CHAPTER-I

INTRODUCTION

INTRODUCTION
Customer satisfaction:
The state in which customer needs, wants and expectations throughout the
product or service's life are met or exceeded resulting in repeat purchase, loyalty
and favorable worth-of mouth.
According to Jones and Sasser (1995), four basic elements affect customer
satisfaction.

A business term, is a measure of how products and services supplied by a company meet
or surpass customer expectation. It is seen as a key performance indicator within business and is
part of the four of a Balanced Score motors.
In a competitive marketplace where businesses compete for customers, customer
satisfaction is seen as a key differentiator and increasingly has become a key element of business
strategy.
There is a substantial body of empirical literature that establishes the benefits of customer
satisfaction for firms.

Automobile Industry:
Industry that produces

automobiles and other gasoline-powered vehicles,

such as buses, trucks, and motorcycles. The automobile industry is one of the most
important industries in the world, affecting not only the economy but also the
cultures of the world. It provides jobs for millions of people, generates billions of
dollars in worldwide revenues, and provides the basis for a multitude of related
service and support industries. Automobiles revolutionized transportation in the
20th century, changing forever the way people live, travel, and do business.

The automobile has enabled people to travel and transport goods farther and faster, and
has opened wider market areas for business and commerce. The auto industry has also reduced
the overall cost of transportation by using methods such as mass production (making several
products at once, rather than one at a time), mass marketing (selling products nationally rather
than locally), and globalization of production (assembling products with parts made worldwide).
From 1886 to 1898, about 300 automobiles were built, but there was no real established industry.
A century later, with automakers and auto buyers expanding globally, auto making became the
world's largest manufacturing activity, with nearly 58 million new vehicles built each year
worldwide.
As a result of easier and faster transportation, the United States and world economies
have become dependent on the mobility that automobiles, trucks, and buses provide. This
mobility allowed remote populations to interact with one another, which increased commerce.

The transportation of goods to consumers and consumers to goods has become an industry in
itself. The automobile has also brought related problems, such as air pollution, the emission of
greenhouse gases that contribute to global warming, congested traffic, and highway fatalities.
Nevertheless, the automobile industry continues to be an important source of employment and
transportation for millions of people worldwide.

Automobile India:
The history of the automobile industry in India actually began about 4,000
years ago when the first wheel was used for transportation. In the early 15th
century, the Portuguese arrived in China and the interaction of the two cultures led
to a variety of new technologies, including the creation of a wheel that turned under
its own power. By the 1600s, small steam-powered engine models were developed,
but it was another century before a full-sized engine-powered automobile was
created.

The dream a motors age that moved on its own was realized only in the 18th
century when the first motors rolled on the streets. Steam, petroleum gas,
electricity and petrol started to be used in these MOTORSs.

The automobile, as it progressed, was a product of many hands, of

revolutionary concepts, and of simple, almost unnoticed upgrading. India's transport
network is developing at a fast pace and the automobile industry is growing too.
The automobile industry also provides employment to a large section of the
population. Thus the role of automobile industry cannot be overlooked in Indian
Economy. All kinds of vehicles are produced by the automobile industry. It includes
the manufacture of trucks, buses, passenger motors, defense vehicles, twowheelers, etc. The industry can be broadly divided into the motors manufacturing,
two-wheeler manufacturing and heavy vehicle-manufacturing units.

NEED AND IMPORTANCE OF THE STUDY:

The Indian automobile industry is witnessing changes like never

before. The Indian consumer is changing with new players entering the market and
increasing availability of service, the consumer is demanding more. Now the
question is where TATA Motors stands in this scenario? TATA Motors is the only
company that maintenance good relationship with their customers and providing
good service, well as presenting the market with a range of motors by motors by
introducing different models, and to provide better after sales service to their
customers. TATA Motors has increased its service stations all over the country, and
thats why TATA Motors is ranked as No.1 in customer satisfaction. And to maintain
relationship with their customers TATA Motors is providing 24 hours service to their
customers after introducing May services, how fast the consumer is satisfying with
it, and to know after sales service of TATA motors owners opinion on the service
and the performance of the dealer.

OBJECTIVES OF STUDY:

To know the customer perception towards the service

To know the factors influencing the customers after sales service of the TATA
Motors (AUTOFIN LIMITED).

To know whether the customer is satisfied with dealer renders after sales
service, how fast the consumer is satisfied with it..

To know the customers reaction for the dealer performance on TATA Motors
(AUTOFIN LIMITED).

To know whether the customer problem is resolving completely at service

station.

To know whether the vehicle is delivering on time to the customers.

To know whether the TATA Motors (AUTOFIN LIMITED) given benefits to

the customer.

SCOPE OF THE STUDY:

The scope is very limited because attitude of the people change according to
the time.

The scope of project work is to get the opinions from respondents on the
issues mentioned earlier.

It is limited to the twin cities of Hyderabad and is confined to the urban areas
as the respondents are the subscribers of TATA Motors (AUTOFIN
LIMITED)is one form or the other.

RESEARCH METHODOLOGY:
Research is the plan structure & strategy for investigation conceived to
answer to research question & control variance. It is the overall operation pattern to
framework of project that stipulated the information to be collected from which
sources by word procedure. What are the two possible sources of data for securing
in the above mentioned information in the primary & secondary data.

Research design:
The study undertaken to access the after sales service of TATA owners in
Hyderabad and R.R.Dist.

Research procedure:
The questionnaire designed for the study in the structured & disguised in
nature. It consists of multiple choice & short questions.

Data:
Information required for the project is mainly primary data. The information
was collected by survey method. With the help of questionnaire by meeting various
motors owners (TATA).

Secondary data is collected form the company journals, magazines,

broachers & websites.

Sample design:
The sampling unit was confined to end consumers of the product i.e. TATA
motors owners to know there satisfaction level regarding performance of motors
performance of motors and service.

Sample universe:
The survey was done in Hyderabad and R.R.Dist only according to my
convenience. It is not giving the complete picture of Andhra Pradesh (or) India.
Sample frame/unit: professionals, business people, employees etc

Sample size:
The total sample size is 100 only.

Sample method:
The information is planned to be collected by sample method, the sample
method followed is random sampling method. The probability random sampling
method is stratified random sampling.

Analytical Method:
Simple percentage method is used for the analysis purpose.

Period of study:
Study is during the month of January & February 2015.

Data collection:

The information is collected through questionnaires and personal interviews.

And the information of customers is known by companys service sheet and the free
service sheet.
A Direct structure questionnaire has been asked to all the respondents in the
sample followed by direct personal interviews.

Descriptive Studies:
In descriptive studies, when the researcher is interested in knowing the
characteristics of certain groups such as age. Sex, educational level occupation of
income, a descriptive study is necessary. Descriptive studies are well structured. It
is therefore, necessary that the researcher gives sufficient thought to framing
research questions and deciding the types of data to he collected and the procedure
to be used for this purpose-The objective of such a study is to answer the who,
what and how of the subject under investigation.

SOURCES OF DATA:
A classification of data is very important procedure in this concept. The
collected data can be classified into two types.

1. primary data
2. secondary data

Primary data:
The primary data is very important source for to make suggestions to the title
obtained. This data can be collected in various methods like survey, interviewing,
feedback, i.e. Group Discussion etc., for collection of primary data the survey
method

is

used,

which

involved

predetermined

questions.

The

structured

questionnaire contained a form list of question framed so as to get the facts. But it
involves high risk and huge expensive method to get the facts.

Secondary Data:
Collection of secondary data is very easy compared with primary data. But
this data is also very important for the growth of an organization, to predict the
future and will help to make the future plan regarding sales and improve the
measures of sales.
This data can be collected from the magazines. Annual reports of the
organization and other published data.

Sample procedure:
The sample size consists of 100 consumers. The sample consists of
Businessman, Doctors, Engineers, Officers and Contractors etc.
The survey was conducted in the form of an interview among randomly
chosen sample of 100 consumers of TATA customers Sample size form the dealer
randomly.

LIMITATIONS OF THE STUDY:

The study is restricted to both Hyderabad and Ranga Reddy Dist and that to
among 100 respondents.

The study is conducted for 45 days.

The study is restricted to certain area. So it could not give an accurate picture
about Andhra Pradesh of India.

The Accuracy Of The Answers Depends Upon The Mode Of Interest Of

Respondents.

Though the customers wanted to give information they could not, as they
felt it takes away their business time.

The accuracy of the answers depends upon the mode of interest of

respondents.

The opinions of the sample may or may not depict the exact opinions of the
total population.

CHAPTER-II
INDUSTRY PROFILE &
COMPANY PROFILE

INDUSTRY PROFILE
Introduction:
The automobile industry is one of Indias most vibrant and growing industries.
This industry accounts for 22 per cent of the country's manufacturing gross
domestic product (GDP). The auto sector is one of the biggest job creators, both
directly and indirectly. It is estimated that every job created in an auto company
leads to three to five indirect ancillary jobs.
India's domestic market and its growth potential have been a big attraction for
many global automakers. India is presently the world's third largest exporter of twowheelers after China and Japan. According to a report by Standard Chartered Bank,

India is likely to overtake Thailand in global auto-export market share by the year
2020.
The next few years are projected to show solid but cautious growth due to improved
affordability, rising incomes and untapped markets. With the governments backing,
and trends in the international scenario such as the decline in prices of natural
rubber, the Indian automobile industry is slated to witness some major growth.

Market size:
The cumulative foreign direct investment (FDI) inflows into the Indian
automobile industry during the period April 2000 August 2014 was recorded at
US$ 10,119.68 million, as per data by Department of Industrial Policy and Promotion
(DIPP).
Data from industry body Society of Indian Automobile Manufacturers (SIAM)
showed that 137,873 passenger cars were sold in July 2014 compared to 131,257
units during the corresponding month of 2013. Among the auto makers, Maruti
Suzuki, Hyundai Motor India and Honda Cars India emerged the top three gainers
with sales growth of 15.45 per cent, 12 per cent and 11 per cent, respectively.
The three-wheeler segment posted a 24 per cent growth to 51,461 units on
the back of increased demands from the urban market. Total sales across different
vehicle segments grew 12 per cent year on year (y-o-y) to 1,586,123 units.
Scooter sales have jumped by 29 per cent in the ongoing fiscal, and now form
27 per cent of the total two-wheeler market from just 8 per cent a decade back. The
ever-rising demand for scooters, which has far outstripped supply has prompted
Honda to set up its first dedicated scooter plant in Ahmedabad.
Tractor sales in the country is expected to grow at a compound annual growth rate
(CAGR) of 89 per cent in the next five years making India a high-potential market
for many international brands.

Investments:

To match production with demand, many auto makers have started to invest
heavily in various segments in the industry in the last few months. Some of the
major investments and developments in the automobile sector in India are as
follows:

Ashok Leyland plans to invest Rs 450500 crore (US$ 73.5481.71 million) in

India, by way of capital expenditure (capex) and investment during FY15. The
company is required to manage Rs 6,000 crore (US$ 980.56 million) of assets
in seven locations across the world, for which maintenance capex is needed.

Honda Motors plans to set up the world's largest scooter plant in Gujarat to
roll out 1.2 million units annually and achieve leadership position in the
Indian two-wheeler market. The company plans to spend around Rs 1,100
crore (US$ 179.76 million) on the new plant in Ahmedabad, and expand its
range with a few more offerings.

Yamaha Motor Co has restructured its business in India. Now, Yamaha Motor
India (YMI) will take care of its India operations. The restructuring is part of
Yamahas mid-term plan aimed at improving organisational efficiency, as per
Mr Hiroyuki Suzuki, Chief Executive and Managing Director. YMI would be
responsible for corporate planning and strategy, business planning and
business expansion, quality control, and regional control of Yamaha India
Business.

Tata Motors plans to use the 'hub-and-spoke' model in which India will be the
key manufacturing base while it will have mini-hubs in overseas markets. The
company also plans to set up mini hubs in potential markets like Africa,
Middle-East and South East Asia.

Government Initiatives:

The Government of India encourages foreign investment in the automobile

sector and allows 100 per cent FDI under the automatic route. To boost
manufacturing, the government had lowered excise duty on small cars,
motorcycles, scooters and commercial vehicles to eight per cent from 12 per cent,
on sports utility vehicles to 24 per cent from 30 per cent, on mid-segment cars to 20
per cent from 24 per cent and on large-segment cars to 24 per cent from 27 per
cent.
The governments decision to resolve VAT disputes has also resulted in the
top Indian auto makers namely, Volkswagen, Bajaj Auto, Mahindra & Mahindra and
Tata Motors announcing an investment of around Rs 11,500 crore (US$ 1.87 billion)
in Maharashtra.
The Automobile Mission Plan for the period 20062016, designed by the
government is aimed at accelerating and sustaining growth in this sector. Also, the
well-established Regulatory Framework under the Ministry of Shipping, Road
Transport and Highways, plays a part in providing a boost to this sector.
The Government of India-appointed SIAM and Automotive Components
Manufacturers Association (ACMA) are responsible in working for the development
of the Indian automobile industry.

Road Ahead:
The future of the auto industry depends on the positive sentiments and the
demand for vehicles in the market. With the festival season coming up, the Indian
auto sector will see a rise in demand which is expected to bring in major growth. An
auto dealer survey by firm UBS suggested that the Indian auto industry, riding on
trends like the upcoming festival season and decline in fuel price, will observe a 12
per cent y-o-y growth in FY15.
Also, keeping up with international trends, there is expected to be a surge in
the number of hybrid vehicles in the Indian auto sector in the years to come.

The growth story for the Indian automobile industry in 2014 rode on the twowheeler segment and not on passenger cars or commercial vehicles, as high
interest rates and a stuttering manufacturing industry kept a check on demand.
The year also saw Competition Commission of India (CCI) levying a penalty of
Rs.2,544.65 crore ($415) on 14 car makers for their restrictive trade practices by
preventing independent repairers coming into the market. Some of the leading car
makers also had to recall some models over defective components.
When other segments like passenger cars and commercial vehicles logged
negative growth, the two-wheeler makers registered around 13 percent growth
between January and October. Riding on the two-wheeler sector's growth, the
automotive industry grew 9.8 percent by volume year-on-year (YoY) between
January and October.
"The two-wheeler segment is the only one that has clocked positive growth at
12.9 percent YoY (year-on-year) to reach sales of nearly 13.5 million units by
October. This can be attributed to the low cost of two wheelers
In India," Vijay Kakade, vice president for automotive and transportation practice

at Frost & Sullivan, told IANS.

He said the light commercial vehicle (LCV) segment has been the worst hit,
with sales reducing to approximately 330,000 units -- an 18.9 percent YoY fall over
2013.
"The passenger car, medium and heavy commercial vehicle segments
contracted by 0.8 and 6.5 percent respectively during the period, compared to
2013. The reduction in sales can be attributed to the slowdown and the high interest
rates set by the RBI (Reserve Bank of India) reducing the availability of finance
options to the public," Kakade added.
"These segments have shown positive signs over the past few months, which is
expected to lead to growth in the next year."

"The year 2014 has been a year of stagnation, which is a positive sign as the
decline has stopped. The industry has shown signs of growth, albeit slower than
expected, over the past few months," Kakade remarked.
P. Balendran, vice president, General Motors India, had similar views to share with
IANS: "Of late, we have seen some movements in new entries driven by novelty
factors and some select manufacturers have been getting the benefits too."
He said the market has not shown any movement forward, despite the excise duty
reduction, while the customer sentiment has not picked up due to sticky interest
rates, which remain at high levels.
"Although fuel prices have started coming down significantly, the enquiry levels
at showrooms have come down and conversions are not taking place at all. The
sales of diesel vehicles are also tapering off because of the narrowing price gap visa-vis petrol," Balendran added.
Expecting the government to continue with a lower excise duty regime for
small/mid-sized/big cars and sports utility vehicles (SUV) till March 2015, Balendran
said the rates should be continued till the Goods and Services Tax ( GST) is
introduced -- aiding the turnaround of the auto sector.
Terming 2014 a mixed bag for the automobile industry, Sumit Sawhney, chief
executive and managing director of Renault India, told that while there has been a

sea change in the consumer sentiment with a gradually improving economic climate
in the country, the optimism has still to translate into sustained sales growth.
"The industry is looking forward to the budget for pro-business policies to
reignite the automobile industry in India."

Highlights of India's automobile industry 2014:

* Overall growth was 9.8 percent by volume year-on-year (YoY) between January and
October.
* Two-wheeler sector grew 12.9 percemt
* Passenger car, medium and heavy commercial vehicle segments contracted by
0.8 and 6.5 till October
* LCV segment worst hit, with sales falling 18.9 percent YoY fall over 2013 till
October
* Excise duty reduction on automobiles
* Competition Commission of India (CCI) fines 14 car-makers Rs.2,544.65 crore for
restrictive trade practices.
Auto manufacturers have been trying to cope with economical rough patch in
last two years. Trying to boost sales and implementing cost effective schemes just
wasnt enough. They also had to cut many of their employees loose to stay
somewhat balanced, in some cases. On a fashionable note, senior employees were
asked to take voluntary retirement (not sure what voluntary is doing in that
sentence).
Tata Motors apart from giving customers attractive offers, gave 600 of their
employees early retirement offers, last month. Ashok Leyland too offered 500 of
their employees with irresistible retirement schemes, last year (pun intended).
Sales of Cars, SUVs, Vans, pick-ups, and entire commercial vehicle segment
went south, with passenger vehicle market encountering first decline in the decade.
But what saved the overall scenario was the two-wheeler market. It took 7.31% hike
with motorcycle sales going 3.91% up and scooter sales riding 23% north. Export
sales figures also contributed to somewhat saving the year with rise of 7.21%.

The downtrend left auto manufacturers with piled up inventory and

stagnation. The interim budget announced in February, gave a minor boost as all
vehicles prices were reduced marginally, but it hasnt exactly helped boost sales
yet. Automakers are expecting aid from the governments new budget by way of
further tax cuts.
Sales figures of March 2014 shows 12.83% overall growth also by means of
increased two-wheeler sales. Commercial Vehicles have further dipped compared to
March 2013 and passenger cars stagnating below the graph. However, overall
production has increased by 9.95% comparing March figures of both years,
suggesting auto makers confidence in ongoing fiscal to make better.
Launch of new A segment compact cars by various auto majors seems to be
helpful in this economy, for customers as well as value chain entities. Maruti Suzuki
finished top on podium with 42% share in overall car sales, followed by Hyundai
with 15% share.
Society of Indian Automobile Manufacturers (SIAM) expects a 6% growth over
in the fiscal 2014-15, with boost in manufacturing sector, new investment and fresh
capacities in the industry. Vikram Kirloskar, president of SIAM says, Whichever
government comes inI am looking for stability in excise duty and some reduction
in taxes. We are an over-taxed industry.

COMPANY PROFILE

COMPANY PROFILE:
The Tata group comprises over 100 operating companies in seven business
sectors: communications and information technology, engineering, materials,
services, energy, consumer products and chemicals. The group has operations in
more than 100 countries across six continents, and its companies export products
and services to 150 countries.
Founded by Jamsetji Tata in 1868, the Tata group is a global enterprise
headquartered in India, and comprises over 100 operating companies, with
operations in more than 100 countries across six continents, exporting products and
services to over 150 countries. The revenue of Tata companies, taken together, was
$103.27 billion (around Rs624,757 crore) in 2013-14, with 67.2 percent of this
coming from businesses outside India. Tata companies employ over 581,000 people
worldwide.
Every Tata company or enterprise operates independently. Each of these
companies has its own board of directors and shareholders, to whom it is
answerable. There are 32 publicly listed Tata enterprises and they have a combined
market capitalisation of about $107.60 billion (as on January 30, 2014), and a
shareholder base of 3.9 million. The major Tata companies are Tata Steel, Tata
Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global
Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels.
Tata Steel is among the top ten steelmakers, and Tata Motors is among the
top five commercial vehicle manufacturers, in the world. TCS is a leading global
software company, with delivery centres in the US, UK, Hungary, Brazil, Uruguay
and China, besides India. Tata Global Beverages is the second-largest player in tea

in the world. Tata Chemicals is the worlds second-largest manufacturer of soda ash
and Tata Communications is one of the worlds largest wholesale voice carriers.
In tandem with the increasing international footprint of Tata companies, the
Tata brand is also gaining international recognition. Brand Finance, a UK-based
consultancy firm, valued the Tata brand at $18.16 billion and ranked it 39th among
the top 500 most valuable global brands in their BrandFinance Global 500 2013
report. In 2010, BusinessWeek magazine ranked Tata 17th among the '50 Most
Innovative Companies' list.
Tata companies have always believed in returning wealth to the society they
serve. Two-thirds of the equity of Tata Sons, the Tata promoter holding company, is
held by philanthropic trusts that have created national institutions for science and
technology, medical research, social studies and the performing arts. The trusts also
provide aid and assistance to non-government organisations working in the areas of
education, healthcare and livelihoods. Tata companies also extend social welfare
activities to communities around their industrial units.
Going forward, Tata is focusing on new technologies and innovation to drive
its business in India and internationally. The Nano car is one example, as is the Eka
supercomputer (developed by another Tata company), which in 2008 was ranked
the worlds fourth fastest. Anchored in India and wedded to traditional values and
strong ethics, Tata companies are building multinational businesses that will achieve
growth through excellence and innovation, while balancing the interests of
shareholders, employees and civil society.
Tata Motors Limited is Indias largest automobile company, with consolidated
revenues of INR 2,32,834 crores (USD 38.9 billion) in 2013-14. It is the leader in
commercial vehicles in each segment, and among the top in passenger vehicles
with winning products in the compact, midsize car and utility vehicle segments.
The Tata Motors Groups over 60,000 employees are guided by the mission
to be passionate in anticipating and providing the best vehicles and experiences
that excite our customers globally.''
Established in 1945, Tata Motors presence cuts across the length and
breadth of India. Over 8 million Tata vehicles ply on Indian roads, since the first

rolled out in 1954. The companys manufacturing base in India is spread across
Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar
(Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka). Following a strategic
alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group
Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and
Fiat powertrains. The companys dealership, sales, services and spare parts network
comprises over 6,600 touch points, across the world.
Tata Motors, also listed in the New York Stock Exchange (September 2004),
has emerged as an international automobile company. Through subsidiaries and
associate companies, Tata Motors has operations in the UK, South Korea, Thailand,
South Africa and Indonesia. Among them is Jaguar Land Rover, acquired in 2008. In
2004, it acquired the Daewoo Commercial Vehicles Company, South Korea's second
largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company
has launched several new products in the Korean market, while also exporting these
products to several international markets. Today two-thirds of heavy commercial
vehicle exports out of South Korea are from Tata Daewoo. In 2006, Tata Motors
formed a 51:49 joint venture with the Brazil-based, Marcopolo, a global leader in
body-building for buses and coaches to manufacture fully-built buses and coaches
for India - the plant is located in Dharwad. In 2006, Tata Motors entered into joint
venture with Thonburi Automotive Assembly Plant Company of Thailand to
manufacture and market the company's pickup vehicles in Thailand, and entered
the market in 2008. Tata Motors (SA) (Proprietary) Ltd., Tata Motors' joint venture
with Tata Africa Holding (Pty) Ltd. set up in 2011, has an assembly plant in Rosslyn,
north of Pretoria. The plant can assemble, semi knocked down (SKD) kits, light,
medium and heavy commercial vehicles ranging from 4 tonnes to 50 tonnes.
Tata Motors is also expanding its international footprint, established through
exports since 1961. The company's commercial and passenger vehicles are already
being marketed in several countries in Europe, Africa, the Middle East, South East
Asia, South Asia, South America, CIS and Russia. It has franchisee/joint venture
assembly operations in Bangladesh, Ukraine, and Senegal.
The foundation of the company's growth over the last 68 years is a deep
understanding of economic stimuli and customer needs, and the ability to translate

them into customer-desired offerings through leading edge R&D. With over 4,500
engineers, scientists and technicians the company's Engineering Research Centre,
established in 1966, has enabled pioneering technologies and products. The
company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India,
and in South Korea, Italy, Spain, and the UK.
It was Tata Motors, which launched the first indigenously developed Light
Commercial Vehicle in 1986. In 2005, Tata Motors created a new segment by
launching the Tata Ace, India's first indigenously developed mini-truck. In 2009, the
company launched its globally benchmarked Prima range of trucks and in 2012 the
Ultra range of international standard light commercial vehicles. In their power,
speed, carrying capacity, operating economy and trims, they will introduce new
benchmarks in India and match the best in the world in performance at a lower lifecycle cost.
Tata Motors also introduced India's first Sports Utility Vehicle in 1991 and, in
1998, the Tata Indica, India's first fully indigenous passenger car.
In January 2008, Tata Motors unveiled its People's Car, the Tata Nano. The
Tata Nano has been subsequently launched, as planned, in India in March 2009, and
subsequently in 2011 in Nepal and Sri Lanka. A development, which signifies a first
for the global automobile industry, the Nano brings the joy of a car within the reach
of thousands of families.
Tata Motors is equally focussed on environment-friendly technologies in
emissions and alternative fuels. It has developed electric and hybrid vehicles both
for personal and public transportation. It has also been implementing several
environment-friendly

technologies

in

manufacturing

processes,

significantly

enhancing resource conservation.

