al ne ed s o f mor e th an 7, 20 ,0 00 s at is fi e d i nv es to rs .
We ar e a ls o a mon gs t t he fi rs t f in an c i a l f ir ms i n I nd ia to ex pa nd
o pe ra t io ns i n t h e lu cr a t iv e gu lf ma r ke t , b y ac qu i ri ng l i c en s e f or br ok in g
a nd cl e ar in g m e mb e r w it h D u ba i G o ld an d Co m mo di t i es ex ch an g e
(D G C X ). The S M C
A d va n ta g e:

T he S M C Ad va n t ag e :

L arge av en u es o f in ve s t me nt s o lu t io ns a nd f in a nc i a l s er vi ce s u nd er
o ne ro of

P ers on a li z ed s o lu t io n a nd a t te n t io n o ffe re d t o e a ch in ve s t or s

R es ea rc h s up po rt a nd ti me l y ad vi c e b y ou r hi gh - te c h r es e ar c h w in g

A n e x te ns iv e ne tw or k of b ra nc h o ffic es
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CAPITAL MARKET

A p er fe c t b le nd of l a t es t t ec hn o lo g y an d r ic h e xp er i en c e o f ov er 2 0
ye a rs

H o ne s t y, tr an s p ar e nc y a nd fa ir ne s s i mb i b ed in a l l o ur d ea l in gs

P ro vi de rs of on e of th e be s t tr ad i ng p la t fo r ms in t er ms o f s p ee d,
c on ve n ie n ce an d r is k ma na g e me n t t o tr a de in N S E , BS E, F &O ,
N C D E X , M CX ,, M CX - S X , N M CE , IC EX , AC E & D G CX

Key Management People

Mr.SCAggarwal
(Chairman & Managing Director, SMC Group)
Co-founder and promoter of the SMC Group, Mr.Aggarwal has rich and
extensive experience of more than 23 years. He has an in-depth knowledge and
strong understanding of various intricacies of Securities Market and Financial
Services. It is through his exceptional leadership skills and outstanding
commitment towards the company that SMC today has become the Best Equity
Brokerage and the Largest Distribution houses of India. His efforts have led to
the diversification of group business from Stock Broking and Arbitrage to
Commodity Broking, IPOs & Mutual Funds distribution, Insurance Products,
Merchant Banking, Wealth Management and Advisory Services. Mr. Aggarwal
is a member of the Managing Committee & Cost Accounting Standards
Committee of the Associated Chamber of Commerce and Industry
(ASSOCHAM). He is also the Co-Chairman of the Capital Market Expert
Committee of the ASSOCHAM. Along with this he holds the Chairmanship of
Capital Market Vision-2020 Committee of ANMI & Co- Opted Membership
of National Council of ANMI (ASSOCHAM Nominee).

Mr.MaheshGupta
(Vice Chairman & Managing Director, SMC Group)
Mr. Mahesh C Gupta is a Co-founder and Promoter of the SMC Group with
more than 23 years of widespread experience in Securities Market. He is also a
fellow member of the Institute of Chartered Accountants of India. His
extraordinary leadership skill, astute business acumen and disciplined life
style have helped SMC strongly diversify to a fully fledged financial services
firm with a Pan India presence across 500 cities providing Brokerage services
in equity, commodity, currency & derivatives, depository services, clearing
services, Investment banking, portfolio & wealth management, distribution of
Insurance, IPOs, Mutual Funds, Fixed Deposites and other 3rd party products.
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CAPITAL MARKET
His principles of honesty, transparency and moral integrity have given SMC
strong foundation based on which it has become the Best Equity Broker and
the Largest Distribution House in India. Mr. Gupta has also given his vital
contribution in various conferences & seminars on securities market
Mr.DKAggarwal
(Chairman & Managing Director SMC Comrade Limited & SMC Capitals
Limited; Chairman - SMC Investments & Advisors Ltd)
Mr. DK Aggarwal is one of the key architects of success of the SMC Group.
Innovation in offerings, Branding, Research and Arbitrage are his forte. He has
more than 20 years of wide and rich experience in Equity and Commodity
Broking and Arbitrage. He is the Chairman of SMC Wealth Management
Services Limited. He is an eminent speaker and regularly presents his views
and expertise on various market related issues through print and television
media. He is also a fellow member of the Institute of Chartered Accountants of
India. He is the National President of Commodity Participants Association of
India.
companys Securities and Commodities business. Mr Aggarwal is a person with
unmatched sharp calculative skills and analytical bent of mind.

Our Vision
To be a global major in providing complete investment solutions, with
relentless focus on investor care, through superior efficiency and complete
transparency.
CORPORATE ETHOS
Core Values
Ethicaldeals: Honestyistheonlypolicy.Experience and trust: Over 20 years of
experience has made SMC earn the trust of more than7, 20,000Investors.
Expertise:Know-howandskillstoprovideinvestorsanedge.
Personalized Solutions: Every investor is unique. Every solution is unique.
Our Approach
Value for investors trust: SMC values the trust reposed in by the clients and
iscommittedtoupholditatallcost.
Integrity and honesty: Integrity, honesty and transparency are the underlying
principlesinallourdealings. Personalized attention: The most valued asset is
our relationship with the clients, which has been built over years by giving
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personalizedattention. Network which works: SMC has a vast network
extending to 460+ cities and towns ensuring easy accessibility, convenience
and hassle free tradingexperience. Research based advisoryservices:SMC
offers proactive and timely world class research based advice and guidance to
its clients to enable them to take informed decisions
Our Credentials

