Karvy Stok Broking Ltd 1a4q3i

SUMMER TRAINING REPORT ON “COMPANY OVERVIEW” AND “CUSTOMER BUYING PREFERENCE”

AT

Karvy Stock Broking Ltd.

IN PARTIAL FULFILLMENT OF THE REQUIREMENT IN THE MBA DEGREE OF VNSGU , Surat

SUBMITTED BY:

GUIDED BY:

Kaushal V. Bhatt

INTERNAL GUIDE AT GRIMS: Prof. Pankaj Patel EXTERNAL GUIDE AT CO. Mr. Shiril Vora

G.I.D.C. RAJJU SHROFF ROFEL INSTITUTE OF MANAGEMENT STUDIES G.I.D.C. VAPI

1

Declaration I, Mr. Kaushal V. Bhatt student of GIDC RAJJU SHROFF ROFEL INSTITUTE OF MANAGEMENT STUDIES, VAPI, d to VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT hereby declare that this project report is a result of culmination of my sincere efforts. I declare that this submitted work is done solely by me and to the best of my knowledge; no such work has been submitted by any other person for the award of degree or diploma. I also declare that all the information collected from various secondary sources has been duly acknowledged in this project report.

_______________________ (Kaushal Bhatt)

2

PROJECT COMPLETION CERTIFICATE This is to certify

that

Mr. Kaushal Bhatt

has

satisfactorily completed the project work entitled, “Consumer Survey” under my Guidance Based on the declaration made by the candidate and my association as a guide for carrying out this work, I recommend that this project report for evaluation as a partial requirement of the MBA Programme of Veer Narmad South Gujarat University.

Date:

Prof. Pankaj Patel GRIMS, VAPI

This project is forwarded for evaluation/Vive-Voce Examination to the Veer Narmad South Gujarat University.

Date: (Dr.R.S.Shah) Director, GRIMS, VAPI

3

ACKNOWLEDGEMENT To acknowledge is very great way to show your gratitude towards the persons who have contributed in your success in one or other way. I find words inadequate to express my gratitude to Mr. SHIRIL VORA for providing me an opportunity to carry out my summer training as such a well reputed and leading stock broking company Karvy Stock Broking Limited (KSBL). At the very outset of the training I deem it is my pious duty to express my sincere thanks also to company’s Branch Manager Mr. Sameer Vora for his continuous guidance and supervision and during the training period. I would also like to thank to Ms. Jaypalsinh Rathod, Mr. Dhruvpalsinh Jadeja, who have spared sometime and helped me out to carry on my project work successfully at the best level. I would like to thank Prof. Pankaj Patel, who has guided me for my project work and provided encouragement through out my training period. This study could not have been successful without the valuable input of the customer of Karvy.

4

PREFACE I know that training is for the development and enhancement of the knowledge in this particular field. It can never be possible to make a mark in today’s competitive era only with theoretical knowledge when industries are developing at global level, practical knowledge of istration and management of business is very important. Hence, practical study is of great importance to M.B.A. student.

With a view to expand the boundaries of thinking, I have undergone 3rd SEM TRAINING at Karvy Stock Broking Limited (KSBL). I have made a deliberate to collect the required information and fulfill training

objective.

5

EXECUTIVE SUMMARY

For every Stock Broking Company one has to compulsorily know how

the

people

are

taking

their

decision

regarding

the

investments. Herewith, I have tried to compile the CUSTOMER BUYING PREFERENCE in Bhavnagar City. Therefore I have selected this topic in order to know the mindset of the people and how they decide with which company, they should deal with. I’ve tried to find out various aspect of the investor in Bhavnagar City. For that I have taken the help of graphs to represent the research data in a graphical manner.

This project report also gives brief information of the other companies and all the four-departmental activities of Karvy Ltd.

6

INDEX DECLERATION CERTIFICATE

I II

ACKNOWLEDGEMENT III PREFACE EXECUTIVE SUMMARY Sr. No. 1

IV V

Particulars GENERAL INFORMATION

Page No. 2

2

ABOUT KARVY

26

3

SWOT ANALYSIS

35

4

MARKETING DEPARTMENT

48

5

FINANCIAL DEPARTMENT

68

6

HUMAN RESOURCE DEPARTMENT

72

7

OPERATION DEPARTMENT

87

8

RESEARCH METHODOLOGY

98

9

LIMITATION

102

10

CONCLUSION

118

11

BIBLIOGRAPHY

119

7

8

ABOUT INDUSTRY: • HISTORY OF THE STOCK BROKING INDUSTRY Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as "The Stock Exchange"). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated. Thus in the same way, gradually with the age of time number of exchanges were increased and at currently it reached to the figure of 24 stock exchanges.

