CHAPTER participate in the market. One of the

CHAPTER I INTRODUCTIONINTRODUCTIONFOREIGN INSTITUTIONAL INVESTOR:The term Foreign Institutional Investor is defined by SEBI as under:”Means an institution established or incorporated outside India which proposes to make investment in India in securities.

Provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor.”Foreign Investment refers to investments made by residents of a country in financial assets and production process of another country.Entities covered by the term ‘FII’ include “Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies etc.(fund having more than 20 investors with no single investor holding more than 10 per cent of the shares or units of the fund)” (GOI (2005)).FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client accounts that the FII manages are known as ‘sub-accounts’. The term is used most commonly in India to refer to outside companies investing in the financial markets of India.

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International institutional investors must register with Securities & Exchange Board of India (SEBI) to participate in the market. One of the major market regulations pertaining to FII involves placing limits on FII ownership in Indian companies. They actually evaluate the shares and deposits in a portfolio.CONCEPTUAL FRAME WORKAn investor is someone who allocates capital with the expectation of a financial return.

The types of investments include, — equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc. This definition makes no distinction between those in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. Since those in the secondary market are considered investors, speculators are also investors. According to this definition there is no difference.INVESTINGThe act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.It’s actually pretty simple: investing means putting your money to work for you.

Essentially, it’s a different way to think about how to make money. Growing up, most of us were taught that you can earn an income only by getting a job and working. And that’s exactly what most of us do. There’s one big problem with this: if you want more money, you have to work more hours. However, there is a limit to how many hours a day we can work, not to mention the fact that having a bunch of money is no fun if we don’t have the leisure time to enjoy it.You can’t create a duplicate of yourself to increase your working time, so instead, you need to send an extension of yourself – your money – to work. That way, while you are putting in hours for your employer, or even mowing your lawn, sleeping, reading the paper or socializing with friends, you can also be earning money elsewhere.

Quite simply, making your money work for you maximizes your earning potential whether or not you receive a raise, decide to work overtime or look for a higher-paying job.There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or real estate (among many other things), or starting your own business. Sometimes people refer to these options as “investment vehicles,” which is just another way of saying “a way to invest.” Each of these vehicles has positives and negatives, which we’ll discuss in a later section of this tutorial.

The point is that it doesn’t matter which method you choose for investing your money, the goal is always to put your money to work so it earns you an additional profit. Even though this is a simple idea, it’s the most important concept for you to understand.WHAT INVESTING IS NOTInvesting is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a “hot tip” you heard at the water cooler is essentially the same as placing a bet at a casino.True investing doesn’t happen without some action on your part.

A “real” investor does not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still is risk, and there are no guarantees, but investing is more than simply hoping Lady Luck is on your side.WHY BOTHER INVESTING?Obviously, everybody wants more money. It’s pretty easy to understand that people invest because they want to increase their personal freedom, sense of security and ability to afford the things they want in life.

However, investing is becoming more of a necessity. The days when everyone worked the same job for 30 years and then retired to a nice fat pension are gone. For average people, investing is not so much a helpful tool as the only way they can retire and maintain their present lifestyle.TYPES OF INVESTMENTSThere are many ways to invest money. Of course, to decide which investment vehicles are suitable for one needs to know their characteristics and why they may be suitable for a particular investing objective.BONDSGrouped under the general category called fixed-income securities, the term bond is commonly used to refer to any securities that are founded on debt. When you purchase a bond, you are lending out your money to a company or government.

In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed, or risk-free. The safety and stability, however, come at a cost.

Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities. (The Bond Basics tutorial will give you more insight into these securities.

)STOCKSWhen you purchase stocks, or equities, as your advisor might put it, you become a part owner of the business. This entitles you to vote at the shareholders’ meeting andallows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends.While bonds provide a steady stream of income, stocks are volatile. That is, they fluctuate in value on a daily basis. When you buy a stock, you aren’t guaranteed anything. Many stocks don’t even pay dividends, in which case, the only way that you can make money is if the stock increases in value – which might not happen.Compared to bonds, stocks provide relatively high potential returns.

Of course, there is a price for this potential: you must assume the risk of losing some or all of your investment.MUTUAL FUNDSMutual fund is a type of collective instrument method by which many people pool many in a fund and invest into various stock,bond or cash. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks .The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself. In reality, there are some aspects about mutual funds that you should be aware of before choosing them, but we won’t discuss them here.DEFINITION OF ‘FINANCIAL INSTRUMENT’Financial instruments are monetary contract.

They can be traded,modified and settled. They can be cash ,ownership interest in an entity. INTERNATIONAL ACCOUNTING STANDARD 32 and 39 define financial instrument as “any contract that rise to an financial asset of one entity and a financial liability or equity instrument of another entity”.Financial instruments can be thought of as easily tradable packages of capital, each having their own unique characteristics and structure.

The wide array of financial instruments in today’s marketplace allows for the efficient flow of capital amongst the world’s investors.FINANCIAL INSTRUMENTS IN INDIAThey can be broadly classified into Government securities and Industrial securities.The Government securities are fixed income securities backed by the government and there is no risk of default.

The Major Instruments that fall under Industrial Securities are Debentures, Preference Shares and Equity Shares. In other words, the industrial securities are about the stock market and mutual funds.GOVERNMENT SECURITIES (G-SEC):In India G- Secs are issued by the agencies of Central Government, State Governments and Semi Government Authorities such as municipalities, port trusts, state electricity boards and public sector corporations. The Central and State Governments raise money through these securities to finance the creation of new infrastructure as well as to meet their current cash needs. Since these are issued by the government, the risk of default is minimal. The liquidity profile of guilt edge securities varies.

The profile of securities by central government is high.These securities may have maturities ranging from five to twenty years.These are fixed income securities, which pay interest every six months. The Reserve Bank of India manages the issues of the securities.

These securities are sold in the primary market mainly through the auction mechanism. The RBI notifies issue of a new tranche of securities. Prospective buyers submit their bids. The RBI decides to accept bids based on a cut off price.The G -secs are primarily bought by the institutional investors. The biggest investors are commercial banks who invest in G-secs to meet the regulatory requirement to maintain a certain percentage of Statutory Liquidity Ratio (SLR) as well as an investment vehicle. Insurance companies, provident funds, and mutual funds are the other large investors. The Primary Dealers perform the function of market makers through buying and selling activities.

The Government of India also borrows short term funds for up to one year. This is through the issue of Treasury Bills which are sold at a discount to the face value and redeemed at the full face value. The feature of these securities re they provide wide range of tax incentive.INDUSTRIAL SECURITIES:These are securities issued by the corporate sector to finance their long term and working capital requirements.

The Major Instruments that fall under Industrial Securities areDebentures,Preference SharesEquity Shares.DEBENTUREDebenture is a medium to long term debt instrument used by large company. Debt is like a certificate of loan where a company is liable to pay specified amount with interest .Since these carry a predefined rate of return, there is no scope for any major capital appreciation. However, in case of fixed rate debentures, their market price moves inversely with the direction of interest rates. The debenture issues are rated by the professional credit rating agencies regarding the payment of interest and the repayment of the capital amount. Apart from the `plain vanilla’ variety of debentures (periodic payment of interest during their currency and repayment of capital on maturity), a number of variations have been devised.

For example, zero coupon bonds are issued at a discount to their face value and redeemed at the full face value. The difference constitutes return for the investor.PREFERENCE SHARESPreference Shares are a type of shares those carry a fixed rate of dividends. These carry a preferential right to dividends over the equity shareholders. This means that equity share holders cannot be paid any dividends unless the preference dividend has been paid in full.

Similarly on the winding up of the company, the preference share holders get back their capital before the equity share holders. In case of cumulative preference shares, any dividend unpaid in past years accumulates and is paid later when the company has sufficient profits. Now all preference shares in India are `redeemable’, i.e. they have afixed maturity period. Thus, preference shares are sometimes called a `hybrid variety’incorporating features of debt as well as equity.EQUITY SHARESEquity Shares is a main finance source for any company to raise the capital and claim their assets.

They are regarded as high return high risk instruments. These do not carry any fixed rate of return and there is no maturity period. The company may or may not declare dividend on equity shares.

Equity shares of major companies are traded on the stock exchanges and carry right to vote , share profits. They are authorized ,issued, subscribe, paid up and bonus etc. CALL MONEY MARKET:The loans made in this market are of a short term nature – overnight to a fortnight . This is mostly inter-bank call money market. Those banks which are facing a short term cash deficit, borrow funds from the cash surplus banks. The rate of interest is market driven and depends on the liquidity position in the banking system.COMMERCIAL PAPER (CP) AND CERTIFICATE OF DEPOSITS (CD) :Comercial paper are issued by the corporate to finance their working capital needs.

These are issued for short term finance. These are issued at a discount and redeemed at face value. These are unsecured and therefore only those companies who have a good credit standing are able to access funds through this instrument.

The rate of interest is market driven and depends on the current liquidity position and the creditworthiness of the issuing company. The characteristics of CDs are similar to those of CPs except that CDs are issued by the commercial banks.FINANCIAL INSTRUMENTSEquities: Equities are a type of security that represents the ownership in a company.

Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues.

However, along with the possibility of greater returns comes greater risk.Mutual funds: A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation.

You can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.

Bonds: Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.Deposits: Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum.Cash equivalents: These are relatively safe and highly liquid investment options. Treasury bills and money market funds are cash equivalents.NON-FINANCIAL INSTRUMENTSReal estate: With the ever-increasing cost of land, real estate has come up as a profitable investment proposition.

Gold: The ‘yellow metal’ is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds.EQUITIESDefinition of Equity A stock or any other security representing an ownership interest.

On the company’s balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as “shareholders’ equity”.In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.

In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage value . It is theamount that the owner would receive after selling a property and paying off the mortgage.In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor’s portfolio. In finance, in general, you 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 because he or she can readily sell the item for cash. Stocks are equity because they represent ownership in a company. In short, Equity is an instrument that signifies an ownership position, or equity, in a corporation, and represents a claim on its proportionate share in the corporation’s assets and profits. A person holding such an ownership in the company does not enjoy the highest claim on the company’s earnings.Instead,anequity holder’s claim is subordinated to creditor’s claims, and the equity holder will only enjoy distributions from earnings after these higher priority claims are satisfied as they carry voting right . Also called equities or equity securities or corporate stock.

Types of Equity: There are a number of types of equity, each with different characteristics.Common stock or ordinary shares: Common stock, as it is known in the United States, or ordinary shares, according to British terminology, is the most important form of equity investment. An owner of common stock is part owner of the enterprise and is entitled to vote on certain important matters, including the selection of directors. Common stock holders benefit most from improvement in the firm’s business prospects. But they have a claim on the firm’s income and assets only after all creditors and all preferred stock holders receive payment.

Some firms have more than one class of common stock, in which case the stock of one class may be entitled to greater voting rights, or to larger dividends, than stock of another class. This is often the case with family owned firms which sell stock to the public in a way that enables the family to maintain control through its ownership of stock with superior voting rights.Preferred stock: Also called preference shares, preferred stock is more akin to bonds than to common stock. Like bonds, preferred stock offers specified payments onspecified dates. Preferred stock appeals to issuers because the dividend remains constant for as long as the stock is outstanding, which may be in perpetuity. Some investors favour preferred stock over bonds because the periodic payments are formally considered dividends rather than interest payments, and may therefore offer tax advantages.

The issuer is obliged to pay dividends to preferred stock holders before paying dividends to common shareholders. if the preferred stock is cumulative, unpaid dividends may accrue until preferred stock holders have received full payment. In the case of non cumulative preferred stock, preferred stock holders may be able to impose significant restrictions on the firm in the event of a missed dividend.CONVERTIBLE PREFERRED STOCKThis may be converted into common stock under certain conditions, usually at a predetermined price or within a predetermined time period. Conversion is always at the owner’s option and cannot be required by the issuer. Convertible preferred stock is similar to convertible bonds.Warrants: Warrants offer the holder the opportunity to purchase a firm’s common stock during a specified time period in future, at a predetermined price, known as the exercise price or strike price.

