A

PROJECT REPORT

ON

“A study of factors impacting participation of retail investor in India”

A Project report Submitted in the partial fulfillment of the requirement

for the degree of

“MASTERS OF BUSINSS ADMINISTRATION”

OMKARANANDA INSTITUTE OF MANAGEMENT ANDOMKARANANDA INSTITUTE OF MANAGEMENT AND TECHNOLOGY, RISHIKESHTECHNOLOGY, RISHIKESH

Submitted to:- Submitted by:-

Mr.Pramod UNIYAL Anil Chamoli

Asst. Prof. MBA 3rd

OIMT

CERTIFICATE

This is to certify that the project report “A study of factors impacting participation of

retail investor in India” has been prepared out by Anil Chamoli under supervision and

guidance. The project report is submitted towards the partial fulfillment of 2 years, full

time Masters of Business Administration.

Candidate declaration

I, Anil chamoli, student of MBA 3RD Semester, Omkarananda Institute of Management and

Technology, here by declare that the project report titled “A study of factors impacting

participation of retail investor in India” is completed & submitted under the valuable

guidance of “MR. ALOK PRAKASH” faculty of management. It is an original work. The

imperial finding in this report is based on the data collected by me. This project has not been

submitted to Omkarananda Institute of Management and Technology or any other university for

the purpose of compliance of any requirement of any examination or degree.

Director Asst.Prof.

Dr.Aditya gautam Pramod Uniyal

OIMT OIMT

PREFACE

Summer training project is necessary part for fulfillment of M.B.A course. The emphasis in the

project is providing the study and an insight into Indian FMCG Business Scenario.

The summer training project is designed to provide participation of MBA program as on the job

experience. This has given a chance to try and apply the academic knowledge and gain insight

into corporate culture. This helps in developing decision-making abilities and emphasizes on

active participation by the student.

I undertook my project in MOTILAL OSWAL SECURITY LTD. a leading bottler and

marketing partner of the Pepsi Foods. During the training, I had worked on the project “A study

of factors impacting participation of retail investor in India””

I gained valuable experience & knowledge during the survey. The project consists of my

findings after tabulation of collected data, then analyzed conclusions were drawn and finally

suggestions were put forward.

EXECUTIVE SUMMARY

The increasing trend towards globalization and industrialization has increased the trend of competition in the financial market, intensified by the coming of Non Banking Financial Company (NBFC), like motilal oswal Securities, and so has the need for the marketing of financial instruments has intensified.

NBFCs are financial institutions are ones which provide banking services without meeting the legal definition of a bank, i.e. one which does not hold a license. They are not allowed to take deposits from public. Nonetheless all the operations of these institutions are covered under banking regulations.

This project is completely focused to identify some of the demand drivers, rather factors that make people invest in such institutions and in this regard what are the various differentiating factors that provide motilal oswal Securities a competitive edge over other players in the market.

There has been an emphasis on the various businesses and of motilal oswal Securities that make it standout in this league, rather than being a “me too” product. In words of Al Ries and Jack Trout, “differentiate or die”.

BACKGROUND AND LITERATURE REVIEW

The Securities Brokerage Industry is cyclical and comprised of two distinct types of businesses. Brokerages, also known as financial services companies, strive to meet the investing needs of their clients, and exchanges facilitate securities trading. Net profits correlate to the performance of the broader equity market.

In this market with less differentiated products and many players, there exists an oligopoly (saying in book terms), characterized by tough competition, entry and exit barriers and many more.

1. Al Ries and Jack Trout, in his work said “differentiate or die”, too many less differentiated products creates a kind of information overload, and in this clutter of too much information, products which are not properly differentiated or advertised just end up becoming a me too product. To avoid it every marketer needs to position his/ her products in a way that makes a specific image in the minds of consumers.

2. Jack Miller, in his work published on June 03, 2010, talked about how investors make investment decisions. He broke the process of decision making in pulling the buy or sell trigger. According to him investors made the investment decisions in the ways like simple screening, then lateral recommendation, followed by piggy bank investing.

3. According to U.S. Securities and Exchange Commissions’, one of the articles: investors first evaluate their current financial roadmap, and then they evaluate their comfort zone in taking on risk. Consider an appropriate mix of investments, create and maintain an emergency fund, consider dollar averaging, consider rebalancing portfolio occasionally, and in the process also try to avoid the circumstances that can lead to fraud.

4. Peter Roger Eiving (1970) identified those factors which motivated and guided the investment decisions of the common stock investors. The factors include (i) Income from Dividends (ii) Rapid Growth(iii) Purposeful Investment as a protective outlet of savings (iv) Professional Investment Management.

5. Shanmugam (1990) examined the factors affecting investment decision and found that the investors are high risk takers. The investors possessed adequate knowledge of Government regulations, monetary and fiscal policy.

6. Warren et al [13]. (1996) studied the lifestyle and demographic profiles of investors based on the value and types of investment holding.