Best Currency Broker in India (Source: UTV Bloomberg Financial

Leadership awards, 2011)

Best Equity Broking House in India (Source: BSE-D&B Equity Broking

Awards, 2010)

Largest distribution network in the country (Source: BSE-D&B Equity

Broking Awards, 2011 & 2010)

Indias Best Wealth management Company (Source : Business Sphere

2011)

Awarded the Fastest Growing Retail Distribution Network in financial

services (Source: Business Sphere, 2010)

Received Major Volume Driver award from

consecutively(2004-05, 2005-06 and 2006-07)

Nominated amongst the top 3, in the CNBC Optimix Financial Services

Award 2008 under "National Level Retail Category"

Amongst the First Financial Firms in India to expand operations in the

lucrative gulf market, by acquiring license for broking and clearing
member with Dubai Gold and Commodities exchange (DGCX)

One of the largest proprietary desk for doing near risk-free arbitrage in
equities and commodities

Institute of Economic Studies (IES) has honored our Chairman with the
Pride of India and Udyog Rattan awards. Also, IIFS has conferred
him with Glory of India award recently

Memberships & Registrations

Page 47

BSE

for

years

CAPITAL MARKET

Trading Member of NSE, BSE, NCDEX, MCX, DGCX, NMCE, ICEX,

ACE, USE, MCX-SX,National Spot Exchange Ltd.(NSEL) & NCDEX
Spot Exchange Ltd.( NSPOT).

Clearing Member in NSE (F&O, Currency), BSE (F&O),

MCX (Commodities), NCDEX,NMCE,MCX-SX, ICEX, ACE,USE &
DGCX

Depository Participant with CDSL & NSDL

Category 1 Merchant banker

Corporate Insurance Broker

(Registered with IRDA)

Distributor of IPOs & Mutual Funds (Registered with AMFI)

Portfolio Management Services (PMS) registered with SEBI

Non Banking Financial Company (NBFC) registered with RBI

Association
with
London
based
(Registered under FSA & NSA ,London)

ACE Derivatives and commodities Exchange (ACE)

for

Life

&

General

Sapien

Insurance

Capital,

Equities & Derivatives

Overview
Our experienced team of Research Analysts and Advisory Managers guide you
with appropriate solutions, backed by in-depth research, knowledge and
expertise on a regular basis. We constantly help you with strategies for equity
and derivatives investment, recommendations for trading on futures & options,
hedging with Nifty and other products and opportunities of near risk free
arbitrage between various segments.
Our Offerings
Online trading: SMC Trading Platform offers online equity & derivatives
trading facilities for investors who are looking for the ease and convenience of
a hassle free trading experience. We provide ODIN application, which is a
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CAPITAL MARKET
high-end, integrated trading application for fast, efficient and reliable
execution of trades. You can now trade in NSE and BSE simultaneously from
any destination at your convenience. You can access a multitude of resources
like live quotes, charts, research, advice and online assistance to help you take
informed decisions. You can also avail our state-of-art mobile trading
application "SMC mobitade"

Offline trading: You can also trade through our branch network by registering
as our client. We also provide trade through us on phone by calling our
designated representatives in the branches where you are registered as a client.
Trading in Equities with SMC truly empowers you for your investment needs.
We ensure that you have a superlative trading experience through:

A highly process driven, diligent approach

Powerful research & analysis support.

One of the "best-in-class" dealing rooms

Equities & Derivatives Overview Our experienced team of Research Analysts and Advisory
Managers guide you with appropriate solutions, backed by in-depth research, knowledge and
expertise on a regular basis. We constantly help you with strategies for equity and
derivatives investment, recommendations for trading on futures & options, hedging with
Nifty and other products and opportunities of near risk free arbitrage between various
segments. Our Offerings online trading: SMC Trading Platform offers online equity &
derivatives trading facilities for investors who are looking for the ease and convenience of a
hassle free trading experience. We provide ODIN application, which is a high-end,
integrated trading application for fast, efficient and reliable execution of trades. You can now
trade in NSE and BSE simultaneously from any destination at your convenience. You can
access a multitude of resources like live quotes, charts, research, advice and online
assistance to help you take informed decisions. You can also avail our state-of-art mobile
trading application "SMC mobitade" Offline trading: You can also trade through our branch
network by registering as our client. We also provide trade through us on phone by calling
our designated representatives in the branches where you are registered as a client. Trading
in Equities with SMC truly empowers you for your investment needs. We ensure that you
have a superlative trading experience through:

A highly process driven, diligent approach

Powerful research & analysis support.

One of the "best-in-class" dealing rooms

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CAPITAL MARKET
Our edge

Equity advisory team with highly trained equity professionals, who act as your
Equity Advisor and pro-actively help you take informed equity and derivatives
investment decisions and build a healthy portfolio

Pan India coverage

Powerful research support by a pool of highly skilled research analysts

Focused services which make investments in equities simple.

SMS service providing intraday research support to the clients.

Competitive brokerage rates

Call & Trade facility through a simple phone call

A superior trading platform

Prompt news on stock results, earnings, bonus, share holding patterns, etc.

