CAPITAL MARKET

CHAPTER-1INTRODUCTION:

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Introduction to Capital Markets

Capital markets in the United States provide the lifeblood of capitalism. Companies

turn to them to raise funds needed to finance the building of factories, office buildings,

airplanes, trains, ships, telephone lines, and other assets; to conduct research and

development; and to support a host of other essential corporate activities. Much of the

money comes from such major institutions as pension funds, insurance companies, banks ,

foundations, and colleges and universities. Increasingly, it comes from individuals as well.

As noted in chapter 3, more than 40 percent of U.S. families owned common stock in the

mid-1990s.

Very few investors would be willing to buy shares in a company unless they knew

they could sell them later if they needed the funds for some other purpose. The stock market

and other capital markets allow investors to buy and sell stocks continuously.

The markets play several other roles in the American economy as well. They are a

source of income for investors. When stocks or other financial assets rise in value, investors

become wealthier; often they spend some of this additional wealth, bolstering sales and

promoting economic growth. Moreover, because investors buy and sell shares daily on the

basis of their expectations for how profitable companies will be in the future, stock prices

provide instant feedback to corporate executives about how investors judge their

performance.

Stock values reflect investor reactions to government policy as we<,/ll. If the government

adopts policies that investors believe will hurt the economy and company profits, the market

declines; if investors believe policies will help the economy, the market rises. Critics have

sometimes suggested that American investors focus too much on short-term profits; often,

these analysts say, companies or policy-makers are discouraged from taking steps that will

prove beneficial in the long run because they may require short-term adjustments that will

depress stock prices. Because the market reflects the sum of millions of decisions by

millions of investors, there is no good way to test this theory.

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In any event, Americans pride themselves on the efficiency of their stock market and

other capital markets, which enable vast numbers of sellers and buyers to engage in millions

of transactions each day. These markets owe their success in part to computers, but they also

depend on tradition and trust -- the trust of one broker for another and the trust of both in the

good faith of the customers they represent to deliver securities after a sale or to pay for

purchases. Occasionally, this trust is abused. But during the last half century, the federal

government has played an increasingly important role in ensuring honest and equitable

dealing. As a result, markets have thrived as continuing sources of investment funds that

keep the economy growing and as devices for letting many Americans share in the nation's

wealth.

To work effectively, markets require the free flow of information. Without it,

investors cannot keep abreast of developments or gauge, to the best of their ability, the true

value of stocks. Numerous sources of information enable investors to follow the fortunes of

the market daily, hourly, or even minute-by-minute. Companies are required by law to issue

quarterly earnings reports, more elaborate annual reports, and proxy statements to tell

stockholders how they are doing. In addition, investors can read the market pages of daily

newspapers to find out the price at which particular stocks were traded during the previous

trading session. They can review a variety of indexes that measure the overall pace of

market activity; the most notable of these is the Dow Jones Industrial Average (DJIA),

which tracks 30 prominent stocks. Investors also can turn to magazines and newsletters

devoted to analyzing particular stocks and markets. Certain cable television programs

provide a constant flow of news about movements in stock prices. And now, investors can

use the Internet to get up-to-the-minute information about individual stocks and even to

arrange stock transactions.

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SCOPE OF THE STUDY

The present study involves an analysis of various Capital Market Instruments that are

available in the market, analysis of Dematerialization and limited lists of securities that

are available for trading in corporate

OBJECTIVE OF THE STUDY

This study is done to know about Primary and Secondary capital market (Stock

exchange) activities.

To know why the companies go to new issue market.

To know how the primary market intermediaries communicate companies and

investors.

To know how the primary market activities used by the companies in their new issue

shares.

To know how the companies listed in the stock exchanges.

To know how trading activity is to be done.

To know the complete awareness of secondary market (stock exchanges like NSE,

BSE).

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METHODOLOGY

The data collection methods include both the Primary and Secondary Collection methods.

1. Primary Collection Methods:

This method includes the data collected from the personal discussions with

the authorized clerks and members of the Exchange.

2. Secondary Collection Methods:

The Secondary Collection Methods includes the lectures of the superintend of

the Department of Market Operations, EDP etc, and also the data collected from the

News, Magazines of the NSE and different books issues of this study.

LIMITATIONS OF THE PROJECT

- Time constraint was a major limiting factor. Forty five days were insufficient to even

grasp the theoretical concepts.

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

- Lack of knowledge with the brokers.

- Difference of theory from practice.

- Absence of required knowledge and technology.

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CHAPTER-2

REVIEW AND LITER

Capital market:

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A capital market is a market for securities (debt or equity), where business

enterprises (companies) and governments can raise long-term funds. It is defined as a market

in which money is provided for periods longer than a year, as the raising of short-term funds

takes place on other markets (e.g., the money market). The capital market includes the stock

market (equity securities) and the bond market (debt). Financial regulators, such as the UK's

Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission

(SEC), oversee the capital markets in their designated jurisdictions to ensure that investors

are protected against fraud, among other duties.

Capital markets may be classified as primary markets and secondary markets. In primary

markets, new stock or bond issues are sold to investors via a mechanism known as

underwriting. In the secondary markets, existing securities are sold and bought among

investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

INDIAN CAPITAL MARKET

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

Chronology of the Indian capital markets:

1830s: Trading of corporate shares and stocks in Bank and cotton Presses in Bombay.

1850s: Sharp increase in the capital market brokers owing to the rapid development of commercial enterprise.

1860-61: Outbreak of the American Civil War and ' Share Mania ' in India.

1894: Formation of the Ahmadabad Shares and Stock Brokers Association.

1908: Formation of the Calcutta Stock Exchange Association.

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

relations and infrastructures whereby persons trade, and goods and services are exchanged,

forming part of the economy. It is an arrangement that allows buyers and sellers to exchange

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things. Markets vary in size, range, geographic scale, location, types and variety of human

communities, as well as the types of goods and services traded. Some examples include

local farmers’ markets held in town squares or parking lots, shopping centers and shopping

malls, international currency and commodity markets, legally created markets such as for

pollution permits, and illegal markets such as the market for illicit drugs.

In mainstream economics, the concept of a market is any structure that allows buyers and

sellers to exchange any type of goods, services and information. The exchange of goods or

services for money is a transaction. Market participants consist of all the buyers and sellers

of a good who influence its price. This influence is a major study of economics and has

given rise to several theories and models concerning the basic market forces of supply and

demand. There are two roles in markets, buyers and sellers. The market facilitates trade and

enables the distribution and allocation of resources in a society. Markets allow any tradable

item to be evaluated and priced. A market emerges more or less spontaneously or is

constructed deliberately by human interaction in order to enable the exchange of rights (cf.

ownership) of services and goods.

Historically, markets originated in physical marketplaces which would often develop into —

or from — small communities, towns and cities.

Types of markets

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Although many markets exist in the traditional sense — such as a marketplace — there are

various other types of markets and various organizational structures to assist their functions.

The nature of business transactions could define markets.

Financial markets

Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in

two markets, the stock markets and the bond markets. NYSE, AMEX, and the NASDAQ are

the most common stock markets in the US. Futures markets, where contracts are exchanged

regarding the future delivery of goods are often an outgrowth of general commodity

markets.

Currency markets are used to trade one currency for another, and are often used for

speculation on currency exchange rates.

The money market is the name for the global market for lending and borrowing.

Prediction markets

Prediction markets are a type of speculative market in which the goods exchanged are

futures on the occurrence of certain events. They apply the market dynamics to facilitate

information aggregation.

Organization of markets

A market can be organized as an auction, as a private electronic market, as a commodity

wholesale market, as a shopping center, as a complex institution such as a stock market, and

as an informal discussion between two individuals.

Markets of varying types can spontaneously arise whenever a party has interest in a good or

service that some other party can provide. Hence there can be a market for cigarettes in

correctional facilities, another for chewing gum in a playground, and yet another for

contracts for the future delivery of a commodity. There can be black markets, where a good

is exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not

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physically interact during negotiation. There can also be markets for goods under a

command economy despite pressure to repress them.

Mechanisms of markets

In economics, a market that runs under laissez-faire policies is a free market. It is "free" in

the sense that the government makes no attempt to intervene through taxes, subsidies,

minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers

with monopoly power, or a buyer with monophony power. Such price distortions can have

an adverse effect on market participant's welfare and reduce the efficiency of market

outcomes. Also, the level of organization or negotiation power of buyers, markedly affects

the functioning of the market. Markets where price negotiations meet equilibrium though

still do not arrive at desired outcomes for both sides are said to experience market failure.

Study of markets

The study of actual existing markets made up of persons interacting in space and place in

diverse ways is widely seen as an antidote to abstract and all-encompassing concepts of “the

market” and has historical precedent in the works of Fernand Braudel and Karl Polanyi. The

latter term is now generally used in two ways. First, to denote the abstract mechanisms

whereby supply and demand confront each other and deals are made. In its place, reference

to markets reflects ordinary experience and the places, processes and institutions in which

exchanges occurs. Second, the market is often used to signify an integrated, all-

encompassing and cohesive capitalist world economy. A widespread trend in economic

history and sociology is skeptical of the idea that it is possible to develop a theory to capture

an essence or unifying thread to markets.. For economic geographers, reference to regional,

local, or commodity specific markets can serve to undermine assumptions of global

integration, and highlight geographic variations in the structures, institutions, histories, path

dependencies, forms of interaction and modes of self-understanding of agents in different

spheres of market exchange Reference to actual markets can show capitalism not as a

totalizing force or completely encompassing mode of economic activity, but rather as “a set

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of economic practices scattered over a landscape, rather than a systemic concentration of

power”

C. B. Macpherson identifies an underlying model of the market underlying Anglo-American

liberal-democratic political economy and philosophy in the seventeenth and eighteenth

centuries: Persons are cast as self-interested individuals, who enter into contractual relations

with other such individuals, concerning the exchange of goods or personal capacities cast as

commodities, with the motive of maximizing pecuniary interest. The state and its

governance systems are cast as outside of this framework.). This model came to dominant

economic thinking in the later nineteenth century, as economists such as Ricardo, Mill,

Jevons, Walras and later neo-classical economics shifted from reference to geographically

located marketplaces to an abstract “market”. This tradition is continued in contemporary

neoliberalism, where the market is held up as optimal for wealth creation and human

freedom, and the states’ role imagined as minimal, reduced to that of upholding and keeping

stable property rights, contract, and money supply. This allowed for boilerplate economic

and institutional restructuring under structural adjustment and post-Communist

reconstruction.