Through its subsidiaries, the company is engaged in engineering and
automotive solutions, automotive vehicle components manufacturing and supply
chain activities, vehicle financing, and machine tools and factory automation
solutions.
Tata Motors is committed to improving the quality of life of communities by
working on four thrust areas - employability, education, health and environment.

The activities touch the lives of more than a million citizens. The company's support
on education and employability is focused on youth and women. They range from
schools to technical education institutes to actual facilitation of income generation.
In health, the company's intervention is in both preventive and curative health care.
The goal of environment protection is achieved through tree plantation, conserving
water and creating new water bodies and, last but not the least, by introducing
appropriate technologies in vehicles and operations for constantly enhancing
environment care.
2015

Vistara takes to the skies

Prime Minister of India, Narendra Modi, releases commemorative coin to

mark the 175th birth anniversary of Jamsetji Nusserwanji Tata

2014

Tata Sons sets up office in Singapore as base for Asean region

WWF-India and Tata Housing unveil first-ever crowd-funding campaign for

species conservation in India

Tata Chemicals celebrates 75 years of glorious presence

Tata Motors unveils the all-new Zest and Bolt

Voltas and Dow Chemical Pacific (Singapore) join forces in India

Tata headquarters is India's first heritage building to get prestigious green

rating

Land Rover debuts invisible car technology

TCS and Mitsubishi Corporation join forces, create strategic Japanese IT

services company

Tata Global Beverages' UK subsidiary acquires 100 percent equity stake in

Earth Rules, Australia

Tata Power crosses 500 MW landmark of renewable energy generation

capacity

Tata Power Solar successfully commissions Indias largest solar power

project with NTPC

Jaguar Land Rover develops the self-learning intelligent car of the future

Pilatus and Tata Advanced Systems announce the manufacturing of PC-12

'Green Aircraft' aerostructures in India

Tata ClassEdge crosses 10,000 classrooms milestone

CMC amalgamates with TCS

First Land Rover Discovery Sport rolls off the production line securing 3.5
billion in UK supplier contracts

Tata Motors celebrates 60 years of truck manufacturing in Jamshedpur

Tata Power Solar completes 25 years of harnessing solar power to

transform lives

2013

Tata Motors Jamshedpur plant rolls out its two millionth truck
Tata Power synchronises fifth 800MW unit and makes its first UMPP of

4,000MW, at Mundra, fully operational

Tata Sons announces formation of the Group Executive Council
Tata Technologies acquires Cambric, a premier US-based engineering

services company
TCS acquires IT services firm Alti to help drive long-term growth in France
Titan Industries is now Titan Company
Tata Sons and Singapore Airlines to establish new airline in India
Mount Everest Mineral Water (MEMW) to be merged with Tata Global

Beverages
Jaguar Land Rover celebrates 1,000,000 vehicles built at Halewood

operations
Tata Toyo and Air International enter into a joint venture
Titan Company celebrates retail milestone with 1,000 stores

2012

Tata Global Beverages and Starbucks form joint venture to open Starbucks

cafs across India. First outlet launched in October in Mumbai

Tata Communications completes worlds first wholly-owned cable network

ring around the world

Indias first iodine plus iron fortified salt launched by Tata Chemicals
Tata AIG Life Insurance Company to be now called Tata AIA Life Insurance

2011

Tata Chemicals rebrands its global subsidiaries in the UK, the US and

Kenya under the Tata Chemicals corporate brand

The Tata brand soars into the top 50 club of global brands
Tata Medical Center, a comprehensive cancer care and treatment facility

established in Kolkata, was inaugurated by Tata Sons Chairman Ratan Tata

The Tata Nano begins international journey in Sri Lanka and Nepal
Jaguar celebrates 50 years of iconic E-Type car
Tata Steel completes centenary of its first blast furnace
Tata BP Solar becomes wholly owned Tata company (now known as Tata
Power Solar Systems)

2010

TRF acquires UK-based Hewitt Robins International

New plant for Tata Nano at Sanand inaugurated
Advinus Therapeutics announces the discovery of a novel molecule

GKM-001 for the treatment of type II diabetes

Tata Tea announces joint venture with PepsiCo for health drinks
Tata Tea group rebrands itself as Tata Global Beverages, headquartered in

London
Tata Chemicals acquires 100-per-cent stake in leading vacuum salt

producer British Salt, UK

Tata Chemicals launches i-Shakti dals, India's first national brand of pulses

2009
Tata Motors announces commercial launch of the Tata Nano; delivers first

Tata Nano in the country in Mumbai

Tata Teleservices announces pan-India GSM service with NTT DOCOMO
TRF acquires Dutch Lanka Trailer Manufacturers (DLT), Sri Lanka, a world-

class trailer manufacturing company

Jaguar Land Rover introduces its premium range of vehicles in India
Tata Chemicals launches Tata Swach the worlds most cost-effective

water purifier
Tata Housing makes waves with its launch of low cost housing in Mumbai

2008

Tata Motors unveils Tata Nano, the Peoples Car, at the 9th Auto Expo in

Delhi on January 10, 2008

Tata Motors acquires the Jaguar and Land Rover brands from the Ford

Motor Company
Tata Chemicals acquires General Chemical Industrial Products Inc (now
known as Tata Chemicals North America)

Company

Starbucks opens spectacular flagship store in Mumbai, honouring the

dynamic culture of India

Tetley Tea celebrates 175th anniversary
Tata Steel expands aerospace activities in China
Cyrus P Mistry takes over as Chairman, Tata Sons from Ratan N Tata

Board of Directors
Mr. Mistry with the Safari Storme
Mr. Kant with the Ultra
Mr. Wadia with the Range Rover Evoque
Mr. Cyrus P. Mistry
Non-Executive Director and Chairman
Mr. Mistry was appointed as a Director of Tata Motors with effect from May 29,
2012, and as Deputy Chairman of the Company with effect from November 7, 2012.

Mr. Mistry took over as Chairman from Mr. Ratan N. Tata on his retirement with
effect from December 28, 2012.
Mr. Mistry was earlier Managing Director of the Shapoorji Pallonji group and
was also responsible for building the infrastructure development vertical in the
Shapoorji Pallonji group.
Mr. Mistry is a Graduate of Civil Engineering from the Imperial College London
(1990) and has an MSc in Management from the London Business School (1997). He
was recently bestowed with the Alumni Achievement Award by the London Business
School.
Mr. Ravi Kant
Non-Executive Director and Vice Chairman
Mr. Kant has been with the Company since February 1999, joining as Senior
Vice President (Commercial Vehicles), and was inducted on the Board as an
Executive Director in July 2000 and became the Managing Director in July 2005.
Upon retiring from his Executive position on June 1, 2009, Mr. Ravi Kant continues to
be on the Companys Board of Directors as Vice-Chairman.
Prior to joining the Company, he was with Philips India Limited as Director of
Consumers Electronics business and prior to which with LML Ltd. as Senior
Executive Director (Marketing) and Titan Watches Limited as Vice President (Sales &
Marketing).
Mr. Ravi Kant holds a Bachelor of Technology degree in Metallurgical
Engineering from the Institute of Technology, Kharagpur and a Master's degree in
Science from the University of Aston, Birmingham, UK.

Mr. Nusli N. Wadia

Non-Executive, Independent Director

Educated in the UK, Mr. Wadia is the Chairman of the Bombay Dyeing &
Manufacturing Company Limited and heads the Wadia Group. He is also the
Chairman/ Trustee of various charitable institutions and non-profit organisations.
Mr. Wadia has been on the Companys Board since December 1998 as an
Independent Director.
Dr. Raghunath A. Mashelkar
Non-Executive, Independent Director
Dr. Mashelkar is an eminent chemical engineering scientist retired from the
post of Director General from the CSIR and is the President of Indian National
Science Academy (INSA), National Innovation Foundation, Institution of Chemical
Engineers, UK and Global Research Alliance. The President of India honoured Dr.
Mashelkar with the Padmashri (1991) and the Padmabhushan (2000). Dr. Mashelkar
holds a Ph.D. in Chemical Engineering from the Bombay University.
He was appointed as an Independent Director of the Company w.e.f. August
28, 2007.

National interest:
The Tata group is committed to benefit the economic development of the
countries in which it operates. No Tata company shall undertake any project or
activity to the detriment of the wider interests of the communities in which it
operates.
A Tata companys management practices and business conduct shall benefit
the country, localities and communities in which it operates, to the extent possible
and affordable, and shall be in accordance with the laws of the land.
A Tata company, in the course of its business activities, shall respect the
culture, customs and traditions of each country and region in which it operates. It
shall conform to trade procedures, including licensing, documentation and other
necessary formalities, as applicable.

Financial reporting and records:

A Tata company shall prepare and maintain its accounts fairly and
accurately and in accordance with the accounting and financial reporting standards
which represent the generally accepted guidelines, principles, standards, laws and
regulations of the country in which the company conducts its business affairs.
Internal accounting and audit procedures shall reflect, fairly and accurately,
all of the companys business transactions and disposition of assets, and shall have
internal controls to provide assurance to the companys board and shareholders
that the transactions are accurate and legitimate. All required information shall be
accessible to company auditors and other authorised parties and government
agencies.There shall be no willful omissions of any company transactions from the
books and records, no advance-income recognition and no hidden bank account and
funds.
Any willful, material misrepresentation of and / or misinformation on the
financial accounts and reports shall be regarded as a violation of the Code, apart
from inviting appropriate civil or criminal action under the relevant laws. No
employee shall make, authorise, abet or collude in an improper payment, unlawful
commission or bribing.

Competition:
A Tata company shall fully support the development and operation of
competitive open markets and shall promote the liberalisation of trade and
investment in each country and market in which it operates. Specifically, no Tata
company or employee shall engage in restrictive trade practices, abuse of market
dominance or similar unfair trade activities.
A Tata company or employee shall market the companys products and
services on their own merits and shall not make unfair and misleading statements
about competitors products and services. Any collection of competitive information
shall be made only in the normal course of business and shall be obtained only
through legally permitted sources and means.

Equal opportunities employer:

A Tata company shall provide equal opportunities to all its employees and
all qualified applicants for employment without regard to their race, caste, religion,
colour, ancestry, marital status, gender, sexual orientation, age, nationality, ethnic
origin or disability.
Human resource policies shall promote diversity and equality in the
workplace, as well as compliance with all local labour laws, while encouraging the
adoption of international best practices.
Employees of a Tata company shall be treated with dignity and in accordance
with the Tata policy of maintaining a work environment free of all forms of
harassment, whether physical, verbal or psychological. Employee policies and
practices shall be administered in a manner consistent with applicable laws and
other provisions of this Code, respect for the right to privacy and the right to be
heard, and that in all matters equal opportunity is provided to those eligible and
decisions are based on merit.

Gifts and donations:

A Tata company and its employees shall neither receive nor offer or make,
directly or indirectly, any illegal payments, remuneration, gifts, donations or
comparable benefits that are intended, or perceived, to obtain uncompetitive

favours for the conduct of its business. The company shall cooperate with
governmental authorities in efforts to eliminate all forms of bribery, fraud and
corruption.
However, a Tata company and its employees may, with full disclosure, accept
and offer nominal gifts, provided such gifts are customarily given and / or are of a
commemorative nature. Each company shall have a policy to clarify its rules and
regulations on gifts and entertainment, to be used for the guidance of its
employees.

Government agencies:
A Tata company and its employees shall not, unless mandated under
applicable laws, offer or give any company funds or property as donation to any
government agency or its representative, directly or through intermediaries, in
order to obtain any favourable performance of official duties. A Tata company shall
comply with government procurement regulations and shall be transparent in all its
dealings with government agencies.

Political non-alignment:
A Tata company shall be committed to and support the constitution and
governance systems of the country in which it operates.
A Tata company shall not support any specific political party or candidate for
political office. The companys conduct shall preclude any activity that could be
interpreted as mutual dependence / favour with any political body or person, and it
shall not offer or give any company funds or property as donations to any political
party, candidate or campaign.

Health, safety and environment:

A Tata company shall strive to provide a safe, healthy, clean and
ergonomic working environment for its people. It shall prevent the wasteful use of
natural resources and be committed to improving the environment, particularly with
regard to the emission of greenhouse gases, and shall endeavour to offset the effect
of climate change in all spheres of its activities.

A Tata company, in the process of production and sale of its products and
services, shall strive for economic, social and environmental sustainability.

Quality of products and services:

A Tata company shall be committed to supply goods and services of worldclass quality standards, backed by after-sales services consistent with the
requirements of its customers, while striving for their total satisfaction. The quality
standards of the companys goods and services shall meet applicable national and
international standards.
A Tata company shall display adequate health and safety labels, caveats and
other necessary information on its product packaging.

Corporate citizenship:
A Tata company shall be committed to good corporate citizenship, not only in
the compliance of all relevant laws and regulations but also by actively assisting in
the improvement of quality of life of the people in the communities in which it
operates.

The company shall encourage volunteering by its employees and

collaboration with community groups.

Tata companies are also encouraged to develop systematic processes and
conduct management reviews, as stated in the Tata corporate sustainability
protocol, from time to time so as to set strategic direction for social development
activity.
The company shall not treat these activities as optional, but should strive to
incorporate them as an integral part of its business plan.

Cooperation of Tata companies:

A Tata company shall cooperate with other Tata companies including
applicable joint ventures, by sharing knowledge and physical, human and
management resources, and by making efforts to resolve disputes amicably, as long
as this does not adversely affect its business interests and shareholder value.

In the procurement of products and services, a Tata company shall give

preference to other Tata companies, as long as they can provide these on
competitive terms relative to third parties.

Public representation of the company and the Group:

The Tata group honours the information requirements of the public and its
stakeholders. In all its public appearances, with respect to disclosing company and
business information to public constituencies such as the media, the financial
community, employees, shareholders, agents, franchisees, dealers, distributors and
importers, a Tata company or the Tata group shall be represented only by
specifically authorised directors and employees. It shall be the sole responsibility of
these authorised representatives to disclose information about the company or the
Group.

Third party representation:

Parties which have business dealings with the Tata group but are not
members of the Group, such as consultants, agents, sales representatives,
distributors, channel partners, contractors and suppliers, shall not be authorised to
represent a Tata company without the written permission of the Tata company, and /
or if their business conduct and ethics are known to be inconsistent with the Code.
Third parties and their employees are expected to abide by the Code in their
interaction with, and on behalf of, a Tata company. Tata companies are encouraged
to sign a non-disclosure agreement with third parties to support confidentiality of
information.

Use of the Tata brand:

The use of the Tata name and trademark shall be governed by manuals,
codes and agreements to be issued by Tata Sons. The use of the Tata brand is
defined in and regulated by the Tata Brand Equity and Business Promotion
agreement. No third party or joint venture shall use the Tata brand to further its
interests without specific authorisation.

Group policies:
A Tata company shall recommend to its board of directors the adoption of
policies and guidelines periodically formulated by Tata Sons.

Shareholders:
A Tata company shall be committed to enhancing shareholder value and
complying with all regulations and laws that govern shareholder rights.The board of
directors of a Tata company shall duly and fairly inform its shareholders about all
relevant aspects of the companys business, and disclose such information in
accordance with relevant regulations and agreements.

Ethical conduct:
Every employee of a Tata company, including full-time directors and the chief
executive, shall exhibit culturally appropriate deportment in the countries they
operate in, and deal on behalf of the company with professionalism, honesty and
integrity, while conforming to high moral and ethical standards. Such conduct shall
be fair and transparent and be perceived to be so by third parties.
Every employee of a Tata company shall preserve the human rights of every
individual and the community, and shall strive to honour commitments.
Every employee shall be responsible for the implementation of and
compliance with the Code in his / her environment. Failure to adhere to the Code
could attract severe consequences, including termination of employment.

Regulatory compliance:
Employees of a Tata company, in their business conduct, shall comply with all
applicable laws and regulations, in letter and spirit, in all the territories in which
they operate. If the ethical and professional standards of applicable laws and
regulations are below that of the Code, then the standards of the Code shall prevail.
Directors of a Tata company shall comply with applicable laws and regulations
of all the relevant regulatory and other authorities. As good governance practice
they shall safeguard the confidentiality of all information received by them by virtue
of their position.

Concurrent employment:
Consistent with applicable laws, an employee of a Tata company shall not,
without the requisite, officially written approval of the company, accept
employment or a position of responsibility (such as a consultant or a director) with
any other company, nor provide freelance services to anyone, with or without
remuneration. In the case of a full-time director or the chief executive, such
approval must be obtained from the board of directors of the company.

Conflict of interest:
An employee or director of a Tata company shall always act in the interest of
the company, and ensure that any business or personal association which he / she
may have does not involve a conflict of interest with the operations of the company
and his / her role therein. An employee, including the executive director (other than
independent director) of a Tata company, shall not accept a position of responsibility
in any other non-Tata company or not-for-profit organisation without specific
sanction.
The above shall not apply to (whether for remuneration or otherwise):
a) Nominations to the boards of Tata companies, joint ventures or associate
companies.
b) Memberships / positions of responsibility in educational / professional bodies,
wherein such association will benefit the employee / Tata company.
c) Nominations / memberships in government committees / bodies or organisations.
d) Exceptional circumstances, as determined by the competent authority.
Competent authority, in the case of all employees, shall be the chief
executive, who in turn shall report such exceptional cases to the board of directors
on a quarterly basis. In case of the chief executive and executive directors, the
Group Executive Council shall be the competent authority.
An employee or a director of a Tata company shall not engage in any
business, relationship or activity which might conflict with the interest of his / her
company or the Tata group. A conflict of interest, actual or potential, may arise
where, directly or indirectly
a) An employee of a Tata company engages in a business, relationship or activity

with anyone who is party to a transaction with his / her company.

b) An employee is in a position to derive an improper benefit, personally or to any
of his / her relatives, by making or influencing decisions relating to any transaction.
c) An independent judgement of the companys or Groups best interest cannot be
exercised.

The main areas of such actual or potential conflicts of interest shall include
the following:
a) An employee or a full-time director of a Tata company conducting business on
behalf of his / her company or being in a position to influence a decision with regard
to his / her companys business with a supplier or customer where his / her relative
is a principal officer or representative, resulting in a benefit to him / her or his / her
relative.
b) Award of benefits such as increase in salary or other remuneration, posting,
promotion or recruitment of a relative of an employee of a Tata company, where
such an individual is in a position to influence decisions with regard to such benefits.
c) The interest of the company or the Group can be compromised or defeated.
Notwithstanding such or any other instance of conflict of interest that exist
due to historical reasons, adequate and full disclosure by interested employees shall
be made to the companys management. It is also incumbent upon every employee
to make a full disclosure of any interest which the employee or the employees
immediate family, including parents, spouse and children, may have in a family
business or a company or firm that is a competitor, supplier, customer or distributor
of or has other business dealings with his / her company.
Upon a decision being taken in the matter, the employee concerned shall be
required to take necessary action, as advised, to resolve / avoid the conflict.
If an employee fails to make the required disclosure and the management of
its own accord becomes aware of an instance of conflict of interest that ought to
have been disclosed by the employee, the management shall take a serious view of
the matter and consider suitable disciplinary action against the employee.

Securities transactions and confidential information:

An employee of a Tata company and his / her immediate family shall not
derive any benefit or counsel, or assist others to derive any benefit, from access to
and possession of information about the company or Group or its clients or suppliers
that is not in the public domain and, thus, constitutes unpublished, price-sensitive
insider information.
An employee of a Tata company shall not use or proliferate information that is
not available to the investing public, and which therefore constitutes insider
information, for making or giving advice on investment decisions about the
securities of the respective Tata company, Group, client or supplier on which such
insider information has been obtained.
Such insider information might include (without limitation) the following:

Acquisition and divestiture of businesses or business units.

Financial information such as profits, earnings and dividends.

Announcement of new product introductions or developments.

Asset revaluations.

Investment decisions / plans.

Restructuring plans.

Major supply and delivery agreements.

Raising of finances.

An employee of a Tata company shall also respect and observe the

confidentiality of information pertaining to other companies, their patents,
intellectual property rights, trademarks and inventions; and strictly observe a
practice of non-disclosure.

Protecting company assets:

The assets of a Tata company shall not be misused; they shall be employed
primarily and judiciously for the purpose of conducting the business for which they
are duly authorised. These include tangible assets such as equipment and
machinery, systems, facilities, materials and resources, as well as intangible assets
such as information technology and systems, proprietary information, intellectual
property, and relationships with customers and suppliers.

Citizenship:
The involvement of a Tata employee in civic or public affairs shall be with
express approval from the chief executive of his / her company, subject to this
involvement having no adverse impact on the business affairs of the company or
the Tata group.

Integrity of data furnished:

Every employee of a Tata company shall ensure, at all times, the integrity of
data or information furnished by him / her to the company. He / she shall be entirely
responsible in ensuring that the confidentiality of all data is retained and in no
circumstance transferred to any outside person / party in the course of normal
operations without express guidelines from or, the approval of the management.

Reporting concerns:
Every employee of a Tata company shall promptly report to the management,
and / or third-party ethics helpline, when she / he becomes aware of any actual or
possible violation of the Code or an event of misconduct, act of misdemeanour or
act not in the companys interest. Such reporting shall be made available to
suppliers and partners, too.
Any Tata employee can choose to make a protected disclosure under the
whistleblower policy of the company, providing for reporting to the chairperson of
the audit committee or the board of directors or specified authority. Such a
protected disclosure shall be forwarded, when there is reasonable evidence to
conclude that a violation is possible or has taken place, with a covering letter, which
shall bear the identity of the whistleblower.

The company shall ensure protection to the whistleblower and any attempts
to intimidate him / her would be treated as a violation of the Code.

Note:
The TCoC does not provide a full, comprehensive and complete explanation of
all the rules that employees are bound to follow. Employees have a continuing
obligation to familiarise themselves with all applicable laws, company policies,
procedures and work rules.
All JVs could adopt TCoC or a joint code of conduct incorporating all elements
of the TCoC.
This version of the TCoC supersedes all earlier versions and associated
documents and stands effective from October 1, 2013.
PRODUCT PICTURES
PRODUCTS OF TATA MOTORS

INDICA V2

INDICA LX

SAFARI DICOR

TATA SUMO

TURBO

SAFARI DELUX

SUMO VICTA

CHAPTER-III
REVIEW OF LITERATURE

CUSTOMER SATISFACTION:

Definition of Customer Satisfaction:

Kotler (1997) defines customer satisfaction as follows:

Satisfaction is a person's feelings of pleasure or disappointment resulting

from comparing a Products perceived performance (or outcome) in relation to his or
her expectations.