9

DEVELOPMENT An important early event in the development of the stock market in India was the formation of the Native Share and Stock Brokers’ Association at Bombay in 1875, the precursor of the present-day Bombay Stock Exchange. This was followed by the formation of associations /exchanges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). IN addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion during depressing times subsequently. In order to check such aberrations and promote a more orderly development of the stock market, the central government introduced a legislation called the Securities Contracts (Regulation) Act, 1956. Under this legislation, it is mandatory on the part of stock exchanges to seek government recognition. As of January 2002 there were 23 stock exchanges recognized by the central Government. They are located at Ahemdabad, Bangalore, Baroda, Bhubaneshwar, Calcutta, Chenni,(the Madras stock Exchanges ), Cochin, Coimbatore, Delhi, Guwahati, Hyderbad, Indore, Jaipur, Kanpur, Ludhiana, Mangalore, Mumbai(the National Stock Exchange or NSE), Mumbai (The Stock Exchange), popularly called the Bombay Stock Exchange, Mumbai (OTC Exchange of India), Mumbai (The Inter-connected Stock Exchange of India), Patna, Pune, and Rajkot. Of course, the principle bourses are the National Stock Exchange and The Bombay Stock Exchange, ing for the bulk of the business done on the Indian stock market. While the recognized stock exchanges have been accorded a privileged position, they are subject to governmental supervision and control. The rules of a recognized stock exchanges relating to the managerial powers of the governing body, ission, suspension, expulsion, and re-ission of its , appointment of authorized representatives and clerks, so on and so forth have to be approved by the government. These rules can be amended, varied or rescinded only with the prior approval of the government. The Securities Contracts (Regulation) Act vests the government with the power to make enquiries into the affairs of a recognized stock exchange and its business, withdraw the recognition the task of regulating the stock exchange to the Securities Exchanges Board of India.

10

• BSE (BOMBAY STOCK EXCHANGE) The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualise and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956. The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own memberbrokers. It also strives to educate and enlighten the investors by conducting investor education program and making available to them necessary informative inputs. A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.

NSE (NATIONAL STOCK EXCHANGE) 11

NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the Wholesale Debt Market Segment. Subsequently it launched the Capital Market Segment in November 1994 as a trading platform for equities and the Futures and Options Segment in June 2000 for various derivative instruments. NSE has been able to take the stock market to the doorsteps of the investors. The technology has been harnessed to deliver the services to the investors across the country at the cheapest possible cost. It provides a nation-wide, screen-based, automated trading system, with a high degree of transparency and equal access to investors irrespective of geographical location. The high level of information dissemination through on-line system has helped in integrating retail investors on a nation-wide basis. The standards set by the exchange in of market practices, Products , technology and service standards have become industry benchmarks and are being replicated by other market participants. Within a very short span of time, NSE has been able to achieve all the objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian Capital Markets to its present form. The Indian Capital Markets are a far cry from what they used to be a decade ago in of market practices, infrastructure, technology, risk management, clearing and settlement and investor service.

12

• NCDEX (NATIONAL COMMODITIES AND DERIVATIVES EXCHANGE)

NCDEX started working on 15th December, 2003. This exchange provides facilities to their trading and clearing member at different 130 centers for contract. In commodity market the main participants are speculators, hedgers and arbitrageurs. Promoters of NCDEX are,  National Stock Exchange(NSE)  ICICI bank  Life Insurance Corporation(LIC)  National Bank for Agricultural and Rural Development (NABARD)  IFFICO  Punjab National Bank (PNB)  CRISIL

Why NCDX?  NCDEX is nationalized screen based system which is providing transparent, private and easy services.  NCDEX is one of the traditional media which gives online information  NCDEX is one of the Indian commodity exchange, constructed on the basis of the current national institutes the exchange has been established with the coloration of leading institutes like NABARD, LIC, NSI etc….  In India NCDEX has maximum settlement guarantee fund.  NCDEX has appointed two exports for checking quality at the time of delivery

Facilities Provided By NCDEX  NCDEX has developed facility for checking of commodity and also provides a wear house facility 13