7. Krishnan and Booker (2002) [8] analyzed the factors influencing the decisions of investors who basically used analysts’ recommendations to arrive at short term decision to hold or to sell a stock

OBJECTIVE OF THE PROJECT

An increasing trend has been observed in demand for the services of Non Banking Financial Institutions nowadays. This project is aimed to find out factors affecting investment decisions in these firms. There has also been emphasis to find out the plus points of Motilal Oswal Securities. In short:

To find out the factors affecting investment decisions in a NBFC. To analyze the scenario of retail investor in Haridwar. What are the various factors that they consider before investing.

METHODOLOGY

This is a two dimensional project focusing on two aspects, as already mentioned (objectives). For my project work I have focused on both primary and secondary data as well.

Basically any research work proceeds as:

2. Hypothesis of the Study .The study tested the following hypothesis.H1 : The retail investors’ firmly believe that many factors do influence their future investment. i.e Value of Equity Shares

IV. Methodology of the StudyA. Sources of DataThe research design for the study is descriptive in nature. TheResearchers depended heavily on primary data. The requireddata were collected from the retail investors living in Haridwar througha Structured Questionnaire

B. Sampling Size and ProcedureThe sample size covered 30 retail investors who were spreadthrough five different Investment Centers in . Theimportant Investment Centers, where large number of investorsis available, are identified for this study using PurposiveSampling Method. In order to collect referred information fromthe retail investors, the sampling design was carefully decidedand properly chosen for the study. Totally five important centersin Haridwar were identified and those centers are Religare share broking, Shri financial services,. From each identifiedInvestment Centre, five approved stock brokers were chosenand eight investors were contacted with the help of stockbrokers. However, on a detailed scrutiny of the questionnaires,it was found that 25 of them had given incomplete informationand hence those 25 responses could not be used for furtheranalysis. Thus, this study was based on the responses by 375selected respondents from the retail investors.

For this project my challenge was to find out the factors and the scenario of individual customer. For which I conducted a descriptive research.

I have collected primary data through questionnaire and survey. For secondary data, company records, some reviews in economic times, data on

moneycontrol site, some online research works have been referred. I have taken 11 factors in my survey so my population size is of 66. I have targeted only

investors, who were customers, general investors and company employees. A factor analysis has been run on the data to find the most influential factor. For rest my own analytical skill is used.

SCOPE OF THE PROJECT

This project has been a great insight for me as I came to know about stock market, demat accounts, buying and selling of dematerialized securities, who are brokers, how to make investment and how to track portfolio of investments.

The project is aimed to cover maximum factors affecting the demand drivers and competitiveness.

Nowadays even the government is taking up steps to find such factors to give a boost to the Indian financial system.

LIMITATIONS OF STUDY

The population size is limited to Haridwar area. There may be interviewer bias or judgmental bias. There may be redundancy of data or area surveyed. Due to time and resource constraints some important segment of population might have

been missed out.

INDUSTRY OVERVIEW

The Financial Market

The financial industry or financial services industry includes a wide range of companies and institutions involved with money management, lending, investing, insuring and securities insurance and trading services. The following institutions are a part of the industry:

Banks Credit card issuers Investment companies Investment bankers Securities traders Financial planners Security exchanges

Products of the financial market:

The major crises that have shaped the modern financial industry are:

The Great Depression(1929) Black Monday(1987) Asian Financial Crisis(1990) Stock Market Downturn(2002)

Sub-prime Crisis(2007)

The Classification of financial market in India

THE BROKERAGE INDUSTRY

The brokerage industry is currently characterized by a large number of companies (private or unorganized). In effect it is a fragmented industry with a large number of participants. The industry thus has ‘monopolistic competition’, i.e. a large number of firms selling a slightly differentiated product.

Indian stock broking industry is the oldest trading industry that has been around even before the establishment of BSE in 1875. Despite passing through a number of changes in post liberalization period, the industry has found its way towards sustainable growth. With the purpose of gaining deeper understanding about the role of Indian stock broking industry, in the country’s economy, here are some data gleaned from analysis of secondary research.

On the basis of recent research:

On the basis of geographical concentration, Western region has maximum of 52%, around 24% are located in the North, 13% in South, and 10% in the East.

3% of firms started broking operations before 1950, 65% between 1950-1995, and 32% post 1995.

On the basis of terminals 40% are located in Mumbai, 12% in Delhi, 8% in Ahmadabad, 7% in Kolkata, 4% in Chennai, and 29% in other cities.

From the study it was found that 36% of firms trade in cash, 27% in derivatives, and 20% in cash, derivatives and commodities.

In the cash market, 34% trade in NSE, 14% in BSE, 45% in both. Whereas in debt market, 31% trade in NSE, 26% trades in BSE, and 43% in both.

Majority branches are located in North, i.e. 40%, 31% in West, 24% in South, and 5% in East.

In terms of sub-brokers, around 55% are located in South, 29% in West, 11% in North, and 4% in East.

Trading, IPOs and Mutual Funds are the top three products offered by 90% of firms offering trading, 67% IPOs, and 53% offering Mutual Fund transaction.

