Download pdf - Indian Stock Broking Industry & Franchisee Business Model (2015)

Sumit Kumar Singh

SMC GLOBAL SECURITIES, LINK ROAD MALAD(w), MUMBAI

SUMMER PROJECT REPORT 19TH MAY TO 17TH JULY

Topic: ‘Indian Stock-Broking Industry & Franchisee Business Model’

MMS SUMMER PROJECT REPORT’

SUMIT KUMAR SINGH Page 1 of 72

A PROJECT REPORT ON

INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE

BUSINESS MODEL

FOR

SMC GLOBAL SECURITIES LTD.

BY

SUMIT KUMAR SINGH

MMS: SEM III Specialization: FINANCE Roll No: 86

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT

OF

MASTER OF MANAGEMENT STUDIES

ACADEMIC YEAR 2015-16

Submitted to Prof. (SRINJAY SENGUPTA)

ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH

MUMBAI - 400092




A PROJECT REPORT ON

INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE

BUSINESS MODEL

FOR

SMC GLOBAL SECURITIES LTD.

BY

SUMIT KUMAR SINGH

MMS: SEM III Specialization: FINANCE Roll No: 86

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT

OF

MASTER OF MANAGEMENT STUDIES

ACADEMIC YEAR 2015-16

Submitted to Prof. (SRINJAY SENGUPTA)

ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH

MUMBAI - 400092







CERTIFICATE

This is to certify that the project work titled “INDIAN STOCK BROKING INDUSTRY AND

FRANCHISEE BUSINESS MODEL” is a summer internship work carried out by Mr.

SUMIT KUMAR SINGH during 2015

The project was completed for (SMC Global Securities Ltd.), under the guidance of Mr.

SURENDER KAMBOJ (Sr. Manager Business Development)

I further certify that the said work has not been submitted in the part or in full, to any other

University.

Date: ______________

Prof. Srinjay Sengupta

Project Guide

Dr. Manoj Bhatia

Director




DECLARATION

I, Mr. SUMIT KUMAR SINGH, student of Aditya Institute of Management Studies and

Research, MMS (Semester III) hereby declare that I have completed the summer internship

project on “INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE BUSINESS

MODEL” with SMC GLOBAL SECURITIES LTD in the Academic year 2015-2016. The

information submitted is true & original to the best of my knowledge.

Date: ______________

Signature

Sumit Kumar Singh

MMS

Finance

86




ACKNOWLEDGEMENT

I would like to thank SMC Global Securities Ltd. and Aditya Institute of Management studies and

Research for giving me an opportunity to learn and pursue my Summer Internship and understand about

Finance and Research aspects.

I would like to thank and express my sincere gratitude to Surender Kamboj (Sr. Manager Business

Developmet). His constant encouragement, valuable insights and attention to detail had made this

exercise, a great learning experience.

I am also thankful to Sahil Gaikwad (Sr. Manager Business Development) who contributed his

valuable time and gave valuable insights during the development of the project.

I am also thankful to Dr. Manoj Bhatia (Director, Aditya Institute of Management Studies And

Research) and my institution, for giving me an opportunity to undergo this learning experience

Special thanks to Prof. Srinjay Sengupta for her valuable guidance in completing this project and

helping me to understand this project better and supporting me with her expertise on the same to make

my project worth for my own benefit and also for the overall benefit of the objective of the summer

project.

Last but not the least; I take pride in thanking my family, siblings and friends for their much valued

support.




Table of Content:

Sr. No Topic Page

List of Tables

List of Figures

List of Symbols, Abbreviations and Nomenclature (Optional )

1 CHAPTER I : INTRODUCTION 8

1.1 Research Background 8

1.1.1 Detail of company 8

1.1.2 Details of industry 17

1.1.3 Details of my department 22

1.2 Identified Problem 23

1.2.1 Need for study 24

1.2.2 Objectives & Scope 25

2 CHAPTER 2 : LITERATURE SURVEY 27

3 CHAPTER 3 : METHODOLOGY 28

3.1 Type of Project 28

3.2 Target respondents 28

3.3 Assumptions, Constraints and Limitations 29

3.4 Sampling Methods 30

4 CHAPTER 4 : DATA ANALYSIS AND INTERPRETATION 31

4.1 Survey on ‘Indian Stock-broking Franchisees Business Model’ 31

4.2 Top Stock Brokers, And their competitive schemes 39

4.3 AUTO TRENDER (A web based auto-tracking software) 45

5 CHAPTER 5: CONCLUSIONS 58

5.1 Summary of Findings 58

5.2 Suggestions & Recommendations 61

5.3 Conclusions 64

5.4 Directions for Future Research 65

6 SILC details (Summer Internship Learning Curve details) 66

6.1 Annexure 1(a): Main task report

6.2 Annexure 1(b): Work plan & status report

6.3 Annexure 1(c): Suggestion report




List of Table

Table and Caption Page No

Table 1.1 : No. of Stock Brokers & Sub-Brokers in Cash Segment 19

Table 1.2 : No. of Stock Market Participant over a period of time 20




List of Figures

Figures and Caption Page No

Figure 1.1 : No. of Stock Exchanges in India 18

Figure 1.2 : No. of Stock Brokers & Sub-Brokers in Cash Segment 19

Figure 1.3 : FPI Investments in Equity and Debt Segment 20

Figure 4.1 : Composition of Sample Set 33

Figure 4.2 : Area Covered for survey 34

Figure 4.3 : Rating Graph 35

Figure 4.4 : Deposit Requirement 36

Figure 4.5 : Exposure time 36

Figure 4.6 : Brokerage sharing ratio 37

Figure 4.7 : Delay Payment Charges 37

Figure 4.8 : Demat Charges 38




List of Symbols, Abbreviations and Nomenclature

AP Authorized Person

ASBA Application Supported by Blocked Amount

SCSB Self-Certified Syndicate Banks

SE Stock Exchange

Na Not Applicable

DP Depository Participant

RMS Risk Management & Surveillance

SEBI Securities Exchange Board of India

IRDA Insurance and Regulatory Development Authority

AMS Annual Maintenance Charges

RM Relationship Manager




EXECUTIVE SUMMARY

Financial year FY14, was yet another difficult year for the domestic brokerage industry despite

the pick-up in trading volumes in the latter half of the year. The rupee volatility, current account

deficit, fiscal deficit, persistent inflation along with perceived delays in policy formulation

together contributed to erosion in investor confidence in the Indian capital market for a major

part of the year. However, perception of improvement in major macro-economic indicators

buttressed expectations of the economy bottoming out and led to an improvement in the global

risk perception of India in the later part of the last fiscal. In anticipation of a stable national

government post elections in May 2014, the Q4FY14 FII inflows of USD 9.4 billion infused

optimism in an otherwise lackluster year for the Indian capital markets. Not only did the

benchmark indices scale newer highs in March 2014 and continued their upward march in April

2014, even broader based mid-cap indices displayed a significant uptick in Q4FY14.