Brown (1992) defines customer satisfaction as:

The state in which customer needs, wants and expectations throughout the
product or service's life are met or exceeded resulting in repeat purchase, loyalty
and favorable worth-of mouth.
According to Jones and Sasser (1995), four basic elements affect customer
satisfaction.
They are: The basic elements of the product or service, basic support
services, a recovery process for counteracting bad experiences, and extraordinary

service. There are many definitions of the key elements of the services, but this one
is considered appropriate in the context of care or after sales services.
Satisfaction is a function of perceived performance and expectation. If the
performance matches the expectations the customer is satisfied. If the performance
exceeds the expectation the customer is highly satisfied and delighted. If the
performance does not match the expectations the customer is dissatisfied.
Satisfaction is a persons feelings of pleasure of disappointment resulting for
comparing a products perceived performance (out-come) in relation t his/her
expectation. The link between customer satisfaction and customer loyalty is
proportional. Suppose customer satisfaction is rated on a scale from 1 5. At a very
low levels of customer satisfaction.
Level-1, customers are likely to abandon.
Level-2 to 4, customers are fairly satisfied but still find tit easy to
switch when a better offer comes along.
Level-5, the customer is very likely to repurchase an even spread good
word of mouth about the company.

Customers are very likely to repurchase LEVEL5

Customers are fairly satisfied

LEVEL

2-4

Low level of customer satisfaction

1

LEVEL

The key to generating high customer loyalty is to deliver high customer

value. A companys value proposition is much more than its positioning on a single
attribute. Most of the successful companies are raising expectations and delivering
performances to match. These companies are aiming for TCS Total Customer
Satisfaction. Customer satisfaction is both a goal and a marketing tool. Companies
that achieve high customer satisfaction ratings make sure that their target market is
known.
After sales support management system is apart of ERP Enterprise
Resource Planning solution dealing with the support module after the sales of
product. It creates an advanced environment to the organization, which are in to
technical support after sales e.g. Companies offering electronic goods and motor
vehicles etc.

The functional features include:

Customer complaints tracking

Service engineers information tracking
Job scheduling for the complaints
Spares management
Online support
Reports

Customer complaints tracking:

Complaint is the start point of any technical support system. With out a
client request the technical support is not initiated. Complaint tracking is done as
follows:

Client may come down or make a phone call or complaint online

The client is validated. The client may have an annual maintenance
contract or may have a product in warranty or of warranty.
The intensity of the complaint is to be estimated to allocate resources.
Expected service type has to be finalized. It may be online assistance
indoor or onsite assistance.

Service Engineers information tracking:

Information about the engineers is inevitable in job scheduling.
Information about the engineers has to be added, deleted or modified in the
database. It may contain the following: the name, id of the engineer; the skill set of
the manager; the status of the engineer.

Job scheduling for the complaints:

Job scheduling means sequencing the request to its intensity,
assignment of a service engineer and creating a job card. It is done to optimize the
technical resources and to render the best service to the customer. Minor problem
are processed by technicians requests are handled by the expert team.

The job card includes the following:

The compliant id, the assigned engineer id, the data and time of
service, the spare details, no. of man hours required etc.

 The spare part name and serial number

The available quantity of each spare part
The prize, warranty and other specifications
The supplier information.

Online support:
The service is done online also. The client may visit the website to
obtain basic support information about the product and FAQ. He can chat with the
service engineer on phone or online.

Report:
The report reflects the current status of the system. The reports that
can be generated are as follows:
Customer request report status of the system. The reports that can
be requests.
Service engineer report provides the information about the skills
and strengths of the support team.
Job scheduling report states the allotment of engineers to jobs.
Spares report discloses the availability of all the shapes in the
system.
Receipts and payments report gives information about the cash flow
in the system.
Bills generation.

Customer satisfaction tracking:

Customer satisfaction is the key concept to dictate the future of the
organization. In order to maximize the customer satisfaction along with quick
response and efficient service some other activities are to be performed.

They may be as follows:

Reception of the customer with hospitality.

Entertaining environment to the customer.

Providing guidance about the usage and maintenance of the product.

Offering gift and discounts.

Operationalisation of Customer Satisfaction:

As customer needs and expectations are changing all the time, this will
lead to a situation whereby customers keep setting ever higher standards,
and therefore to achieve perfection is impossible. Markets should be seen as
a group of individual companies, and each of them must be treated
individually with different requirements, experiences, commitments, and
relationships.

Implementing

customer

satisfaction

philosophy

means

identifying customers, then identifying their needs and expectations and

finally, measuring their perceptions. Knowing the needs of the customer
makes it easier to anticipate the ideal set of products and services. A major
flaw for all the companies has proved to be their inability to understand other
ways that customers can be satisfied. By implementing direct and continuous
employee contacts with the customers, the customers' requirements and
expectations

can

be

determined.

This

employee-customer

connection

additionally conveys the message that the company cares about their
customers.
Customer needs can be determined through marketing research,
customer interviews, reading customer concerns, or involving customers in
the design of services and service deliveries. In order to decide if the service
can be provided at a profit, it is necessary to link value equation to the
strategic service vision. Working together with both supplier and customer
can increase profitability by expanding margin potential.
A customer satisfaction study should begin by asking about the factors
affecting customer satisfaction, how important those factors are for the
whole, and the level of customer satisfaction. A problem with customer
satisfaction surveys (Naumann, 1994) is that a poor customer satisfaction
programme yields vague data and raises customer expectations. If customer

expectations are raised and a company's performance remains the same, the
customer's overall satisfaction will decrease.

Business Definition for: After-sales Service:

Customer support following the purchase of a product or service. In some

cases, after-sales service can be almost as important as the initial
purchase. The manufacturer, retailer, or service provider determines what
is included in any warranty (or guarantee) package. This will include the
duration of the warranty traditionally one year from the date of purchase,
but increasingly two or more years maintenance and/or replacement
policy, items included/excluded, labor costs, and speed of response. In the
case of a service provider, after-sales service might include additional
training or helpdesk availability. Of equal importance is the customer's
perception of the degree of willingness with which a supplier deals with a
question or complaint, speed of response, and action taken.

After Sales Excellence:

After Sales Excellence is a key driver for customer satisfaction and loyalty but
also a very important source of revenues and profits throughout a vehicle lifecycle. Our after
sales experts support our clients in all relevant areas of after sales service to improve the internal
cost base, the retail attractiveness as well as customer satisfaction. Our results are measurable significant improvements on key indicators such as warranty costs, service quality, and fixed first
visit rate.

Supply Chain Excellence:

Our Supply Chain Excellence service enables you to realize substantial
improvements in your supply chain performance in terms of cost, efficiency, lead times, demand
management, customer service and working capital requirements. We measure, improve and
qualify supply chain organizations and processes and support our clients by identifying and
rapidly implementing cost and efficiency savings in the entire supply chain. This can be achieved
with the comprehensive, cross-functional redesign of all logistics processes leveraging the entire
supply chain including customers and suppliers. With our proven Integrated Supply Chain

Excellence Audit we quickly identify gaps to proven best practices and benchmarks within, and
beyond, the Automotive Industry.

Value Chain Design:

Constantly reviewing the companies value chain in a rapidly evolving
environment; deriving required core competencies and partnerships is a key management
responsibility. We help our clients design their value chain in terms of a global engineering
footprint, production and service network, thereby improving efficiency and customer
satisfaction in alignment with corporate strategy.

Customer Contacts and Relationships:

In all cases, the supplier had been involved with the customer since the
beginning of the network building. It is difficult to distinguish whether some of the
changes in customer-supplier relationship were due to the duration of the
relationship between the two parties and whether some of the changes were caused
by changes in the customer's needs resulting from the customer's new position in
the network life cycle curve. For the results of this research, that question in terms
of the underlying factors has not addressed, but for future studies, it would be
relevant to clarify which of these two factors is the more significant or in fact,
whether they can be distinguished.

Relation of the Care to Customer Satisfaction:

Innis

and

La

Londe

(1994)

discovered

that

several

customer

satisfaction variables significantly affect a customer's total customer satisfaction.

Customer service attributes received high ratings for the importance of customer
satisfaction. Attributes for physical distribution of customer service were rated
higher than many marketing attributes.

Most Important Services:

Barsky (1995) proposed that what is important for one customer may
not be important for another. Barsky proposes this in the area of priority marketing,

and the idea was applied to different services in general. When a buyer considers
closer integration with a supplier, they may consider that it will most likely limit the
number of potential suppliers and fear that the partner may take advantage of this
by increasing prices or delivering poorer quality or poorer service. Interlocking with
the supplier can limit the opportunity to acquire innovations if the supplier lacks the
capability of being a leading-edge supplier. Research has shown that there are
frequently differences between the views of the supplier's management on
customer value and the customers' views on what they say they value. This was
studied in the present study as well.

CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION

DATA ANALYSES:
1. What is the model of cars used by customers?

A) Indica DLX
B) Indica V2
C) TATA Sumo
D) TATA Safari
E) TATA Dicor
S.No

Models

No.of

Percentag

Respondents

Indica DLX

37

37

Indica V2

37

37

TATA Sumo

13

13

TATA Safari

10

10

TATA Dicor

03

03

100

100%

Total No.of Respondents

Interpretation:
It is observed that 37% of the total respondents use Indica DLX, 37% of the
respondents use Indica V2,13% of the respondents use TATA Sumo,10% of the
respondents use TATA Safari and last 03% of respondents use TATA Dicor model.
.

2. Which type of Car have you bought?

A) New
B) Pre Owned
S.No

Buyers

New

Pre Owned

Total No. of Respondents

No. of

Percentag

Respondents

94

94

100

100%

Interpretation:
From the survey conducted it is observed that 94% of the respondents
purchased new cars and 6% of the respondents purchased Pre Owned
cars.

3. Whether the price of the Vehicle is?

A) Affordable

B) Not Affordable
S.No

Price

No. of

Percentag

Respondents

Affordable

85

85

Not Affordable

15

15

100

100%

Total No. of Respondents

Interpretation:
It is observed that 85% of the people feel that the price of vehicle is affordable,
and 15% of people feel that the price of vehicle is not affordable.

4. What is the purpose of buying this Car?

A) Personal use
B) Rental use
C) Other use
S.No

Purpose of

No. of

Percentag

buying

Respondents

Personal use

87

87

Rental use

10

10

Other use

100

100%

Total No. of Respondents

Interpretation:
From the data collected it is observed that 87% of the customers use
their vehicle for personal use, 10% of the customers use their vehicle
use for rental and 3 % of the buyers use for other use.

5. Who influenced in buying this Car?

A) Your self
B) Family
C) Friends
D) Advertisement

S.No

Influenced

No. of

Percentag

Respondents

Your self

48

48

Family

32

32

Friends

12

12

Advertisement

100

100%

Total No. of Respondents

Interpretation:
From the study it is observed that 48% is influenced by themselves,
36% feel that the family place a vital role to purchase there vehicle,
and then comes to friends 12% and then advertisement 8%.

6. What does this car convey?

A) Status
B) Necessity
C) Comfort
D) Other
S.No

Car Conveys

No. of

Percentag

Respondents

Status

24

24

Necessity

54

54

Comfort

18

18

Other

04

04

Total No. of Respondents

100

100%

Interpretation:
From the data collected it is concluded that 24% of the consumers purchase the
vehicle to maintain the status, where as 54% of the consumers purchase the vehicle
because of their necessity. 18% of the consumers purchases as it gives comfort,
12% of the consumer purchase the vehicle for other reason.

7. What are the reasons for buying this Car?

A) Price
B) Mileage
C) Service
D) Brand Image

S.No

Crucial

No. of

Percentag

Respondents

Price

34

34

Mileage

53

53

Service

Brand Image

100

100%

Total No. of Respondents

Interpretation:
It is concluded from the study that 34% of them say that price is crucial, 53%
of them say mileage and 7% & 6% of them say service and brand image.

8. You use your Car mostly for?

A) Office
B) Family
C) Long drives
D) Shopping
S.No

Car used for

No. of

Percentag

Respondents

Office

44

44

Family

45

45

Long Drives

Shopping

100

100%

Total No. of Respondents

Interpretation:
It was observed that 44% of the respondents use there vehicle for going to
office, 45% of the respondents use there vehicle to take there family out and 2%
and 9% of the respondents use there vehicle of shopping and long drives.

9. How long you will use this vehicle?

A) 1-2 years
B) 2-4 years
C) 4-8 years
D) 8 years & above
S.No

How long you

No. of

Percentag

will use

Respondents

1-2 years

2-4 years

15

15

4-8 years

68

68

8 years & above

12

12

100

100%

Total No. of Respondents

Interpretation:
From the study it is observed that 5%and 15% of the consumer keep their
vehicle 1-2 years and 2-4 years and 68% and 12% of consumers keep their vehicle
for 4-8 years and 8 years &above.

10.

Rate

your

Organization?

A) Excellent
B) Good
C) O.K
D) Poor

satisfaction

for

the

service

provided

by

the

S.No

Satisfaction level

No. of

Percentag

at service station

Respondents

Excellent

Good

61

61

O.K

24

24

Poor

Total No. of Respondents

100

100%

Interpretation:

From the survey conducted satisfied level at service center show at X-axis
and No.Respondents at Y-axis. 7 % of the consumers said excellent, 61% said good
and 24% and 8% of the consumers said ok and poor.

11.

Are you satisfied with mileage give by your Car?

A) yes
B) no

S.No

Satisfied with

No. of

Percentag

mileage

Respondents

Yes

81

81

NO

19

19

100

100%

Total No. of Respondents

Interpretation:
It is observed that 81% of the respondents are satisfied with mileage given by
there car and 19% are not satisfied with mileage given by there cars.

12.

Express your satisfaction level on performance of your Vehicle?

A) satisfied
B) O.K
C) Not satisfied

S.No

Performance of

No. of

Percentag

your vehicle

Respondents

Satisfied

80

80

O.K

20

20

Not satisfied

00

00

100

100%

Total No. of Respondents

Interpretation:

It was observed that 80% of customers are satisfied on the overall

performance of the vehicle and 20% of the customers are at constant (o.k).

13.

Comment on the prices charged at service station?

A) High
B) Medium
C) Reasonable
D) Low
S.No

Comment on

No. of

Percentag

prices

Respondents

High

Medium

38

38

Reasonable

56

56

Low

100

100%

Total No. of Respondents

Interpretation:
It was observed that 8% of the respondents feel that the prices charged at
service station was high and 38% feel it is medium and 56% of the respondents feel
that the prices are reasonable cost and 2% feel that the prices are low.

14.

How is the performance of the executives?

A) Excellent
B) Good
S.No

Performance of

No. of

Percentag

C) O.K

Executives

Respondents

D) Po

or

Excellent

Good

62

62

O.K

23

23

Poor

Total No. of Respondents

100

100%

Interpretation:
It is observed that 8% of the respondents feel that performance of executives
is excellent, 62% of the respondents said that performance of the executives is
good, 23% the respondents said the performance of the executives is ok and 7% of
the respondents said that performance of the executives is poor.

CHAPTER-V
FINDINGS:
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY
QUESTIONNAIRE

FINDINGS:
Most of the buyers are professionals and business people using the TATA cars.

94% of the respondents purchase new cars only.

Nearly about 85% of the customers feel that the price of vehicle
is affordable.

About 87% of the respondents use TATA cars for there personal
use.

The reason for purchase only TATA is necessity for 54% of the
customers, 24% of the consumers feels status and 18% feel
comfortable.

Many of the respondents are satisfied with regard to mileage,

price.

45% of the respondents use there vehicle to take there family

out and 44% use for going to office.

61% of the respondents were satisfied with service provided by

the dealer at the service center, 24% and 7% of the respondents

said ok and excellent, and 8% of the respondents were not

satisfied with service at service station.

Above 56% of the respondents feel the prices are reasonable at

the service center. Where 8% and 38% of the respondents feel
that the prize are high and medium respectively.

62% of the respondents feel that the overall performance of the

vehicle is good, 8% and 23% of the respondents feel that the
performance of the vehicle is excellent and o.k.

SUGGESTIONS:

It

is suggested that some more place should be provided for

luggage.
To provide better service to customers at work shop
To make the vehicle more spacious inside
To improve the comfort ness in the vehicle
Skilled and experienced persons should be provided at service
center, so that problems of the vehicle should be resolved
completely.

 Engine capacity should be increase, this leads to increase mileage

and pickup once when A/C is on
To increase the place of parking at work shop.

CONCLUSION:
The global business environment is buzzing with the single most important
issue of Building a competitive edge by creating and retaining a large number of
customers than their goods and services every organization is there fore seized of
the task of establishing sustaining its worth to the customer, who has been
rendered unpredictable by competition

Therefore every business is making a continuous effort for achieving

customer effort for achieving customer loyalty

In short it is total organizational culture and brand equity, which face

challenge. So that there is a perennial struggle amongst organizations to sustain
their existence in the market place, and hence in order to sustain the stiff
competition the company has to take up market Research frequently to know the
changing needs & preference of the customers.

This helps the company to reframe the policies in providing cutting edge
technology to satisfy the customer & retain him for a life time.

BIBLIOGRAPHY

Consumer Behavior

Leon G. Shiftman

Journals

ICFAI General of Marketing

Retail Marketing

Marketing Research

G.C.Beri

Magazines

Auto India

Principles of Marketing :

Business Today

Philip Kotler & Gary

Armstrong

Services Marketing

Web Sites

Adlarian Palmer

www.autofinlimited.com

www.tatamotors.com

QUESTIONNAIRE:
PERSONAL DATA

NAME

DESIGNATION
DEPARTMENT

:
:

EXPERIENCE

What is the model of cars used by customers?

b) Indica DLX
c) Indica V2
d) TATA Sumo
e) TATA Safari

2. Which type of Car have you bought

a) New
b) Pre Owned

3. Whether the price of the Vehicle is?

a) Affordable
b) Not Affordable

4. What is the purpose of buying this Car?

a) Personal use
b) Rental use
c) Other use
5. Who influenced in buying this Car?

a) Your self
b) Family
c) Friends
d) Advertisement

6. What does this car convey?

a) Status
b) Necessity
c) Comfort
d) Other

7. What are the reasons for buying this Car?

a) Price
b) Mileage
c) Service

d) Brand Image

8. You use your Car mostly for?

a) Office
b) Family
c) Long drives
d) Shopping

9. How long you will use this vehicle?

a) 1-2 years
b) 2-4 years
c) 4-8 years
d) 8 years & above

10.Rate your satisfaction for the service provided by the Organization?

a) Excellent
b) Good
c) O.K
d) Poor

11.Are you satisfied with mileage give by your Car?

a) yes
b) no

12.Express your satisfaction level on performance of your Vehicle?

a) satisfied
b) O.K
c) Not satisfied

13.Comment on the prices charged at service station?

a) High
b) Medium
c) Reasonable
d) Low

14.How is the performance of the executives?

a) Excellent
b) Good
c) O.K
d) Poor

15.Suggestions for the company?

---------------------------------------------------------------------------------------------------------------------------------------

CHAPTER-I
INTRODUCTION

INVENTORY MANAGEMENT

INTRODUCTION:

.Stock, stock, beautiful stock

Piles on the fixtures and more in the dock
Some of it ancient and some of it new
Alas, and tomorrow another lots due.

The couplet beautifully sums up the predicament of all those who are connected
with the stock (inventory). What is this inventory? What are its functions? What can
be done to minimize this inventory? These and other relevant issues have been
discussed in this chapter.
Every enterprise needs inventory for smooth running of its activities. It serves as
a link between production and distribution process. There is, generally, a time lag
between the recognition of a need and its fulfillment. The greater the time lag, the
higher requirements for inventory. It also provides a cushion for future price
fluctuations.
In a complex industry like Hero MotoCorp Ltd. it studied clearly of how the
thing are being performed and what is the real impact of these on industry and how
effectively the inventory is utilized is interested to be known by researcher because
of its great significance in the research.

MEANING AND NATURE OF INVENTORY

Inventory can be referred to as sum of the value of raw materials fuels and
lubricants, spare parts, maintenance consumables, semi processed materials and
finished goods, stock at any given point of time.
In large companies inventory place a most significant part of the current assets.
The business has about 15 to 30% of inventories in total assets.
Inventory is composed of assets that will be sold in feature in the normal course of
business operations. The assets which firms stores as inventory is anticipation of
need are raw materials, work in progress and finished goods.

MEANING OF INVENTORY MANAGEMENT

Inventory management consists of maintaining for a given financial investment an
adequate of something in order to meet and accepted pattern of demand.
Inventory considers control over costs of inventory on one hand and handle the size
of inventory on other hand.
Controlling investments in inventories constitute crucial part in current assets.
An efficient inventory controlling system will decide,
What to purchase
When to purchase
How to purchase
Size of purchase
And from where to purchase (Suppliers)
The main purpose of inventory management is to ensure
Required quantity of availability of raw materials
Minimize the investments in inventories.

INVENTORY CONTOR
Inventory control is the system devised an adopted for controlling investments in
inventory. It involves inventory planning and decision making with regard to the
quantity and time of purchase, fixation of stock levels, maintenance of stock records
and continuous stock taking.
IMPORTANCE OF THE STUDY:
Decisions Relating to Inventories are taken primarily by executives in
productions, purchasing, and marketing departments. Usually, raw material policies
are shaped by purchasing and production executives, work-in-process inventory is
influenced by the decisions of production executives, and finished goods inventory
policy is evolved by production and marketing executives. Yet, as inventory
management has important financial implications, the financial manager has the
responsibility to ensure that inventories are properly monitored and controlled. He
has to emphasize the financial point of view and initiate programmes with the
participation and involvement of others for effective management of inventories.

NEED OF THE STUDY:

Every industry on average spends 70% on raw materials (inventory).
Therefore there is a need to know the raw material cost and also there is great
importance to understand the inventory management system of this industry.
The study helps a log to various departments to take steps to control the
inventory process.

SCOPE OF STUDY:

The scope of study is limited to collecting the financial data published

in the annual reports of the company with reference to the objectives stated above
and an analysis of the data with a view to suggest favorable solutions to the various
problems related to Inventory Control Management.
This particular topic is selected to the Inventory Control Management is
recent years. The study is conducted to evaluate the performance of the company
with reference to inventory control management. The project is aimed at studying
by means of developing effective Inventory Control Management

OBJECTIVES OF THE STUDY:

To examine the organization structure of inventory management in the

stores of Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.)
(Phoenix Motors Pvt. Ltd).

To discuss pattern, levels and trends of inventories in Hero MotoCorp

Ltd.

To understand the various inventory control techniques followed by

studies in Hero MotoCorp Ltd.

To access the performance of inventory management of the Hero

MotoCorp Ltd by selected accounting ratios.

To know the inventory control techniques of Hero MotoCorp Ltd.

METHODOLOGY :

The study is based on both primary and secondary data.

PRIMART DATA:
The primary data has been collected through structured questionnaire
reflecting inventory management practices of Hero MotoCorp Ltd.
SECONDARY DATA:
The collected data is tabulated and suitable interpretation had been made by
considering the data collection through secondary data like annual reports purchase
registers, storage records of the organization.

LIMITATIONS OF THE STUDY:

The study has the following limitations:
The study is limited only for a period of 5 years i.e., from 2009 10 to 2013
14.
The study in the organization is 45 days only.
The limitations of ratio analysis can be applicable of the study.
There may be approximation in calculating ratios and taking the figures from
the annual reports.

CHAPTER-II

INDUSTRY PROFILE
Introduction
The automobile industry is one of Indias most vibrant and growing industries. This
industry accounts for 22 per cent of the country's manufacturing gross domestic
product (GDP). The auto sector is one of the biggest job creators, both directly and
indirectly. It is estimated that every job created in an auto company leads to three
to five indirect ancillary jobs.
India's domestic market and its growth potential have been a big attraction for
many global automakers. India is presently the world's third largest exporter of twowheelers after China and Japan. According to a report by Standard Chartered Bank,
India is likely to overtake Thailand in global auto-export market share by the year
2020.
Market size
The cumulative foreign direct investment (FDI) inflows into the Indian automobile
industry during the period April 2000 August 2014 was recorded at US$ 10,119.68
million, as per data by Department of Industrial Policy and Promotion (DIPP).
Data from industry body Society of Indian Automobile Manufacturers (SIAM) showed
that 137,873 passenger cars were sold in July 2014 compared to 131,257 units
during the corresponding month of 2013. Among the auto makers, Maruti Suzuki,
Hyundai Motor India and Honda Cars India emerged the top three gainers with sales
growth of 15.45 per cent, 12 per cent and 11 per cent, respectively.