Similar formalism occurs in a wide variety of social democratic and Marxist discourses that

situate political action as antagonistic to the market. In particular, commodification theorists

such as Georg Lukács insist that market relations necessarily lead to undue exploitation of

labour and so need to be opposed in toto. ,). Pierre Bourdieu has suggested the market model

is becoming self-realizing, in virtue of its wide acceptance in national and international

institutions through the 1990s. ). The formalist conception faces a number of insuperable

difficulties, concerning the putatively global scope of the market to cover the entire Earth, in

terms of penetration of particular economies, and in terms of whether particular claims about

the subjects (individuals with pecuniary interest), objects (commodities), and modes of

exchange (transactions) apply to any actually existing markets.

A central theme of empirical analyses is the variation and proliferation of types of markets

since the rise of capitalism and global scale economies. The Regulation School stresses the

ways in which developed capitalist countries have implemented varying degrees and types

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of environmental, economic, and social regulation, taxation and public spending, fiscal

policy and government provisioning of goods, all of which have transformed markets in

uneven and geographical varied ways and created a variety of mixed economies. Drawing

on concepts of institutional variance and path dependency, varieties of capitalism theorists

(such as Hall and Soskice) identify two dominant modes of economic ordering in the

developed capitalist countries, “coordinated market economies” such as Germany and Japan,

and an Anglo-American “liberal market economies”. However, such approaches imply that

the Anglo-American liberal market economies in fact operate in a matter close to the

abstract notion of “the market”. While Anglo-American countries have seen increasing

introduction of neo-liberal forms of economic ordering, this has not lead to simple

convergence, but rather a variety of hybrid institutional orderings.. Rather, a variety of new

markets have emerged, such as for carbon trading or rights to pollute. In some cases, such as

emerging markets for water, different forms of privatization of different aspects of

previously state run infrastructure have created hybrid private-public formations and graded

degrees of commodification, commercialization and privatization

Problematic for market formalism is the relationship between formal capitalist economic

processes and a variety of alternative forms, ranging from semi-feudal and peasant

economies widely operative in many developing economies, to informal markets, barter

systems, worker cooperatives, or illegal trades that occur in most developed countries.

Practices of incorporation of non-Western peoples into global markets in the nineteenth and

twentieth century did not merely result in the quashing of former social economic

institutions. Rather, various modes of articulation arose between transformed and hybridized

local traditions and social practices and the emergence world economy. So called capitalist

markets in fact include and depend on a wide range of geographically situated economic

practices that do not follow the market model. Economies are thus hybrids of market and

non-market elements

Helpful here is J. K. Gibson-Graham’s complex topology of the diversity of contemporary

market economies describing different types of transactions, labour, and economic agents.

Transactions can occur in underground markets (such as for marijuana) or be artificially

protected (such as for patents). They can cover the sale of public goods under privatization

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schemes to co-operative exchanges and occur under varying degrees of monopoly power

and state regulation. Likewise, there are a wide variety of economic agents, which engage in

different types of transactions on different terms: One cannot assume the practices of a

religious kindergarten, multinational corporation, state enterprise, or community-based

cooperative can be subsumed under the same logic of calculability (pp. 53–78). This

emphasis on proliferation can also be contrasted with continuing scholarly attempts to show

underlying cohesive and structural similarities to different markets.

Equity

An equity security is a share of equity interest in an entity such as the capital stock of a

company, trust or partnership. The most common form of equity interest is common stock,

although preferred equity is also a form of capital stock. The holder of an equity is a

shareholder, owning a share, or fractional part of the issuer. Unlike debt securities, which

typically require regular payments (interest) to the holder, equity securities are not entitled

to any payment. In bankruptcy, they share only in the residual interest of the issuer after all

obligations have been paid out to creditors. However, equity generally entitles the holder to

a pro rata portion of control of the company, meaning that a holder of a majority of the

equity is usually entitled to control the issuer. Equity also enjoys the right to profits and

capital gain, whereas holders of debt securities receive only interest and repayment of

principal regardless of how well the issuer performs financially. Furthermore, debt securities

do not have voting rights outside of bankruptcy. In other words, equity holders are entitled

to the "upside" of the business and to control the business.

Hybrid

Hybrid securities combine some of the characteristics of both debt and equity securities.

Preference shares form an intermediate class of security between equities and debt. If the

issuer is liquidated, they carry the right to receive interest and/or a return of capital in

priority to ordinary shareholders. However, from a legal perspective, they are capital stock

and therefore may entitle holders to some degree of control depending on whether they

contain voting rights.

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Convertibles are bonds or preferred stock which can be converted, at the election of the

holder of the convertibles, into the common stock of the issuing company. The

convertibility, however, may be forced if the convertible is a callable bond, and the issuer

calls the bond. The bondholder has about 1 month to convert it, or the company will call the

bond by giving the holder the call price, which may be less than the value of the converted

stock. This is referred to as a forced conversion.

Equity warrants are options issued by the company that allow the holder of the warrant to

purchase a specific number of shares at a specified price within a specified time. They are

often issued together with bonds or existing equities, and are, sometimes, detachable from

them and separately tradable. When the holder of the warrant exercises it, he pays the money

directly to the company, and the company issues new shares to the holder.

Warrants, like other convertible securities, increases the number of shares outstanding, and

are always accounted for in financial reports as fully diluted earnings per share, which

assumes that all warrants and convertibles will be exercised.

The securities markets

Primary and secondary market

In the U.S., the public securities markets can be divided into primary and secondary

markets. The distinguishing difference between the two markets is that in the primary

market, the money for the securities is received by the issuer of those securities from

investors, typically in an initial public offering transaction, whereas in the secondary market,

the securities are simply assets held by one investor selling them to another investor (money

goes from one investor to the other). An initial public offering is when a company issues

public stock newly to investors, called an "IPO" for short. A company can later issue more

new shares, or issue shares that have been previously registered in a shelf registration. These

later new issues are also sold in the primary market, but they are not considered to be an IPO

but are often called a "secondary offering". Issuers usually retain investment banks to assist

them in administering the IPO, obtaining SEC (or other regulatory body) approval of the

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offering filing, and selling the new issue. When the investment bank buys the entire new

issue from the issuer at a discount to resell it at a markup, it is called a firm commitment

underwriting. However, if the investment bank considers the risk too great for an

underwriting, it may only assent to a best effort agreement, where the investment bank will

simply do its best to sell the new issue.

In order for the primary market to thrive, there must be a secondary market, or aftermarket

which provides liquidity for the investment security, where holders of securities can sell

them to other investors for cash. Otherwise, few people would purchase primary issues, and,

thus, companies and governments would be restricted in raising equity capital (money) for

their operations. Organized exchanges constitute the main secondary markets. Many smaller

issues and most debt securities trade in the decentralized, dealer-based over-the-counter

markets.

In Europe, the principal trade organization for securities dealers is the International Capital

Market Association. In the U.S., the principal trade organization for securities dealers is the

Securities Industry and Financial Markets Association, which is the result of the merger of

the Securities Industry Association and the Bond Market Association. The Financial

Information Services Division of the Software and Information Industry Association

(FISD/SIIA) represents a round-table of market data industry firms, referring to them as

Consumers, Exchanges, and Vendors.

Public offer and private placement

In the primary markets, securities may be offered to the public in a public offer.

Alternatively, they may be offered privately to a limited number of qualified persons in a

private placement. Sometimes a combination of the two is used. The distinction between the

two is important to securities regulation and company law. Privately placed securities are

not publicly tradable and may only be bought and sold by sophisticated qualified investors.

As a result, the secondary market is not nearly as liquid as it is for public (registered)

securities.

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Another category, sovereign bonds, is generally sold by auction to a specialized class of

dealers.

Listing and OTC dealing

Securities are often listed in a stock exchange, an organized and officially recognized market

on which securities can be bought and sold. Issuers may seek listings for their securities in

order to attract investors, by ensuring that there is a liquid and regulated market in which

investors will be able to buy and sell securities.

Growth in informal electronic trading systems has challenged the traditional business of

stock exchanges. Large volumes of securities are also bought and sold "over the counter"

(OTC). OTC dealing involves buyers and sellers dealing with each other by telephone or

electronically on the basis of prices that are displayed electronically, usually by commercial

information vendors such as Reuters and Bloomberg.

There are also euro securities, which are securities that are issued outside their domestic

market into more than one jurisdiction. They are generally listed on the Luxembourg Stock

Exchange or admitted to listing in London. The reasons for listing euro bonds include

regulatory and tax considerations, as well as the investment restrictions.

Market

London is the centre of the euro securities markets. There was a huge rise in the euro

securities market in London in the early 1980s. Settlement of trades in eurosecurities is

currently effected through two European computerized clearing/depositories called

Euroclear (in Belgium) and Clearstream (formerly Cedelbank) in Luxembourg.

The main market for Eurobonds is the EuroMTS, owned by Borsa Italiana and Euronext.

There are ramp up market in Emergent countries, but it is growing slowly.

Physical nature of securities

Certificated securities

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Securities that are represented in paper (physical) form are called certificated securities.

They may be bearer or registered.

Bearer securities

Bearer securities are completely negotiable and entitle the holder to the rights under the

security (e.g. to payment if it is a debt security, and voting if it is an equity security). They

are transferred by delivering the instrument from person to person. In some cases, transfer is

by endorsement, or signing the back of the instrument, and delivery.

Regulatory and fiscal authorities sometimes regard bearer securities negatively, as they may

be used to facilitate the evasion of regulatory restrictions and tax. In the United Kingdom,

for example, the issue of bearer securities was heavily restricted firstly by the Exchange

Control Act 1947 until 1953. Bearer securities are very rare in the United States because of

the negative tax implications they may have to the issuer and holder.

Registered securities

In the case of registered securities, certificates bearing the name of the holder are issued, but

these merely represent the securities. A person does not automatically acquire legal

ownership by having possession of the certificate. Instead, the issuer (or its appointed agent)

maintains a register in which details of the holder of the securities are entered and updated

as appropriate. A transfer of registered securities is effected by amending the register.

Function

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Secondary marketing is vital to an efficient and modern capital market. In the secondary

market, securities are sold by and transferred from one investor or speculator to another. It

is therefore important that the secondary market be highly liquid (originally, the only way to

create this liquidity was for investors and speculators to meet at a fixed place regularly; this

is how stock exchanges originated, see History of the Stock Exchange). As a general rule,

the greater the number of investors that participate in a given marketplace, and the greater

the centralization of that marketplace, the more liquid the market.

Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the

investor's desire not to tie up his or her money for a long period of time, in case the investor

needs it to deal with unforeseen circumstances) with the capital user's preference to be able

to use the capital for an extended period of time.