The tangible value of a warrant is the market price of the stock less the strike price. If the tangible value when the warrants are exercisable is zero or less the warrants have no value, as the stock can be acquired more cheaply in the open market. A. In a rights offering, warrants are allotted to existing stock holders in proportion to their current holdings. If all shareholders subscribe to the offering the firm’s total capital will increase, but each stock holder’s proportionate ownership will not change. The stock holder is free not to subscribe to the offering or to pass the rights to others. In the UK a stock holder chooses not to subscribe by filing a letter of renunciation with the issuer.

MUTUAL FUNDSInvestment Options: Mutual Funds stand out: Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man.

Banks: Considered as the safest of all options, bank plays a very prominent role in money circulation of an economy .The banks have been the roots of the financial systems in India To promote as the means to social development, banks in India have indeed played an important role in the rural upliftment. The two main modes of investment in banks, savings accounts and fixed deposits have been effectively used by one and all.

However, today the interest rate structure in the country is headed southwards, keeping in line with global trends. In the coming recent banking do provide the net banking with various facilties . Add to this, the inflationary pressures in economy and you have a position where the savings are not earning. The inflation is creeping up, to almost 6 percent at times, and this means that the value of money saved goes down instead of going up. This effectively change of net banking has provide a wide scope of easy access to facilities ,accuracy and transparency. Post Office schemes: Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial assistance as well as serving the basic requirements of communication. Among all saving options, Post office schemes have been offering the highest rates and safest mode .

Added to it is the fact that the investments are safe with the department being a Government of India entity. So the two basic and most important for features, those of return safety and quantum of returns were being handsomely taken care of. Though certainly not the most efficient systems in terms of service standards and liquidity, these have still managed to attract the attention of small, retail investors. However, with the government announcing its intention of reducing the interest rates in small savings options, due to change in techonolgy the demand for office post schemes have reduced this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirement period for most people and have been considered good option largely due to the fact that returns were higher than most other options and also helped people gain from tax benefits under various sections.

This option too is likely to lose some of its sheen on account of reduction in the rates offered.Company Fixed Deposits: one of the route to invest has been the fixed deposit schemes floated by companies. Companies have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid interest on them.

The safer a company is rated, the lesser the return offered has been the thumb rule. First of all, the danger of financial position of the company not being understood by the investor . The investors rely on intermediaries information who more often than not, d tend to reveal the entire truth. Secondly, liquidity is a major problem with the amount being received monthsafter the due dates. Premature redemption is generally not entertained without cuts in the returns offered and though they present a reasonable option to counter interest rate risk (especially when the economy is headed for a low interest regime), the safety of principal amount has been found lacking. The options discussed above are essentially for the risk-averse, people who think of safety and then quantum of return, in that order. For the brave, it is dabbling in the stock market.

Stock markets provide an option to invest in a high risk, high return game. While the potential return is much more than 10-11 percent any of the options discussed above can generally generate, the risk is undoubtedly of the highest order. But then, the general principle of encountering greater risks and uncertainty when one seeks higher returns holds true. However, as enticing as it might appear, people generally are clueless as to how the stock market functions and in the process can endanger the hard-earned money.For those who are not adap at understanding the stock market, the task of generating superior returns at similar levels of risk is arduous to say the least. This is where Mutual Funds come into picture.

Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC) which are also called at trust..

Different business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in collaboration with reputed international firms. Several international funds like Alliance and Templeton are also operating independently in India. Many more international Mutual Fund giants are expected to come into Indian markets in the near future.The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that we normally associate with them. Some of the other major benefits of investing in them are:Number of available options: Mutual funds invest according to the underlying investment objective as specified at the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs ofthe investor. The availability of these options makes them a good option. While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of security that is aimed for at the time of making investments.

Money market funds offer the liquidity that is desired by big investors who wish to park surplus funds for very short-term periods. Balance Funds acts as to the investors having an image for risk greater than the debt funds but less than the equity funds. The only pertinent factor here is that the fund has to be selected keeping the risk profile of the investor in mind because the products listed above have different risks associated with them. So, while equity funds are a good bet for a long term, they may not find favour with corporates or High Networth Individuals (HNIs) who have short-term needs.Diversification: Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because all stocks do not move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own.Professional Management: Mutual Funds employ the services of skilled professionals who have years of experience to back them up.

They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment.Potential of Returns: The Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period of time. People can pick their investment horizon or vertical and stay put in the chosen fund for the duration. Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks.

The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the portfolio.Liquidity: Fixed deposits with companies or in banks are usually not withdrawn premature because there is a penal clause attached to it. The investors can withdraw or redeem money at the Net Asset Value related prices in the open-end schemes.

In closed-end schemes, the units can be transacted at the prevailing market price on a stock exchange. Mutual funds also provide the facility of direct repurchase at NAV related prices. The market prices of these schemes are dependent on the NAVs of funds and may trade at more than NAV (known as Premium) or less than NAV (known as Discount) depending on the expected future trend of NAV which in turn islinked to general market conditions.

Bullish market may result in schemes trading at Premium while in bearish markets the funds usually trade at Discount. This means that the money can be withdrawn anytime, without much reduction in yield. Some mutual funds however, charge exit loads for withdrawal within a period linked toBesides these important features, mutual funds also offer several other key traits. Important among them are:Well Regulated: Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken.

SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors interests are also implemented effectively. Every organisation has to comply with the regulators which implements and modify.Transparency: Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors.

This means that the investment strategy, outlooks of the market and scheme related details are disclosed with reasonable frequency to ensure that transparency exists in the system. This is unlike any other investment option in India where the investor knows nothing as nothing is disclosed.Flexible, Affordable and a Low Cost affair: Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as capital market operations. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Even the investors, who could otherwise not enter stock markets with low investible funds, can benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds.As has been discussed, mutual funds offer several benefits that are unmatched by other investment options. Post liberalization, the industry has been growing at a rapid pace and has crossed Rs.

100000 crore size in terms of its assets under management. However, due to the low key investor awareness, the inflow under the industry is yet to overtake the inflows in banks. Rising inflation, falling interest rates and a volatile equity market make a deadly cocktail for the investor for whom mutual funds offer aroute out of the impasse. The investments in mutual funds are not without risks because the same forces such as regulatory frameworks, government policies, interest rate structures, performance of companies etc. that rattle the equity and debt markets, act on mutual funds too. But it is the skill of the managing risks that investment managers seek to implement in order to strive and generate superior returns than otherwise possible that makes them a better option than many others.

INSURANCEDefinition: A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.When shopping around for an insurance policy, look for the best priced package that is right for you – prices can vary from one insurance company to the next. And make sure you know what you want. Some individuals, for example, prefer 24-hour claims service or face-to-face contact with an insurance representative. Also consider the claims settlement process, the amount of the deductible and the extent of the replacement coverage. Insurance companies and the policies they offer are not all the same, so think about more than just the price.Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance.

The party bearing the risk is known as the ‘insurer’ or ‘assurer’ and the party whose risk is covered is known as the ‘insured’ or ‘assured’.Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company.A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any case of loss to the insured in case of happening of an uncertain event is paid out of this pool.

Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type.CONCEPT OF INSURANCE / HOW INSURANCE WORKSThe concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds.

Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.Effect of Insurance: Risk of 5 house owners is spread over 1000 house owners in the village, thus reducing the burden on any one of the owners.Why should one buy Insurance?All assets have some economic value attached to them. No person can deny that there is also a possibility that these assets may get damaged/destroyed or become non- operational due to risks like breakdowns, fire, floods, earthquake etc. Different assets are exposed to different types of risks like a car has a risk of theft or meeting an accident, a house is exposed to risk of catching fire, a human is exposed to risk of death/accident. Insurance is needed because of following reasons:SOCIAL SECURITY TOOLInsurance acts as an important tool providing a sense of security to the society on a whole. It is the right of every human-being to have basic amenities like food, clothing, housing, medical care, standard of living necessary for his personal and family’s well being, and right to security in case of unemployment, disability, sickness or any other circumstances out of his control.In case the bread earner of a family dies, the family suffers from direct financial loss as family’s income ceases.

As a result, family’s economic condition gets affected unless there are other arrangements to rescue the family from this situation. Life insurance is one alternate arrangement that offers some respite to the family from financial distress. Otherwise this family would have been pushed into the lower strata of the society, which would be an additional cost to the society. This is because subsidies would have to be given to the family so as to enable it to survive and enjoy the basic rights at par with other people. Moreover, a poor family is generally seen tohave a large family size with family members being illiterate. This on a whole affects the society and is a cost to the society. Therefore, insurance compliments the state in social management efforts.

UNCERTAINTYThe basic need of insurance arises as risks are uncertain and unpredictable in nature. Getting insurance for an asset does not mean that the asset is protected against risks or its exposure to risk is reduced, but it actually implies that in case the asset suffers any loss in value due to such risk, the insurance company bears the loss and compensates the insured by making payment to him.ECONOMIC DEVELOPMENTThe premium paid by people to the insurance companies is a part of their savings.

Insurance, thus, acts as a useful instrument in promoting savings and investments, particularly within the lower-income and middle-income families. These savings are ultimately used as investments fuelling economic growth.GENERAL PURPOSES OF INSURANCEInsurance is widely popular and beneficial because of its following general purposes:Protection or safety (Term insurances) : These plans are best suited for people aged upto 35 years as it provides higher protection at low cost.

These plans are also beneficial for a person whose income is low and want to secure their family from financial default in case of his death.Marriage or education of the child (Children plans)Speedy growth of money ; risk cover (Unit Linked Plans)Saving and Protection (Endowment type plans)Saving, protection ; liquidity (Money back plans)The above purposes apply for life insurance. In case of General insurance the basic purpose is to protect the insured against financial loss suffered by him or creation of liability, due to the causes covered by the policy.

DEPOSITSBank Deposits: Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The “deposit” itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited.When someone opens a bank account and makes a deposit of $500 cash, the account holder surrenders legal title to the $500 cash.

This cash becomes an asset of the bank; the account becomes a liability. In the United States, the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance that guarantees the deposits of member banks up to $250,000 per depositor, per bank. Member banks are required to place signs visible to the public stating that “deposits are backed by the full faith and credit of the United States Government.”Saving money is advantageous because it provides people the opportunity to earn interest while keeping their money safe. Investing money can be risky, but it offers higher returns than bank savings accounts and can help people build wealth over the long-term.Savings accounts and other savings vehicles such as certificates of deposit are advantageous because they provide the account holder with the opportunity to earn interest on his savings while having little to no risk. While the interest rates are typically low, the amount earned in interest is incentive for saving.

Savings accounts and money market accounts are designed to provide the account holder with anytime access to his money. Certificates of deposit, or CDs, impose a penalty if the funds are withdrawn before the expiration date of the certificate, but generally have higher interest rates than savings accounts.The benefits of saving money are priceless. It is no secret that conserving money is crucial.

In a time when the value of homes are decreasing and the price of food is rising, saving money is the only way to weather this economic catastrophy.A person can start doing this by taking account of every penny they earn. The advantages of saving money outnumber the disadvantages.Peace of Mind: When a person saves money continuously, it gives them a “peace of mind”. An individual will sleep better at night knowing they have additional money put aside. Peace of mind translates into better relationships because if a person can sleep better at night, they will be more alert and receptive to there spouse, children and friends. Since most stress originates from financial worry, saving will reduce this type of anxiety. There will be less tension and irritability.

Who wouldn’t want that?More Income: Saving money means an individual will have more it at the end of the year. This is what saving money does. It allows a person to have more of the money they earned. Uncle Sam takes enough of it, why not keep more for yourself? A person could have as much as $5,000 more. Sky is the limit.Monetary Safety Net: Saving money provides a person with a financial net of safety just in case they lose their job, become disabled or can no longer work.