At the industry level, Equity Average Daily Volumes (ADV) rose by ~22% to Rs. 511 trillion

in FY14 buoyed by the continued rise in volumes of option trading, which accounted for ~78%

of the overall market volumes in FY14 (~76% in FY13). Despite the modest rise of 2% in FY14

after the last few years of steady decline, the proportion of cash volumes to overall traded equity

volumes continued to decline to 6.5% as compared to 7.8% in FY13. On the other hand, futures

volumes rose by ~19% in FY14 while options volumes displayed a strong growth of 25% over

the same period. Anecdotal evidence suggests that more and more non-institutional investors

have been taking a liking to trading in options. A broad based investor segment could ensure

that the dominant share of options volumes to total equity volumes continues over the medium

term




At the industry level, Equity Average Daily Volumes (ADV) rose by ~22% to Rs. 511 trillion

in FY14 buoyed by the continued rise in volumes of option trading, which accounted for ~78%

of the overall market volumes in FY14 (~76% in FY13). Despite the modest rise of 2% in FY14

after the last few years of steady decline, the proportion of cash volumes to overall traded equity

volumes continued to decline to 6.5% as compared to 7.8% in FY13. On the other hand, futures

volumes rose by ~19% in FY14 while options volumes displayed a strong growth of 25% over

the same period. Anecdotal evidence suggests that more and more non-institutional investors

have been taking a liking to trading in options. A broad based investor segment could ensure

that the dominant share of options volumes to total equity volumes continues over the medium

term

Consequently, the domestic institutional brokers’ share has slipped to ~25% while that of the

foreign brokers has strengthened to ~75% compared to the usual one-thirds and two-thirds share

respectively in the past. Also, as a large proportion of incremental flows have been from long-

only funds, the penetration of Direct Market Access (DMAs) has stabilized at ~30-35% of

overall volumes. ICRA notes signs of consolidation in the industry as many small and mid-

sized foreign brokers have cut down operations significantly. In ICRA’s view, as the cycle

turns, large brokers who have withstood this test of the last few years successfully may be better

positioned to ride the possible upside.

On the retail equities side, the going remained tough as the retail participation was at multi-year

lows for a large part of FY14. Post the strong FII inflows in Q4FY14, retail volumes also saw

traction and were higher by 5-25% in March - April 2014 as compared to the average of the rest

of the year. However ICRA notes that the same exuberance has not been seen consistently

across retail brokers and the sustainability of this increase in retail participation remains a

question.




Three trends pertaining to FY14 are worth highlighting. One, recognizing the downturn was

more protracted than earlier estimated, ever rising costs of servicing customers, compliance

costs as well as connectivity costs in an environment seeing pressures on revenue is causing

some of the larger standalone brokers to change their positioning and incrementally focus on

the affluent client segment from mass markets. To control costs, while the sales teams continue

to be pruned down, the brick and mortar models (including franchisee route) are now being

consolidated. Smaller clients are being persuaded to go online as servicing them becomes

increasingly unviable. However, while letting go of some clients can be acceptable to larger

brokers, the smaller brokers cannot afford any such luxury and continue to face challenges

regarding their future.

A Snapshot of Report:

An exhaustive attempt has been made to understand the Indian Stock Broking Industry,

and their franchisee/AP’s business model.

For understanding the Indian Broking Industry, secondary data have been used from

different web based sources. And, in order to understand the franchisee business model

from root level, primary survey has been undertaken, by visiting at different franchisees

places in selected areas in Mumbai.

To understand the different products in stock broking business, the company (SMC

Global)’s booklet, and the knowledge of others who are working in SMC have been

utilized.

An attempt has been made to understand the software that the company uses to trade in

stock market (Technological Part)

Summary of the findings, and suggestion & recommendation have been made

Other ancillary things like Annexures (Timely Work Planning & Execution Report)

have been attached at the end of this report.




CHAPTER 1

1.1 Research Background

1.1.1 Details about the company (SMC Global Securities Ltd.)

stablished In 1994, SMC is a well-diversified financial services company in India

offering services across brokerage (across the asset classes of equities (cash and

derivatives), commodities and currency), investment banking, wealth management,

distribution of third party financial products, research, financing, depository services, insurance

broking and clearing services and real estate advisory services to corporate, institutional, high

net worth individuals and other retail clients.

As one of the financial institutions in India in the broking and financial products distribution

segment, SMC believes that its ability to identify emerging trends in the Indian capital markets

sector and creating business lines and service offerings around them, has given us a competitive

edge over other participants in the industry. It believes in the wide range of products and

services that it offers enables it to build stronger relationships with its clients and cross sell its

products. In addition, its diverse portfolio reduces our dependence on any particular product,

service or customer and allows it to exploit synergies across its businesses.

E




SMC services its clients through a network of 50 branches including overseas office at Dubai

and over 2,400 registered sub-brokers and authorized persons with a PAN-India presence.

Additionally, to support our distribution of third party financial products, SMC has more than

23,000 registered associates/service providers who are engaged with it on a non-exclusive basis

under its banner.

2,521

Employee

50

Branches

23000

Registered

-Associate

2433

Sub-

broker/AP

SMC Quantified




Products & Services

1 Broking

a) Equities & Derivatives

SMC constantly helps clients 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.

b) Currency

SMC believes 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.

SMC Comex International DMCC (part of SMC Group) is one of the clearing and broking

members of Dubai Gold and Commodities Exchange (DGCX). It offers trading in Forex

(USD/INR, USD/EUR, USD/GBP, USD/JPY), Gold, Silver, Crude (WTI & Brent) and Steel

Rebar Contracts.

c) Commodities

SMC Comtrade Limited, a key constituent of SMC Group of Companies, came into existence

at the very start of Commodity Exchanges in India. With nationwide presence, it enables the

Distribution

Wealth Management

Online Trading Broking

Equity & Derivatives, currency,

Commodity, depository,

institutional broking, clearing,

loan against securities

Research

Investment Banking Insurance




retail & corporate investors to diversify their portfolio and enjoy the benefits of commodity

trading

d) Depository

SMC, as a Depository Participant, offers depository accounts to individual investors as well as

to corporate houses, which enables them to trade in the dematerialized environment.

e) Institutional Broking

Institutional Broking Services at SMC cater to the investment needs of leading domestic and

foreign institutional investors backed by research. This division is a one-stop investment

gateway and knowledge repository for the clients, servicing their unique and sophisticated

needs.

f) Clearing Services

SMC is one of the clearing members, which currently manages the clearing services for trading

members in different segments of different exchanges.

g) Loan against Securities

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.