Accurate share price allocates scarce capital more efficiently when new projects are financed

through a new primary market offering, but accuracy may also matter in the secondary

market because: 1) price accuracy can reduce the agency costs of management, and make

hostile takeover a less risky proposition and thus move capital into the hands of better

managers, and 2) accurate share price aids the efficient allocation of debt finance whether

debt offerings or institutional borrowing.

Related usage

The term may refer to markets in things of value other than securities. For example, the

ability to buy and sell intellectual property such as patents, or rights to musical

compositions, is considered a secondary market because it allows the owner to freely resell

property entitlements issued by the government. Similarly, secondary markets can be said to

exist in some real estate contexts as well (e.g. ownership shares of time-share vacation

homes are bought and sold outside of the official exchange set up by the time-share issuers).

These have very similar functions as secondary stock and bond markets in allowing for

speculation, providing liquidity, and financing through securitization.

Private Secondary Markets

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Partially due to increased compliance and reporting obligations enacted in the Sarbanes-

Oxley Act of 2002, private secondary markets began to emerge. These markets are generally

only available to institutional or accredited investors and allow trading of unregistered and

private company securities.

In private equity, the secondary market (also often called private equity secondary’s or

secondary’s) refers to the buying and selling of pre-existing investor commitments to private

equity funds. Sellers of private equity investments sell not only the investments in the fund

but also their remaining unfunded commitments to the funds.

EQUITY SHARES:

They are also called as common stock. The common stock holders of a company are its

real owners, the own the company and assume the ultimate risk associate with

ownership. Their liability, how ever is restricted to the amount of their investment in the

event of liquidation, these stock holders have a residual claim on the assets of the

company after the claims of all creditors and preferred stock holders,are settled in full.

Common stock like preferred stock, as no maturity date.NSE started trading in the

equities segment (Capital Market segment) on November 3, 1994 and within a short

span of 1 year became the largest exchange in India in terms of volumes

transacted.Trading volumes in the equity segment have grown rapidly with average daily

turnover increasing from Rs.17 crores during 1994-95 to Rs.14,148 corers during FY

2007-08. During the year 2007- o8,NSE reported a turnover of Rs.3,551,038 crores in

the equities segment.The Equities section provides you with an insight into the equities

segment of NSE and also provides real-time quotes and statistics of the equities market.

In-depth information regarding listing of securities, trading systems & processes,clearing

and settlement, risk management, trading statistics etc are available here.

AUTHORIZED, ISSUED AND OUTSTANDING SHARES:

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An authorized shares is the maximum no. of shares that the articles of association (AOA)

of

thecompany permit it to issue in the market. A company can however amend its AOA to

increase the number. The number of shares that the company has actually issued out

these authorized shares is called as issued shares. A company usually likes to have a

number of shares that a authorized but un-issued. These un-issued allow flexibility in

granting stock options, pursuing merger targets andsplitting the stock. Outstanding

shares refer to the number of shares issued and actually held by public. The corporation

can buy back part of its issued stock and hold it as a treasury stock.Par value , book

value and liquidating value :The par value of a share of stock is merely a recorded figure

in the corporate charter and is of little economic significance. A company should not,

however, issue common stock at a price less than par value, because any discount from

par value ( amount by which the issuing price is less than the par value) is considered a

contingent liability of the own wrest to the creditors of the company. In the event of

liquidation, the share holders would be legally liable to creditors of any discount from

par value.

Example: suppose that xyz inc. is ready to start business for the first time and sold

10000 shares rupees 10 each . the share holders equity portion of the balance sheet

would be common stock @ 10 each at par value:10000 shares issued and outstanding

RS100000 Total shares holders equity RS100000.The book value per share of common

stock is the shareholders equity – total assets minus liabilities and preferred stocks as

listed on the balance sheet- dividing by the number of shares outstanding .suppose that

xyz is now 1 year old has generated RS 500000 after- tax profits, but pays number

dividing. Thus, retained earnings are RS 50000. the share holders equity is now RS

100000+ RS 50000 =150000 and the book value per share is rs 1500000/10000=RS

25.Although one might expect the book value per share of stock to correspond to the

liquidating value (per share) of the company, most frequently does not. Often assts are

sold for less than their values, particularly when liquidating costs are involved.

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Market value

Market value per share is the current price at which the stock is traded. For actively

traded stocks, market price quotations are readily available. For the many in active

stocks that have thin markets, price are difficult to obtain. Even when obtainable, the

information may reflect only the sale of a few shares of stock of common stock and not

typify the market value of the firm as the whole. The market value of a share of common

stock will usually differs from its book value and its liquidating value. Market value per

share of common stock is a function of the current and expected future dividends of the

company and the perceived risk of the stock on the part of investors.

Rights of common share holders:

1.Rights of income:

If the company fails to pay contractual interest and principle and payments

to creditors, the creditors are able to take legal action to insure that principle payments

are made of company is liquidated. Common share holders, on the other hand, have legal

recourse to a company for not distributing profits. only if management, the board of

directors, or both engaged in fraud may share holders take their case to court and

possibly force the company to pay dividends.

1. VOTING RIGHTS:

2. The common shares of a company are its owners and they are entitled to elect a board

of directors. In a large corporations shares holders usually exercise only indirect control

through the board of directors they elect. The board, in turn, select the management, and

the management actually controls the operations of the company. In a sole proprietorship,

partnership, or small corporation, the owners usually control the operation of the business

directly.

2. Proxies and proxy contests:

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Common share holders are entitled to one vote for each share of stock that they

own . it is usually difficult, both physically and financially, for the most share holders to

attend a corporation’s annual meetings. Because of this, many share holders vote of

means of a proxy, a legal document by which share holders assign their right to vote to

another person.

3. Voting procedures:

Depending on the corporate charter, the board of directors is elected under

either

Majority rule voting system or a cumulative voting system. Under the majority rule

system, stock holders have one for each share of stock that they own, and they must vote

for each director position that is open. Under cumulating voting system, a stock holder is

able to accumulate votes and cast them for less than the total number of directors being

elected. The total number of votes of each share holders is equal to the number of shares

the stock holder times the number of directors being elected.

ISSUE MECHNISM:

The success of an issue depends, partly, on the Issue Mechanism.

The methods by, which new issues are made of

1. public issue through prospectus.

2. Offer for sale.

3. Placement.

4. Rights issue.

1. Public Issue Through Prospectus :

Under this method, the issuing companies themselves offer directly to general

public a fixed number of shares at a stated price, which in the case of new companies is

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invariably the face value of the securities, and in the case of existing companies, it may

something include a underwritten to ensure arising out of unsatisfactory public

response. Transparency and wide distributions of shares are its important and

advantages. The foundation of the public issue method is a prospectus, the minimum

contents of which are prescribed by the Companies Act 1956. It also provides both civil

and criminal liabilityfor any misstatement in the prospectus. Additional disclosure

requirements are also mandated by the SEBI.

The content of the prospectus, inter aria, include:

Name and registered office of the issuing company.

Existing and proposed activities.

Board of directors.

Location of the industry.

Authorized, subscribed and proposed issued of capital to public.

Dates of opening and closing of subscription list.

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

copies

prospectus can be obtained.

Minimum subscription.

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

directors,

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

A statement that the company will make an application stock exchange for the

permission to deal in or for a quotation of its and so on.

2. offer for sale:

Broker to their own client of securities which have been previously purchased or

subscribed”. Under this method, securities are acquired by the issue houses, as in offer

for sale method, but instead of being subsequently offered to the public, they are placed

with the client of the issue houses, both individual and institutional investors. Each issue

house has a prepared to subscribe to any securities which are issued in this manner. Its

procedure is the same with the only Difference of ultimate investors. In this method, no

formal underwriting of the issue is required as the placement itself Amount to

underwriting since the houses agree to place the issue with their clients. The main

Advantages of placing, as a method issuing new securities, are its relative cheapness.

There is a cost cutting on account of underwriting commission, expense relating to

applications, allotment of shares and the stock exchange requirements relating to

contents of the prospectus and its advertisement. This method is generally adopted by

small companies with unsatisfactory financial performances. Its weakness arises from

the point of distribution of securities. As the securities are offered only to a select group

of investors, it may lead to the concentration of shares in to a few hands that may create

artificial scarcity of scripts in times of hectic dealings in such shares in the market.

3.Rights Issue :

Only the existing companies can use this method. In the case of companies

whose shares are already listed and widely-held , shares can be offered to the existing

shareholders. This is called right issue. Under this method, the existing shareholders. Are

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offered the right to subscribed to new shares in proportion to the number of shares they

already hold. This is made by circular to existing shareholders only.

In India, section 81 of the companies act 1956 provides that where a

company increases its subscribed capital by the issue of new shares, either after two

years of its formation or after one year of first issue of shares whichever is earlier,

these have to be first offered to the existing shareholders with this requirement by

passing a special resolution to the same effect. The chief merit of rights issues is that it

is an inexpensive method.

Sweat equity shares :

Under section 9Aof the companies Act , 1956, a company can issue sweat equity shares

to its employees or directors at discount or for consideration other than cash for

providing know-how making available rights in the nature of intellectual property rights

or value additions etc on the following.

Conditions:

1. The issue of sweat equity share is authorized by a special resolution passed by the

company in the general meeting.

2. The resolution specifies the number of shares, current market, Price, resolution, if

any, and the class or classes of directors Or employees to whom such equity shares are

to be issued.

3. The company is entitled to issue sweat equity shares after completion of one year

from the date of Commencement Of business.

4. The equity shares of the company must be listed on a recognized stock exchange.

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5. The issue of sweat equity shares must be listed on a accordance with the regulations

made by the SEBI in the behalf.

6. An unlisted company can issue sweat equity shares in accordance with the

prescribed

guidelines made for this purpose.

7. All the limitations, restrictions and provision relating to equity shares shall be

applicable to sweat equity shares.

PREFERENCE SHARES :

Preference shares are a hybrid security because it has both ordinary shares and

bonds. Preference shareholders have preferential rights in respect of assets and

dividends. In the event of winding up the preference share holders have a claim on

available assets before the ordinary shareholders. In addition, preference shareholders

get their stated dividend before equity shareholders can receive any dividends.

TYPES OF PREFERENCE SHARES:

1. Cumulative and Non-cumulative preference shares:

The cumulative preference gives rights to demand the unpaid dividends of

any year, during the subsequent ears when the profits and ample. All preference

dividends arrears must be paid before any dividends can be paid to equity shareholders.

The non cumulative preference share carry a right to a fixed dividend out of the profits

to any year. In case profits are not available in a year, the holders get nothing, nor can

they claim unpaid dividends in subsequent years.