Life is uncertain, but money does not have to be. Having an emergency fund that will last a year is perfect. When a person saves money they actively build this net for emergencies. Things happen, and what this does is protect a person from suffering economically.Saving Earns Interest: Allocating money in a certain savings account will allow it to earn interest. Online banks help money grow at faster rates. For example, if an individual puts $1,000 in an ING savings account, this money will earn approximately$3.00 a month in interest.

This depends on the market as well. In a year a person can earn $40 in interest alone if they leave the money in there. It pays to save money.

Emigrant pays about 5% interest so it earns more than ING direct.More Options: When a person decides to save money and make it a lifestyle, a plethora of choices is available. One could invest or purchase something they want. It is nice to have some wiggle room.Now is the time to save money. All one has to do is look on the news and see that times will only become more difficult before they get better. The only way for anyone to thrive during this turbulent time is to set aside money for the future. A person must take their financial destiny into their hands because no one else will.

Institutional Investors: Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets. They can also include operating companies which decide to invest their profits to some degree in these types of assets.Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. For instance, an ordinary person will have a pension from his employer.

The employer gives that person’s pension contributions to a fund. The fund will buy shares in a company, or some other financial product. Funds are useful because they will hold a broad portfolio of investments in many companies. This spreads risk, so if one company fails, it will be only a small part of the whole fund’s investment.Institutional investors will have a lot of influence in the management of corporations because they will be entitled to exercise the voting rights in a company. They can actively engage in corporate governance. Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under.

Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management.OVERVIEW OF INSTITUTIONAL INVESTORS:Because of their sophistication, institutional investors may often participate in private placements of securities, in which certain aspects of the securities laws may be inapplicable. For example, in the United States, a private placement under Rule 506 of Regulation D may be made to an “accredited investor” without registering the offering of securities with the U.S. Securities and Exchange Commission. In essence institutional investor, an accredited investor is defined in the rule as:a bank, insurance company, registered investment company (generally speaking, a mutual fund), business development company, or small business investment company;an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;a charitable organization, corporation, or partnership with assets exceeding$5 million;a director, executive officer, or general partner of the company selling the securities;a business in which all the equity owners are accredited investors;a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; ora trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.INSTITUTIONALINVESTORSASFINANCIAL INTERMEDIARIESNumerous institutional investors act as intermediaries between lenders and borrowers.

As such, they have a critical importance in the functioning of the financial markets. Economies of scale imply that they increase returns on investments and diminish the cost of capital for entrepreneurs. Acting as savings pools, they also play a critical role in guaranteeing a sufficient diversification of the investors’ portfolios. Their greater ability to monitor corporate behaviour as well to select investors’ profiles implies that they help diminish agency costs.TYPES OF INSTITUTIONAL INVESTORS:Endowment Funds – A financial endowment is a transfer of money and/or property donated to an institution.

The total value of an institution’s investments is often referred to as the institution’s endowment and is typically organized as a public charity, private foundation, or trust. Among the institutions that commonly manage an endowment are academic institutions (e.g., colleges, universities, private schools), cultural institutions (e.

g., museums, libraries, theaters, hospitals), and religious establishments. An endowment may come with stipulations regarding its usage. In some circumstances an endowment may be required to be spent in a certain way or alternatively invested, with the principal to remain intact in perpetuity or for a defined time period. This allows for the donation to have an impact over a longer period of time than if it were spent all at once.Mutual Fund: A mutual fund is a type of professionally-managed collective investment vehicle that pools money from many investors to purchase securities. It is managed by asset management company, The person who handle is called hedger. While there is no legal definition of mutual fund, the term is most commonly applied only to those collective investment vehicles that are regulated, available to the general public and open-ended in nature.

Hedge funds are not considered a type of mutual fund. The term mutual fund is less widely used outside of the United States and Canada. For collective investment vehiclesoutside of the United States, see articles on specific types of funds including open- ended investment companies, SICAVs, unitized insurance funds, unit trusts and Undertakings for Collective Investment in Transferable Securities.In the United States, mutual funds must be registered with the Securities and Exchange Commission, overseen by a board of directors or board of trustees and managed by a registered investment advisor. They are not taxed on their income if they comply with certain requirements.

Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances.There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The most common type, the open-end mutual fund, must be willing to buy back its shares from its investors at the end of every business day. Exchange- traded funds are open-end funds or unit investment trusts that trade on an exchange.

Open-end funds are most common, but exchange-traded funds have been gaining in popularity. Mutual funds are classified by their principal investments. The four largest categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively-managed.Investors in a mutual fund pay the fund’s expenses. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses by offering several different types of share classes.Hedge Funds: A hedge fund is an investment fund that can undertake a wider range of investment and trading activities than other funds, but which is generally only open to certain types of investors specified by regulators.

These investors are typically institutions, such as pension funds, university endowments and foundations, or high-net-worth individuals, who are considered to have the knowledge or resources to understand the nature of the funds. As a class, hedge funds invest in a diverse range of assets, but they most commonly trade liquid securities on public markets. They also employ a wide variety of investment strategies, and make use of techniques such as short selling and leverage.Hedge funds are typically open-ended, meaning that investors can invest and withdraw money at regular, specified intervals. The value of an investment in a hedge fund is calculated as a share of the fund’s net asset value, meaning that increases and decreases in the value of the fund’s investment assets (and fund expenses) are directly reflected in the amount an investor can later withdraw.Most hedge fund investment strategies aim to achieve a positive return on investment whether markets are rising or falling. Hedge fund managers typically invest their own money in the fund they manage, which serves to align their interests with investors in the fund.

A hedge fund typically pays its investment manager a management fee, which is a percentage of the assets of the fund, and a performance fee if the fund’s net asset value increases during the year. Some hedge funds have a net asset value of several billion dollars. As of 2009, hedge funds represented 1.1% of the total funds and assets held by financial institutions. As of April 2014, the estimated size of the global hedge fund industry was US$2.13 trillion.Because hedge funds are not sold to the public or retail investors, the funds and their managers have historically not been subject to the same restrictions that govern other funds and investment fund managers with regard to how the fund may be structured and how strategies and techniques are employed. Regulations passed in the United States and Europe after the 2008 credit crisis are intended to increase government oversight of hedge funds and eliminate certain regulatory gaps.

Pension Funds: Pension fund is any plan, fund, or scheme which provides retirement income. Pension funds are important to shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold about $6 trillion in assets. In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity. Although the (Japan) Government Pension Investment Fund (GPIF) lost 0.25 percent, in the year ended March 31, 2013 GPIF was still the world’s largest public pension fund which oversees 114 trillion Yen ($1.5 trillion).

Insurance Companies: Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as theequitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

A Sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Most SWFs are funded by foreign exchange assets.Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation’s banking system; this type of fund is usually of major economic and fiscal importance.

Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and that may not have a significant role in fiscal management.The accumulated funds may have their origin in, or may represent, foreign currency deposits, gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations that are typically held in domestic and different reserve currencies (such as the dollar, euro, pound and yen). Such investment management entities may be set up as official investment companies, state pension funds, or sovereign oil funds, among others.There have been attempts to distinguish funds held by sovereign entities from foreign exchange reserves held by central banks. Sovereign wealth funds can be characterized as maximizing long term return, with foreign exchange reservesserving short term currency stabilization and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management.

Moreover it is widely believed most have diversified hugely into assets other than short term, highly liquid monetary ones, though almost no data is publicly available to back up this assertion. Some central banks have even begun buying equities or derivatives of differing ilk (even if fairly safe ones like overnight interest rate swaps).Investment Banking: An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client’s agent in the issuance ofsecurities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed incomeinstruments, foreign exchange, commodities, and equity securities.Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (Glass–Steagall Act) until 1999 (Gramm–Leach–Bliley Act), the United States maintained a separation between investment banking and commercial banks.

Other industrialized countries, including G8 countries, have historically not maintained such a separation.There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.

e., underwriting, research, etc.) is the “sell side”, while dealing with pension funds, funds, hedge, and the investing public (who consume the products and services of the sell-side in order to maximize their return on investment) constitutes the “buy side”. Many firms have buy and sell side components.An investment bank can also be split into private and public functions with an barrier which separates the two to prevent information from crossing.

The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information.An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities ; Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.Unit Trust: A unit trust is a form of collective investment constituted under a trust deed. Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, Malaysia and the UK, unit trusts offer access to a wide range of securities. Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. Each fund has a specified investment objective to determine the management aims and limitations.An Investment Trust is a form of collective investment found mostly in the United Kingdom.

Investment trusts are closed-end funds and are constituted as public limited companies. The name is somewhat misleading, given that (according to law) an investment “trust” is not in fact a “trust” in the legal sense at all, but a separate legal person or a company. This matters for the fiduciary duties owed by the trustees and the equitable ownership of the fund’s assets.Globalization of Financial Markets: When considered from a strictly local standpoint, institutional investors are sometimes called foreign institutional investors (FIIs).

This expression is mostly used in emerging markets such as Malaysia and India.In countries like India, statutory agencies like the Securities and Exchange Board of India have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs. In 2008, FIIs represented the largest institution investment category, with an estimated US$ 751.14 billion.

RBI REGULATIONS FOR FIIS IN INDIAForeign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India.The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the Indian company and 10 per cent for NRIs/PIOs.

The limit is 20 per cent of the paid up capital in the case of public sector banks, including the State Bank of India.The ceiling of 24 per cent for FII investment can be raised up to sectoral cap/statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect. And the ceiling of 10 per cent for NRIs/PIOs can be raised to 24 per cent subject to the approval of the general body of the company passing a resolution to that effect.The ceiling for FIIs is independent of the ceiling of 10/24 per cent for NRIs/PIOs.

The equity shares and convertible debentures of the companies within the prescribed ceilings are available for purchase under PIS subject to: – the total purchase of all NRIs/PIOs both, on repatriation and non-repatriation basis, being within an overall ceiling limit of (a) 24 per cent of the company’s total paid up equity capital and (b) 24 per cent of the total paid up value of each series of convertible debenture; and the investment made on repatriation basis by any single NRI/PIO in the equity shares and convertible debentures not exceeding five per cent of the paid up equity capital of the company or five per cent of the total paid up value of each series of convertible debentures issued by the company.MONITORING FOREIGN INVESTMENTSThe Reserve Bank of India monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. The cut-off point, for instance, is fixed at 8 per cent for companies in which NRIs/ PIOs can invest up to 10 per cent of the company’s paid up capital. The cut-off limit for companies with 24 per cent ceiling is 22 per cent and for companies with 30 per cent ceiling, is 28 per cent and so on. Similarly, the cut-off limit for public sector banks (including State Bank of India) is 18 per cent.Once the aggregate net purchases of equity shares of the company by FIIs/NRIs/PIOs reach the cut-off point, which is 2% below the overall limit, the Reserve Bankcautions all designated bank branches so as not to purchase any more equity shares of the respective company on behalf of FIIs/NRIs/PIOs without prior approval of the Reserve Bank.

The link offices are then required to intimate the Reserve Bank about the total number and value of equity shares/convertible debentures of the company they propose to buy on behalf of FIIs/NRIs/PIOs. Onreceipt of such proposals, the Reserve Bank gives clearances on a first-come-first served basis till such investments in companies reach 10 / 24 / 30 / 40/ 49 per cent limit or the sectoral caps/statutory ceilings as applicable. On reaching the aggregate ceiling limit, the Reserve Bank advises all designated bank branches to stop purchases on behalf of their FIIs/NRIs/PIOs clients.BOMBAY STOCK EXCHANGE:Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asia’s first Stock Exchange and one of India’s leading exchange groups.

Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising platform. Popularly known as BSE, the bourse was established as “The Native Share & Stock Brokers’ Association” in 1875.BSE is a corporatized and demutualised entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange as strategic partners. BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME). Around 5000 companies are listed on BSE making it world’s No.