2 Distribution

SMC offers distribution services of IPO, Mutual Funds, Public Issues, Company Fixed

Deposits, Bonds, Acquisitions and Mergers through its network of branches across India. SMC

also provides retail application financing in IPO’s, FPO's & Bonds. SMC assures you a hassle

free transaction experience. It focuses on offering integrated solutions for client’s investment

needs.




3 Research

With the EIC (Economy, Industry, Company) approach, SMCs Research team offers Research

reports covering investment summary, Equity Trend, sector trends, commodity trend, Currency

Trend, along with the trend of world markets,. The same is covered in its weekly magazine

“Wise Money”. SMC have a team of experienced analysts in all the segments such as Equity,

Commodity, Derivatives, Mutual Funds and Currency.

4 Online Trading

SMC Online is gateway of youre 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.

5 Wealth Management

At SMC Investments & Advisors Ltd., it brings together a

Comprehensive knowledge base with over two decades of experience to design customized

solutions. Its dedicated Wealth Managers develop personalized wealth management strategies

for its clients by listening to them and understanding their financial needs and goals. its

investment solutions cater to the financial needs of high net-worth individuals, retail clients,

corporate houses and

financial institutions.




6 Investment Banking

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 Placement and

Debt Syndication, Merger & Acquisition Advisory, Valuation Services and ESOP.

7 Insurance

SMC offers risk management services and a 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.

8 SMC Real Estate Advisory

At SMC Real Estate Advisory, It offers real estate broking

and advisory services. SMC Real Estate has its registered office in Noida and corporate office

in New Delhi. SMC Teams are empanelled with various renowned developers and real estate

service providers with an objective to provide diverse real estate solutions on PAN India basis

to its valued client’s best suited to their needs and requirement.




Trade with SMC easily (At any time, from anywhere)

No matter where are you, Trade with SMC Online’ and you can trade over world’s leading

stock exchanges.

Trade with SMC, by using your favorite device. Use your TAB or SMART PHONE to trade

easily, any time/ anywhere.




Recognition & Awards

In 2015,

Property Consultant of the Year-Residential (ABP News)

Best financial service provider (ASSOCHAM)

In 2014,

Best Equity Broking House – Derivative Segment (BSE)

Best Commodity Broker – (ASSOCHAM)

In 2013,

Fastest Growing Equity Broking House- Large Firm (BSE)

Emerging SME Investment Banker (ASSOCHAM)

& Many More…..




Memberships & Registrations

Trading Member of NSE (Cash, F&O, and Currency), BSE (Cash, F&O), MCX-SX

(Cash, F&O, and Currency), MCX, NCDEX, NMCE, ICEX, ACE, UCX, USE,

NCDEX SPOT & DGCX.

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

MCX, NCDEX, NMCE, ICEX, ACE, UCX, USE, NCDEX SPOT & DGCX

Depository Participant with CDSL, NSDL & Comtrack (SEBI approved Qualified

Depository Participant (QDP))

Category 1 Merchant banker, Registered with SEBI

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




1.1.2 Overview of Industry

With the participation and turnover in India Equity Market is growing strongly in recent years,

the Indian Stock Broking Industry is going through a transformation phase. In last one year the

stock broker industry in India has seen many significant changes.

The new generation of discount brokers has changed the face of the brokerage industry.

Thousands of traders and investors moved to the discount brokers in last one year. The high

performance trading platforms, good customer service and off course saving of over 60% on

brokerage made them try these services.

Unlike traditional broker who spend lot of money on advertising their services, the discount

brokers has grown through word-of-mouth. The discount brokers are the future of the brokerage

industry and if you have not tried them yet, It’s strongly advisable you to choose one of them

and try. You will not regret your decision.

MCX-SX, India's new stock exchange, got permission to trade in equity. This will give stiff

competition to existing players like BSE and NSE in coming years. This is in the benefit of

stock traders and investors as this will eventually bring down the cost of trading.

Announcement of BSE SME and NSE SME exchanges allowing small and medium enterprises

to raise funds from capital market. 13 SME companies listed on the SME platform in the first

year itself and many more are in line.

SEBI introduced 'No-Frill Demat Account' for small investors, which significantly reduces the

AMC charged by the demat account providers. You don't have to pay the AMC, which generally

ranges from Rs 400 to Rs 800 a year, if you hold securities with the value of lesser then Rs

50,000. AMC is limited to Rs 100 if the portfolio value reaches up to Rs 2 lakhs. This will bring

larger retail participation in the stock market.




SEBI has done many IPO reforms this year. One key decision was the allotment of a minimum

number of shares to retail investors to increase the participation in the market. Wider acceptance

of ASBA by investors this year has helped registrars to reduce the IPO share application

processing time significantly.

Unlike many other large economies around the world, the participation in stock market by retail

investors in India is the lowest. The focus of the Government of India this year was to build

policies to encourage more retail investors to choose equity as a long term investment option.

These policies and reforms will start showing results in coming years and the investors and

broking industry will gain the most from this.

As of December 3, 2012, 52 Banks are acting as SCSBs. Investors may submit their ASBA

Applications to these SCSBs in order to apply for Public Issues. The list of SCSBs include the

likes of Axis Bank, HDFC Bank, ICICI Bank, State Bank of India, Punjab National Bank, UCO

Bank, IDBI Bank among others.

Fig. 1.1 No. of Stock Exchanges in India

19 19

1617

14

2 3 3 3 34 4 4 4 3

2011-12 2012-13 2013-14 APR13-DEC13 APR14-DEC14

No. of Stock Exchanges in India

SE(Cash) SE(F&O) SE(Currency)Source: SEBI




Table 1.1 No. of Stock Brokers & Sub-Brokers in Cash Segment

Intermediaries 2011-12 2012-13 2013-14 Apr13-

Dec13

Apr14-Dec-

14

Brokers (Cash Segment) 9,307 10,128 9,411 9,150 7,306

Corp. Brok. (Cash Segment) 4,672 5,113 4,917 4,925 4,196

Sub-Brok. (Cash Segment) 77,165 70,178 51,885 54,846 44,540

Fig. 1.2 No. of Stock Brokers & Sub-Brokers in Cash Segment

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2011-12 2012-13 2013-14 Apr13-Dec13 Apr14-Dec14

Stock Broker & Sub-broker

Brokers Corporate brokers Sub-Brokers Source: SEBI




Table 1.2 No. of Stock Market Participant over a period of time

Intermediaries 2011-12 2012-13 2013-14 Apr13-

Dec13

Apr14-Dec-

14

DP 854 865 857 866 858

Merchant Bankers 200 199 197 198 198

Bankers to an Issue 56 57 59 56 60

Underwriters 3 3 3 3 2

Credit Rating Agency 6 6 6 6 6

Custodians 19 19 19 19 19

Portfolio Managers 250 241 212 221 193

Investment Advisors Na Na 129 70 239

Depositories 2 2 2 2 2

Fig. 1.3 FPI Investments in Equity and Debt Segment

Equity (in cr.)