2. Cumulative convertible preference shares:

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The cumulative convertible preference (CCP) share is an instruments that embraces

features of both equity shares and shares and preference shares, but which essentially is a

preference shares. Since the CCP shares capital would constitute a class of shares,

distinct from purely equity and purely preferences share capital, the rights of the

instrument holders must be stated either in a general body resolution or in the articles or

in the terms of issues in the offer documents viz., prospectus /letter of offer.

3. Participating and non participating preference shares:

Participating preference shares are those shares which are entitled to

a fixed preferential dividend and. in addition, carry a right to participate in the surplus

profits along with equity shares holders after dividend at a certain rate has been paid to

equity share holders. Again in the event of winding up, if after paying back both

preference and equity share holders, there is still any surplus left, then the participating

preference share holders get additional shares in the surplus assets of the company.

Unless expressly provided, preference share holders get only the fixed preference

dividends and return on capital in the event of winding up out of realized values of assets

after meeting all external liabilities and nothing more. The rights to participate may be

given either in the memorandum or articles or by virtue of terms of issue.

4. Redeemable and Irredeemable preference shares: Subjects to an authority in the articles of association, a public

limited

company may issue redeemable preference shares to be redeemed either at a fixed date

or after a certain period of time during the life time of the company. The companies act,

1956 prohibits the issue of any preference share which is irredeemable or is redeemable

after the expiry of a period of twenty years from the date issue.

Power to Issue Redeemable Preference Shares: Section 80 of the companies act 1956 permits a company to

issue

Redeemable preference shares if:

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The company is limited by shares.

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

Those shares are redeemable at the option of the company.

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

circumstances:

Such preference shares shall be redeemed only out of profits of the company,

which would otherwise be available for dividend.

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

made of the purpose of redemption.

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

redemption shall be provided out of profits of the company or out of securities

premium account, before the share are redeemed.

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

The redemption of preference shares under this section shall not be taken as

reducing the authorized capital of the company.

The capital redemption reserve account may used for issue of fully paid bonus

shares.Companies are not allowed to issued irredeemable preference shares or

preference shares which are redeemable after the expire of a period of 20 years from the

date of its issue.In case of default, the company and every officer of the company who is

indefault shall be punishable with a fine which may extend to Rs 10000.

Deferred/ Founders shares:

A private company any issue what are known as deferred or

founder’s shares. Such shares are normally held by promoters and directors of the

company. That is why they are usually called of a smaller denomination, say on rupee

each. How ever they are generally given. equal voting rights with equity shares, which

may be of higher denomination, say Rs10 each. Thus, by investing relatively lower

amounts, the promoter may gain control over the management of the company. As

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regards the payment of dividends have been declared on the preference and equity

shares. It is because of this deferment of the dividend payment that these shares are also

called deferred shares. The promoters, founders and directors tend to have direct interest

in the success of the company they will receive dividends on these shares only if the

profits are high enough to leave a balance of after paying dividends to preference an

equity shareholders. Besides greater the profits of the company , the higher will be

dividends paid on these shares.

Issued share at a premium:

When a company issues shares at a premium, whether or cash or

consideration other than cash, the premium collected on those shares shall be transferred

to a separate account called ‘securities premium account’. The provision of the act

relating reduction of shares capital shall also apply to the securities premium account

may be applied by the company in the following ways:

In paying up un issued shares of the company to be issued to members of the

company as fully paid up shares.

1. In writing off the preliminary expenses of the company.

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

issue of shares debentures of the company.

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

debentures.

Issued share at a Discount:

The issue of shares at a discount must be of a class of shares issued by the

Company.

1. The issue of shares at a discount must be authorized by a resolution passed in the

general meeting and sanctioned by the central government.

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2. The resolution shall specify the maximum rate of Discount at which the shares

are to be issued.

3. The maximum rate of discount must not exceed 10% unless the central

government is of the Opinion that higher percentage of discount may be allowed in

special circumstances.

4. The shares must be issued within two months from the date of sanction by the or

within such extended time as the central government may allow.

5. The issue of shares at a discount can be done by a company only a year after the

Commencement of the business by the company.

DEBENTURES: “Acknowledge of debt , given under the seal of the company and containing a contract

for the

repayment of the principal sum at a specified date and for repayment of the principal

sum at a specified date and for the payment of interest at fixed rate percent until the

principal sum is

repaid,and it may or may not give the charge on the assets to the company as security

of the

loan”.

Kinds of debentures:

1. Bearer debentures: Bearer debentures are similar to share warrants in that

too are negotiable instruments, transferable by delivery. The interest on bearer

debentures is paid by the means of attached coupons. On maturity, the principal sum is

paid to the bearers.

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2. Registered debentures: These are debentures which are payable to the registered

holders i.e.. persons whose names appear in the register of debenture holders. Such

debentures are transferable in the same way as shares.

3. Perpetual or Irredeemable debentures: A debenture which contains no clause as

to payment or which contains a clause that it shall not be paid back is called a perpetual

or : irredeemable debenture. These debentures are redeemable only on the happening of

a contingency on the expiration of a period, however long. It follows that debentures can

be made perpetual, i.e. the loan is repayable only on winding up or after a long period of

time.

4. Redeemable debentures : These debentures are issued for a specified period of

time. On the expiry of the specified time the company has the right to pay back the

debenture holders and have its properties released from the mortgage or charge.

Generally, debentures are redeemable.

5. Debentures Issued as Collateral Security for a Loan: The term collateral security

or secondary security means, a security which can be realized by the party holding it in

the event of the loan being not paid at the proper time or according to the agreement of

the parties. At times, the lenders of money are given debentures as a collateral security

for loan. The nominal value of such debentures is always more than the loan. In case the

loan is repaid, The debentures issued as collateral security are automatically redeemed.

Convertible debentures (CDs):

A company may also issue CDs in which case an option is given to the

debenture holders to covert them in to equity or preference shares at stated rates of

exchange, after a certain period. Such debentures once converted in to shares cannot be

reconverted in to debentures. CDs may be fully or partly convertible. In case of fully

convertible debentures, the inter face values converted in to shares at the expiry of

specified period(S). In case of partly convertible debenture only convertible portion is

redeemed at the end of specified period. Non convertible debenture do not confer any

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option on the holder to the debenture in to shares and are redeemed at the expiry of

specified period (s).CDs, whether fully or partly convertible, may be converted in to

shares at the end of specified periods in one or more stages. The company should get a

credit rating of debenture done by credit rating agency. CDs are listed on stock

exchanges. The partly convertible debenture (PCDs) offer more flexibility to both

companies and investors. It has been claimed to be better than fully convertible

debenture as it does not automatically entail large equity base, particularly in case of

new companies. Experience shows that servicing of large base of capital is not easy in

case of new projects, especially if the company runs in to rough weather due to

marketing difficulties. As such, the non-convertible portion of the debenture keeps the

equity of a company within manageable limits.

American Depository Receipts (ADR):

An American depository receipt (ADR) is a negotiable receipt which represents one or

more

depository shares held by a US custodian bank, which in turn represent underlying

shares of

non- issuer held by a custodian in the home country. ADR is an attractive investment to

US

investors willing to invest in securities of non US issuers for following reasons:

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

dollars ADR

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ADR OFFERINGS:

A public offering provides access to the broadest US investor base and most

liquid US securities market. The compliance requirements in public offerings are the

strictest and comprise of Registration of underlying security under the Act (From F1)

Registration of ADR under the 1993Act (From F6) Registration under the 1934 Act (if

the company is not already Regulation act under the 1934 Act).

Global Depository Receipt (GDR):

With the growth in international equity issuance, together with growth in the

underlying

secondary market investment, an increasing need has been felt for better fungibility. The

investors demand stocks that trade freely on an international basis without restrictions.

The depository receipts have be used as a partial solution to this problem. American

depository receipts have been the favored forms of investments by US investors in

foreign equities. A number of international equity offers, particularly some Asian

markets have increasingly used global depository receipts (GDR),particularly where

legal restrictions and closed markets have prevented the world wide circulation of

underlying security on a freely trade basis. The GDRs continue to have value in liquid

or restricted markets and are frequently used by project companies to raise equity

funds.

CHARACTERISTICS OF A GDR:

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

underlying security.

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

depository.

The depository, in turn, issues GDRs evidencing their rights as share holders.

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Depository receipts are denominated in foreign currency and are listed of international

exchange such as London or Luxembourg.

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

exchange and yet have rights in foreign shares.

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

settlement.

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

currency.

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

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

MARKING TO MARKET

In the futures market, at the end of each trading day, the margin account is a adjusted to

reflect the investor’s gain or loss depending upon the futures closing price or settlement

price. This is called Marking-to-Market.

MAINTENANCE MARGIN:

If the balance in the margin account falls below the maintenance margin, the investor

receives a margin call and is expected to top up the margin account to the initial margin

level before trading commences on the next day.

BETA:

Beta is a concept to be used futures and options for hedging. Beta measures the

sensitivity of a share or a portfolio to that of the index. Beta of a share is found out by

relating the daily price changes of a share to the daily changes in a stock price index. If a

graph is drawn with daily changes of the share price on y axis and daily changes in the

index on x axis the slope of the straight line fitted will be the value of beta.

mathematically it is found by regression method. If the beta of Tisco is found to bel.23,it

implies if the index increases by 10% in a period, price of Tisco will increase by 12.3%.

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Beta of the portfolios is found by weighted average of the betas of the shares in the

portfolios. For example, an investor’s portfolio has equal value in Tisco and Infosys.

Tisco has a beta of 1.23 and Infosys has a beta 1.37.

SPECULATORS AND HEDGERS IN FUTURES:

Speculators buy and sell derivatives to make profit, while hedgers buy and sell

derivatives to reduce risk. Speculators are vital to derivatives markets. They facilitate

hedging and provide liquidity. It is highly unlikely that hedger wishing to buy futures

will precisely match hedgers selling futures in terms of contracts to be traded. If hedgers

are net sellers there will be tendency for futures prices to fall. Speculators will buy such

under period futures. Such purchases by speculators allow net sales on the part of

hedgers. In so doing, they tend to maintain price stability since they are buying into a

falling market. Proper speculation thus provides stability to prices in markets.In a liquid

market, hedgers can make their transactions with ease and with little impact costs.

Speculative transactions add to market liquidity. speculators by definition do a lot of

information search and processing to forecast future behavior of prices. Therefore they

make markets more information ally efficient. In the stock index futures markets

speculators have two alternative strategies. If they are bullish on the index they can go

long on index Futures. If the spot prices go up, future prices follow them along with their

carry premiums and the speculators make the profits.If the speculator is bearish he can

go short on the index futures. If the spot Index goes down, futures price also will go

down and speculator makes a profit. The two speculative strategies can be summarized

as:

Bullish market, long index futures

Bearish market, short index futures

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ARBITRAGE IN FUTURE AND SPOT MARKET:Future prices and spot prices are tightly linked by the fair price formula. Also on the day

of the expiry, the final settlement price of the future is made equal to the spot index

price. thus at the end , the spot and futures prices converge. Any deviation between the

fair price and actual price of a future can be utilized for earning risk less profits by

agents who are willing to buy in the spot market and deliver in future at expiry. Such

operations are called as arbitrage operations. Buying in the spot and delivering in the

future market is resorted to when actual futures price in the market is higher than the fair

price.

