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TABLE OF CONTENTS

S.NO. TITLE PAGE NOABSTRACT 1

LIST OF TABLES

LIST OF FIGURES1 INTRODUCTION

1.1 OUT LINE OF THE PROJECT 2

1.2 NEED OF THE STUDY 4

1.3 SCOPE OF THE STUDY 5

1.4 OBJECTIVE OF THE STUDY 6

1.5 RESEARCH METHODOLOGY 71.5.1 RESEARCH DESIGN 7

1.5.2 DATA COLLECTION METHODS 8

1.5.3 RESEARCH INSTRUMENTS 9

1.5.4 SAMPLING 9

1.5.5 STATISTICAL TOOLS 10

1.6 LIMITATION OF THE STUDY 13

1.7 CHAPTERIZATION 14

1.8 LITERATURE REVIEW 15

1.8.1 COMPANY PROFILE20

1.8.2 PRODUCT PROFILE 34

2. DATA ANALYSIS AND

INTERPRETATION

2.1 PERCENTAGE ANALYSIS 42

2.1 GRAPHICAL ANALYSIS 42

2.2 STATISTICAL ANALYSIS 76

2.2.1 WEIGHTED AVERAGE 76

2.2.2 CHI-SQUARE 79

3. SUMMARY AND CONCLUSION

3.1 FINDINGS 82

3.2 SUGGESTIONS 87

3.3 CONCLUSIONS 88

APPENDIX 89

REFERENCES 94


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CHAPTER I:INTRODUCTION:

Advertising has always been criticized. The critics are very skeptical about themanipulative effect of advertising; that it can control the minds of the audience

and can drive them to a particular way of thinking. However, there is another

group who disagrees. It believes that advertising truly reflects a culture. People of

this group believe that:

You can tell the ideals of a nation by its advertisements

(Norman Douglas)

Thus, if one wants to have a true picture of a nation, their ads should be viewed,

i.e., the ads reflect the culture. The following text is an attempt to solve this

controversy.

To find out whether advertising reflects the trends or creates them, a

representative sample of about 150 respondents was taken. The respondents

belonged to youth of age group 18-25. Their responses were recorded on a self-

administered questionnaire.

The results are, however, not completely in any sides favor. The respondents

have agreed that advertising has more benefits than drawbacks. They further agree

that advertising has the driving power to make the audience act in a particular

way, and spend in a particular pattern, i.e. advertising does have manipulative

power. Thus, the ads that we view do have impact on the viewers. One particular

thing that is note worthy is the type of ads that respondents like. The initial results

might not clearly be on any one side, but in this regard, the results show that

irrelevant, obscene, and ads that do not conform to our culture have no space in

the audiences diary of likeable ads.

Thus, a safe conclusion would be that the line cannot be drawn whether the

advertising is inherently good or bad. It does have impact, either positive or

negative, it does reflect our culture. The need of the hour is to channel the

energies of ads to constructive impact.


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Advertising

When Semenik (2002, 10) defines advertising, he does so in a very concise

fashion: A paid, mass mediated attempt to persuade A more elaborate definition

of advertising states:

Advertising is the structured and composed, non personal communication of

information, usually paid for and usually persuasive in nature, about products

(goods, services, and ideas) by identified sponsors, through various mass media.

Arens (2002, 7)

This detailed definition has several terms asking for an explanation, that wont go

unattended.First, there is structured and composed, which means that the

advertising follows a definite pattern and that all the areas in an advertisement are

organized. Not only organized, they are all coordinated towards a common goal.

Selling can be done in two ways: Personal, where the seller and the buyer interact

face-to-face, together at the same place; Non-personal, which doesnt require a

face-to-face contact between the buyer and the seller. Advertising is non-personal

way of communication because both the parties are not present face-to-face

together, at the same time. Rather, advertisements use mass media which is

directed at a larger audience.

Communication is defined by Sharma and Singh (2006, 10) as a mean by which

a person can pass information, ideas or feelings to another through speech or

pictures. We communicate through our five senses. But in the world of

advertising, only two senses are required; Sound and Sight. Sound means words

that are uttered. They can be used in a variety of media to create a theatre of the


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mind, where the audience can imagine themselves, enjoying the advertised

product. Sight is the visual display of the advertised product. A picture is still

worth a thousand words and no matter how many words are used, some details

will be left out that are visible at a glance, Sharma and Singh (2006,

12)Information is knowledge, facts, or views. However, the information can be

complete or incomplete, biased or unbiased. The commonly held concept is that

advertisers present incomplete and biased information that favor the advertisers.

And, thinking from the advertisers point of view, it is quite logical. No advertiser

would want the audience to know the harmful aspects of its product, at any cost.

This is also discussed in the conclusions and recommendations section.The media

charges the advertisers for the time and space it provides to the advertisers, thus

advertising is always paid for, except for the Public Service AnnounPaintss

(PSAs) that are shown free of cost and the cost is borne by the media.

Being Persuasive in nature is the basic idea of advertising. All the pain that is

taken to make an ad is only to differentiate the product from that of the

competitors so as to convince people to act in the desired way.

Advertising can be about product, service, or ideas. As already explained, the

product comes in tangible goods, while the other two are intangible. When Honda

advertises its automobiles, its a product, when it mentions the sales and after

sales services, that is service, and finally when it advertises about the benefits of

wearing seat belts while driving, thats an idea.


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What is the advertising all about? Its all about getting people to know about the

company, to identify the sponsor. Without this, the advertiser is likely to be less

successful.

Mass Media are used to reach the target audience. Mass media used can be of

various kinds depending on the target audience and the desired result. The most

commonly used media are TV, radio, newspaper, magazines, billboards. Since

innovation is taking place everywhere, the advertisers have also found innovative

ways to advertise. Interactive advertising, sky-writing, air balloons, and electronic

hoardings are some of the recent innovations.

1.2.1 Classification of Advertising:

It depends on the marketing strategy of the company which type of advertising it

wants to adopt. But generally the advertising is classified in the following heads:

By Target audience:

Just as marketing mix is directed towards a target market, advertising strategies

are directed towards a target audience. It includes:

Consumer advertising:

Consumers are people who buy a product for their own personal consumption.

Most of the advertisements that we see daily belong to this category. Nestle and

Unilever products, Honda cars, Nokia cell phones are all consumer products.

Business advertising:

This advertising is targeted to audience who buy the product for all purposes other

than personal or family satisfaction. It is further classified as:

Trade advertising: advertising aimed at the intermediaries of the channel of

distribution, i.e. the wholesalers and the retailers.


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Professional advertising: advertising aimed at specific professions that require

specific needs to be fulfilled, like lawyers, doctors, engineers.

Agriculture advertising: directed at agri-business, and includes mainly

agricultural input/products. Pakistani media shows a lot of ads for this category.

Commonly seen ads are Engro and FFC fertilizers, tractors, and other

insecticides and pesticides.

Industrial advertising: these ads are directed at the manufacturers of other

products, as machineries, spark plugs etc.

By Geographic area:

Geography determines the type of advertising the company will devise. It

includes:

Local (retail) advertising:

When local stores inform the local audience about the availability of products or

for making any other announPaints, its called local advertising. For example, R-

Sheen, orServis, orWadud Sons announcing a Sale.

Regional advertising:

When a product that is sold in a specific region is advertised, it will be called as

regional advertising. For example Punjab has many specialties that are not

available in other provinces of Pakistan.

National advertising:

In this type of advertising, the products are advertised throughout the country. For

example, any new model of Honda or Toyota is advertised nationally in Pakistan.

International advertising:

It can also be called Global Advertising. A product available globally with no

or minimum variations is advertised through global advertising. Pepsi and Coke

use this strategy.


