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Faculty of Management Studies Maharishi Arvind Institute of Engineering & Technology, Jaipur (Affiliated to Rajasthan Technical University)


I MANISH KUMAR S/O GOKUL SINGH Student of MBA IInd year hereby declares that for the purpose of Training Project Report I have conducted study on OVERVIEW OF PRIMARY & SECONDARY MARKET for the partial fulfillment of MBA degree. It is my original work.

Place:JAIPUR Date: 30/11/2011


ACKNOWLEDGEMENT:The project would not be completed without a mention of those, who have spared their valuable time and rich experience, in making this project successful. I owe my indebtedness to Mr. Manoj parihar, Branch head BMA Wealth Creators Ltd, Jaipur, for granting me an opportunity to work with the esteemed organization. He has been benevolent enough to lend his help and spare his valuable time throughout the project. I extend my heart felt thanks to all the entire team of BMA Wealth Creators Ltd specially Mr. Kapil Jain, Mr. Jitendra Sharma for their incessant guidance and support all through the project. They have been immensely contributed with ideas and have guided me on all aspects. I also feel privileged to place on record the excellent marketing. Which I learnt during my project. And last but not the least I would like to thank the MAIET faculty, my family and friends for their constant help and support.


PREFACE:Summer Training is the bridge for a student that takes him from his theoretical knowledge world to practical industry world. The main purpose of industrial visit is to expose for industrial and business environment, which cannot be possible in the class room. The advantages of this sort of integration, which promotes guided to corporate culture, functional, social and norms along with formal teaching are numerous. 1) To bridge the gap between theory and practical. 2) To install the feeling of belongingness and acceptance. 3) To help the student to develop the better understanding of the concept and questions already raised or to be raised subsequently during their research period. The present report gives a detailed view of the OVERVIEW OF PRIMARY & SECONDARY MARKET. The research is definitely going to play an important role in developing an aptitude for hard self-confidence. The main objectives of the project is To understand the functioning of primary and secondary market. Trading in securities. To study the terms and concepts of stock market.

Share Market which is basically my concern industry around which my project has to be revolved is really a very complex industry. And to work for this was really a complex and hectic task and few times I felt so frustrated that I thought to left the project and go for any new industry and new project. Challenges which I faced while doing this project were followingShare Market was quite similar in offering its products because it was very difficult to discriminate between our product and products of the other Broking firms. Target customers and respondents were too busy persons that to get their time and view for specific questions was very difficult. Sensitivity of the industry was also a very frequent factor which was very important to measure correctly. Every financial customer has his/her own need and according to the requirements of the customer product customization was not possible. As there is high risk in this globalised market, it is very difficult to get the new clients for the business. After the recession hit the global economy, people are hardly interested in investing share market, rather they like to invest in govt. Securities and Gold &Silver.



CHAPTER: 1 OBJECTIVES:Today every one dreams to earn huge money and looking to the present situation the best option towards the investor is to invest in the securities which includes shares, debentures, etc. Thats why I join the BMA Wealth Creators Ltd, which is one of the leading broking houses of India as a trainee so that I can learn more about the securities market. The following are the main objectives of my training in BMA Wealth Creators LTD. . To understand the functioning of primary and secondary market. Trading in securities. To study the terms and concepts of stock market. Role of Depository Participant. To understand the role of finance in an organisations. To understand the financial instrument. Investor psychology with regard to the investment. To understand the procedure of issuing an IPO. Listing of securities. Management of risk. Investor strategy.

CHAPTER: 2 INDUSTRY PROFILE :Indian securities market : Meaning of securities :

The issues in stock exchanges are called securities. This includes shares and debentures issued by public companies, government and semi-government bonds, debentures bonds issued by government companies, etc. Indian stock market has a long history dated back to 19th century. At the end of 19th century Bombay stock exchange was established in MUMBAI .

Types of securities:
Following are the main types of securities:

Government securities:
Government securities refer to securities issued by the central government or state government. Securities point of view, government securities are considered to be better. It is called golden edge securities.

Semi-government securities:
The bonds and debentures issued by public utility services are known as semi government securities. Security point of view, place for the category of securities comes after the government securities. The payment of invested money with interest on such securities is guaranteed by the government.

Investment Securities :
The security that is suitable in view of investment is called investment securities. A certain fixed income is expected from such securities, and comparatively price is also remaining stable. For example the government and semi-government securities, issued by banks and insurance companies come under this category. 9

Speculative securities :
The prices of securities that fluctuate largely called speculative securities. The speculators have special interest in such securities. They earn profit under the impression of future increase or decrease in prices

Trustee securities :
Such securities in which some trust money can be invested, is called trustee securities.

Industrial securities:
Industrial security is a wider term and it includes the securities of Bank, Insurance, and industrial activities etc. Only the securities issued by business institutions are categorized separately as industrial securities.

Registered securities:
Registered securities are those which are registered with the concerned institutions book. Registered securities can be transferred from one person to another through Registered.

Bearer securities:
Bearer securities can be transferred by mere delivery from one person to another. The names of bearer securities are not deemed to be its owner.

Listed Securities:
The securities that include in the list of recognized stock exchanges, is called listed securities. Only listed securities are transacted in stock exchanges.

Cleared securities:
Those securities that have been recognized by the stock exchanges for transactions are called cleared securities.

Non-cleared securities:
The securities that are not been recognized by the stock exchanges for transaction, is called non-cleared securities.



The following procedure may be followed by a purchaser of securities at a stock exchange:

1. Selection of a broker:
Since only members can deal in securities at a stock exchange, the intending buyer will have to take the help of a broker for purchase of securities. The broker may be engaged either directly or through the mediation of a bank with which the intending buyer has dealings. The latter, or course is generally preferred, since the banks are integrity of the broker.

2. Placement of order:
Ordinarily the broker recommends for purpose of investment a number of securities and indicates in each case the advantages and disadvantages of investing funds in it, the risk involved, anticipated return, prospects of appreciation and deprecation. The investor, on the basis of the advice of broker draws upon the order wherein he generally specifies the price at which the different securities may be purchased.

3. making of a contract:
After receiving the order the broker or his authorized agent goes to the hall of the stock exchange where the securities required are dealt with. He announces his requirement by shouting in the hall during the time allotted for dealings in the particular class of securities ,In response to his 'shouting' another broker who has an order with him to sell those securities, may accept his offer or may make a counter offers. Instead of shouting in the hall , another alternative open to broker is to contact the members in their cabins and find out whether they are willing to sell the securities he wants to buy After negotiations with them a bargain is struck. 11

4. preparation of contract note:

A book called "sauda book" is maintained by each broker. After recording the transaction of purchase or sale of securities in the book, the broker will get the signatures of the other member brokers with whom he had the dealing in confirmation of the purchase of sale .A copy of the transactions recorded in this book is submitted by the broker to the stock exchanges at the end of the day. This facilitates reconciliation by stock exchanges of all transactions for purchases with sales and vice versa.

5. settlement of the transactions:

The broker or members of the stocks exchanges settle the transactions on the settlement day on behalf of their clients. The mode and time of settlement depends on the nature of transactions, i.e. whether it is a ready delivery transactions or a forward delivery transaction. In case a person wants to sell the securities, practically the same procedure, as discussed above, will have to be followed.


Market-oriented economic reforms in India began in 1991. With the removal ofAdministrative controls on bank credit and the primary market for securities, the capital markets came to occupy a larger role in shaping resource allocation in the country. This led to a heightened interest amongst policy makers in the institutional development of securities markets. The efforts towards empowering the securities market regulator (SEBI), and the first efforts towards attracting foreign portfolio investment began early in the reforms process. Almost immediately after the reforms began, there was a prominent scandal on the fixed income and equity markets, which was exposed in April 1992.


This set the stage for an unusual policy intervention: the establishment of a securities exchange, the National Stock Exchange (NSE), by the government Contrary to most expectations, NSE succeeded, becoming the largest equity market in 1995. NSE pioneered many important innovations in market design in India. The most important of these included nationwide electronic trading (1994), the clearing corporation as a central counterparty (1996) and paperless settlement at the depository (1996). NSE was a pioneer amongst securities exchanges in the world in using a demutualised structure, where brokerage firms did not own the exchange. The demutualised structure helped in keeping NSE focused on the needs of investors as opposed to the profit maximization of brokerage firms. The creation of the new exchange, clearing corporation and depository were important accomplishments of institution building. From 1996 onwards, debates about policy issues on the equity market were dominated by questions about the role for leveraged trading. There was a proposal to have a spot market based on rolling settlement (where leverage is limited to intraday positions only). In 2001, a major crisis broke on the equity market. It involved numerous elements: large leveraged positions which went wrong, accusations of market manipulation, a payments crisis at the Calcutta exchange, fraud in the banking system, ethics violations at the Bombay Stock Exchange, This crisis was valuable in breaking this fiveyear deadlock and moving on with reforms. In June 2001, trading in index options commenced & within a matter of weeks, liquidity improved sharply. Over the 1990s, the equity market became a nationwide platform with realtime capability for trading and settling stock transactions.


However, comparable improvements in the infrastructure for funds transfer in the country have not taken place. Beyond technical questions of market design, the most important concerns about the securities markets today are questions of governance and policy formulation Securities markets have made significant progress in terms of exploiting modern trading technology and modern financial instruments. However, the regulatory capacity on the part of both exchange institutions and SEBI is highly limited.

The term 'the stock market' is a concept for the mechanism that enables the trading of company stocks, other securities, and derivatives. The stocks are listed and traded on stock exchanges which are entities (a corporation or mutual organization) specialized in the business of bringing buyers and sellers of stocks and securities together.

Equity/Share Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.


There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, UK, Germany, France, India and Japan.


Function and purpose

The financial system performs three main tasks: first, it handles transfer of payments; second, it channels savings to investments with a good return for future consumption; and third, it spreads and reduces (local enterprise) economic risks in relation to the players' targeted returns. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. The stock market is one of the most important sources for companies to raise money. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions.


Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere.

Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the Normal Normal equities Market Market Open Close segment ::09:55 15:30 are: hours hours

Listing means admission of securities of an issuer to trading privileges on a stock exchange through a formal agreement. The prime objective of admission to dealings on the Exchange is to provide liquidity and marketability to securities.

"Securities" is a generic term describing a transferable certificate of ownership in an investment product. An investment product includes notes, bonds, stocks, futures, contracts and options. A Security gives the holder an ownership interest in the assets of a company. For example, when a company issues security in the form of stock, they give the purchaser an interest in the company's assets in exchange for money. There are a number of reasons why a company issues securities: meeting a short-term cash crunch or obtaining money for an expansion are just two. 16

NSE introduced for the first time in India, fully automated screen based trading. It uses a modern, fully computerized trading system designed to offer investors across the length and breadth of the country a safe and easy way to invest.

The NSE trading system called 'National Exchange for Automated Trading' (NEAT) is a fully automated screen based trading system, which adopts the principle of an order driven market.

The trader workstation is the terminal from which the member accesses the trading system. Each trader has a unique identification by way of Trading Member ID and User ID through which he is able to log on to the system for trading or inquiry purposes. A member can have several user IDs allotted to him by which he can have more than one employee using the system concurrently.

A Trading Member can define a hierarchy of users of the system with the Corporate Manager at the top followed by the Branch Manager and Dealers.

The Trader Workstation screen of the Trading Member is divided into several major windows:

Title Bar Tool Bar Ticker Window Market Watch Window On line Index and Index Inquiry Inquiry Window 17

Snap Quote Order/Trade Window Systems Message Window Supplementary Menu

Title Bar The title bar displays the current time, Trading system name and date. Tool Bar A window with different icons which provides quick access to various functions such as Market By Order, Market By Price, Market Movement, Market Inquiry, Auction Inquiry, Snap Quote, Market Watch, Buy order entry, Sell order entry, Order Modification, Order Cancellation, Outstanding Orders, Order Status, Activity Log, Previous Trades, Net Position, Online Backup, Supplementary Menu, Security List and Help. All these functions Ticker Window The ticker displays information about a trade as and when it takes place. The user has the option to set-up the securities which appear in the ticker. are also available on the keyboard.

market watch window The Market Watch window is the main area of focus for a Trading Member. The purpose of Market Watch is to view market information of pre-selected securities that are of interest to the Trading Member.

To monitor various securities, the trading member can set them up by typing the Security Descriptor consisting of a Symbol field and a Series field. Securities can also be set up by invoking the Security List and selecting the securities from the window. The Symbol field incorporates the Company name and the Series field captures the segment/instrument type. A third 18 field indicates the market type.

For example, company (Symbol) ACC Instrument type (Series): EQ Market Type:

For each security in the Market Watch window, market information is dynamically updated on a real time basis. The market information displayed is for the current best price orders available in the regular lot book. For each security, the corporate action indicator (e.g., Ex or cum dividend, interest, rights etc.), the total buy order quantity for the best buy price, best sell price, total sell order quantity for the best sell price, the Last Traded Price (LTP), the last traded price change indicator ('+' if last traded price is better than the previous last traded price and '-' if it is worse) and the no delivery indicators are displayed. If the security is suspended, "SUSPENDED" appears in front of the security. On line Index and Index Inquiry With every trade in a security participating in Index, the user has the information on the current value of the Nifty. This value is displayed at the extreme right hand corner of the ticker window.

Index Inquiry gives information on Close, Open, High, Low and current index values at the time of invoking this inquiry screen.

Inquiry Window In this window, the inquiries such as Market by Order, Market by Price, Previous Trades, Outstanding Orders, Activity Log, Order Status and Market Inquiry can be viewed.

Market By Order (MBO): The purpose of Market by Order is to enable the user to view outstanding orders in the trading books in the order of price/time priority. The information is displayed for each order. Stop Loss orders, which are not triggered will not be displayed on the window. Buy orders are displayed on the left side of the window and Sell orders on the right side. The orders are presented in a price/time priority with the "best priced" order at the top.


Market by Price (MBP) The purpose of Market By Price is to enable the Trading Member to view aggregate orders waiting in the book at given prices.