Debts (in cr.)-100,000

0

100,000

200,000

2011-122012-13

2013-14Apr 13-Dec

13

2011-12 2012-13 2013-14 Apr 13-Dec 13

Equity (in cr.) 43,737 104031 79,709 57,514 74,859

Debts (in cr.) 49,988 28,333 -28,060 -63,592 123624

FPI Investments in Equity and Debt Segment

Equity (in cr.) Debts (in cr.) Source: SEBI




Important Note:

1. Hyderabad Stock Exchange, Coimbatore Stock Exchange, Saurashtra Kutch Stock

Exchange, Mangalore Stock Exchange Ltd, Inter-Connected Stock Exchange of India Ltd,

Cochin Stock Exchange Ltd, Bangalore Stock Exchange Ltd and Ludhiana Stock exchange Ltd

have been granted exit vide SEBI order dated January 25, 2013, April 4, 2013, April 5, 2013,

March 03, 2014, December 08, 2014, December 23, 2014, December 26, 2014 and December

30, 2014 respectively.

2. Delhi stock exchange has been derecognized vide SEBI order dated November 19, 2014.

3. SEBI vide letter dated August 21, 2014 issued no objection to the proposed amalgamation

of United Stock Exchange of India (USE) with Bombay Stock Exchange. USE halted its trading

platform on December 29, 2014 at 12.30 p.m.

5. With the commencement of FPI Regime from June 1, 2014, the erstwhile FIIs, Sub Accounts

and QFIs are merged into a new investor class termed as “Foreign Portfolio Investors (FPIs)”.

All existing FIIs and SAs are deemed to be FPIs till the expiry of their registration.




1.1.3 Details about my Department

I was working in Business Development Department. The main task of this department is to

develop the business chain by bringing prospective franchisees. Stock Market is a place, where

expansion is possible only by making more quality franchisees (Sub-brokers, AP & Channel

Partners)

It is said that ‘Building of structure’ is simple but ‘maintaining the same’ is little difficult. The

same lines are applied here. The employees (Business Developers) are always involved not only

in bringing new franchisees but also maintaining the good relationship with them.

Maintaining the good relationship means;

1 Providing them better infrastructure.

2 Solving their issues/problems related with trading.

3 Offering them bunch of products/services, so that, they can offer to their clients.

4 Technical experts provide them the data about the future expected market move, which helps

franchisees to execute profitable trade.

5 RMS provides them the limit for the better risk management.

As this department is fully responsible for the expansion of business. Their progress on job also

largely depend up their target completion, and their relationship skills.

As, I was placed in this department, initially I was required to do the survey of competitors

franchisees working the selected areas. The main purpose of doing this was to understand the

franchisees business from the deep. And, of course, if you do such kind of survey, you would

understand this much better than by just writing the stuff from secondary data.




1.2 Identified Problem

If you see in Fig 1.2, you will find that over the year, the no. of stock sub-brokers/AP has

declined. However this report will extensively cover the following problems which are faced

by the Stock Brokers (especially by SMC).

1 If you see the no. of stock sub-brokers/franchisees/Authorized Persons have declined

extensively in recent years. So, what are the core reasons behind that?

2 If you see in the market, some franchisees are working well but some are suffering even

too survive in the market. So, what are the reasons behind that?

3 As a stock broker (SMC Global Securities) it’s not too easy to acquire franchisees in the

market. So, why is it like that?

The above problems that have been specified will come across while explain the details of real

market scenario.

However, this report will help you to understand the business model of franchisees/AP. And,

you will get some core information about the role of technical analysis in trading decisions.




1.2.1 Need for Study

As every report says something, and are always helpful as a reference for others. In the very

same way, I am also preparing this report to know/understand/solve the following stuff.

1. Some problems I have already mentioned in the above problem statement. So, off

course, an attempt has been made to understand the reasons behind the mentioned problems.

2. This report will also provide the information about the different kinds of scheme that

under Top 10 stock brokers are offering to its clients and prospective clients to attract more

franchisees/AP

3. This report will also provide the core information about “AutoTrender”. AutoTrender

is a web-based application. It has been developed by SMC indigenously. You will find a full-

fledged information about it in this report.

4. In stock market, ODIN is used intensively for trade, so, you will also find some

information about that

5. An attempt has been made to describe about the franchisees which are working in

different parts of Mumbai (especially in western part of Mumbai).




1.2.2 Objectives & Scope

Objective of this Research/Report

Objective of this research or of this study to provide the general information about the Stock

Market, and, to provide the information about the structure of Stock Broking Companies.

Structures include everything like Trading Platform E.g. BSE INDIA etc., Trading Member

like SMC Global Securities etc., Clearing Houses, Franchisees Business/ Authorized Person.

One important object of this report is to provide the information about the software that SMC

use to provide technical information which helps to predict the market based on real time. And,

with the help of that any person, not necessarily being educated can make profit from it.

As, I visited at many places in Mumbai, So, one of my object from this report to provide the

information about the franchisees working in different parts of Mumbai.




SCOPE/STUDEY AREA

As, this project/study/research will provide the information about the stock sub-broker/AP

doing trading in share market with their respective Trading Member. And, their business model.

And, the kind of support that they get form their Main Trading Member.

And, as I mentioned that this report will also provide the business model of different Trading

Member, and their competitive advantage that they have.

And, especially about the one special software that SMC has indigenously built to track the

market effectively.

The following areas are covered for the above mentioned purpose

1. A field work (survey of competitors in selected areas in Mumbai)

2. Help of different broker’s website have been taken.

3. In order to get the feedback of SMC’s franchisees, callings were undertaken, and also the

main purpose of calling were to solve their issues/problems.

4. And, of course for data purpose, the only reliable source is SEBI’s website, so, some data

were extracted from the SEBI website.




CHAPTER 2: LITERATURE SURVEY

To get the statistical review of Indian stock broking industry, Sebi’s ‘handbook of Indian Stock

broking 2015 has been utilized’. This is the optimum source as for as data is concerned.

Research repot of ‘Abhijit Parikh’ from Amity Global Business School of 2009-11. He was an

intern at SMC. His report has been reviewed to get the basic idea of doing survey.

In order, to get the information about the company (SMC), SMC’s own publishing have been

utilized.




CHAPTER 3: METHODOLOGY

3.1 Type of Project

IT’s a ‘Search and Find Project’. As, an internship, I have selected the topic ‘Indian stock

broking industries and Franchisees business Model’ and got approval from the respective

person in SMC. My main motive is not to define the problem, and build the hypothesis, and

accept or reject the hypothesis.