Online trading account which provides exposure against the cash margin as well as
shares lying idle in clients DP account

Currency
Overview
Currently in India, there are 3 major exchanges offering Currency future trading NSE,
MCX-SX & USE. SMC Global Securities is a trading cum clearing member of all these
exchanges for the currency segment. We believe in the tremendous potential of currency
future to become a dominant force of the Indian financial market with a turnover which can
outperform even equity and commodity segment. We firmly believe that wider market
participation will bring more strength to the market & this can be achieved through
disseminating education & information among various market participants. For us, currency
is not just any other segment of business; it is "the business of future". Our Offerings
Offline trading: This is the most traditional way of carrying out trading in financial
markets. Clients can place their orders with our nearest branch by visiting them personally
or on the phone.
Online trading: Online trading offers the convenience to trade from the comfort of your
home / office. We provide trading software which can be downloaded by the client on any
system. Through their user ID & password, clients can start trading online. Alternatively, we
also provide the facility to trade through our browser based application.
Corporate advisory: We believe that corporate participation is the key to growth of this
segment. We understand that corporateS have a very special set of requirements for hedging
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CAPITAL MARKET
as well as investment. Every business needs customized solutions to its requirements and
that is what we deliver - hedging / investment solutions based on what is best-suited to the
business dynamics. Our dedicated team of Relationship Managers ensures that our
deliverables exceed the expectations & a long-lasting relationship is built.
Commodities
Overview SMC Comrade Limited, a key constituent of SMC Group of Companies, came
into existence at the very start of Commodity Exchanges in India. With nationwide presence,
it enables the retail & corporate investors to diversify their portfolio and enjoy the benefits
of commodity trading in MCX, NCDEX, NMCE, and ACE & ICEX. Our highly appreciated
research team guides the investors to make wise investment decisions for agri-commodity
market as well as international commodities trading.
SMC Comex International DMCC (part of SMC Group) is one of the initial, leading &
experienced clearing and broking members of Dubai Gold and Commodities Exchange
(DGCX). It offers commodity trading in Gold, Silver, Crude (WTI & Brent), Forex (INR,
Euro, and Dollar & Sterling) and Steel Rebar Contracts. For more information
Clearing Services Overview SMC is one of the leading clearing members, which currently
manages the clearing services for more than 134 trading members in different segments of
different exchanges. Our offerings We are Clearing Member of NSE (F&O, Currency), BSE
(F&O), MCX (Commodities), MCX-SX, NCDEX,NMCE,ICEX, ACE,USE & DGCX Our
edge

Trusted name in Broking Industry

One of the leading clearing members of NSE

Incredible track record of timely delivery of Commitments

Concern about timely need of Trading Members being, in the same fraternity

Attitude to follow the best practices in the Industry

Committed approach to business

Technologically sound to cope with the growing needs of Trading Members

Senior Professional personnel for every service need

Flexibility and adaptability to the dynamic needs of the market

Institutional Broking
Overview
Institutional Broking Services at SMC cater to the investment needs of leading domestic
and foreign institutional investors. Backed by incisive research, this division is a one-stop
investment gateway and knowledge repository for the clients, servicing their unique and
sophisticated needs. Our offerings Our efficient execution, quality research, top quality
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CAPITAL MARKET
human resources and complete compliance with stock exchange regulations as well as
business standard ethics lend towards our exemplary institutional services to investors
through:

IPOs

Equities

Derivatives

Mutual Funds

We also focus on identifying undiscovered value stocks to investors. Through our gamut of
institutional services, this division is well suited to the investment side of all classes of
institutional investors including Mutual Funds, Insurance Companies, Banks and FIIs. Our
edge

A wide array of products and services, specifically aimed at serving unique needs of
unique clients.

A research division with a designated team for each asset class and sector to evaluate
market trends and make unbiased and objective reports

Specialized services for international investors

Idea Generation and Stock Picks

In-depth, detailed and insightful coverage across different sectors which comprise :
o

Initiating coverage reports

Result Previews

Result Updates

Sect oral Reports

India Strategy Reports

An international distribution network servicing the needs of institutions &

corporate houses through a large global network and with the ability to
execute globally

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CAPITAL MARKET
Depository
Overview Depository Participants (DP) offers a safe & convenient way to hold securities in
electronic form as compared to paper form. It offers freedom from delays, forgeries,
settlement risk and paper work. SMC provides an integrated single platform for our clients
ensuring a quick, risk free and efficient process. We are participants of Central Depository
Services Limited (CDSL) and National Securities Depository Limited (NSDL). We believe
in efficient, cost-effective and integrated fixed deposit services support to our brokerage
business India. SMC, as a Depository Participant, offers depository accounts to individual
investors as well as corporate houses, which enables them to trade in the dematerialized
environment. We are one of the few Depository Participants offering depository facilities for
commodities. We are empanelled with NCDEX, MCX and spot exchanges. Our offerings

De-materialization of physical shares and mutual fund units into electronic form

Re-materialization to convert the dematerialized shares and mutual fund units into
physical form

Inter and intra fixed depository services to transfer securities from one demat
account to another

Pledging of shares and commodities to avail loans

Commodity demat account

Internet services for online access to demat account and research reports

SMS Alert Facility for debits and IPO credits in demat account

Loan against securities

Overview
Moneywise Financial Services Pvt. Ltd. (MFSPL), registered as a non banking financial
company (NBFC), is a subsidiary of SMC global securities Ltd. offers loan against securities
of shares. Our offerings

Available to all major Indian citizens

Additional buying power to create wealth and grab market opportunity

Loans against shares are extended against basket of securities traded on BSE/ NSE

List of securities is available on demand and/or on our web site

Client has to maintain requisite margin as per categorization of scrips, value based on
LTV
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CAPITAL MARKET

Margin calls are made if the value of margin falls by 10% which can be met either by
redemption of the securities or placing additional securities

Tailor-made scheme to cater to the needs of all segments of investors

Free trade environment

Interest application on daily balances to minimize the cost of fund

Bunch of financial products with expert opinion

Easy processing and simple documentation

Securities are to be transferred to MFSPL

Securities may be sold to ensure adequacy of stipulated margins without reference to

clients in case the margins are not maintained

Minimum interest rate subject to market conditions

Registration:

Applicant should have poa - demat and trading account with SMC global
securities Ltd.