1 exchange in terms of listed members. The companies listed on BSE Ltd command a total market capitalization of USD Trillion 1.06 as of May 15, 2014. BSE Ltd is world’s fifth most active exchange in terms of number of transactions handled through its electronic trading system. It is also one of the world’s leading exchanges (5th largest in May 2014) for Index options trading (Source: World Federation of Exchanges).BSE also provides a host of other services to capital market participants including risk management, clearing, settlement, market data services and education. It has a global reach with customers around the world and a nation-wide presence. BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments.

BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certifications. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT).It operates one of the most respected capital market educational institutes in the country (the BSE Institute Ltd.

). BSE also provides depository services through its Central Depository Services Ltd. (CDSL) arm.BSE’s popular equity index – the SENSEX – is India’s most widely tracked stock market benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa).VISION:”Emerge as the premier Indian stock exchange with best-in-class global practice in technology, products innovation and customer service.”ACHIEVEMENTS OF BSEAt par with international standards, BSE Ltd. has been a pioneer in several areas over the decades and has many firsts and key achievements to its credit. BSE is the first exchange in India to To Launch a special platform for trading in SME securitiesTo Introduce Equity DerivativesTo Launch a Free Float Index – SENSEXTo Launch Exchange Enabled Internet Trading PlatformTo Obtain ISO certification for a stock exchangeExclusive facility for financial training – BSE Institute Ltd.To Launch its website in Hindi and regional languagesTo Host the popular opening-bell ceremony in Indian capital marketsLaunch mobile-based trading in India in Sept 2012To Become securities market infrastructure member of SWIFT in India and provide corporate actions to custodians in ISO 15022 formatTo Launched SENSEX Realized Volatility (REALVOL) Index in Nov 2012 Besides the above, BSE has taken large strides in product and service innovation for the benefit of its members and investors, notable ones beingTo Launch of a reporting platform for corporate bondsTo Launch of the BSE IPO index and PSU websiteRevamp of its website with wide range of new investor-friendly featuresTo Launch of trading in SENSEX futures on EUREX and leading exchanges of the BRICS nation blocTo Launched Smart Order Routing for members and investorsIntroduced SACT (SMS alert & Complaint Tracking system)To Launched co-location facility at BSE premises in November 2012Reduction in membership fees to Rs. 10 lakh for new memberships to promote financial access and inclusionLaunch of web-based mutual fund trading platform for investorsOBJECTIVES OF THE STUDY:To get the knowledge of stock market.To find out the relationship between the FIIs investment and BSE Sensex companies.To know the price fluctuations of BSE Sensex due to FIIs.To study the behavioral pattern of FII in India during 2015 to 2017.To study and understand the online trading of secondary market.To study and analyze the revenues of the company when the exchange rates fluctuate.To analyze income statement and find out the revenues when the dollars are converted into Indian rupees.NEED AND SCOPE OF THE STUDY:The study consists of researchers towards the prominence of FIIs in the developing countries.This information also provokes the thought to understand and to put up emphasis on what would be the importance of FIIs on Indian Stock markets and the impact that they show on the companies being part of the indices of these stock exchanges (BSE).Hence, this study focuses on the FIIs with respect of BSE Sensex Companies and considering the values from indices-sensex.SCOPE OF THE STUDY:The scope of the study is to consider the same BSE Sensex Companies and their value variations in period of the study from 2015 to 2017.The study describes the behavioral pattern and correlation between FII investments in India with special reference to BSE Sensex and also with groups of shares in BSE Sensex.It is based on secondary data obtained from websites, newspaper and journals.RESEARCH METHODOLOGYThe methodology adopted in this study was Mostly on secondary data based i.e..,PRIMARY DATAData collected from Newspaper & Magazines.Data obtained from the internet.Data collected from brokers.Data obtained from company journals.Companies Annual ReportsInformation from InternetPublicationsInformation provided by Angel Broking Ltd.SECONDARY DATAData collected from various books and sites.HYPOTHESIS:Null Hypothesis – H10 – There is no significant impact of FIIs on chosen BSE 30 companies.Alternative Hypothesis – H 1a – There is a significant impact of FIIs on chosen BSE 30 companies.Sampling: The 30 companies that are chosen for the study are the companies which have registered themselves with BSE and who have consistency in stock markets. These companies are chosen basing on Conditional sampling at primary level and then convenience sample at the secondary level to arrive at the proper data analysis and successful completion of the study. The list these companies is placed in the scope of the study mentioning those companies as the sample for analysis.DATA COLLECTION:The study is completely based on secondary data that is available on the internet which would be extracted from BSE websites and the data would be clearly dependent on the values provided by SEBI.Techniques for Data Interpretation and Analysis:The data as said above collected would be interpreted through line graphs showing the movement of companies’ indices and would be analyzed using thestatistical analysis tools as Correlation to find the significant relationship between the parameters and ANOVA to test the hypothesis.LIMITATIONS:The study focuses on chosen 30 companies but it is uncertain to understand whether these companies really got affected by FIIs funds investment or sales.It is very difficult to understand the exact impact of FIIs on investors into these companies which is not just fiscal but also psychological expression through which investors get diverted to investing in various companies.The values are truly based on the sources and the weighted average provided by the sources; as it is very difficult to get the exact values on hand apart form these sources directly as primary data.The time frame is really short to work on the 40 companies and understand to ground level facts.CHAPTER II REVIEW OF LITERATUREREVIEW OF LITRATUREStanley Morgan (2002) has examined that FIIs have played a very important role in building up India’s forex reserves, which have enabled a host of economic reforms. Secondly, FIIs are now important investors in the country’s economic growth despite of domestic sentiment. The Morgan Stanley report notes that FII strongly influence short-term market movements during bear markets. However, the correlation between returns and flows reduces during bull markets depends on fluctuations as other market participants raise their involvement reducing the influence of FIIs. Research by Morgan Stanley shows that the correlation between foreign inflows and market returns is high during bear and weakens with strengthening equity prices due to increased participation by other players.Agarwal, Chakrabarti et al (2003) have found in their research that the equity return has a significant and positive impact on the FII. But given the huge volume of investments, foreign investors could play a role of market makers and book their profits, i.e., they can buy financial assets when the prices are declining thereby jacking-up the asset prices and sell when the asset prices are increasing. Hence, there is a possibility of bi-directional relationship between FII and the equity returns.P. Krishna Prasanna (2008) has examined the contribution of foreign institutional investment particularly among companies included in sensitivity index (Sensex) of Bombay Stock Exchange. Also examined is the relationship between foreign institutional investment and firm specific characteristics in terms of ownership structure, financial performance and stock performance. It has been observed that foreign investors invested more in companies with a higher volume of shares owned by the general public. The promoters’ holdings and the foreign investments are inversely related. Foreign investors choose the companies where family shareholding of promoters is not substantial. Among the financial performance variables the share returns and earnings per share are significant factors influencing their investment decision.Gurucharan Singh (2004) highlighted that the securities market in India has come a long way in terms of infrastructure, adoption of best international practices and introduction of competition. Today, there is a need to review stock exchanges and improve the liquidity position of various listed on them. A study conducted by the World Bank (1997) reports that stock market liquidity improved in those emerging economies that received higher foreign investments.Anand Bansal and J.S. Pasricha (2009) studied the impact of market opening to FIIs on Indian stock market behaviour. They empirically analyze the change of market return and volatility after the entry of FIIs to Indian capital market and found thatwhile there is no significant change in the Indian stock market average returns; volatility is significantly reduced after India unlocked its stock market to foreign investors. In the next section we are discussing the data sources and methodology of the study.Kumar (2001) investigated the effects of FII inflows on the Indian stock market represented by the Sensex using monthly data from January 1993 to December 1997. Kumar (2001) inferred that FII investments are more driven by Fundamentals and they do not respond to short-term changes or technical position of the market. In testing whether Net FII Investment (NFI) has any impact on Sensex, a regression of NFI was estimated on lagged values of the first difference of NFI, first difference of Sensex and one lagged value of the error correction term (the residual obtained by estimating the regression between NFI and Sensex). The study concluded that Sensex causes NFI. Similarly, regression with Sensex as dependent variable showed that one month lag of NFI is significant, meaning that there is causality from FII to Sensex. This finding is in contradiction with the findings of Rai and Bhanumurthy (2003) who did not find any causation from FII to return in BSE using similar data between 1994 and 2002. However, Rai and Bhanumurthy have also found significant impact of return in BSE on NFI.CHAPTER III THE INDUSTRY AND COMPANY PROFILEINDUSTRY PROFILESTOCK MARKET:Indian stock market has shown dramatic changes last 4 to 5 years. As of 2004 march-end, Indian stock exchanges had over 9400 companies listed. Of course, the number of companies whose shares are actively traded is smaller, around 800 at the NSE and 2600 at the BSE. Each company may have multiple securities listed on an exchange. Thus, BSE has over 7200 listed securities, of which over 2600 are traded. The market capitalization of all listed stocks now exceeds Rs. 13 Lakh crore. Total turnover-or the value of all sales and purchases – on the BSE and the NSE now exceeds Rs. 50 lakh crore.As large number of indices are also available to fund managers. The two leading market indices are NSE 50-shares (S&P CNX Nifty) index and BSE 30-share (SENSEX) index. There are index funds that invest in the securities that form part of one or the other index. Besides, in the derivatives market, the fund managers can buy or sell futures contracts or options contracts on these indices. Both BSE and NSE also have other sect oral indices that track the stocks of companies in specific industry groups-FMCG, IT, Finance, Petrochemical and Pharmaceutical while the SENSEX and Nifty indices track large capitalization stocks, BSE and NSE also have Mid cap indices tracking mid-size company shares. The number of industries or sectors represented in various indices or in the listed category exceeds50. BSE has 140 scrip’s in its specified group A list, which are basically large-capitalization stocks. B 1 Group includes over 1210 stocks, many of which are mid-cap companies. The rest of the B2 Group includes over 4500 shares, largely low-capitalization.SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):SEBI was established in April 1988 by securities exchange act officially by government of india which is the regulator for the Securities Market in India. Chaired by C B Behave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmadabad.Preamble:The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as”… protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith orincidental thereto” .Functions and responsibilities:SEBI