My motive is to analyze the stock broking industries as a whole. And, also for those who will

study this report, will get an exhaustive idea about the stock mark, business model of Trading

Member, and their sub-brokers, and the analytics that they use for trading.

3.2 Target Respondents

For Franchisees Survey:

For survey, I have visited in some selected areas in Mumbai in Borivali (w), Malad (w),

Kandivali (w), Jogeswari (w), Goregaon (w), Andheri (w), Mahim (w), Matunga (w), Dadar

(w), Ghatkopar (w). I extracted the data (address of SB) from the NSE site. I had selected the

some popular spot, so that I can reach out there easily.

For Understanding the Trading Members Business Model/Rate structure

Help of some specific websites have been taken to compare the revenue model of popular

trading members.




For ‘AutoTrender’

Calling was undertaken to each SMC’s franchisee for finding their status whether they are using

it or not and if there is any problem then at the same time their problems were cured.

3.3 Assumptions/Constraints/Limitations

It has never been easy to do field survey. Because, getting the information from SB is not very

easy.

Constraints:

When I extracted the data form NSE site for Addresses of franchisee, I marked some particular

places, and visited, but what I found that there were no such an offices, and on some address, it

was just a residential address, and some franchisees have even closed their business, and there

were another kind of shops. I visited at ‘around 60 spots’ in above mentioned areas, but, did not

get information from 40 places because of the above stated reasons.

Limitations:

Although lots of rejections, I could be able to manage to get data from around 20 places. But,

whether they have provided me the right data or not, I can’t say exactly. So, I have assumed

that whatever data they had provided me are correct.




3.4 Sampling Method/Data Processing/Tools for Analysis.

Deliberate sampling method has been used for the survey purpose. I have selected those

franchisees which are working under those trading members which are very close competitors

for the SMC Global Securities. Close competitors like’ Motilal Oswal, Sharekhan, ICICI direct,

SBI Securities, IIFL, Religare, Kotak Securities etc.

A Pre-formatted form was provided to me from the Company side itself, and they had given the

instructions that how to collect the data, and what to collect.

Preparation of data, and presentation of the same through the Table & Figure, and suggestion

& recommendation of the same based on the study.




Chapter 4: DATA ANALYSIS AND INTERPRETATION

4.1

Outcome of Survey on

Indian Stock-broking Franchisees Business Model

Now a days, franchisee business is becoming very popular in every country. As far as franchisee

business in stock market is concerned, it is has been in existence for many years. In franchisee

business model, the main broker appoints a sub-broker as its agent who gets or attract retail

client for the main broker. They enter in to a contract called sub-broker-ship agreement, and the

form in which the details are entered is called ‘sub-broker relationship form’. This form govern

the business between 3 parties i.e. the franchiser, the franchisee, and the client. The sub-broker-

ship agreement has to comply with the SEBI rules & regulation.

The sub-brokers/Authorized Person acquires business for the broking firm through his network

or prospective retail clients. And the brokerage firm in turn shares part of the brokerage with

the sub-broker. The sub-broker operates under the brand name of the broking firm.

The broking firm provides the following support

Marketing and promotional support

Back-office support

Research support

Advisory support and

Technical support to the franchisee

Setting up entire infrastructure is either born by the sub-broker (franchisee) or is shared with

sub-broker, depends up the terms of agreement. A sub-broker is required to deposit certain

amount with the broking firm as margin money for covering default risk. It has to sign a sub-

broker-ship agreement with the broking firm. The infrastructure means office space, computer




terminals, internet connectivity and some prior experience in the industry as per requirement

specified by the broker.

The account opening charges are charged by the broking firm which include trading account

and demat account. The agreement form contains the details of brokerage that can be charged

by the franchisee to their client.

The brokerage sharing ratio between franchiser and franchisee could wither be a fixed amount

or a percentage of the brokerage generated. The higher the volume generated by a franchisee

the better is its bargaining power to demand a higher share in the brokerage for itself.

A sub-broker can compete with another on different grounds such as product and services, the

trading and demat account opening charges, the brokerage and other charges. AMC (Amount

Maintenance Charges), exposure limit given to client play very important role in attracting the

clients.




Survey Process & Outcomes

I visited at 57 places in selected areas in Mumbai, mostly in western part, and I had a survey

form, which was provided by SMC. It had contained the relational questions as well as

informational questions. Below, I have mentioned the name of 30 franchisees who currently are

working under different Stock-Broker (Member of Stock-Exchange). I found information only

from franchisees because of different reasons, reasons were like some shops were closed down,

and some have just rejected to give any information.

I have picked up some brokers from below tables, and explained about their business model.

Note: Graphical Presentations are done by taking the name of Franchiser, but the details of

business model is from franchisees side

Area Covered

Fig. 4.1 Composition of Sample Set

7

6

222

3

2

2

11

1 1

Composition of Sample Set

Motilal Oswal Angel IIFL Magnum Anand Rathi Sharekhan

Edelweiss Kotak Arcadia S&S Venture Axis ISE Securities




Fig. 4.2 Area Covered for survey

Franchisees Perception regarding followings relational questions

1) The brokerage firm has created good brand awareness through regular advertisements

2) The brokerage firm provides state-of-art trading facilities.

3) The brokerage firm has effective risk management system.

4) The brokerage firm has competitive rate structure.

5) The brokerage firm provides excellence service support.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree

The above questions are based on satisfaction level, but to represent it in better way I have

assigned ratings to these options.

16%

16%

14%

12%3%

7%

7%

2%

12%

9%2%

Area Covered for franchisees survey

Borivali Malad Kandivali Goregaon Jogeswari Ghatkopar

Dadar Matunga Mahim Andheri Vile Parle




23 23

20

21

20

22 22

21

22

21

Motilal Sharekhan Magnum Angel IIFL Kotak Anand Rthi Venture Edelweiss Axis

Ratings Graph

Stock Broker

Satisfaction Level Ratings

Strongly Agree 5

Agree 4

Neutral 3

Disagree 2

Strongly Disagree 1

Fig. 4.3 Rating Graph

The above chart explains clearly the perception of franchisees about their Trading Member/

Trading Partner/ Franchiser. Motilal Oswal, Sharekhan, got higher ratings, Kotak, Anand Rathi,

Edelweiss stood at second position, Angel Broking, Venture Securities, Axis stood at third

position and remaining IIFL, Magnum stood at last among all above.

Some popular Stock-brokers like Axis, IIFL have got ratings because of either their profit

sharing is not so competitive or other grounds.