Previous Trades (PT) The purpose of this window is to provide information to users for their own trade.

Outstanding Orders (OO) The purpose of Outstanding Orders is to enable a Trading Member to view his/her own outstanding buy or sell orders for a security. An outstanding order will be an order that was entered by the user, but is not yet completely traded or cancelled.

Activity Log (AL) The Activity Log shows the activities that have been performed on any order of the Trading Member such as whether the order has been traded against fully or partially, it has been modified or has been cancelled. It displays information only of those orders in which some activity has taken place. It does not display orders, which have entered the books but have not been matched (fully or partially) or modified or cancelled.

Order Status (OS) Order Status enables the user to look into the status of a specific order. Current status of the order and other order details are displayed. In case the order is traded, the trade details are also displayed.

Market Inquiry (MI) Market Inquiry enables the user to view the market statistics like Open, High, Low, Previous close, Last traded price change indicator, Last traded quantity, date and time etc. A user may find inquiry screens like Market Movement, Most Active Securities and Net Position useful. These are available in the supplementary menu.

Market Movement (MM) The Market Movement screen provides information to the user regarding the 20

movement of a security for the current day. It gives details of the movement of the scrip for a time interval. The details include total buy and sell order quantity value, Open, High, Low, Last traded price etc.

Most Active Securities This screen gives a list of the securities with the highest traded value during the day and the quantity traded for each of them.

Net Position This functionality enables the user to interactively view his net position for all securities in which he has traded.

Snap Quote The Snap Quote feature allows a Trading Member to get instantaneous market information on any desired security. This is normally used for securities that are not already on display in the Market Watch window. The information presented is the same as that of Market Watch window.

Order/Trade Window Order entry mechanisms enable the Trading Member to place orders in the market. The system will request re-confirmation of an order so that the user is cautioned before the order is finally released into the market. Orders once placed on the system can be modified or cancelled till they are matched. Once orders are matched they cannot be modified or cancelled.

There is a facility to generate online order/trade confirmation slips as soon as an order is placed or a trading is done. The order confirmation slip contains among other things, order no., security name, price, quantity, order conditions like disclosed or minimum fill quantity etc. The trade confirmation slip contains the order and trade no., date, trade time, price and quantity traded, amount etc. Orders and trades are identified and linked by unique numbers so that the investor can check his order and trade details.


Systems Message Window This window is used to view messages from the Exchange to all specific Trading Members.

Supplementary Menu Some of the supplementary features in the NEAT system are:





An on line back up facility is provided which the user can invoke to take a back up of all order and trade related information. There is an option to copy the file to any drive of the computer or on a floppy diskette. Trading members find this convenient in their back office work.





A member is able to make an order entry in the batch mode.

Who regulates the Securities Market? The responsibility for regulating the securities market is shared by Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).


The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c) regulating the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition 22

to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for: 1. Regulating the business in stock exchanges and any other securities markets 2. Registering and regulating the working of stock brokers, subbrokers etc. 3. Promoting and regulating self-regulatory organizations 4. Prohibiting fraudulent and unfair trade practices 5. Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self regulatory organizations, mutual funds and other persons associated with the securities market.

Clearing Corporation
A Clearing Corporation is a part of an exchange or a separate entity and performs three functions, namely, it clears and settles all transactions, i.e. completes the process of receiving and delivering shares/funds to the buyers and sellers in the market, it provides financial guarantee for all transactions executed on the exchange and provides risk management functions. National Securities Clearing Corporation (NSCCL), a 100% subsidiary of NSE, performs the role of a Clearing Corporation for transactions executed on the NSE. Rolling settlement all open positions at the end of the day mandatorily result in payment/ delivery n days later. Currently trades in rolling settlement are settled on T+2 basis where T is the trade day. For example, a trade executed on Monday is mandatorily settled by Wednesday (considering two working days from the trade day). The funds and securities pay-in and pay-out are carried out on T+2 days.

Factors affecting the prices of securities in stock exchange:

Some of the important factors that influences the prices of securities are as under: Rates of dividend declared by companies. Changes in the capital structure of companies. 23

Present economic condition of the institution. Change in the management and control. Strikes of employees. Government policies towards industrial licensing and taxation. Rate of interest in money market and availability of credit. Business cycles. Circulation of money. National politics and change in government.

Financial market can be divided into following sub-markets:

Markets can be classified into different categories depending upon characteristics of market or instrument used to create categories. Securities created by institutions in the markets normally pay an interest on the nominal amount (the amount shown on the certificate or contract). The interest-bearing securities market is split into money market and the capital market, based on the term to maturity (the term left to redemption of the debt) of the securities. The capital market is the market for issue and trade of long terms securities. The money market is that of short-term securities .The money market is basically

concerned with the issue and trading of securities with short term, maturities or quasimoney instrument .The instruments traded in the money market are Treasury Bill ,Certificates of Deposits (CDs),Commercial paper(CPs), Bills of exchange and other such instruments of short term maturities (i.e. not exceeding 1year with regard to the original maturity). The Bond market, which provide financing through the issuance of bonds, and Commodity markets, which facilitate the trading of commodities. The derivatives markets, which provide instrument for the management of Futures markets, which provide standardized forward contracts for trading 24 enable the subsequent trading thereof.

financial risk. products at some future date

Insurance markets, which facilitate the redistribution of various risks. Foreign exchange markets, which facilitate the trading of Foreign exchange.


The market for instruments (also called securities) issued for the time, is called the primary market. Because the standardization of these instruments. Different needs in the market at different times, and different views of economic factors, these instruments are traded between institutions after they have been issued for the first time. If a leader needs his money before redemption date of the loan, the lender could trade the loan by selling the certificate to another institution. The buyer of the instrument pays the seller and amount (the present value the future cash flows of the loan), and the buyer becomes the new lender. The market where instrument are traded subsequent to the first issue is called the secondary market. SECONDARY MARKET: The secondary market in some of the securities is a very active, market. Activities in the secondary market have strong determining influence on issue in the primary market as liquidity, market rates, scale of demanded. Of specific instruments are reflected in the secondary market. The variable of the economy in these markets are expressed through the interest rate (the price mechanism) determined in the rate and value at which issue can take place in the primary market. The secondary markets give the investor the opportunity to manage his portfolio in terms of risk and return ratio, liquidity, etc. The investor receives or wants to receive on his investment (called the yield), can be managed within certain parameters and by using different strategies of buying and selling different instruments and investments in the secondary market. 25


There are basically two ways to buy the shares of the company. The ways are:-

1. Buying from the primary market 2. Buying from the secondary market Buying From the primary Market
It means that buy the shares directly from companies when the make new issues of shares or come out with IPOs. One can also get rights issue and bonus shares.

Reasons to buy Shares from Primary Market

Listing gains are the chief attractions of buying the shares I the primary market. The following are the important reasons to pick the shares through IPOs, rather than buy them from the market: The first reason is that often companies issue their shares cheaply and, later, when these shares are listed on the stock Exchange, they list at a premium (higher than the price at which they were issued). So make a lot of money if sell the shares soon. It also happens that companies who are going public or listing shares for the first time also usually offer their shares cheap, and could go on to become very successful, IPOs thus offer investors the chance to participate in their prosperity cheaply.

Buying From the Secondary Market

It means buy the shares of a company that is already listed people can buy them from the stock exchange through brokers.



BMA Wealth Creators Pvt., Ltd. operates as a financial services organization in India. It provides individual and corporate financial and investment solutions. BMA Wealth Creators Pvt., Ltd. was formerly known as BMA Stock Broking Pvt., Ltd. and changed its name in July 2007. The company was incorporated in 2004 and is based in Kolkata, India. A premier financial services organisation providing individual and corporate customized financial solutions. We work towards understanding your financial goals and risk profile. Our expertise combined with thorough understanding of the financial markets results in appropriate investment solutions for you. At BMA Wealth Creators were alize your dreams, needs, aspirations, concerns and resources are unique. This is reflected in every move we make with and for you. We have deep appreciation for the Value of building an everlasting relationship with YOU. We inherit the legacy of BMA group which has been one of the dominant entities in Ferrous and Ferro Alloy industry in India. The BMA Group has created its niche in by promoting successful ventures in the fields of coal mining, refractory, steel and ferroalloy. The strive to achieve excellence and dynamic growth has been possible through optimum mix of technology, customer orientation, best business practices, forging alliances, high quality standards and proactive business culture. Millenium City

PROMOTERS:BMA Wealth Creator is managed by a team of highly qualified and experienced professionals from the finance industry across the country. Know more about them: ANUBHAV BHATTER :As the Managing Director and Chief Executive Officer, Mr Anubhav Bhatter isthe guiding force of the Company. A graduate in Commerce from St. Xavier College, Kolkata 27

and a Chartered Financial Analyst, Mr. Anubhav Bhatter founded one of the leading financial services company in India, BMA Wealth Creators Limited. With over nine years of financial experience, he has set new standards and established niche operations to bring BMA Wealth Creators Limited to a position that it has reached today. AVINASH AGARWAL :An MBA from Xavier Institute of Management, Bhubaneshwar, Mr. Avinash Agarwal is the voice of knowledge on the Board of Directors of the Company. With over nine years of severe market experience in Financial as well as the Product Manufacturing industry, Mr. Avinash Agarwal has given shape to the growth of BMA Wealth Creators Limited. With an extensive knowledge of the nuances involved in the financial sector and a strong foot hold over the market, the entire Group looks up to his contribution. ASIT KUMAR GHOSH :A pillar of strength to the Company, Asit Kumar Ghosh has been associated with BMA Wealth Creators Limited since the day of its inception. Having joined in the capacity of a Vice President, currently he is operating as Director, BMA Wealth Creators Limited. From establishing and strengthening the customer base to setting up the entire Retail Channel, he has played a vital role in the formation of the Company. A Bachelor of Science from the University of Kolkata and a Post Graduate in Computer Applications, Mr. Asit Kumar Ghosh has worked in the capacity of various managerial positions for numerous organizations including Alliance Credit & Investments, Tata TD Waterhouse, Anagram Securities and IL & FS where he successfully proved his worth. With over fifteen years of experience and his extensive knowledge, Mr. Ghosh keeps adding value to the Company. SHIV KUMAR DAMANI :Experience is the greatest education. And you know it when you meet Mr Shiv Kumar Damani. With a financial career spanning over twenty years, currently he is operating as Director, BMA Wealth Creators Limited. He has been associated with the Company since its inception and ever since, he has nurtured the growth and operation 28

of the Company just as a parent would do for its child. A Bachelor in Commerce from the University of Calcutta, Mr. Shiv Kumar Damani has studied the financial market from close quarters to manage the risks involved while working towards the benefit of the Company and the people it is associated with, thus saving them the wrath of the global economic slowdown. SAIKAT GANGULY :With over twelve years of financial market experience, Saikats knowledge of the industry is comprehensive. A certified Chartered Financial Analyst and an MBA from Birla Institute of Management, he held several top managerial positions in various organizations including Reliance Money before he joined BMA Wealth Creators Limited in the year 2009 as its Chief Operating Officer. Ever since, he has led BMA Wealth Creators Limited in handling several niche Sales, Distribution and Product Management initiatives. He has been instrumental in setting the pan India foot print of the organization by setting up Branches and distribution network in every nook and corner of the country. His extensive knowledge, along with his leadership skills will surely help BMAWC touch zenith.

MISSION & VISION :MISSION :To be a premier financial supermarket providing integrated investment services.

VISION:To provide integrated financial services building investor wealth and Confidence.


KEY AREAS :The company has main areas of business:

Alumina Silicate Bricks : MHD & HHD Bricks, Super Heat Duty Bricks | High Alumina (Bauxite) Bricks Insulation Bricks : Special Insulation Bricks | Insulation Castables & Mortars Monolithics : High Alumina Mortars | High Alumina Castables | High Alumina Ramming Masses

High Carbon Ferro Manganese | Medium Carbon Ferro Manganese | Low Carbon Ferro Manganese | High Carbon Silico Manganese | Medium Carbon Silico Manganese | Low Carbon Silico Manganese | Ferro Silicon | Ferro Chrome


Hard Coke | Metallurgical Coke

Sponge Iron | Pig Iron | MS Billet | MS Bars and Rods (Thermex TMT and Thermex QST)


MS Bars and Rods (Thermex TMT and Thermex QST) | MS Billet | MS Scrap | Pig Iron | Sponge Iron | Low Ash Coking Coal | Low Ash Metallurgical Coke

Wealth Management Services | Investment Advisory Services | Securities Broking Equities and Derivatives | Distribution of Financial Products | Marketing of Equity and Mutual Fund IPO | Commodities Broking 30

BMA Financial Services primarily focuses on offering diversified financial planning services to corporate & individuals. Our spectrum of services include financial planning, advising, executing, monitoring of investments & more. With our team of financial consultants & experts we ensure to deliver customized solution to all our clients. BMA Wealth Creators - The A to Z of Wealth Creation Techniques BMA Wealth Creators work towards understanding our financial goals and risk profile. BMA group expertise combined with thorough understanding of the financial markets results in appropriate investment solutions for us. BMA offer a wide range of financial services and solutions through our varied services. 1. Wealth Management Services 2. Investment Advisory Services 3. Securities Broking Equities and Derivatives 4 Distribution of Financial Products 5. Marketing of Equity and Mutual & IPO 6. Commodities Broking BMA group expertise in each of these areas, help us achieve our financial objectives. BMA provide full service functions, which include: Planning Advising Executing Monitoring our investments BMA corporate entities are represented by BMA Stock Broking Pvt. Ltd. 31

It holds corporate membership in National Stock Exchange Ltd, Bombay Stock Exchange Ltd. and Central Depositories Securities Ltd. BMA Commodities Pvt. Ltd. It holds corporate membership in commodities exchange of NCDEX and MCX. It is also is SEBI approved AMFI registered Mutual Fund advisory and intermediary. Time to shed our worries. In the present day scenario, there are way too many options that can be rather confusing. The key is to decide well. Making the correct choice will ensure the realization of all our dreams. With BMA, we can at least forget about our financial worries. BMA with the correct knowledge of the market and years of experience behind its will help us invest our money in the right avenues. So that we can rest assured as our money grows. All we have to worry about now is ways to utilize the wealth and create the perfect picture of happiness for us and our loved ones.