has to be responsive to the needs of three groups, which constitute the market:the issuers of securitiesthe investorsthe market intermediaries.NATIONAL STOCK EXCHANGE (NSE):The NSE of india is leading stock exchange market of india was incorporated in 1992 as first demutualized electronic exchange in country. Vikram limaye is the chief executive director and managing director of NSE. The promotions for NSE were financial institutions, insurance companies, banks and SEBI capital market ltd, Infrastructure leasing and financial services ltd. and stock holding corporation ltd.NSE is a national market for shares, PSU bonds, debentures and government securities since infrastructure and trading facilities are provided. The genesis of the NSE lies in the recommendations of the Pherwani Committee (1991).It has been setup to strengthen the move towards professionalization of the capital market as well as provide nation wide securities trading facilities to investors.NSE-Nifty:The NSE on April22, 1996 which holds total capitalization of US$2.27 trillion,making worlds 11largest stock exchange as per april 2018. NSE flagship nifty index ,NIFTY 50, 50 stock index used by investors in india and around world. “Nifty” means National Index for Fifty Stocks.The NSE-50 comprises 50 companies that represent 20 broad industry groups with an aggregate market capitalization of around 2.27 trillion. All the companies included in the Index have a market capitalization in excess of Rs. 500 crores. Each and should have traded for 85% of trading days at an impact cost of less than 1.5%.The base period for the index is the close of price on NOV 3, 1995 which makes one year of completion of operation of NSE’s, capital market segment. The base value of the index has been set at 1200,base capital of 2.06 trillion. MARKETSCurrently, NSE has some of the following major segments of the capital market:EquityFutures and OptionsRetail Debt MarketWholesale Debt MarketCurrency futuresNSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee, on 31 August,2009, a futures contract based on 7% 12 Year GOI bond (NOTIONAL) was launched with quarterly maturitiesNSE-MIDCAP INDEX:The NSE madcap index or the Junior Nifty comprises 50 stocks that represents 21 board Industry groups and will provide proper representation of the madcap. In case of 50 midcap derivate contract available are less han 50 stock in index .The nifty midcap represent 5.8% free foat of capitalization.The base period for the index is Nov 4, 1996 which signifies 2 years for completion of operations of the capital market segment of the operations. The base value of the index has been set scale of 100-1000.Average daily turnover of the present scenario 258212(laces) and number of average daily trades 2160(laces).BOMBAY STOCK EXCHANGE (BSE):This stock exchange, Mumbai, popularly known as “BSE” was established In 1875 as “The native share and stock brokers association”, as a voluntary non-profit making association .It has evolved over the years into its present status as the premier stock exchange in the country. It may be noted that the stock exchange is the oldest one in Asia, even older than the Tokyo Stock Exchange, this was founded in 1878.The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia and has the greatest number of listed companies in the world, with 5,439 listed as of August 2018.It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 2.1 trillion, making it the largest stock exchange in South Asia and the 12th largest in the world.The governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange.The ban on all the deferral products like BLESS AND ALBM in the Indian capital markets by SEBI with effect from July 2, 2001, abolition of account period settlements, introduction of compulsory rolling settlements in all scripts traded on the exchanges with effect from Dec 31, 2001, etc., have adversely impacted the liquidity and consequently there is a considerable decline in the daily turnover at the exchange. The average daily turnover of the exchange in the present scenario is 121363(laces) and the no of average daily trades is 1257(laces)BSE INDICES:In order to enable the market participants, analysts etc., to track the various ups and downs in Indian stock market, the exchange had introduced in 1986 an equity stock index called BSE-SENSEX that subsequently became the barometer of the moments of the share prices in the Indian stock market. It is a “market capitalization – weighted” index of 30 component stocks representing a sample of large, well established and leading companies. The base year of sensex is 1978-79.The Sensex is widely reported in both domestic and international markets through print as well as electronic media. Sensex is calculated using a market capitalization weighted method. As per this methodology, the level of index reflects the total market value of all 30-component stocks from different industries related toparticular base period. The total value of a company is determined by multiplying the price of its stock by the number of shares outstanding.Statisticians call an index of a set of combined variables (such as price number of shares) Composite index. An Indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over a time. IT is much easier to graph a chart base on indexed values then one based on actual values world over majority of the well known indices are constructed using “Market capitalization weighted method”. The divisor is only link to original base period value of the sensex.New base year average = old base year average*(new market value/old market value)Membership criteria:Membership for the new segment in both the exchanges is not automatic and has to be separately applied for.Membership is currently open on both the exchanges.All members will also have to be separately registered with SEBI before they can be accepted.MEMBERSHIP CRITERIANSEClearing Member (CM)Net worth – 3 croreInterest-Free Security Deposits – Rs. 50lakhCollateral Security Deposit – Rs. 10lakhIn addition for every TM he wishes to clear for the CM has to deposit Rs. 12lakh.Trading Member (TM)Net worth – Rs. 120 lakhInterest-Free Security Deposit – Rs. 16lakhAnnual Subscription Fees – Rs. 2.5 lakhBSEClearing Member (CM)Net worth – 3 crores Interest-Free Security Deposits – Rs. 50 lakhCollateral Security Deposit – Rs. 25 lakhNon-refundable Deposit – Rs. 5 lakhAnnual Subscription Fees – Rs. 50 thousandIn addition for every TM he wishes to clear for the CM has to deposit Rs. 12 lakh with the following break-up.Cash – Rs. 2.5 lakhCash Equivalents – Rs. 25 lakhCollateral Security Deposit – Rs. 5 lakhTRADING MEMBER (TM)Net worth – Rs. 50 lakhNon-refundable Deposit – Rs. 3 lakhAnnual Subscription Fees – Rs. 25 thousandThe Non-refundable fees paid by the members is exclusive and will be a total of Rs.8 lakhs if the member has both Clearing and Trading rights.RULES AND LAWS:Both the BSE and the NSE have been give in-principle approval on their rule and laws by SEBI.According to the SEBI chairman, the Gazette notification of the Bye-Laws after the final approval is expected to be completed by May 2000.Trading is expected to start by mid-June 2018MOSTLY TRADED CURRENCIES IN FCH ANGEL BROKING LIMITEDCountry Currency name SymbolUnited states of America Dollar USD ($)Europe Euro EUR (€)United kingdom Pound GBP (?)Japan Yen JPY (¥)Switzerland Swiss Franc CHF (fr)Australia Dollar AUD ($)Canada Dollar CAD ($)Singapore Dollar SGD ($)Bahrain Dinar BHDKuwait Dinar KWDOman Rial OMRQatar Rial QARSaudi Rial SARUAE Dhiram AEDChinese Yuan CNYEgyptian Pound EGPHong kong Dollar HKDMalaysia Ringgit MYRNew Zealand Dollar NZDSouth africa Rand ZARThailand Baht THBJordan Dinar JODSwedish Kroner SEKCOMPANY PROFILEAngel Broking Limited an indian stock broking firm establishe in 1987, is one of the leading and professionally managed stock broking firm involved in quality services and research. Angel Broking Limited is a corporate member of The Stock Exchange, Mumbai.It is also the corporate member of NSE,National commodity and derivative exchange(NCDEX),Multi commodity exchange(MCX).The company ha 8500 subroker and has franchised 900 across india. The Stock Exchange Mumbai was originally in the name of Mukesh R. Gandhi, which was eventually turned into a corporate membership in the name of Angel Broking Limited.Angel Broking Limited is managed by Mr. Dinesh Thakkar and he is well supported by Mr. Mukesh Gandhi, a fifteen years veteran in the market and later incorporates as “wealth management”.The group is well supported by a professional and qualified research team and efficient operations and back office team, which comprises of highly dedicated and qualified individuals. Angel has an in-house, state of art research department.Angel believes in reaching out to the customer at the farthest end rather than by reaching out to them. The company in its endeavour to give its client the best has opened up several branches all over Mumbai, which are efficiently integrated with the Head Office.Angel Broking Limited offers wide range of product like Angel eye ,Angel speed pro, Angel swift. The Angel eye and angel speed pro act as trade offer platform for share. Swift act as small trading application.Angel has empowered its physical presence throughout India through various strategies which it has been adopting efficiently and effectively over a period of time, like opening up of branches at various places, tie-ups with various agencies and sales agents, buy-outs of smaller regional outfits and appointment of sub-brokers and franchisees. Moreover Angel has been tapping and including high net-worth and self-employed individuals it its vast array of clients.Angel has always strived in the direction of delivering ultimate client satisfaction and developing stronger bonds with its customers and chose partners. Angel has a vision to introduce new and innovative products and services regularly. Angel has been one among the pioneers to introduce the latest technological innovations and integrate it efficiently within its business.HISTORY & MILESTONESAngel Broking’s tryst with excellence in customer relations whch has began in 1987. Today, Angel has emerged as one of the most respected Stock-Broking and Wealth Management Companies in India. With its unique retail-focused stock trading business model, Angel is committed to providing ‘Real Value for Money’ to all its clients.The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX & MCX. Angel is also registered as a Depository Participant with CDSL. Awarded with ‘Broking House with Largest Distribution Network’ and ‘Best Retail Broking House’ at Dun & Bred street Equity Broking Awards2009· August, 2008 Crossed 500000 trading accounts 2018 : ‘fulcrums of commodity derivative market’ award by mcx Certified as ‘great workplace’ after assessment conducted By great place to work institute Ceo award for “Best trading platform of the year 2018” in india , And “ANGEL BEE” Ceo award for bestmobile app for donwoad for mutual fund SNAPSHOT OF THE COMPANY:Date of Establishment 1997Revenue Not AvailableMarket Cap Rs. 725 crore (January 27, 2006)Address G-1, Akruti Trade Center, Road No -7, MIDC, Andheri (E), Mumbai – 400093Branches Andhra Pradesh, Gujarat, New Delhi, Haryana, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu, Uttar Pradesh and West BengalManagement Team Dinesh Thakkar, Chairman and MD Lalit Thakkar, Director – ResearchAmit Majumdar, ED – Operations & FinanceRajiv Phadke, ED – Human Resources & Corporate CommunicationsVinay Agrawal, ED – Equities Broking Nikhil Daxini, ED – Sales and MarketingHitungshu Debnath , ED – Distribution & Wealth ManagementKetan Shah, Associate Director – Information Technology Pinky Kothari , Associate Director – Sales And MarketingOverview Angel Broking provides retail related services encompassing Ebroking, Investment Advisory, Portfolio Management Services, Wealth Management Services and Commodities Trading. It is a member of Bombay Stock Exchange and National Stock Exchange. It is also a registered depository participant with CDSL.The company has a relaxed work atmosphere which thrives upon human values, co-operation, trust and respect. It ensures career growth to its employees with ample introduction to business practices. It has employee friendlyHR policies which gives security and fair promotions.COMPANY ANALYSIS:According to the Individual – Audited financial statement for the Year of 2018 , total net operating revenues increased with 59.38%, from INR 11,000 tens of millions to INR 224.94 tens of millions. The company gained over 8,50,000 download angel broking app and more 4,50,000 download of Angel BEE which enables cutomer to acess services digitally .Return On Asset (Net income / Total Asset) went from 18.81% to -44.27% and the Net Profit Margin (Net Income/Net Sales) went from 10.74% to -10.27% when compared to the same period of last year. The Debt to Equity Ratio (Total Liabilities/Equity) was 1122.34% compared to 309.45% of last year. Finally, the Current Ratio (Current