The three-wheeler segment posted a 24 per cent growth to 51,461 units on the
back of increased demands from the urban market. Total sales across different
vehicle segments grew 12 per cent year on year (y-o-y) to 1,586,123 units.
Investments
To match production with demand, many auto makers have started to invest heavily
in various segments in the industry in the last few months. Some of the major
investments and developments in the automobile sector in India are as follows:

Ashok Leyland plans to invest Rs 450500 crore (US$ 73.5481.71 million) in

India, by way of capital expenditure (capex) and investment during FY15. The
company is required to manage Rs 6,000 crore (US$ 980.56 million) of assets
in seven locations across the world, for which maintenance capex is needed.

Honda Motors plans to set up the world's largest scooter plant in Gujarat to
roll out 1.2 million units annually and achieve leadership position in the
Indian two-wheeler market. The company plans to spend around Rs 1,100
crore (US$ 179.76 million) on the new plant in Ahmedabad, and expand its
range with a few more offerings..

Hero Cycles through its unit OPM Global has acquired a majority stake in
German bicycle company Mitteldeutsche Fahrradwerke AG (MIFA) for 15
million (US$ 19.11 million). The company plans to invest an additional 4
million (US$ 5.09 million) as capital expenses in restructuring the acquired
company.

Government Initiatives
The Government of India encourages foreign investment in the automobile sector
and allows 100 per cent FDI under the automatic route. To boost manufacturing, the
government had lowered excise duty on small cars, motorcycles, scooters and
commercial vehicles to eight per cent from 12 per cent, on sports utility vehicles to
24 per cent from 30 per cent, on mid-segment cars to 20 per cent from 24 per cent
and on large-segment cars to 24 per cent from 27 per cent.

The governments decision to resolve VAT disputes has also resulted in the top
Indian auto makers namely, Volkswagen, Bajaj Auto, Mahindra & Mahindra and Tata
Motors announcing an investment of around Rs 11,500 crore (US$ 1.87 billion) in
Maharashtra.
The Automobile Mission Plan for the period 20062016, designed by the
government is aimed at accelerating and sustaining growth in this sector. Also, the
well-established Regulatory Framework under the Ministry of Shipping, Road
Transport and Highways, plays a part in providing a boost to this sector.
The

Government

of

India-appointed

SIAM

and

Automotive

Components

Manufacturers Association (ACMA) are responsible in working for the development

of the Indian automobile industry.

Road Ahead
The future of the auto industry depends on the positive sentiments and the demand
for vehicles in the market. With the festival season coming up, the Indian auto
sector will see a rise in demand which is expected to bring in major growth. An auto
dealer survey by firm UBS suggested that the Indian auto industry, riding on trends
like the upcoming festival season and decline in fuel price, will observe a 12 per
cent y-o-y growth in FY15.
Also, keeping up with international trends, there is expected to be a surge in the
number of hybrid vehicles in the Indian auto sector in the years to come.

The growth story for the Indian automobile industry in 2014 rode on the twowheeler segment and not on passenger cars or commercial vehicles, as high
interest rates and a stuttering manufacturing industry kept a check on demand.
The year also saw Competition Commission of India (CCI) levying a penalty of
Rs.2,544.65 crore ($415) on 14 car makers for their restrictive trade practices by
preventing independent repairers coming into the market. Some of the leading car
makers also had to recall some models over defective components.
When other segments like passenger cars and commercial vehicles logged negative
growth, the two-wheeler makers registered around 13 percent growth between
January and October. Riding on the two-wheeler sector's growth, the automotive
industry grew 9.8 percent by volume year-on-year (YoY) between January and
October.
"The two-wheeler segment is the only one that has clocked positive growth at 12.9
percent YoY (year-on-year) to reach sales of nearly 13.5 million units by October.
This can be attributed to the low cost of two wheelersin India," Vijay Kakade, vice
president for automotive and transportation practice at Frost & Sullivan, told IANS.
He said the light commercial vehicle (LCV) segment has been the worst hit, with
sales reducing to approximately 330,000 units -- an 18.9 percent YoY fall over 2013.
"The passenger car, medium and heavy commercial vehicle segments contracted
by 0.8 and 6.5 percent respectively during the period, compared to 2013. The

reduction in sales can be attributed to the slowdown and the high interest rates set
by the RBI (Reserve Bank of India) reducing the availability of finance options to the
public," Kakade added.
"The year 2014 has been a year of stagnation, which is a positive sign as the
decline has stopped. The industry has shown signs of growth, albeit slower than
expected, over the past few months," Kakade remarked.
P. Balendran, vice president, General Motors India, had similar views to share with
IANS: "Of late, we have seen some movements in new entries driven by novelty
factors and some select manufacturers have been getting the benefits too."
He said the market has not shown any movement forward, despite the excise duty
reduction, while the customer sentiment has not picked up due to sticky interest
rates, which remain at high levels.
Terming 2014 a mixed bag for the automobile industry, Sumit Sawhney, chief
executive and managing director of Renault India, told that while there has been a
sea change in the consumer sentiment with a gradually improving economic climate
in the country, the optimism has still to translate into sustained sales growth.
"The industry is looking forward to the budget for pro-business policies to reignite
the automobile industry in India."
Highlights of India's automobile industry 2014:
* Overall growth was 9.8 percent by volume year-on-year (YoY) between January and
October.
* Two-wheeler sector grew 12.9 percemt
* Passenger car, medium and heavy commercial vehicle segments contracted by
0.8 and 6.5 till October
* LCV segment worst hit, with sales falling 18.9 percent YoY fall over 2013 till
October
* Excise duty reduction on automobiles
* Competition Commission of India (CCI) fines 14 car-makers Rs.2,544.65 crore for
restrictive trade practices.
Auto manufacturers have been trying to cope with economical rough patch in last
two years. Trying to boost sales and implementing cost effective schemes just
wasnt enough. They also had to cut many of their employees loose to stay
somewhat balanced, in some cases. On a fashionable note, senior employees were

asked to take voluntary retirement (not sure what voluntary is doing in that
sentence).

Tata Motors apart from giving customers attractive offers, gave

600 of their employees early retirement offers, last month. Ashok Leyland too
offered 500 of their employees with irresistible retirement schemes, last year (pun
intended).
Sales of Cars, SUVs, Vans, pick-ups, and entire commercial vehicle segment went
south, with passenger vehicle market encountering first decline in the decade. But
what saved the overall scenario was the two-wheeler market. It took 7.31% hike
with motorcycle sales going 3.91% up and scooter sales riding 23% north. Export
sales figures also contributed to somewhat saving the year with rise of 7.21%.
Sales figures of March 2014 shows 12.83% overall growth also by means of
increased two-wheeler sales. Commercial Vehicles have further dipped compared to
March 2013 and passenger cars stagnating below the graph. However, overall
production has increased by 9.95% comparing March figures of both years,
suggesting auto makers confidence in ongoing fiscal to make better.
Society of Indian Automobile Manufacturers (SIAM) expects a 6% growth over in the
fiscal 2014-15, with boost in manufacturing sector, new investment and fresh
capacities in the industry. Vikram Kirloskar, president of SIAM says, Whichever
government comes inI am looking for stability in excise duty and some reduction
in taxes. We are an over-taxed industry.

COMPANY PROFILE

Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest
manufacturer of two - wheelers, based in India.
In 2001, the company achieved the coveted position of being the largest twowheeler manufacturing company in India and also, the 'World No.1' two-wheeler
company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd.
continues to maintain this position till date.
Vision
The story of Hero Honda began with a simple vision - the vision of a mobile and an
empowered India, powered by its two wheelers. Hero MotoCorp Ltd., company's
new identity, reflects its commitment towards providing world class mobility
solutions with renewed focus on expanding company's footprint in the global arena.

Mission
Hero MotoCorps mission is to become a global enterprise fulfilling its customers'
needs and aspirations for mobility, setting benchmarks in technology, styling and
quality so that it converts its customers into its brand advocates. The company will
provide an engaging environment for its people to perform to their true potential. It
will continue its focus on value creation and enduring relationships with its partners

Strategy
Hero MotoCorps key strategies are to build a robust product portfolio across
categories,

explore

growth

opportunities

globally,

continuously

improve

its

operational efficiency, aggressively expand its reach to customers, continue to

invest in brand building activities and ensure customer and shareholder delight.
Manufacturing
Hero MotoCorp two wheelers are manufactured across 3 globally benchmarked
manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which
are located in the state of Haryana in northern India. The third and the latest
manufacturing plant is based at Haridwar, in the hill state of Uttrakhand.
Technology
In the 1980s Hero Honda pioneered the introduction of fuel-efficient, environment
friendly four-stroke motorcycles in the country. Today, Hero Honda continues to be
technology pioneer. It became the first company to launch the Fuel Injection (FI)
technology in Indian motorcycles, with the launch of the Glamour FI in June 2006.
Distribution
The Company's growth in the two wheeler market in India is the result of an intrinsic
ability to increase reach in new geographies and growth markets. Hero MotoCorps
extensive sales and service network now spans over to 6000 customer touch points.
These comprise a mix of authorized dealerships, service & spare parts outlets and
dealer-appointed outlets across the country.
Brand
The new Hero is rising and is poised to shine on the global arena. Company's new
identity "Hero MotoCorp Ltd." is truly reflective of its vision to strengthen focus on
mobility and technology and creating global footprint. Building and promoting new
brand identity will be central to all its initiatives, utilizing every opportunity and
leveraging its strong presence across sports, entertainment and ground-level
activation
HERO'S MANDATE

Hero is a world leader because of its excellent manpower, proven management,

extensive dealer network, efficient supply chain and world-class products with
cutting edge technology from Company, Japan. The teamwork and commitment are
manifested in the highest level of customer satisfaction, and this goes a long way
towards reinforcing its leadership status

BOARD OF DIRECTORS
No.

Name of the Directors

Designation

Mr. Brijmohan Lall Munjal

Chairman & Whole-time Director

Mr. Pawan Munjal

Managing Director & C.E.O.

Mr. Toshiaki Nakagawa

Joint Managing Director

Mr. Sumihisa Fukuda

Technical Director

Mr. Sunil Kant Munjal

Non-Executive Director

Mr. Suman Kant Munjal

Non-Executive Director

Mr. Takashi Nagai

Non-Executive Director

Mr. Yuji Shiga

Non-Executive Director

Mr. Pradeep Dinodia

Non-executive & Independent

Director

10

Gen. (Retd.) V. P. Malik

Non-executive & Independent

Director
11

Mr. Analjit Singh

Non-executive & Independent

Director

BRIEF PROFILE OF DIRECTORS

MR. BRIJMOHAN LALL MUNJAL
Mr. Brijmohan Lall Munjal is the founder Director and Chairman of the Company
and the $ 3.2 billion Hero Group. He is the Past President of Confederation of Indian
Industry (CII), Society of Indian Automobile Manufacturers (SIAM) and was a Member
of the Board of the Country's Central Bank (Reserve Bank of India).

No Name of Company

Nature of Office

.
1

Hero Honda Motors Limited

Chairman and Whole-time Director

Hero Honda Finlease Limited

Chairman and Director

Munjal Showa Limited

Chairman and Director

Easy Bill Limited

Director

Rockman Industries Limited

Director

Shivam Autotech Limited

Director

STAKEHOLDER TIES AT THE GRASSROOTS

Hero Honda Motors takes considerable pride in its stakeholder relationships,
especially ones developed at the grassroots. The Company believes it has managed
to bring an economically and socially backward region in Dharuhera, Haryana, into
the national economic mainstream.
An Integrated Rural Development Centre has been set up on 40 acres of land along
the Delhi-Jaipur Highway. The Centre-complete with wide approach roads, clean
water, and education facilities for both adults and children-now nurtures a vibrant,
educated and healthy community.
The Foundation has adopted various villages located within vicinity of the Hero
Honda factory at Dharuhera for integrated rural development. This includes:

Installation of deep bore hand pumps to provide clean drinking water.

Constructing metalled roads and connecting these villages to the National

Highway (NH -8).

Renovating primary school buildings and providing hygienic water and toilet
facilities.

Ensuring a proper drainage system at each of these villages to prevent waterlogging.

Promoting non-conventional sources of energy by providing a 50 per cent

subsidy on biogas plants.

The Raman Munjal Vidya Mandir began with three classes (up to class II) and 55
students from nearby areas. It has now grown into a modern Senior Secondary,
CBSE affiliated co-educational school with over 1200 students and 61 teachers. The
school has a spacious playground, an ultra-modern laboratory, a well-equipped
audio visual room, an activity room, a well-stocked library and a computer centre.
The Raman Munjal Sports Complex has basketball courts, volleyball courts, and
hockey and football grounds are used by the local villagers. In the near future,
sports academies are planned for volley ball and basket ball, in collaboration with
National Sports Authority of India.
Vocational Training Centre
In order to help local rural people, especially women, Hero Honda has set up a
Vocational Training Centre. So far 26 batches comprising of nearly 625 women have
been trained in tailoring, embroidery and knitting. The Company has helped women
trained at this centre to set up a production unit to stitch uniforms for Hero Honda
employees. Interestingly, most of the women are now self-employed.
Adult Literacy Mission
This Scheme was launched on 21st September, 1999, covering the nearby villages
of Malpura, Kapriwas and Sidhrawali. The project started with a modest enrolment
of 36 adults. Hero Honda is now in the process of imparting Adult Literacy Capsules
to another 100 adults by getting village heads and other prominent villagers to
motivate illiterate adults.
Marriages of underprivileged girls
Marriages are organized from time to time, particularly for girls from backward
classes, by the Foundation by providing financial help and other support to the
families.
KEY POLICIES

AN ENVIRONMENTALLY AND SOCIALLY, AWARE COMPANY

At Hero Honda, our goal is not only to sell you a bike, but also to help you every
step of the way in making your world a better place to live in. Besides its will to

provide a high-quality service to all of its customers, Hero Honda takes a stand as a
socially responsible enterprise respectful of its environment and respectful of the
important issues.
Hero Honda has been strongly committed not only to environmental conservation
programmers but also expresses the increasingly inseparable balance between the
economic concerns and the environmental and social issues faced by a business. A
business must not grow at the expense of mankind and man's future but rather
must serve mankind.
"We must do something for the community from whose land we generate
our wealth."
A famous quote from our Worthy Chairman Mr.Brijmohan Lall Munjal.
Environment Policy
We at Hero Honda are committed to demonstrate excellence in our
environmental performance on a continual basis, as an intrinsic element of
our corporate philosophy.
To achieve this we commit ourselves to:

Integrate environmental attributes and cleaner production in all our business

processes and practices with specific consideration to substitution of
hazardous chemicals, where viable and strengthen the greening of supply
chain.

Continue product innovations to improve environmental compatibility.

Comply with all applicable environmental legislation and also controlling our
environmental discharges through the principles of "alara" (as low as
reasonably achievable).

Institutionalise resource conservation, in particular, in the areas of oil, water,

electrical energy, paints and chemicals.

Enhance environmental awareness of our employees and dealers / vendors,

while promoting their involvement in ensuring sound environmental
management.

Quality Policy
Excellence in quality is the core value of Hero Honda's philosophy.
We are committed at all levels to achieve high quality in whatever we do,
particularly in our products and services which will meet and exceed customer's
growing aspirations through:

Innovation in products, processes and services.

Continuous improvement in our total quality management systems.

Teamwork and responsibility.

Safety Policy
Hero Honda is committed to safety and health of its employees and other
persons who may be affected by its operations. We believe that the safe work
practices lead to better business performance, motivated workforce and higher
productivity.
We shall create a safety culture in the organization by:

Integrating safety and health matters in all our activities.

Ensuring compliance with all applicable legislative requirements.

Empowering employees to ensure safety in their respective work places.

Promoting safety and health awareness amongst employees, suppliers and

contractors.

Continuous improvements in safety performance through precautions besides

participation and training of employees.

INTRODUCTION ABOUT PHOENIX DEALER PROFILE (PHOENIX MOTORS)

PHOENIX MOTORS PVT LTD is dealership type of business. PHOENIX MOTORS

PVT LTD. is established on 21 st march 2003. The business is running by only
one man. The owner name is ch .madhu mathi the firm is located at habsiguda in
Hyderabad.
Generally the sale will be either on cash basis or on institutional basis.
Bank like ICICI, HDFC and CENTURION are providing loans to customers.
Advertising strategy of phoenix motors:
They are giving the ads through newspapers, wall paintings,
hoardings and field staff. They are upgrading sales by introducing the schemes,
group bookings, institutional sales and customer door-to-door activities.
Categorization of Staff members:
Staff members are categorized for technicians, 25 members are
allotted for field staff, 5 members are recruited for sales for persons, 5 persons are
placed for evaluating for spare parts, 5 members are allotted for managerial
accounts and another 3 persons for cash transaction and other members are
allotted for remaining work.
Customer relationship:
They entertain the showroom providing a customers huge
having pool game, internet facility and television with home there system. They
provide bile maintenance programs on every week.
According to other dealers PHOENIX motors in first in sales and best in service. They
treat customer, is the very important person at PHOENIX motors customer
satisfaction is their motto, why because, they will satisfied customer is the best
advertisement. They provide better value for the customers and as well as
employees also. At PHOENIX motors the customer is the boss.
SALES STRATEGY OF PHOENIX MOTORS:
Average they are selling 28 vehicles per day. PHOENIX motors PVT L.T.D
is the A.P s NO.1 dealership in sales and other activities? It is a QLAD (qualify leader

through quality dealer). At PHOENIX motor they gave the quality service to the
customers why because the cost is long forgotten but the quality is remembered
for ever. They treat quality has a...
Q

Quest for excellence

Understanding customers needs

Action to achieve customers appreciation.

Leadership determined to be a leader

involving all the people

T
Y

Team spirit to work for a common goal

Yard sticks to measure programs.

WARRANTY ON PROPRIETARY ITEMS:

Warranty on proprietary items like Tyros, Tubes and Battery etc, will be
directly handled by the respective original manufactures (OEMs) except AMCO for
batteries and Dunlop and Falcon tires and Tubes. In case of any defect in proprietary
items, other than the above two mentioned OEMS the dealers must approach the
Brach office dealer of the respective manufacture. For AMCO batteries and Dunlop
and falcon tires, tubes claims will be accepted at our authorized dealerships per the
mutually agreed terms and conditions between HERO and of these two OEMs in
case the claim is not accepted for invalid reasons. Then the claim along with the
refusal note form the OEM can be sent to the warranty section at gorgon plan after
due to recommendation of the area service engineer. If any other six services or
subsequent paid services is not availed as per the recommended schedule given in
the owners manual. If HERO recommended engine oil is not used. To normal wear &
tear components like bulbs, electric wiring, filters, spark plug, clutch plates, braded
shoes, fasteners, shim washers, oil seals, gaskets, rubber parts (other than tyre and
tube) plastic components, chain$ sprockets and in case of wheel rim misalignment
or bend.
SOCIAL SERVICE ACTIVITIES

PHOENIX motors participate and conduct social service activities. Recently

the phoenix motors organized a BLOOD DONATION CAMP for the trust on 21 st
January 2006.they motivated on the consumers to participated in this camp and
also provide certificate for the customers
THE MARKETED BIKES OF PHOENIX (All Hero Moto Corp.)

CUSTOMER RELATIONSHIP:
To entertain the customers the showroom providing a customers huge having
pool game, Internet facility and television with home theatre system. They provide
bike maintenance programs on every week. According to other dealers PHOENIX
motors in first in sales and best in service. They treat customer, is the very
important person at PHOENIX motors customer satisfaction is their motto, why

because, the well satisfied customer is the best advertisement. They provide
better value for the customers and as well as employees also. At PHONIX motors the
customer is the boss.
SOCIAL SERVICE ACTIVITIES
PHOENIX Motors participates in social service activities. The Phoenix motors
organize a BLOOD DONATION CAMP for the trust in every year. They motivated on
the customers to participated in this camp and also provide Certificate for the
customers.

CHAPTER-III

LITERATURE REVIEW

REVIEW OF LITERATURE

The investment in inventories constitutes the most significant part of current

assets / working capital in most of the undertakings. Thus, it is very essential to
have proper control and management of inventories.
The purpose of inventory management is to ensure availability of materials in
sufficient quantity as and when required and also to minimize investment in
inventories.

Meaning and Nature of Inventory:

In accounting language, inventory may mean the stock of finished goods only.
In a manufacturing concern, it may include raw materials, work- in progress and
stores etc.

Inventory includes the following things:

a)

Raw Material: Raw material from a major input into the organization.
They are required to carry out production activities uninterruptedly. The quantity of
raw materials required will be determined by the rate of consumption and the time
required for replenishing the supplies. The factors like the availability of raw
materials and Government regulations etc., too affect the stock of raw materials.

b)

Work in progress: The work in progress is that stage of stocks which are
in between raw materials and finished goods. The quantum of work in progress
depends upon the time taken in the manufacturing process. The quantum of work in
progress depends upon the time taken in the manufacturing process. The greater
the time taken in manufacturing, the more will be the amount of work in progress.

c)

Consumables: These are the materials which are needed to smoother

the process of production but they act as catalysts. Consumables may be classified
according to their consumption add critically. Generally, consumable stores doe not
create any supply problem and firm a small part of production cost. There can be
instances where these materials may account for much value than the raw
materials. The fuel oil may form a substantial part of cost.

d)

Finished goods: These are the goods, which are ready for the
consumers. The stock of finished goods provides a buffer between production and
market, the purpose of maintaining inventory is to ensure proper supply of goods to
customers.

e)

Spares: The stock policies of spares fifer from industry to industry. Some
industries like transport will require more spares than the other concerns. The costly
spare parts like engines, maintenance spares etc., are not discarded after use,
rather they are kept in ready position for further use.
All decisions about spares are based on the financial cost of inventory on
such spares and the costs that may arise due to their non availability.

BENEFITS OF HOLDING INVENTORIES

Although holding inventories involves blocking of a firms and the costs of
storage and handling, every business enterprise has to be maintain certain level of

inventories of facilitate un interrupted production and smooth running of business.

In the absence of inventories a firm will have to make purchases as soon as it
receives orders. It will mean loss of time and delays in execution of orders which
sometimes may cause loss of customers and business.
A firm also needs to maintain inventories to reduce ordering cost and avail
quantity discounts etc.
There are three main purpose of holding inventories.
1.

The transaction motive: This facilitates continuous production and timely

execution of sales order.

2.

The precautionary motive: Which necessitates the holding of inventories

for meeting the unpredictable changes in demand and supplies of materials

3.

The speculative motive: Which induces to keep inventories for taking

advantage of price fluctuations, saving in reordering costs and quantity
discounts
RISK AND COSTS OF HOLDING INVENTORIES
The holding of inventories involves blocking of firms funds and incurrence of

capital and other costs.

The various costs and risks involved in holding inventories are:
Capital costs: Maintaining of inventories results in blocking of the firms
financial resources. The firm has therefore to arrange for additional funds to meet
the cost of inventories.
The funds may be arranged from own resources or from outsiders. But in both
the cased, the firm incurs a cost. In the former case, there is an opportunity cost of
investment while in the later case; the firm has to pay interest to t he outsiders.
1.

Storage and Handling Costs: Holding of inventories also involves costs on

storage as well as handing of materials. The storage of costs include the
rental of the godown, insurance charges etc.

2.

Risk of Price decline: There is always a risk of reduction in the prices of

inventories by the supplies, competition or general depression in the market.

3.

Risk of Obsolescence: The inventories may become absolute due to

improved technology, changes in requirements, change in customer tastes
etc.

4.

Risk Determination in quality: The quality of materials may also

deteriorate while the inventories are kept.

Objects of Inventory Management

Definition of Inventory Management: Inventory Management is concerned
with the determination of optimum level of investment for each components of
inventory and the operation of an effective control and review of mechanism.
The main objectives of inventory management are operational and financial.
The financial objective means that inventory should not remain idle and
minimum working capital should be locked in it.

The

following

are

the

objectives

of

inventory

management:
1.

To ensure continuous supply of materials, spares and finished goods so that

production should not suffer at any time and the customers demand should
also be met.

2.