BMA Wealth Creators Ltd provides wide strange of investment options. They are following:-


EQUITY SERVICE STOKES Provide research based advice on select clients would us e this information to trade in the markets. PORTFOLIO MANAGEMENT SERVICE Construction and management of Equity Portfolios sing expertise in equity capital markets. ADVISORY ON MUTUAL FUNDS Research based recommendation on best of Breed funds. INSURANCE Life Cover with a blend of distinctive Investment Options. IPO Insightful advice on merits of Public Issue and inputs in case of book building issues. DERIVATVES Extensive experience on the derivatives market. COMMODITIES Trading in various commodities


RESEARCH REPORT When any investor invests through BMA Wealth Creators Ltd., he also gets recommendation from the BMA research centre to help investor decide if he should invest in a particular IPO. Decision making becomes easy as can access all the relevant information at his fingertips. Gets in depth analysis of: NEW IPO ISSUSES IPO CALENDAR IPO LISTING PROSPECTUS OFFER DOCUMENTS


If investor is a professional trader, the BMA Wealth Creators Ltd research center brings him a whole host of research facilities, so that he can take complete control of his account. Fundamental research reports including macro-economic research, followed be sector research and research on companies, so that investor can decide where to put money in Technical research brings investor compressive derivatives trading reports, intra-day technical calls, details on every high that the Sensex registers, and much more . And if they want to do their own research, this can be useful raw material as well. MARKET MORNING: A technical view summarizing the previous day movement and what is expected to happen on the current day. This report will also provide technical calls for trading along with various supports and resistances of chosen stokes. Intraday Call: These calls are provided according to changing market situation. Be it news momentum or technical perspective, be updated with what are experts advise you to do during the market hours. Special reports: These reports give you an in depth coverage on special event such as the budget report, Quarterly results, RBI credit & monetary policy, Monsoon report and much. 34

Daily morning Reports: Every morning, gets updated with daily economy news, corporate news, daily bulk deals, gainers and loser, forthcoming events in a company or market, and lots more. Weekly Technical Analysis: The weekly technical analysis brings a complete round up of the week- gone byrecommendation, major supports and resistance, what to look forward to and more. Stock Ideas: Ever wanted to pick a needle from a stack of hay. Thats exactly what a stoke idea is. This research desk picks out potential stokes, which can provide immense scope for returns on investment. This is a report, which is completely based on fundamentals. Sectoral Report: Deciding, which sector to invest in? Super report can guide investor Know details including the effect of government policies and regulation and estimates about how the sector is exported to behave. Since companies in a particular sector are affected universally by legislation/economic changes, investor can make the best choice based on expert opinions on the sector. Derivative Reports: Trader can view the put call ratio, the most active derivative contracts and top changes in open interest. Trade can also get FLL statistic, the top gaining and losers and the cost of carrying out various derivative contracts. BMA SMS Alerts: Trader can get these expert tips and recommendation as SMS on their mobile phone.


Regular Research Reports: Supported by valid , fact based and research inputs and published results, this report educate about industry trends, sector news, which company scrips to by sell hold 35

etc. these reports are simple comprehensive and help to make informed investment decision on their own, while executing their choices efficiently. Ideal for Investor: If investor is unsure about where to invest, fundamental research give him a clear analysis picture fundamental research takes him through the key factors/parameter which explore the future prospectus of the economy / sectors/companies. Fundamental research is a backed by Data, Mathematical & statistical modelling and Conclude with expert opinion. Marco Economic Research: Analysis on the current Indian market, latest government policies and their effect on the economy. It gives investor the birds eye view on the counter physical health and its impact, factor that have a bearing on the stoke market. Industry or Sector Research: Details on how an industry is faring, whether current policies favour the industry, and more. Company Research: Full details of a company-from its industry and its organizational structure to its share prices, its future prospectus and more.

Types of client
The private client group of BMA deals with the following types of clients: Normal Equity Client Margin Funding Client Margin Securities Client

Normal Equity Client: The transaction volumes of this client are generally small to medium in size. He falls in the retail category. The client calls up the dealer to place his orders. The 36 transactions involving the Securities is done as per his or the dealer advice. The normal

trading clients settles his trades on a bill-to-bill basis. Margin Funding Client: The Margin funding client does trades as a normal client, but avails of funding facility from BMA Wealth Creator Ltd. The transaction volumes of this client are generally large in size. He takes huge positions in the market. He has to register himself as a funding client. Margin Securities Client: This client gives stocks as a margin with the broker. He is not a margin funding client. He settles his trades on a bill-to-bill basis.

BMA Product Features:

Trading A/C Trading a/c cannot be opened in joint names. Minor not allowed. One client has one code. Group code should be mention. PAN no. & proof needs to be provided. DP a/c details & proof (or) complete DP a/c opening form(this is required even if (Or) latest bank statement Depository A/C There could be maximum up to 3 holders in a DP a/c. Identity proof, address proof & signature proof of all holders are required whereas

the client wants to trade on derivative only).(Or) personalized cheque leaf

only first holder's bank details and proof are required. Personalized cheque leaf gives the proof of bank a/c no. ; Name and full address

of the bank branch, Pin code and whether the a/c is in the name of the client or not. In case non-personalised cheque leaf, the client needs to provide us either a copy passbook or bank statement. Nomination facility is available. 37

For nomination details require nominee's photo, signature and 2 witnesses. If nominee is minor [guardian photo and sign on minor behalf] .



What are IPOs? An "initial public offering" is a company's first sale of stock to the public. This is why it is also referred to as "going public". When a company that has already issued stock issues more stock it is called a "secondary offering". Why do companies do IPOs? The biggest reason companies do IPOs is to raise capital to meet the capital needs of the business. If a small company is doing $100 million in sales and it believes it could get up to $2 billion then it might take a while if it's growth is funded from internal profits. So it sells part of the company to investors (the public) and uses the money to grow quicker than it would have otherwise. Another reason companies go public is to make it easier to acquire other companies. Buying other companies requires a lot of cash. Doing an IPO allows them to raise cash as well as have a publicly traded stock that they can use as a currency to buy another company (called a "stock swap"). Another reason a company will do an IPO is to create liquidity for their stock options programs. If a company is a private company and they give out stock options to employees then there is no public market for them to trade on. Having a publicly traded stock makes it easier for option holders to realize the value of their options. Being a public company can also give you cachet because people tend to trust a company more if it is public. A small company looking to create a strong brand with their customers may be able to use their status as a publicly traded company as a marketing tool - although this reason by itself is rarely enough for a company to do an IPO. How is an IPO done? The process by which an IPO is issued is called an "underwriting". When a company wants to go public they contact an investment bank (usually one of the big ones on Wall Street) and hammer out the terms of the deal (like how much money to raise, how many shares to issue, etc). The investment bank agrees to sell the shares to the public. Sometimes the investment bank will agree to buy the shares directly from the company and re-sell them to the public. Many times a single investment bank will not want to 39

shoulder the whole risk of an IPO so they will team up with other investment banks to form what is called a "syndicate" where one bank is the lead underwriter. Any investment bank involved in the IPO will earn a commission based on a percent of the money raised in the IPO. There have been attempts over the past few years to revolutionize the IPO process by eliminating the investment banks from the IPO process. None of these efforts have gained any substantial traction. Personally, I think the IPO market is ripe for innovation because one of the big trends over the last few years in business has been to mitigate the role of the middleman. And the investment banks who act as middlemen in the IPO process earn enormous fees for doing so. Although some people may point out the risk involved and how complicated the process is, I believe there is considerably less risk than say deriving your income from correctly calling market trends. The big Wall Street investment banks seem to get the all the business only because they are large and prestigious. But I believe some of the medium-sized financial firms who don't have much market share in IPOs would do well to under price the big Wall Street firms. The process of doing an IPO, after all, has been around for a long time and does not require unique technology. The IPO market If you read the business news regularly you will see people referring to the "IPO market". They are referring to how many companies have gone public recently and how many are scheduled to go public soon. Even investors who don't buy IPOs usually keep an eye on the IPO market. This is because the IPO market is an indicator of the public's hunger for stocks in general. Because IPO activity is somewhat of a gauge of supply and demand for equities, the IPO market is commonly used as a contrary indicator. In other words, when tons of companies are doing IPOs then it means people are euphoric about the market and it is probably time to sell. The dotcom era of the late 90's was one of the best examples in history of using the IPO as a market indicator. If you want to get technical, you could graph the number of monthly IPOs and overlay it onto a stock index chart. If you want to monitor the IPO market here are a few indicators you can use: 40

The number of IPOs this quarter vs. the same quarter last year. The number of IPOs last quarter vs. this quarter. The return of the IPOs on their first day of trading. The return of all IPOs year-to-date. The quality of the companies going public. How many IPOs get delayed because of lack of demand. The total market cap of all IPOs this year vs. last year. The truth about (some) IPOs I talked earlier about how the reason that a company issues stock was to raise money to meet the long-term capital needs of the business and many times to fund the company's growth. Well, this was based on the assumption that the owners of the company believe that the best times for the company are in the future so the company needs to raise money if it wants to take advantage of these opportunities. But one of the things that is rarely mentioned is that sometimes a company is taken public because the owners believe the best times for a company (from a valuation standpoint) are behind it. In this case the IPO serves as an "exit strategy", or a way to sell the company so the owners can cash in their profits (also referred to as a "liquidation event"). Some investors may think this is unfair. But as long as there is enough information for investors to make an accurate assessment of the company's value then it isn't. If investors want to pay too much for a stock based on that information then they have a right to do that. Most investors operate under the illusion that all IPOs are growth 41

companies with great prospects. People forget sometimes that the IPO process is simply a process where a seller sells a stock to a buyer. An owner of a stock usually sells the stock because they think the value has been realized. This happens with IPOs too. Amateur investors & IPOs This first thing beginners need to learn about IPOs is that IPOs are nothing special. One of the biggest areas where amateur investors show their flaws when it comes to investing is with IPOs. Amateur investors are often seduced by IPOs because they believe that the companies going public are somehow better investment opportunities. They're not. They are just regular companies just like all other companies. There will be opportunities where there IPOs that are way underpriced but those opportunities are no different than opportunities in stocks that have been trading for a while. PRIMARY MARKET BMA Wealth Creators Ltd is the leading breaking house, it deals in IPO. People highly obliged to BMA securities which give us a chance to understand the primary market .In 2 months training period many companies came up with their IPOs and we people deal in the process of every IPO, which came during our training period. We learn how the company offers a new IPO, what are the rules of SEBI guidelines regarding the IPO. We also learn how to fill the application for the IPO, and what are the necessary documents required for an IPO, what can be reasons for rejection of application form, and the final stage in an IPO is the bidding ,we also get the opportunity to bid the form for various IPO. In this section of training we also get chance to understand the procedure. Different kinds of issues: Primarily, issues can be classified as an public, Rights or preferential issues(also known as private placement). While public and rights issues involve a detailed procedure, private placements and preferential issues are relatively simpler. The classification of issues is illustrated below: Public issues can be further classified into initial Public offerings and further public offerings .In a public offerings, the issuer 42

makes an offer for new investors to enter its shareholding family. The issuer company makes detailed disclosures as per the DIP guidelines in its offer document and offers it for Subscription. The significant features are illustrated below: Issues Public Preferential Rights Initial Public Offerings Further Public Offering Fresh Issue Offer for sale Fresh Issue Offer for sale

Initial public offering (IPO): is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public .This paves way for listing and trading of the issuers securities. Follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale the public, through an offer document. An offer sale such scenario is allowed only if is made to satisfy listing of continuous listing obligations. Rights Issue (RI) is when a listed company which proposes to issue fresh security to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. The rote is best suited for companies who would like to raise capital without diluting stake of its exiting shareholder unless they do not intend to subscribe to their entitlements. A Preferential Issue is an issue of share or of convertible securities by listed companies to select group of person under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way a company to raise equity capital. The 43

issuer company has to comply with Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI. IPO An Initial public 0ddering (IPO) is the first sale of a companys common shares to public investors. IPOs are good source of funds for companies and are done with the objective of raising money for specific operations. Typically, a company will hire an investment banker to underwrite the offering and a corporate lawyer to assist in the drafting of the prospectus. Currently, IPOs are being heavily over scribed and there many retail investors applying for the same IPO. In such a situation, there is a high risk that even after applying for an IPO an individual investor might not get an allotment of the shares.

TYPES OF IPO :There are two types of IPO issues:1. Fixed Pricing Method: It is method where the company and the lead merchant Banker fix a price at which the shares will be to the public. 2. Book Building:It is a method where the company and the lead manager (LM) stipulate a floor price a price band leave it to market forces to determine the final price. During the method for which the IPO is open, bids are collected from investors at various price, which are above or equal to the floor price (the lower price band). The offer price is determined after the bid closing date.

DEFRENCE BETWEEN BOOK BUILDING AND FIXED PRICE ISSUE : BOOK BUILDING Book Building securities are offered at a price above or equal to the floor price. . 44 FIXED PRICE ISSUE In case of fixed price issue securities are Offered at a fixed price.

In case of book building, the demand can be known every days as the book is built.

But in case of the fixed price issue, the demand is known at the close of the issue.

There is book or price discovery in Book Building. The IPOs which issue as book building covers large area of investment market In case of Book Building the total amount allotted to RLL must be at least 35% of the total; issue and at least 15% must given to NLLs, QIBs must be allotted no more than 50% of the issue

There is no book or price discovery in a fixed-price issue. Fixed price issues are typically small. There is no reservation for FLLs/HNLs in a fixed- price issue.