In terms of various areas of growth, 84% of firms have shown their interest in expanding their institutional clients, 66% firms intend to increase FIIs, and 34% are interested in setting up Joint Ventures in India and abroad.

In terms of IT penetration 62% firms provide their website, and 90% have email facility.

Brokerage terminals in various regions:

Almost 52% of the terminals in the sample are based in the Western region of India, followed by 25% in the North, 13% in the South and 10% in the East. Mumbai has got the maximum representation from the West, Chennai from the South, New Delhi from the North and Kolkata from the East.

Mumbai also has got the maximum representation in having the highest number of terminals. 40% terminals are located in Mumbai while 12% are from Delhi, 8% from Ahmadabad, 7% from Kolkata, 4% from Chennai and 29% are from other cities in India.

Branches and sub-brokers in various regions:

The maximum concentration of branches is in the North, with as many as 40% of all branches located there, followed by the Western region, with 31% branches. Around 24% branches are located in the South and East constitutes for 5% of the total branches of the total sample.

In case of sub-brokers, almost 55% of them are based in the South. West and North follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total sub-brokers.

Analysis of brokerage industry based on Michael Porter’s 5 factor model

Competition

The industry is now in a fairly high growth phase. However the brokerage industry is very cyclical and is impacted by activity levels in the markets. During the downturns such as 2008-2009 periods, the smaller players were squeezed out of the business. As a result there is a contrast consolidation happening in the industry.

Potential of new entrants

A new entrant in addition to the above also needs a reasonable level of capital to fund the working requirements of the business (finance to customers, deposits with exchanges, etc).

The scale requirements are increasing constantly and as a result a new entrant will require higher levels of investments in the future to enter the business. As pointed out, it is likely to see many entrants in the industry. On the contrary, it is likely that the smaller players will exit by selling out or closing.

Power of the supplier

Not much relevant in most segments except investment banking, where employees control client relationships and hence have to be highly compensated.

Power of the buyers/customers

This is important in the institutional brokerage business which involves high volume and low brokerage charges. The extent of buyer power is very low to non-existent in all kinds of retail segments.

Threat of substitutes

The products offered by all firms in this industry are more or less differentiated. Investing rather saving in the bank rather than investing in a brokerage firm can be one option; else this is not applicable for this industry.

In a summary the industry has a moderate to low level of competitive advantage. There is low level of customer lock-in and customer will move his or her business if the brokerage rates are not competitive with rest of the industry. The only competitive advantage for companies in this sector comes from size and scale which enables them to leverage their size to reduce average costs and thus make a profit on low brokerage margins.

In addition to high fixed costs, the industry has very low margin cost. As a result the cost of adding an additional customer is low and per transaction costs are limited. Due to this reason, we are seeing a constant pressure on the brokerage rates has intensified the competition in the industry and is resulting in consolidation with the top players.

The basic brokerage business is now sometimes a loss leader to enable the brokerage firm to acquire customers and sell other products such as wealth management services, or third party mutual funds. This segment will provide adequate returns in the future for a company with scale.

DEMAND AND SUPPLY DRIVERS OF THE INDUSTRY

Demands for financial products are driven by risk-reward assessment, which considers:

Potential yield

The expectation of financial incentives or return on investment is a great demand driver which tempts people to invest or engage into transactions of the financial markets.

Risk Rating

Higher risks assumes higher profits and vice versa. Risk ratings are a vital point when making a decision to park ones resources into this industry.

Liquidity

To maintain strong and flexible liquidity position people tend to invest in financial markets, in order to meet their contingencies.

Availability of information

The more disclosure, the more is information symmetry, and so will be visibility and access to returns and so will be the expectation from this market increase along with investment.

Access to alternatives

More the disclosure in the market more will be the competition with more profits, so more will be the choices and access to alternatives to park ones resources.

The major supply drivers are:

Money supply

The supply of money has a big role to play in this industry, the more the supply of money in this industry; more will be the availability of financial services and products.

Interest rates

Interest rate determines the terms of trade, fluctuations in interest rates can entirely fluctuate this industry. Higher interest rate= will give higher returns, with great supply no doubt but borrowing or ascertaining the real market value may become difficult.

Inflation

Value of a currency appreciates and depreciates with the rates of inflation. Inflation thus serves as a great supply driver in this market. As in high inflation with higher supply of money there will be higher supply and vice versa.

Economic conditions

Rates of inflation, the upsurge or downturn in the domestic and global economy is another supply driver which is beyond the control of any business firm.

Government Regulations

The attitude of the government towards the trade policies and various other financial firms and industry matters a lot. Various restrictions or duties or taxes may restrict the supply and may hinder the growth of this industry. And will flourish with the ease of trade.

GLOBAL AND DOMESTIC ECONOMIC ENVIRONMENT OF

The financial industry

According to global 2000 (annual report by Forbes), seven of the top 10 companies belonged to the financial industry. These included the Citygroup, Bank of America, HSBC Holdings, and JPMorgan Chase. Their combined revenue in 2007 was worth $647 billion, down from 2006 high of $785 billion.