Deposit Amount

Fig. 4.4 Deposit Requirement

Exposure Time (RMS)

Fig. 4.5 Exposure time

100000

100000

200000

100000

100000

10000

100000

Deposit

Motilal

Sharekhan

IIFL

Aand Rathi

Angel Broking

India Nivesh

Magnum

Min 10 k, Mx no

0

2

4

6

8

10

12

Motilal Sharekhan IIFL Aand Rathi Angel Broking India Nivesh Magnum

Exposure Time




Brokerage Sharing Ratio

Fig. 4.6 Brokerage Sharing Ration

Delay Payment Charges

Fig. 4.7 Delay Payment Charges

50

60

50

n/a

50

60

75

50

40

50

50

40

25

0 20 40 60 80 100 120

Motilal

Sharekhan

IIFL

Aand Rathi

Angel Broking

India Nivesh

Magnum

Brokerage Sharing Ratio

Stock Broker Franchisee

18

18

2418

18

18

18

Dealy Payment Charges (%)





Demat Charges (Inclusive)

Fig. 4.8 Demat Chages

450

1500

750

750

350

750

350

Demat Charges





4.2

Market Share of Top Stock Brokers

And, their competitive schemes

The top 50 broker-members of leading stock exchanges NSE and BSE account for more than

half of the cash market turnover at these bourses and their market shares have reached record

levels in about two decades.

As per the data released by SEBI in its latest 'Handbook of Statistics on Indian Securities

Market', the top-50 members of the BSE commanded a cash segment market share of 57.5 per

cent during the last fiscal till December 2011. This was their highest market share since 1994-

95, from when the data is available.

At the NSE, the cash segment market share of the top-50 members was even higher at 64.3 per

cent, which is also the highest since the fiscal 1994-95.

The top-25 members alone commanded a market share of 48.3 per cent at the NSE during the

first nine months of the last fiscal, while the same was 42.5 per cent in the case of BSE. These

are also the record high figures since 1994-95.

The top-five members, however, commanded a higher market share of 17.5 per cent at the BSE,

as against 16.7 per cent at the NSE.

The top 10 members of BSE had 26.5 per cent share of cash segment, as against 27.6 per cent

in case of the NSE, while the top-100 members of the BSE and NSE had market shares of 73.7

per cent and 78.8 per cent respectively.

The market share of top brokers has risen sharply from the previous year (2009-10) levels --

rising from 51.9 per cent to 57.5 per cent for BSE's top-50 members, and from 42.9 per cent to

48.3 per cent for NSE's.




In terms of the securities also, the top-traded stocks command very high market share, but were

below their record-high levels during the last fiscal till December 2011. The top-five securities

commanded a 19.6 per cent share of total cash segment turnover at BSE, up from 10.2 per cent

in the previous year but way below a record 50 per cent in 2000-01.

At the NSE also, the share of top-five securities stood at 21.6 per cent -- up from 15.3 per cent

in 2009-10, but much below a high of 83 per cent in 1995-96.

The top-100 securities at the NSE commanded 83 per cent cash segment market share last fiscal

till December 2011, up from 68.9 per cent in previous year. It was, however, far off a high of

98.2 per cent in 1996-97.

At the BSE, the top-100 securities commanded a market share of 75.5 per cent last fiscal, up

from 51.5 per cent in 2009-10. It had touched a high of 97.5 per cent in 2000-01

The above listed stock brokers are the most wanted stock brokers in the Indian stock market.

So, knowing their rate structure & their competitive important is very important. SMC Global

Securities comes under top 10 Indian stock broking industry.




A stock brokerage is an investment services company that is primarily involved in the business

of buying and selling stocks and other financial securities on behalf of its clients in return for

a fees or commission. The industry operates under close government regulations that aim to

protect the investing public. A stock brokerage may not open for business without filing for

appropriate registrations and obtaining certain memberships. A stock brokerage may focus on

different investment services and clients. It must also be able to provide a wide range of security

information to clients for investment research and trade selections. As per Section 65(93) of

Finance Act, 1994 “Stock-broker” means a person, who has either made an application for

registration or is registered as a stock broker, in accordance with the rules and regulations made

under the Securities and Exchange Board of India Act, 1992. A retail brokerage serves only

individual investors, whereas an institutional brokerage has the capacity to handle large order

flows from institutional investors such as mutual funds. The objectives of the study are to study

the performance analysis of Stock Brokering Services and providing findings/results and

conclusions based on analysis. Exploratory research design has been adopted. This particular

study is based on secondary data containing annual number, fees & other charges, type and

turnover of registered stock brokers from 2009-2014. The data is collected from sebi.gov.in,

money control.com and comparestockbroker.com various other reports like magazines,

journals, published books and official websites. The statistical tools applied for data analysis in

the present study are descriptive statistics. It is concluded that stock brokering service plays a

major role in mobilizing funds through its expertise in attracting investors to make investment

by its suitable guidance. It has become lucrative service in terms of earning.




Account Opening Charges of these brokers

If you see Indiabulls charges arountd1375 for demat & trading a/c which is very high, and then

on 2nd and 3rd position are HDFC Securities and Axis Direct respectively charging 999 for the

same. SMC Global Securities charge 499 for demat & trading, which stands at 2nd as for as

lowest charging is concerned.

AMC (Annual Maintenance Charges)

350999

600975

750999

1375750750

550499

0 200 400 600 800 1000 1200 1400 1600

Angel

Bonanza

Sharekhan

Indiabulls

Kotak

SMC

Account opening charges in Rs.

300400

275500

441550

450450

50900

0

0 100 200 300 400 500 600 700 800 900 1000

Angel

Bonanza

Sharekhan

Indiabulls

Kotak

SMC

AMC in Rs.

Source: comparesharebroker.com





Motilal Oswal charges around 900 for annual maintenance of demat & trading a/c, and it stands

very high among the others listed above.

Kotak charges very minimal amount ie Rs 50. And SMC Global does not charge any amount

for maintenance of the same accounts.

Brokerages Charges

There are two kinds of trading. First is Delivery based trading, and the second one is Intraday

trading. In intraday, you have to buy, and sale your stocks/shares on the same day itself. In

delivery based trading, you buy and keep your shares in your demat a/c to sell at future date at

higher price

Generally, the charges for delivery based trading is higher, because it takes T+2 days to get

clear the trading.

Delivery-based Brokerage

0.5

0.5

0.5

0.55

0.5

Higher of 25 or 0.5

0.3

0.5

0.59

0.5-0.9

0.3

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Angel

Axix Direct

Bonanza

ICICI direct

Sharekhan

HDFC Securities

Indiabulls

IIFL

Kotak

Motilal

SMC

Delivery based brokerage in (% of total value)





Intra-day trading Brokerage

For delivery-based trading, Motilal Oswal’s charges rage around 0.5 to 0.9 which is flexible

but at the same time it is high, if we compare it with others. India bulls and SMC charges lest

amount for the same. And, all others charge around 0.5 %.

E.g. Suppose you buy shares of valuing Rs. 100000, the you will pay 0.5 % of Rs. 100000

which would be around 500 as brokerage.