ELIGIBILITY NORMS FOR MAKING THE ISSUE:SEBI has laid down eligibility norms for entities accessing the primary market through public issues. There is no eligibility norm for a listed company making a rights issue as it is an offer made to the existing shareholders who are expected to know their company .The main entry norms for companies making a public issue (IPO or FPO) are summarized as under: Entry norms I (EN I): The company shall meet the following requirements: (a) Net tangible assets of at least RS.3 crores for 3 full years (b)Distributable profits in at least three years (c)Net worth of at least RS.1 crore in three years (d)If change in name ,at least 50% revenue for preceding 1 year should be from the new 45

activity. To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters ,SEBI has provided two other alternative routes to company not satisfying any of the above conditions, for accessing the primary market , as under. Entry Norm II(EN II): (a) Issue shall be through a book building route, with at least 50% to be mandatory allotted to the qualified institutional buyers (QIBs). (b)The minimum post-issue face value capital shall be RS.10crore or there shall be a compulsory market - making for at least 2 years.

Entry Norms III(EN III): (a)The "project" is appraised and participated to the extent of 15% by FIs/scheduled commercial banks of which at least 10% comes from the appraisers(S). (b)The minimum post-issue face value capital shall be RS.10 crore or there shall be a compulsory market-making for at least 2 years. In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having at least 1000 prospective allotted in its issue

Companies fall into two broad categories:

Private and public A privately held company has fewer shareholders and their owners don't have to disclose much information about the company .Anybody can go out and incorporate a company. Just put in some money, file the right legal documents and follow the reporting rules the jurisdiction. Most small businesses are privately held. But large companies can be private too. For e.g.: Domino's pizza and hallmark cards are all privately held. It usually isn't possible to buy shares in a private company. One can approach the owners about investing, but they're not obligated to sell anything. Public companies on the other hand, have sold least a portion of themselves to 46

the public and trade on a stock exchange. This is why doing an IPO is also referred to as "going public" Public companies have thousands of shareholders and are subject to strict rules and regulations .They must have a board of directors and they must report financial information every quarter. In the united states public companies report to the securities and exchange commission (SEC). In other countries, public companies are overseen by governing bodies similar to the SEC. From an investor's standpoint, the most exciting thing about a public company is that the stock is traded in the open market like any other commodity. Only need cash to invest.

Benefits to invest in public companies:Going public raises cash and usually a lot of it. Being publicity traded also opens many financial doors:(a) Because of the increased scrutiny public companies can usually get better rates when they issue debt. (b)As long as there is market demand a public a company can always issue more stock. Thus mergers and acquisitions are easier to do because stock can be issued as part of the deal. (c)Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.

Reasons behind IPO:

Following are the main reasons that are why company comes out with IPOs: 1 .When a company requires funds 2. In order to expand the existing facilities 3. Undertake a new project. 4. To repay a high cost loan. 5. To achieve the benefit of listing on the stock exchange.

Intermediaries in an IPO
Merchant banker or book running lead managers (BRLM) to the issue, syndicate 47

members, underwriters to issue, registrars to issue , bankers to issue, auditors etc. are the intermediaries to an issue . Contact details of all intermediaries like, contact person, telephone number, address, email address etc. are disclosed by the issuer.

ROLE OF BOOK RUNNING LEAD MANAGERS :Book running lead manager (BRLM) or lead manager performs all the pre and post issue activities. PRE-ISSUE AVTIVITIES: These activities involves due diligence of company's operations / legal / management / business plans etc., designing & drafting offer documents, prospectus, memorandum for salient features of prospectus and statutory advertisements .BRLM should ensure to comply with stipulated requirement and formalities in prescribed formats with SEBI , stock exchange, and register of companies. They also have a market the issue and appoint other intermediaries like advertising agency, registrar, bankers and printers. Activities like managing escrow accounts, allocation to noninstitutional, intimation of allocation and dispatch of refunds to bidders forms the part of post- issue process. POST ISSUE ACTIVITIES : It involves necessary follow-ups, which includes finalization of trading, dealing of instruments, dispatch certificates, demat of delivery of shares with different agencies associated with like registrar to issue, banker to issue and banking handling refund operations

Quotas for specific investors:

For allotment purpose, investors in a book building issue are divided into three categories:-Retail individual investors (RIIs), Non institutional investors (NIIs), and 48

Qualified institutional buyers (QIBs) RETAIL INDIVIDUAL INVESTORS: A Retail is one who application for share does not exceed RS 1 laky in value. NON INSTITUTIONAL INVESTORS: NIIs are investors who bid values amount to over RS1 laky each. QUALIFIED INSTITUTIONAL BUYERS: QIBs consist of mutual fund, financial institutions, scheduled commercial banks, insurance companies, provident funds, state industrial development corporations, etc.

According to SEBI guidelines, each of these categories must be allocated a certain percentage of the total issue .The total amount allotted to RII must be at least 35% of the total issue and at least 15% must be given to NIIs, QIBs must be allotted no more than 50% of the issue. IPO GRADING:. What is IPO Grading? IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below.

IPO grade 1: Poor fundamentals IPO grade 2: Below-average fundamentals IPO grade 3: Average fundamentals 49

IPO grade 4: Above-average fundamentals IPO grade 5: Strong fundamentals

IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO.


I am an issuer. By when am I required to obtain the grade for the IPO?

IPO grading can be done either before filing the draft offer documents with SEBI or thereafter. However, the Prospectus/Red Herring Prospectus, as the case may be, must contain the grade/s given to the IPO by all CRAs approached by the company for grading such IPO.

Further information regarding the grading process may be obtained from the Credit Rating Agencies.


Who bears the cost of the IPO grading process?

The company desirous of making the IPO is required to bear the expenses incurred for grading such IPO.



Is grading optional?

No, IPO grading is not optional. A company which has filed the draft offer document for its IPO with SEBI, on or after 1st May, 2007, is required to obtain a grade for the IPO from at least one CRA.


Can the issuer company reject an IPO grade?

IPO grade/s cannot be rejected. Irrespective of whether the issuer finds the grade given by the rating agency acceptable or not, the grade has to be disclosed as required under the DIP Guidelines. However the issuer has the option of opting for another grading by a different agency. In such an event all grades obtained for the IPO will have to be disclosed in the offer documents, advertisements etc.


Will IPO grading delay the process of issue?

IPO grading is intended to run parallel to the filing of offer document with SEBI and the consequent issuance of observations. Since issuance of observation by SEBI and the grading process, function independently, IPO grading is not expected to delay the issue process.



What are the factors that are evaluated to assess the fundamentals of the issue while arriving at the IPO grade?

The IPO grading process is expected to take into account the prospects of the industry in which the company operates, the competitive strengths of the company that would allow it to address the risks inherent in the business(es) and capitalise on the opportunities available, as well as the companys financial position.

While the actual factors considered for grading may not be identical or limited to the following, the areas listed below are generally looked into by the rating agencies, while arriving at an IPO grade

Business Prospects and Competitive Position i. ii. Industry Prospects Company Prospects

Financial Position Management Quality Corporate Governance Practices Compliance and Litigation History New ProjectsRisks and Prospects


It may be noted that the above is only indicative of some of the factors considered in the IPO grading process and may vary on a case to case basis.


Does IPO grading consider the price at which the shares are offered in the issue?

No. IPO grading is done without taking into account the price at which the security is offered in the IPO. Since IPO grading does not consider the issue price, the investor needs to make an independent judgment regarding the price at which to bid for/subscribe to the shares offered through the IPO.


Where can I find the grades obtained for the IPO and details of the grading process?

All grades obtained for the IPO along with a description of the grades can be found in the Prospectus. Abridged Prospectus, issue advertisement or any other place where the issuer company is making advertisement for its issue. Further the Grading letter of the Credit Rating Agency which contains the detailed rationale for assigning the particular grade will be included among the Material Documents available for Inspection.


Does an IPO grade, which indicates above average or strong fundamentals mean I could subscribe safely to the issue?


An IPO grade is NOT a suggestion or recommendation as to whether one should subscribe to the IPO or not. IPO grade needs to be read together with the disclosures made in the prospectus including the risk factors as well as the price at which the shares are offered in the issue.


How do I interpret the IPO Grades?

The grades are allocated on a 5-point scale, the lowest being Grade 1 and highest Grade 5.The meaning of these grades have been explained under Question 1 in this FAQ.


How does IPO Grading help in deciding about investing in an IPO?

IPO Grading is intended to provide the investor with an informed and objective opinion expressed by a professional rating agency after analyzing factors like business and financial prospects, management quality and corporate governance practices etc. However, irrespective of the grade obtained by the issuer, the investor needs to make his/her own independent decision regarding investing in any issue after studying the contents of the prospectus including risk factors carefully.


What is the role of SEBI in IPO grading exercise?


SEBI does not play any role in the assessment made by the grading agency. The grading is intended to be an independent and unbiased opinion of that agency.


Will IPO Grading given by CRAs be a parameter for SEBI to issue its observations?

The grading is intended to be an independent and unbiased opinion of a rating agency. SEBI does not pass any judgment on the quality of the issuer company. SEBIs observations on the IPO document are entirely independent of the IPO grading process or the grades received by the company.


Which credit rating agencies are registered with SEBI?

As on date the following four credit rating agencies are registered with SEBI. a) Credit Analysis & Research Ltd (CARE) 4th Floor, Godrej Coliseum, Somaiya Hospital Road , Off Eastern Express Highway , Sion (East), Mumbai 400 022. b) ICRA Limited 55 1105, Kailash Building 11th Floor, 26,Kasturba Gandhi Marg New Delhi-110 001 c) CRISIL CRISIL House 121-122 Andheri Kurla Road Andheri (East) Mumbai 400093 d) FITCH Ratings Fitch ratings India (P) Limited Apeejay House, 6th Floor 3, Dinshaw Vachha Road, Churchgate, Mumbai 400 020

IPO grading is the grade assigned by a credit rating agency registered with SEBI, to the initial public offering (IPO) of shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative 56

assessment of the fundamentals of that issue in relation to the other listed equity securities in India. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below. IPO GRADE: 1 Poor fundamental IPO GRADE: 2 Below-average fundamentals IPO GRADE: 3 Average fundamentals IPO GRADE: 4 Above-average fundamentals IPO GRADE: 5 Strong fundamentals

Investment strategies shape the future .The excitement of joining the world of investing, the opportunity to turn your $ into millions. The basic types of investment strategies: growth investing, income investing and value investing. GROWTH INVESTING The name says it all; growth investment is the investment strategy of looking for the big winners in the stock market. Growth investors are looking for companies that traditionally have high growing earnings. In theory, high growth equals high stock prices and in turn, high profits. People involved in growth investing take their risks wagering that young, upcoming will break through and become leaders in their industry. Many growth companies applicable to this investment strategy started with a dream, an idea and very little operating capital. They were able to overcome the obstacles and become strong profitable companies. Companies like this can achieve initial success but tend to be limited by capital. As they start attracting investors the result can be very good .This investment strategy offers risk reward ratios that are quite drastic. While the rewards can be very high in growth investing the risks are high as well. INCOME INVESTING Income investing is the most conservative and easy to understand investment strategy. Income investors target companies that consistently pay high stock dividends .This is a preferred stock market strategy for those around retirement age. This investment strategy looks for companies that tend to be large and well established. 57

There is always risk in stock market investing, but income investing is the most conservative investment strategy, in fact it is also known as defensive investing because it tends to protect the trader. VALUE INVESTING This investment strategy is a search for one thing; investors try to find stocks that have been overlooked by the rest of the market. While this doesnt necessarily mean they are low priced stocks, it does mean that for whatever reason, the market has undervalued a particular stock. Many times a stock gets overlooked while investors chase profits in another company in the stock sector or a similar company that is perceived differently by investors. Technical analysis is important with such companies since an investor doesnt want to confuse undervalued with underperforming. A value investor can look at the price to earnings ratio as one guide to the value of a stock .The hope of the value investor is that the market will recognize the worth of the company and its stock will be bid up to true value realizing a profit for the successful trader. These investment strategies are all beneficial to the successful investor. The significant difference between them is their level of risk. It is likely that a younger investor will have a greater tolerance for risk due to a greater time to make up for any losses, while an investor close to retirement might choose a conservative approach to make money yet better protect his or her investments.


An investor has to look for many important things in an IPO to ascertain the risk factors before deciding to buy the shares of a company .Few of them are listed below: TRACK RECORD OF THE PROMOTERS: Background and experience of the promoters, the management team and their expertise is one of the main factors that need to be considered as they will be the ones 58

responsible for the profitability of the company. Studying this point will help investors avoid fly by night promoters and companies. FINANCIALS: The companys balance sheet is a very important document and investors should look at it carefully. Investors should look at not just the current balance sheet but also of the three to four years to get an idea of the company's growth and focus. PROSPECTUS: Read the prospectus for the company carefully .The prospectus called as redhearing prospectus is a document that every company that goes for a public offering has to file with the SEBI. The prospectus has all the details about the company, the risk factors and the company's financials. ISSUE PRICE: Investors need to decide if the issue is worth investing in at that price. One way of checking the valuation is to look at the price-earnings (P/E) multiple. The P/E multiple is the ratio of the share price to earnings per share (EPS which is listed in the balance sheet).P/E of the issue should be compared with the industry average and the other companies in that sector. RISK FACTORS LISTED IN THE OFFER DOCUMENT: Risk factors specific to this particular venture , nature of the market, government policies associated with this particular industry or filed and the performance of that particular sector in the previous years and any available forecasts for this industry for the near future. OTHER FACTORS Apart from these three important points other factors like amount to be paid on application, the lead managers for the issue, the stock exchanges that issue plans to list on and the current market sentiment are other factors to watch out for. HOW TO APPLY IN AN IPO:For the past 2-3 years there has been a huge bully rally in the Indian stock 59

markets, which has brought people back to investing in the stock market. Fallout of this capital market bull rally is the tremendous increase in the activity - taking place in the primary market (IPO market). Companies are rushing in to tap the capital markets and raise funds through initial public offers (IPO) and follow on public offers (FPO). Through paper work has been considerably reduced. The process of applying in an IPO is still little complicated for people not familiar with investing in the stock market. Here are simple steps to starts investing in stock market and IPO, s (primary market). There is two ways to invest in IPO's -----1. Online mode 2. Offline mode INVESTING IN IPO's ONLINE (through the internet) This is the simpler of the two methods. The following are the steps one should follow to invest in IPO online:1. To get started in investing in IPO's one will need to open a demat account cum trading account (To do this the person will need a bank account and a PAN number) 2. After opening demat and trading accounts one will need to login through his/her trading account and select the IPO he/she wish to invest in. 3. Transfer funds from the bank account to trading account. 4. Then select the number of shares one want to apply for and the price at which he/she want to bid for (or use cut off option). 5 .If one get the shares allotment, the shares will be created to his / her demat account .The IPO refund will be sent by cheque to the postal address.