 By collaborating with industrial partners, industrial companies, news agencies, banks and developers of kiosk network NCDEX is able to provide current rates and contracts rate.  To prepare guidelines related to special products of securitization NCDEX works with bank.  To avail farmers from risk of fluctuation in prices NCDEX provides special services for agricultural.  NCDEX is working with tax officer to make clear different types of sales and service taxes.  NCDEX is providing attractive products like “weather derivatives”

14

MCX(MULTI COMMODITY EXCHANGE) ‘MULTI COMMODITY EXCHANGE’ of India limited is a new order exchange with a mandate for setting up a nationwide, online multi-commodity market place, offering unlimited growth opportunities to commodities market participants. As a true neutral market, MCX has taken several initiatives for s in a new generation commodities futures market in the process, become the country’s premier exchange. MCX, an independent and a de-mutualized exchange since inception, is all set up to introduce a state of the art, online digital exchange for commodities futures trading in the country and has accordingly initiated several steps to translate this vision into reality. Market Watch:

The market watch window is used to view the market details for a particular or group of contracts and for a particular instrument type. This window displays the following details: Symbol, Expiry, price quotation unit, buy qty, buy price, sell price, sell qty, last traded price, D.P.R, volume (in 000’s), value (in lack), % change, average trade price, high, low, open, close & open interest.

15

STOCK MARKET BASIC

What are corporations? Companies are started by individuals or may be a small circle of people. They pool their money or obtain loans, raising funds to launch the business. A choice is made to organize the business as a sole proprietorship where one Person or a married couple owns everything, or as a partnership with others who may wish to invest money. Later they may choose to "incorporate". As a Corporation, the owners are not personally responsible or liable for any debts of the company if the company doesn't succeed. Corporations issue official-looking sheets of paper that represent ownership of the company. These are called stock certificates, and each certificate represents a set number of shares. The total number of shares will vary from one company to another, as each makes its own choice about how many pieces of ownership to divide the corporation into. One corporation may have only 2,500 shares, while another, such as IBM or the Ford Motor Company, may issue over a billion shares. Companies sell stock (pieces of ownership) to raise money and provide funding for the expansion and growth of the business. The business founders give up part of their ownership in exchange for this needed cash. The expectation is that even though the owners have surrendered a portion of the company to the public, their remaining share of stock will become increasingly valuable as the business grows. Corporations are not allowed to sell shares of stock on the open stock market without the approval of the Securities and Exchange Commission (SEC). This transition from a privately held corporation to a publicly traded one is called going public, and this first sale of stock to the public is called an initial public offering, or IPO.

• Why do people invest in the stock market? When you buy stock in a corporation, you own part of that company. This gives you a vote at annual shareholder meetings, and a right to a share of future profits. When a company pays out profits to the shareholder, the money received is called a "Dividend". "k»j* I I **« I *-f • %• I V* * I

16

The corporation's board of directors choose when to declare a dividend and how much to pay. Most older and larger companies pay a regular dividend, most newer and smaller companies do not. The average investor buys stock hoping that the stock's price will rise, so the shares can be sold at a profit. This will happen if more investors want to buy stock in a company than wish to sell. The potential of a small dividend check is of little concern. What is usually responsible for increased interest in a company's stock is the prospect of the company's sales and profits going up. A company who is a leader in a hot industry will usually see its share price rise dramatically. Investors take the risk of the price falling because they hope to make more money in the market than they can with safe investments such as bank CD's or government bonds.

What is a stock market index? In the stock market world, you need a way to compare the movement of the market, up and down, from day to day, and from year to year. An index is just a benchmark or yardstick expressed as a number that makes it possible to do this comparison. For e.g. S&P CNX Nifty is the index of NSE and SENSEX is the index of BSE.

•

Market Cap As you become familiar with stock and mutual fund investing, you will encounter the term "Cap", as in Small-Cap, Mid-Cap, and Large-Cap. Cap is short for capitalization. As a stock market term, the capitalization of a company is calculated by multiplying the total number of shares by the current price per share. If a company has 500 million shares trading at $20 a share, its market cap is $10 billion (500,000,000 x $20). This is the total value of the company's stock, the value that the world of stock market investors has placed on the company (at least for today, investors are quick to change their minds). 17

Much of this perceived value is due to the expectations of a company's future prospects. Market cap is not dictated by how "big" a company is. Today, we define a large-cap company as one whose stock is valued at over $10 billion (some still say over $5 billion), a mid-cap from $1 to $10 billion, a small-cap from $250 million to $1 billion, and a company whose stock value is under $250 million as a micro-cap. Depending on whom you listen to or how old your reference book is, these definitions will vary. A related point - don't think a company is big just because it has a high stock price, or that it is small just because its stock price is low. For example, Disney trading at $23 is not smaller than Barnes & Noble trading at $33, since Disney has 2,048,690,000 shares outstanding (called the "float") and B&N has just 68,585,000 shares. That's a $4.7 billion market cap for Disney versus only $226 million for Barnes & Noble. The price per share, like the market cap, has nothing to do with how big a company is.