To avoid both over stocking and under stocking of inventory.

3.

To maintain investment in inventories at the optimum level as required by the

operational and sales activities.

4.

To keep material cost under control so that they contribute in reducing the
cost of production and overall costs.

5.

To eliminate duplication in ordering or replenishing stocks. This is possible

with the help of centralizing purchases.

6.

To minimize losses through deterioration, pilferages, wastages and damages.

7.

To ensure perpetual inventory control so that materials shown in stock

ledgers should be actually lying in the stores.

8.

To ensure right quality goods at reasonable prices. Suitable quality standards

will ensure proper quality of stocks. The price analysis, the cost analysis and
value analysis will ensure payment of proper prices.

9.

To facilitate furnishing of data for short term and long term planning and
control of inventory.
TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT
A proper inventory control not only helps in solving the acute problem of

liquidity but also increases profit and causes substantial reduction in the working
capital of the concern.
The

following

are

the

important

tools

and

techniques

of

inventory

management and control.

1.

Determination of stock levels:

Carrying of too much and too little of inventory is detrimental to the firm. If

the inventory level is too little, the firm will face frequent stock outs involving heavy
ordering cost and if the inventory level is too high it will be unnecessary tie up of
capital.
An efficient inventory management requires that a firm should maintain an
optimum level of inventory where inventory costs are the minimum and at the same
time there is no stock out which may result in loss or sale or shortage of production.
a)

Minimum stock level:

It represents the quantity below its stock of any item should not be allowed to

fall.
Lead time: A purchasing firm requires sometime to process the order and
time is also required by the supplying firm to execute the order.
The time in processing the order and then executing it is known as lead time.
Rate of Consumption: It is the average consumption of materials in the
factory. The rate of consumption will be decided on the basis of past experience and
production plans.
Nature of materials: The nature of material also affects the minimum level.
If a material is required only against the special orders of the customer then
minimum stock will not be required for such material.

Minimum stock level can be calculated with the help of following formula.
Minimum stock level Re ordering level (Normal consumption x Normal
re order period)
b)

Re ordering Level:
When the quantity of materials reaches at a certain figure then fresh order is

sent to get materials again. The order is sent before the materials reach minimum
stock level.
Re ordering level is fixed between minimum level maximum level.
c)

Maximum Level:
It is the quantity of materials beyond which a firm should not exceeds its

stocks. If the quantity exceeds maximum level limit then it will be over stocking.
Overstocking will mean blocking of more working capital, more space for
storing the materials, more wastage of materials and more chances of losses from
obsolescence.
Maximum stock level Reordering Level + Reorder Quantity (Maximum
Consumption x Minimum reorder period)
d)

Danger Stock Level:

It is fixed below minimum stock level. The danger stock level indicates

emergency of stock position and urgency of obtaining fresh supply at any cost.
Danger Stock level = Average rate of consumption x emergency delivery
time.
e)

Average Stock Level:

This stock level indicates the average stock held by the concern.
Average stock level = Minimum stock level + x reorder quantity.

2)

Determination of Safety Stocks:

Safety stock is a buffer to meet some unanticipated increase in usage. The

demand for materials may fluctuate and delivery of inventory may also be delayed
in such a situation the firm can be facing a problem of stock out.
In order to protect against the stock out arising out of usage fluctuations,
firms usually maintain some margin of safety stocks.
Two costs are involved in the determination of this stock that is opportunity
cost of stock outs and the carrying costs.
If a firm maintains low level of safety frequent stock outs will occur resulting
into the larger opportunity costs. On the other hand, the larger quantity of safety
stocks involves carrying costs.
3)

Economic Order Quantity (EOQ):

The quantity of material to be ordered at one time is known as economic

ordering quantity.
This quantity is fixed in such a manner as to minimize the cost of ordering
and carrying costs.
Total cost material = Acquisition Cost + Cost + Carrying Costs + Ordering
Cost.
Carrying Cost:
It is the cost of holding the materials in the store.
Ordering Cost:
It is the cost of placing orders for the purchase of materials.
EOQ can be calculated with the help of the following formula
EOQ = 2CO / I
WhereC = Consumption of the material in units during the year
O = Ordering Cost

I = Carrying Cost or Interest payment on the capital.

4)

A B C Analysis: (Always better control analysis):

Under A B C Analysis. The materials are divided into 3 categories viz., A, B

and C.
Almost 10% of the items contribute to 70% of value of consumption and this
category is called A category.
About 20% of the items contribute about 20% of value of category C covers
about 70% of items of materials which contribute only 10% of value of consumption.
5)

VED Analysis: (Vitally Essential Desire)

The VED analysis is used generally for spare parts. Spare parts classified as

Vital (V), Essential (E) and Desirable (D).

The vital spares are a must for running the concern smoothly and these must
be stored adequately. The E type of spares is also necessary but their stocks may
be kept at low figures. The stocking of D type spares may be avoided at times. If
the lead time of these spares is less, then stocking of these spares can be avoided.
6)

Inventory Turnover ratio:

Inventory turnover ratios are calculated to indicate whether inventories have

been used efficiently or not.

The inventory turnover ration also known as stock velocity is normally
calculated as sales / average inventory of cost of goods sold / average inventory.
Inventory conversion period may also be calculated to find the average time
taken for clearing the stocks. Symbolically.
Inventory Turnover Ratio

Cost of goods sold

__________________________
Average inventory at cost

(Or)
Net sales
=

________________________

(Average) Inventory
And,
Inventory conversion period =

Days in a year

______________________
Inventory Turnover ratio
7)

Classification and Codification of Inventories:

The inventories should first be classified can then code numbers should be

assigned for their identification. The identification of short names are useful for
inventory management not only for large concerns but also for small concerns. Lack
of proper classification may also lead to reduction in production.
Generally, materials are classified accordingly to their nature such as
construction

materials,

consumable

stocks,

spares,

lubricants

etc.

After

classification the materials are given code numbers. The coding may be done
alphabetically or numerically. The later method is generally used for coding.
The class of materials is assigned two digits and then two or three digits are
assigned to the categories of items divided into 15 groups. Two numbers will be
category of materials in that class.
The third distinction is needed for the quality of goods and decimals are used
to note this factor.
8)

Valuation of inventories Method of valuation:

FIFO method
LIFO method
Base Stock method

Weighted average price method

CRITERIA FOR JUDGING THE INVENTORY SYSTEM

While the overall objective of the inventory system is to minimize the cost to
the firm at the risk level acceptable to management, the more proximate criteria for
judging the inventory system are:
Comprehensibility
Adaptability
Timeliness
Area of improvement:
Inventory

management

in

India

can

be

improved

in

various

ways.

Improvements could be affected through.

Effective Computerization: Computers should not be used merely for accounting
purpose but also for improving decision making.
Review of Classification: ABC and FSN classification must be periodically reviewed.
Improved

Coordination:

Better

coordination

among

purchase,

production,

marketing and finance departments will be help in achieving greater efficiency in

inventory management.
Development of long term relationship:
Companies should develop long term relationship with vendors. This would
help in improving quality and delivery.
Disposal of obsolete / surplus inventories:
Procedures for disposing obsolete / surplus inventories must be simplified.
Adoption of challenging norms:
Companies should set benchmarks with global competitors and use ideals like
JIT to improve inventory management.

Inventory cost an overall view:

Introduction:
In financial parlance, inventory is defined as the sum of the value of the raw
materials, fuels and lubricants spare parts maintenance consumable semi
processed materials and finished goods stock at any giving point of time. The
operational definition of inventory would be amount of raw materials, fuel and
lubricants, spare parts and semi processed materials to be stock for the smooth
running of the plant / industry.

Need of Inventory:
Inventories are maintained basically for the operational smoothness which
they can be affected by uncoupling successive stages of production, whereas the
monetary value of the inventory serves as a guide to indicate the size of the
investment

made

to

achieve

management departments

this

operational

primary function

convenience.

is to provide

The

materials

this operational

convenience with a minimum possible investment in inventories. Materials

department is accused of both stock outs as well a large investment in inventories.
The solution lies in exercise a selective inventory control and application of
inventory control techniques. Inventories build to act as a cushion between supply
and demand. It is sufficient to take care of the requirements of demand till the next
supply arrives. It is sufficient to take care of probable delays in supply as well as
probable variations in demand.
The size of the inventory depends upon the factors such as size of industry
internal lead time for purchase, suppliers lead time, vendor relations availability of
the materials, annual consumption of the materials. Inventory coat can be
controlled by applying Modern Techniques viz., ABC analysis, SDE, ESN, HMC, VED
etc. These techniques can be used effectively with the help of computerization.

What is meant by inventory cost:

A.

The total value of stores and spares and capital spares.

B.

Stores in transit and under inspection and

C.

Stock of finished products.

Normally, there are certain problems in maintaining optimum level of

inventory. Problems of inventory can be resolved by the cost implications. Costs

which are relevant for consideration are discussed in the following lines;
Basically there are four costs for consideration in developing and inventory model.
1.

The cost of placing a replenishment order.

2.

The cost of carrying inventory.

3.

The cost of under stocking and

4.

The cost of over stocking.

The cost of ordering and inventory carrying cost are viewed as the supply

side costs and help in the determination of the quantity to be ordered for each
replenishment.
The under stocking and over stocking costs are viewed as the demand side
costs and help in the determination of the amount of variations in demand and the
delay in supplies which the inventory should withstand.
Whenever an order placed for stock replenishment, certain costs are
involved, and, for most practical purpose it can be assumed that the cost per order
is constant. The ordering cost may vary depending upon the type of items, for
example raw material like steel against production component like castings in steel
plants, support materials in the case of Steel industry.
The cost ordering includes:
1)

Paper work costs, typing and dispatching an order.

2)

Follow up costs the follow up, the telephones, telex and postal bills etc.,

3)

Costs involved in receiving of the order, inspection, checking and handling

in the stores.

4)

Any set up cost of machines charged by the supplier, either directly

indicated in quotations or assessed through quotations of various
quantities.

5)

The salaries and wages of the purchase department.

Cost of Inventory carrying:

This cost in measured as of the unit cost of the item. This measure gives
basis for estimating what is actually costs a company to carry stock.
This cost includes:
1)

Interest on capital.

2)

Insurance and tax charges.

3)

Storage costs labor costs, provision of storage area and facilities like
bins, racks etc.,

4)

Transport bills and hamali charges.

5)

Allowance for deterioration or spoilages.

6)

Salaries of stores staff.

7)

Obsolescence.
The inventory carrying cost varies and a major portion of this is

Accounted for by the interest on capital.

Under stocking cost:

This cost is the cost incurred when an item is out of stock. It includes cost of
lost production during the period of stock out and the extra cost per unit which
might have to be paid for an emergency purchase.
Over stocking cost:
This cost is the inventory carrying cost (which is calculated per year) for a
specific period of time. The time varies in different contexts it could be the lead
time of procurement of entire life time of machine. In the case of one time
purchases, over cost would be = Purchase Price Scrap Price.
INVENTORY VALUATION AND COST FLOWS:

What is the cost of inventory?

One can readily visualize the determination of inventory quantities by
physical count or by use of perpetual inventory records. When this quantity is
determined, it must be multiplied by a unity cost in order to determine the
inventory value that is used on financial statements.
Trade and quantity discount are to be excluded from unit cost since these
discount exist for the purpose of defining the true invoice cost of merchandise. Cash
discounts, on the other hand, have been considered as a reward for early payment
and as a penalty for late payment. The reward has often been interpreted as a
loss rather than as a part of unit cost. Thus it would not be difficult to find difference
of opinion as to whether invoice cost includes or excludes cash discount.
When the current replaAutomobial cost of material on hand at the close of
a year is less than the actual cost, the inventory value is reduced to
replaAutomobial cost (current market price). Thus the acceptable basis inventory
valuation is the lower of cost or market or more properly the lower of actual cost
or replaAutomobial cost.
The determination of inventory values is very important from the point of
view of the balance sheet and the income statement since costs not included in the
inventory (the balance sheet) are considered to be expensive and are thus included
in the income statement.
Valuation of inventories methods of determination:
Although the prime consideration in the valuation of inventories is cost, there
are a number of generally accepted methods of determining the cost of inventories
at the close of an accounting period. The most commonly used methods are first
in first out (FIFO) average, and last in first out (LIFO). The selection of the
method for determining cost for inventory valuation is important for it has a direct
bearing on the cost of goods sold and consequently on profit. When a method is
selected, it must be used consequently and cannot be changed for year to year in
order to secure the most favorable profit for each year.
THE FIFO METHOD (FIRST IN FIRST OUT METHOD):

Under this method it is assumed that the materials or goods first received are
the first to be issued or sold. Thus, according to this method, the inventory on a
particular date is presumed to be composed of the items which were acquired most
recently.
The value inventory would remain the same even if the perpetual inventory
system is followed.
Advantage:- The FIFO method has the following advantages.
1)

It values stock nearer to current market prices since stock is presumed to

be consisting of

2)

The most recent purchases.

3)

It is based on cost and, therefore, no unrealized profit enters into the

financial accounts of the company.

4)

The method is realistic since it takes into account the normal procedure of
utilizing or selling those materials or goods which have been longer
longest in stock.

Disadvantages:- The method suffers from the following disadvantages.

1)

It involves complicated calculations and hence increases the possibility of

clerical errors.

2)

Comparison between different jobs using the same type of material

becomes sometimes difficult. A job commenced a few minutes after
another job may have to bear an entirely different charge for materials
because the first job completely exhausted the supply of materials of the
particular lot.
The FIFO method of valuation of inventories is particularly suitable in

The following circumstances.

I.

The materials or goods are of a perishable nature.

II.

The frequency of purchases is not large.

III.

There are only moderate fluctuations in the prices of materials or goods

purchased.

IV.

Materials are easily identifiable as belonging to a particular purchase lot.

The LIFO method (Last in First Out method):

This method is based on the assumption that last item of materials or goods
purchased are the first to be issued or sold. Thus, according to this method,
inventory consists of items purchased at the earliest cost.
Advantages: - This method has the following advantages:
1)

It takes into account the current market conditions while valuing materials
issued to different jobs or calculating the cost of goods sold.

2)

The method is base on cost and, therefore, no unrealized profit or loss is

made on account of use of this method.
The method is most suitable for materials which are of bulky and non

Perishable type.
Base Stock Method:
This method is based on the contention that each enterprise maintains at all
times a minimum quantity of materials or finished goods in its stock. This quantity is
termed as base stock. The base stock is always valued at this price and its carried
forward as a fixed asset. Any quantity over and above the base stock is valued in
accordance with any other appropriate method. As this method aims at matching
current costs to current sales, the LIFO method will be most suitable for valuing
stock of materials or finished goods other than the base stock. The base stock
method has advantage of charging out material / goods at actual cost. Its other
merits or demerits will depend on the method which is used for valuing materials
other than the base stock.
Weighted average price method:
This method is based on the presumption that once the materials are put into
a common bin, they lose their identity. Hence, the inventory consists of no specific
batch of goods. The inventory is thus priced on the basis of average priced on the
quantity purchased at each price.
Weighted average price method is very popular on account of its being based
on the total quantity and value of materials purchased besides reducing number of

calculations. As a matter of fact the new average price is to be calculated only when
a fresh purchase of materials is made in place of calculating it every now and then
as is the case with FIFO, LIFO methods. However, in case of this method different
prices of materials are charged from production particularly when the frequency of
purchases and issues/sales in quite large and the concern is following perpetual
inventory system.
Valuation of inventories impact on the flow of costs:
As should be quite evident, the different methods of calculating inventory
values will all have their impact on the flow of costs through the balance sheet into
the income statement. The dollars that are paid to acquire inventory are always
divided between the balance sheet (inventories) and the income statement (cost of
goods sold), there is not other place to put them. Thus if the different methods of
calculating inventory produce differing inventory values, they will also produce
differing cost of goods sold figures, and the differing cost of goods sold figures will
naturally produce differing profit figures.
In order show the impact of inventory valuation on cost flows, the preceding
exhibits are summarized. Each method produces a different figure for the transfer of
raw materials to work in process. These differences appear small, but the only
reason for this is that the dollar amounts have been kept small to make the
illustration workable.
Evaluation of methods What causes the differences?
The differences in inventory values and flows for each of the method
illustrated result from only one factor, that it, changing purchases prices or unit
costs. If purchase prices had remained stable or unchanged, each method would
have produced the same inventory value and cost flow.
Cost flows and inventory are exactly the some under stable prices. With a
falling price level, the LIFO method produces the highest cost flow and the lowest
inventory. With a falling price level, the LIFO method produces the lowest cost flow
and highest inventory. The cost flow under LIFO follows the price level, LIFO
produces larger cost flows when prices are rising and smaller cost flows when prices

are falling. A final item to consider is that the average method produces results
which fall between the extremes of LIFO and FIFO.

Evaluation of methods can we justify the differences?

The best method of inventory valuation might be specific identification, that
is, the units in inventory should be identified with the specific invoices and thus
specific unit costs to which they apply.
Fortunately, the FIFO method constitutes a very useful approximation to the
specific identification method if one can reasonably assume that the actual flow of
materials is first-in first-out. This assumption is not unreasonable and thus we have
stated the main argument for the FIFO inventory scheme, that is, the physical flow
of materials would match the flow of costs under the first in first out method.
When the units in inventory are identical, interchangeable and do not follow
any specific pattern of physical flow, the average cost system would seen to
appropriate.
The primary difference between the FIFO and average methods is centered
on the physical flow since both methods could involve identical and interchangeable
units. The FIFO method fits a first-in first-out physical flow. The average method fits
a system which has no specific pattern of physical flow. Finding a situation where
there is no specific pattern of physical flow should be quite difficult because of the
fact that most inventory items are subject to deterioration by instituting a person
would attempt to reduce such deterioration and any reasonable person would
attempt to reduce such deterioration by instituting a physical flow approximating
first-in-first-out. The major reason for the use of the average method is something
other than the lack of specific physical flow.

Ordinarily the LIFO method cannot be justified on the basis of the physical
flow of materials. Under conditions of changing prices, the advocate of LIFO says
that the only method which matches costs and revenues is the LIFO method. The
LIFO method assumes that the latest item is the first item out, and thus the current
costs of materials are matched with the other hand, assumes that the first item in is
the first item out, and thus the non-current costs of matching current costs with
current revenues is the essence of the argument for the LIFO method.
Inventories valued at standard cost:
A very useful method of valuing inventories is at a standard cost. With a
standard cost system is no need of spending a great deal of time and money tracing
unit cost through perpetual inventory record.

PERPETUAL INVENTORY CARD UNDER A STANDARD COST

SYSTEM
Perpetual inventory Plant: Standard cost:

Location: Order Quantity:.....

Order Point:
..

Date

Description

On order

Receive
d

Available
Issued

On
order

On hand

As shown above, there is need only for physical quantities since the inventory
values is the physical quantity multiplied by the standard cost. With the cost and
value columns disposed off, a perpetual inventory card can include additional data

such as quantities on order, quantities reserved, and quantities available. These

additional data are very useful for inventory and production control purpose. On the
basis of a few calculations concerning into inventories on a FIFO, a LIFO, or an
average cost basis.

Inventory of Obsolescence:
Absolvent inventories cannot be used or disposed off at values carried on the
books. Frequent reviews should be made of all inventories, and when obsolescence
is indicated a request for revaluation should be prepared for approval by
management. The difference between original and obsolete value should be
recorded by a change to operating account. Inventory obsolescence, and a credit to
inventory. If the material is scrapped, this will be for the full inventory value or used
in areas where it will be work less than its
Original value, the entry would be only for the amount of write down. Some
companies carry a solvage inventory and transfer to it materials which may be sold
or used at reduced values. Where this is done, the entry would be:
Dr. Inventory Obsolescences. Raw Material inventory or Supplies inventory.

Inventory cost in relation Hero MotoCorp Ltd shall to classifieds follows:

Inventory can be classified as capital and revenue certain items through titled
as capital in nature. Hence, due care is to be take whole drawing the material.
Materials which are to be imported from other countries have to be planned
well in advance nearly about 24 months are to initiate the proposals for
procurement.

Similarly some of the items do not require any lead time some they are
available in the local market.
Automobile is highly energy intensive industry, the inputs like power and
Steel are the major part of the variable cost since Government controls the Steel &
fuel sector, and increase is rates adversely effects the Automobile industry.
Hero MotoCorp Ltd has it own power plant and through which it saves energy
consumption. By this the cost since Government controls the Steel & fuel sector,
any increase rates adversely effects the Automobile industry.
Inventory cost of any organization also adversely affects by retaining
obsolete / scraps and inventory costs can be reduced by management with an
advance planning of procurement of materials, periodical reviews of existing spares
with reference to the fast consumption, ascertaining the information regarding the
availability of spares in other areas. Holding of extra inventory will be an additional
financial burden to the company due to payment of interest charges on the
materials purchased, diminishing value of materials purchased, diminishing value of
materials by keeping them in stores for a log time, handling charges, spare rent
etc.,
Automobile factory runs with various equipments:
i.

ii.

technical department
1.

Store

2.

Mechanical

3.

Electrical

4.

Civil

Commercial departments
1.

stores

2.

purchase

3.

accounts

To run the plant and maintain equipments departments require spares. for such
requirement of spares departments raise indents and send the indents to purchase
department through stores.
Indents:
1)

Annual indents for consumable items (stores items).

2)

Regular indents raised by consuming departments.

3)

Annual requirement of raw materials promo & QC.

Enquiries:
1)

Enquires will be sent approved sun contractors.

Order processing form:

1)

Receiving quotations from sub contractors.

2)

Enter the price details of enquiry sent in the

Order processing form.

4)

Selection of party on merit basis.

Purchase order:
1)

Prepare purchase order on selected party.

2)

Send purchase order copies to party, stores and

Departments.

Goods receipt note:

1)

Receiving goods receipt note from stores.

Purchase department:
Activity receiving indents:
Flow chart:

 Receipt of annual indents for consumable items / stores items from stores
department.
Checking

of

indent

number

an

authority

of

item,

delivery

time

consumption period.
In case of any deficiency, send the information to concerned department
for clarification.
Segregation of indents for attending at C.P.D. and Hyderabad Office.
Sent the Hyderabad indents to Hyderabad Office.
Enter the indents details in indent register.

PURCHASE DEPARTMENT
PURCHASE ENQUIRY
Ms.
Sl.

Material

Departm

Quantit

No.

Code

ent

Unit

When
Required

ACTIVITY: FLOATING ENQUIRIES:

FLOW CHART:

Checking indented items and equipment name.

Taking previous suppliers information from previous supply. If new

equipment / item, information to be taken from concerned department or
from competitors / journals / yellow pages.

Prepare enquiry to approved sub contractors through enquiry format.

If emergency requirement, send the enquiries through fax / e-mail.

Enter the details of enquiries sent in order processing form.

PURCHASE DEPARTMENT
ORDER PROCESSING FORM
Sl.

Inde

No

nt

Ref

Materi
al

Descripti

Siz

Qt

Code

on

1 2 3 4 5 6

Remar
ks

No.

ACTIVITY: PREPARATION OF ORDER PROCESSING FROM

FLOW CHART:

Receiving quotation against enquiries sent.

Enter price and other of the quotation received from sub contractors in
the order processing from.

Mention the earlier purchase details of indented items against each item
in the order processing form if available.

Put up the processing from with enquiry and quotations to head

(purchase).

Examine order processing from with decide the sub contractor to whom
purchase order to be placed.

PURCHASE DEPARTMENT
PURCHASE ORDER
Sl.

Inden

Item

Descrip

No.

t No.

Code

tion

Qty

Rate

Unit

Amou
nt

ACTIVITY: PREPARATION OF PURCHASE ORDER

FLOW CHART:

Prepare purchase order after finalization of price and other technical terms
mentioning the following details.
1. Material code
2. Indent number
3. Material specification & part number
4. Quantity
5. Rate
6. Payment and other terms & conditions

Stipulation of terms of test certificate / ibr / manufactures certificate

where applicable.

Fill in and attach the purchase order review proforma to purchase order.

Send the prepared purchase order to head (purchase) and competent

authority for approval.