INVESTING IN IPO's OFFLINE Here one will need only the demat account. Trading account is not necessary unless one decide to sell the shares he/she has been allotted through IPO's. One will have to visit the nearest broker and get the IPO application form, fill it up and give the filled from along with the cheque to the broker. The person will be given an acknowledgement from, need to attach a photocopy of the PAN card with the IPO application form. 60

PROCEDURE TO APPLYING FOR AN IPO:1. KEEP THE EYES AND EARS OPEN IPO are normally heavily as advertised in the media. Not only because it is statutorily required but because companies want to maximum publicity to ensure that are there issue a success. Before applying, be sure to read the prospectus for the issue. This is a document inviting the public to subscribe the shares of the company and contains plenty of information of the company's financials, its track record, and what the management plans to do with the money that it is rising. 2. GET AN APPLICATION FORM One can pick up the applications forms at any brokers office --- they are even available on some street kiosks in the city's financials area. The forms are all free. 3. FILL IT UP Fill up the form the directions are given in the form--- and write a cheque for the amount want to apply for. Every issue has a minimum number of shares that one must apply for, which is specified in the application for. Submit both within the time frame specified. 4.SUBMIT THE FORM Submit the form to the collecting bankers (a list is given in the form), or to the collecting agents for the merchant bankers (financial players managing the entire issue for the company) to the issue.

A COMPLETE OVERVIEW OF COMPANY WHICH ISSUE IPO IN THE MARKET: TIMBOR HOME IPOs Price band: RS.54 - 63 Bid lot: 10 equity shares and in multiples of 10 equity shares Issue opens and closes Listing 10 MARCH 25 MARCH BSE and NSE 61

Issue Size Issue Management Team

36,90,000 Equity Shares Book running lead managers (CORPORATE LTD) STRATEGIC ALLIANZ

COMPANY OVERVIEW:Timbor Home Limited (Timbor) manufactures and markets modular kitchens, furniture and doors, and door and window frames. The company markets its products under the brand names Timbor Cucine- Modular Kitchens, Timbor Doors-Doors & Door Frames, Timbor Home-Home Furniture, and IKI Kitchens-Hi-end kitchen solutions using 'Hettich' hardware and accessories. It operates as a manufacturer-retailer with 84 retail stores, of which three (all in Ahmedabad) are company owned and company operated (COCO) while the rest are franchisees. OBJECTS OF THE ISSUE: Purchase of Machinery Establishment of new stores across India Additional working capital requirements Public Issue Expenses General Corporate Purpose. To list shares of the company

STRENGTHS: An established brand name and reputation for project execution Strategic locations Scale of operations Experienced and dedicated management


Price brand: RS 63 to 72 Bid lot: 10 equity shares and in multiples of 10 equity shares. Issue details: Issue opens and closes Listing Issue Management Team 5 /3/2012 9/3/2012 BSE and NSE Book running lead managers (CORPORATE STRATEGIC ALLIANZ Issue size COMPANY OVERVIEWIncorporated in 1993, Rushil Decor Ltd, a flagship company of the Rushil Group is a leading Indian manufacturer of decorative high pressure laminates and plain particle boards. They operate in India and internationally with brand names of Vir laminate and Rushil decor premium laminate. They have four manufacturers of particle board products and decorative laminated products in Gujarat state. Vir Laminate is the largest seller of Laminated sheets and Particle Board in India. Company offers comprehensive engineered interior products which include: 1. Decorative Laminate Sheets 2. Industry laminate Sheets 3. Rushil Kitchen Door 4. Plain Particle Boards LTD) 56,43,750 Equity share

OBJECTS OF THE ISSUE:The object of the issue are to: 1. Setting up of Medium Density Fibre Board (MDF) plant at Plot No. 58 & 59, Industrial Area, Taluka and District: Chikmagalur, Karnataka. 2. Margin for Working Capital Requirement; 3. Public Issue Expenses; 4. General Corporate Purpose. Amble

BOOK BUILDING :SEBI guidelines defines book building as "a process undertaken by which a 63

demand for the securities proposed to be issued by a body corporate is elicited and built-up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means by means of a notice, circular, advertisement, document or information memoranda or offer document." Book building is basically a process used in initial public offer (IPO) for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various at various prices, which are above or equal to the floor price. The offer is determined after the bid closing date. As per the SEBI guideline, an issuer company can issue securities to the public though prospectus in the following manager: *100% of the net offer to the public through book building process. *75% of the net offer to the public through book building process and 25% at the price determined through book building. The fixed price portion is conducted like normal public issue after the book built portion, during which the issue price determined. The concept of book building is relatively new in India. However it is a common practice in most developed countries. The securities and exchange board of India recently issued a circular amending the guidelines relating to allotment process in book built IPO's .The charges include doing away with discretionary allotment for qualified institutional bidders (QIB) in a book built issue and introduction of 5% reservation for domestic MFs (mutual funds) in such issues. New the allotment in the QIB portion of a book built issue will be on proportionate basis like in the case of HNIs and retail investors .SEBI has also made it mandatory for QIBs to pay 10% margins while applying during IPOs PROCESS: Earlier, the company determined a fixed price for the stock issue. The issue was marketed to general public through advertisement and a media campaign. Today companies prefer a book building process, Book building in the process of price discovery. That means there is no fixed price for the share. Instead, the company issuing the shares comes up with a price band. The lowest price is referred to as the floor and the highest, the cap. Bids are then invited for share. Each investor states how many shares he/she wants and what he/she is willing to pay for those shares (depends 64

on the price band ) the actual price is then discovered based on this bids. HOW THE GAME IS PLAYED Individuals who apply for the IPO put on their bids. The process is transparent. After evaluating the bid prices; the company will accept the lowest price that will allow it to dispose the entire bloke of shares. That is called the cut off price. For example: number of share issued by the company =100 Price band=RS 30- RS 40 WHAT INDIVIDUAL HAVE BID FOR: The shares will be sold at the bid 5 price of 20 shares for RS 35 why Because bidders 1 to 5 are willing to pay at least RS 35 per share. The total bids from bidders 1 to 5 ensure all 100 shares will be sold (20+10+20+30+20) The cut off price is therefore bid 5's price =RS 35 Bidder's 1 to 5 gets allotment at that price Bidders 6 and 7 do not get an allotment because their bids are below the cut off price. HOW THE ALLOTMENT IS DONE : The bids are first allotted to the different categories and the over- subscription (more share applied for than the shares available) in each category is determined. Retail investors and high net worth individual get allotments on a proportional basis. Assuming a retail investor and have applied for 200 shares in the issue , and the issue is oversubscribed five times in the retail category, then investor qualify to get 40 shares (200 shares/5) Sometimes the oversubscription is huge or the issue is priced so high that one can't really bid for too many shares before the RS 50000 limit is reached. In such cases allotments are made on the basis of a lottery. Say a retail investor has applied for 5 shares in an issue, and the retail category has been oversubscribed 10 times, the investor is entitled to half a share. Since that isnt possible, it may then be decided that every 1in 2 retail investor will get allotment will get allotment. The investors are then selected by lottery and the issue allotted on a proportional basis among. That is why there is no way can be sure of getting an allotment. 65

INVESTOR STRATEGY TO GET AN ALLOTMENT: Puts in bids in the names of his/ her family members. The problems is , investor will need to open demat account for them first . Most regular IPO investors try to calculate how much the issue will be oversubscribed and then put in their bids accordingly. For instance, if an investor want 10 shares and feel the retail portion of the issue will be over-subscribed three times then investor should bid for 30 shares. One could also apply separately in the high net worth category if have the money.

CHAPTER: 6 LISTING OF SECURITIES :Listing of Securities and Benefits Listing means admission of securities of an issuer to trading privileges on a stock exchange through a formal agreement. The prime objective of admission to dealings on the Exchange is to provide liquidity and marketability to securities, as also to provide a mechanism for effective management of trading. Thus Listing is the admission of securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi governmental and other 66

financial institutions/corporations, municipalities, etc. Objectives of Listing * Provide liquidity to securities; * Mobilize savings for economic development; * Protect interest of investors by ensuring full disclosures Benefits of Listing: The following are the benefits of listing of securities in a Stock Exchange: A premier marketplace: The sheer volume of trading activity ensures that the impact cost is lower on the Exchange which in turn reduces the cost of trading to the investor. The automated trading system ensure consistency and transparency in the trade matching which enhances investors confidence and visibility of our market. Visibility: The trading system provides unparallel level of trade and post-trade information. The best 5 buy and sell orders are displayed on the trading system and the total number of securities available for buying and selling is also displayed. This helps the investor to know the depth of the market. Further, corporate announcements, results, corporate actions etc are also available on the trading system. Unprecedented reach: Stock exchanges provide a trading platform that extends across the length and breadth of the country. Investors from number of centres can avail of trading facilities. The Exchange uses the latest in communication technology to give instant access from every location. Value addition: A listing can also be anticipated to attach importance to a company's Employee Share Ownership Scheme. In addition, a listing on a stock exchange can add value to a company. A listing could press forward brand awareness of company products and can augment a company's corporate standing. Furthermore, the superior 67

profile, tied with larger lucidity, could add to the company's capacity to have access to traditional sources of capital. Increasing capital: The Stock Exchange makes available access to a collection of

institutional and retail investors and to the capital market. A registration on the exchange allows a company to raise capital and use it to sponsor investment and expansion. Even after a company is listed, it can boost up capital from the market, through the issue of fresh securities such as Rights issues or through the issue of a new nature of securities. Access to a widespread shareholder base: The stock exchange puts forward companies a right of entry to a wide-ranging and mounting investor base, which contains both entity investors and plentiful local and international institutional investors. Price Detection: A listing facilitates companies to ascertain a price for their shares. Low cost capital: The primary gain of raising capital from the market is that it eschews a number of the intermediation expenses apparent in the other forms of capital raising. Consequently, the market endows companies with capital at a cheaper cost. Corporate Informations: The stock exchanges used to disseminate information and company announcements across the country. Important information regarding the company is announced to the market through the Broadcast Mode through the websides of the stock exchanges. Corporate developments such as financial results, book closure, announcements of bonus, rights, takeover, mergers etc. are disseminated across the country thus minimizing scope for price manipulation or misuse. Trade statistics for listed companies Listed companies are provided with monthly trade statistics for all the securities of the company listed on the Exchange. Other Benefits: In addition to the above benefits the following are the benefits of listing 68

of securities in a stock exchange * Access to a widespread shareholder base * The stock exchange puts forward companies a right of entry to a wide-ranging and mounting investor base, which contains both entity investors and plentiful local and international institutional investors. * Price Detection * A listing facilitates companies to ascertain a price for their shares. * Low cost capital * The primary gain of raising capital from the market is that it eschews a number of the intermediation expenses apparent in the other forms of capital raising. Consequently, the market endows companies with capital at a cheaper cost. Listing means admission of securities of a company for dealing on recognized stock exchange. Trading in recognized stock exchange in India is confined only to listed securities. Listing of security essentially means the admission of that security obligation for public limited companies. However, most companies get their securities listed on one or more stock exchange to get advantages for doing so. TYPES OF LISTING The securities listed on the stock exchanges may be of various types. The securities issued by the following modes may be listed for dealings on stock exchange. 1 NEW ISSUES OF SECURITIES The initial issue of securities when listed on stock exchange for the first time is commonly termed as initial listing. 2 SUBSEQUENT PUBLIC ISSUES A company whose securities are already on the list of stock exchange may also get its subsequent issue listed on the same stock exchange. 3 RIGHT ISSUE OF SECURITIES 69

Securities may also be issued to existing holders in the form of right issue. These right issues may also be enlisted on stock exchange. 4 ISSUE OF BONUS SHARES Such shares are issued by capitalization of profits by a company. They may also be listed on the stock exchange.

PROCEDURE OF LISTING The following procedure is adopted by a public company for enlisting its securities on a recognized stock exchange:1. Application for listing 2. Scrutiny of documents by stock exchange 3. Approval of listing 4. Non- acceptance of listing 5. Appeal against non-acceptance 6. Suspension or withdrawal of enlistment 1) APPLICATION FOR LISTING: A public company desirous of getting its securities listed on a recognized stock exchange shall apply for the purpose to the stock exchange and forward its application along with the following documents with particulars: a) Memorandum and articles of association b) Copies of all prospectus or statements in lieu of prospectus issued by the company at any time. c). d). Copies of offers for sale and circular or advertisement offering any securities for Copies of balance sheet and audited accounts for the last five years etc. subscription or sale during the last five years.