The Securities Market consists of two segments, viz. Primary market and Secondary market. Primary market is the place where issuers create and issue equity, debt or hybrid instruments for subscription by the public; the Secondary market enables the holders of securities to trade them. Secondary market essentially comprises of stock exchanges, which provide platform for purchase and sale of securities by investors. In India, apart from the Regional Stock

18

Exchanges established in different centers, there are exchanges like the National Stock Exchange (NSE) and the Over the Counter Exchange of India (OTCEI), who provide nation wide trading facilities with terminals all over the country. The trading platform of stock exchanges is accessible only through brokers and trading of securities is confined only to stock exchanges. Thus, the securities market has two independent, inseparable segments, the new issues (primary) market and the stock (secondary) market. The primary market provides channel for sale of new securities while the secondary market deals in securities previously issued. The issuer of securities sells the securities to the primary market to raise funds for investment and/or to discharge some obligations. The secondary market enables them who hold securities to adjust their holdings in response to change in their assessment of risk and return. They also sell securities for cash to meet their liquidity needs. The corporate securities market dates back to the 18™ century when the securities of the East India Company were traded in Mumbai and Kolkata. The brokers used to gather under a banyan tree in Mumbai and under a neem tree in Kolkata for the purpose. However, the real beginning came in the 1850s with the introduction of the t stock companies with limited liability. The 1860s witnessed beverish dealings in securities and securities speculation. This brought brokers to Bombay together in July 1875 to boom the first organized stock exchange in the country, viz. The Stock Exchange, Mumbai, Ahmedabad Stock Exchange in 1894 and 22 others followed with 20™ century. The Stock Exchanges are the exclusive centers for trading in equities and the trading platform of an exchange is accessible only to brokers. The regulatory framework heavily favors the recognized stock exchanges by almost banning trading activity outside the stock exchanges. The securities are divided into two parts viz. Corporate securities and Government Securities

•

Corporate Securities:

The no of stock exchanges increased from 11 in 1990 to 23 now. All the exchanges are fully computerized and offer 100% on-line trading. 9644 companies were available for trading on stock exchanges at the end of March 2002. The trading platform of the stock exchanges was accessible to 9687 from over 400 cities on the same date. The sectoral distribution of turnover has undergone significant change over last few Years. The share of manufacturing companies in turnover of top '50' companies, which was nearly 80% in 1995-96, declined sharply to about 6% in 201-02. During the same period the share of IT companies in turnover increased sharply from nil in 1995-96 to 67% in 2001-02. 19

•

Government Securities:

The aggregate turnover in central and state government dated securities, including treasury bills, through SGL transactions increased 31 times between 1994-95 and 200102. During 2001-02 it reached a level of Rs. 1,573,893 core, higher than combined trading volumes in equity segments of all the exchanges in the country, reflecting deepening of the market. The share of outright transactions in government securities increased from 23.2% in 1995-96 to 77% in 2001-02. The share of repo transactions declined correspondingly from 76.8% in 1995-96 to 23% in 2001-02. The Share of dated securities in turnover of government securities increased from 69% in 1996-97 to 94% in 2001-02. The T-bills ed for remaining SGL turnover. •

Derivatives Market:

Derivatives trading commenced in India in June 2000. The total exchange traded derivatives witnessed a volume of Rs. 442,343 crore during 2002-03 as against Rs. 4018 crore during the preceding year. While NSE ed for about 99.5% of total turnover, BSE ed for about 0.5% in 2002-03. The market witnessed higher volumes from June 2001 with introduction of index options, and still higher volumes with introduction of stock options in July 2001. There was a spurt in volumes in November 2001 when stock futures were introduced. It is believed that India is the largest market in the world for stock futures. The stock market or secondary market ensures free marketability, negotiability and price discharge. For these reasons the stock market is referred to as the nerve center of the capital market, reflecting the economic trend as well as the hopes, aspirations and apprehensions of the investors. Stock Market is also called the barometer of the economy.