Client should complete the Loan application along with necessary documents

Loan settlement and release of shares:

o

Loan can be settled by payment to Moneywise Financial Services Pvt. Ltd.

Shares shall be released on clearance of the payment

In case of closure, client has to clear all the dues

Shares may be released if matching securities are furnished. Surplus value of

shares may be released in part/full (as per borrowers request). Alternatively
surplus value of share may be used for additional funding

Distribution
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Overview
SMC offers distribution services of IPO, Mutual Funds, Public Issues, Company Fixed
Deposits, Bonds, Acquisitions and Mergers through its mammoth network of branches
across India. SMC also provides retail application financing in IPOs, FPO's & Bonds. We
assure you a hassle free and pleasant transaction experience through us. Our focus is to offer
integrated solutions for your investment needs of our investors. Our offerings

Mutual funds: The range of products includes liquid, gilt, debt, equity and balanced
funds. Moreover, the setup of a legal structure safeguards investors interests &
ensures that they are not cheated out of their hard-earned money.

Public issues: It is the first sale of a company's common shares to public investors.
This paves the way for listing and trading of their securities on the stock exchange.
With expert analysis and timely advice, it can prove to be a highly profitable
investment.

Fixed deposits: Company Fixed Deposit is an attractive option for regular income
with option to receive monthly, quarterly, half yearly & annual interest income.
Fixed Deposits in companies earn a fixed rate of return for specified time period.
Deposits mobilized are governed by the Companies Act under Section 58A. It may
be noted that deposits are unsecured, and hence in of any default by of company, the
investor cannot sell the documents to recover his capital, thus making it a risky
investment option.

Bonds: We also deal in Capital Gain Bond Issues which facilitates tax exemption
against long term capital gain as per Sec 54EC of Income Tax Act. Besides this we
all deal in GOI 8% Bonds and Bonds issued by Companies from time to time.

Our edge
Being one of the leading distribution houses, we aim at helping you in financial planning
and achieving long-term goals through our widespread network and team of financial
advisors. Contact us:
Research
Overview
With the EIC (Economy, Industry, and Company) approach, our Research team offers timely
Research reports covering investment summary, trend of world markets, sector trends,
commodity trends. The same is covered in our esteemed weekly magazine Wise Money.
We have a team of highly experienced analysts, who cover stocks, commodity, currency,
mutual funds and special reports. All our research reports, estimates and enhanced analytics
are available on our website www.smctradeonline.com our offerings Equity Reports:

Morning Mantra

Evening Buzzer
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CAPITAL MARKET

Derivatives

IPO Reports

Wise Money equity content.

Commodities Reports:

Morning Mantra- Agri

Morning Mantra- metals & energy

Afternoon Metals & Energy

Evening Buzzer- Agri & Metals

Special Commodities Updates

Trading opportunity report

DGCX Daily

Currency Reports:

Currency Daily

Afternoon Currency Buzzer

Mutual fund Reports:

NFO Analysis

Mutual Fund Tracker

Mutual Fund Weekly update

Portfolio Monitor

Special reports:

Result Updates

Pre-Budget Analysis

Post-Budget Analysis
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CAPITAL MARKET
Newsletters:

Wise Money

SMS service
Chat rooms our edge we specialize in five core product areas. These are Equities,
Commodities, Currencies, Derivatives and Mutual Funds. Our views are purely based on
analysis and are independent, unbiased and balanced.
Online Trading
Overview
SMC Online is your single gateway for all your financial needs. Now, you can invest online
in Equities, Commodities, IPOs, Mutual Fund Schemes and Currency Futures anywhere
anytime. You can access a multitude of resources like live quotes, charts, research, advice
and online assistance to help you take informed decisions. You can also access your account
from anywhere using our Call-N-Trade services. So get empowered and enrich your
experience of online trading, which opens the door to a whole new world of possibilities to
get convenient & hassle-free online stock trading experience. Our offerings SMC Trading
Platforms offer investors the ease and convenience of an uninterrupted trading experience.
SMC offers seamless Online Trading experience with freedom to opt for a product that
meets your needs:
SMC SELECT - Easy to use simple web-based trading platform for beginners

SMC EXCLUSIVE - Advanced web-based trading platform with live streaming

quotes

SMC PRIVILEGE - Software-based trading platform for active traders.

SMC Mob trade - state-of-art mobile trading application.