Assets/Current Liabilities) went from 1.39 to 1.02 when compared to the previous year.TURNOVER OF THE COMPANYLegal Status of Firm : Limited Liability/Corporation (Privately Held)Nature of Business : Service ProviderTurnover :US$ 3.2 Million (or Rs. 1-4 Crore Approx.)MajorMarkets :Indian SubcontinentPRODUCTS AND SERVICESWe are a one-stop financial services shop, most respected for quality of its advice, personalized service and cutting-edge technology.EquitiesAngel broking provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to CD. CD leveraged technology to bring the convenience of trading to the investor’s location of preference (residence or office) through computerized access. CD made it possible for clients to view transaction costs and ledger updates in real time.PMSOur Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. It is a platform tat provide wide range of accessible products and serives.We at Angel Broking invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don’t have that expertise for day-to-day management of their equity portfolio.ResearchSound investment decisions depend upon reliable fundamental data and stock selection techniques. Angel Broking Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work. They choose Ford Equity Research when they can clear your doubts.CommoditiesAngel Broking extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Company’s commodities business provides a contra-cyclical alternative to equities broking. The company was among the first to offer the facility of commodities trading in India’s young commodities market (the MCX commenced operations only in 2003). Average monthly turnover on the commodity exchanges increased from Rsbn to Rs 20.02 bn. The commodities market has several products with different and non-correlated cycles. On the whole, the business is fairly insulated against cyclical gyrations in the business.Invest OnlineAngel Broking has made investing in Mutual funds and primary market so effortless. All you have to do is register with us and that’s all. No paperwork no queues and No registration charges.INVEST IN Mutual FundAngel Broking offers you a host of mutual fund choices under one roof, backed by in-depth research and advice from research house and tools configured as investor friendly.APPLY IN IPOsYou could also invest in Initial Public Offers (IPO’s) online without going through the hassles of filling ANY application form/ paperworkSMSStay connected to the market:The trader of today, you are constantly on the move. But how do you stay connected to the market while on the move? Simple, subscribe to Angel Broking Stock Messaging Service and get Market on your Mobile!InsuranceAn entry into this segment helped complete the client’s product basket; concurrently, it graduated the Company into a one-stop retail financial solutions provider. To ensure maximum reach to customers across India, we have employed a multi pronged approach and reach out to customers via our Network, Direct and Affiliate channels. Following the opening of the sector in 1999-2000, a number of private sector insurance service providers commenced operations aggressively and helped grow the market. The company’s entry into the insurance sector de-risked the company from a predominant dependence on broking and equity-linked revenues. The annuity based income generated from insurance intermediation result in solid core revenues across the tenure of the policy.Wealth Management ServiceImagine a financial firm with the heart and soul of a two-person organization. A world-leading wealth management company that sits down with you to understand your needs and goals. We offer you a dedicated group for giving you the most personal attention at every level.ROLES AND RESPONSIBILITIES IN ORGANIZATION:We will give updates to customers inEconomic Outlook and UpdatesSector & Company ReportsTechnical RecommendationsDaily Market ReportDaily Technical OutlookReports on New Fund OfferingsWeekly analysis of mutual funds – Fund FocusWeekly debt report: Debt DoseOffer daily technical calls through SMS to our clientsKEY LEARNINGS IN ORGANIZATION:EQUITYMUTUAL FUNDSTAX SAVENGS SCHEMES IN MUTUAL FUNDSONLINE AND OFFLINE TRADINGIPO (INITIAL PUBLIC OFFER)DERIVATIVESFOREX MARKETCURRENCYCOMMODITIESSWOT ANALYSISA SWOT analysis focuses on the internal and external environments, examining strengths and weaknesses in the internal environment and opportunities and threats in the external EnvironmentSTRENGTHService· Distribution network · Marketing· ProductsWEAKNESSCustomer Satisfaction· Branding· Competition from BanksOPPORTUNITIESEver increasing market· Improving technology · Unfulfilled needs of Customers· Education levelTHREATSNew competitors· Technology based businessFUTURE OUTLOOK:Angel broking Limited has to decrease its margin money up to Rs. 3000it Attracts more new clients and for sub-broker ship company should decrease its Security up to Rs. 50,000 Company has to more aggressive toward its existing client’s feedback and for their services after giving them products because it can increase company loyalty as well its brand name.KEY BENEFITS OF ANGEL STOCK BROKING LIMITEDEquity is a share in the ownership of a company. It represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably.Holding a company’s stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (to the extent of your holding) to everything the company owns. Yes, this means that technically, you own a portion of every piece of furniture; every trademark; every contract, etc. of the company.As an owner, you are entitled to your share of the company’s earnings as well as any voting rights attached to the stock.Another extremely important feature of equity is its limited liability, which means that, as a part-owner of the company, you are not personally liable if the company is not able to pay its debts. In case of other entities such as partnerships, if the partnership goes bankrupt, the partners are personally liable towards the creditors/lenders and they may have to sell off their personal assets like their house, car, furniture, etc., to make good the loss. In case of holding equity shares, the maximum value you can lose is the value of your investment.Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.Angel Stock Broking Limited gives you the access to Over 5000 Schemes of 28 Assets Management Companies (AMCs) with just one account. Some of them included are.Portfolio TrackerManage your mutual fund portfolio from the Angel Stock Broking Limited account. Benefit from live valuation and alerts and also track NAVs of any scheme online.Choice of investment strategiesFrom just two scheme types (equity scheme and debt scheme) offered when the mutual fund industry was conceived more than four decades ago, today, mutual funds offer a plethora of scheme types with different investment strategies.Life InsuranceAngel Stock Broking Limited Account gives you the advantage of buying policies from 12 different Life Insurance companies, helping you get unbiased opinion.General InsuranceAngel Stock Broking Limited Account also extends the product offerings from 10 General Insurance Companies with exhaustive range of insurance products that covers most risks including Motor, Health, Property, Marine, Casualty and Liability.Over the Counter ProductsYour Angel Stock Broking Limited Account makes it so simple for you to buy insurance products that it’s as easy as buying something over the is offering most dynamic web based trading environment to its customers. The new trading platform has many new features which basically fill up the gap between old online trading companies in India and their customers.The Angel Stock Broking Limited trading websites comes with special security features Security Token, which makes you online trading experience more secure without complexity.Stock Trading is available in BSE and NSE. Offline trading is also available through Angel Stock Broking Limited partners in your city and through phone by dialing 022- 39886000.TYPE OF ACCOUNTAngel Stock Broking Limited is offering 3 types of accounts to its customers. Account for beginners, for meddlers and for experts.How to open account with Angel Stock Broking Limited ?Account opening with Angel Stock Broking Limited is easy. Simply fill a form online at below address and somebody from Angel Stock Broking Limited will contact you soon.Advantages of Angel Stock Broking LimitedExtra security features with ‘Security which is the most secures and tested technology in computer world.Simple, easy and fast online stock trading.Almost all investment options are available under one account including Equity Trading, Derivatives, Forex, Commodity, IPO, Mutual Funds and Insurance.Branches are now available in all major cities and the number is growing. Branches are open from 9am to 9pm.Online trading is presently at its nascent stage and is not the most preferred option for financial transactions owing to security concerns and lack of accessibility points. Angel Stock Broking Limited through this hi-speed, technologically secure kiosks will therefore be able to reach out to all its existing and potential customers at even the remotest locations in the country without compromising on the security of its customer’s funds.Why should you choose Angel Stock Broking Limited ?Because it is from Reliance. Reliance capital has big plans regarding this business. It may announce attractive offers to gain market share. Reliance will never enter into a business with small plans.Its brokerage charges are lowest in the country among major providers. With Rs 2500 prepaid amount, you can trade for Rs 5 crore.Site is simple in design, fast to access and easy to find required information.Its daily reports on market trends and technical breakouts are very useful.Website content is divided according to the requirements of experts and beginners.You can trade in Forex, Derivatives, Mutual funds, IPO and buy Insurance.Why should you stay away from Angel Stock Broking Limited ?The trading platform is still in development stage. There are many bugs needs to be rectified.Its “Insta trade” service is not up to the standard. Angel Stock Broking Limited software is a java based simple software. It should provide advanced software to meet the needs of advanced traders.Its system is sometimes very slow and orders are not placed at the time.Its market watch solution is a way behind its competitors like Money control and ICICIdirect.Its service people are not as efficient as competitors.It is still not providing options to buy Post office savings.It is recommending few stocks even when stock markets are on roll.ORGANIZATIONAL STRUCTURE1333500228600CEODeputyCEONationalHeadZONALHEADZONALHEADZONALHEADREGIONALHEADREGIONALHEADREGIONALHEADCLUSTERHEADCLUSTERHEADCLUSTERHEADCENTERMANAGERCENTERMANAGERBDEsBDEsBDEs00CEODeputyCEONationalHeadZONALHEADZONALHEADZONALHEADREGIONALHEADREGIONALHEADREGIONALHEADCLUSTERHEADCLUSTERHEADCLUSTERHEADCENTERMANAGERCENTERMANAGERBDEsBDEsBDEs25609552518410Pr o d u c t s00Pr o d u c t sADA GROUP STRUCTURE171450015176500PRODUCTS offered b y An gel St ock Broking Limit ed are: -Trading Portal ( wit h almost negli gibl e brokerage )Equit y Broki n gCommodi t y Bro kin gDerivati ves ( Fut ures & Options )Offshore In vestm ent s (C ont ract For Differences )D-M at Accou nt.Finan cial Produ ctsMutual FundsLi fe Ins uranceULIP pl anTerm Pl anMone y Back P lanGen eral Insu ranceVehicle/ Moto r In su ran ceHealt h Insu ran ceHous e ins uran ceI PO’ sNFOsValu e- Add ed ServicesReti rem ent Pl ann in gFinanci al P lannin gTax Savin gChildren Fut ure P lan nin gCredi t Ca rdsGold coins retailin gCHAPTER IV DATA ANALYSIS ANDINTERPRETATIONDATA ANALYSIS AND INTERPRETATIONLAST THREE YEARS BSE 30 COMPANIES SENSEX VALUESBSE SENSEXCompany 2017 2016 2015Bajaj Auto 1,822.60 1,592.80 1,541.50Bharti Airtel 310.35 342.9 358.4BHEL 221.5 239 2,324.75Cipla 381.45 319.55 369.9Coal India 360.1 300.85 314.5Dr Reddys Labs 1,758.90 1,577.95 1,662.55GAIL 337.25 384.1 510.8HDFC 775.75 649.45 727.95HDFC Bank 662.35 427.05 2,346.50Hero Motocorp 1,829.80 1,905.25 1,986.10Hindalco 109.6 115.75 246HUL 537.35 407.8 312.3ICICI Bank 1,018.55 684.6 1,144.65Infosys 2,469.15 2,765.05 3,445.00ITC 293.7 201.3 174.50Jindal Steel 379.45 453.1 713.20Larsen 1,619.60 995.1 1,979.05Mahindra and Mahindra 928.65 683.05 777.55Maruti Suzuki 1,493.30 920.05 1,420.60NTPC 158.6 160.6 200.60ONGC 249.75 256.95 1,293.40Reliance 786.2 692.9 1,058.20SBI 2,112.20 1,619.50 2,811.05Sterlite Ind 101.95 89.6 186.60Sun Pharma 700.25 496.85 484.65Tata Motors 266.4 178.4 1,306.30Tata Power 103.35 87.25 1,365.70Tata Steel 376.05 376.05 335.25TCS 1,295.10 1,161.25 1,165.05Wipro 378.75 398.8 490.25FII Performance for the last Three Fiscal Years:Month FII (in Rs. Crores)Gross Purchase Gross Sales Net Sales2014 -2015 63,999.11 57,472.38 6,526.732015 -2016 52,192.02 44,215.13 7,976.892016 -2017 59,692.57 44,900.24 14,792.33BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value ofBSE price Log value ofBSE price2015 2016 2017* FII 4.170 