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By Medium:

Print media: newspapers, magazines, journals.

Broadcast/electronic media: TV, radio.

Out-of-home advertising: billboards, transit, posters, banners, electronic

billboards.

Direct-mail advertising: sent through postal services or e-mails.

Interactive advertising: internet, kiosks.

By purpose:

Product/Non-Product:

When the company wants to advertise a product (including service), that is called

product advertising. On the other hand, if the company wants to improve its

image, create goodwill, wants the people to know that it exists, then its called

non-product advertising.

Commercial/Non-commercial:

When the purpose of the advertising is to earn profit, irrespective of it being

product or non-product, it is called commercial advertising. Any advertisement

not for this purpose may be called as non-commercial advertising.

Primary/selective demand:

Advertising a whole class of products is advertising for primary demand. For

example, when advertising is done for the benefits of using internet, it will be

included in primary demand advertising. If the advertising is able to create a

demand, the specific ads of specified company providing internet connections will

be shown.

Direct action/indirect action:

If the advertiser is seeking an immediate response from the audience, by giving a

toll free number or announcing any free gifts, lets say, for the first 100


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customers, that is called direct action advertising. If the advertising is done just to

create awareness for future transactions, that is an indirect action advertising.

Figure 1: Diagram showing the relation of Customer C with the 4 Ps of the marketing

Mix. (Source: Perreault, William D. and Jerome McCarthy, 2005, 38)

The Two aspects of Advertising

Advertising is the granddaddy of all the promotional tools. Its the most

conspicuous, the most scrutinized, and the most controversial.Semenik (2002,

265)

Just like anything else, advertising also has its opponents and proponents. But the

difference of the advertising dilemma from others is that both the sides are true

and nones view point can be denied. Thus, the advertising industry lies in a

delicate balance ofto be or not to be.

The opponents of advertising say that it plays a manipulative role on its target

audience. It has the power to control the choices that the consumers make. It often

P

P

PP

C


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portrays such glamorous images that aspires the audience to act in their desired

way, to buy a certain brand of car, wear specific designers clothes, use a

particular cell phone, join a specific fan-club, and visit the advertised location.

Failure to do so can result in dire consequences, ranging from simple inferiority

complex to outright rejection by the society. It is this philosophy that makes the

audience think that advertisers would do whatever they want, to get a bucket full

of cash, and would make the advertisers least concerned with the welfare of the

audience that becomes the customers of the product. This thinking has always

been haunting the advertisers, lest their advertising campaigns might be rejected

on these grounds, altogether.

On the far side there are the proponents of advertising who give hope to the

advertisers. They believe that although the advertising has the power to attract the

audience, but the real power lies with the audience. The audience can only be

attracted to that image which is already embedded in their minds. Remember

when the last time you saw an advertisement after which your response was

pathetic! This is because probably the ad wasnt directed towards you and you

didnt fall in the target audience. The advertisements then, only act as a stimulus,

a catalyst. They argue that how could a person ever be induced to buy something

that he/she doesnt want! The famous saying that Advertisements can sell a

refrigerator to Eskimos is then an exaggeration! And answering to the other

controversy, they say that since advertisers personal image, the companys

reputation, and both of their futures are at stake, therefore, no advertiser and

company would ever want to use dirty tricks in the bag to sell substandard,

harmful products to the customers. Consequently, the buyers can be confident in

buying the advertised products since the company has put its own reputation at

stake.


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History of Advertising

Advertising as a discrete form is generally agreed to have begun with

newspapers, in the seventeenth century, which included line or classified

advertising. Simple descriptions, plus prices, of products served their purpose

until the late nineteenth century, when technological advances meant that

illustrations could be added to advertising, and color was also an option.

An early advertising success story is that of Pears Soap. Thomas Barratt

married into the famous soap making family and realized that they needed to be

more aggressive about pushing their products if they were to survive. He launched

the series of ads featuring cherubic children which firmly welded the brand to thevalues it still holds today. he took images considered as "fine art" and used them

to connote his brand's quality, purity (i.e. untainted by commercialism) and

simplicity (cherubic children). He is often referred to as the father of modern

advertising.

World War I saw some important advances in advertising as governments

on all sides used ads as propaganda. The British used advertising as propaganda to

convince its own citizens to fight, and also to persuade the Americans to join. No

less a political commentator than Hitler concluded that Germany lost the war

because it lost the propaganda battle: he did not make the same mistake when it

was his turn. One of the other consequences of World War I was the increased

mechanization of industry - and hence increased costs which had to be paid for

somehow: hence the desire to create need in the consumer which begins to

dominate advertising from the 1920s onward.


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1.2. Need of the study:

This study is about advertising in Networth Stock Broking Ltd Stock

Broking Ltd. These studies to know the impact of Networth Stock Broking Ltd Stock

Broking Ltd advertising and the brand image created by the Networth

Stock Broking Ltd among competitor.

Findings of the study helps their satisfaction level at Networth Stock

Broking Ltd

SCOPE OF THE STUDY

This study undertaken for The Networth Stock Broking Ltd aims to study

and identify the potential customers.

This has been done by preparing a questionnaire which contains questions

put forth to the respondents which would help is analyzing advertisement

management in Networth Stock Broking Ltd.

All this would help in giving suggestion to The Networth Stock Broking

Ltd in improving Networth Stock Broking Ltd thereby satisfying their corporate

and retail clients

1.4 Objective of the study:

To study the brand image created by Networth Stock Broking Ltd

among competitor.


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To find out the reason for choosing Networth Stock Broking Ltd

To Create New marketing Strategies in Broking Companies

1.5 RESEARCH METHODOLOGY:

INTRODUCTION:

Research methodology is a way to systematically solve the research

problem is to how research is done scientifically. It consists of the different

steps that are generally adopted by the researcher to the study his research

problem along with logic behind them. It is necessary to the researcher todevelop certain tests.

1.5.1 RESEARCH DESIGN:

Research design is a plan to answer whom, when, where, and how the

subject under investigation conceived so as to obtain answers to research

questions. The type of research design involved in this study is descriptive

research studies.

DESCRIPTIVE RESEARCH STUDIES:

Descriptive research studies are those studies, which are concerned with

describing the characteristics of a particular individual, or of a group, where as

diagnostic research study determine the frequency with which something occurs

or its association with something else. The studies concerning whether certain

variables are associated are example of diagnostic research studies. As against

this, study concerned individual, group or situation are all example of descriptive

research studies. Most of the social research studies come under this category

from the point of view of the research design.


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1.5.2 DATA COLLECTION METHOD:

The required data was collected by both the primary and secondarysources.

The data objective are describe from the research objectives and their

determination rests mainly on the research to translate what the decision marker

wants into specific descriptive of the needed data.

Primary:

The primary data was collected from the, Networth Stock Broking Ltd.,

users at HYDERABAD. The Respondents were met personally at their

establishments and questionnaire has been given to them and answered

questionnaires were collected back.

Primary data is the data gathered for the first time by the researcher by

using questionnaire.

Secondary data:

Secondary data, on the other hand, is those which have already been

collected by someone else and which already been passed through the

statistical process.

Secondary data pertaining to this study was obtained from company

documents, broachers, departmental informations websites etc.

1.5.3 RESEARCH INSTRUMENTS:

Instrument : Questionnaires (personal administered)

Instrument Design : Both open end enclose ended

Question and used in questionnaires.

Questionnaire Design


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A well structured questionnaire was used for this study. The types

of questions used in the questionnaire were open-ended, multiple-choice

and Dichotomous questions.

1. Open-end questions are questions, which are entitled to give a

free response to their choice.

2. Multiple-choice questions are question, which contain a list of

answer and permit the subject to select the best answer.