Clients opting for above mentioned products get facility to invest in IPOs & Mutual Fund
schemes at no extra cost. Our edge

Convenience of integrating the Bank, Trading and Demat accounts with attractive
brokerage options

Designed for better speed for instant order & trade confirmation

Lifetime free AMC option

User friendly platforms

24 X 7 online back office access

Pan-India presence
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Dedicated customer care

Excellent research & advisory support

A range of trading options

State-of-the-art technology

Wealth Management
Overview
At SMC Investments & Advisors Ltd., we abide by one principle, Precious solutions for
your Precious Wealth. We bring together a comprehensive knowledge base with over two
decades of experience to design customized solutions. Our dedicated Wealth Managers
develop personalized wealth management strategies for our clients by listening to them and
understanding their financial needs and goals. Our investment solutions cater to the financial
needs of high net-worth individuals, retail clients, corporate houses and financial
institutions. Our offerings our wealth management services include:

Portfolio Management Services

Multi Manager Investment Solutions

Portfolio Advisory

Trading in Equity, Currency, Interest Rate Futures

Depository Services

Mutual Funds & IPOs

Fixed Income Products

Near Risk-free Arbitrage Products

Structured Products

Real Estate Funds

Private Equity Funds

Financial Planning

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CAPITAL MARKET
At SMC Investments, benefit from our collaborative team approach, customized solutions
and proactive risk management. Our edge

Understanding and addressing of our client's financial needs

Working with investment experts, financial planners and tax experts to see the big

A belief that "Every client is unique & every plan has to be unique"

Dedicated Wealth Managers

Transparency in all our dealings

High client focus

Investment Banking
Overview
SMC Capitals Limited is the Investment Banking arm of SMC group and is a SEBI
registered Category I Merchant Banker with strong management team; financial sponsors
and corporate partners to help corporate clients achieve their financial and strategic goals.
We offer a wide spectrum of investment banking services covering Corporate Advisory,
Public Issues Management, Capital Restructuring, Private Equity and Debt Syndication,
Merger & Acquisition Advisory, Valuation Services and ESOP.
SMC Capitals is associated with London-based Spien Capital. Sapien is authorized and
regulated by the Financial Services Authority (FSA), UK and is a member of the London
Stock Exchange (LSE) which helps companies to raise money from foreign markets by
issuing ADR, GDR and IDR. Sapien is also an approved broker for the AIM segment of the
LSE. Our offering SMC capitals offer a wide spectrum of services covering:

Corporate Advisory

Public Issue Management

Capital Restructuring

Private Equity and Debt Syndication

Buybacks

Delisting

ESOP
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CAPITAL MARKET

QIPs

FCCBs

Merger & Acquisition Advisory

Valuation Services

Our edge At SMC Capital we put our clients' success first and seek to develop broader and
deeper, lasting relationships with them. We feel proud to say that our clients are at the
centre of everything we do. We focus on their ever-growing needs, implementing the best
solutions across the whole value chain in which they operate.
Insurance
Overview
SMC offers risk management services and a complete range of insurance solutions through
its subsidiary company SMC Insurance Brokers Pvt. Ltd. The company holds a Direct
Insurance Broker's license from Insurance Regulatory and Development Authority (IRDA)
and provides a wide array of Life Insurance and General Insurance products under
professional guidance of experts in the field. SMC provides customized solutions to
individual clients, small and medium enterprises as well as to the leading corporate houses
and institutions across the country. Our philosophy We believe that "a transaction is for a
moment but a relationship is forever". Hence we give all transactions equal importance
and strive to offer our esteemed clientele an unmatched service. Our edge

Pan India presence with 2500+ offices of group companies

1,00,000+ customers

1500+ man years of General Insurance experience

Robust IT Infrastructure with over 1 lac Sq. ft. office space

Widest possible product range

A team of passionate professionals with strong Domain knowledge and expertise

Flexibility to choose product of any insurance company

Quality of services

Customized solutions

Value addition for our customers

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Comprehensive Risk Portfolio Management including identification, measurement,

assessment and handling of the risk, of which insurance is an integral part.

Designing of customized and qualitative insurance programme

Offer of choices while recommending suitable insurance policies

Assistance in deciding sum insured to avoid under-insurance

Due to our volume of business, knowledge of market and expertise, we are able to
obtain the best possible premium rates.

Selection of Policy wording and clauses where choice is available

Assistance in processing of claims to obtain fair and prompt settlement from

Insurance Companies

Extensive rapport and liaison with insurance companies

Outsourcing of major part of insurance function

NRI (NON RESIDENTAL OF INDIA)

We at SMC, guide our NRI clients at every step of their investment needs so that they have
complete peace of mind about their investments in India. Our past performance in financial
markets is testimony to our consistent approach towards customer delight by fulfilling their
investment needs. For NRI investors, it is very important to select investment avenues with
due diligence because it is all about hard earned money & future financial security. Our
capability to analyze relevant information in market trends, relevant data and the best-inclass investment products plays an important role in assisting our NRI clients in making a
right decision. Our rich experience of capital market & retail financial services makes us a
reliable NRI investment solutions company. Our products, services and technology adopted
are directed towards enabling us to provide a state of the art customer convenience, thereby
facilitating an excellent investment experience.