Send the purchase order to identified approved sub contractor.

Send the purchase order copies to store and concerned departments.

Enter the details of purchase order in purchase order register.

PURCHASE DEPARTMENT
AMENDMENT / CANCELLATION OF ORDER

Material Code

Material

Price /

Amended

Quantity as

Price /

per Order

Quantity

ACTIVITY: ORDER AMENDMENT, ORDER FOLLOW UP AND INFORM THE

SUPPLIER FOR THE REJECTIONS / DAMAGES / SHORTAGES:
FLOW CHART:

Issue of amendments in case of modification to purchase order.

Review the pending order and follow up the pending order for breakdown
requirement.

Send regular reminders to suppliers against pending purchase order every

month.

Receive shortage / excess / damages report from stores for the material
received.

Information the supplier for the rejections / damage / excess / shortage.

PURCHASE DEPARTMENT

ACTIVITY: IMPORTS:
FLOW CHART:

Receipt of indents for import items from stores department.

Taking previous / item, information to be taken from concerned

department or from competitors / journals / Yellow pages.

Send enquiry to overseas supplier.

Receiving quotations against enquiries sent.

Enter price and other terms of the quotations received from overseas
supplier in the order processing form.

1) Material code
2) Indent number
3) Material specification & part number
4) Quantity

5) Rate
6) Payment
7) Insurance and other terms and conditions.

Send the prepared purchase order to head (purchase) and competent

authority for approval.

Send the purchase order to overseas supplier.

Send the purchase order copies to stores and concerned departments.

Prepare IC documents and submit to bank for onward transmission to

overseas supplier.

Receive shipping documents from overseas supplier and send same to

clearing agents for collection of the material.

STORES DEPARTMENT
ACTIVITY: RECEIPTS AND UNLOADING MATERIAL

Receiving of Goods through Trunk / Personnel Delivery.

Entry of vehicle at Gate Office.

Stamping on Dispatch Advise / Delivery challan by Gate Office.

Checking of challans / Dispatch Advise with purchase order.

Unloading of Goods at allotted place or in case of urgency direct at works

site.

All safety precautions are taken while unloading of material like workers
should wear safety shoes, helmets, leather head gloves, noise respirator,
nose mask.

STORES DEPARTMENT
Activity: preparation of receipt and approval book for general material / d.c. enter of
block, repair and stationary material manually in register

Sorting of Delivery challans as below:

a) General
b) Stationery
c) Repairs
d) Block

Checking with P.O. and mentioning Material Code, Party Code, Indent No.
Department Name on each & every challans.

Creation of D.C. entry in system for general materials.

Preparation of identification tags for General Materials through system.

Preparation of Receipt & Approval Book for General materials.

Manual entry of block, stationery, repairs materials.

Preparation of intimations for block, stationery, repairs materials.

STORES DEPARTMENT
ACTIVITY: PHYSICAL VERIFCATION OF GOODS:

All D.C. handed over to stores assistant physical verification like

measuring, counting and tallying with D.C.s Quantity / Description of the
materials by the Stores Assistant.

Identification tags to be attached to the verified material. Shortage /

Excess / Damages if any found to be noted on challans and inform to
section incharge.

Preparation of Shortage / Excess / Reports if any sending to parties under

copy to purchase / bills sections.

STORES DEPARTMENT
ACTIVITY: APPROVAL OF MATERIAL AND PREPARATION OF GOODS RECEIPT
NOTES:

Intimation is be sent to all the concerned departments. Showing materials

to concern person.

Taking approval of the material in receipt & approval book.

Preparation general material in receipt & approval book.

Preparation general material GRNs through system and stationery /

block / repairs GRNs manually.

STORES DEPARTMENT
ACTIVITY: REJECTED MATERIALS

Rejected materials kept in allotted area of rejected materials.

Packing of rejected materials.

Preparation of gate passes for rejected materials.

Sending back to suppliers through our Hyderabad Office.

Sending consignee copy to party vides Register Letter for booking of

Register goods to partys other than.

STORES DEPARTMENT
ACTIVITY: EXCISE GATE PASSES

Sending duplicate for transport copy of excise invoice from suppliers

delivery challans.

Mentioning A.B. Sl. No. and named of concerned department.

Duplicate for transport copy of excise invoice over to bills section for
sending the same to Excise Department.

Corresponding with supplier. If the Excise Invoice is not found with delivery
challans.

CHAPTER-IV

DATA ANALYSES AND INTERPRETATIO

The investment on raw materials over a period of 5 years from 2010 to 2014 is
presented in the following table.
1.

Investment on Raw Materials:

Year

Investment on Raw Material

(in crores)

2009 2010

3925.71

2010 2011

5128.75

2011 - 2012

3964.26

2012 - 2013

3623.83

2013 2014

4088.77

Investment on Raw Material

(in crores)

6000
5000
4000
3000
2000

Investment on Raw
Material
(in
crores)

1000
0

Interpretation:
1)

From the above table it can be understood that the inventory of was recorded
at 4088.77 during the year 2013 14 and it is decreased to 3964.26 during
the year 2012 13.

2)

It shows that there is on decrease in the inventory to the more extent of

4088.77.

3)

The average inventory of HERO MotoCorp was recorded at Rs.4088.77.

4)

The highest investment in inventory was recorded in the years 2010-11.

2.

Trend Analysis:
Trend analysis technique is applied to know the growth rate in investment of

raw material of Hero MotoCorp Ltd over the review period which is shown in the
following table.
Trend Analysis:

Year

Raw Material (in Lacks)

Trend %

2009 2010

436.40

100

2010 2011

524.93

120.286434

2011 - 2012

675.57

128.69716

2012 2013

636.76

94.2552215

2013 2014

669.55

105.149507

Trend %
140
120
100
80
60
40
20
0

Trend %

Interpretation:
1)

The investment on inventory has increased in the year 2013 14. And the
lost year investment has declared continuously. The percentage in 2009 10
was 105.14 % as compared to years 2009 10 to 2013 14.

2)

The trends in inventories show that inventory have been more in the year
2011 12 and then it has shown a downward trend and again it increased to
some extent.

3)

The investment in inventories has shown fluctuating trend is initial years and
then it rose to 109.67 % and again showing fluctuating trend.

3.

Inventory Turnover Ratio:

This ratio indicates the number of times the stock has been turned over

during the period & evaluates the efficiency with which a firm is able to manage its
inventory. This ration is calculated by applying the following formula.
Cost of goods sold
Inventor turn over ration

_________________

Average inventory
Inventory turn over ration:
Year

Cost of goods

Avg.

sold

Inventory

Ratio

2009 2010

13084.39

436.40

29.9825619

2010 2011

16796.90

524.93

31.9983617

2011 - 2012

20032.81

675.57

29.6531966

2012 2013

20446.16

636.76

32.1096802

2013 2014

21727.05

669.55

32.4502277

Ratio
33
32.5
32
31.5
31
30.5
30
29.5
29
28.5
28

Ratio

Interpretation:
1.

From the above table it can be observed that inventory turnover ratio is 29.98

in the year 2009-10 and it gradually increased to 32.45 during 2013 2014.
2.

In the year 2011 12 it is clear that the ratio is very less i.e., his stock
Is not turned into sales quickly.

3.

As compared to all the years the ratio is very less in 2011 12.

4.

The average inventory turn over ratio was recorded at 31.23 times during the

review period.
4.

Inventory conversion period:

It may also be of interest to see average time taken for clearing the stocks.
This can be possible by calculating inventory conversion period. This period is
calculated by dividing the number of the days by inventory turns over.
This formula may be as:
Days in a year (360 days)
Inventory conversion period =

_____________________
Inventory turnover ratio

Inventory conversion period: (in crores)

Year
2009

Cost of goods

Avg.

sold

inventory

13084.39

2010
2010

16796.90

2011
2011 -

20032.81

2012
2012

20446.16

2013
2013
2014

436.40

524.93

675.57

636.76

Ratio

ICP (Days)

29.9825619

12.0069793

31.9983617

11.250576

29.6531966

12.1403437

32.1096802

11.2118097

32.4502277

11.0939907

21727.1
669.55

ICP (Days)
12.4
12.2
12
11.8
11.6
11.4
11.2
11
10.8
10.6
10.4

ICP (Days)

Interpretation:
From the above table it can be identified the following observations:
1)

The inventory conversion period was 11.09 days during the year, which
indicates that the stock has been very quickly converted into sales which
mean the company is managing the inventory efficiently.

2)

The lowest inventory conversion period was recorded at 11.9 days in the year
2013 14 and the highest inventory conversion was recorded at 12.14 days
in the year 2011 12.

3)

The average inventory conversion period was recorded at 10.2 days during
the review period.

5.

Percentage of Inventory over current assets:

In order to know the percentage of inventory over current assets the

Ratio of inventory to current assets is calculated and which is presented in the

Following table.

Inventory
Inventory over current assets ratio

__________ X 100

Current assets

Percentage of Inventory Over current assets:

Year

Inventory

Current
Assets

Ratio (%)

2009 2010

436.40

2890.46

15.0979429

2010 2011

524.93

1510.52

34.7516087

2011-2012

675.57

1951.69

34.6146161

2012 2013

636.76

2884.75

22.0733165

2013 2014

669.55

2911.17

22.9993439

Ratio (%)
40
35
30
25
20
15
10
5
0

Ratio (%)

Interpretation:
1)

From the above table it can be understand that the 22.99 % of inventory over
current assets ratio was showing a inclining trend for two years 2013 2014.

2)

However from the year 2011 12 it is showing an increasing trend.

3)

The lowest inventory over current assets ratio was recorded at 15% during
the year 2009 10 and the highest inventory over current assets ratio we
recorded at 34.75 % during 2010-2011.

4)

The average inventory over current assets ratio was recorded at 22.99 %.

7. Percent of Inventory Over total current assets & fixed assets:

Inventory / Current + Fixed assets
Year

Inventory

Current Assets+ Fixed

assets

Ratio (%)

2009 2010

436.40

3531.05

12.3589301

2010 2011

524.93

4447.22

11.8035537

2011 - 2012

675.57

5284.68

12.7835555

2012 2013

636.76

5308.40

11.9975882

2013 2014

669.55

5599.87

11.9565275

Ratio (%)
13
12.8
12.6
12.4
12.2
12
11.8
11.6
11.4
11.2

Ratio (%)

Interpretation:

1)

From the year 2009-10 it is showing fluctuating trend but as compared

to above 2 years it is increasing.

2)

The lowest inventory over total assets ratio was recorded at 11.59%
during the year 2013-14 and the highest inventory ratio was recorded
at 12.18 % during the year average.

3)

The average inventory to total assets ration was recorded at 11.59 %

during the review period

7.

Percentage of Inventory over current liabilities:

In order to know the percentage of inventory over current liabilities the

Ration of inventory to current liabilities is calculated and which is presented in

The following table.
Inventory
Inventory over current liabilities ratio

= __________________ X 100
Current liabilities

Percentage of Inventory Over current liabilities:

Current

Year

Inventory

2009 2010

436.40

4992.04

8.74191713

2010 2011

524.93

6397.47

8.2052749

2011- 2012

675.57

4610.73

14.6521267

2012 2013

636.76

4333.25

14.6947441

2013 - 2014

669.55

4497.43

14.8873912

liabilities

Ratio (%)

Ratio (%)
16
14
12
10
8
6
4
2
0

Ratio (%)

Interpretation:

1)

From the above table it can be understand that the % inventory over current
liabilities ratio was showing a declining trend for two years 2010-14.

2)

During the year 2010-11 the ratio was it gradually decreased to 8.20 and
there is a net increase to the extent of 12.45.

3)

The lowest inventory over total amounts ratio was recorded at 8.20 during
the year 2010-11.

4)

The highest inventory to current liabilities ratio was recorded at 14.88 during
the year 2013-14.

5)

The average inventory to current liabilities ratio was recorded at 14.88 during
the review period.

8.

Current Ratio:

In order to know the current ratio the percentage of current assets to current
liabilities is calculated and which is presented in the following table.

Current assets
Current Ratio

= _____________________
Current liabilities

Calculation of Current Ratios:

Current

Current

assets

liabilities

2009 2010

2890.46

4992.04

0.57901379

2010 2011

1510.52

6397.47

0.23611209

2011- 2012

1951.69

4610.73

0.42329306

2012 2013

2884.75

4333.25

0.66572434

2013 - 2014

2911.17

4497.43

0.64729634

Year

Ratio (%)

Ratio (%)
0.8
0.6
0.4
0.2
0

Interpretation:

Ratio (%)

1)

From the above table it can be interpreted that the % of current assets
over current liabilities ratio i.e., current ratio was showing a fluxuation
trend from year 2010-2014.

2)

In the year 2009-2010 the ratio was 0.57 % and has increased to 0.64 %
in the year 2013-2014.

3)

The lowest current ratio was recorded at 2010-11 which is 0.23 % and the
highest current ratio was recorded at 0.57 % during the year 2009-10.

4)

The average current ratio was recorded at 0.54 % during the review
period.

9.

Quick Ratio:
The quick ratio is the relationship between quick to current liabilities quick

assets is more rigorous test of liability position of a firm it is computed by applying

the following formula.
Quick ratio =

Quick assets / Current Liabilities

Where Quick assets = Current Assets Inventory

Year

Quick assets

Current
liabilities

Ratio (%)

2009 2010

2454.06

4992.04

0.49159462

2010 2011

985.59

6397.47

0.15405934

2011- 2012

1276.12

4610.73

0.27677179

2012 2013

2247.99

4333.25

0.51877689

2013 2014

2241.62

4497.43

0.49842243

Ratio (%)
0.6
0.5
0.4
0.3

Ratio (%)

0.2
0.1
0

Interpretation:

1)

From the above table it can be understand as that the % of quick assets to
current liabilities i.e., the quick ratio was 0.49 % in 2009-10 and from that
year it is showing increasing trend.

2)

The highest quick ratio was recorded at 0.51 % during the year 2012-13
and the lowest quick ratio was recorded at 0.15 % during the year 201011.

3)

The average quick ratio was recorded at 0.49 % during the review period.

ABC ANALYSIS FOR THE YEAR 2009-10:

ITEM

RANK

ANNUAL

CUMULATIVE

CUMULATIVE

CONSUMPTION USAGE

PERCENTAGE

(RS/Cr)

(Cr)

OF USAGE

25983

25983

40.43

16727

42710

66.47

FINISHED GOODS

10679

53389

83.09

MATERIAL IN

4719

58108

90.43

1187

59295

92.30

3045

62340

97.02

1806

64146

99.83

108

64254

100.00

WORK IN
PROGRESS
RAW
MATERIALS

TRANSIT
INDIRECT
MATERIAL
MATERIAL WITH
FABRICATION
TRANSFER IN
TRANSIT
SCRAP ARISE &
OTHERS

A Occupies 70% of annual consumption value i.e., 70% of 64254 is 44977.80

A + B Occupies 90% of annual consumption value i.e., 90% of 64254 is 57828.60
Actual Value of A = 42710/64254*100 = 66.47%
B = 23.96% & C = 9.57%
RANKS

% CHANGE

97.0299.83 100
83.0990.4392.3
66.47
40.43

AB
C ANALYSES FOR 2009-10

INTERPRETATION

Now we conclude that Class A occupies 55.01% of total values of them,

therefore items work in progress, raw materials and finished goods are comes underclass
A category and Class B occupies 37.47%after the class A percentage therefore item
material in transit comes under class B category, and lastly Class C occupies 7.57% with
items indirect material, material with fabrication, transfer in transit, scraps and others.

ABC ANALYSIS FOR THE YEAR 2010-11:

ITEM

RANK

ANNUAL

CUMULATIVE

CUMULATIVE

CONSUMPTION USAGE

PERCENTAGE

(RS/Cr)

(Cr)

OF USAGE

29148

29148

38.61

19656

48804

64.65

FINISHED GOODS

13017

61821

81.89

MATERIAL IN

5038

66859

88.56

1286

68145

90.27

4963

73108

96.84

2107

75215

99.63

WORK IN
PROGRESS
RAW
MATERIALS

TRANSIT
INDIRECT
MATERIAL
MATERIAL WITH
FABRICATION
TRANSFER IN
TRANSIT

SCRAP ARISE &

278

75493

100.00

OTHERS

A Occupies 70% of annual consumption value i.e., 70% of 75493 is 52845.10

A + B Occupies 90% of annual consumption value i.e., 90% of 75493 is 67943.70
Actual Value of A = 61821/75493*100 = 81.89%
B = 8.38%
C = 9.73%

RANKS

81.89

88.56 90.27

% CHANGE

96.84 99.63 100

64.65
38.61
1

ABC
ANALYSES FOR 2010-11
INTERPRETATION
Now we conclude that Class A occupies 81.89% of total values of them,
therefore items work in progress, raw materials and finished goods are comes underclass
A category and Class B occupies 13.25%after the class A percentage therefore item
material in transit comes under class B category, and lastly Class C occupies 4.86% with
items indirect material, material with fabrication, transfer in transit, scraps and others.

ABC ANALYSIS FOR THE YEAR 2011-12:

ITEM

RANK

ANNUAL

CUMULATIVE

CUMULATIVE

CONSUMPTION USAGE

PERCENTAGE

(RS/Cr)

(Cr)

OF USAGE

33123

33123

40.65

21772

54895

67.38

FINISHED GOODS

4190

59085

72.52

MATERIAL IN

9198

68283

83.81

1546

69829

85.70

7968

77797

95.48

3379

81176

99.63

300

81476

100.00

WORK IN
PROGRESS
RAW
MATERIALS

TRANSIT
INDIRECT
MATERIAL
MATERIAL WITH
FABRICATION
TRANSFER IN
TRANSIT
SCRAP ARISE &
OTHERS

A Occupies 70% of annual consumption value i.e., 70% of 81476 is 57033.20

A + B Occupies 90% of annual consumption value i.e., 90% of 81476 is 73328.40
Actual Value of A = 59085/81476*100 = 72.52%

B = 22.96%
C = 4.52%

ABC ANALYSES FOR 2011-12

RANKS

67.38 72.52

83.81 85.7

% CHANGE

95.48 99.63 100

40.65

INTERPRETATION
Now we conclude that Class A occupies 72.52% of total values of them,
therefore items work in progress, raw materials and finished goods are comes underclass
A category and Class B occupies 22.96%after the class A percentage therefore item
material in transit comes under class B category, and lastly Class C occupies 4.51 % with
items indirect material, material with fabrication, transfer in transit, scraps and others.

ABC ANALYSIS FOR THE YEAR 2012-13:

ITEM

WORK IN

RANK

ANNUAL

CUMULATIVE

CUMULATIVE

CONSUMPTION USAGE

PERCENTAGE

(RS/LAKHS)

(RS)

OF USAGE

25814

25814

35.46

11646

42458

58.33

15320

57778

79.37

10262

68040

93.47

1317

69357

95.28

1279

70654

97.06

PROGRESS
RAW
MATERIALS
FINISHED
GOODS
MATERIAL
IN TRANSIT
INDIRECT
MATERIAL
MATERIAL
WITH
FABRICATION

TRANSFER IN 7

2029

72683

99.85

111

72794

100.00

TRANSIT
SCRAPS ARIS 8
& OTHERS

A Occupies 70% annual consumption value i.e., 70% of 72794 = 50955.8

A + B Occupies 90% annual consumption value i.e., 90% of 72794 = 65514.6
Actual Value of A = 57778/72794*100
= 79.37%
B = 14.10%
C = 6.53%

ABC Analysis 2012-2013

100
90
80
70
60
50
40

RANKS

30

% CHANGE

20
10
0

INTERPRETATION
Now we conclude that Class A occupies 79.37% of total values of them,
therefore items work in progress, raw materials and finished goods are comes underclass
A category and Class B occupies 14.10 after the class A percentage therefore item
material in transit comes under class B category, and lastly Class C occupies 6.53% with
items indirect material, material with fabrication, transfer in transit, scraps and others

ABC ANALYSIS FOR THE YEAR 2013-14

ITEM

RANK

WORK IN

ANNUAL

CONSUMPTIONUSAGE

PERCENTAGE

(RS/LAKHS)

OF USAGE

FINISHED GOODS

669.55

MATERIAL IN

15560

TRANSIT
5

OTHERS

47.67052

19844.12

49.33511

35404.12

88.01933

36628.12

91.06235

38195.12

94.95812

40135.12

99.78122

40223.12

100

1940

TRANSIT
SCRAP ARISE &

19174.57

1567

FABRICATION
TRANSFER IN

2.123431

1224

MATERIAL
MATERIAL WITH

854.11
18320.46

MATERIALS

INDIRECT

(RS)

854.11

PROGRESS
RAW

CUMULATIVE CUMULATIVE

88

A Occupies 70% of annual consumption value i.e., 70% of 40223.12 is 28156.18

A + B Occupies 90% of annual consumption value i.e., 90% of 40223.12 is 36200.80
Actual Value of A = 28156.18/40223.12*100 = 69.99%

B = 24.42%
C = 5.59%

ABC ANALYSES FOR 2013-14

45000

40000

35000

30000

25000
RANK
20000

ANNUAL CONSUMPTION
(RS/LAKHS)
CUMULATIVE USAGE (RS)

15000

CUMULATIVE PERCENTAGE
OF USAGE

10000

5000

INTERPRETATION
Now we conclude that Class A occupies 69.99% of total values of them, therefore
items work in progress, raw materials and finished goods are comes underclass A category
and Class B occupies 24.56%after the class A percentage therefore item material in
transit comes under class B category, and lastly Class C occupies 5.58% with items
indirect material, material with fabrication, transfer in transit, scraps and others.

CHAPTER-V

FINDINGS

SUGGESSIONS

CONCLUSIONS

BIBLIOGRAPHY

FINDINGS

Over all the inventory of Hero MotoCorp Ltd is up to the mark.

The production during 2013-14 was 21727.05 and 20446.16 respectively

which is higher as compared to 2012-2013 which is 23586.80 and
25252.98.

Investment on raw material in 2011-2012 is 3623.83 Cr which very high as

compared to 2012-13 which is only 3964.26 Cr.

The inventory turn over ratio shows that the stock has been converted
into sales is only 1.01 times.

In the year 2009-10 the stock was cleared within 11.02 days whereas it
took 12.73 days in the year 2012-2013 which took more days for clearing
stock.

Year 2013-14 is not showing sample profits. This is because of Iron prices
have been continuously under pressure due to persistent mismatch
between supply and demand.
.

SUGGESTIONS

Though the production is higher is the year 2009-2010 and the sales were
very high i.e., as per inventory conversion period it took 11.01 days. This
shows that there is demand for Automobile and the funds unnecessarily tied
up. So, proper demand forecasting should be done and according to that it
may be manufactured.

The investment on raw material should be made as per the requirement.

Unnecessary investment may block up the funds.

Neither too high nor too low inventory turnover ratios may reduce profit and
liquidity position of the industry. So, proper balance should be made to
increase profits and to ensure liquidity.

The raw material should be acquired from the right source at right quality and
at right cost.

CONCLUSION

Today business scenario inventory management is becoming very

crucial part of the organization.

The system of inventory management in Hero MotoCorp Ltd very

effective. The organization is basically and assembling unit and thus
inventory place a most significant role in the decision making process.

From the various calculations and figures relating to inventory

management it is clear that the inventory classification of A items are
maintain for days, as a result it reduce investment in raw material,
reducing the lead time and also the large quantity discount because
the stock are kept for days.

In the classification of ABC items procedure is following in Hero

MotoCorp Ltd has launched the different type of card system for class
C items.

Class A & B items are consider under the just in time philosophy as the
procurement time has been reduced up to greater extent by the proper
co-ordination of buyer and supplier.

There is great improvement in the inventory turnover ratio from 3

years. It is increased from 5.98 to 7.24% this position indicates that
the stocks are fast moving and get converted into sales quickly in
Hero MotoCorp Ltd,

Finally we conclude that Hero MotoCorp Ltd the inventory system is

very good with high techniques.

BIBLIOGRAPHY

1.

Financial Management

By I.M Pandey

2.

Financial Management

By Prasanna Chandra

3.

Total Quality Management

By K. Shridhara Bai

4.