For intra-day based trading, Sharkhan charges 0.1, which stands highest amongst the others in

the above graph. And, for the same, SMC charges least, which is 0.03 %

Motilal charges Nil for buy, and for sale charges 0.25 to 0.4, which is flexible in nature. Even

there is flexibility in case of HDFC charges.

0.06

0.05

0.05

0.05

0.1

higher of 25 or 0.05

0.05

0.05

0.06

Buy-Nil, For sell-0.25 to 0.4

0.03

0 0.02 0.04 0.06 0.08 0.1 0.12

Angel

Axix Direct

Bonanza

ICICI direct

Sharekhan

HDFC Securities

Indiabulls

IIFL

Kotak

Motilal

SMC

Intra-day based brokerage in (% of total value)





4.3

AUTO TRENDER

(A web based auto-tracking software)

SMC AutoTrender is a web based application that has been developed indigenously. The

advantage of this software is that even a beginner of stock market can easily track the market,

and can take his decision whether to buy or sell any particular scrip.

AutoTrender provides information on the basis of time which vary from 5, 10, 15, and 30 and

for the entire day.

You can even include your favorite scrip in your portfolio, so that, you can keep tracking your

favorite scrips, as and when you want.

This software tracks not only to equity segment but also currency, and commodity.

The only limitation of this software is that, you cannot execute trade with this.




Below is the Screen Shot of AutoTrender




Left side of Interface

Left Side Explanation

Trending lines, which show the scrips

behavior based on time interval

Track Your Portfolio Here

Here you can choose, the market

you want to track e.g. World index,

F&O Stocks, Call/Put etc.

This shows the sentiments of stock/index. Stocks

which are likely to go up fall under more than 60

Companies expected result based on technical

and fundamental analysis.

You can choose your sector from here eg. Auto,

capital good, FMCG, IT etc. It reflects the likely

movements in the sector.




Right side of Interface (Sentiment Box)

This sub-box shows the

sentiment of Scrips in

Future & Options trading.

As you can see currently

140 stocks are in buy

sentiments

This sub-box reflects the

Nifty Sentiments based on

time interval.

As you can see in the next

15 minutes 75% sentiments

are for buy in Intra-day

trade. And, so on.

This sub-box reflects the

sectorial sentiments. The

other features are the same

as in the above case.




Middle Part of Interface (When market shows uptrend)

Here you can select the

scrip/index which you want

Here you can select

time interval

Here you can see the sector’s

index, and, you can select a

particular which you want

These are 9 indicators. If more

than 4 indicates green, then

you can go for buy.

Green-Red=Remaining

7, 8 no. indicates likely

up of market




Middle Part of Interface (When market shows downtrend)

This is the same chart as in the case of above chart but, the only difference is, this is showing

downtrend. So, you should sell you holdings (whether it is Equity, Commodity, Currency or

Derivatives product).

Note: At the same time see the time interval also before buying & selling.

E.g. Suppose all the 9 indicator showing down, and you will be thinking to sell you stocks, but

stock, see the trend of you particular stock for the daylight it is still green, the you should hold

your position.




Right hand-side (bull box, bear box, and message box)

This box shows the scrips which were

up at a particular time.

Here you can see some market news

which are trending.

This shows the opposite of bull.

Which were down at a particular

time.




The upper most important part of Interface

It is called as TICKER

1. Up/Down (5Min & 15 Min) (I)

This ticker line shows the trends for the previous 5 & 15 minutes. All the Green

scrips show the uptrend, and all the red colored scrips show the down trend. So, on

the left side all scrips show the uptrend, and on the right side it’s opposite. (I) stands

for Intra-day trading.

2. T_Funda (15Min & Daily) (I)

This ticker line works on 15 minutes & daily time frame. (P) Stands for positional

trading. This ticker line will help you in execution of positional trading.

3. UP/Down (85% all time)

It shows those scrip which were up/down 85% of total trading session.

4. Strength Up/Down

Strength of stock in co-relation with Nifty

5. Nifty (Option)

You can trade in option while using this ticker




Ex. ACC Scrip

Below is the snapshot of ACC, in the next page you will find the details of that




In the above snap, you can see it’s showing down trend for the previous 5 & 15 minutes, for

Intra-day trading it’s not recommended, but at the same time it’s showing up trend for the

previous 30 & 60 minutes, and also the daily trend is up. So, you can enter in positional trading.

You can take advice of your broker for better deal.

Support means, it cannot go below this, if it goes below from one support then there is a chance

that it can tough second support. And, you can apply same funda in case Resistance.

At the same time you can see other scrips of same industry.




Portfolio Management

Above screen shot is of your own portfolio. You can add any stock in your portfolio which you

want to track.

Effect of World Market

The above snapshot reflect the effect of world index on Nifty. E.g. If SP500 moves 1% whether

up/down, reflection on nifty would be 0.57 times. And, so on for the remaining.




Limitations

1. GAPS: Gaps are areas on the chart where the price of a stock moves sharply up or down,

with little or no trading in between. As a result, the stock chart shows a "gap" in the normal

price pattern.

a) GAP UP OPENING:

In case of gap up opening in the market, software will pick the values of indicators, which

normally follow the prices. i.e trend of the market will be seen as UP in case of gap up opening.

So, it is advised that one should avoid taking trades in stocks, if it opens with a gap up. One

should wait for the market to retrace at least 30% from its highest level and then should initiate

trade matching with all the indicators showing UP.

b) GAP DOWN OPENING:

In case of gap down opening in the market, the software will pick the values of indicators,

which normally follow the prices. i.e trend of the market will be seen as DOWN in case of gap

down opening. So, it is advised that one should avoid taking trades in any stock, if it opens with

a gap down. One should wait for the market to retrace at least 30% from its lowest level and

then should initiate trade matching with all the indicators showing DOWN.

2. NON TRENDING MARKET: As the name”AUTOTRENDER” itself suggest, the software

will “automatically” indicate about the “trend” of the market, based on technical studies.

However, in case of sideways or without specific direction, the trades are expected to remain

limited or imperfect.




3. BULK DEALS IN BULL & BEAR BOX: “High probability buys OR sell stock appears in

bull box or the bear box, when matches volume based criteria. However, in case of any bulk

trade in any particular stock, it cannot get filtered. So, one should keep a close watch and remain

updated about any bulk trade happening in any scrip before executing any trade.

4. EXTREME HIGH VOLATILITY: In “AUTOTRENDER”, “5 minute” as a minimum time

frame is included for any trend detection. It means values of the indicators will also update after

every “5 minute” time interval for trend detection after following movement in prices.

However, in case of extreme volatility, i.e. if the market moves sharply in the opposite

directions within 5 minutes or before 5 minutes, then the strict stop loss (SL) should be placed

to avoid unwanted loss.