India's economy is sizzling and is one of the fastest growing in the world

Political stability and broad consensus on reforms Liberal and transparent foreign
investment regime

Well developed banking system

Page 61

CAPITAL MARKET

Vibrant capital market. (National Stock Exchange: third largest, Bombay Stock
Exchange: 5th largest in terms of number of trades)

India is rated as the most attractive destination for offshore business processing by
global consultancy A T Kearney

India amongst the leading entrepreneurial hotbeds globally (Red Herring clubs India
with Israel)

Indian policies fully compatible with World Trade Organization

World bank sees Indias growth positive (Source Hindustan Times)

220 of the fortune 500 companies source software from India

Page 62

CAPITAL MARKET

CHAPTER-4
DATA ANALYSIS AND
PRESENTATION

STOCK MARKET
Stock Prices
Page 63

CAPITAL MARKET
Company : LICHSGFIN ( 500253 )
Period ( 01-Dec-2013 to 31-Dec-2013 )
Date
1/12/13
2/12/13
3/12/13
4/12/13
7/12/13
8/12/13
9/12/13
10/12/13
11/12/13
14/12/13
15/12/13
16/12/13
17/12/13
18/12/13
21/12/13
22/12/13
23/12/13
24/12/13
29/12/13
30/12/13
31/12/13

Open
Price
845.00
876.00
846.00
850.00
850.00
840.00
840.00
822.00
838.00
812.00
770.00
770.00
799.90
785.00
776.70
767.05
775.00
770.00
799.00
800.00
810.00

High
Price
874.30
884.70
868.80
859.90
857.00
853.50
853.00
833.25
838.00
816.00
802.90
799.45
799.90
791.65
783.00
780.50
796.90
805.05
814.00
812.80
815.00

Low
Price
845.00
851.10
845.20
845.50
836.20
832.00
823.20
820.10
805.65
792.00
770.00
770.00
782.00
768.40
763.25
767.05
773.00
770.00
789.00
800.00
797.15

Close
Price
869.05
856.45
851.55
849.95
840.10
849.80
826.55
824.00
810.85
795.05
785.70
790.10
787.00
772.20
766.80
774.00
791.95
790.10
803.75
802.80
803.55

WAP
868.43
871.74
859.53
852.83
847.62
843.12
834.82
826.69
821.05
802.13
791.19
789.74
789.81
781.41
773.64
775.18
789.70
796.22
804.92
806.96
804.22

Page 64

No. of No. of Total Turnover

Shares Trades
(Rs.)
1,94,950 5,088
16,92,99,654
3,14,497 8,650
27,41,59,002
1,91,405 5,153
16,45,17,854
1,50,450 4,421
12,83,08,850
1,22,889 3,798
10,41,63,548
1,70,081 4,725
14,33,99,416
2,20,565 5,085
18,41,31,368
2,37,803 6,931
19,65,89,208
1,78,386 4,768
14,64,63,084
1,98,698 5,679
15,93,81,234
2,19,339 6,635
17,35,39,765
2,30,770 6,746
18,22,47,765
1,60,496 4,108
12,67,61,793
1,04,409 3,521
8,15,86,269
1,18,620 4,076
9,17,68,806
1,04,623 3,332
8,11,01,904
2,55,763 5,910
20,19,76,722
1,84,449 4,528
14,68,62,794
2,58,766 8,030
20,82,85,848
1,00,847 3,400
8,13,79,908
1,85,268 3,407
14,89,95,836

CAPITAL MARKET
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

INTERPRETATION:
On 1st dec open value has increased to 869.05 than compared to higher value of
EPS 866.43. Then coming to higher price to 865.23 wholly the conclusion is 811.49.
Then coming to the volume on the same dates or days volume are increased.
Because totally this month LIC House finance. EPS value is increased i.e. percentage
21%.

Stock Prices
Page 65

CAPITAL MARKET
Company : ANDHRABANK ( 532418 )
Period ( 01-Dec-2013 to 31-Dec-2013 )
Date
1/12/13
2/12/13
3/12/13
4/12/13
7/12/13
8/12/13
9/12/13
10/12/13
11/12/13
14/12/13
15/12/13
16/12/13
17/12/13
18/12/13
21/12/13
22/12/13
23/12/13
24/12/13
29/12/13
30/12/13
31/12/13

Open
Price
115.05
118.00
119.85
120.00
118.00
116.40
116.00
115.00
118.85
113.50
113.00
106.00
104.00
103.55
102.45
103.50
104.40
105.95
107.35
106.35
105.00

High
Price
116.80
121.95
121.55
120.00
118.90
117.35
116.80
118.00
119.00
114.80
113.00
107.90
106.60
105.00
104.45
104.25
105.70
108.20
108.00
106.35
105.40

Low
Price
114.30
117.50
118.30
116.50
115.20
113.70
114.40
113.25
113.00
111.70
105.00
101.65
102.40
102.00
102.10
103.10
104.30
105.95
105.10
103.05
104.10

Close
Price
115.90
118.25
119.15
117.20
115.85
116.95
114.75
117.45
113.65
112.15
106.10
103.80
105.80
102.35
102.55
103.65
105.20
107.35
105.50
104.00
104.35

WAP
115.52
119.71
120.31
117.94
117.18
115.58
115.40
115.15
115.17
112.57
108.21
103.89
105.02
103.61
103.28
103.70
104.97
107.23
105.91
103.72
104.61

Page 66

No. of No. of Total Turnover

Shares Trades
(Rs.)
84,410
917
97,51,014
8,01,076 5,250
9,58,96,608
3,64,964 3,015
4,39,09,611
1,69,543 1,585
1,99,96,008
1,28,895 1,230
1,51,03,983
1,32,164 1,301
1,52,75,648
1,85,019 1,259
2,13,52,091
3,11,462 1,889
3,58,65,468
3,86,266 2,184
4,44,84,452
1,39,618 1,363
1,57,17,332
2,77,440 2,419
3,00,22,879
3,41,565 2,683
3,54,86,504
2,50,937 2,064
2,63,54,577
2,76,763 1,683
2,86,74,593
1,11,448 1,248
1,15,10,143
87,022
876
90,23,826
1,89,798 1,430
1,99,23,466
2,57,976 1,907
2,76,62,449
5,97,681 1,097
6,32,98,938
3,63,796
939
3,77,33,915
88,834
666
92,93,282

CAPITAL MARKET
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1 2 3 4 5 6 7 8 9 101112131415161718192021

INTERPRETATION:
On 1st dec open value has increased to 115.90 than compared to higher value of
EPS 114.51. Then coming to higher price to 121.32 wholly the conclusion is 120.54
Then coming to the volume on the same dates or days volume are increased.
Because totally this month Andhra Bank. EPS value is increased i.e. percentage 11%.