Management Accounting

R.K.Sharma &S.KGuptha

WEBSITES:

www.google.com
www.heromoto.com
www.indiancompanys.com
www.automobilsindia.com

Table Content

Chapte
r

Title

Page No
1-5

Introduction
Objectives Of The Study
I

Need Of The Study

Methodology Of The Study
Limitations Of The Study

II

Review Of Literature

6-27

Research Studies
Stock Markets
III

Company Profile

28-36

IV

Data Analysis And Interpretation

37-44

Findings

45-46

VI

Suggestions

47-48

VII

Conclusions

49-50

VIII

Bibliography

51-52

CHAPTER-I
INTRODUCTION

Introduction
Objective of the study
Need and scope of the study
Methodology of the study
Limitations

INTRODUCTION
Stock Market integration is generally perceived as a real barometer for the economic growth.
This integration is because of globalization and liberalization. With financial integration,
emerging economies have become increasing attractive place for the portfolio investors who
generally seek marginal amount of return than what available in other developed countries. There
are several benefits associated with financial integration such as real price discovery, market
efficiency, higher savings and investments, low transaction costs and that would lead to overall
economic development.
The correlation between the returns for different markets is the core indicator to measure the
influence of portfolio risk Markowitz (1952). According to the portfolio theory, assets with low
correlation between their returns significantly enhance the risk-adjusted return of the portfolio.
Thus diversifying the investments in the emerging market will give scope to reduce unsystematic
risk or to improve the marginal returns. If all markets are highly correlated then the crash in one
market will ripple to other markets too. In January 2008, national stock markets declined sharply
due to credit market developments in the United States.
India has the distinction of having the second largest number of listed companies after the USA.
Number of firms in emerging markets now cross-list on international exchanges to get benefit of
lower cost of capital and more liquidity-traded shares. There are some debates whether stock
market integration brought economic development or will cause economic disruptions. This issue

had been extensively studied nearly four decades ago by Shaw (1973) and McKinnon (1973), wh
oresulted in significant evidence that financial development

promotes economic growth, mainly through a raise in the level of saving and investment. The
returns of domestic and foreign markets are less than perfectly correlated. This indicates higher
the correlation, higher chances of co-movement and vice versa. The modern portfolio theory
elicits the integration and interdependence which focuses the issue of diversifying assets. The
advantages of assetdiversification have extensively discussed in the literature
[see Grubel (1968), Lessard (1973),Agmon and Lessard (1977), Solnik
(1991)].
There have been numerous reasons forwarded for rapid growth in some of the selected countries.
Firstly, Governments in less developed and emerging countries have become more liberal in
adopting market-oriented reforms geared to privatize previously public enterprises such as
transport and communications and public utilities; secondly financial sectors in these countries
have been opened to foreign private sector investment; thirdly, the corporate sectors are
now becoming increasingly competitive in these countries, even on an international level; state
owned enterprises continue to become more privatized, paving the way for shares being
distributed amongst a wider span of the population. The objective of this paper is to study comovement of Indian stock markets index with developed as well as developing countries stock
market indices.
In investigating these issues, we take Nifty index as the core barometer of the Indian
stock market as it captures the major chunk of Indian stock market. On the other hand, the other
stock markets are selected based on Indias significant trade and financial relations with foreign
countries. We have selected stock markets of India, China, U.S, U.K, Hong Kong, Japan,
Germany, and Australia as a developed market.

SELECTED STOCK MARKETS AND THEIR INDEX:

COUNTRY

STOCK MARKET

INDICES

ABBREVIATI
ON

INDIA

National Stock Exchange

NIFTY

NIFTY

CHINA

Shanghai composite Index

SCI

SCI

U.S

NASDAQ

NASDAQ

U.K

Financial Time Stock Exchange

FTSE

FTSE

GERMANY

Deutrcher Aktien Index

DAX

DAX

FRANCE

CAC

CAC

JAPAN

Tokyo Stock Exchange

NIKKIE

NIKKIE

HONG KONG

Hong Kong Stock Index

Hangseng

HANGSENG

NEED FOR THE STUDY:

Presently, the fluctuations in the Indian market are attributed heavily to cross border capital
flows in the form of FDI, FII and to reaction of Indian market to global market cues. In this
context, understanding the relationship and influence of various exchanges on each other is very
important. This study compares global exchanges which are from different geo- politico-socioeconomic areas. With the cross border movements of capital like never before in the form of FDI
and FII, coupled with the easing of restrictions bringing various stock exchanges at par in terms
of system and regulations, it can be assumed reasonably that a particular stock exchange will
have some impact on other exchanges.

OBJECTIVES OF THE STUDY:

1.
2.
3.
4.
5.

To know the relationship between the global markets with Indian market.
To find which global markets mostly influence the Indian market.
To find the relationship between MSCI and Indian Stock Market(NSE and BSE)
To find the risk of an Index stock i.e., ONGC with Nifty and Sensex.
To find the volatility of Nifty and Sensex at budget session time between 11am to
12:40pm.

METHODOLOGY:
The study is based on the data collected from eight global markets.
The secondary data is collected from NSE website, BSE website, SEBI website, chittorgarh
website, karvy website Angel Broking website, Books, Newspaper Journals and etc.
Statistical tools: Beta, Correlation, standard deviation

LIMITATIONS:

1.
2.
3.
4.
5.
6.
7.

Duration is very short

No primary data
Extracted data from NSE and BSE website, which is secondary.
As a student I dont have investment experience
Dependability
Very few indices have been taken for the whole study
Detailed study of the topic was not possible due to limited size of the project.

CHAPTER II
REVIEW OF LITERATURE:

Research studies
Global integration
Concept of stock exchange
National stock exchange
Global market movement

REVIEW OF LITERATURE

There is a numerous empirical research studies conducted in field of financial co-integration of

Indian stock markets with other countries stock markets during different time period by
employing different co-integration techniques.
Sharma and Kennedy (1977) examined the price behaviour of Indian market with the US and
UK markets and found that the behaviour of the Indian market is statistically indistinguishable
from that of the US and UK markets and found no evidence of systematic cyclical component
or periodicity found for these markets.

Taylor and Tonks (1989) were the first to apply bivariate co-integration in the UK and U.S
markets to test the importance of the latter after the abolition of foreign exchange controls in
1979. Using cointegration techniques, they found no significant increase in the correlation of
short-run stock market returns for the UK and certain overseas markets post 1979; their findings
also implied the inefficiency of a number of stock markets.
Rao and Naik (1990) applied the Cross-Spectral analysis and found the Indian stock index, the
gains estimates from either the US or the Japan indices are not dependent and hence they
concluded the relationship of Indian market with international markets is poor reflecting the

institutional fact that the Indian economy has been characterized by heavy controls throughout
the entire seventies with liberalization measures initiated only in the late eighties.

Cheung and Mak (1992) studied weekly return series of the AsianPacific emerging markets for
the period 1977 to 1988 and concluded that The US market can be considered as a 'global factor'
and is found to lead most of the Asian Pacific emerging markets except Korea, Taiwan and
Thailand. The Japanese market is found to have a less important influence on the Asian Pacific
emerging markets.
Kasa (1992) suggested that the short-term return correlation between stock markets is not
appropriate from the perspective of long-horizon investors driven by
common stochastic trends. A cointegration model is useful since it not only distinguishes
between the nature of long-run and of short-run linkages among financial markets, but captures
the interaction between them as well.
Hassan and Naka (1996) investigates the dynamic linkages among the U.S., Japan, U.K. and
German stock market and found significant evidence in support of both short-run and long-run
relationships among these four stock market indices. They suggested that in co-integrated
markets, price movements in one market immediately influence other markets, consistent with
efficient information sharing and free access to markets by domestic and foreign investors.
Elyasiani (1998) have investigated the interdependence and dynamic linkages between the
emerging capital markets of Sri Lanka with the markets of its major trading partners and have
found no significant interdependence between the SriLankan market and the equity market of the
US and other Asian countries.

Darrat and Zhong (2002) examined the linkages between eleven emerging Asia-Pacific markets
with US and Japan. They argued that the effect of the movements in the Japan market on the
Asia-Pacific region is only transitory.
Golaka C Nath&Sunil Verma (2003) examined the interdependence of the three major stock
markets in South Asia. Using daily stock market data from January 1994 to November 2002,
they examine the stock market indices of India (NSE-Nifty), Singapore (STI) and Taiwan
(Taiex). On employing bivariate and multivariate co-integration analysis to model the
linkages among the stock markets, no co-integration was found for the entire period. Hence, they
conclude that there is no long run equilibrium.
The results of Johnson (2003) revealed that the high share of trade with the US shows positive
effect, while the increased bilateral exchange rate volatility shows reverse effect on the stock
market co movements.
Flood and Rose (2003), describe a simple methodology to test for asset integration and apply it
within and between American stock markets. The techniques based on a general inter-temporal
asset-pricing model and rely on estimating and comparing expected risk free rates across assets.
Expected risk free rates are allowed to vary freely over time, constrained only by the fact that
they are equal across assets. The methodology used here takes into the fact that asset markets are
integrated when assets are priced by the same stochastic discount rate. This model has been
applied to stocks drawn from the S&P 500 and the NASDAQ, and the conclusions are that the
NASDAQ is usually integrated, the S&P always seems to be integrated and the S&P and the
NASDAQ do not seem to be closely integrated.
Guha, Oak,Bhupal and Daga (2004) have conducted research on the interdependence among
the major stock markets of the world. Using the monthly data from January 1993 to September
2003, They examined the stock market indices of India (SENSEX), Hong Kong (Hang Seng), the
USA(DJIA) and the UK (FTSE-100). Co-integration technique has been employed to study the
long-term linkages among the markets. They found that the equity markets of India and Hong
Kong are co-integrated with the other markets whereas the markets of the USA and UK are not.

Narayan

et al.

(2004) examines

the dynamic

linkages between

the stock

markets of

Bangladesh, India, Pakistan and Sri Lanka using Granger causality approach. In the short run
there is unidirectional Granger causality running from stock prices in Pakistan to India, stock
prices in Sri Lanka to India and from stock prices in Pakistan to Sri Lanka. Bangladesh is the
most exogenous of the four markets.
Mukharjee and Mishra (2005) applied the Engel-Granger (Engeland Granger1987) test of
causality and co integration and Geweke measure of feedback to empirically investigate the
hypothesis that the Indian stock market is not co integrated with other national markets in the
long run and there is no cause and effect relationship among those markets .The grangers
causality test and unidirectional Geweke feedback statics proved the fact that though Indian
equity market have some influence on the stock market of some of the Asian countries , the
equity market of European and American countries are not at all influenced /caused by India.

Colthup (2005) have found that bilateral trade, inflation rate differential, industrial production
growth differential, interest rate differential, stock market size and volatility, region etc. are some
of the important factors that can affect the spill over of information among the markets. In the
paper by A.S. Lamba (2005), he examined the influence of developed equity markets on Indian
markets and what influence can the Indian equity market exert on the others To examine these
dynamic relationships, a multivariate co- integration framework is used with error correction
models estimated to analyse the casual influence of the major developed markets on south Asian
markets. This method allows separation of any long run equilibrium relationships between the
markets from the short run casual effects.
Won, Agrawaland Du (2005) have investigated the long-run equilibrium relationship and shortrun dynamic linkage between the Indian stock market and the stock markets in major developed
countries (United States, United Kingdom and Japan) after 1990 by examining the Granger
causality relationship and the pair wise, multiple and fractional co integrations between the
Indian stock market and the stock markets from these three developed markets. They conclude

that Indian stock market is integrated with mature markets and sensitive to the dynamics in these
markets in a long run. In a short run, both US and Japan Granger causes the Indian stock market
but not vice versa. In addition, they find that the Indian stock index and the mature stock indices
form fractionally co integrated relationship in the long run with a common fractional, no
stationary component and find that the Johansen method is the best reveal their co-integration
relationship.

Bose and Mukharjee (2006) examined the co movement of the Indian stock market with
developed markets like US, Japan and other Asian markets with using tools like pair wise and
group wise co integration and granger-causality test .They found that on a daily bases the Indian
index is most highly correlated with the Singapore STI index, and it is also very highly
correlated with the stock indices of Malaysia, South Korea, Taiwan and Thailand , while the least
correlation is observed with the US S&P 500 index. Stock return in India are seen to be highly
correlated with returns in major markets like Hong Kong, Singapore, and Korea and also with
Thailand and Taiwan , while lowest correlations are observed.
Lamba (2005) conducted research on short run and long run relationship between India,
Pakistan and Sri Lanka and major developed market during July 1997 - December 2003. Using a
multivariate co integration framework and vector error-correction modeling, they found that the
Indian

market

is

influenced by the US, UK and Japan and South Asian equity markets are becoming more integ
rated witheach other but at a relatively slow pace.
Ashwin et al. (2008) has studied the long term and short term co-movement among the
developed market and emerging market with the help of co-integration technique. They had
studied the co-movements of the BSE, BVSP, MXX, HANGSENG, RTS, FTSE100, DJIA
and NASDAQ stock markets by using daily returns data for the July 1, 1997 to June 30, 2008

period. They found that the correlation of BSE with BVSP, MXX, FTSE100, DJIA and
NASDAQ is low.

Raj et al. (2009) has studied how the Indian stock market is integrated with other global markets
of the US, the UK and Japan and other major regional markets in Asia such as Singapore and
Hong Kong by VECM model and found that the integration of the Indian stock markets with
global markets such as the US and UK is much higher than with the regional markets.
Chittedi, Krishna Reddy (2009) empirically investigates the long run equilibrium relationship
between the BRIC(Brazil, Russia, India and China) stock markets and the stock market indices
of three major developed countries as a using the multivariate co integration. The multivariate co
integration technique is used to investigate the long run relationship. To assess the short run
influence of one market on the other and to assess how many days each market takes to factor
out the influence Indian stock market, they have used the Granger causality test with 02 days.
The study found that US, and Japan market factors influencing Indian stock market. It might be
because of maximum international trade commercial activities between these countries. Indian
stock market is not influencing by UK, Brazil, Russia and China markets. But Brazil and Russia
markets are influencing by Indian stock market. The study finally conclude that India and
developed countries markets USA, UK, Japan, and other Emerging BRIC markets highly co
integrating during the period of the study.

THEORITICAL FRAMEWORK
Global integrationthe widening and intensifying of linksbetween high-income and
developing countries has accelerated over the years. Over the past few years, the financial
markets have become increasingly global. The Indian market has gained (FIIs). Following the
implementation of reforms in the securities industry in the past few years, Indian stock world
ranking as per Standard and Poors Fact Book 2012,India ranked 11th in terms of market
capitalization, 17th in terms of total value traded in stock exchanges, and 30th in terms of turn
over ratio, as of December 2011.

The turnover of all the markets taken together has increased from US$65 trillion in 2010 to
US$66.4 trillion in 2011. Significantly, the US alone accounted for about 46.3 percent to the
world wide turn over in 2011. Despite having a large number of companies listed on its
exchanges, India accounted for a meager 1.1 percent to the total world turn over in 2011. A scan
be observed from Table1-4, the market capitalization of all the listed companies taken together
across all the markets stood at US$45.08 trillion in 2011(US$54.51trillionin2010). The share of
the US in world wide market capitalization increased from 31.4 percent at the end of 2010 to
34.7 percent at the end of 2011, ,while the Indian listed companies accounted for 2.3 percent of
the total market capitalization at the end of 2011.The stock market capitalization for some
developed and emerging countries is shown in Chart 1-3

Table1-4:International Comparison of Global Stock Markets:

InternationalComparis Market Capitalisation(US$mn)

on

MarketCapitalisationRatio
(inpercent)

No.oflistedCompanies

Markets

2009

2010

2011

2009

2009

2010

2011

DevelopedMarket

33,531,413

39,309,690

33,169,049

24,635

27,024

27,497

Australia

1,258,456

1,454,547

1,198,164

136.07

157.28

87.34

1,882

1,913

1,922

France

1,972,040

1,926,488

1,568,730

74.43

72.71

56.57

941

901

893

Germany

1,297,568

1,429,707

1,184,459

38.77

42.72

33.17

601

571

670

Japan

3,377,892

4,099,591

3,540,685

66.66

80.90

60.35

3,208

3,553

3,961

Korea

836,462

1,089,217

994,302

100.47

130.83

89.08

1,778

1,781

1,792

Singapore

310,766

370,091

308,320

170.53

203.09

128.63

459

461

462

UK

2,796,444

3,107,038

1,202,031

128.60

142.88

49.43

2,179

2,056

2,001

USA

15,077,286

17,138,978

15,640,707

105.76

120.22

103.62

4,401

4,279

4,171

EmergingMarkets

13,848,456

15,201,722

11,913,772

24,073

21,675

22,056

China

5,007,646

4,762,837

3,389,098

100.46

95.55

68.42

1,700

2,063

2,342

India

1,179,235

1,615,860

1,015,370

90.01

123.33

63.81

4,955

4,987

5,112

Russia

861,424

1,004,525

796,376

69.99

81.62

46.37

279

345

327

Brazil

1,167,335

1,545,566

1,228,969

74.26

98.32

47.13

377

373

366

Indonesia

178,191

360,388

390,107

32.98

66.70

21.04

398

420

440

Malaysia

255,952

410,534

395,083

133.59

214.27

91.85

960

957

941

Mexico

340,565

454,345

408,691

38.93

51.93

29.48

125

130

128

WorldTotal

47,379,869

54,511,412

45,082,821

--

--

--

48,732

48,782

49,553

2010

2011

USAaspercentofWorld 31.8

31.4

34.7

--

--

--

9.03

8.77

8.42

IndiaaspercentofWorld 2.5

3.0

2.3

--

--

--

10.17

10.22

10.32

Note: Listed companies in India pertain to BSE.

Market Capitalization ratio is computed as a percentage of GDP.
Koreahasbeenclassifiedasdevelopedmarketsfrom2010onwards.

Source: S&P Global Stock Market Factbook,2012 and World Development Indicators,
World Bank

Source: S&P Global Stock Market Factbook,2012 and World Development

Indicators, World Bank

CONCEPT OF STOCK EXCHANGE

The Securities Contracts (Regulation) Act, 1956, has defined Stock Exchange as an "association,
organization or body of individuals, whether incorporated or not, established for the purpose of
assisting, regulating and controlling business of buying, selling and dealing in Securities".
Stock exchange as an organized security market provides marketability and price continuity for
shares and helps in a fair evaluation of securities in terms of their intrinsic worth. Thus it helps
orderly flow and distribution of savings between different types of investments. This institution
performs an important part in the economic life of a country, acting as a free market for securities
where prices are determined by the forces of supply and demand. Apart from the above basic
function it also assists in mobilizing funds for the Government and the Industry and to supply a
channel for the investment of savings in the performance of its functions.
The Stock Exchanges in India as elsewhere have a vital role to play in the development of the
country in general and industrial growth of companies in the private sector in particular and
helps the Government to raise internal resources for the implementation of various development
programmes in the public sector. As a segment of the capital market it performs an important
function in mobilizing and channelising resources which remain otherwise scattered. Thus the

Stock Exchanges tap the new resources and stimulate a broad based investment in the capital
structure of industries.
A well developed and healthy stock exchange can be and should be an important institution in
building up a property base along with a socialist in India with broader distribution of wealth and
income. Thus Stock Exchange is a vital organ in a modern society. Without a stock exchange a
modern democratic economy cannot exist. The system of joint stock companies financed through
the public investment as emerged has put the vast means of finances almost to entrepreneurs'
needs.
Finance from external sources mainly from the investing public can become possible only
when an institute like Stock Exchange provides opportunities for the conversion of scattered
savings into profitable investments with the promises of a reasonable yield and minimum
element of risk. Such a mechanism as provided by Stock Exchanges is not merely a source of
capital but also a conduit which channelises the savings into investment along with a free
movement of capital. With the probable exception of a totalitarian state no Government will be
able to mobilize resources from the public if the money market in the form of stock exchange
does not exist.
The Stock Exchange benefits the entire community in a variety of way. It enables the
producers to raise capital which directly and indirectly gives gainful employment to millions of
people on the one hand and helps consumers to get ;the variety of goods needed by them on the
other. It provides opportunities to savers to store the value either as temporary abode of
purchasing power or as a permanent abode of purchasing power in the form of financial assets. It
also helps the segments of the savers who put their savings in commercial firms and non-banking
financial intermediaries because these institutions avail themselves of the services of Stock
Exchange to invest the money thus collected. The Stock Exchange comes close enough to a
perfectly competitive market allowing the forces of demand and supply a reasonable degree of
freedom to operate as compared to other markets specially the commodity markets. This segment
of the factor market can be considered as a perfect or a nearly perfect market.

Apart from providing a mechanism for transacting business in stock and shares it generates
genuine potential for a new entrepreneur to take up initiative in the private sector enterprises and
allows the expansion of investing community by offering gainful development of their otherwise
sluggish or shy capital.
The Stock Exchange must assume the responsibility of protecting the rights of investors specially
the small investors in the Joint Stock Companies.

EVOLUTION OF STOCK EXCHANGES IN INDIA

Any attempt at raising the standard of living of the masses must address itself to the task of
producing the right quantity of the right types of goods and have them available for consumption
at the right time. This requires large-scale production through coordination of activities of
hundreds of people under the same roof even when the product is the simplest to make.
This, however, calls for raising vast amounts of financial resources for the purpose of acquiring
land, buildings and equipments, besides purchasing raw materials and employing labour. No one
individual or a small group of individuals is rich enough to provide all the capital required by
modern business enterprise and savings of hundreds, if not thousands, of people must be
mobilized.
The corporate form of organization is well adapted to the task of raising capital from many
people. This is done by issuing or offering for sale at cash, different types of securities, that is,

shares and bonds, which offer to individual investors a means of productively employing
capital/savings suited to his/her needs and temperament.
The need for offering for sale different types of securities is obvious. Some people may desire
safety of the amount they have invested and a regular income from their investment. To them the
corporation or company may offer debenture bonds- a certificate issued under the seal of the
company promising a refund of the loan on a specified date and payment of interest at prescribed
intervals.
Other investors may be willing to commit their savings for an indefinite period of time and to
assume greater risk while still desiring safety of capital and stability of income. To them the
corporation will sell preference shares. Still other investors may be willing to shoulder the
business risk that goes along with the ownership of the business in the hope that the profit
realized would be large enough to compensate the greater risk they are assuming. But no one will
buy these securities unless there exists an organized market where the holders can dispose of
them, should the need arise, and new investors can purchase them. Over the years, such
organized markets have come into existence in all democratic and capitalistic countries including
India. Such a market is called stock market or a stock exchange in English speaking countries
and a 'brouse' in continental Europe.

There is, obviously, no need for stock exchange in

Communist countries since in such countries all the productive organizations are owned by the
government.
Organized stock exchange in India are of recent origin. As late as 1933 there were only three
stock exchanges one each at Ahmedabad, Bombay and Calcutta, but trading in securities was in
vogue much prior to that year. Of course, no one can tell when the first transaction took place,
however, it is generally agreed that business in securities had begun as early as the concluding
years of the 18th century, that is, between the years 1790 and 1800 A.D.

Existing structure of the stock exchanges in India

The Act recognizes stock exchanges with different legal structure. Presently the stock exchanges
which are recognized under the Securities Contracts (Regulation) Act in India, could be

segregated into two broad groups 20 stock exchanges which were set up as companies, either
limited by guarantees or by shares, and the 3 stock exchanges which are functioning as
associations of persons (AOP) viz. BSE, Ahmedabad Stock Exchange and Indore Stock
Exchange. The 20 stock exchanges which are companies are: the stock exchanges of Bangalore,
Bhubaneswar, Calcutta, Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Interconnected SE,
Jaipur, Ludhiana, Madras, Magadh, Managalore, NSE, Pune, OTCEI, Saurashtra-Kutch, Uttar
Pradesh, and Vadodara. Of these, the stock exchanges of Ahmedabad, Bangalore, BSE, Calcutta,
Delhi, Hyderabad, Madhya Pradesh, Madras and Guwahati were given permanent recognition by
the Central Government at the time of setting up of these stock exchanges. Apart from NSE, all
stock exchanges whether established as corporate bodies or Association of Persons (AOPs), are
non-profit making organizations.