According to Fortune 500 rankings, in 2006 financial services generated $257 billion in profits, a third of total Fortune 500 profits. In 2008, however, they lost a staggering $213 billion, a total swing of $470 billion. Big players on the list, such as Citygroup and Bank of America, may only be alive today just because of government money.

The financial industry is an industry in itself as well as an ancillary that supports other industries. Trade and commerce across the world would come to standstill if there was no means to fund, pay and protect the transactions.

The Brokerage industry

Domestic Economic Environment

In 1991, Manmohan Singh, as Finance Minister in Narasimha Rao’s government, embarked on a programme of liberalization prompted by an acute balance-of-payment crisis.

Indian economy growth factors

Indian Brokerage Industry-Pre 2000

Post liberalization period. Business restricted to friends and relatives. Settlement T+15 days. Low trade volumes- No derivatives trading allowed. Lack of investment in technology- No front or back office software.

Indian Brokerage Industry 2000-2008

Venture capital funding for brokerage businesses. Investment in technology- Front end and back end. National presence. Integrated risk management system. Significant increase in trade volumes- Derivatives trades play a major role.

Margin funding for the retail clients.

Indian Brokerage Industry 2009 onwards

Paradigm shift from transaction oriented to research/ portfolio based advisory. Focus on franchisee based business model. Dematerialized accounts access for international trade. Access to international stock exchange.

Trading on hand held platform (mobile phones etc) allowed.

Current Global Economic Environment The global economy is slowly recovering from a deep recession, with significant risks

remaining. Countries are looking for ways to achieve sustainable economic growth and job creation. Competitiveness has become more important than ever

-Globalization will continue and strong international competitors are emerging.-Companies are re-examining everything in terms of how and where they operate.

India has achieved a long-term competitive transformation, but the next stage of development will be more challenging.

Critical Success Factors of the Industry

Seeing the overall brokerage as a single unit, the key success factors or the winning strategy of Indian Brokerage Industry is a mixture of:

People Process Technology

There are the three ingredients that together create value for both international and domestic customers.

By people it indicates to the service providers or the employees of the various firms of this industry, who day in and day out interact with the customers and provide them services and satisfy them.

Transparency of the process followed and disclosure method is yet another success factor. The settlement of transactions is generally done in a process of T+2 days. And the government support even still plays a very vital role in forming the rules and norms of such processes.

Technology enables to stay competitive and on edge with the competitors; facilitating the ease of processes and speed and to maintain and be up to date. This serves as a great success of the brokerage industry.

All these factors together help create value to the customer.

VARIOUS MEASURES TAKEN BY INDIAN GOVERNMENT TO IMPROVE THE SITUTATION OF INDIAN STOCK MARKET

MEASURES OBJECTIVES

Allow foreign institutional investors to invest in equity and debt markets.

Liberalization of stock market to attract foreign investment in order to boost economic growth.

Expanding the product range offered by the stock exchanges.

Bring Indian market at par with the international standards and diversify product portfolio.

Allowing Indian companies to issues ADRS and GDRS.

Allowing Indian companies to invest abroad.

Facilitate market integration and give freedom to the companies.

Access to more funds for investment.

Divestment of government ownership Facilitate growth through privatization

Strengthening of institutional To ensure transparency.

framework in primary and secondary markets Demutualization

Investor protection. Provide a standard framework for operations. Deregulation. Reduces the conflict of interest.

BSE and NSE to set up and maintain corporate bond reporting platforms

To capture all information relating to trading. Investor protection

Making PAN compulsory Strengthening KYC (Know Your Client)

PESTEL ANALYSIS OF BROKERAGE INDUSTRY

PESTEL analysis stands for "Political, Economic, Social, Technological, Environmental and Legal analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.

Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make

decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands.

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates.

Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality and lead to innovation.

Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

LEGAL ISSUES WITH A BROKERAGE FIRM

Securities Exchange Act of 1934 (Exchange Act)

In contrast to the Securities Act, the Exchange Act primarily regulates transactions of securities in the secondary market - that is, sales that take place after a security is initially offered by a company (the issuer).  These transactions often take place between parties other than the issuer, such as trades that retail investors execute through brokerage firms.  The Exchange Act operates somewhat differently from the Securities Act.  To protect investors, Congress crafted a mandatory disclosure process that is designed to force companies to make public information that investors would find pertinent to making investment decision.  In addition, the Exchange Act provides for direct regulation of the markets on which securities are sold (the securities (stock) exchanges) and the participants in those markets (industry associations, brokers, and issuers).

Monetary and Fiscal Policies

In the securities industry there exist regulators who have established a set of rules and regulations that administer the entire industry. Financial markets, depositors, clearing houses, and vendors work together to regulate the investment in the industry.

The 3 major US government agencies that govern the securities industry and frame monetary and fiscal policy, they are: the Federal Reserve System, the Securities Exchange Commission (SEC), and the Office of Comptroller of the Currency.