Page 67

CAPITAL MARKET

Stock Prices
Company : BAJAJAUT ( 532977 )
Period ( 01-Dec-2013 to 31-Dec-2013 )
Date
1/12/13
2/12/13
3/12/13
4/12/13
7/12/13
8/12/13
9/12/13
10/12/13
11/12/13
14/12/13
15/12/13
16/12/13
17/12/13
18/12/13
21/12/13
22/12/13
23/12/13
24/12/13
29/12/13
30/12/13
31/12/13

Open
Price
1,502.65
1,650.00
1,705.00
1,686.00
1,651.00
1,625.00
1,644.00
1,678.95
1,652.00
1,724.00
1,795.00
1,744.00
1,731.00
1,725.00
1,710.00
1,678.00
1,700.00
1,709.00
1,715.00
1,681.10
1,714.85

High
Price
1,647.00
1,699.00
1,712.00
1,686.00
1,674.00
1,650.00
1,685.00
1,690.00
1,732.00
1,800.00
1,799.90
1,750.00
1,743.85
1,748.60
1,710.00
1,706.75
1,720.00
1,734.95
1,728.25
1,710.00
1,779.80

Low
Price
1,480.00
1,648.00
1,666.00
1,638.10
1,621.20
1,621.00
1,625.20
1,628.10
1,652.00
1,724.00
1,730.25
1,702.00
1,717.00
1,700.00
1,638.00
1,678.00
1,700.00
1,686.00
1,677.00
1,657.00
1,705.20

Close
Price
1,637.55
1,690.80
1,684.15
1,651.40
1,629.65
1,640.55
1,670.70
1,643.15
1,724.50
1,784.30
1,742.70
1,729.75
1,728.05
1,704.10
1,672.05
1,695.35
1,705.75
1,700.00
1,683.10
1,698.50
1,761.70

WAP
1,618.07
1,684.10
1,698.25
1,657.58
1,656.27
1,638.69
1,671.04
1,651.25
1,712.98
1,763.36
1,755.27
1,724.98
1,726.55
1,715.99
1,673.85
1,698.00
1,709.66
1,712.38
1,702.03
1,679.12
1,751.86

Page 68

No. of No. of Total Turnover

Shares Trades
(Rs.)
1,72,520 3,075
27,91,50,087
1,13,531 3,356
19,11,97,730
34,188 1,735
5,80,59,756
16,759 1,038
2,77,79,300
25,385
951
4,20,44,438
11,373
741
1,86,36,817
35,876 1,374
5,99,50,231
36,837 1,271
6,08,26,971
1,52,019 4,479
26,04,05,276
1,29,493 4,057
22,83,43,375
85,917 2,333
15,08,07,405
38,729 1,588
6,68,06,828
22,822 1,403
3,94,03,297
11,911
707
2,04,39,111
1,17,379 1,108
19,64,74,911
26,551 1,050
4,50,83,663
25,592
863
4,37,53,699
51,312 1,195
8,78,65,759
13,882
661
2,36,27,599
60,044 1,350
10,08,21,117
86,972 2,164
15,23,62,559

CAPITAL MARKET
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
1 2 3 4 5 6 7 8 9 101112131415161718192021

INTERPRETATION:
On 1st dec open value has increased to 1,637.45 than compared to higher value of EPS
1,647.52. Then coming to higher price to 1,684.18 wholly the conclusion is 1.686.32
Then coming to the volume on the same dates or days volume are increased.
Because totally this month Baja auto. EPS value is increased i.e. percentage 29.25%.

Page 69

CAPITAL MARKET
Stock Prices
Company : SUNPHARMA ( 524715 )
Period ( 01-Dec-2013 to 31-Dec-2013 )
Date
1/12/13
2/12/13
3/12/13
4/12/13
7/12/13
8/12/13
9/12/13
10/12/13
11/12/13
14/12/13
15/12/13
16/12/13
17/12/13
18/12/13
21/12/13
22/12/13
23/12/13
24/12/13
29/12/13
30/12/13
31/12/13

Open
Price
1,466.00
1,560.00
1,500.00
1,494.60
1,500.00
1,453.25
1,465.00
1,490.00
1,477.00
1,459.00
1,472.00
1,453.00
1,477.00
1,484.00
1,505.00
1,499.95
1,513.55
1,539.00
1,550.10
1,535.00
1,545.00

High
Price
1,554.95
1,592.00
1,520.00
1,507.90
1,500.00
1,480.00
1,496.95
1,490.00
1,477.00
1,476.00
1,472.00
1,474.90
1,490.00
1,517.00
1,513.95
1,508.80
1,542.00
1,573.90
1,569.00
1,538.10
1,545.00