BOMBAY STOCK EXCHANGE

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asias first
Stock Exchange and one of Indias leading exchange groups. Over the past 137 years, BSE has
facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising
platform. Popularly known as BSE, the bourse was established as "The Native Share & Stock
Brokers' Association" in 1875. BSE is a corporatized and demutualised entity, with a broad
shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore
Exchange as strategic partners.BSE provides an efficient and transparent market for trading in
equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities
of small-and-medium enterprises(SME).
More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms
of listed members. The companies listed on BSE Ltd command a total market capitalization of

USD 1.32 Trillion as of January 2013. It is also one of the worlds leading exchanges (3rd largest
in December 2012) for Index options trading (Source: World Federation of Exchanges).
BSE also provides a host of other services to capital market participants including risk
management, clearing, settlement, market data services and education. It has a global reach with
customers around the world and a nation-wide presence. BSE systems and processes are
designed to safeguard market integrity, drive the growth of the Indian capital market and
stimulate innovation and competition across all market segments.
BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000
certification. It is also the first Exchange in the country and second in the world to receive
Information Security Management System Standard BS 7799-2-2002 certification for its OnLine trading System (BOLT). It operates one of the most respected capital market educational
institutes in the country (the BSE Institute Ltd.). BSE also provides depository services through
its Central Depository Services Ltd.(CDSL)arm.
BSEs popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock
market benchmark index. It is traded internationally on the EUREX as well as leading
exchanges of the BRCS nations (Brazil, Russia, China and South Africa).

HOURS OF OPERATION:

Session

Timing

Pre-open Trading Session

09:00 - 09:15

Trading Session

09:15 - 15:30

Position Transfer Session

15:30 - 15:50

Closing Session

15:50 - 16:05

Option Exercise Session

16:05

The hours of operation for the BSE quoted above are stated in terms the local time (GMT +
5:30). BSE's normal trading sessions are on all days of the week except Saturday, Sundays and
holidays declared by the Exchange in advance.

NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) is India's leading stock exchange covering
various cities and towns across the country. NSE was set up by leading institutions
to provide a modern, fully automated screen-based trading system with national
reach. The Exchange has brought about unparalleled transparency, speed &
efficiency, safety and market integrity. It has set up facilities that serve as a model
for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms
of microstructure, market practices and trading volumes. The market today uses
state-of-art information technology to provide an efficient and transparent trading,
clearing and settlement mechanism, and has witnessed several innovations in
products & services viz. demutualization of stock exchange governance, screen
based trading, compression of settlement cycles, dematerialization and electronic
transfer of securities, securities lending and borrowing, professionalization of
trading members, fine-tuned risk management systems, emergence of clearing
corporations to assume counterparty risks, market of debt and derivative
instruments and intensive use of information technology.
The National Stock Exchange (NSE) is stock exchange located at Mumbai, India.
It is the 11th

largest

stock

exchange in the world by market

capitalization and largest in India by daily turnover and number of

trades, for both equities and derivative trading. NSE has a market
capitalization of around US$1 trillion and over 1,652 listings as of
July 2012.Though a number of other exchanges exist, NSE and
the Bombay Stock Exchange are the two most significant stock
exchanges in India and between them are responsible for the vast
majority of share transactions. The NSE's key index is the S&P CNX
Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major
stocks weighted by market capitalization.
NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and
other financial intermediaries in India but its ownership and management operate as separate
entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have
taken a stake in the NSE.As of 2006, the NSE VSAT terminals, 2799 in total, cover more than
1500 cities across India. In 2011, NSE was the third largest stock exchange in the world in terms

of the number of contracts (1221 million) traded in equity derivatives. It is the second fastest
growing stock exchange in the world with a recorded growth of 16.6%.

ORIGIN OF NSE: The National Stock Exchange of India was set up by Government of
India on the recommendation of Pherwani Committee in 1991.Promoted by leading Financial
institutions essentially led by IDBI at the behest of the Government of India, it was incorporated
in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock
exchange under theSecurities Contracts (Regulation) Act, 1956. NSE commenced operations in
the Wholesale Debt Market (WDM) segment in June 1994. The Capital market (Equities)
segment of the NSE commenced operations in November 1994, while operations in
the Derivatives segment commenced in June 2000.

OBJECTIVES OF NSE: .

Establishing nationwide trading facilities for all types of securities.

Ensuring equal access to investors all-over the country through an appropriate
communication network
Meeting international benchmarks and standards.
Enabling shorter settlement cycles and book entry settlements

MARKETS: Currently, NSE has the following major segments of the capital market

Equities

Equities

Indices

Mutual Funds

Exchange Traded Funds

Initial Public Offerings

Security Lending and Borrowing Scheme

Derivatives

Equity Derivatives (including Global Indices like S&P 500, Dow Jones and FTSE )

Currency Derivatives

Interest Rate Futures

Debt

Retail Debt Market

Wholesale Debt Market

Corporate Bonds

Equity Derivatives The National Stock Exchange of India Limited (NSE) commenced
trading in derivatives with the launch of index futures on June 12, 2000. The futures and options
segment of NSE has made a mark for itself globally. In the Futures and Options segment, trading
in S&P CNX Nifty Index, CNX IT index, Bank Nifty Index, Nifty Midcap 50 index and single
stocks are available. Trading in Mini Nifty Futures & Options and Long term Options on S&P
CNX Nifty are also available. The average daily turnover in the F&O Segment of the Exchange
during 2009-10 was ` 72,392 crore (US $ 16,097 million)
On August 29, 2011, National Stock exchange launched derivative contracts on the worlds most
followed equity indices, the S&P 500 and the Dow Jones Industrial Average. This was the first
time that derivative contracts on global indices are available in India. This is the also the first
time in the world that futures contracts on the S&P 500 index were introduced and listed on an
exchange outside of their home country, USA. The new contracts include futures on both the
DJIA and the S&P 500, and options on the S&P 500. The first day volumes at the close of trading
on August 29, 2011 at 3.30 pm, on the 2 indices in futures and options contracts were nearly
Rs.122 crores (1220 million).

On May 3, 2012,The National Stock exchange launched derivative contracts (futures and
options) on FTSE 100, the widely tracked index of the UK equity stock market. This was the
first of its kind for an index of the UK equity stock market to be launched in India. FTSE 100
includes 100 largest UK listed blue chip companies and has given returns of 17.8 per cent on
investment over three years. The index constitutes 85.6 per cent of UKs equity market cap. NSE
recorded a volume of 500 crores (5000 million) on the 1st day of trading.

Currency Derivatives In August 2008 currency derivatives were introduced in India with
the launch of Currency Futures in USD INR by NSE. It also added currency futures in euros,
pounds and yen. Interest Rate Futures were introduced for the first time in India by NSE on 31
August 2009, exactly one year after the launch of Currency Futures.

Debt Market NSE became the first stock exchange to get approval for interest rate futures, As
recommended by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10
Year Government of India (Notional) was launched with quarterly maturities.

GLOBAL MARKETS MOVEMENT:

The movement of a few of the selected indices presented in Table 4-6 brings out the trends
witnessed in the Indian and foreign markets during 2010-2011and 2011-2012. A global
comparison of these selected indices indicates that in 2010-11, all these indices barring Nikkei
225 witnessed average returns in the range of 10-15 percent. However, in 2011-2012 all these
indices depicted varied kinds of performance, US indices and Nikkei225 managed to close in
green and rest al indices closed in red compared to 2010-2011 values. The period AprilSeptember 2012 saw some mixed performance again. The S&P CNX Nifty gained 7.7 percent,
while the Nikkei 225 Index lost the maximum ground, to the tune of 12.1percent in the first six
months of 2012-13.

Table4-6:Movement of Select Indices on Indian & Foreign Markets

Index-Country

IndexValueason

Changedurin
g2011-12
(Percent)

Changedurin
gApr-Sep'12(
Percent)

31-Mar-11

31-Mar-12

30-Sep-12

12319.73

13212.04

13437.13

7.2

1.7

Nasdaq-US

2781.07

3091.57

3116.23

11.2

0.8

FTSE100-UK

5908.80

5768.45

5742.07

-2.4

-0.5

CAC-France

3989.18

3423.81

3354.82

-14.2

-2.0

5833.75

5295.55

5703.30

-9.2

7.7

BSESensex-India

19445.22

17404.20

18762.74

-10.5

7.8

HangSeng-HongKong(China)

23527.52

20555.58

20840.38

-12.6

1.4

Nikkei-Japan

9755.10

10083.56

8870.16

3.4

-12

Kospi-SouthKorea

2106.70

2014.04

1996.21

-4.4

-0.9

DowJones-US

AsiaPacific

Europe Americas

Region

Nifty50(S&PCNXNifty)-India

Source:Bloomberg,BSE&NSE

Comparing the movement of the Nifty, SENSEX, and NASDAQ over 2010-2011 (as depicted
in Chart4- 1) , the Nifty 50 performed better than other Asian indices such as the Nikkie225
and the Hang Seng Index for most of the year. The returns on the NASDAQ were 11.2 percent
in 2011-2012, while that of the FTSE100 and the Hang Seng Index declined to 2.4 percent

and12.6 percent, respectively, over the same period (Table4-6). The Japanese stock market
indicator Nikkie225 yielded returns of 3.4 percent.

Source:NSE,Bloomberg

CHAPTER-III
COMPANY PROFILE

Brief History of company

Structure of the company
Investment advisory services
Portfolio management services

HISTORY OF THE ANGEL BROKING

Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel has
emerged as one of the most respected Stock-Broking and Wealth Management Companies in
India. With its unique retail-focused stock trading business model, Angel is committed to
providing Real Value for Money to all its clients.
It has membership on Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and the
leading Commodity Exchanges in the India NCDEX & MCX. Angel is also registered as a
Depository Participant with CDSL.

Angel Group Companies:

Angel Broking Ltd

- Members on the BSE and Depository participant with CDSL
Angel Capital & Debt Market Ltd Membership on the NSE Cash and Futures &
options Segment
Angel commodities Broking Ltd Member on the NCDEX & MCX
Angel securities Ltd Member on the BSE.

Incorporated

1987

BSE Membership

1997

NSE Membership

1998

Member of NCDEX&MCX

Depositor Participants with CDSL

Angels presence:
Nation-wide network of 21 regional hubs
Presence 124 cities
6800 + sub brokers and business associates
5.9 lakh + clients

Management:
S.N
O

Name
Mr. Dinesh
Thakkar
Mr. Lalit Thakkar
Mr. Amit
Majumdar
Mr. Rajiv Phadke

Mr. Vinay Agarwal

Mr. Nikil Daxini

Mr. Hitungshu
Debnath

1
2
3

Designation & Department

Founder Chairman &
Managing Director
Director-Research
Executive Director-Strategy
and Finance
Executive Director-HR & Corp
Executive Director-Equity
Broking
Executive Director-Sales &
Marketing
Executive DirectorDistribution & Wealth
Management

Awards & Milestones:

May,2009:Angel Broking wins two prestigious awards for 'Broking House with Largest
Distribution Network' and 'Best Retail Broking House' at Dun & Bradstreet Equity

Broking Awards
August,2008:Angel Broking crosses 5,00,000 mark in unique trading accounts
November, 2007 Major Volume Driver for 2007

December, 2006 Created 2500 business associates

October, 2006 Major Volume Driver award for 2006
September, 2006 Launched Mutual Fund and IPO business
July, 2006 Launched the PMS function
October, 2005 Major Volume Driver award for 2005
September, 2004 Launched Online Trading Platform
April, 2004 Initiated Commodities Broking division
April, 2003 First published research report
November, 2002 Angels first investor seminar
March, 2002 Developed web-enabled back office software
November, 1998 Angel Capital and Debt Market Ltd. Incorporated
December, 1997 Angel Broking Ltd. Incorporated

Vision of the Company:

To provide best value for money to investors through innovative products, trading/investments
strategies, state of the art technology and personalized service.

Philosophy of the Company:

Ethical practices & transparency in all our dealings

Customers interest above our own
Always deliver what we promise
Effective cost management

Quality Assurance Policy:

We are committed to providing world-class products and services which exceed
the expectations of our customers, achieved by teamwork and a process of
continuous improvement.

CRM Policy : Customer is King

A Customer is the most Important Visitor on our premises. He is not dependent on us, but we are
dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an
outsider in our business. He is part of it. We are not doing him a favour by serving.He is doing us
a favour by giving us an opportunity to do so.

Logo of the Company:

OUR ORGANISATIONAL SRUCTURE:

Business Associates

Products of Angel Broking:

Online Trading

Commodities

Portfolio Management Services

Mutual Funds

Life Insurance

IPO

Depository Services

Personal loans

E-Broking:
Angel has different products and voila trading on BSC,NSE,F&O,MCX & NCDEX. It provides
four softwares to customers for online trading.

Angel Investor:

User-friendly browser for investors

Easy online trading platform
Works in proxy and firewall system setup
Integrate Back office: Access account information-anytime, anywhere
Online fund transfer facility
Multiple exchanges on single screen

Angel Trade:

Browser based for investor

No installation required
Advantage of mobility
BSC,NSC,F&O,MCX & NCDEX

Angel Diet:

Application based ideal for traders

Online fund transfer facility
Multiple exchanges on single screen
User friendly and simple navigation
BSC,NSC,F&O,MCX & NCDEX

Angel Anywhere:

Application-based platform for day traders

Intra-day/historical charts with various indicators
BSC,NSC,Cash &Derivatives
Online fund transfer facility

Investment Advisory services:

To derive optimum returns from equity as an asset classes requires professional guidance and
advise. Professional assistance will always be beneficial in wealth creation. Investment decisions
without expert advises would be like treating alignment without the help of a doctor.

Expert advise
Timely Entry and Exit.
De-Risking Portfolio.

Commodities:
Commodity is a basic good representing a monitory value.Commodities are most often used as
inputs in the production of other goods or services.

Types of Commodities:
Precious metals

Gold and silver

Base Metals

Copper, zinc and aluminium

Energy

Crude oil, Brent crude and natural Gas

Pulses

Chana, urad and Tur

Benefits at Angel:

Three different online products tailored for traders and investors.

Single screen customised Market-watch for MCX/NCDEX with BSE/NSE.
Streaming Quotes and real time rates. Intra-day trading calls.
An array of daily, weekly an special research reports.
Seminars,workshops and investment camps for investors

Depository Participant service:

Wide branch coverage

Personalised/attentive services of trained a dedicated staff
Centralised building and accounting
Acceptances and executions of instructions on fax.
Daily statement of transactions and holding statement on e-mail
No charges for extra transaction statement and holdings statement

Portfolio Management Services:

Successful investing in capital markets demands every more time and expertise. Investment
management is an art and a science in itself.The portfolio management service combined with
competent fund management, dedicate research and technology, ensures rewarding experience
for its clients.

Mutual Fund:
To enable clients to diversify their investment in right direction.Angel broking as added another
product in its range with mutual funds

Access to in-depth research and proper selection from diversified funds based on your

preferred criteria
Rating and ranking for all mutual funds from our in house expert analysts
Current and historical performance of different funds enable comparisons.

Benefits:

No risk of loss,wrong transfer, mutilation or theft of share certificates

Hassle free automated pay-in of your sell obligations by your clearing members
Reduced paper work
Instant disbursement of non-cash benefits like bonus and rights into your account
Efficient pledge mechanism

CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION

Calculation of correlation between global and Indian markets

- Calculation of volatility between BSE and NSE

VOLATILITY OF NIFTY AND SENSEX DURING BUDGET

SESSION
NIFTY DURING BUDGET HOURS:

NSE
5834
5836
5831
5827

deviati squa
ons
res
36.333 1320.
333
11
38.333 1469.
333
44
33.333 1111.
333
11
29.333 860.4
333
44

5812
5799
5773
5774
5693
total
mea
n

14.333
333
1.3333
333
24.666
67
23.666
67
104.66
67

5217
9
5797
.67

Volatility

205.4
44
1.777
78
608.4
44
560.1
11
1095
5.1
1709
2
1899
.11

43.5
78

SENSEX DURING BUDGET HOURS:

BSE

deviatio
ns

squar
es

Total
mea
n

1926
5
1929
2
1927
4
1922
9
1922
0
1915
8
1910
4
1907
2
1886
2
1724
76
1916
4

Volatility

101

10201

128

16384

110

12100

65

4225

56

3136

-6

36

-60

3600

-92

8464

-302

91204
14935
0
1659
4.4

128.8
19

INTERPRETATION:
The volatility of sensex is very high when compared with Nifty at the time of budget.

CORRELATION BETWEEN THE GLOBAL MARKETS WITH

NIFTY:

Days
Mon 4
Tue 5
Wed 6
Thu 7
Fri 8

Correlat
ion

Nikkie 225
Prev.Cl Open
ose
Price@12:15
Pm
11606. 11685.93
38
11652.
29
11683.
45
11932.
27
11968.
08

11756.41
11830.61
11999.38
12191.35

%Cha
nge

S&P Cnx Nifty

Close Open
Price

0.685
399

5719.
7

5698.5

0.893
558
1.259
559
0.562
424
1.865
546

5698.
5
5784.
25
5818.
6
5863.
3

5784.2
5
5818.6
5863.3
5945.7

%Cha
nge
0.370
65
1.504
782
0.593
854
0.768
226
1.405
352

0.4939
45

Interpretation:

The Above Table Depicts The Correlation Between Nikkie With Nifty. The Values Shows That
Japan Market Moderately Correlated With Indian Market In Asia Japan Economy Is Considered
As One Of The Bigger Economy As Flows Of Fii Are Impacting The Indian Markets.

CORRELATION BETWEEN THE SHANGI WITH NIFTY:

Days
Mon 4
Tue 5

Shang
ai
Prv.Clo
se
2359.
51

S&P Cnx Nifty

Open
Price@11:15am
2300.566

2273.
4
2326.
31
2347.
18

2298.519

Fri 8

2324.
29

2323.794

Correlat
ion

0.843
945

Wed 6
Thu 7

Interpretation:-

2341.482
2343.915

%Chn
age
2.498
15
1.104
909
0.652
192
0.139
1
0.021
34

Close
5719.
7

Open
Price
5698.5

5698.
5
5784.
25
5818.
6

5784.2
5
5818.6

5863.
3

5945.7

5863.3

%Cha
nge
0.370
65
1.504
782
0.593
854
0.768
226
1.405
352

As Correlation Is High Between China And India ,The Impact Of China On Indian Stock
Market Is Moderately Effected. In Our Asian Economy China And India Growth Is More That Is
The Reason Fdi And Fii Flows Are Very High On The Two Countries.

CORRELATION BETWEEN THE HANGSENG WITH NIFTY:

Days
Mon 4
Tue 5
Wed 6
Thu 7
Fri 8

Correlat
ion

Hang Seng
Prv.Clo Open
se
Price@11:15am
22880 22645
.22
22537
.8
22560
.5
22777
.84
22771
.96

0.787
64

Interpretations:

22610.59
22742.54
22800.69
23001.03

%Chn
ge
1.028
05
0.322
969
0.806
893
0.100
312
1.005
948

S&P Cnx Nifty

Close Open
Price
5719. 5698.5
7
5698.
5
5784.
25
5818.
6
5863.
3

5784.2
5
5818.6
5863.3
5945.7

%Cha
nge
0.370
65
1.504
782
0.593
854
0.768
226
1.405
352

When Correlation Between Hangseng And S&P Cnx Nifty Is High, Our Indian Economy
Performed Well Due To Positive Aspects On India.

CORRELATION BETWEEN THE FTSE 100 INDEX WITH

NIFTY:

Ftse 100
Prev.Cl
ose
6378.6

Index
Open
Price
6379.2
7

%Chn
age
0.010
504

S&P Cnx Nifty

12:30 012:40
pm
pm
5687. 5677.6
25

Tue 5

6345.6
3

6345.7
2

0.001
418

5755.
6

5752.4
6

Wed 6

6431.9
5
6427.6
4

6432.3
2
6427.5
6

5183.
7
5813.
1

5812.1
5
5808.4
5

6439.1
6

6439.2

0.005
753
0.001
24
0.000
621

5893.
25

5897.2
5

Days
Mon 4

Thu 7
Fri 8

%Cha
nge
0.169
68
0.054
56
12.12
358
0.079
99
0.067
874

Correlat
ion

0.2670
06

Interpretation:-

Even Though London Stock Market Is 3 Largest Economy In The World ,As The
Movements Of This Stock Market Is Less Active With Our Indian Economy,
Indian Stock Markets Are Least Effected.

CORRELATION BETWEEN THE CAC 40 INDEX WITH NIFTY:

Cac
40
Pr.Clo
se
3699.
91

Op
Price
3699.
91

%Cha
nge
0

12:30
pm
5687.
25

012:40
pm
5677.6

Tue 5

3709.
76

3709.
76

5755.
6

5752.4
6

Wed 6

3787.
19
3773.
76

3787.
19
3773.
76

5183.
7
5813.
1

5812.1
5
5808.4
5

Days
Mon 4

Thu 7

S&P Cnx Nifty

%Cha
nge
0.169
68
0.054
56
12.12
358
0.079

Fri 8

3793.
78

Correlat
ion

=0

3793.
78

5893.
25

5897.2
5

99
0.067
874

Interpretation:

As Correlation Is Zero There Is No Effect Of French Market On Indian Economy.

CHAPTER-V

FINDINGS

FINDINGS:
U.S.A markets are most influencing one in the world.70% of the world economy is moved by the
global markets and in that US is playing the vital role. Based on time zone analysis Asian
markets are opening based on last night closing of US markets. European markets are also major
markets than India, according Indian time 12:30pm to 12:40pm in between these markets will
open. Opening of European also will have its impact on us.

There is huge volatility between NSE and BSE during budget session
The correlation between NIKKIE 225 and NIFTY is 0.493945.So,the Japan market

is moderately correlated with Indian market in Asia.

The correlation between SHANGAI and NIFTY is 0.843945.So,the China markets

are highly correlated with Indian markets

The correlation between the HANG SENG and NIFTY is 0.78764. so, the

HONGKONG markets are highly correlated with Indian markets.

The correlation between the FTSE 100 and NIFTY is 0.267006.So,the UNITED

KINGDOM markets are slightly correlated with Indian markets.

The correlation between CAC 40 and NIFTY is 0.So,the EUROUP markets are
slightly correlated with Indian markets.

CHAPTER-VI

SUGGESTIONS

Suggestions:

1.Trading Should Start At 8o Clock In The Morning And End At 4o Clock In The Evening
With One Hour Break Between1pm To 2pm.
2.There Should Be 24 Hours F &O
3. The Pre Open Session Should Be Introduced For IPO'S On Listing Day.
4. NSE Along with SEBI Should Take More Initiative To Increase The Awareness About The
Market From Schooling.
5. The Exchange Has To Increase Their Branches & Network.
6.Nse Should Change The Calculations Of Stock Settlement Prices After Closing The Market.
7. Brokers Are Blocking Illiquid Counters By Stopping Trading In Particular Companies. SEBI

And Exchange Should Guide The All The Brokers To All Trading In All The Stocks Which Are
There In NSE And BSE.

CHAPTER-VII

CONCLUSIONS

Conclusion:
I Conclude The Analysis On The Correlation Of Indian Stock Market With Global Markets. In
The Modern Economic, Investment Are Taking Place Across The Global, Flow Of Fund Are
Rolling With The Growth Nation In The Form Of Fiis. Global Market Are Impacting The India
Stock Market In The Analysis I Have Measured The Co- Relation Between Asian Market
European Market With India Based On The Time Zone Analysis I Found Japan And Germany
Are Having High Co relation With India, There Is A Scope For The Further Research To Measure
The Impact On India Markets With Global Markets.

CHAPTER-VIII
BIBILOGRAPHY

BIBLIOGRAPHY
WEBSITES:

http://www.nseindia.com/
http://www.rbi.org.in/home.aspx
http://www.sebi.gov.in/sebiweb/
http://www.forex.com/pages/land-international.html

NEWSPAPERS:

Economic Times

Business Line