Federal Reserve System

The Federal Reserve System is a government institution created to administer nation’s credit and monetary policies and to oversee the banking industry as well as certain aspects of the broker activity, such as credit.

The Fed is responsible for establishing and enforcing monetary policy and for regulating the amount of credit outstanding. The fed does this by establishing the bank discount rates and the rules for credit. The market’s response to the Fed’s determination to control inflation by raising and lowering the discount rate affects long term interest rates, which have a significant impact on the securities’ market.

Securities Exchange Commission

The Securities Exchange Commission (SEC) is the primary regulatory agency that oversees the securities industry. The SEC is an independent bipartisan, quasi-judicial agency of the government. The laws administered by SEC deal with securities and finance and seek to provide protection for investors in their securities’ transactions.

Office of the Comptroller of the Currency

The Office of the Comptroller of the Currency’s (OCC) principal function is supervising the national banking system. The OCC must approve the establishment of new national banks, bank mergers involving national banks, and the liquidations of national banks.

COMPANY OVERVIEW

Motilal Oswal Securities Ltd.

Motilal Oswal Securities is a leading research and advisory based stock broking house of India, with a dominant position in both institutional and retail broking. Asia money Brokers Poll 2005 has ranked us the best Indian brokerage firm. There are various other categories where we have been rated number one – most independent research, sales and service etc by the Brokers Poll.

In March 2006, AQ Research, a firm that analyses the accuracy of a broker’s research call, declared Motilal Oswal Securities the best research house for Indian stocks.

Motilal Oswal Securities has witnessed rapid organic growth due to favorable market conditions as well as efforts put in by the company itself. FY05 and FY06 saw the company grow inorganically through acquisition of three significant regional broking firms from Andhra Pradesh, Karnataka and Kerala. Over a period of time many more regional broking firms may be acquired to gain solid footing in various regions of India.

The company was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices, respect for professionalism, research-based value investing and implementation of cutting-edge technology have enabled us to blossom into an almost two thousand-member team.

Our institutional business unit has relationships with several leading foreign institutional investors (FIIs) in the US, UK, Hong Kong and Singapore. In a recent media report we were rated as one of the top-10 brokers in terms of business transacted for FIIs.

Our unique Wealth Creation Study, authored by Mr. Raamdeo Agrawal, Managing Director, is now in its eleventh year. Investors keenly await this annual study for the wealth of information it has on how companies created wealth during the preceding five years.

The organization finds its strength in its team of young, talented and confident individuals. Qualified professionals carry out different functions under the able leadership of its promoters, Mr.Motilal   Oswal and Mr.   Raamdeo   Agrawal Stringent employee selection process, focus on continuous training and adoption of best management practices drive the quest to achieving our Vision.

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices, respect for professionalism, research-based value investing and implementation of cutting-edge technology has enabled us to blossom into an almost 2000 member team.

Today we are a well diversified financial services firm offering a range of financial products and services such as

    

Wealth Management

    

Broking & Distribution

    

Commodity Broking

    

Portfolio Management Services

    

Institutional Equities

    

Private Equity

    

Investment Banking Services and

    

Principal Strategies

We have a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. We are headquartered in Mumbai and as of June 30, 2008, had a network spread over 450 cities and towns comprising 1,496 Business Locations operated by our Business Partners and us. As at June 30, 2008, we had 486,648 registered customers.

In 2006, the Company placed 9.48% of its equity with two leading private equity investors based out of the US – New Vernon Private Equity Limited and Bessemer Venture Partners.

The company got listed on BSE and NSE on September 9, 2007. The issue which was priced at Rs.825 per share (face value Rs.5 per share) got a overwhelming response and was subscribed 27.18 times in turbulent market conditions. The issue gave a return of 21% on the date of listing.

As of end of financial year 2008, the group networth was Rs.7 bn and market capitalization as of March 31, 2008 was Rs.19 bn.

For year ended March 2008, the company showed a strong top line growth of 91% to Rs.7 bn as compared to Rs.3.68 bn, last year. New businesses like investment banking, asset management and fund based activities have contributed to this growth.

Rs. Crores FY 2007- 08 Growth (YoY)

Total Revenues 701 91%

EBIDTA 270 97%

PAT 156 100%

Credit rating agency Crisil has assigned the highest rating of P1+ to the Company’s short-term debt program.

Awards

For his work and contribution to the capital markets, Oswal has received several awards including

Special Contribution award to Indian Capital Markets’ Award by Zee Business. The Hall of Fame for Excellence in Franchising’ by Franchising World Magazine

Champion of Arthshastra’ by the Rotary Club .

Motilal Oswal Securities won the Best Performing Equity Broker (National) Award at CNBC TV18 Financial Advisor Awards 2013 held in Mumbai.

Motilal Oswal Financial Services Ltd's Analyst Mr. Jinesh Gandhi won the Best Market Analyst Award for the categories Equity-Auto at ‘India`s Best Market Analyst Awards 2013 organized by Zee Business.

Motilal Oswal Securities was declared "Best Equity Broker" at Bloomberg UTV Financial Leadership Awards in April 2012.