Low
Price
1,458.15
1,485.00
1,487.00
1,470.00
1,448.00
1,446.10
1,465.00
1,449.10
1,430.00
1,445.50
1,446.00
1,453.00
1,455.20
1,480.00
1,478.05
1,480.00
1,505.00
1,521.30
1,530.00
1,505.05
1,501.00

Close
Price
1,538.80
1,495.35
1,494.60
1,481.70
1,453.25
1,466.95
1,479.90
1,453.35
1,441.45
1,450.75
1,450.45
1,467.90
1,481.30
1,497.85
1,495.30
1,503.55
1,538.00
1,563.65
1,537.95
1,518.55
1,507.10

WAP
1,524.80
1,537.02
1,502.69
1,487.85
1,462.90
1,464.02
1,481.17
1,461.50
1,450.01
1,460.63
1,457.22
1,467.38
1,480.95
1,504.67
1,495.16
1,499.38
1,528.19
1,553.08
1,546.48
1,518.54
1,521.17

Page 70

No. of No. of Total Turnover

Shares Trades
(Rs.)
58,619 2,729
8,93,81,964
1,05,464 4,185
16,20,99,880
36,825 1,588
5,53,36,678
27,739 1,363
4,12,71,406
14,239 1,047
2,08,30,269
16,320 1,140
2,38,92,822
36,257 2,166
5,37,02,617
30,652 1,813
4,47,97,784
18,227 1,223
2,64,29,316
15,965 1,258
2,33,18,990
7,060
645
1,02,88,005
18,616 1,431
2,73,16,745
17,740
942
2,62,71,994
29,002 1,655
4,36,38,530
20,924
640
3,12,84,650
8,492
495
1,27,32,710
19,145 1,260
2,92,57,246
16,866 1,016
2,61,94,315
8,046
506
1,24,42,944
10,914
664
1,65,73,387
9,568
769
1,45,54,546

CAPITAL MARKET
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1 2 3 4 5 6 7 8 9 101112131415161718192021

INTERPRETATION:
On 1st dec open value has increased to 1,538.80 than compared to higher value of EPS
1596.32 Then coming to higher price to 1,658.25 wholly the conclusion is 1,598.32.
Then coming to the volume on the same dates or days volume are increased.
Because totally this month Sun Pharmacy. EPS value is increased i.e. percentage
25.36%.

Page 71

CAPITAL MARKET

CHAPTER-5
SUGGESTIONS & CONCLUSIONS

Page 72

CAPITAL MARKET

SUGGESTIONS
There must be prohibition on disposal of promoters share holding, and also
restrictions and the expansion without prior approval of the financial
institutions for declaration of higher amount/ rate.
The availability of derivative products in eluding index futures, index
options, individual stock futures and individual stock options re-enforces the
overall attractiveness of this market to foreign and domestic investors.
Volume of paper work is small but it is very complicated to maintain data in
system so tries to reduce that by regular audit and updating data.
Most of the DPs do not have the necessary infrastructure to handle the high
work load of transactions leading to may error by DPs, so by giving full
infrastructure information to every DO can avoid this problem.
The pool account doesnt know the true owner of the share and hence
dividends are paid to the broker instead of owners by this the broker can do
any manipulation or any fraud with the owner, for this the owner can loose
his dividend.
Hence for this try to pay the dividend directly to the owner.
If the shares are fake/forged which delivery by the broker the share holder
can loose that shares an have to receive another lot of issued shares from the
broker in 21 days, this system stands abused.
So minimize that waiting days are deliver the issued shares to the share
holder as soon as
Possible.

Page 73

CAPITAL MARKET

CONCLUSION
The comprehensive study of capital market instrument at Inter Connected
stock exchange has been an enlightening experience stressing on the positive
aspects on Dematerialization.
And settlement of shares, derivative market and capital instruments has done
in whole lot of good to the issuer, investor companies and country.
The depository systems has reduced the lag in delivery and settlement of
securities but also supported the cause of providing more liquidity to the
security holder, the need for setting up of a depository paper less trading.
Through online trading system and settlement became inevitable and
unavoidable for the smooth and the efficient functioning of the capital
market.
This system has proved its worthiness by increasing in the speed of
transactions within T+3 days which are earlier T+5 days.

Now there is a proposal that the settlement will be done within T+1days in
near future which is in it an indication of a boon in the system of demat and
capital market instruments.
It has been fairly long since derivative trading started off on the Indian
Indexes.

Page 74

CAPITAL MARKET
Actively has failed to really take off with low figures being transacted in
terms of value and volumes.
The introduction of derivative trading was hailed by the punters in the capital
markets but has not really brought about a wave so as to speak.
There are several factors, which impede the growth of the derivative markets
in India.
Of these factors the absence of clear guidelines on tax-related issues and the
high cost of transactions are the most prominent.
Now it is T+2days started from 1 April 2003.

Page 75

CAPITAL MARKET

BIBLIOGRAPHY
REFFERED
Financial Investment V.K. Balla
Financial Markets and Services Gordon & Natarajan
Financial management, IM PANDEY
Security analysis portfolio management PUNITHAVATHI PANDIAN

WEBSITES :
http://www.mcgraw-hill.co.uk/html/0071263926.html
http://www.exeltip.com/book-0471409154. html
http://www.infibeam.com/books/equity/97
http://www.focusinvestor.com/book-list.html
http://www.wiley.com/wileycda/producted- 0470395214.html
http://www.focusinvestor.com/book-list.html

JOURNALS :
The week
Business today

NEWS PAPERS :
Times of india
Economic timesBusiness line

Page 76