Introduction to options:Options give the holder or buyer of the option the right to do something. If the option is

called option, the buyer or holder has the right to buy the number of shares mentioned in

the contract at the agreed strike price. if the option is a put option, the buyer of the

option has the right to sell the number of shares mentioned in the contract at the agreed

strike price. the holder or the buyer does not have to exercise this right. Thus on the

expiry of day of the contract the option may or may not be exercised by the buyer. In the

contrast, in a futures contract, the two parties to the contract have committed themselves

to doing something at future date. To have this privilege of doing the transaction at a

future only if it is profitable, the buyer of options has to a premium to the seller of

options.

HISTORY OF OPTIONS: In 1983 trading on stock index options contracts started. Since 1983, trading on options

of

individual options decreased as most of the trading shifted to index options. One of the

reasons is that volatilities of the individual scripts is high and therefore premiums on

individual scripts is also high. In India stock index options were introduced in june 2001.

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OPTION TERMINOLOGY:

INDEX OPTION:

An option having the index as the underlying asset. Like index futures contracts, index

option contract are also called cash settled.

STOCK OPTIONS:

Stock options are options on individual stocks. A contract gives the holder the right to

buy or sell shares at the specified price.

AMERICAN OPTIONS:

American options are options that can be exercised any time up to the expiration date.

This name is only a classification and does not imply that they are available only in

America.

EUROPEAN OPTIONS:

European options are options that can be exercised only on the expiration date. European

options are easier to analyze than American options, and properties of American options

are frequently deducted from those of its European counterpart.

CALL OPTIONS:

A call option gives the holder the right but not the obligation to buy an asset by a certain

date for a certain price.

PUT OPTIONS:

A put option gives the holder the right but not the obligation to sell an asset by a certain

date for a certain price.

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BUYER OF OPTIONS:

The buyer of the option, calls or put, pays the premium and buys the right but not the

obligation to exercise his option on the seller/writer.

WRITER OF AN OPTION:

The writer of a call/put option is the one who receives the option premium and is thereby

obliged to sell/buy the asset if the buyer exercises on him. Option writer is the seller of

the option contract.

STRIKE PRICE:

The price specified in the option contract at which buying or selling will take place is

known as the strike price or the exercise price.

OPTIONS PRICE:

Option price is the premium, which the option buyer pays to the option seller or writer.

Black and schools formula is widely used for determining the fair value of share.

EXPIRATION DATE:

It is the date on which the European option is exercised. It is also called as exercise date,

strike date or maturity date.

INTRINSIC VALUE OF AN OPTION:

The option premium cab be broken down into two components- intrinsic value and time

value.The intrinsic value of an option is the amount, which the holder will get by

exercising his option and immediately selling or buying the acquired shares in the spot

market. For example, if the strike price of a call option on Reliance shares is Rs.325 and

current market price is Rs.350. The holder of the option can buy the Reliance share at

Rs.325 by exercising the option and can make a profit of Rs.25 by immediately selling

them in the market. In this case the intrinsic value of the call option is Rs.25.

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TIME VALUE OF THE OPTIONS:

The time value of an option is the difference between its premium and its intrinsic value.

AT-THE-MONEY:

An option is called at-the-money option when the strike price equals, or nearly equals,

the spot price of the share. For example, if the strike price of stock index option on Nifty

index is also at 1080, the option is called at-the-money option.

SPOT PRICE > STRIKE PRICE IN-THE-MONEY:

A call option is in the money when the underlying asset price is greater than the strike price.

For example, if the strike price in the case of Nifty stock index option is 1050 and Nifty is at

1080, the option is in-the-money option.

SPOT PRICE = STRIKE PRICE

OUT-OF-THE-MONEY:

A call option is out-of-the-money if the strike price is greater than the underlying asset

price. For example, if the strike price in the case of Nifty stock index option is 1100 and

Nifty is at 1080, the option is out-of-the-money option.

SPOT PRICE < STRIKE PRICE

USES OF OPTIONS:

Like futures options are also used for hedging and speculations. Arbitrageurs can look

for Mispricing between spot, option and futures markets and do transactions whenever

they find miss pricing.

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TRADING OR SPECULATING WITH OPTIONS:

Options provide multiple opportunities for trading. Options premiums are determined by

volatility of the underlying asset, time to expiration of the option and the risk free

interest rate .Changes in any of these variables changes option premiums even though

the price of the underlying asset remains constant. Thus a speculator who analyses

multiple dimensions has a lot more opportunity in options to strategize and act.

ARBITRAGE WITH OPTIONS:

Arbitrage involves making risk less profits from miss pricing; relatively under priced

options are bought and relatively overpriced are sold. Pure arbitrage requires that none

of the arbitragers own capital is used. He should be able to borrow all the capital

required. If the arbitrager uses his own capital, the process is called quasi-arbitrage.

There will be number of situations providing arbitrage opportunity as three markets,

spot, futures and options are involved

SUMMING UP:

Options are used by hedgers and speculators. Options provide a variety of ways in which

they can be used to attain the hedging and speculative objectives. Thus trading interest

comes from different participants with different motives. Arbitrageurs will have

opportunities whenever option premiums are out of line with the fair prices. A fully

developed option market provides a good market for traders to display their trading

expertise and hedgers an alternative-hedging medium.

FORWARD CONTRACTS:

In order to avoid this risk one way could be that the farmer may sell his crop at an

agreed-upon rate now with a promise to deliver the asset, i.e., crop at a pre-determined

date in future. This will at least ensure to the farmer the input cost and a reasonable

profit. Thus, the farmer would sell wheat forward to secure himself against a possible

loss in future. It is true that by this way he is also foreclosing upon him the possibility of

a bumper profit in the event of wheat prices going up steeply. But the, more important is

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that the farmer has played safe and insured himself against any eventuality of closing

down his source of livelihood altogether. The transaction which the farmer has entered

into is called a forward transaction and the contract which covers such a transaction is

called a forward contract.

QUICK AND LOW COST TRANSACTIONS:

Futures contracts can be created quickly at low cost to facilitate exchange of money for

goods be delivered at future date. Since these low cost instruments lead to a specified

delivery of goods at a specified price on a specified date, it becomes easy for the finance

managers to take optimal decisions in regard to production, consumption and inventory.

The costs involved in entering into future contracts in significant as compared to the

value of commodities being traded underlying these contracts.

Price discovery function:

The price of futures contracts incorporates a set of information based on which the

producers and the consumers can get a fair idea of the future demand and supply position

of the commodity and consequently the futures spot price. This is known as the ‘price

discovery’ function of futures.

Advantage of informed individuals:

Individuals, who have superior information in regard to factors like commodity demand

supply, market behavior, technology changes etc., can operate in futures markets and

impart efficiency to the commodity’s price determination process. This in turn leads to a

more efficient allocation of resources.

Hedging Advantage:

Adverse price changes, which may lead to losses, can be adequately and efficiently

hedged against through futures contracts. An individual who is exposed to the risk of an

adverse change while holding a position, either long or short a commodity will need to

enter into a transaction which could protect him in the event of such an adverse change.

For example a trader who has imported a consignment of copper and the shipment is to

reach within a fortnight may sell copper futures if he foresees fall in copper prices. In

case copper prices actually fall, the trader will lose on sale of copper but will recoup

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through futures. On the contrary if copper prices rise, the trader will honour the delivery

of the futures contract through the imported copper stocks already available with him.

Employee stock option plans:“Employees stock options means the options given to the whole-time directors, officers

or employees of acompany, which gives such directors, officers or employees the benefit

or right to purchase or subscribe at a future date, the securities offered by the company at

a pre-determined price”. Stock option is defined as the “right to buy a designated stock

at an option of the holder at any time within a specified period at a determinable price. it

can also represents the right to sell designated stock within an agreed period at a

determinable price.

Benefits of ESOPs:

The ESOPs will benefit the organization in the following ways:

It is used as a HRD tool by the management in connection with restriction of higher turnover of the employees and retaining the best talents with the organization.

The plan is used as a technique of corporate financing modernization, expansion, spin-off a division, acquisition etc.

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

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

Without any financial strains the employees are rewarded by

printing of share certificated only.

Studies undertaken in USA on ESOPs suggest that they tend to out perform their

traditionally organized counterparts in variety of ways, better survival rates, higher

productivity, a better employment and sales growth and higher net operating margins.

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CHAPTER-3

COMPANY PROFILE

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CAPITAL MARKET

Overview

SMC Group, founded in 1990, i s India’s best Equity Broking House and the Largest Dis t r ibut ion Network, providing a wide range of f inancia l serv ices andinvestmentsolu t ions .Ablendofextensiveexperience; diverse talentandcl ient focushasmadeusachievethis landmark.Over the years , SMC has expanded i t s operat ions domest ica l ly as well as internat ional ly . Exis t ing network inc ludes regional of f ices a t Mumbai , Kolkata , Chennai , Ahmadabad,Jaipur ,andHyderabad,bangaloreplusagrowingnetworkof2500+off icesspreadacross500+ci t ies / townsinIndia . We offer a d iverse range of f inancia l services which inc ludes ins t i tu t ional and reta i l brokerage of equity , cur rency, commodi t ies , der iva t ives , onl ine t rading , deposi tory services , f ixed Deposi ts , IPOs and mutual funds dis t r ibut ion , dedicated desk for NRI and ins t i tut ional c l ients , insurance broking , c lear ing services , margin funding, inves tment banking , por t fo l io management , weal th advisory & research . We have a h ighly ef f ic ient workforce of over 3,350+ employees and over 16500 f inancia l advisors serv ing the f inancia l needs of more than 7 ,20,000 sa t i sf ied investors .We are a lso amongst the f i rs t f inancia l f i rms in India to expand opera t ions in the lucrat ive gulf market , by acquir ing l icense for broking and c lear ing member wi th Dubai Gold and Commodi t ies exchange (DGCX). The SMC

Advantage:

The SMC Advantage: Large avenues of investment solu t ions and f inancia l serv ices under

one roof Personal ized solut ion and a t tent ion of fered to each investors Research suppor t and t imely advice by our h igh-tech research wing An extensive network of branch of f ices A perfec t blend of la tes t technology and r ich experience of over 20

years Honesty, t ransparency and fa i rness imbibed in al l our deal ings Providers of one of the bes t t rading pla t forms in te rms of speed,

convenience and r isk management to t rade in NSE, BSE, F&O,

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NCDEX, MCX,, MCX-SX, NMCE, ICEX, ACE & DGCX