Motilal Oswal Securities was awarded with Best Performing National Financial Advisor Equity Broker Award in 2012, second time in succession.

Motilal Oswal Financial Services was honoured with an award for Best Use in PR in Financial Services Category at India PR & Corporate Communications Awards 2012.

Motilal Oswal Securities received Best Equity Broking House Award by BSE IPF-D&B Equity Broking Awards 2011

Motilal Oswal Mutual Fund's MOSt Shares M50 ETF was adjudged Most Innovative Fund of the Year by CNBC TV18 CRISIL Mutual Fund Award 2011

CNBC TV18 awarded Motilal Oswal the Best Performing Equity Broker Award in 2010 at CNBC TV18 Financial Advisor Awards 2010

Best Capital Markets & Related NBFC Award for FY11 by CNBC TV18 India Best Banks & Financial Institutions Awards 2011

Motilal Oswal IB team won the Asia Pacific Cross Border Deal of the year award in 2010 and the CEO Ashutosh Maheshvari got India M&A Investment Banker of the Year award

Motilal Oswal Securities Ltd. rated as No.1 Broker in ET Now – Starmine Analyst Awards 2009[10].

MOSL awarded 'The Best Franchisor in Financial Services' by Franchisee. World Magazine 2008 for the second consecutive year.

Motilal Oswal Securities Ltd. wins the “Best Research as Research Showcase Partner” at RESEARCHBYTES IC AWARDS 2014. The winners were selected from a poll of over 1500 Fund Managers/Analysts!.

Motilal Oswal Securities received two awards for its equity research in IT and commodity (forex) segments at India's Best Market Analyst Awards 2014, India's biggest Financial Market Awards also called as ZEE Business Awards 2014.

Achievements

Oswal has received the Rashtriya Samman Patra awarded by the Government of India for being amongst the highest income taxpayers in the country for a period of 5 years from FY95–FY99.

Oswal is associated with various social organisations. He is the President of the Jain International Trade Organisation (JITO) and a Trustee of “Agarwal-Oswal Chhatravas” of the Rajasthan Vidyarthi Griha; among others

He has authored two books of quotations on ‘The Essence of Business & Management’ and ‘The Essence of Life’.

MOSt Vision

 

MOSt Guiding Principles & Core Values

Customer interest is paramount

Ethical and transparent business practices

Respect for professionals,associates and business partners

Research based value investing

Cutting edge technology to ensure world-class customer service

  Shareholding Pattern at on June 30, 2008

As of 30th June, 2008; the total shareholding of the Promoter and Promoter Group stood

at 70.37%. The shareholding of institutions stood at 9.78% and non-institutions at 12.26%.

Our Business StreamsOur businesses and primary products and services are:

Wealth ManagementFinancial planning for individual, family and business wealth creation and management needs. These are provided to customers through our Wealth Management service called ‘Purple’

Broking & Distribution services

Equity (cash and derivatives)

Commodity broking

Portfolio Management Services

Distribution of financial products

Financing    

Depository Services    

IPO distribution

We offer these services through our branches, Business Partner locations, the internet and mobile channels. We also have strategic tie-ups with State Bank of India and IDBI Bank to offer our online trading platform to its customers.

Commodity BrokingThrough Motilal Oswal Commodities Broker (P) Ltd our fully owned subsidiary; we provide commodity trading facilities and related products and services on MCX and NCDEX. Besides access to the best of research in the form of Daily Fundamentals & Technical Reports on highly traded commodities, our clients also get access to our exclusive Customized Trading Advice on both the trading platforms. We offer these services through our branches, Business Partner locations, the internet and mobile channels

Portfolio Management Services Motilal Oswal Portfolio Management Services offer a range of investments solutions through

discretionary services. We at Motilal Oswal have helped create wealth for our customers through our Portfolio Management Services. Our knowledge of the markets together with our understanding of our customers and their risk profiles has helped us design a range of portfolio offerings for our clients. These include the Value PMS, Bulls Eye PMS, Trillion Dollar Opportunity and Focused Portfolio Series I. As of June 30th, 2008, the assets under management of our various portfolio schemes stood at Rs.6.92 bn.

Motilal Oswal group has applied to the regulatory bodies for a license to operate as a Domestic Asset Management Company (Mutual Fund) and we expect to begin operations soon.

Institutional EquitiesWe offer equity broking services in the cash and derivative segments to institutional clients in India and overseas. These clients include companies, mutual funds, banks, financial institutions, insurance companies, and FIIs. As at March 31, 2008, we were empanelled with over 300 institutional clients including 191 FIIs. We service these clients through dedicated sales teams across different time zones.

Investment BankingWe offer financial advisory services relating to mergers and acquisitions (domestic and cross-border), divestitures, restructurings and spin-offs through Motilal Oswal Investment Advisors Private Ltd. (MOIAPL)

We also offer capital raising and other investment banking services such as the management of public offerings, private placements (including qualified institutional placements), rights issues, share buybacks, open offers/delistings and syndication of debt and equity.