1.5.4 SAMPLING:

Sampling is the process of selecting a sufficient number of elements

from the population, so that a study of sample and an understanding of its

properties or characteristics would make it possible for us to generalize such

properties or characteristics to the population elements.

SAMPLEING PLAN:

Sampling technique : Cluster sample

Sample size : Sample size chosen here for this study

was 100 as suggested by the company

SAMPLE DESIGN:

A Sample design is a definite plan for obtaining a sample from given

population. It refers to the technique or the procedure the researcher would adoptin selection items for the sample. Sample may as well lay down the number of

items to be included in the sample namely, the size of the sample.

Probability sampling:


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Make a specific mention of it in the thesis. So that the conclusions would

be evaluated accordingly. Probability sampling refers to the sampling process in

which the samples are selected for a specific purpose with a pre-determined basis

of selection. This type of samples is also required at times when random selection

may not be possible. Therefore the reliability of conclusions based on this type of

sampling is less. Whenever a researcher uses this type of sampling.

Cluster Sampling:

Cluster sampling method suggests, the samples are selected at different

stages. In this method, the population is first divided into different stages. Then

from the first stage, a few items are selected at random based on a specific feature

or characteristic. From these in the second stage, a few elements are selected at

random possessing, he characteristic. From which in the third stage a few are

selected at random satisfying the characteristic and so on to finally make the

necessary selection of samples. All the samples selected at random at different

stages will posses the common characteristic or will be homogeneous on some

basis.

Cluster sampling involves arranging elementary items in a population into

heterogeneous subgroups that are representative of the overall population. One

such group constitutes a sample for study.

SAMPLING SIZE:

The total numbers of respondents are termed as sample size. The

sample size for this analysis is 100 respondents.

Percentage Analysis:


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Percentage refers to a special kind of ratio. It is used to make

comparison between two or more series of data. They can be used to

compare the relative items, the distribution of two or more series of data

since the percentage reduce everything as common base and allow the

meaningful comparisons to be made.

Percentage refers to the special kind of ratio percentage are used in

making comparison between two or more series of data. Percentages are

used to describe relationship.

FORMULA:

No. of respondents

Percentage (%) = _________________________ X 100

Total respondents

Bar chart and Pie charts are used to explain the tabulation clearly.

LIMITATIONS OF THE STUDY

The study is restricted to some areas of Hyderabad city.


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The findings of the study are based on the assumption that the

respondents divulged correct information.

The study is relevant only to present situation and not to future.

Bias and unwillingness of certain respondents to answering some

questions may hinder the study.

The study is time bound, due to rapid changes in the market, expectation

level of consumers, introduction of new products.

The study may not be applicable over a period of time


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Company Profile

COMPANY PROFILE


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Incorporated in 1993, Net worth Stock Broking Limited (NSBL) has been

a listed company at Bombay Stock Exchange (BSE), Mumbai since 1995.

A Member, at the National Stock Exchange of India (NSE) and Bombay Stock

Exchange, Mumbai (BSE) on the Capital Market and Derivatives (Futures &

Options) segment, NSBL has been traditionally servicing Institutional clients and

in the recent past has forayed into retail broking, establishing branches across the

country. Presence is being marked in the Middle East, Europe and the United

States too, as part of our attempts to cater to global markets. We are a Depository

participant at Central Depository Services India (CDSL) with plans to become

one at National Securities Depository (NSDL) by the end of this quarter. We have

our customers participating in the booming commodities markets with our

membership at the Multi Commodity Exchange of India (MCX) and National

Commodity & Derivatives Exchange (NCDEX), through Networth Stock Broking

Ltd Stock.Com Ltd. With its strong support and business units of research,

distribution & advisory, NSBL aims to become a one-stop solution to the broking

and investment needs of its clients, globally.

Strong team of professionals experienced and qualified pool of human

resources drawn from top financial service & broking houses form the backbone

of our sizeable infrastructure. Highly technology oriented, the companys

scalability of operations and the highest level of service standards has ensured

rapid growth in the number of locations & the clients serviced in a very short span

of time. Networth Stock Broking Ltdians, as each one of our 400 plus and ever


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growing team members are addressed, is a dedicated team motivated to

continuously progress by imbibing the best of global practices, Indian sing

such practices, and to constantly evolve a comprehensive suite of products &

services trying to meet every financial / investment need of the clients.

NSE CM and Derivatives Segment SEBI Regn. 1NB230638639 &

1NF230638639

BSE CM and Derivatives Segment SEBI Regn. 1NB010638634 &

PMS SEBI Regn. 1NP000001371 CDSL DP SEBI Regn. IN-DP-CDSL

251-2004

Commodities Trading: MCX -10585 and NCDEX - 00011 (through Networth

Stock Broking Ltd Stock.Com Ltd.)

Hyderabad (Somajiguda)

401, Dega Towers, 4th Floor, Raj Bhavan Road, Somajiguda Hyderabad - 500

082

Andhra Pradesh.

Phone Nos.: 040-55560708, 55562256, and 30994985

Mumbai (MF Division)

49, Au Chambers, 4th Floor, Tamarind Lane, Fort

Mumbai - 400 001

Maharashtra.

Phone Nos.: 022- 22650253


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Mumbai (Registered Office)

5, Church gate House, 2nd Floor, 32/ 34 Veer Narirnan Road, Fort

Mumbai - 400 001

Maharashtra.

Phone No. 022-22850428

The Networth Stock Broking Ltd connectivity with 107 branches and

growing

1 0 7 b r a n c h1 0 7 b r a n c h


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Products and services portfolio

Retail and institutional broking

Research for institutional and retail clients

Distribution of financial products

PMS

Corporate finance

Net trading

Depository services

Commodities Broking


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Infrastructure

A corporate office and 3 divisional offices in CBD of Mumbai which

houses state-of-the-art dealing room, research wing & management and

back offices.

All of 107 branches and franchisees are fully wired and connected to hub

at Corporate office at Mumbai. Add on branches also will be wired and

connected to central hub

Web enabled connectivity and software in place for net trading.

60 operative IDs for dealing room


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In house technology back up team to ensure un-interrupted connectivity.

1993: Networth Stock Broking Ltd Started with 300 Sq.ft. of office space & 10

employees

2006: Spread over 42 cities (around 70,000 Sq.ft of office space) with over 107

branches & employee strength over 400

Market & research

Focusing on your needs

Every investor has different needs, different preferences, and different

viewpoints. Whether investor prefers to make own investment

decisions or desire more in-depth assistance, company committed to

providing the advice and research to help you succeed.

Networth Stock Broking Ltd providing following services to their customers,

Daily Morning Notes

Market Musing

Company Reports

Theme Based Reports

Weekly Notes

IPOs

Sector Reports

Stock Stance

Pre-quarter/Updates

Bullion Tracker

F&O Tracker


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QUALITY POLICY

To achieve and retain leadership, Networth Stock Broking Ltd shall aim for

complete customer satisfaction, by combining its human and technological

resources, to provide superior quality financial services. In the process, Networth

Stock Broking Ltd will strive to exceed Customers expectations.

As per the quality policy, Networth Stock Broking Ltd will:

Build in house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of

services.

Establish a partner relationship with in its investor service agents and

vendors that will help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skill so as to respond to customers needs.

Continue to uphold the values of honesty & integrity and strive to

establish unparalleled standards in business ethics.

Use state-of-the art information technology in developing new and

innovative financial products and services to meet the changing needs of

investors and clients.


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Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice of

it.

Strive to keep all stake-holders (share holders, clients, investors, employees,

suppliers and regulatory authorities) proud and satisfied.

Key Personnel:

Mr. S P Jain CMD Networth Stock Broking Ltd Stock Broking Ltd.