2) SCRUTINY OF DOCUMENTS BY STOCK EXCHANGE After receiving the application and necessary documents the governing body of 70

the exchange scrutinizes them. The objective of this scrutiny is so see whether the application complies with all the requirements and the documents provide the information desired. 3) APPROVAL OF LISTING If the governing board is satisfied fully with the soundness of the company, the securities are accepted for listing by the stock exchange. The stock exchange wants to satisfy itself on the following; a) The issue of the security has been made in accordance with the statutory requirements. b) The capital structure of the company is broad based. c) The size of the company is viable. d) The issue is large enough to deal on stock exchange. 4) NON-ACCEPTANCE OF LISTING The governing board is empowered to reject the application for listing. If the application for listing wants more information, the respective stock exchange may ask the company to furnish additional information with regards to listing 5) APPEAL AGAINST NON- ACCEPTANCE: The company that has applied for listing has a right to appeal against nonacceptance. The appeal may be made to the central government within a specific period time. 6) SUSPENSION OR WITHSRAWAL OF ENLISTMENT A recognized stock exchange may suspend or withdraw admission of a company or body corporate either for a breach of or a non- compliance with, any of the conditions of admissions or for any other reason, to be recorded in writing, however , that no such action shall be taken by a stock exchange against a company or body corporate concerned unless a reasonable opportunity is given to explain its position.


WORK RELATED TO IPO WE DONE IN BMA WEALTH CREATORS LTD: CALLING: Firstly we have done the calling to the potential customers. The main aim of calling is to create general awareness for the upcoming issues. We provide the detail information to the potential customers in respect of the upcoming issues by using electronic media like land phone, cell phone, e-mail services etc. We call in such a manner so that it helps in creating the demand for the upcoming issues in the market. We give the following information to the prospectus about the upcoming issues: Name of the upcoming issues Brief overview of the company Date of opening and closure of issues. Price band of the issue (Floor price and cap price) Lot size of the issues

DETAIL STUDY: Before starting the calling, we collect all the information about the company, which is coming with their new issues in the market. We obtain the information through net under the supervision and kind control of executives of BMA securities. After obtaining all necessary information about the company, we make our efforts to judge the working results of the company with the help of parameters fixed by the BMA securities in respect of research work to find out the working results of the company and about the past performance and experience of the promoters of the company. The study enables us to give proper advice to the clients. 72

DISPATCH THE FORMS: After getting the order from the clients we dispatch the application forms in the required to the clients and investors. BMA securities also give the sub - broker code to the brokers so that they can easily work with the BMA securities.

RECEIVING THEN FORM : We collect the filled application the clients and also from the brokers. We check the following information in the forms: 1 2 3 4 5 6 Pan cards copy attached. Application form correctly filled. In lieu of pan card copy form 60 attached. Cheque attached. Signature of the investors. DP id or beneficiary Id properly filled. If the application form is completely filled then we give the acknowledgment receipt to the investors after properly stamp with the BMA seal. If anything is missing we inform the investors about the incomplete information. So that investor timely fulfilled the requirements. If the investor is not able fulfill the requirements in time the form get reject. BIDDING THE FORMS : After checking the forms, we bid the forms. In biding we make a lot according to the brokers so that no problem arises in the. EXPORT & IMPORT : At last when we complete the building, the operational export the bid forms to the exchange.



Introduction Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock).

Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match 74

the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or History history. 18th Century 1830's 1840's 1850's 1860's 1860-61 East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share 1862-63 1865 Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87) of the through Indian Stock Internet. Market The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old

Pre-Independance Scenario - Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business, brokers used to gather 75

at a street (now well known as "Dalal Street") for the purpose of 1875 1880's 1894 1880 - 90's 1908 1920 1923 1934 1936 1937 transacting business. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with 1940 1944 1947 establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"




The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 76

1. Bombay 2. Calcutta 3. Madras 4. Ahmedabad 5. Delhi 6. Hyderabad 7. Bangalore 8. Indore Many more stock exchanges were established during 1980's, namely: 1. Cochin Stock Exchange (1980) 2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) 3. Pune Stock Exchange Limited (1982) 4. Ludhiana Stock Exchange Association Limited (1983) 5. Gauhati Stock Exchange Limited (1984) 6. Kanara Stock Exchange Limited (at Mangalore, 1985) 7. Magadh Stock Exchange Association (at Patna, 1986) 8. Jaipur Stock Exchange Limited (1989) 9. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital, which is visible from the following table:


S. No. 1 2 3 4 5 6

As on 31st December

1946 1961 1971 1975 1980 1985 7 8 8 9 14

1991 20 6229 8967 32041

1995 22 8593 11784 59583

No. of Stock Exchanges 7 No. of Listed Cos. No. of Stock Issues of Listed Cos. Capital of Listed Cos. (Cr. Rs.) Market value of Capital of Listed Cos. (Cr. Rs.) Capital per Listed Cos. (4/2)(Lakh Rs.) Market Value of Capital

1125 1203 1599 1552 2265 4344 1506 2111 2838 3230 3697 6174 270 971 24 753 1812 2614 3973 9723

1292 2675 3273 6750 25302 110279 478121 63 113 168 175 224 514 693

per Listed Cos. (Lakh 86 Rs.) (5/2) Appreciated value of








Capital per Listed Cos. 358 (Lak Rs.)















Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). They are divided into two categories:


Types Indian stock exchanges:



The flowchart below describes the types of transactions that can be carried out on the


Indian stock exchange allows a member broker to perform following activities: 1. Act as an agent, 2. Buy and sell securities for his clients and charge commission for the same, 3. Act as a trader or dealer as a principal, 4. Buy and sell securities on his own account and risk.








Traditionally, trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. This age-old trading mechanism in the Indian stock markets used to create many functional inefficiencies. Lack of liquidity and transparency, long settlement periods and benami transactions are a few examples that adversely affected investors. In order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.


Advantages of OTCEI 1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India 2. The screen-based scripless trading ensures transparency and accuracy of prices 3. Faster settlement and transfer process as compared to other exchanges 4. Shorter allotment procedure (in case of a new issue) than other exchanges National Stock Exchange

In order to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. NSE provides exposure to investors in two types of markets, namely: 1. Wholesale debt market 2. Capital market


Wholesale Debt Market - Similar to money market operations, debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instrumets like treasury bills, government securities, commercial papers Trading at NSE 1. Fully automated screen-based trading mechanism 2. Strictly follows the principle of an order-driven market 3. Trading members are linked through a communication network 4. This network allows them to execute trade from their offices 5. The prices at which the buyer and seller are willing to transact will appear on the screen 6. When the prices match the transaction will be completed 7. A confirmation slip will be printed at the office of the trading member Advantages of trading at NSE 1. Integrated network for trading in stock market of India 2. Fully automated screen based system that provides higher degree of transparency 3. Investors can transact from any part of the country at uniform prices 4. Greater functional efficiency supported by totally computerized network etc.

EXCHANGES Major Indices

NSE S & CNX NiftyComprising of Scraps 30scrips

BSE Sensex -Comprising of

Trading Hours IST Contract Size

0930 hours 1530 hours Monday to Friday. The schedule may change due to external factors. Minimum 1 share Minimum 1 share 82

Securities held in electronic mode are only bought Securities Traded and sold through the Exchanges. Physical/Paper securities are not recognized for delivery/trading T+2. Rolling Settlement. The trades are settled on Settlement type the third day after the contract date. That is, the funds or shares are required to be transferred to the broker well before the T+2 date, to complete the settlement. Settlement Basis Margin System Case settlement All non institutional trade in the case market are compulsorily subject to margins. There are to depositories through which an Depositories investor can receive/deliver his securities on either Exchange. These are the NSDL and CDSL. The depository work on ISO Standard 6166, issuing ISIN Numbering System.

The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It was set up in 1993 to encourage stock exchange reform through system modernization and competition. It opened for trading in mid-1994. It was recently accorded recognition as a stock exchange by the Department of Company Affairs. The instruments traded are, treasury bills, government security and bonds issued by public sector companies.

Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the 83

development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. With demutualization, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors. The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of market intermediaries. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.


OTCEI was incorporated in 1990 as a Section 25 company under the Companies Act 1956 and is recognized as a stock exchange under Section 4 of the Securities Contracts Regulation Act, 1956. The Exchange was set up to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide investors with a transparent & efficient mode of trading. Modeled along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market making and scripless trading. As a measure of success of these efforts, the Exchange today has 115 listings and has assisted in


providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant mineral water, etc. ROLE OF OTCEI The objective of OTCEI is to find techniques of making small cap stocks more liquid than would be the case on the other major exchanges.








(a) there exists a unidirectional causality between the exchange rate and interest rate and between the exchange rate return and demand for money; (b) the study confirms that though stock return, exchange rate return, the demand for money and interest rate are related to each other but any consistent relationship doesnt exist between them. The forecast error variance decomposition further evidences that (a) the exchange rate return affects the demand for money, (b) the interest rate causes exchange rate return change (c) the exchange rate return affects the stock return, (d) the demand for money affects stock return, (e) the interest rate affects the stock return, and (f) the demand for money affects the interest rate. Our results have implications for investors, policy makers and researchers.


Modernization of market infrastructure improves market transparency standard. The improvement of market microstructure increases trading efficiency. Risk containment measures help in improving market integrity and safety. Rolling settlement enhances liquidity and also provides for faster settlement .These have been the main focus of the SEBI's efforts in the secondary market. The SEBI extends its oversight to 23 stock exchange in the country and directs its efforts towards encouraging them to become more effective and efficient self-regulatory organisations. The measures taken by the SEBI in 1999-2000 in the secondary market are discussed below. Strengthening the safety and integrity of the secondary securities market Intra-day trading and exposure limits Safety and integrity of the securities trading system is an integral part of a healthy market. The SEBI has been continuously striving to achieve these objectives. The SEBI has introduced capital adequacy norms. As such both the gross exposure limit of 20 times the base minimum capital and additional capital deposited by the member brokers and intra-day trading limits of 33 1/3 times the base minimum capital and the additional capital as prescribed by the SEBI have already been implemented by all the stock exchanges. During 1999-2000, most of the major exchanges viz. National, Bombay, Calcutta and Uttar Pradesh stock exchanges monitored the exposure and intra-day trading limits on a real time basis. Setting up of trade/settlement guarantee fund by stock exchanges To ensure timely completion of settlements the SEBI had advised all the stock exchanges to set up a trade guarantee fund or clearing corporation. During the year 1999-2000, the settlement guarantee fund schemes of Hyderabad, Cochin, Jaipur, Uttar Pradesh and Pune stock exchanges were approved. As at the of march 2000, 16 out of the total 23 exchanges (the remaining 7 exchanges have nil / insignificant turnover) have already set up trade/settlement guarantee fund.

Enhancing efficiency and transparency in the stock exchanges weekly settlement cycle and auction The stock exchanges were required to necessarily complete their settlement within Seven days and to conduct the auction immediately i.e. not later than eight days, after 86

the completion of the relevant trading period, in those cases where members have failed to give the delivery, as on date, the exchanges have a weekly settlement cycle. Modified carry forward system The SEBI had appointed a committee under the chairmanship of Prof.J.R.Verma to review the existing Revised Carry-forward System recommended earlier by the G.S.Patel Committee. IN October 1997, the Modified Carry-Forward System (MCFS) recommended by the J.R.Verma Committee was approved and all exchanges desirous of implementing Modified Carry Forward System were advised to approach the SEBI for prior approval. Till 1998-99, Bombay, Ludhiana, Delhi and Calcutta stock exchanges introduced the facility to carry forward trades under the modified carry-forward system. During the year 1999-2000, Ahmedabad, Madras and Bangalore stock exchanges have introduced the modified carry-forward system. Uniform settlement cycle Uniform settlement cycle for stock exchange can help in reducing the arbitrage across the country. The SEBI committee on uniform settlement discussed the ways and means for the implementation of one common settlement cycle for the smaller exchanges and one for the larger exchanges vis-a-vis the introduction of rolling settlement for all exchanges in the shares which are being traded in dematerialized form for all investors. The committee discussed the issues relating to one common settlement system and concluded that introduction of uniform settlement cycle to other stock exchanges has implications in terms of availability of infrastructure, particularly with the custodians and the depository participants. Rolling Settlement In order to change liquidity and to shorten the carry forward cycle and to make feasible the availability of alternative hedging mechanism in the form of derivatives. The SEBI introduced rolling settlement in respect of shares wherein compulsory dematerialized trading for the investors has been introduced .Initially, only ten scraps were placed for trading under rolling settlement system, based on the recommendations of the committee on rolling settlement. Trading was made compulsory in rolling settlement for all investors in the 10 scraps from January 10, 2000 and an additional 34 87

scrips from March 21, 2000 and in 119 scrips from May 8, 2000. SETTLEMENT PERIOD Activity Trading Clearing Rolling Settlement Trading Custodial Confirmation Delivery Generation Settlement Securities and Funds pay in Securities and Funds pay out Valuation Debit Day T T+1 working days T+1 working days T+2 working days T+2 working days T+2 working days

1. 2. 3.

Small cap Mil cap Large cap The stokes of small companies that have the potential to grow rapidly are

Small Cap Stokes classified as small- cap stoles. These stokes are the best option for an investors who wishes to generate significant gain in the long run: as long he does not Require current dividends and withstand price volatility. Generally companies that have a market capitalization in the range of to 250 crores are small cap stokes. As many of these companies are relatively new, it is difficult to predict how they will perform in the market. Being small enterprises, growth spurts dramatically affect their values and revenues, sending prices soaring. On the other hand, the storks of these companies tend to be volatile and may decline dramatically. Most Initial public offerings are for small-caps companies, although these days large companies do tend to source the capital market for expansion plan. Aggressive mutual funds are also enthusiastic about adding small cap stocks in their portfolio. Because they have the advantage of being highly growth oriented, small cap stocks can forego paying divides to investors, which enables the profits earned to be reinvested for 88

future growth. Mid cap stock Mid cap stocks are typically stocks of medium size companies. These are stocks of well-known companies, recognized as seasoned player in the market. They offer you the twin advantage to acquiring stocks with good growth potential as well as the stability of a larger company, generally companies that have a markets capitalization in the range of 250-4000 crores are mind cap stocks.Mid cap stocks also include baby blue chips: companies that show steady growth backed by a good track record. They are like blue-chip stock (Which are large I cap stock) but lack their size. These stocks tend to grow well over long term. Large cap stocks Stocks of the largest companies (many being blue chip firms) in the market such as Tata, reliance, and ICICI are calcified as large cap stocks. Being established enterprise, they have at their disposal large reserve of case to exploit new business opportunities. The sheer volume of large cap does not let them grow as rapidly as smaller capitalized companies and the smaller stocks tend to outperform them over time. Investors however gain the advantage of reaping relatively higher dividends compared to small and mid cap stocks while also ensure the long term preservation of their capital. These calcifications are based on the market capitalization of deferent companies. In case market segment volumes in the term of money are dominated by large caps. Now there is a changing trend in the market and is moving towards mid cap reasons are large caps are not viable for a retail investor due to their high market prices.