The broad structure of the secondary market as on March 31, 2000 is presented below: Stock Exchanges Exchanges with Screen Based Trading system Exchanges having Trade/Settlement Guarantee Fund Exchanges with Internet Trading ed (brokers) ed Foreign Brokers ed Corporate ed Sub-Brokers ed FIIS Listed Companies Market Capitalization Turnover during 1999-2000 20

24 24 16 1 9192 38 3136 5675 506 9871 Rs. 1192630 crore Rs. 2067031 crore

Supply and Demand A stock's price movement up and down until the end of the trading day, is strictly a result of supply and demand. The SUPPLY is the number of shares offered for sale at anyone one moment. The DEMAND is the number of shares investors wish to buy at exactly that same time. What a share of a company is worth on anyone day or at any one minute, is determined by all investors voting with their money. If investors want a stock and are willing to pay more, the price will go up. If investors are selling a stock and there aren't enough buyers, the price will go down. Period.

How does one buy stocks? Buying stocks is not as simple as walking into a stockbroker's office and buying shares like you would a pair of shoes from a store. You are required to open an with the brokerage, like opening an at a bank. Some brokers will allow you to open an with very little money. The firm will then hold this money in an interest earning cash , awaiting your orders to buy or sell stock, or other securities such as bonds or mutual funds. When you buy or sell, you pay a commission, which is deducted, from your . When a stock is purchased, the ownership of the shares may be listed in one of two ways. "Listed" means how the corporation tracks the ownership of their stock. If you choose to have the stock listed in your name, you will receive the actual stock certificates. Most investors choose to have the ownership listed in the broker's name, called "held in street name", with the broker keeping track of whose trading the stock actually belongs to. The benefits are reduced paperwork, consolidated portfolio statements, no concerns about storing and processing the paper certificates, and the ability to instantly sell and transfer the shares. Either way, any dividends are credited to your . Stocks held in street name are insured up to $500,000 by the federal government against fraud or financial failure of the brokerage company.

Why do people sell their stock? The reasons people sell their stock are more complex. A person may just need the money. He or she may have watched the price go up, and have a hunch this is a good time to lock in their profit and sell some or all their shares. Bad news concerning a company or its industry, or a disappointing earnings report is sure to prompt heavy selling.

21

An investor may see better opportunities in another company, and so sell his stocks that aren’t moving up. But usually, investors sell because they’ve watched the price fall, and just want to get out before they lose even more.

•

Secondary Market Intermediaries

Stock brokers, sub-brokers, portfolio managers, custodians, share transfer agents constitute the important intermediaries in the Secondary Market. A stock broker plays a very important role in the secondary market helping both the seller and the buyer of the securities to enter into a transaction. The buyer and seller may be either a broker or a client. The transaction entered cannot be annulled except in the case of fraud, willful misrepresentation or upon prima-facie evidence of a material mistake in the transaction, in the judgment of the existing authorities. If a member of the stock exchange (broker) has orders to buy and to sell the same kind of securities, he may complete the transaction between his clients concerned.

When executing an order the stock may on behalf of his client buy or sell securities from his i.e. as principal or act as an agent. For each transaction he has to issue necessary contract note indicating whether he as principal or as an agent for another has entered into the transaction. While buying pr selling securities as a principal, the stock broker has to obtain the consent of his client and the prices charged should be fair and justified by the conditions of the market. A sub-broker is one who works along with the main broker and is not directly ed with the stock exchange as a member. He acts on behalf of the stockbroker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stockbrokers. No stockbrokers or sub-brokers shall buy, sell or deal in securities unless he holds a certificate of registration granted by SEBI under the Regulations made by SEBI ion relation to them. The Central Government has notified SEBI (Stock Brokers & Sub-Brokers) Rules, 1992 in exercise of the powers conferred by section 29 of SEBI Act, 1992. These rules came into effect on 20th August, 1992.

22

• Ten Golden rules for Investment: Warren Buffet has suggested ten golden rules for investing which proves to be immense use to the investors who want a better investment in stock market, Karvy follows these rules which are as described below: 1. Never invest in a business you cannot understand. 2. Concentrating on a few holdings can reduce risk. 3. Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. 4. Buy companies with strong histories of profitability and with a dominant business franchisee. 5. Be fearful when others are greedy and greedy when others are fearful. 6. Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market. 7. Do not take yearly results too seriously. Instead, focus on four or five year averages. 8.

Focus on return on equity, not earnings per share (EPS).

9. Calculate "owner earnings" to get a true reflection of value. Look for companies with high profit margins. 10.

Always invest for the long term. Does the business have favorable long-term prospects?