3.902 3.8151 Bajaj Auto 3.187944 3.202161 3.2606912 Bharti Airtel 2.554368 2.535167 2.4918523 BHEL 3.366376 2.378398 2.3453744 Cipla 2.568084 2.504539 2.5814385 Coal India 2.497621 2.47835 2.5564232191385145415004.544906010177800004820285107315FIIBajaj Auto Bharti Airtel BHELCiplaCoal India00FIIBajaj Auto Bharti Airtel BHELCiplaCoal India3.549060101492250034906010125730002.5490601098425002490601073660001.54906010469900010.50201520162017BSE: The impact of FII trend to the BSE sensex values of the companies for the years 2014 – 2015, 2015 – 2016, 2016 – 2017 was as follows,FII had significant decline in terms of Net sales, i.e. in spite of purchases being increased but simultaneously the sales of equities was also on higher side year on year hence the net sales had a significant decline.In comparision with FIIs Bharati Airtel and cipla at BSE has a very little impact or almost no impact when compared to the movement of FIIs. Bharati Airtel pricing was almost standard till the mid 2015-2016 and from there took off to a slight improvement form the existing position inspite of FIIs going down.Bajaj Auto at BSE had a dip till the second half of the 2015-2016 Fiscal years and then slowly picked up in the rest of the fiscal and reached maximum by the end of 2016-2017, which was absolutely against the trend of FIIs.Coal india had maintained a stable stand at the Sensex prices in BSE for the past three fiscal years irrespective of the FIIs inflow and out flow of funds.There was a significant impact of FIIs on the movement of BHEL Industries prices. The trend of Sensex price variation was almost same up to mid-2015 – 2016 nut later BHEL tried to pick up to an extent and regained the old position slowly by the end of 2016 – 2017.BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value of BSE price Log value of BSE price2015 2016 2017* FII 4.170 3.902 3.8151 Dr Reddys Labs 3.220775 3.198093 3.2452412 GAIL 2.708251 2.584444 2.5279523 HDFC 2.862102 2.812546 2.8897224 HDFC Bank 3.370421 2.630479 2.8210885 Hero Motocorp 3.298001 3.279952 3.2624042191385146050004.544992370178435004918075107950FIIHindalco HULICICI BankInfosys ITC00FIIHindalco HULICICI BankInfosys ITC3.549923701498600034992370126365002.5499237099060002499237074295001.54992370457200010.50201520162017INTERPRETATION:The impact of FII trend to the BSE prices of the companies for the years 2014 – 2015, 2015 – 2016, 2016 – 2017 was as follows,FII had significant decline in terms of Net sales, i.e. in spite of purchases being increased but simultaneously the sales of equities was also on higher side year on year hence the net sales had a significant decline.In comparision with FIIs Dr.Reddy’s prices at BSE were not influenced and they continued to have a growth trend in spite of the increment of FIIs sales.In comparision with FIIs Hero Motocorp at BSE has seen a tremendous down trend being highly influenced by the sales increases of FII equities and purchases not being influenced to greater extent.HDFC at BSE has shown a consistent fixed performance with much variation in their sensex prices. The FII’s investments nor sales had literally no impact on the trend movements at Adani ports.GAIL has seen a very faint increment against the decline of FIIs, this indicates that FIIs impact neither increased pressure on GAIL sensex prices but also couldn’t lead to a high level growth rate.BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value of BSE price Log value of BSE price2015 2016 2017* FII 4.170 3.902 3.8151 Hindalco 2.390935 2.063521 2.0398112 HUL 2.494572 2.610447 2.7302573 ICICI Bank 3.058673 2.835437 3.0079824 Infosys 3.537189 3.441703 3.3925475 ITC 2.241795 2.303844 2.4679042191385144780004.544992370177165004918075107315FIIHindalco HULICICI BankInfosys ITC00FIIHindalco HULICICI BankInfosys ITC3.549923701504950034992370125730002.5499237099695002499237073660001.54992370463550010.50201520162017INTERPRETATION:In the case of BSE the trend of down fall of Financial Services Industry seem to strength till the mid 2015 – 2016 fiscal year and slowly picked up and reached normal at the end of 2016 – 2017. But ICICI and Hindalco also suffered a down trend as the international markets suffered in till Mid 2015 – 2016 and slowly picked up andstabilized but couldn’t reach their position back but just tried to improve their status. In these three fiscal years the ITC domain remained stand still and continued growth trend in spite of the FIIs influence on the imported ITC. Infosys and HUL continued strong growth in their Sensex prices at BSE.BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value of BSE price Log value of BSE price2015 2016 2017* FII 4.170 3.902 3.8151 Jindal Steel 2.853211 2.656194 2.5791552 Larsen 3.296457 2.997867 3.2094083 Mahindra-Mahindra 2.890728 2.834452 2.9678524 Maruti Suzuki 3.152472 2.963811 3.1741475 NTPC 2.302331 2.205746 2.2003032191385146050004723130240665FIIJindal Steel LarsenMahindra and MahindraMaruti SuzukiNTPC00FIIJindal Steel LarsenMahindra and MahindraMaruti SuzukiNTPC4.54815840920750043.534815840112395002.521.548158401314450010.5481584027940000201520162017INTERPRETATION:In the case of BSE the trend of down fall of Financial Services Industry seem to strength till the mid 2015 – 2016 fiscal year and slowly picked up and reached normal at the end of 2016 – 2017. But Larsen and Maruthi suziki also suffered a down trend as the international markets suffered in till Mid 2015 – 2016 and slowly picked up and stabilized but couldn’t reach their position back but just tried to improve their status. In these three fiscal years the NTPC domain remained stand still and continued growth trend in spite of the FIIs influence on the imported NTPC. Mahindra and Manhindra continued strong growth in their Sensex prices at BSE.BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value ofBSE price Log value ofBSE price2015 2016 2017* FII 4.170 3.902 3.8151 ONGC 3.111733 2.409849 2.3975052 Reliance 3.024568 2.840671 2.8955333 SBI 3.448869 3.209381 3.3247354 Sterlite Ind 2.270912 1.952308 2.0083875 Sun Pharma 2.685428 2.696225 2.8452532191385146050004.544885690177800004791710107315FII ONGCReliance SBISterlite IndSun Pharma00FII ONGCReliance SBISterlite IndSun Pharma3.548856901504950034885690125730002.54885690100330002488569073660001.54885690469900010.50201520162017INTERPRETATION:Even though FII net sales has dropped over the period of the three latest fiscal due to the increase in Gross sales in spite of a remarkable increase in Gross purchase the impact of FIIs over companies as Reliance, SBI and Sun pharma were not significant and they remain to move in the growth trend and had advanced with an advantage of Sensex price inclination both at BSE. Whereas companies as ONGC and Sterlite industries have felt the down trend due to the net sales increased for FIIs.BSE SENSEX COMPANIES COMPARISIONS with FIIS.NO Company Name Log value of BSE price Log value ofBSE price Log value ofBSE price2015 2016 2017* FII 4.170 3.902 3.8151 Tata Motors 3.116043 2.251395 2.4255342 Tata Power 3.135355 1.940765 2.014313 Tata Steel 2.525369 2.575246 2.5752464 TCS 3.066345 3.064926 3.1123035 Wipro 2.690418 2.600755 2.5783532191385145415004.544904105177800004811395107950FIITata Motors Tata Power Tata Steel TCSWipro00FIITata Motors Tata Power Tata Steel TCSWipro3.549041051498600034904105126365002.5490410599060002490410574295001.54904105476250010.50201520162017INTERPRETATION:BSE: The impact of FII trend to the BSE prices of the companies for the years 2014 – 2015, 2015 – 2016, 2016 – 2017 was as follows,FII had significant decline in terms of Net sales, i.e. in spite of purchases being increased but simultaneously the sales of equities was also on higher side year on year hence the net sales had a significant decline.In comparision with FIIs Wipro prices at BSE had initial impact of FIIs but ultimately built up back to the trend in spite of FIIs continuing their down trend.In comparision with FIIs Tata Steel at BSE has a very little impact or almost no impact when compared to the movement of FIIs. Tata Steel pricing was almost standard till the mid 2015-12 and from there took off to a slight improvement form the existing position inspite of FIIs going down.Tata Motors and Tata power at BSE had a dip till the second half of the 2015 – 2016 Fiscal year and then slowly picked up in the rest of the fiscal and reached maximum by the end of 2016 – 2017, which was absolutely against the trend of FIIs.TCS had maintained a stable stand at the Sensex prices in BSE and NSE for the past three fiscal years irrespective of the FIIs inflow and out flow of funds.MUTUAL FUNDSMEASURES OF RETURNS IN MUTUAL FUNDSA mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned though these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them.Returns on the mutual funds are measured using the following parameters.Sharpe RatioTreynor Ratio?(Beta) co-efficientReturnsThe Sharpe’s MeasureIn this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it.According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as:Sharpe Index (Si) = (Ri – Rf)/SiWhere, Si is standard deviation of the fund.While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.The Treynor MeasureDeveloped by Jack Treynor, this performance measure evaluates funds on the basis of Treynor’s Index.This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta). Symbolically, it can be represented as:Treynor’s Index (Ti) = (Ri – Rf)/Bi.Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.All risk-averse investors would like to maximize this value. While a high and positive Treynor’s Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor’s Index is an indication of unfavorable performance.? (Beta) Co-efficient:Systematic risk is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a Mutual Fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk cannot. By using the risk return relationship, we try to assess the competitive strength of the Mutual Funds vis-à-vis one another in a better way.?(Beta) is calculated asN (?XY) –?X?YN (?X2) – (?X) 2Returns:Returns for the last one-year of different schemes are taken for the comparison and analysis part.Note: All the data used for analysis is taken upto the period 30-June-2016HYPOTHESISThe hypothesis of the study involves comparison betweenReliance Growth FundHDFC Growth fundRELIANCE FUND GROWTH FUND (FUND MANAGER :Mr Sunil Singhania)Reliance Growth fund is an aggressive diversified equity schemeReliance Growth fund follows a bottom up stock specific approach and invests in a mix of large and mid cap stocks.The fund has a high portfolio turnover ratio.The fund manager is bullish on the markets in the long term and expects good returns from the same.The fund manager is of the opinion that the market may not fall due to the abundant liquidity in the system. however the fund managers sees high oil prices a big concern in the global markets.The fund has invested into equities to the tune of 93% of the total portfolio.the fund manager would continue to hold 7-10% of the portfolio in cash .The fund is recommended for investors willing to take above average risk.RELIANCE MUTUAL FUNDFund name Reliance mutual fundFund type Open endedInvestment plan Growth fundAMC Reliance capital asset management ltd.Min investment Rs 5000Asset Size 6864.16(June 302014)Fund manager Sunil SinghaniaLaunch date Oct 8th 1995Face value 10Custodian Deutsche Bank AGASSET ALLOCATIONTable 3Equities 96.11Derivatives Cash and Other Receivables 3.89Table 4CAPITALIZATION (in %)1252130138838Figure 5Interpretation: It shows that the asset allocation of Reliance mutual fund in which Equities consists of 96.11% and Derivatives, Cash and Other Receivables consists of 3.89%.PORTFOLIOCOMPANY NAME % HOLDBank Of Baroda 4.95ICICI Bank Ltd. 4.55E.I.D Parry(India)Ltd. 3.96Lupin Ltd. 3.94HCL Technologies Ltd. 3.71Reliance Industries Ltd. 3.69State Bank Of India 3.42Jindal Saw Ltd. 3.30Divis Laboratories Ltd. 2.82Jindal Steel & Power Ltd. 2.52Table 3Interpretation: Thus ‘Asset Allocation’ is allocating of Reliance mutual fund of investments into different investment options depending on your risk profile and return expectations.11931653530601614121086420001614121086420Industry Allocation of Equity Holding (% of Net Assets)1546860-2231390BanksPharmaceuticalsSoftware Consumer Non DurablesFerrous Metals Petroleum ProductsFinance Industrial ProductsAuto industrial Capital GoodsFertilisers Media And EntertainmentConstruction Telecom-Services Minerals/MiningPesticidesPowerOil CementGas Textile-syntheticRetailing Textile-CottonPaper Telecom-Equipment & AccessoriesConstruction Project Auto Ancillaries Textile Products Tranportation Miscellaneous00BanksPharmaceuticalsSoftware Consumer Non DurablesFerrous Metals Petroleum ProductsFinance Industrial ProductsAuto industrial Capital GoodsFertilisers Media And EntertainmentConstruction Telecom-Services Minerals/MiningPesticidesPowerOil CementGas Textile-syntheticRetailing Textile-CottonPaper Telecom-Equipment & AccessoriesConstruction Project Auto Ancillaries Textile Products Tranportation MiscellaneousFigure 6 RELIANCE GROWTH FUND PERFORMANCE:YEAR Rp Rm Rf (Rm-Rf) X (Rp-Rf) Y X2 XY (X -Xbar) D D2LAST 1YEAR -1.88% 3.83% 5.5% -1.67 -7.38 2.788 12.325 -1.88 3.534LAST 3YEARS 14.26% 11.73% 6% 5.73 8.26 32.83 47.33 -2.53 6.401LAST 5 YEARS 17.65% 12.74% 10% 2.74 7.65 7.507 20.961 2.53 6.401SINCE INCEPTION 27.37% 12.04% 18% -5.96 9.37 35.522 55.85 -6.17 38.07TOTAL 0.84 17.9 78.65 136.47 54.406Table 6Xbar = ?X / N= 0.84 / 4= 0.21Std.Deviation (? )= ? ?