CHAPTER 5: CONCLUSIONS

5.1 Summary of Finding

Although there were lot of difficulties while doing survey of franchisees but, as always said,

when you do something which is not easy, gives a real experience, and great learning.

Throughout the survey certain key parameters were identified. A stock broking company has

roles to be played while balancing itself with SEBI compliance and compete with the other

stock brokers registered with NSE, and BSE.

Followings are the key areas, improvement of which improve the business relation between

franchisees and franchiser.

1. Brand Development

This is the key to develop any business. Advertising on various means of media is just the one

of the aspect of nurturing the Brand. Followings are the sub-points which helps to improve the

image of stock-broker.

(a) Publishing the reports and various articles of Indian Economy as well as world

economy.

(b) Encouraging youth is becoming the mainstream for source of investors. Keeping the

mock stock is becoming popular day by day. So, it is important to tap this segment.

(c) Renowned person at the top always creates a different image in the mind of

investors. So, for any stock broker having a great personality in financial area gives

an extra edge to the stock-broker.

(d) Keeping events/seminars creates extra edge to attract more franchisees.




2. Risk Management

This is very sensitive area, and should be taken care of because during the boom all stock broker

performs well but, during recession few survive, therefore it is essential not to get carried away

market jump but stock broking firms always need to assess their risk for which they need to

have cost effective and economically viable business models. Here comes franchisee model

into picture which is most cost effective in short run as well as in long run.

3. Viable Franchisee Model

Franchisee business model always needs a viable business model to improve profitability.

Whenever an application is made by sub-broker to the franchiser or stock broking company,

the company involves certain cost such as scrutinizing the relevant documents and their

verification involves certain cost, companies need to send their RM’s to sub-brokers place to

interview them and verifying whether they possess adequate working knowledge because

sometimes the trading software are different and therefore it requires proper training also,

therefore cost incurred to get a new franchisee should be minimize by developing the viable

model.

4. Continuous Back office support

The support of back office is very important, and essential in all the way. Unless there is support

from back office, the success of franchisee business is not possible. Stock broking industry is

very fast-paced industry and need up-gradation as it comes or issued by regulatory authority.




5. Friendly Policies

Carefully planning the business model, consumer friendly policies or ethical practices while

being in operation of business of the stock building firm can go long way can give the company

tremendous market respect, this principle of transparency and ethics should be well imbibed in

the working culture as well as passing the same ethical principles down to the franchisee owner,

this ethical policy and working transparency should be seen in all the aspect of the stock broking

companies.




5.2 Suggestions & Recommendations

Working under stock-broking firm gave me an opportunities to know the franchisee business

model, how they work with co-ordination of trading member

Expansion of franchisee model is possible from two ways

1) Expand sub-broker-ship

2) Attract more individual, HNI customers

This can be called as a dual role of franchisee model. The more the clients to the franchisee,

more the revenue in terms of brokerage for the franchisee as well as franchiser.

1) Margin Deposit

While doing survey, I came to know that the margin deposit for the franchisees are ranging

from 100000 to 200000. SMC is already competitive in this area as it’s minimum margin

deposit is 50000, and it has many other schemes as it increases it’s margin deposit like free

demat a/c, broking a/c

Deposit Amount Rs. 50000, and this amount can also be deposited in other form like FD

certificate.

1 scheme which, I would recommend towards Commerce Graduate/PG Students

Demat a/c Rs. 300 (including trading a/c). And no transaction charge, no brokerage for buy,

brokerage charge only for sale at a rate, as it has currently 0.3 for delivery based, .03 for intra-

day.




2) Brokerage Flexibility

Franchisees must be given brokerage facility which is very flexible in nature, reason for this is

some clients are regular trader with franchisee they demand preferential brokerage and more

exposure then prescribed limit. The franchisee should generally trust franchisee owner to enable

them to sell/buy its stocks on preferential brokerage at the request of franchisees. This will

enable client retention and such highly traded client can bring in some more customers for

franchisee and such a move should always be on case-to-case basis.

3) Excellent Back-Office Network

The underlying truth of franchisee model is to make earning through relationships and through

providing better services to their customer. Today’s stock broking firms are associated with

Arrays of services in financial products due to suppressed margin in brokerage, the only thing

which is viable is to provide arrays of services to their clients at reasonable rates for which

there should excellent back-office support their franchisee during survey I had come across

various franchisee seen consulting for Mutual Fund, Life Insurance and general insurance

products this kind of service can eventually gather more clients for main business for back-

office support is essential for co-ordination.

4) Matching up to client expectations

Client expect great deal of transparency in the business because money involved is client’s hard

earned money therefor client expect highest level of transparency in business there should be

the code of conduct laid down stating that without clients authorized call trading should not

take place also client should be bothered with requests




to buy or sell particular scrip unless the amount required is showing debit balance in their

account.

5) Choose the right candidate for franchisee

Selection of right candidate is essential who is capable and experienced to handle responsibility

to serve client with understanding and ability to manage client’s wealth these candidate in

reality are brand ambassadors of the stock broking firms.

6) Constant Training & Seminar

Training and workshop should be conducted from time to time to enable franchisee to

update/upgrade their skill set a specialized training on soft skills should also be provided which

can help I dealing with client in a proactive manner.

7) Controlling the Operation Cost per franchise

The overall operation overheads cost per franchisee should be controlled most effectively the

cost incurred per franchisee shouldn’t be more than 20% of the income generated from each

franchisee if this ratio of overhead expenditure and subsequent income is not managed well

then franchisee model cannot be said to be effective and there the branch model in viable




5.3 Conclusion

Success of stock-broking franchisee model depends up on the certain ingredients, which are

controllable or uncontrollable. Uncontrollable includes PESTLE. Political, Economical, Soci-

Culture, Technological, Legal, and Environmental. Out of these the one factor which is

Economical factor can be minimized, if a strong research, and prediction is done before

anything happens, so the loss of stock-market participant can be minimized eg. Hedging.

Internal factors like quality service, competitive offerings, securing brand image, strong

investor relations are the controllable factors which should be monitored continuously, so that

in growing stock market industry, you should also grow without losing your brand.




5.4 Direction for future research

For those who will be referring this project, I would like to given few tips, so that they can make

their project report efficiently. Following points are very useful, and must follow before starting

field survey.

1) NSE database for addressees of franchisees are not always up-to-date. So, while selecting

the address, please ignore the address which belong to society. And, mostly selected the

address which starts with office No.

2) Choose the right time to go in to their office. In morning time from 10 to 1, and then after

3:30. This is because in running market, they will not even listen you. So, it is recommended

to go after 3:30 ‘o’ clock.

3) Refer SEBI website for authentic statistics.

4) Read more about the company in which you are working, and read the previous survey

report. You will get the idea of how to do field survey, and should be in report to present it

in a better way.




The End