23

HISTORY OF ONLINE TRADING: Online stock trading is very old concept for big institutions who trade thru private networks owned by Reuter's "Instinet" and a system called "Posit" since 1969. But it becomes internet based for lay men only in late 90s. Funny, that actually idea was first time used by a company making Beer called "WIT beer" to help its shareholders trade its shares. That’s how "WIT Capital" was born which is considered pioneer of this concept. It was made mainstream and household name by an offshoot of Charles Schwab & Co called eSchwab which is used by millions of people in USA. Lots of NRI's play in US stock market even when they come to India for holidays, via website of eSchwab. There are other serious players like E*trade, DATEK online etc. All this companies ask you to start with US $5000 and you can buy and sell stock using these funds. They also issue you a check book which you can use to make payments from this . Or use their ATM card to withdraw cash from your stock trading . Today practically every big name brokerage firm offers online stock trading as it reduces their costs. Earlier they had army of brokers on phone with clients executing trade, which is done by computers accepting orders from clients directly. This firm now offers human access to high net worth s, and to rest at charge per trade.

24

E- BROKING - A SMALL BEGINNING: You have some money to dabble with. Trading shares on BSE/NSE has always been your dream. When will you ever find the time? And besides, the hassle of finding a broker is not easy. Realizing there is untapped market of investors who want to be able to execute their own trades when it suits them, brokers have taken their trading rooms to the Internet. Known as online brokers, they allow you to buy and sell shares via Internet. There are 2 types of online trading service: 1. Discount brokers and 2. Full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don’t. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher. 5Paisa.com, ICICIDirect.com, IndiaBulls.com, Sharekhan.com, Karvy.com, HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in India. With Net trading in securities and rapid consolidation between multiple stock exchanges, the international securities marketplace is fast becoming a "global village" through the creation of a universal virtual equity market. Compared to the Western countries, online trading is still in its infancy in India. With trading turnover at around Rs. 10 crore per day from online trading compared to a combined gross turnover of around Rs. 9000-10,000 crore handled by the BSE and NSE together, online trading has a long way to go.

25

INTERNET TRADING IN INDIA: In the past, investors had no option but to their broker to get real time access to market data. The Net brings data to the investor on line and net broking enables him to trade on a click. Now information has become easily accessible to both retail as well as big investors. The development of broking in India can be categorized in 3 phases: 1. Stock brokers offering on their sites features such as live portfolio manager, live quotes, market research and news to attract more investors. 2. Brokers offering on line broking and relationship management by providing and offering analysis and information to investors during broking and non-broking hours based on their profile and needs, that is, customized services. 3. Brokers (now e-brokers) will offer value management or services such as initial public offerings on line, asset allocation, portfolio management, financial planning, tax planning, insurance services and enable the investors to take better and wellconsidered decisions. In the US, 82 per cent of the deals are done on line. The European on line broking market is expected to be of $8 billions and is likely to raise five fold by 2002. In India, presently Internet trading can take place through the order routing system, which will route client orders to exchanges trading systems for execution of trades on stock exchanges (NSE and BSE). This will also require interface with banks to facilitate instant cash debit or credit and the depository system for debit or credit of securities.

OBJECTIVES OF INTERNET TRADING: • • • • • •

Increase transparency in the markets. Enhance market quality through improved liquidity, by increasing quote continuity and market depth. Reduce settlement risks due to open trades, by elimination of mismatches. Provide management information system (MIS). Introduce flexibility in system, to handle growing volumes easily and to nationwide expansion of market activity. Besides, through Internet trading three fundamental objectives of securities regulation can be easily achieved, these are: Investor protection, creation of a fair and efficient market and, reduction of the systematic risks.

26

PROCEDURE FOR INTERNET TRADING: •

Step-1: Those investors interested in doing the trading over internet system, that is,

•

Step-2: After registration, the broker will provide to them a name,

•

Step-3: Actual placement of an order. An order can then be placed by using the place

NEAT-ISX, should approach the brokers and with the Stock Broker.

and a personal identification number (PIN).

order window as under: o First by entering the symbol and series of stock and other parameters such as quantity and price of the scrip on the place order window. o Second, fill in the symbol, series and the default quantity.