(X-Xbar)2 / N= ?54.406/4= 3.69Co-efficient= N (?XY) –?X?Y N (?X2) – (?X) 2= 4(136.47) – (0.84)(17.9)4(78.65) – (0.84) 2= 1.69Sharpe’s Ratio= Rp-Rf / ?= 17.9/3.69= 4.85Treynor’s Ratio= Rm-Rf / ?= 0.84/1.69= 0.50HDFC GROWTH FUND (FUND MANAGER: Mr. Tushar Pradhan)The fund manager feels that the recent rally in the market was driven by liquidity.The fund manager is of the view that the equity markets can give returns of around 15-20% over a time frame of 1-2yrs. The fund manager also believes that equity would be a preferred asset class as other avenues offer lower returns.The fund manager has reduced its exposure to cash at 9% of the total portfolio.The fund manager is bullish on the Transport,CapitalGoods,AutoAncilliaries sectors.The fund has a fairly diversified portfolio with the top 5 stocks accounting for only 21% of the total portfolio.The fund is recommended to investors willing to take average risk.HDFC GROWTH FUNDInvestment InformationFund name HDFC mutual fundFund Type Open-EndedInvestment Plan GrowthAMC HDFC asset management company ltd.Asset Size 1339.46 cr (june-30-2014)Min. Investment Rs 5,000Fund Manager Mr.TusharPradhanLaunch date sept 11th 2014Face value 10Custodian HDFC Bank ltdTable 7Asset Allocation (%)Cash & Equivalents And Net Current Assets 3.31Equities 96.69Table 8CAPITALIZATION (in %)1343846215785Figure 7Interpretation: It shows that the asset allocation of HDFC in which Cash Equilvalents and net current assets consists of 3.31% and Others Equities consists of 96.69%.PortfolioCompany Name % HoldingsInfosys Technologies Ltd. 7.82Reliance Industries Ltd. 7.23ICICI Bank Ltd. 6.39State Bank Of India 6.07ITC Ltd. 5.84Bharat petroleum Ltd. 4.41HDFC 4.28Solar industries India Ltd. 4.28Divi’s Laboratories Ltd. 3.82Bank Of Baroda 3.38Table 9Interpretation: ‘Asset Allocation’ is allocating of HDFC mutual funds in investments into different investment options depending on your risk profile and return expectations.149034549720500Industry Allocation of Equity Holding (% of Net Assets)1197610107315181614121086420001816141210864201200911-1195066Figure 8HDFC GROWTH FUND PERFORMANCEYEAR Rp Rm Rf (Rm-Rf) X (Rp-Rf) Y X2 XY (X -Xbar) D D2LAST 1 YEAR 8.45% 2.96% 5.5% 2.54 2.95 6.45 7.49 -0.46 0.212LAST 3 YEARS 22.82% 12.08% 6% 6.08 16.82 36.97 102.27 3.08 9.49LAST 5 YEARS 14.19% 12.73% 10% 2.73 4.19 7.45 11.44 -0.27 0.073SINCE INCEPTION 22.84% 18.66% 18% 0.66 4.84 0.44 4.84 -2.34 5.48TOTAL 12.01 28.8 51.31 126.04 15.255Table 10Xbar= ?X / N= 12.01 /4= 3Std.Deviation (? ) = ? ?(X-Xbar)2 / N= ?15.255/4= 3.814Co-efficient= N (?XY) –?X?Y N (?X2) – (?X) 2= 4(126.04) – (12.01)(28.8)4(51.31) – (12.01) 2= 2.595Sharpe’s Ratio= Rp-Rf / ?= 28.8/3.814= 7.55Treynor’s Ratio= Rm-Rf / ?= 12.01/2.595= 4.628OBSERVATIONSObservations are made from the data analysis.The following observations are drawn from the analysis of schemes:HDFCGrowth Fund Reliance Growth FundSharpe’s Ratio 7.55 4.85Treynor’s Ratio 4.628 0.50? Co-efficient 2.595 1.69Std.Deviation(?) 3.814 3.69Table 11COMPARATIVE ANALYSIS USING NET ASSET VALUESReliance mutual fundDate January(2017) January(2016) January(2015) January(2014) January(2013)NAV 500.782 431.412 220.862 476.850 270.0501411581205775Jan 2013Jan 2014Jan 2015Jan 2016Jan 2017Figure 10Fund performance and NAV values over a period of 5 year.Interpretation:It shows that the NAV values of Reliance mutual funds of the following years from January 2013 to Jan 2017.HDFC MUTUAL FUNDDate January(2017) January(2016) January(2015) January(2014) January(2013)NAV 93.228 73.695 42.370 81.287 48.8281413596161769Jan 2013Jan 2014Jan 2015Jan 2016Jan 2017Figure 11Fund performance and NAV values over a period of 5 year.Interpretation: It shows that the NAV values of HDFC mutual funds of the following years from January 2013 to Jan 2017.PERFORMANCE EVALUATIONWe are interested in discovering if the management of a mutual fund is performing well; that is, has management done better through its selective buying and selling of securities than would have been achieved through merely “buying the market” picking a large number of securities randomly and holding them throughout the period?One of the most popular ways of measuring management’s performance is by comparing the yields for the managed portfolio with the market or with a random portfolio.The following formula can be used to evaluate Mutual fund performance:-2712720177165NAVt + Dt1NAVt – 100NAVt + Dt1NAVt – 14160520-608965003038475-60896500Where:NAV t =per-share net asset value at the end of year tD t =Capital appreciation during year.NAV t-1 =per-share net asset value at the end of the previous year.PERFORMANCE EVALUATION OF SELECTED FUNDSNAV t-1 = 1st January, 2013NAV t = 1st January, 2017RELIANCE MUTUAL FUND(G)538416533083500Table 1NAV t-1 NAV t D t =(NAV tNAV t-1)270.050 500.782 230.732Applying the formula we get-=500.782 + 230.732 – 1270.050=1.7538416584137500HDFC MUTUAL FUNDNAV t-1 NAV t D t =(NAV tNAV t-1)48.828 93.228 44.4Applying the formula we get-=93.228+ 44.4 – 148.828=1.8FUND PERFORMANCE RANKINGTable 2Name of the Fund NAV RankHDFC MUTUAL FUND MUTUAL FUND(G) 1.8 1RELIANCE MUTUAL FUND(G) 1.7 22063954211409Figure 12Interpretation: It shows that ranking wise HDFC mutual fund is stands for No-1 and 2nd is the Reliance mutual fund.CHAPTER VFINDINGS, CONCLUSIONS AND SUGGESTIONSFINDINGSThis study found that the behavior of FII in last decade was opportunistic; profit accumulation was prime objective behind the portfolio investments in India.A good co – relation was found in the total FII turnovers and A group shares turnover, as ell as this has been attracted the highest attention of portfolio investors in India.The lack of proper regulation has been found in the stock market for guiding the movement of foreign portfolio investors in IndiaThe Biggest advantage with Mutual Funds is that the investor don’t need huge amount to be invested in all his favorite stocks and bonds. Most Mutual Funds have a minimum investment of Rs.1000 to Rs.5000.From the above comparative analysis between HDFC and RELIANCE we can find the differences between their growth schemes performances.By using both the methods i found that the performance of mutual fund growth scheme of HDFC is better than the Reliance.Hence the calculated NAV result of Reliance(1.8) is better than that of HDFC(1.7)By using sharpe’s ratio and treynors ratio we can find the same result that is HDFCis performing better than Reliancein this particular growth scheme.HDFC:-Sharpe’s ratio- 7.55Treynor’s ratio- 4.628Reliance:-Sharpe’s ratio- 4.85Treynor’s ratio- 0.50By the above results we can rank the HDFC growth fund as no-1And Reliance Growth fund as no-2SUGGESTIONS AND RECOMMENDATIONSANGEL BROKING LIMITED. Should create and maintain its brand image in the market so that it can attract more customers and enhance its revenues from this market.As the competition is intense, the company should increase its promotion by advertising more in the areas like Hitech city where there are many corporate prospects, big malls, multiplexes and areas near Airport where there are many individual prospects.Though the software used for entering and tracking daily transactions and generating basic reports satisfies the basic requirements, more sophisticated software which acts as Management Information System (MIS) and Decision Support System (DSS) could make the entire business more efficient.More systematic. Formal training and simple tests to executives would help in minimizing human errors.As Better prices and credit period are two main factors that corporate look for while selecting a full fledged money changer, to increase the number of corporate clients, ANGEL BROKING LIMITED could rework on increasing the credit limits if the corporate profile is credible or give better prices if certain volume is assured by the client.The Asset Management Company must design the portfolio in such a way, to lessen the risk that is prevalent in the market.The Asset Management Company must design the portfolio in such a way, to increase the returns.The Asset Management Company must make sure to pay regular dividends to the investorThe Asset Management Company must dedicate itself to a more professional management of the Fund because it motivates the investors and potential investors to invest in Mutual Funds.The Asset Management Company must make the most advantageous use of print and electronic media in order to motivate the investors and potential investors to invest in Mutual Funds.The Asset Management Company must make sure that the Net Asset Value (NAV) of the fund remains considerably high because it is the most important factor that would be checked by the investors before investing in Mutual Funds.The Asset Management Company must organize itself professionally and manage the Fund efficiently and with dedication to earn the goodwill of the public.CONCLUSIONThe result shown a positive correlation between stock market and investment of FII’s in a relation that sensex follows the investment behavior of FII’s, but there are some exception seen. The net foreign institutional investment, thus implying that the market informational efficiency hypothesis can be rejected for BSE Sensitive Index with respect to the FII. It also shows that positive or negative movement of FII’s leads to a major change/shift in the sentiments of domestic or related investors in market. It suggests the policy implication that the authorities can focus on domestic economic policies to stabilize the stock market. Where as in the case of individual group securitiesBasing on the information in this project, recommendations made to investors are as follows:-Mutual funds provide regular and steady income to investors.Systematic investment plan in Mutual Funds is the best tool for sound investment to small investors who prefer investments in installments.Liquidity, transparency, well regulated and flexibility are some of the features of Mutual funds which is very advantageous to investors.The entry load and exit load in Mutual Funds is very low which does not affect the ultimate yields.Safety of funds & positive rate of return over inflation are the basic two needs of traditional investor. Mutual Fund is well equipped to cater to these basic desires of investors.FII’s had shown a positive correlation in less regulated and high capitalized securities in the market to earn high equity yield.Investors can therefore apply profitable trading rules to earn supernormal profits. Under the circumstances, the Indian stock market seems to be bearing the underlying strain not currently visible at the surface.The implementation of profitable trading strategy may at any point of time generate over-enthused investment and this, if coupled with market overreaction, may result in a destabilized system.A point also to be noted here is the heavy investment and selling attitude of FII’s causing a major hurdle in stabilization of market sentiments.BIBLIOGRAPHYBIBLIOGRAPHY BOOKS AND REFERENCESStephen G. Ryan, Financial Instruments and Institutions, 2nd edition, John Wiley & Sons, Inc., 2007Nalini Prava Tripathy, Financial Instruments and Services, Eastern Economy Edition, Prentice Hall of India Pvt. Ltd. 2004Frank F. Fabozzi, The Handbook of Financial Instruments, John Wiley & Sons, Inc. 2002David M. Weiss,FinancialInstruments: Equities, Debt,Derivatives, and Alternative Investments, Portfolio, 2009Anthony M. Santomero, David F. Babbel, Financial Markets, Instruments, and Institutions, McGraw-Hill/Irwin, 2001Publications and articlesJoseph Koshy (2006) “FDI in Retail sector” Copyright© 2006, Joseph and Joseph Law OfficesNitin Kansal, (2009), “FDI and FII in India” Available on the Internet at ( Budget 2009Economic Survey, 2008-09, “Government Focuses on Strengthening of Primary Health Infrastructure and Improving Service Delivery”Athreye and Kapur (2001)11 Athreye, S. and S. Kapur (2001), “Private Foreign Investment in India: Pain or Panacea?” The World Economy, 24, pp.399-424.Goldman Sachs, 2009, Dreaming with BRICs: The path to 2050Moonis Rehman “Impact of FDI in Retain in India” http://www.tradeindia.comKakali Majumdar “Impact of FDI on Indian Retail Trade: Good, Bad or a Mix” Kakali [email protected] Kanjani et al , 2010, “Impact of FDI and FII on India, 2010″MAGAZINES AND NEWSPAPERS:Economic TimesET WealthThe HinduBusiness StandardThe Financial ExpressThe Hindustan TimesThe Indian ExpressThe Times of IndiaWEBLIOGRAPHYwww.investopedia.comwww.slideshare.comwww.managementparadise.com fiis-1353232340 &opttopic=indexcomp&index=4


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