A qualified Chartered Accountant with over 15 years of experience in

the capital markets.

Mr. Deepak Mehta Head PMS

Over 12 years of experience in the capital markets and has the prior

work experience of serving on the Equity desk of Reliance.

Mr.Viral Doshi Equity Strategist

A qualified Chartered Accountant with experience of over a decade in

technical analysis with respect to equity markets.

Mr. Vinesh Jain Asst. Fund Manager

A qualified MBA graduate specializing in finance and over two years of

experience in the capital markets.

Research and the Back office.


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we have sought to provide premium financial services and information, so that the

power of investment is vested with the client. We equip those who invest with us

to make intelligent investment decisions, providing them with the flexibility to

either tap into our extensive knowledge and expertise, or make their own

decisions. We made our debut into the financial world by servicing Institutional

clients, and proved its high scalability of operations by growing exponentially

over a short period of time. Now, powered by a top-notch research team and a

network of experts, we provide an array of financial products & services spanning

entire India.Our strong support, technology-driven operations and business units

of research, distribution, advisory, wide array of products & services coalesce to

provide you with a one-stop solution to cater to all your investment needs. Our

single minded objective is to help you grow your Networth Stock Broking Ltd.

OUR GROUP COMPANIES

Networth Stock Broking Ltd Stock Broking Ltd. [NSBL]

NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the

Bombay Stock Exchange Ltd (BSE) in the Capital Market and Derivatives

(Futures & Options) segment. NSBL has also acquired membership of the

currency derivatives segment with NSE, BSE & MCX-SX. It is Depository

participants with Central Depository Services India (CDSL) and National

Securities Depository (India) Limited (NSDL). With a client base of over 1L loyal


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customers, NSBL is spread across the country though its over 230+ branches.

NSBL is listed on the BSE since 1994.

Networth Stock Broking Ltd Wealth Solutions Ltd. [NWSL]

NWSL is into the business of delivery of Financial Planning & Advice. Its vision

is to Advice & Execute money related solutions to/for our customers in the most

Convenient & Consolidated manner, while making sure that their experience with

us is always pleasant & memorable resulting in positive advocacy. The product

& Services include Financial Planning, Life Insurance, On-line Trading Account,

Mutual Funds, Debentures/Bonds, General Insurance, Loans and Depository

Services.

Networth Stock Broking LtdStock.ComLtd.[NSCL]

NSCL is the commodities arm of NSBL. It is a member at the Multi Commodity

Exchange of India (MCX) and National Commodity & Derivatives Exchange

(NCDEX) and is backed by solid research & analytics in Commodities.

Networth Stock Broking LtdSoftTechLtd.[NSL]

NSL is an ISO 9001:2000 Certified Company. It is into Application Development

& maintenance. Building & Implementation of packaged software across various

functions within the Financial Services Industry is at its core. It also provides data

center services which include hosting of websites, applications & related services.


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It combines a unique delivery model infused by a distinct culture of customer

satisfaction.

Ravisha Financial Services Pvt. Ltd. [RFSL]

RFSL is a RBI registered NBFC engaged in financing, primarily it provides loan

against securities

Principles & Values

At Net worth Stock Broking Ltd. success is built on teamwork, partnership

and the diversity of the people.

At the heart of our values lie diversity and inclusion. They are a

fundamental part of our culture, and constitute a long-term priority in our

aim to become the world's best international bank.

Values

Responsive

Trustworthy

Creative

Courageous

Approach

Participation:- Focusing on attractive, growing markets where wecan leverage our relationships and expertise

Competitive positioning:- Combining global capability, deep local

knowledge and creativity to outperform our competitors


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Management Discipline:- Continuously improving the way we work,

balancing the pursuit of growth with firm control of costs and risks

Commitment to stakeholders

Customers:- Passionate about our customers' success, delighting

them with the quality of our service

Our People:- Helping our people to grow, enabling individuals to

make a difference and teams to win

Communities:- Trusted and caring, dedicated to making a

difference

Investors:- A distinctive investment delivering outstanding

performance and superior returns Regulators: - Exemplary governance and ethics wherever we are.

MARKET PROFILE


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NATIONAL STOCK EXCHANGE

The National Stock Exchange of India (NSE) situated in Mumbai - is the

largest and most advanced exchange with 1016 companies listed and 726 trading

members. Capital market reforms in India and the launch of the Securities and

Exchange Board of India (SEBI) accelerated the incorporation of the second

Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a

few years of operations, the NSE has become the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another.

The Wholesale Debt Market (WDM) commenced operations in June 1994 and the

Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures

and Options segment began operating in 2000. Today the NSE takes the 14th

position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and

CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a

diversified index of 50 stocks from 25 different economy sectors. The Indices are

owned and managed by India Index Services and Products Ltd (IISL) that has a

consulting and licensing agreement with Standard & Poor's.


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In 1998, the National Stock Exchange of India launched its web-site and was the

first exchange in India that started trading stock on the Internet in 2000. The NSE

has also proved its leadership in the Indian financial market by gaining many

awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and

1997) and CHIP Web Award by CHIP magazine (1999).

The NSE is owned by the group of leading financial institutions such as Indian

Bank or Life Insurance Corporation of India. However, in the totally de-

mutualised Exchange, the ownership as well as the management does not have a

right to trade on the Exchange. Only qualified traders can be involved in the

securities trading.

The NSE is one of the few exchanges in the world trading all types of securities

on a single platform, which is divided into three segments: Wholesale Debt

Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market.

Each segment has experienced a significant growth throughout a few years of

their launch. While the WDM segment has accumulated the annual growth of

over 36% since its opening in 1994, the CM segment has increased by even 61%

during the same period. The National Stock Exchange of India has stringent

requirements and criteria for the companies listed on the Exchange. Minimum

capital requirements, project appraisal, and company's track record are just a few

of the criteria. In addition, listed companies pay variable listing fees based on

their corporate capital size.


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The National Stock Exchange of India Ltd. provides its clients with a single, fully

electronic trading platform that is operated through a VSAT network. Unlike most

world exchanges, the NSE uses the satellite communication system that connects

traders from 345 Indian cities. The advanced technologies enable up to 6 million

trades to be operated daily on the NSE trading platform.

NSE Nifty:

The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index

for large companies on the National Stock Exchange of India. S&P CNX Nifty is

a well diversified 50 stock index accounting for 22 sectors of the economy. It is

used for a variety of purposes such as benchmarking fund portfolios, index based

derivatives and index funds.

Nifty was developed by the economists Ajay Shah and Susan Thomas, then at

IGIDR. Later on, it came to be owned and managed by India Index Services and

Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is

India's first specialised company focused upon the index as a core product. IISL

have a consulting and licensing agreement with Standard & Poor's (S&P), who

are world leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices,

to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C'

stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The


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S&P prefix belongs to the US-based Standard & Poor's Financial Information

Services.

NSE other indices:

S&P CNX Nifty

CNX Nifty Junior

CNX 100

S&P CNX 500

CNX Midcap

S&P CNX Defty

CNX Midcap 200


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BOMBAY STOCK EXCHANGE:

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;

popularly called The Bombay Stock Exchange, or BSE) is the oldest stock

exchange in Asia. It is located at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600 Indian

companies listed with the stock exchange, and has a significant trading volume.

As of October2006, the market capitalization of the BSE was about Rs. 33.4

trillion (US $ 730 billion). The BSE SENSEX (SENSitive indEX), also called the

BSE 30, is a widely used market index in India and Asia. As of 2005, it is among

the 5 biggest stock exchanges in the world in terms of transactions volume.