CHAPTER: 8 OBSERVATIONS :When we placed orders for customers at the terminals, we had observed certain trading Styles of clients and strategies used by clients to placed orders. Our observation 89

was: Types of trading: 1. Day trading: Day traders buy and sell stocks throughout the day in the hope that the price of the Stocks will fluctuate in value during the day, allowing them to earn quick profits. A day Trader will hold a stock anywhere from a few seconds to a few hours, but will always sell all of those stocks before the close of each day .The day trader will therefore not own any Positions at the close of any day, there is no overnight risk. The objective of the day trading is to quickly get in and out of any particular stock for profit anywhere from a few clients to several points per share on an intra-day basis. Day trading can be further subdivided into a number of styles, including: a) Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small profit per share on each transaction while minimizing the risk. b) Momentum Traders : This style of day trading involves identifying and trading stocks that are in a moving pattern during the day, in an attempt to buy stocks at low prices and sell them at a higher price. 2. Swing Traders: The principle difference between the day trading and swing trading is that the swing traders will normally have a slightly longue time horizon then day traders for holding a position in a stock. As in case with day traders, swing traders also attempt to predict the short term fluctuation in a stock's price. However, swing traders are willing to hold stock for more than one day, if necessary, to give the stock price some to move or to capture additional momentum in the stock's price. Swing traders will generally hold on to their stock positions anywhere from a few hours to several days. Swing trading has the capability of providing higher return than day trading .However unlike day traders who liquidate their position at the end of each day, swing traders assume overnight risk. There are some significant risks in carrying positions overnight. For example, news events and earning warnings announced after the closing 90

bell can results in large unexpected and possibly adverse changes to a stock's price. 3. Position Trading : A position trading is similar to swing trading, but has longer time horizon. Position traders hold stocks for a time period anywhere from one day to several weeks and months. These traders seek to identify stocks where the technical trends suggest a possible large Movement in price is likely to occur, but which may not be fully played out for several Weeks or months. WE ALSO GOT LEARN ABOUT VARIOUS STRATIGIES THAT CAN BE USED TO PLACE DIFFERENT TYPES OF ORDERS TO REDUCE THE RISK OF LOSSING MONEY. STRATEGY 1: Some clients used to buy /sell their shares at different prices so that the average Price would be less/more. With the volatility of the markets, the various orders placed at different prices would get executed at different times during the day. For Example: client A wants to sell 50 shares of Siemens and the present market rate of Siemens is Rs.900 then he would sell: 10 shares@Rs.900 10 shares@Rs.910 10 shares@Rs.915 10 shares@Rs.920 10 shares@Rs.925 Hence, the client would aim to sell 50 shares @Rs.914 (average) rather than selling all 5 shares at the market price that is Rs.900.The same procedure was followed in the case of purchase .The only difference in the case of purchase would be that the clients would try and lower the average price as much as possible. STRATEGY 2: Some clients use to purchase big quantities of a particular share, and sell it as soon as the price of the share goes up by Rs.1 or Rs.2.Hence even through their profit margin was small, they would still gain a big amount of profit due to the large quantity. 91

For Example: client B buys 10000 shares of TATA STEEL (tisco) at a price of 510.Since the market is very volatile, a share like tisco would surely have a negative movement of Rs.4 or Rs.5 during the day .Once the shares climbs by Rs.1 or Rs.2, the client would give an order to sell the share, thus making a profit of rs.10000. STRATEGY 3: If the clients predict that the market would fall during the day, they would first sell their shares at a higher price and then buy the shares they had sold back if the shares prices fall. For Example: client T forecasts a fall in the market he could first sell 200 shares of century textiles @Rs.362 and then buy it back when it falls to a rate lower than Rs.362. STRATEGY 4: Some clients place limit orders for buying and selling at the same time. Hence, both the orders would get executed if there is rise and fall in the market .For example: client C would place an order of buying 1000 shares NTPC @RS.110 and selling 1000 shares @Rs. 115.Depending on the movement of the market both the orders would get executed i.e. if the market falls then the buying order would get executed and then the selling order and vice versa. STRATEGY 5: There were many clients who would place certain orders for sale and purchase, wait for considerable increase and only then sell/buy their shares, depending on the kind of order made by them. However , there were some clients who would place rapid and repetitive orders with a very small margin of profit in mind .For example : clients D would place an order for the sale of 50 shares of reliance industry@ Rs 1000 and buy it back at Rs 950 ,his wait was long but he would gain a profit of Rs .50 .However ,in the order scenario, client E would buy 50 shares of syndicates bank@ Rs 56 and them for Rs 56.50, hence his margin of profit is only 50 paisa but he would repeatedly place various orders and would gain a profit with lesser risk attached to it. This strategy is also called Scalpers in technical terms.


STRATEGY 6: This strategy was used by medium term investors or long term investors. These Investors would buy the shares of companies, whose price is expected to rise over a period of time. They would sell these shares after a few days or month depending on the amount of profit they intend to book. For example: client F would buy 1000 shares of Infosys @ of Rs. 2500 and sell it after a period of 2 weeks when the price of Infosys would have risen to Rs. 3100 this strategy is also called position trading or swing trading in technical terms. However, we have also noticed that investors opting for the above-mentioned strategies have not always booked a profit on the transactions made by them, due to the volatility and unpredictability of the market.


Why should one invest? There are two main reasons why should one invest: To stay ahead of inflation As the cost of living keeps increasing and day-to-day expenses keep rising, investing lets .you keep pace with these changing market conditions.

To achieve financial goals As the saying goes .A journey of a thousand miles begins with a single step.

Investing small accounts of money over a period of time brings investor to his/her financial goals. Where do one start if have no saving The first step to investing begins with saving. One can stay invested, even by saving small portions of money on a monthly basis. Thus, the first successful investment decision is the decision to start saving however difficult it may seem at first. After all, where there is a will, one will always find a way. How can BMA Wealth creators help investor to meet investment objective? BMA group is investor one stop investment destination, offering the investment opportunities In a host of financial instruments; with product like. Easy Equity Easy mutual fund Easy IPO Easy Derivatives Furthermore BMA group offering are customized to suit investors investment profile; hence investor can meet his/her investment objectives. Added to these BMA group, extensive research and wide range of products would cater to investor needs and objectives. Whats the next step after investor first investment? 94

Investing is a long term activity; investors need to keep investing regularly. To keep a track of investment, make use of BMA group portfolio tracker. To know about investment opportunities, keep regarding up about financial markets and companies. What are the instruments traded in the stock market There are various types of instrument in the stock market. They include Shares, Mutual funds, IPO and Future & option. Why would one choose stocks? Stocks are one of the most effective tools for building wealth, as stock are a share of ownership of a company. Investors thus have great potential to receive monetary benefits when own stock shares. Owing stocks of fundamentally strong companies simply lets money work harder for investor since they appreciate in value over a period of time while also offering rich dividend on a periodic basis. Where do one buy stocks? Stock trading happens on stock exchanges, but one cannot individually buy stocks off the exchanges. To do so, investor need to find to find a suitable broker who will understand the investor needs and buy stocks on his behalf .Investor can think of them as agents who will conduct transactions for him without actually owning any of the securities themselves .In exchanges for facilitating or executing a trade ,brokers will charge a commission . Investor can easily buy stocks through BMAWC .com of Indias lading stock brokers, with services and product to cater to all investment needs, at very reasonable brokerage rates. The BMA offer the Internet broking services while also giving the easy access to invest in IPOs derivates and mutual funds. BMA call & trade facility also offers the convenience of trading over the telephone.


A Depository is a place where the stocks of investors are held in electronic form. The depository has agents who are called depository participates (DPs). Depository is like a Bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals. There are only two depositories in India-the National Securities Depository in India Ltd (NSDL) and the central Depository Services Ltd (CDSL). There are over a 100 DPs.

Demat refers to a dematerialized account. Demat is conversion of a share certificate from its present physical form to electronic form for the same number of holding .In simple words, a demat account is like an account. If a person wants to save money, make cheque paymenthe/she need to open an account with a bank. In the same way person need to open a demat account if he/she want to buy or sell stocks. Bank holds cash on behalf of their clients and transfer funds between accounts. Similarly, a Depository participant holds shares in electronic form for their clients and transfers these securities between accounts. Demat enables paperless trading whereby, share transactions and processed electronically without involving any share certificate or transfer deed. Dematerialization is mandatory for trading shares through the stock Exchanges now. Demat account is just like a bank account where actual money is replaced by shares.

Central depository services (India) limited (CDSL) a depository managed by professionals has been promoted by Bombay stock exchange limited along with state bank of India, bank of India as original sponsors. Several leading private sectors bank viz. HDFC bank, standard charted bank and centurion bank are also its sponsors. Objective of CDSL: 96

CDSL objective is to provide Convenient Dependable Secure alternative depository services to investors in shares and securities. Presently it is compulsory to settle all trades done on any stock exchange in demat from only. Although investors have an alternative to hold securities and settle trades unto 500 shares in exchanges are now being settled in demat from only. Dematerialization or demat is a process to convert the securities held in physical form into an electronic record form or to directly allot securities in electronic record form. These electronic record of securities are shown as "electronic balances" in the demat account of investor. Any investor can open a demat ACCOUNT THROUGH A DEPOSITIORY PARTICIPANT. DP provides a link on one hand between the BO, company and CDSL publishes from time to time an updated list of DP's registered with it. NSDL The enactments of Depositories Act in August 1996 pave the way for establishment of NSDL the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in the Indian capital market. Using innovative and flexible technology systems, NSDL works to supports the investors and brokers in the capital market of the country. NDSE aims at ensuring the safety and soundness of Indian market places by developing settlement solutions that increase efficiency, minimize risk and reduce costs.

PROCEDURE FOR OPENING A DEMAT ACCOUNT :1) Look for a DP to have a account with 97

Most banks are also DP participants, as are many brokers. Choose the DP first. To get a list of DP, visit NSDL and CDSL websites and see who the registered DPs are. A broker is separate from a DP. A broker is a member of the stock exchanges, who buys and sells shares on his behalf and on behalf of his clients. A DP will just give the account to hold the shares. The people do not have to take the same DP that the broker takes. The person can choose their DP own but many brokers offer special incentives in the form of lower charges for opening Demat accounts with their DP's. 2) Get the documents in place Once approach the DP, the person will be guided through the formalities of Opening an account. The person must fill up an account opening form and sign an agreement with the DP. The DP will ask for some document as proof of identity and address. Check with them what they require. While they only ask for photocopies of the documents, they will need the originals for verification. WORKING When open an account, the DP will allot a unique BO ID (Beneficial Owner Identification) Number, which a person need to quote for all future transactions. If a person wants to sell the shares, he needs to place an order with the broker and give a 'Delivery Instruction' to his DP. The DP will debit his account with the number of shares sold. The person will receive the payment from his broker. If a person wants to buy shares, inform the broker about the Depository Account Number, so that the shares bought are credited into his account.

Benefits of Holding Securities in the Dematerialized Form:

Elimination of all risks associated with physical certificate: There is no risk of loss, mutilation or theft of certificates of securities. 98

Elimination of bad deliveries: In the depository environment, securities cannot be returned under objection: for any reason and hence the question of bad delivery does not arise more does the investor face any uncertainly on the genuinely of securities purchased by him. Effects immediate transfer and registration of securities: After the pay out, once securities are certified to the investors BO account maintained with DP, the investor becomes the legal owner of the securities as there is no further need to seek registration from the company or its registrar. Faster settlement cycles: All stock exchanges currently follow T+2 rolling settlement cycle i.e. settlement of trades is done on the 2nd working day from the trade day. This has become possible because of demat which enables faster turnover of securities and enhances liquidity. Faster receipt of securities in case of bonus/split/mergers its: Direct credit of securities issued as bonus or on allotment of IPO/right, split and merger ensures faster receipt of securities and avoids risk of loss of certificates in transit. Waiver of stamp duty: No stamp duty is by investors for transfer of any kind of securities received in Demat form. Facilitate recording of change of address, transmission, etc.For all the investments held in the account , instead of advising each company separately about the change in address, bank account particulars, nomination, deletion of name in case of joint holder, one single advice to the DP takes care of all such changes. Ease of portfolio monitoring: The statement of account periodically sent by the DPs provides the investor the consolidated position of all his investments in the demat account. This makes convenient for an investor to compare and monitor his portfolio.


TYPES OF RISK: SYSTEMATIC RISK: This implies risk in the system. This risk applies to the entire market and includes risks such as interest rate risk, inflation risk, exchange risk, political risk, etc. Some of the important systematic risks are included below: INTEREST RATE RISK: Interest rate risk can affect the overall market. As interest rates rise, money become more expensive to borrow, and companies that have lined up expansion plans may postpone their plans due to high interest cost they have to bear. INFLATION RISK: Inflation risk can influence all asset classes. Inflation is nothing but the steady increase in prices of goods and services. With rising inflation, manufacturers of goods incur higher raw material costs and see profit declines. Such a risk is detrimental to the stock market and the overall economy. EXCHANGE RATE RISK: Exchange rate risk is the risk of an investments value changing due to changes in currency exchange rates. This risk usually affects businesses that export and/or import but can also affect the overall economy. POLITICAL RISK: Political risk implies political instability, which can affect the general economy. A stable and progressive government can influence the investment climate in a country and have an effect on the overall market.