Key Management PeopleMr.SCAggarwal (Chairman & Managing Director, SMC Group)

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

Mr.MaheshGupta (Vice Chairman & Managing Director, SMC Group)

Mr. Mahesh C Gupta is a Co-founder and Promoter of the SMC Group with more than 23 years of widespread experience in Securities Market. He is also a fellow member of the Institute of Chartered Accountants of India. His extraordinary leadership skill, astute business acumen and disciplined life style have helped SMC strongly diversify to a fully fledged financial services firm with a Pan India presence across 500 cities providing Brokerage services in equity, commodity, currency & derivatives, depository services, clearing services, Investment banking, portfolio & wealth management, distribution of Insurance, IPOs, Mutual Funds, Fixed Deposites and other 3rd party products. His principles of honesty, transparency and moral integrity have given SMC strong foundation based on which it has become the Best Equity Broker and the Largest Distribution House in India. Mr. Gupta has also given his vital contribution in various conferences & seminars on securities market

Mr.DKAggarwal (Chairman & Managing Director – SMC Comrade Limited & SMC Capitals Limited; Chairman - SMC Investments & Advisors Ltd)

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Mr. DK Aggarwal is one of the key architects of success of the SMC Group. Innovation in offerings, Branding, Research and Arbitrage are his forte. He has more than 20 years of wide and rich experience in Equity and Commodity Broking and Arbitrage. He is the Chairman of SMC Wealth Management Services Limited. He is an eminent speaker and regularly presents his views and expertise on various market related issues through print and television media. He is also a fellow member of the Institute of Chartered Accountants of India. He is the National President of Commodity Participants Association of India.

company’s Securities and Commodities business. Mr Aggarwal is a person with unmatched sharp calculative skills and analytical bent of mind.

Our VisionTo be a global major in providing complete investment solutions, with relentless focus on investor care, through superior efficiency and complete transparency.

CORPORATE ETHOS

Core ValuesEthicaldeals: Honestyistheonlypolicy.Experience and trust: Over 20 years of experience has made SMC earn the trust of more than7, 20,000Investors. Expertise:Know-howandskillstoprovideinvestorsanedge. Personalized Solutions: Every investor is unique. Every solution is unique.

Our ApproachValue for investor’s trust: SMC values the trust reposed in by the clients and iscommittedtoupholditatallcost. Integrity and honesty: Integrity, honesty and transparency are the underlying principlesinallourdealings. Personalized attention: The most valued asset is our relationship with the clients, which has been built over years by giving personalizedattention. Network which works: SMC has a vast network extending to 460+ cities and towns ensuring easy accessibility, convenience and hassle free tradingexperience. Research based advisoryservices:SMC offers proactive and timely world class research based advice and guidance to its clients to enable them to take informed decisions

Our Credentials

Best Currency Broker in India (Source: UTV Bloomberg Financial Leadership awards, 2011)

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

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Awards, 2010) Largest distribution network in the country (Source: BSE-D&B Equity

Broking Awards, 2011 & 2010) India’s Best Wealth management Company (Source : Business Sphere

2011) Awarded the Fastest Growing Retail Distribution Network in financial

services (Source: Business Sphere, 2010) Received Major Volume Driver award from BSE for 3 years

consecutively(2004-05, 2005-06 and 2006-07) Nominated amongst the top 3, in the CNBC Optimix Financial Services

Award 2008 under "National Level Retail Category" Amongst the First Financial Firms in India to expand operations in the

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

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

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

Memberships & Registrations Trading Member of NSE, BSE, NCDEX, MCX, DGCX, NMCE, ICEX,

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

Clearing Member in NSE (F&O, Currency), BSE (F&O),MCX (Commodities), NCDEX,NMCE,MCX-SX, ICEX, ACE,USE & DGCX

Depository Participant with CDSL & NSDL Category 1 Merchant banker Corporate Insurance Broker for Life & General Insurance

(Registered with IRDA) Distributor of IPOs & Mutual Funds (Registered with AMFI) Portfolio Management Services (PMS) registered with SEBI Non Banking Financial Company (NBFC) registered with RBI Association with London based Sapien Capital,

(Registered under FSA & NSA ,London) ACE Derivatives and commodities Exchange (ACE)

Equities & Derivatives

OverviewOur experienced team of Research Analysts and Advisory Managers guide you with appropriate solutions, backed by in-depth research, knowledge and expertise on a regular basis. We constantly help you with strategies for equity and derivatives investment, recommendations for trading on futures & options, hedging with Nifty and other products and opportunities of near risk free

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arbitrage between various segments.

Our OfferingsOnline trading: SMC Trading Platform offers online equity & derivatives trading facilities for investors who are looking for the ease and convenience of a hassle free trading experience. We provide ODIN application, which is a high-end, integrated trading application for fast, efficient and reliable execution of trades. You can now trade in NSE and BSE simultaneously from any destination at your convenience. You can access a multitude of resources like live quotes, charts, research, advice and online assistance to help you take informed decisions. You can also avail our state-of-art mobile trading application "SMC mobitade"

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

A highly process driven, diligent approach Powerful research & analysis support. One of the "best-in-class" dealing rooms

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

A highly process driven, diligent approach Powerful research & analysis support. One of the "best-in-class" dealing rooms

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Our edge

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

Pan India coverage Powerful research support by a pool of highly skilled research analysts Focused services which make investments in equities simple. SMS service providing intraday research support to the clients. Competitive brokerage rates Call & Trade facility through a simple phone call A superior trading platform Prompt news on stock results, earnings, bonus, share holding patterns, etc. Online trading account which provides exposure against the cash margin as well as

shares lying idle in clients DP account

Currency Overview Currently in India, there are 3 major exchanges offering Currency future trading – NSE, MCX-SX & USE. SMC Global Securities is a trading cum clearing member of all these exchanges for the currency segment. We believe in the tremendous potential of currency future to become a dominant force of the Indian financial market with a turnover which can outperform even equity and commodity segment. We firmly believe that wider market participation will bring more strength to the market & this can be achieved through disseminating education & information among various market participants. For us, currency is not just any other segment of business; it is "the business of future". Our Offerings Offline trading: This is the most traditional way of carrying out trading in financial markets. Clients can place their orders with our nearest branch by visiting them personally or on the phone.

Online trading: Online trading offers the convenience to trade from the comfort of your home / office. We provide trading software which can be downloaded by the client on any system. Through their user ID & password, clients can start trading online. Alternatively, we also provide the facility to trade through our browser based application.

Corporate advisory: We believe that corporate participation is the key to growth of this segment. We understand that corporateS have a very special set of requirements for hedging as well as investment. Every business needs customized solutions to its requirements and that is what we deliver - hedging / investment solutions based on what is best-suited to the business dynamics. Our dedicated team of Relationship Managers ensures that our deliverables exceed the expectations & a long-lasting relationship is built.CommoditiesOverview SMC Comrade Limited, a key constituent of SMC Group of Companies, came into existence at the very start of Commodity Exchanges in India. With nationwide presence,

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it enables the retail & corporate investors to diversify their portfolio and enjoy the benefits of commodity trading in MCX, NCDEX, NMCE, and ACE & ICEX. Our highly appreciated research team guides the investors to make wise investment decisions for agri-commodity market as well as international commodities trading. SMC Comex International DMCC (part of SMC Group) is one of the initial, leading & experienced clearing and broking members of Dubai Gold and Commodities Exchange (DGCX). It offers commodity trading in Gold, Silver, Crude (WTI & Brent), Forex (INR, Euro, and Dollar & Sterling) and Steel Rebar Contracts. For more information

Clearing Services Overview SMC is one of the leading clearing members, which currently manages the clearing services for more than 134 trading members in different segments of different exchanges. Our offerings We are Clearing Member of NSE (F&O, Currency), BSE (F&O), MCX (Commodities), MCX-SX, NCDEX,NMCE,ICEX, ACE,USE & DGCX Our edge

Trusted name in Broking Industry One of the leading clearing members of NSE Incredible track record of timely delivery of Commitments Concern about timely need of Trading Members being, in the same fraternity Attitude to follow the best practices in the Industry Committed approach to business Technologically sound to cope with the growing needs of Trading Members Senior Professional personnel for every service need Flexibility and adaptability to the dynamic needs of the market

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

IPOs Equities Derivatives Mutual Funds

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

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

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

Specialized services for international investors Idea Generation and Stock Picks In-depth, detailed and insightful coverage across different sectors which comprise :

o Initiating coverage reports o Result Previews o Result Updates o Sect oral Reports o India Strategy Reportso An international distribution network servicing the needs of institutions &

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

Depository

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

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

physical form Inter and intra fixed depository services to transfer securities from one demat

account to another Pledging of shares and commodities to avail loans Commodity demat account Internet services for online access to demat account and research reports SMS Alert Facility for debits and IPO credits in demat account

Loan against securitiesOverview

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

Available to all major Indian citizens Additional buying power to create wealth and grab market opportunity Loans against shares are extended against basket of securities traded on BSE/ NSE List of securities is available on demand and/or on our web site Client has to maintain requisite margin as per categorization of scrips, value based

on LTV Margin calls are made if the value of margin falls by 10% which can be met either by

redemption of the securities or placing additional securities Tailor-made scheme to cater to the needs of all segments of investors Free trade environment Interest application on daily balances to minimize the cost of fund Bunch of financial products with expert opinion Easy processing and simple documentation Securities are to be transferred to MFSPL Securities may be sold to ensure adequacy of stipulated margins without reference to

clients in case the margins are not maintained Minimum interest rate subject to market conditions Registration:

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

o Client should complete the Loan application along with necessary documents Loan settlement and release of shares:

o Loan can be settled by payment to Moneywise Financial Services Pvt. Ltd.o Shares shall be released on clearance of the paymento In case of closure, client has to clear all the dueso Shares may be released if matching securities are furnished. Surplus value of

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

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

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

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

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

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

Our edge

Being one of the leading distribution houses, we aim at helping you in financial planning and achieving long-term goals through our widespread network and team of financial advisors. Contact us:

Research Overview With the EIC (Economy, Industry, and Company) approach, our Research team offers timely Research reports covering investment summary, trend of world markets, sector trends, commodity trends. The same is covered in our esteemed weekly magazine “Wise Money”. We have a team of highly experienced analysts, who cover stocks, commodity, currency, mutual funds and special reports. All our research reports, estimates and enhanced analytics are available on our website www.smctradeonline.com our offerings Equity Reports:

Morning Mantra Evening Buzzer Derivatives IPO Reports Wise Money equity content.