History:

An informal group of 22 stockbrokers began trading under abanyan tree opposite

the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as

the Bombay Stock Exchange (BSE).In January 1899, the stock exchange moved
http://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Trillionhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Banyanhttp://en.wikipedia.org/wiki/Town_Hall_(Bombay)http://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/1899http://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Trillionhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Banyanhttp://en.wikipedia.org/wiki/Town_Hall_(Bombay)http://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/1899


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into the Brokers Hall after it was inaugurated by James M MacLean. After the

First World War, the BSE was shifted to an old building near the Town Hall. In

1956, the Government of India recognized the Bombay Stock Exchange as the

first stock exchange in the country under the Securities Contracts (Regulation)

Act.1995, when it was replaced by an electronic (eTrading) system named BOLT,

or the BSE Online Trading system. In 2005, the status of the exchange changed

from an Association of Persons (AoP) to a full fledged corporation under the BSE

(Corporatization and Demutualization) Scheme, 2005 (and its name was changed

to The Bombay Stock Exchange Limited).

BSE Sensex:

The BSE SENSEX (also known as the BSE 30) is a value-weighted index

composed of 30 scrips, with the base April 1979 = 100. The set of companies

which make up the index has been changed only a few times in the last 20 years.

These companies account for around one-fifth of the market capitalization of the

BSE.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-

Weighted" methodology of 30 component stocks representing a sample of large,

well-established and financially sound companies. The base year of SENSEX is

1978-79. The index is widely reported in both domestic and international markets

through print as well as electronic media. SENSEX is not only scientifically

designed but also based on globally accepted construction and review

methodology. From September 2003, the SENSEX is calculated on a free-float
http://en.wikipedia.org/w/index.php?title=James_M_Maclean&action=edithttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/1956http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/wiki/1995http://en.wikipedia.org/wiki/ETradinghttp://en.wikipedia.org/w/index.php?title=BOLT&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_OnLine_Trading&action=edithttp://en.wikipedia.org/wiki/2005http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/wiki/1979http://en.wikipedia.org/w/index.php?title=James_M_Maclean&action=edithttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/1956http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/wiki/1995http://en.wikipedia.org/wiki/ETradinghttp://en.wikipedia.org/w/index.php?title=BOLT&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_OnLine_Trading&action=edithttp://en.wikipedia.org/wiki/2005http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/wiki/1979


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market capitalization methodology. The "free-float Market Capitalization-

Weighted"methodology is a widely followed index construction methodology on

which majority of global equity benchmarks are based.

The growth of equity markets in India has been phenomenal in the decade gone

by. Right from early nineties the stock market witnessed heightened activity in

terms of various bull and bear runs. More recently, the bourses in India witnessed

a similar frenzy in the 'TMT' sectors. The SENSEX captured all these happenings

in the most judicial manner. One can identify the booms and bust of the Indian

equity market through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market

hours and displayed through the BOLT system, BSE website and news wire

agencies.

SENSEX calculation:

SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this methodology, the level of index at any point of time reflects the total

market value of 30 component stocks relative to a base period. (The market

capitalization of a company is determined by multiplying the price of its stock by

the number of shares issued by the company). An index of a set of combined

variables (such as price and number of shares) is commonly referred as a

'Composite Index' by statisticians. A single indexed number is used to represent

the results of this calculation in order to make the value easier to work with and


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track over time. It is much easier to graph a chart based on indexed values than

one based on actual values.

The base period of SENSEX is 1978-79. The actual total market value of

the stocks in the Index during the base period has been set equal to an indexed

value of 100. This is often indicated by the notation 1978-79=100. The formula

used to calculate the Index is fairly straightforward. However, the calculation of

the adjustments to the Index (commonly called Index maintenance) is more

complex.

The calculation of SENSEX involves dividing the total market capitalization of

30 companies in the Index by a number called the Index Divisor. The Divisor is

the only link to the original base period value of the SENSEX. It keeps the Index

comparable over time and is the adjustment point for all Index maintenance

adjustments. During market hours, prices of the index scrips, at which latest

trades are executed, are used by the trading system to calculate SENSEX every 15

seconds and disseminated in real time.During market hours, prices of the index

scrips, at which trades are executed, are automatically used by the trading

computer to calculate the SENSEX every 15 seconds and continuously updated

on all trading workstations connected to the BSE trading computer in real time.

BSE - other Indices:

Apart from BSE SENSEX, which is the most popular stock index in India, BSE

uses other stock indices as well:

BSE 500


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BSE PSU

BSE MIDCAP

BSE SMLCAP

BSE BANKEX


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THORETICAL FRAME WORK


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EQUITY MARKET

In financial markets, stock is the capital raised by a corporation through the

issuance and distribution of shares. A person or organization which holds shares

of stocks is called a shareholder. The aggregate value of a corporation's issued

shares is its market capitalization. When one buys a share of a company he

becomes a shareholder in that company. Shares are also known as Equities.

Equities have the potential to increase in value over time. It also provides the

portfolio with the growth necessary to reach the long-term investment goals.

Research studies have proved that the equities have outperformed than most other

forms of investments in the long term. Equities are considered the most

challenging and the rewarding, when compared to other investment options.Research studies have proved that investments in some shares with a longer

tenure of investment have yielded far superior returns than any other investment.

However, this does not mean all equity investments would guarantee similar high

returns. Equities are high-risk investments. One needs to study them carefully

before investing. Since 1990 till date, Indian stock market has returned about 17%

to investors on an average in terms of increase in share prices or capital

appreciation annually. Besides that on average stocks have paid 1.5 % dividend

annually. Dividend is a percentage of the face value of a share that a company

returns to its shareholders from its annual profits. Compared to most other forms

of investments, investing in equity shares offers the highest rate of return, if

invested over a longer duration. The first company to issue shares of stock was

the Dutch East India Company, in

1602. The innovation of joint ownership made a great deal of Europe's economic

growth

possible following the Middle Ages. The technique of pooling capital to finance

the

building of ships, for example, made the Netherlands a maritime superpower.

Before


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adoption of the joint-stock corporation, an expensive venture such as the building

of a

merchant ship could only be undertaken by governments or by very wealthy

individuals

or families. Equity markets, the world over, grew at a great speed in the decade of

the nineties. After the bear markets of the late eighties, the world markets saw one

of the largest ever bull

markets of more than ten years. The opening up of Indian economy in the 1990's

led to a

series of financial sector reforms, prominent being the capital market reforms.

These reforms have led to the development of the Indian equity markets to t

standards of the major global equity markets. All this started with the abolition of

Controller of Capital Issues and subsequent free pricing of shares. The

introduction of dematerialization of shares, leading to faster and cheaper

transactions and introduction of derivative products and compulsory rolling

settlement

has followed subsequently. Despite a series of stock market scams and crises

beginning from 1992 Harshad Mehta's scam to the Ketan Parekh's 2001 scam, the

Indian equity markets have transformed themselves from a broker dominated

market to a mass market. The introduction of online trading has given a much-

needed impetus to the Indian equity markets. However, over the years, reforms in

the equity markets have brought the country on par with many developed markets

on several counts. Today, India boasts of a variety of products, including stock

futures, an instrument launched only by select markets. The introduction of

rolling settlement is the latest step in the direction of overhauling the stock

market. The equity market of the country will most likely be comparable with the

world's most advanced secondary markets with regard to international best

practices. The market moved to compulsory rolling settlement and now


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all settlements are executed on T+2 basis and market is gearing up for moving to

T+1

settlement in 2004 while the Straight Through Processing (STP) is in place from

December 2002.