NON-SYSTEMATIC RISK: This is the risk that is very specific to a particular stock or an industry. Some of the important non-systematic risks are as follows:


INDUSTRY RISK: Industry risk implies risk that directly impacts a sector or industry. TECHNOLOGY RISK: This risk is applicable to a company that does not adapt to new technology, which could significantly improve its business functioning and prospects. RISK MANAGEMENT: Risk management is the process of measuring, or assessing risk and developing strategies to manage it. Strategies include transferring of risk to another party, avoiding the risk, reducing the negative effect of risk, and accepting some or all of consequences of a particular risk. A sound risk management system is integral to an efficient clearing and settlement system. NSE introduced for the first time in India, risk containment measure that were common internationally but were absent from the Indian securities markets. Risk containment measures include capital adequacy requirements of members, monitoring of member performance and track record, stringent margin requirements, position limits based on capital, online monitoring of member positions and automatic disablement from trading when limits are breached, etc. Rationalization of risk management system for the equity market The risk containment measures from time to time prescribed by the SEBI served the market well by ensuring adequate and timely collections of margins. However, as the margin system has evolved over a time, there has been multiplicity of margins, which has made the system complicated. There was need to simplify the margin systems without sacrificing the objective of safety. Besides, there has been a view that under the rolling settlement, the existing margin system would be expensive and may be deficient in the phase of changing nature of emerging risks. As the market moves on to rolling settlement progressively, the market would need to have a new risk containment system.


Thus, taking the objectives of simplifying the margining system and to make the structure of margins the unified one for stock exchanges, the SEBI set up a group on Risk Management System with the following terms of references: 1. Reviewing the entire risk management system comprising the margin system, exposure norms, circuit filter, capital adequacy, etc and also to study the risk management measure in place in the cash markets in the developed and emerging market countries

Rationalizing and simplifying the present risk management system for the

account Period settlement without compromising the present levels of safety and further strengthening the risk containment measures.


Recommending risk containment measures for the securities traded in the rolling



CHAPTER: 12 OPERATIONAL WORK:Operation is an important part of organization. Operational activities are the heart of any organization. We have done the following operational work in BMA which is related with the account opening. For demat account we the call to the prospects and give them the information related to demat account and convince them for opening, demat account. If the prospects are interest then we give the complete information (name, address, phone no.) of the prospect to the salesperson that personally visit the prospects and finally make the prospect the client of BMA group. So, are the steps which we follow? 1. CALLING FOR ACCOUNT OPENING As the current situation it is hard to attract the customers without giving those better services and information because every investor considered as a rational one who makes decision on the basis of comparison. The comparison can only be possible with the help of suitable and sufficient information. So, it is the initial part to make a potential customer as BMA customer/client/member. In this section we have done the calling to the prospects for future customer. So that the rest part which is left can be covered to fulfil this purpose we have done the calling part, which catered two parties: Those who are the participant of stock market and Those who are the general investor. 2. INFORMATION In calling section we tried to conveyance the customer by provide them all the information about account. We provide the information to the prospects in such a manner so that they can easily compare the BMA data with the others. This segment was really hard to cater because there is nothing special as to compare with others. All the process, documents and fees is somewhat similar. 103

At this stage BMA present BMA services with their additional services like research report, SMS facility, and query session. Many a time person who wants to open an account is not able to do so. The main reason behind this is lack of proper knowledge and information also. Thats why we provide the prospects the complete and detailed necessary information timely which is required for account opening like: Documents Fees/ charges Additional Services Benefit to open the account Basket of product 3. PERSONAL VISIT An individual who is working in sales department of BMA Wealth Creators Ltd visit personally to the prospective customers who gave a positive response. Normally, the sales person does some homework prior to the visit like: # # # # What is the occupation of the customer? How much amount he/she normally invest? What type of investment he/she does? Is the customer already having an account with any other company?

After collecting the relevant information about the customer it become easy to understand the requirement of the customer so that he/she can fully satisfied and delight. Sales Person visits the customer personally with full preparation like presentation, documents, stamp papers, etc.


4. FILL THE FORM The salesperson meets the prospects on the prefix time. The salesperson provides the help to the customer in filling the account opening form. The salesperson guides the client about the no. of photograph and no. of signature. Although the customer can be convinced on the calling part but when the salesperson meet him personally and provide him all the information it become easy for the salesperson and the customer. There is less chances for mistake and customer also satisfies with this visit. At this time the salesperson represent the company to the customer, so he/she should sharp and intelligent, so that all the queries of the customer can we solved at the same time. Otherwise this visit can be converted in two/three meeting and may be possible after this the customer will not show any interest to the institution. REQUIRED DOCUMENTS FOR ACCOUNT OPENING Document required for corporate account

Certified true copy balance Sheet for last 2 years/ Net worth certificate on letter head of CA along with CAs membership no, name & stamp.

2. Latest filed IT return (For Old/newly incorporated companies) 3. Verified copy of Company address proof. (Agreement of sale/leave & license, bank statement 4. Verified copy of Company Bank proof.
5. Photograph of all the partners/Whole time Directors, Individual promoters

holding 5% or more either directly or indirectly, in the share holding of the company and of the persons authorized to deal in the securities. 6. Certified copy of latest share holding patterns including those holding more than 5% in the share capital of the company 7. Certified copy of MOA and AOA. 105

8. Certified copy of Resolution of board of director approving participation in

equity/derivatives/debt trading & naming authorized persons for dealing in securities 9. Pan card/form 60 10. Signature proof of the entire authorized signature name in the resolution.
11. MANPIN ID if having (not compulsory). 12. proof of all the authorized person(i.e. address, id, sigh proof) 13. bankers verification 14. List of directors on letterhead of the co.

Document required for the proprietorship firm

1. Certified true copy of balance sheet for last 2 year / net worth certified on

letterhead of CA along with CAs membership no, name & stamp. 2. latest filled it returns (for old /newly incorporated firm) 3. Verified copy of address proof. (For proprietorship firm) 4. verified copy of bank proof (for proprietorship firm) 5. Photograph of proprietor. 6. Pan card/form 60. 7. proof of all proprietors (address, sign, id) 8. DP will be open in the name of proprietor with individual capacity

Document required for HUF 1. Latest field IT returns. 2. HUF deed. 106

3. HUF pan card (compulsory) 4. Verified copy of bank proof in the name of HUF 5. Verified copy of address proof in the name of HUF. 6. Photograph of karta . 7. Identity, address, sing proof of karta. 8. DP will be open in the name of karta with individual capacity.

Document required for the public trust 1. certified true copy of balance sheet for last
2. Year /net worth certified on letterhead of CA along with CAs membership

no ,name &stamp .Verified copy of address proof (for partnership firm). 3. verified copy of bank proof (for partnership) 4. Certified Copy of Latest Share Holding patterns including those holding more that 5% in the share capital of the company
5. Partnership Deed along with the list of partners duly certified copy of

Resolution passed by the Partners and signed by managing partners. 6. PAN card /Form 60 7. Signature proof of all the Authorized partners. 8. Identity, Address, sign proof of the entire partner. 9. DP will be open in the name of Partners with individual capacity.

Document Required for Private Trust. 1. Certified true copy of Trust Deed. 2. Certified true copy Trust registration certificate. 107

3. Certified true copy of Resolution 4. List of trustees with their specimen signatures. 5. Signature proof of all authorized trustees. 6. PAN card in the name of trustee / Form 60 7. Latest IT returns. 8. Verified copy of Bank proof of Trust. 9. Verified copy of Address proof (For Trust) 10. Proof of all the authorized trustees (Address, ID, Sign0 11. Photo of all the trustees and authorized persons. 12. Bankers Verification 13. DP account to be opened in the name of Individuals

Document required for Society

1. Registration certificate of society.

2. Copy of bye law of the society.

3. Details of promoters /partners /key managerial personnel the society in the

specified format. 4. Copies of annual report of last 3 years. 5. Net worth of society. 6. ID, Address, Sign, proof of all the Authorized Signatories 7. Photographs of promoters/Partners/ Key managerial Personnel the Society. 108

5. CHECK THE FORM After that the next step is to check the form. As in Indian stock market SEBI guidelines follows thats why there is so many laws and rules to the fulfilment and verification of the form. Therefore checking is an important step in operation. In this section we checked the information and the document attached with the form. We mainly check the following.

Proper matching of name spelling with the Pan card Check the address and age proof Verify the information about the bank and cheque. Papers are duly signed. Proper information about second holder and third holder and nominee, if any. If all these information and document is same as the rules and laws then the

check becomes selected and further proceeds. But if in case of mismatch or lack of document at this stage the form becomes rejected. The pendency what we people find out1. Error in spelling 2. Mismatch in date of birth 3. Mismatch of signature 4. Not proper sign on the proper place. 5. Lack of proof (id, dl, RC) 6. Stamp paper (expired or not)

The possible solution for all these pendency can be:

1. If mismatch in name ,DOB, address then self-declaration form

2. Bank statement 109

3. If cancelled cheque than cheque leaf 4. Signature on cutting When all the pendency cleared then the final step of processing done. In this process we used the software of BMA which is called MAKER. At this stage all the information which is filled in the form of entered in software. In the processing the form we precede are: EQUITY CMMODITY FRANCHIES After checking all the information then the final step is to recheck the important information so that the form can be ready for the trading. In BMA this process is done through the software is called CHECKER.


FINDINGS & CONCLUSIONS :FINDINGS: 1. Understand the investment psychology of the investors. 2. Know about the BMA services to their customers. 3. Awareness of the customers about the IPOs and other financial instruments 4. Expectation of the customers from the securities. DRAWBACKS: 1. Less response from the interviewee. 2. Less reliable.

The following are the reasons behind not satisfy with the BMA services related to IPO: (a) Problem related to brokerage (b) Problem related to delay in payment. (c) Past performance of BMA (d) Better services provided by competitors.


During the training period we have observed the key areas mainly the IPO and equity investment of BMA. As the BMA is one of the largest brokering house and also g provides the services to the only considering satisfaction of the customer. We are highly obliged that BMA give a chance to learn about the primary and secondary market. In our training period we get the exposure in both the areas (Theoretical & practically). In our training we learn what are the services offered by the BMA, how to conveyance and deal with the customer, how to invest in the market, how one can open a demat account. BMA give us a chance to do a depth study in the field of IPO: In 2 months training period we deal with around 5 IPO (TIMBOR HOME, VMS INDUSTRIES, RUSHIL DECOR, BIRLA PACIFIC MEDSPA LTD, READYMADE STEEL INDIA LTD). They give us the opportunities to understand the functioning of the stock market, deal with query of the investor, weekly class of possible solution about the problem which we faced in training and mock trading all these will help to increase the knowledge. At the end we would like to convey that to convey that an investment in the Share market is a better choice trends have also shown that investors gain money slowly but steadily through investment, people can make money and there is a greater possibility of earning. As final to conclude our report, we would like to share with our readers the following quotes related investments: Any time is good time for investment, if you have the money Franklin Templeton Everything has a price and tomorrow never comes-this is particularly true in case of investment -Joseph roux Experience in the share market is what enables investors to commit new errors or mistakes intakes instead if repeating the old ones - Leonid, Readers Digest. I know I am a fool to pay such a high price for a stock but I know that a greater fool will come along and pay me an even higher price. 112

-Sidney cottle If a little money does not go out, great money will not come in. -Confucius The social object of skilled investment should be to defeat the dark forces of time and ignorance, which envelope our future. -Jone Keynes Its not about how many baskets you put your eggs into. Its about putting your eggs in the right basket. -HSBC Asset Management.


CHEPTER:14 SUGGESTIONS:1. As we all know customer is king of the market. So, the first and foremost thing for a company is to retain the customer effectively. Although the securities is doing well in this part but it requires some more efforts in considering the current market situation and the competitors. 2. Some training should be organized the BMA regularly to update the knowledge of their staff in respect of provisions of statutory law in force related to the securities 3. For an efficient organization the most important thing is the coordination between the staff member so that the organization work will be completed in less time and less chances of repetition of work. This will also help to build the image of the BMA in among the customers. 4. BMA provides a no. of services to its customers but still many of the people are not aware about their services. So we think BMA should emphasize more on its advertising which will help to build image of the company and increase their number of customer. 5. It is suggested that BMA should engage a person who will sit in the department of public relations and answers the various queries raised by the customers and to resolve their minor problems immediately to satisfy their customers.


Kothari C.R., Research Methodology- Method &Techniques, New Age International Publisher, New Delhi, 2004 Chandra Prasanna, Financial Management, Pandey I.M., Financial Management, Vikas Publishing House PVT LTD, New Delhi, 2005



QUESTIONNARE:In order to give the information about the upcoming IPOs (RUSHIL), we done the calling. We call basically to the ARN holders, which includes the existing clients of the BMA and also the potential customers. We have done the telephonic survey, to get the clear picture of the IPO, which is one of the key areas of BMA. For the survey we prepared a questionnaire, which includes some general questions related to IPO, investment. A detailed description of the telephonic survey is discussed below.

1. Ans. a. b. c.

Do you deal in an IPO ?

YES NO NOT at present

58.0% 34.0% 8%

2. Ans.

What are the reasons behind not investing in an IPO ? 56% 7% 38%

(a)Invest in other instruments (b)Financial problem (c) Not Interested


3. Ans.

How do you trade in the market? 24.0% 31.0% 45.0%

(a) Online (b) Offline (c) Both (online and offline)


4. Do you have any knowledge about the upcoming issues? Ans. (a)YES (B)NO (C)Cant Say 57.0% 25.0% 18.0%


5. What are the main sources from which investors get the information about the upcoming IPOS? Ans. (a) Through net (b)Through brokers (c)Through calls (d)Through newspaper/ television/ ratio 43.0% 31.0% 15.0% 11.0%


6. Ans.

Are you satisfy with the BMA services? ** 60.0% 18.0% 22.0%

(a) YES (b) NO (c) Cant say



Purpose of investment in an IPO? 68.0% 32.0%

Ans. (a) Short term (b) Long Term

Notes: *(a) other instruments of investment in which the investors mainly invest their money are mutual funds, derivative, derivative, insurance, commodity, etc.