Commodities Reports:

Morning Mantra- Agri Morning Mantra- metals & energy Afternoon Metals & Energy Evening Buzzer- Agri & Metals

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Special Commodities Updates Trading opportunity report DGCX Daily

Currency Reports:

Currency Daily Afternoon Currency Buzzer

Mutual fund Reports:

NFO Analysis Mutual Fund Tracker Mutual Fund Weekly update Portfolio Monitor

Special reports:

Result Updates Pre-Budget Analysis Post-Budget Analysis

Newsletters:

Wise Money

SMS serviceChat rooms our edge we specialize in five core product areas. These are Equities, Commodities, Currencies, Derivatives and Mutual Funds. Our views are purely based on analysis and are independent, unbiased and balanced.

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

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

SMC PRIVILEGE - Software-based trading platform for active traders. SMC Mob trade - state-of-art mobile trading application.

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

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

Designed for better speed for instant order & trade confirmation Lifetime free AMC option User friendly platforms 24 X 7 online back office access Pan-India presence Dedicated customer care Excellent research & advisory support A range of trading options State-of-the-art technology

Wealth Management

Overview

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

Portfolio Management Services Multi Manager Investment Solutions Portfolio Advisory Trading in Equity, Currency, Interest Rate Futures Depository Services Mutual Funds & IPOs Fixed Income Products Near Risk-free Arbitrage Products Structured Products Real Estate Funds Private Equity Funds Financial Planning

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

Understanding and addressing of our client's financial needs Working with investment experts, financial planners and tax experts to see the big A belief that "Every client is unique & every plan has to be unique" Dedicated Wealth Managers Transparency in all our dealings High client focus

Investment Banking

Overview

SMC Capitals Limited is the Investment Banking arm of SMC group and is a SEBI registered Category I Merchant Banker with strong management team; financial sponsors and corporate partners to help corporate clients achieve their financial and strategic goals. We offer a wide spectrum of investment banking services covering Corporate Advisory, Public Issues Management, Capital Restructuring, Private Equity and Debt Syndication, Merger & Acquisition Advisory, Valuation Services and ESOP.

SMC Capitals is associated with London-based Spien Capital. Sapien is authorized and regulated by the Financial Services Authority (FSA), UK and is a member of the London Stock Exchange (LSE) which helps companies to raise money from foreign markets by issuing ADR, GDR and IDR. Sapien is also an approved broker for the AIM segment of the LSE. Our offering SMC capitals offer a wide spectrum of services covering:

Corporate Advisory Public Issue Management Capital Restructuring Private Equity and Debt Syndication Buybacks Delisting ESOP QIPs FCCBs Merger & Acquisition Advisory Valuation Services

Our edge At SMC Capital we put our clients' success first and seek to develop broader and deeper, lasting relationships with them. We feel proud to say that “our clients are at the centre of everything we do”. We focus on their ever-growing needs, implementing the best solutions across the whole value chain in which they operate.

Insurance

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Overview

SMC offers risk management services and a complete range of insurance solutions through its subsidiary company SMC Insurance Brokers Pvt. Ltd. The company holds a Direct Insurance Broker's license from Insurance Regulatory and Development Authority (IRDA) and provides a wide array of Life Insurance and General Insurance products under professional guidance of experts in the field. SMC provides customized solutions to individual clients, small and medium enterprises as well as to the leading corporate houses and institutions across the country. Our philosophy We believe that "a transaction is for a moment but a relationship is forever". Hence we give all transactions equal importance and strive to offer our esteemed clientele an unmatched service. Our edge

Pan India presence with 2500+ offices of group companies 1,00,000+ customers 1500+ man years of General Insurance experience Robust IT Infrastructure with over 1 lac Sq. ft. office space Widest possible product range A team of passionate professionals with strong Domain knowledge and expertise Flexibility to choose product of any insurance company Quality of services Customized solutions

Value addition for our customers

Comprehensive Risk Portfolio Management including identification, measurement, assessment and handling of the risk, of which insurance is an integral part.

Designing of customized and qualitative insurance programme Offer of choices while recommending suitable insurance policies Assistance in deciding sum insured to avoid under-insurance Due to our volume of business, knowledge of market and expertise, we are able to

obtain the best possible premium rates. Selection of Policy wording and clauses where choice is available Assistance in processing of claims to obtain fair and prompt settlement from

Insurance Companies Extensive rapport and liaison with insurance companies Outsourcing of major part of insurance function

NRI (NON RESIDENTAL OF INDIA)

We at SMC, guide our NRI clients at every step of their investment needs so that they have complete peace of mind about their investments in India. Our past performance in financial markets is testimony to our consistent approach towards customer delight by fulfilling their investment needs. For NRI investors, it is very important to select investment avenues with due diligence because it is all about hard earned money & future financial security. Our

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capability to analyze relevant information in market trends, relevant data and the best-in-class investment products plays an important role in assisting our NRI clients in making a right decision. Our rich experience of capital market & retail financial services makes us a reliable NRI investment solutions company. Our products, services and technology adopted are directed towards enabling us to provide a state of the art customer convenience, thereby facilitating an excellent investment experience.

India's economy is sizzling and is one of the fastest growing in the world Political stability and broad consensus on reforms Liberal and transparent foreign

investment regime Well developed banking system Vibrant capital market. (National Stock Exchange: third largest, Bombay Stock

Exchange: 5th largest in terms of number of trades) India is rated as the most attractive destination for offshore business processing by

global consultancy A T Kearney India amongst the leading entrepreneurial hotbeds globally (Red Herring clubs India

with Israel) Indian policies fully compatible with World Trade Organization World bank sees India’s growth positive (Source Hindustan Times) 220 of the fortune 500 companies source software from India

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CHAPTER-4

DATA ANALYSIS AND PRESENTATION

STOCK MARKET

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Stock Prices Company : LICHSGFIN ( 500253 )    Period   ( 01-Dec-2013  to  31-Dec-2013 )

Date Open Price

High Price

Low Price

Close Price WAP No. of

SharesNo. of Trades

Total Turnover(Rs.)

1/12/13 845.00 874.30 845.0

0 869.05 868.431,94,950 5,088 16,92,99,654

2/12/13 876.00 884.70 851.1

0 856.45 871.743,14,497 8,650 27,41,59,002

3/12/13 846.00 868.80 845.2

0 851.55 859.531,91,405 5,153 16,45,17,854

4/12/13 850.00 859.90 845.5

0 849.95 852.831,50,450 4,421 12,83,08,850

7/12/13 850.00 857.00 836.2

0 840.10 847.621,22,889 3,798 10,41,63,548

8/12/13 840.00 853.50 832.0

0 849.80 843.121,70,081 4,725 14,33,99,416

9/12/13 840.00 853.00 823.2

0 826.55 834.822,20,565 5,085 18,41,31,368

10/12/13 822.00 833.25 820.1

0 824.00 826.692,37,803 6,931 19,65,89,208

11/12/13 838.00 838.00 805.6

5 810.85 821.051,78,386 4,768 14,64,63,084

14/12/13 812.00 816.00 792.0

0 795.05 802.131,98,698 5,679 15,93,81,234

15/12/13 770.00 802.90 770.0

0 785.70 791.192,19,339 6,635 17,35,39,765

16/12/13 770.00 799.45 770.0

0 790.10 789.742,30,770 6,746 18,22,47,765

17/12/13 799.90 799.90 782.0

0 787.00 789.811,60,496 4,108 12,67,61,793

18/12/13 785.00 791.65 768.4

0 772.20 781.411,04,409 3,521 8,15,86,269

21/12/13 776.70 783.00 763.2

5 766.80 773.641,18,620 4,076 9,17,68,806

22/12/13 767.05 780.50 767.0

5 774.00 775.181,04,623 3,332 8,11,01,904

23/12/13 775.00 796.90 773.0

0 791.95 789.702,55,763 5,910 20,19,76,722

24/12/13 770.00 805.05 770.0

0 790.10 796.221,84,449 4,528 14,68,62,794

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29/12/13 799.00 814.00 789.0

0 803.75 804.922,58,766 8,030 20,82,85,848

30/12/13 800.00 812.80 800.0

0 802.80 806.961,00,847 3,400 8,13,79,908

31/12/13 810.00 815.00 797.1

5 803.55 804.221,85,268 3,407 14,89,95,836

1,94,950

1,91,405

1,22,889

2,20,565

1,78,386

2,19,339

1,60,496

1,18,620

2,55,763

2,58,766

1,85,2680

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Series1

INTERPRETATION: On 1st dec open value has increased to 869.05 than compared to higher value of

EPS 866.43. Then coming to higher price to 865.23 wholly the conclusion is 811.49.

Then coming to the volume on the same dates or days volume are increased.

Because totally this month LIC House finance. EPS value is increased i.e. percentage

21%.

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Stock Prices Company : ANDHRABANK ( 532418 )    Period   ( 01-Dec-2013  to  31-Dec-2013 )

Date Open Price

High Price

Low Price

Close Price WAP No. of

SharesNo. of Trades

Total Turnover(Rs.)

1/12/13 115.05 116.80 114.3

0 115.90 115.52 84,410 917 97,51,014

2/12/13 118.00 121.95 117.5

0 118.25 119.718,01,076 5,250 9,58,96,608

3/12/13 119.85 121.55 118.3

0 119.15 120.313,64,964 3,015 4,39,09,611

4/12/13 120.00 120.00 116.5

0 117.20 117.941,69,543 1,585 1,99,96,008

7/12/13 118.00 118.90 115.2

0 115.85 117.181,28,895 1,230 1,51,03,983

8/12/13 116.40 117.35 113.7

0 116.95 115.581,32,164 1,301 1,52,75,648

9/12/13 116.00 116.80 114.4

0 114.75 115.401,85,019 1,259 2,13,52,091

10/12/13 115.00 118.00 113.2

5 117.45 115.153,11,462 1,889 3,58,65,468

11/12/13 118.85 119.00 113.0

0 113.65 115.173,86,266 2,184 4,44,84,452

14/12/13 113.50 114.80 111.7

0 112.15 112.571,39,618 1,363 1,57,17,332

15/12/13 113.00 113.00 105.0

0 106.10 108.212,77,440 2,419 3,00,22,879

16/12/13 106.00 107.90 101.6

5 103.80 103.893,41,565 2,683 3,54,86,504

17/12/13 104.00 106.60 102.4

0 105.80 105.022,50,937 2,064 2,63,54,577

18/12/13 103.55 105.00 102.0

0 102.35 103.612,76,763 1,683 2,86,74,593

21/12/13 102.4 104.45 102.1 102.55 103.21,11,448 1,248 1,15,10,143

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CAPITAL MARKET

5 0 8

22/12/13 103.50 104.25 103.1

0 103.65 103.70 87,022 876 90,23,826

23/12/13 104.40 105.70 104.3

0 105.20 104.971,89,798 1,430 1,99,23,466

24/12/13 105.95 108.20 105.9

5 107.35 107.232,57,976 1,907 2,76,62,449

29/12/13 107.35 108.00 105.1

0 105.50 105.915,97,681 1,097 6,32,98,938

30/12/13 106.35 106.35 103.0

5 104.00 103.723,63,796 939 3,77,33,915

31/12/13 105.00 105.40 104.1

0 104.35 104.61 88,834 666 92,93,282

1 2 3 4 5 6 7 8 9 101112 1314151617181920 210

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Series1Series2

INTERPRETATION: On 1st dec open value has increased to 115.90 than compared to higher value of

EPS 114.51. Then coming to higher price to 121.32 wholly the conclusion is 120.54

Then coming to the volume on the same dates or days volume are increased.