The importance of equity market is increasing. Rightly, realizing the advantages

of

resource allocation through market, Government of India and Reserve Bank of

India have

been pushing reforms in equity markets. Series of steps are being taken to remove

hurdles, increase market efficiency and to make it attractive for the retail investors

to take

part in the equity market. It may not be an exaggeration to say that the Indian

markets are

resourceful to put themselves on par with the markets of the developed countries.

The

Indian markets have assimilated in a relatively lesser time, many a developments

that

took long time in the developed markets.

DEVELOPMENTS IN EQUITY MARKET

The Government of India has been trying to improve market efficiency, enhance

transparency and bring the Indian Equity Market up to international standards.

Many reform measures have been initiated in the 90s. The principal ones are the

formation of Securities Exchange Board of India (SEBI), repeal of the Capital

Issues (Control) Act, 1947, introduction of screen-based trading, shortening of


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trading cycle, demutualization of stock exchanges, establishment of depositories

disappearance of physical share certificates and better risk management systems

in stock exchanges. The formation of SEBI was the first attempt towards

integrated regulation of the securities market. SEBI regulates all market

intermediaries and has the powers to impose monetary penalties for misconduct of

any intermediary. One of the major stumbling blocks in fair pricing of capital

issues has been the Capital Issues (Control) Act, 1947. The issuers were denied

the opportunity to economically raise money from the capital market. This is now

a matter of the past thanks to the repeal of the Act itself. SEBI has also issued

Disclosure and Investor Protection (DIP) guidelines to ensure fair prices

the investors, though however, many issuers in the 90s could unfairly price their

capital issues at the cost of the poor common investors.

The introduction of Screen Based Trading Systems (SBTS) by NSE is a major

development in the capital market. This made the markets more efficient. The

geographical barriers to trade were dismantled resulting in increased trading

volumes. This was possible due to the great advancements in the area of

information technology. SBTS electronically matches orders cutting down time,

cost and errors, and minimizing the chances of fraud. Very long settlement cycle

was another major hindrance in effecting deliveries in the equity market. Often

the securities were delivered after 30 days or more due to weekly/fortnightly

settlements and carry forward transactions. Sebi has enforced the discipline to

compulsorily settle trades in T+3 days since April 2002. This is slated to reduce to

T+2 days from April 2003. All scrips are now under rolling settlement since

December 2001.

The Equity Market is incomplete without products to manage risks in portfolio

values. At long last, derivatives trading appeared on Indian exchanges in June

2000. While the product range in derivatives is still limited (futures and options

on stocks and stock indices), it is certainly a major step forward in broadening the


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financial markets. NSE was established as a demutualized structure separating the

roles of ownership, management and trading to eliminate any conflict of interest

among the stakeholders to improve market efficiency and to focus on investor

interest. Another notable development in the Indian equity market has been the

introduction of depositories to dematerialize the share certificates. This avoids

physical movement of certificates, bad deliveries and quicker transfer of

ownership of shares. Presently all actively traded shares are held, traded and

settled in demat form. The setting up of National Securities Clearing Corporation

Ltd., (NSCCL) in April 1996 has been a major development in managing

counterparty risks in the equity market. This has helped in increasing trading

volumes

since traders are now more confident about default-free settlements. While most

of the

above measures have helped in reinforcing confidence in the Indian equity market

by

providing more transparent and efficient buying, selling and transfer of shares.

International Scenario:

Global integration, the widening and intensifying of links, between high-income

and developing countries, have accelerated over the years. The correlation of

global

markets over a period of time is presented in (Table 1- 2).

Over the past few years, the financial markets have become increasingly global.

The descriptive statistics of the major markets in terms of daily returns is

presented in

(Table 1-3), which shows that the markets are increasingly getting interlinked.

Cross border capital flows have shifted from public transfers to primarily private


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sector flows. Indian market has gained from foreign inflows through investment

of

Foreign Institutional Investors (FIIs) route. During 2006-07, cumulative net

investments

by FIIs amounted to US $ 51,967 million.

Following the implementation of reforms in the securities industry in the past

years, Indian stock markets have stood out in the world ranking. As may be seen

from

(Table 1-4), India posted a turnover ratio of 93.1 %, which was quite comparable

to the

other developed markets. As per Standard and Poor's Fact Book 2007, India

ranked 15th

in terms of market capitalization (18th in 2004 and 17th in 2005) and 18th in

terms of

total value traded in stock exchanges and 21st in terms of turnover ratio as of

December

2006.

A comparative study of concentration of market indices and index stocks in

different

world markets is presented in the (Table 1-5). It is seen that the index stocks share

of total

market capitalization in India is 81.6% whereas US index accounted for 89.5%.

The ten

largest index stocks share of total market capitalization is 32.2% in India and

13.4% in

case of US.

The stock markets worldwide have grown in size as well as depth over the years.

As can

be observed from (Table 1-6), the turnover of all markets taken together have

grown from


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US $ 39.61 trillion in 2004 to US $ 67.91 trillion in 2006. It is significant to note

that US

alone accounted for about 48.99 % of worldwide turnover in 2006. Despite having

a large

number of companies listed on its exchanges, India accounted for a meager 0.94%

in total

world turnover in 2006. The market capitalization of all listed companies taken

together

on all markets stood at US $ 54.19 trillion in 2006 (US $ 43.68 trillion in 2005).

The

share of US in worldwide market capitalization decreased from 38.85 % as at end-

2004

to 35.84 % as at end 2006, while Indian listed companies accounted for 1.51% of

total

market capitalization in 2006.

According to the 'World Development Indicators 2007, World Bank' there has

been an

increase in market capitalization as percentage of Gross Domestic Product (GDP)

in

some of the major country groups. The increase, however, has not been uniform

across

countries. The market capitalization as a percentage of GDP was the highest at

112.9%

for the high income countries as at end 2005 and lowest for middle income

countries at

49.5%. Market capitalization as percentage of GDP in India stood at 68.6 % as at

end

2005. The turnover ratio, which is a measure of liquidity, was 122.2 % for high-

income


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countries and 96.6 % for low-income countries. The total number of listed

companies

stood at 28,733 for high-income countries, 11,141 for middle-income countries

and 6,177

for low-income countries as at end 2006.

EQUITY AS AN INVESTMENT

Equity is:

1. Stock or any other security representing an ownership interest.

2. On the balance sheet, the amount of the funds contributed by the owners (the

stockholders) plus the retained earnings (or losses), also referred to as

"shareholder's

equity".

3. In the context of margin trading, the value of securities in a margin account

minus

what has been borrowed from the brokerage.

Equity is a term whose meaning depends very much on the context. In general,

one can think of equity as ownership in any asset after all debts associated with

that asset are paid off. For example, a car or house with no outstanding debt is

considered the owner's equity since he or she can readily sell the items for cash.

Stocks are equity Because they represent ownership of a company, whereas bonds

are classified as debt because they represent an obligation to pay and not

ownership of assets. The ability of equities to deliver over longer time frames and

even outperform other investment avenues like gold, property and bonds is an

often chronicled fact. However, over shorter time frames, equities also hold the

potential to be a very risky asset class and expose the portfolio to high levels of

volatility. This is the primary reason why any fund

manager worth his salt always recommends a sufficiently long (at least 3 years)

time frame for an equity-oriented investment. Similarly financial planners


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advocate pruning of the equity holdings with advancement in the investors age,

when the investor is typically closer to retirement (shorter investment horizon)

and has a lower risk appetite as well.