MOIAPL has closed 23 transactions in 2007-08 worth US$ 1.8 billion and had 18 mandates in hand as at March 31, 2008.

Private EquityIn 2006, our private equity subsidiary, Motilal Oswal Venture Capital Advisors Private Ltd (MOVCAPL) was appointed as the investment manager and advisor to a private equity fund, India Business Excellence Fund, which was launched with a target of raising US$100 mn. The fund is aimed at providing growth capital to small and medium enterprises in India, with investments typically in the range of US$3 mn to US$7 mn.

MOVCAPL will manage and advise the fund and other private equity funds, which may be raised in the future. In its final closing, in December 2007, the fund obtained commitments of US$125 mn (Rs.4,875 mn) from investors in India and overseas. The Fund has deployed/ committed $ 58 mn across 8 deals.

MOVCAPL has recently launched an INR 750 crores domestic Real Estate Private Equity Fund called “India Realty Excellence Fund” sponsored by Motilal Oswal Financial Services Ltd.

Principal Strategies GroupFor effective management of treasury operations and to capitalize on market opportunities, the Group has set up a 30 member team which would be responsible for effective deployment of funds into different trading and arbitrage strategies.

People behind the organization

Mr. Motilal OswalChairman and Managing Director

Mr. Motilal Oswal is the promoter of Motilal Oswal Securities Ltd. He is an member of Institute of Chartered Accountants of India and started the business along with the co-promoter Mr. Raamdeo Agarwal in 1987.Business Administration is his forte, Honesty, transparency and client goodwill form the core of his business practice.

“Service is required in everything, in research, in execution and in settlement. It is going to be the key to survival. If you give good service and value to your clients, it will translate into good business.”

This has been a strong belief of Mr. Motilal Oswal and he has not only practiced it himself but also made efforts to inculcate similar values in the employees of the organization. He had been elected as a Director of BSE and joined its governing board in 1998. He is currently a member of various committees of CDSIL and SEBI.

Mr. Raamdeo Agrawal Joint Managing Director

Mr. Raamdeo Agrawal is the co-promoter of Motilal Oswal Securities Ltd. A member of the Institute of Chartered Accountants of India & an equity research stalwart, he is the man behind the strong research capability at MOSt.He is respected by all in the research and broking industry for his valuable insights on issues related to equity research. His firm belief in “Value-Investing”, as practiced by the legendary Warren Buffett and Charlie Munger, forms the core of MOSt investment philosophy.

Management TeamMOSt management team is regularly engaged in finding ways to improve operational efficiencies and customer satisfaction. You will find CAs, CFAs, ICWAs, CSs, MBAs and IT professionals managing crucial functions, to bring you best products and services - from research & advice to trade execution & settlement. At MOSt we practice meritocracy and each of the team members is provided extensive training.

Training & Manpower DevelopmentMOSt conducts various training and development programs regularly to enhance the capabilities of its team. As much as 5% of the salary bill is spent on such programs, which is amongst the highest for a broking organization in India. MOSt is truly a learning organization with lead being taken by the Directors, who regularly participate in top management learning programs like Strategic Management Program at Indian School of Business, Hyderabad, Strategy Summits with Management Gurus like Tom Peters and Dr. Lester Thurow, Dean, Sloan School of Management, (MIT) and Brand Management Seminar by Al Ries etc.

SWOT Analysis of Motilal Oswal Securities Ltd.

Strength

Wide range of financial products and focus on premium traders Emphasis is on efficient execution of trades Strong private equity operations Have over 1500 offices in India Financial products and services such as Wealth Management, Broking & Distribution,

Commodity Broking, Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Service.

Large and diverse distribution network Strong research and sales teams Brand recognition Experienced top management Strong financial results

Weakness

Less penetration in developing cities Lack of advertising causes low awareness amongst investors Charges are high compare to other companies in industry

Opportunity

Growing rural market Earning Urban Youth looking for investments Growing Financial Services industry's share of wallet for disposable income Huge market opportunity for wealth management service providers as Indian

wealth management business is transforming from mere wealth safeguarding to growing wealth.

Regulatory reforms would aid greater participation by all class of investors Leveraging technology to enable best practices and processes Increased appetite (need) of Indian corporate for growth capital

Threats

Stringent Economic measures by Government and RBI

  Entry of foreign finance firms in Indian Market Execution risk Slowdown in global liquidity flows Increased intensity of competition from local and global players Unfavorable economic conditions

FACTORS AFFECTING INVESTMENT DECISIONS

There are a numerous reasons that affect investment decisions here are some of them:

Risk Tolerance

Risk refers to the volatility of portfolio’s value. The amount of risk the investor is willing to take on is an extremely important factor. While some people do become more risk averse as they get older; a conservative investor remains risk averse over his life-cycle. An aggressive investor generally dares to take risk throughout his life. If an investor is risk averse and he takes too much risk, he usually panic when confronted with unexpected losses and abandon their investment plans mid-stream and suffers huge losses.