•

Step-4: It is the process of review. Thus, the investor has to review the order placed

•

Step-5: After the review has been satisfactory; the order has to be sent by clicking on

•

Step-6: The investor will receive an ``Order Confirmation'' message along with the

•

Step-7: In case the order is rejected by the Broker or the Stock Exchange for certain

•

Step-8: It is regarding charging payment, for which there are different modes. Some

by clicking the review option. He may also re-set to clear the values.

the send option.

order number and the value of the order.

reasons such as invalid price limit, an appropriate message will appear at the bottom of the screen. At present, a time lag of about ten seconds is there in executing the trade.

brokers will take some advance payment from the investors and will fix their trading limits. When the trade is executed, the broker will ask the investor for transfer of funds by the investor to his .

27

The above figure shows how the internet trading procedure.

• Trading Through Brokers / Traditional Method of Share Trading :Trading in the stock exchange can be conducted only through member broker in securities that are listed on the respective exchange. Investor intending to buy/sell securities in the exchange has to do so only through a SEBI ed broker/sub-broker. This is very popular concept in India for Share Trading before the facilities like on line trading introduce. Both the exchange have switched over from the open outcry trading system to fully automated computerized mode of trading know as Bolt and Neat. In this system, the broker trade with each other through the computer network. Buyers and sellers place their orders specifying the limits for quality and price. Those that are not matched remain on the screen and is opened for future matching during the day / settlement. After the advent of computerized trading the speed of trading has increased multi-fold and a fuller view of the market is available to the investors. To start dealing with broker you have to fill a form with the broker. After fill all the formalities the firm gives you a Id no like a bank a/c no. through which you can enter in the transaction with broker. Broker will gives all the which one investor needed. 28

•

What is stock Broker?

“A stock broker is one who invests other people’s money until it’s all gone.” -Woody Allen, American Film Maker A stock broker is a person or a firm that trades on its clients behalf, you tell them what you want to invest in and they will issue the buy or sell order. Some stock brokers also give out financial advice that you a charged for. It wasn’t too long ago and investing was very expensive because you had to go through a full service broker which would give you advice on what to do and would charge you a hefty fee for it. There are three different types of stock brokers. 1. Full Service Broker - A full-service broker can provide a bunch of services such as investment research advice, tax planning and retirement planning. 2. Discount Broker – A discount broker let’s you buy and sell stocks at a low rate but doesn’t provide any investment advice. 3. Direct-Access Broker- A direct access broker lets you trade directly with the electronic communication networks (ECN’s) so you can trade faster. Active traders such as day traders tend to use Direct Access Brokers

No. of stock broker in India 9368:- Total no of share broker in the country 12687:- The no. of sub-broker. 46%:- The share of trades ed for by NSE broker 90%: The share of On line trades clocked by segment’s top five companies

29

•

Types Of Order :-

There are various types of orders, which can be placed on the exchange : Limit Order:The orders refer to a buy or sell order with a limit price. Suppose, you check the quote of Reliance Industries Ltd.(RIL) as Rs. 251 (Ask). You place a buy order for RIL with a limit price of Rs. 250. This puts a cap on your purchase price. In this case as the current price is greater than your limit price, order will remain pending and will be executed as soon as the price falls to Rs. 250 or below. In case the actual price of RIL on the exchange was Rs 248, your order will be executed at the best price offered on the exchange, say Rs 249. Thus you may get an execution below your limit price but in no case will exceed the limit buy price. Similarly for a limit sell order in no case the execution price will be below the limit sell price. Market Order:Generally investors, who expect the price of share to move sharply and are yet keen on buying and selling the share regardless of price, use a market order. Suppose, the last quote of RIL is Rs 251 and you place a market buy order. The execution will be at the best offer price on the exchange, which could be above Rs 251 or below Rs 251 . The risk is that the execution price could be substantially different from the last quote you saw. Please refer to important Fact for Online Investors. Stop Loss Order:A stop loss order allows the trading member to place an order which gets activated only when the last traded price (LTP) of the share is reached or crosses threshold price called as the trigger price. The trigger price will be as on the price mark that you want it to be. For example, you have a sold position in Reliance Ltd. Booked at Rs 345. Later in case the market goes against you i.e. go up, you would not like to buy the scrip for more than Rs. 353. Then you would put a SL Buy order with a Limit price of Rs. 353. You may choose to give a trigger price of Rs.351.50 in which case the order will get triggered into the market when the last traded price hits Rs.351.50 or above. The execution will then be immediate and will be at the best price between 351.50 and 353. However stock movement can be so violent at times. The prices can fluctuate from the current level to over and above the SL limit price, you had quoted, at one shot i.e. the LTP can move from 350…351… and directly to 353.50. At this moment your order will immediately be routed to the Exchange because the LTp has crossed the trigger price specified by you. However, the trade will not be executed because of the LTP being over and above the limit price that you had specified. In such a case you will not be able to square your position. Again as the market falls, say if the script falls to 353 or below, your order will be booked on the SL limit price that you have specified i.e. Rs.353. Even if the script falls from 353.50 to 352 30