INVESTING PRINCIPLES

1. Invest for Real Returns

2. Keep an Open Mind

3. Never Follow the Crowd

4. Everything Changes

5. Avoid the Popular

6. Learn from your Mistakes

7. Buy during Times of Pessimism

8. Hunt for Value and Bargains

9. Search Worldwide

10. No-one Knows Everything

Equity Markets in India An Overview

If you buy the same securities as other people, you will have the same results as

other people. It is impossible to produce a superior performance unless you do

something different from the majority. To buy when others are despondently

selling and to sell when others are greedily buying requires the greatest fortitude

and pays the greatest reward. Bear markets have always been temporary. And so

have bull markets. Share prices usually turn upward from one to twelve months

before the bottom of the business cycle and vice versa. If a particular industry or

type of security becomes popular with investors, that popularity will always prove

temporary and, when lost, may not return for many years.

The investor should bear in mind that while he makes investment decision, he

should have idea of the companys break-even point and companys position in


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the stock exchange. For this EQUITY RESEARCH is done. Equity Research does

the research of companys income and growth. In the process, it uses the various

sources of financial information available in the country and accordingly advises

in which company an investor should invest.

FUNDAMENTAL ANALYSIS

The investor while buying stock has the primary purpose of gain. If he invests for

a short period of time it is speculative but when he holds it for a fairly long period

of time the anticipation is that he would receive some return on his investment.

Fundamental analysis is a method of finding out the future price of a stock, which

an investor wishes to buy. The method for forecasting the future behavior of

investments and the rate of return on them is clearly through an analyze of the

broad economic forces in which they operate. The kind of industry to which they

belong and the analysis of the company's internal working through statements like

income statement, balance sheet and statement of changes of income.

ECONOMIC ANALYSIS

Investors are concerned with those forces in the economy, which affect the

performance of organizations in which they wish to participate, through purchase

of stock. A study of the economic forces would give an idea about future

corporate earnings and the payment of dividends and interest to investors. Some

of the broad forces within which the factors of investment operate are:

1. POPULATION: -

Population gives an idea of the kind of labor force in a country. In some countries

the population growth has slowed down whereas in India and some other third

world countries there has been a population explosion. Population explosion will

give demand for more industries like hotels, residences, service industries like

health, consumer demand like refrigerators and cars. Likewise, investors should


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prefer to invest in industries, which have a large amount of labor force because in

the future such industries will bring better rates of return.

2. RESEARCH AND TECHNOLOGICAL DEVELOPMENTS: -

The economic forces relating to investments would be depending on the amount

of resources spent by the government on the particular technological development

affecting the future. Broadly the investor should invest in those industries which

are getting a large amount of share in the funds of the development of the country.

For example, in India in the present context automobile industries and spaces

technology are receiving a greater attention. These may be areas, which the

investor may consider for investments.

3. CAPITAL FORMATION: -

Another consideration of the investor should be the kind of investment that a

company makes in capital goods and the capital it invests in modernization and

replacement of assets. A particular industry or a particular company which an

investor would like to invest can also be viewed at with the help of the economic

indicators such as the place, value and property position of the industry, group to

which it 110ngs and the year-to-year returns through corporate profits.

4. NATURAL RESOURCES AND RAW MATERIALS: -

The natural resources are to a large extent responsible for a country's economic

development and overall improvement in the condition of corporate growth. In

India, technological discoveries recycling of materials, nuclear and solar energy

and new synthetics should give the investor an opportunity to invest in untapped

or recently tapped resources which would also produce higher investment

opportunity.

SECTOR ANALYSIS

The industry has been defined as homogeneous groups of people doing a similar

kind of activity or similar work. In India, the broad classification of industry is


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made according to stock exchange list, which is published. This gives a distinct

classification to industry to industry in different forms such as:

(A) Engineering,

(B) Banking and Insurance,

(C) Textiles,

(D) Cement,

(E) Steel Mills and Alloys,

(F) Chemicals and Pharmaceuticals,

(G) Retail,

(H) Sugar,

(I) Information Technology,

(J) Automobiles and Ancillary,

(K) Telecommunications,

(L) FMCG,

(M)Miscellaneous.

Industry should also be evaluated or analyzed through its life cycle. Industry life

cycle may also be studied through the industrial life cycle state. There are

generally three stages of an industry. These stages are pioneering stage, expansion

stage and stagnation stage.

1. THE PIONEERING STAGE: -

The industrial life cycle has a pioneering stage when the new inventions and

technological developments take place. During this time the investor will notice

great increase in the activity of the firm. Production will rise and in relation to

production, there will be a great demand for the product. At this stage, the profits

are also very high as the technology is new. Taking a look at the profit many new

firms enter into the same field and ill; market becomes competitive. The market

competitive pressures keep on increasing with the en" of new-firms and the prices

keep on declining and then ultimately profits fall. At this stage all firms compete

with each other and only a few efficient firms are left to run the business and most

of the other firms are wiped out in the pioneering stage itself.


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2. THE EXPANSION STAGE: -

The efficient firms, which have been in the market now, find that it is time to

stabilize them. Although competition is there, the, number of firms have gone

down during ill pioneering stage itself and there are a large number of firms left to

run the business in the industry. This is the time when each one has to show

competitive strength and superiority. The investor will find that this is the best

time to make an investment. At the pioneering stage it was difficult to find out

which of the firm to invest in, but having waited for the stability period there has

been a dynamic selection proces and a few of the large number of firms are left in

the industry. This is the period of security and safety and this is also called period

of maturity for the firm. This stage lasts from five years to fifty years of a firm

depending on the potential and productivity and policy to meet the change of

competition and rapid change in buyer and customer habit. After this stage

develops the stage of stagnation or obsolescence.

3. THE STAGNATION STAGE: -

During the stagnation stage the investor will find that although there is increase in

sales of an organization, this is not in relation to the profits earned by the

company. Profits are also there but the growth in the firm is lower than it was in

the expansion stage. The industry finds that it is at a loss of power and cannot

expand. During most of the firms who have realized the competitive nature of the

industry and the arrival of the stagnation stage, begin to change their course of

action and start on a new venture should make a continuous evaluation of their

investments. In firms in which they have received profits for large number of

years and have reached stagnation they can plan to their investments and find

better avenues in those firms where the expansion stage has set in.

COMPANY ANALYSIS

Company analysis is a study of the variables that influence the future of a firm

both qualitatively and quantitatively. It is a method of assessing the competitive

position of a firm earning and profitability, the efficiency with which it operates

its financial position and its ful1l with respect to the earning of its shareholders.


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The fundamental nature of this analysis is that each share of a company has an

intrinsic value, which is dependent on the company's financial performance,

quality of management and record of its earnings and dividend. They believe that

the market price of share in a period of time will move towards its intrinsic value.

If the market price of a share is lower than the intrinsic value, as evaluated by the

fundamental analysis, then the share is supposed to be undervalued and it should

be purchased but if the current market price shows that it is more than intrinsic

value then according to the theory the share should be sold. This basic approach is

analyzed through the financial statements of an organization. The basic financial

statements, which are required as tools of the fundamental analyst, are the income

statement, the balance sheet, and the statement of

changes in financial position. These statements are useful for investors, creditors

as well as internal management of a firm and on the basis these statements the

future course of action may be taken by the investors of the firm. While

evaluating a company, its statement must be carefully judged to find out that they

are:

(a) Correct,

(b) Complete,

(c) Consistent and

(d) Comparable

TECHNICAL ANALYSIS

Technical analysis is simply the study of prices as reflected on price charts.

Technical analysis assumes that current prices should represent all knowninformation about the markets. Prices not only reflect intrinsic facts, they also

represent human emotion and the pervasive mass psychology and mood of the

moment. Prices are, in the end, a function of supply and demand. However, on a

moment to moment basis, human emotionsfear, greed, panic, hysteria, elation,

etc. also dramatically effect prices. Markets may move based upon peoples


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expectations, not necessarily facts. A market "technician" attempts to disregard

the emotional component of trading by making his decisions based upon chart

formations, assuming that prices reflect both facts and emotion. Analysts use their

technical research to decide whether the current market is a

BULL MARKET or a BEAR MARKET.