Return Needs

This refers to whether the investor needs to emphasize growth or income. Younger investors who are accumulating savings will want returns that tend to emphasize growth and higher total returns, which primarily are provided by equity shares. Retirees who depend on their investment portfolio for part of their annual income will want consistent annual payouts, such as those from bonds and dividend-paying stocks. Of course, many individuals may want a blending of the two Þ some current income, but also some growth.

Investment Time Horizon

The time horizon starts when the investment portfolio is implemented and ends when the investor will need to take the money out. The length of time you will be investing is important because it can directly affect your ability to reduce risk. Longer time horizons allow you to take on greater risks with a greater total return potential because some of that risk can be reduced by investing across different market environments. If the time horizon is short, the investor has greater liquidity needs some attractive opportunities of earning higher return has to be sacrificed and the result is reduced in return.

Tax Exposure

Investors in higher tax brackets prefer such investments where the return is tax exempt, others will have no such preference.

Management Outlook

lf the management is progressive and has an aggressively marketing and growth outlook, it will encourage innovation and favor capital proposals which ensure better productivity on quality or both. In some industries where the product being manufactured is a simple standardized one, innovation is difficult and management would be extremely cost conscious. In contrast, in industries such as chemicals and electronics, a firm cannot survive, if it follows a policy of 'make-do' with its existing equipment. The management has to be progressive and innovation must be encouraged in such cases.

Competitor’s Strategy

Competitors' strategy regarding capital investment exerts significant influence on the investment decision of a company. If competitors continue to install more equipment and succeed in turning out better products, the existence of the company not following suit would be seriously threatened. This reaction to a rival's policy regarding capital investment often forces decision on a company'.

Opportunity created by technological change

Technological changes create new equipment which may represent a major change in process, so that there emerges the need for re-evaluation of existing capital equipment in a company. Some changes may justify new investments. Sometimes the old equipment which has to be replaced by new equipment as a result of technical innovation may be downgraded to some other applications, A proper evaluation of this aspect is necessary, but is often not given due consideration. In this connection, we may note that the cost of new equipment is a major factor in investment decisions.

Market Forecast

Both short and long run market forecasts are influential factors in capital investment decisions. In order to participate in long-run forecast for market potential critical decisions on capital investment have to be taken.

Fiscal Incentives

Tax concessions either on new investment incomes or investment allowance allowed on new investment decisions, the method for allowing depreciation deduction allowance also influence new investment decisions.

Cash Flow Budgets

The analysis of cash-flow budget which shows the flow of funds into and out of the company may affect capital investment decision in two ways. 'First, the analysis may indicate that a company may acquire necessary cash to purchase the equipment not immediately but after say, one year, or it may show that the purchase of capital assets now may generate the demand for major capital additions after two years and such expenditure might clash with anticipated other expenditures which cannot be postponed. Secondly, the cash flow budget shows the timing of cash flows for alternative investments and thus helps management in selecting the desired investment project.

Non-economic Factors

New equipment may make the workshop a pleasant place and permit more socializing on the job. The effect would be reduced absenteeism and increased productivity. It may be difficult to evaluate the benefits in monetary terms and as such we call this as non-economic factor. Let us take one more example. Suppose the installation of a new machine ensures greater safety in operation. It is difficult to measure the resulting monetary saving through avoidance of an unknown number of injuries. Even then, these factors give tangible results and do influence investment decisions.

Social Economic Factors affecting investors and their decision in CapitalMarket Participation

There are many factors that affect investors’ participation in Capital market. Most of thesefactors are social economic factors as explained below;

Education Level

It is very evident that education level has in impact on investor’s participation in CapitalMarket. This is due to the fact that as you study further there is a deep knowledge onInvestment related information including Capital Market and Shares. From research results itcould be seen those who participate mostly are Degree, masters’ holders.

Level of income

Level of income highly influences investors’ participation in Investment related activities.Level of income is related to savings and investment budget. Most people with low incomehave no interest (or not aware) on Capital Market related activities hence their participation isalmost not there regardless of their level of education.

Awareness /Technology

Awareness on Capital Market activities has an impact on Capital Market Participation.Awareness comes in different forms, level of technology/computer literate of an investor(browsing), Capital Market advertisement (DSE) etc. From research results some investorsof reasonable income and education they are not aware of Dar Es Salaam Stock Exchange.

Other factors includes (but not limited); Risk Tolerance: Risk refers to the volatility of portfolio’s value. The amount of riskthe investor is willing to take on is an extremely important factor.

Return Needs: This refers to whether the investor needs to emphasize growth orIncome. Investment Horizon: The time horizon starts when the investment portfolio is

implemented and ends when the investor will need to take the money out.

Tax Exposure: Investors in higher tax brackets prefer such investments where thereturn is tax exempt, others will have no such preference.

Market Trends: Need to understand how various asset classes have performed in thepast before planning for finances.

Investment Needs: How much money an investor needs at the time of maturity?

Risk Coverage: A type of insurance coverage that can exclude only risks that havebeen specifically outlined in the contract.

Dependents: People who relies on another person, especially a family member, forfinancial support.