Because totally this month Andhra Bank. EPS value is increased i.e. percentage 11%.

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Stock Prices Company : BAJAJAUT ( 532977 )    Period   ( 01-Dec-2013  to  31-Dec-2013 )

Date Open Price

High Price

Low Price

Close Price WAP No. of

Shares

No. of Trade

s

Total Turnover(Rs.)

1/12/13 1,502.65 1,647.001,480.001,637.55 1,618.071,72,520 3,075 27,91,50,087

2/12/13 1,650.00 1,699.001,648.001,690.80 1,684.101,13,531 3,356 19,11,97,730

3/12/13 1,705.00 1,712.001,666.001,684.15 1,698.25 34,188 1,735 5,80,59,756

4/12/13 1,686.00 1,686.001,638.101,651.40 1,657.58 16,759 1,038 2,77,79,300

7/12/13 1,651.00 1,674.001,621.201,629.65 1,656.27 25,385 951 4,20,44,438

8/12/13 1,625.00 1,650.001,621.001,640.55 1,638.69 11,373 741 1,86,36,817

9/12/13 1,644.00 1,685.001,625.201,670.70 1,671.04 35,876 1,374 5,99,50,231

10/12/13 1,678.95 1,690.001,628.101,643.15 1,651.25 36,837 1,271 6,08,26,971

11/12/13 1,652.00 1,732.001,652.001,724.50 1,712.981,52,019 4,479 26,04,05,276

14/12/13 1,724.00 1,800.001,724.001,784.30 1,763.361,29,493 4,057 22,83,43,375

15/12/13 1,795.00 1,799.91,730.251,742.70 1,755.27 85,917 2,333 15,08,07,405

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CAPITAL MARKET

0

16/12/13 1,744.00 1,750.001,702.001,729.75 1,724.98 38,729 1,588 6,68,06,828

17/12/13 1,731.00 1,743.851,717.001,728.05 1,726.55 22,822 1,403 3,94,03,297

18/12/13 1,725.00 1,748.601,700.001,704.10 1,715.99 11,911 707 2,04,39,111

21/12/13 1,710.00 1,710.001,638.001,672.05 1,673.851,17,379 1,108 19,64,74,911

22/12/13 1,678.00 1,706.751,678.001,695.35 1,698.00 26,551 1,050 4,50,83,663

23/12/13 1,700.00 1,720.001,700.001,705.75 1,709.66 25,592 863 4,37,53,699

24/12/13 1,709.00 1,734.951,686.001,700.00 1,712.38 51,312 1,195 8,78,65,759

29/12/13 1,715.00 1,728.251,677.001,683.10 1,702.03 13,882 661 2,36,27,599

30/12/13 1,681.10 1,710.001,657.001,698.50 1,679.12 60,044 1,350 10,08,21,117

31/12/13 1,714.85 1,779.801,705.201,761.70 1,751.86 86,972 2,164 15,23,62,559

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 210

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Series2Series1

INTERPRETATION:

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CAPITAL MARKET

On 1st dec open value has increased to 1,637.45 than compared to higher value of EPS

1,647.52. Then coming to higher price to 1,684.18 wholly the conclusion is 1.686.32

Then coming to the volume on the same dates or days volume are increased.

Because totally this month Baja auto. EPS value is increased i.e. percentage 29.25%.

Stock Prices Company : SUNPHARMA ( 524715 )    Period   ( 01-Dec-2013  to  31-Dec-2013 )

Date Open Price

High Price

Low Price

Close Price WAP No. of

Shares

No. of Trade

s

Total Turnover(Rs.)

1/12/13 1,466.00 1,554.951,458.151,538.80 1,524.80 58,619 2,729 8,93,81,964

2/12/13 1,560.00 1,592.001,485.001,495.35 1,537.021,05,464 4,185 16,20,99,880

3/12/13 1,500.00 1,520.001,487.001,494.60 1,502.69 36,825 1,588 5,53,36,678

4/12/13 1,494.60 1,507.901,470.001,481.70 1,487.85 27,739 1,363 4,12,71,406

7/12/13 1,500.00 1,500.001,448.001,453.25 1,462.90 14,239 1,047 2,08,30,269

8/12/13 1,453.25 1,480.001,446.101,466.95 1,464.02 16,320 1,140 2,38,92,822

9/12/13 1,465.00 1,496.91,465.001,479.90 1,481.17 36,257 2,166 5,37,02,617

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CAPITAL MARKET

5

10/12/13 1,490.00 1,490.001,449.101,453.35 1,461.50 30,652 1,813 4,47,97,784

11/12/13 1,477.00 1,477.001,430.001,441.45 1,450.01 18,227 1,223 2,64,29,316

14/12/13 1,459.00 1,476.001,445.501,450.75 1,460.63 15,965 1,258 2,33,18,990

15/12/13 1,472.00 1,472.001,446.001,450.45 1,457.22 7,060 645 1,02,88,005

16/12/13 1,453.00 1,474.901,453.001,467.90 1,467.38 18,616 1,431 2,73,16,745

17/12/13 1,477.00 1,490.001,455.201,481.30 1,480.95 17,740 942 2,62,71,994

18/12/13 1,484.00 1,517.001,480.001,497.85 1,504.67 29,002 1,655 4,36,38,530

21/12/13 1,505.00 1,513.951,478.051,495.30 1,495.16 20,924 640 3,12,84,650

22/12/13 1,499.95 1,508.801,480.001,503.55 1,499.38 8,492 495 1,27,32,710

23/12/13 1,513.55 1,542.001,505.001,538.00 1,528.19 19,145 1,260 2,92,57,246

24/12/13 1,539.00 1,573.901,521.301,563.65 1,553.08 16,866 1,016 2,61,94,315

29/12/13 1,550.10 1,569.001,530.001,537.95 1,546.48 8,046 506 1,24,42,944

30/12/13 1,535.00 1,538.101,505.051,518.55 1,518.54 10,914 664 1,65,73,387

31/12/13 1,545.00 1,545.001,501.001,507.10 1,521.17 9,568 769 1,45,54,546

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CAPITAL MARKET

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 210

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Series2Series1

INTERPRETATION: On 1st dec open value has increased to 1,538.80 than compared to higher value of EPS

1596.32 Then coming to higher price to 1,658.25 wholly the conclusion is 1,598.32.

Then coming to the volume on the same dates or days volume are increased.

Because totally this month Sun Pharmacy. EPS value is increased i.e. percentage

25.36%.

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CAPITAL MARKET

CHAPTER-5

SUGGESTIONS & CONCLUSIONS

Page 69

CAPITAL MARKET

SUGGESTIONS

There must be prohibition on disposal of promoters share holding, and also

restrictions and the expansion without prior approval of the financial

institutions for declaration of higher amount/ rate.

The availability of derivative products in eluding index futures, index

options, individual stock futures and individual stock options re-enforces the

overall attractiveness of this market to foreign and domestic investors.

Volume of paper work is small but it is very complicated to maintain data in

system so tries to reduce that by regular audit and updating data.

Most of the DPs do not have the necessary infrastructure to handle the high

work load of transactions leading to may error by DPs, so by giving full

infrastructure information to every DO can avoid this problem.

The pool account doesn’t know the true owner of the share and hence

dividends are paid to the broker instead of owners by this the broker can do

any manipulation or any fraud with the owner, for this the owner can loose

his dividend.

Hence for this try to pay the dividend directly to the owner.

If the shares are fake/forged which delivery by the broker the share holder

can loose that shares an have to receive another lot of issued shares from the

broker in 21 days, this system stands abused.

So minimize that waiting days are deliver the issued shares to the share holder as soon as

Possible.

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CAPITAL MARKET

CONCLUSION

The comprehensive study of capital market instrument at Inter Connected

stock exchange has been an enlightening experience stressing on the positive

aspects on Dematerialization.

And settlement of shares, derivative market and capital instruments has done

in whole lot of good to the issuer, investor companies and country.

The depository systems has reduced the lag in delivery and settlement of

securities but also supported the cause of providing more liquidity to the

security holder, the need for setting up of a depository paper less trading.

Through online trading system and settlement became inevitable and

unavoidable for the smooth and the efficient functioning of the capital

market.

This system has proved its worthiness by increasing in the speed of

transactions within T+3 days which are earlier T+5 days.

Now there is a proposal that the settlement will be done within T+1days in

near future which is in it an indication of a boon in the system of demat and

capital market instruments.

It has been fairly long since derivative trading started off on the Indian

Indexes.

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CAPITAL MARKET

Actively has failed to really take off with low figures being transacted in

terms of value and volumes.

The introduction of derivative trading was hailed by the punters in the capital

markets but has not really brought about a wave so as to speak.

There are several factors, which impede the growth of the derivative markets

in India.

Of these factors the absence of clear guidelines on tax-related issues and the

high cost of transactions are the most prominent.

Now it is T+2days started from 1 April 2003.

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CAPITAL MARKET

BIBLIOGRAPHY REFFERED

“Financial Investment” V.K. Balla

“Financial Markets and Services” Gordon & Natarajan

Financial management, IM PANDEY

Security analysis portfolio management PUNITHAVATHI PANDIAN

WEBSITES :

http://www.mcgraw-hill.co.uk/html/0071263926.html

http://www.exeltip.com/book-0471409154. html

http://www.infibeam.com/books/equity/97

http://www.focusinvestor.com/book-list.html

http://www.wiley.com/wileycda/producted- 0470395214.html

http://www.focusinvestor.com/book-list.html

JOURNALS :

The week

Business today

NEWS PAPERS :

Times of india

Economic timesBusiness line

Page 73