1. STOCK CHARTS

A stock chart is a simple two-axis (X-Y) plotted graph of price and time. Each

individual equity, market and index listed on a public exchange has a chart that

illustrates this movement of price over time. Individual data plots for charts can

be made using the CLOSING price for each day. The plots are connected together

in a single line, creating the graph. Also, a combination of the

OPENING, CLOSING, HIGH and/or LOW prices for that market session can be

used for

the data plots. This second type of data is called a PRICE BAR. Individual price

bars are

then overlaid onto the graph, creating a dense visual display of stock movement.

Stock charts can be drawn in two different ways. An ARITHMETIC chart has

equal vertical distances between each unit of price. A LOGARITHMIC chart is a

percentage growth chart.

2. TRENDS

The stock chart is used to identify the current trend. A trend reflects the average

rate of change in a stock's price over time. Trends exist in all time frames and all

markets. Trends can be classified in three ways: UP, DOWN or RANGEBOUND.

In an uptrend, a stock Equity Markets In India An Overview 21 rallies often

with intermediate periods of consolidation or movement against the trend. In

doing so, it draws a series of higher highs and higher lows on the stock chart. In

an

Uptrend; there will be a POSITIVE rate of price change over time. In a

downtrend, a stock declines often with intermediate periods of consolidation or

movement against the trend. In doing so, it draws a series of lower highs and

lower lows on the stock chart. In a downtrend,


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there will be a NEGATIVE rate of price change over time. Range bound price

swings back and forth for long periods between easily seen upper and lower

limits. There is no apparent direction to the price movement on the stock chart

and there will be LITTLE or NO rate of price change. Trends tend to persist over

time. A stock in an uptrend will continue to rise until some change in value or a

condition occurs. Declining stocks will continue to fall until some change in value

or conditions occur. Chart readers try to locate TOPS and BOTTOMS, which are

those points where a rally or a decline ends. Taking a position near a top or a

bottom can be very profitable. Trends can be measured using TRENDLINES.

Very often a straight line can be drawn UNDER three or more pullbacks from

rallies or OVER pullbacks from declines. When price bars then return to that

trend line, they tend to find SUPPORT or RESISTANCE and bounce off the line

in the opposite direction.

3. VOLUME

Volume measures the participation of the crowd. Stock charts display volume

through individual HISTOGRAMS below the price pane. Often these will show

green bars for up days and red

Equity Markets In India An Overview 22 bars for down days. Investors and

traders can measure buying and selling interest by watching how many up ordown days in a row occur and how their volume compares with days in which

price moves in the opposite direction. Stocks that are bought with greater interest

than sold are said to be under ACCUMULATION. Stocks that are sold with great

interest than bought are said to be under DISTRIBUTION. Accumulation and

distribution often LEAD price movement. In other words, stocks under

accumulation often will rise some time after the buying begins. Alternatively,

stocks under distribution will often fall some time after selling begins. It takes

volume for a stock to rise but it can fall of its own weight. Rallies require the

enthusiastic participation of the crowd. When a rally runs out of new participants,

a stock can easily fall. Investors and traders use indicators such as ON

BALANCE


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VOLUME to see whether participation is lagging (behind) or leading (ahead) the

price action. Stocks trade daily with an average volume that determines their

LIQUIDITY. Liquid stocks are very easy for traders to buy and sell. Liquid stocks

require very high SPREADS (transaction costs) to buy or sell and often cannot be

eliminated quickly from a portfolio. Stock chart analysis does not work well on

illiquid stocks.

4. PATTERNS AND INDICATORS

How can one organize the endless stream of stock chart data into a logical format?

Charts allow

investors and traders to look at past and present price action in order to make

reasonable predictions and wise choices. It is a highly visual medium. This one

fact separates it from the colder world of value-based analysis. The stock chart

Equity Markets In India An Overview 23

activates both left-brain and right-brain functions of logic and creativity. So it's no

surprise that over the last century two forms of analysis have developed that focus

along these lines of critical examination. The oldest form of interpreting charts is

PATTERN ANALYSIS. This method gained popularity through both the writings

of Charles Dow and Technical Analysis of Stock Trends, a classic book written

on the subject just after World War II. The newer form of interpretation is

INDICATOR ANALYSIS, a math-oriented examination in which the basic

elements of price and volume are run through a series of calculations in order to

predict where price will go next. Pattern analysis gains its power from the

tendency of charts to repeat the same bar formations over and over again. These

patterns have been categorized over the years as

having a bullish or bearish bias. Some well-known ones include HEAD and

SHOULDERS, TRIANGLES, RECTANGLES, DOUBLE TOPS, DOUBLE

BOTTOMS and FLAGS. Also, chart landscape features such as GAPS and

TRENDLINES are said to have great significance on the future course of price

action. Indicator analysis uses math calculations to measure the relationship of


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current price to past price action. Almost all indicators can be categorized as

TREND-FOLLOWING or OSCILLATORS. Popular trend-following indicators

include MOVING AVERAGES, ON BALANCE VOLUME and MACD.

Common oscillators include STOCHASTICS, RSI and RATE OF CHANGE.

Trend-following indicators react much more slowly than oscillators. They look

deeply into the rear view mirror to locate the future. Oscillators react very quickly

to short-term changes in price, flipping back and forth between OVERBOUGHT

and OVERSOLD levels. Equity Markets In India An Overview 24

Both patterns and indicators measure market psychology. The core of investors

and traders that make up the market each day tend to act with a herd mentality as

price rises and falls. This "crowd" tends to develop known characteristics that

repeat themselves over and over again. Chart interpretation using these two

important analysis tools uncovers growing stress within the crowd that should

eventually translate into price change.

REASONS FOR TRANSITING IN SECONDARY MARKET

There are two main reasons why individuals transact in the secondary market:

1. INFORMATION MOTIVATED REASONS: -

Information motivated investors believe that they have superior information about

a particular security than other market participants. This information leads them to

believe that the security is not being correctly priced by the market. If the

information is good, this suggests that the security is currently under-priced, and

investors with access to such information will want to buy the security. On the

other hand, if the information is bad, the security will be currently overpriced and

such investors will want to sell their holdings of the security.

2. LIQUIDITY MOTIVATED REASONS: -

Liquidity motivated investors, on the other hand, transact in the secondary market

because they are currently in a position of either excess or insufficient liquidity.

Investors with surplus cash holdings (e.g., as a result of an inheritance) will buy

securities, where as investors with insufficient cash (e.g., to purchase a Car) will

sell securities.


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FUNCTION OF THE SECONDARY MARKET1. To facilitate liquidity and marketability of the outstanding equity and debt

instruments.

2. To contribute to economic growth through allocation of funds to the most

efficient Channel through the process of disinvestments to reinvestment.

3. To provide instant valuation of securities caused by changes in the internal

environment (that is, company-wide and industry wide factors). Such valuation

facilitates the measurement of the cost of capital and the rate of return of the

economic entities at the micro level.

4. To ensure a measure of safety and fair dealing to protect investors interest.

To induce companies to improve performance since the market price at the stock

exchanges reflects the performance and this market price is readily available to

investors.

INTROUCTION

EQUITY

Meaning:

Equity is a term whose meaning depends very much on the context. In

general you can think of equity as ownership in any asset after all debts associated

with that are paid off.Stocks are equity because they represent ownership of a company, whereas bonds

are classified as debt because they represent on obligations to pay and not

ownership of assets.


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In a brokerage account the market value of security amount borrowed equity is

particularly important for margin accounts for which minimum standards must

met.

SHARE

Meaning;

Any busines