your buy order will be booked at Rs. 353 only. Some seller, somewhere will book a profit in this case from your buy order execution. Hence, an investor will have to understand that one of the foremost parameters in specifying on a stop loss and a trigger price will have to be its chances of execution ability as and when the situation arises. A two-rupee bandwidth between the trigger and stop loss might be sufficient for execution for say a script like Infosys or Wipro. These vital parameters of volatility bands of scripts will always have to be kept in mind while the Stop loss concept. Generally there are two types of trading have been done in India which is given below: On line Trading / E – Broking / Modern Method Trading through Brokers / Traditional method of Share trading.

• Trading Through Brokers / Traditional Method of Share Trading :Trading in the stock exchange can be conducted only through member broker in securities that are listed on the respective exchange. Investors intending to buy/sell securities in the exchange have to do so only through a SEBi ed broker/sub-broker. This is very popular concept in India for Share Trading before the facilities like on line trading introduce. Both the exchange has switched over from the open outcry trading system to fully automated computerized mode of trading knows as Bolt and Neat. In this system, the broker trade with each other through the computer network. Buyers and sellers place their orders specifying the limits for quality and price. Those that are not matched remain on the screen and is opened for future matching during the day / settlement. After the advent of computerized trading the speed of trading has increased multi-fold and a fuller view of the market is available to the investors. To start dealing with broker you have to fill a form with the broker. After fill all the formalities the firm gives you a Id no like a bank a/c no. through which you can enter in the transaction with broker. Broker will gives all the which one investor needed.

31

32

ABOUT KARVY INTRODUCTION KARVY, is a premier integrated financial services provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporate, comprising the who is who of Corporate India. KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products like mutual funds, bonds, fixed deposit, Merchant Banking & Corporate Finance, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, placement of equity, IPO’s, among others. Karvy has a professional management team and ranks among the best in technology, operations, and more importantly, in research of various industrial segments.

Karvy consultant As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained at the helm of organizational affairs, pioneering business policies, work ethic and channels of progress. Having emerged as a leader in the registry business, the first of the businesses that KARVY ventured into, It has now transferred this business into a t venture with Computer share Limited of Australia, the world’s largest registrar. With advantage of the depositories in the Indian capital market and it has created relationship in the registry business. Karvy believe that they were best positioned to venture into that activity as a Depository Participant. They were one of the early entrants ed as Depository Participant with NSDL (National Securities Depository Limited), the first Depository in the country and then with CDSL (Central Depository Services Limited). Today, It service over 6 lakes customer s in this business spread across over 250 cities/towns in India and are ranked amongst the largest Depository Participants in the country. With a growing secondary market presence, it has transferred this business to Karvy Stock Broking Limited (KSBL), their associate and a member of NSE, BSE and HSE.

33

Miles stones of Karvy Consulting

Karvy ---

Early Days

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a small group of practicing Chartered ants who founded the flagship company …Karvy Consultants Limited. It started with consulting and financial ing automation, and carved inroads into the field of registry and share ing by 1985. Since then, They have utilized their experience and superlative expertise to go from strength to strength…to better their services, to provide new ones, to innovate, diversify and in the process, evolved Karvy as one of India’s premier integrated financial service enterprise. 34

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as an integrated financial services provider, offering a wide spectrum of services. And they have made this journey by taking the route of quality service, path breaking innovations in service, versatility in service and finally…totality in service. Their highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total customer-focus has secured for them the position of an emerging financial services giant enjoying the confidence and of an enviable clientele across diverse fields in the financial world. Their values and vision of attaining total competence in their servicing has served as the building block for creating a great financial enterprise, which stands solid on their fortresses of financial strength - their various companies. With the experience of years of holistic financial servicing behind them and years of complete expertise in the industry to look forward to, They have now emerged as a premier integrated financial services provider. And today, they can look with pride at the fruits of their mastery and experience – comprehensive financial services that are competently segregated to service and manage a diverse range of customer requirements.

Business Focus: The focus of the business is the Customer – Customer service, Customer education, Customer , Customer relations and last but not the least Customer acquisition. Trade execution transparency, timely settlements, risk monitoring and superior service shall have topmost priority, in the best interests of all concerned

35

MISSION “ Our mission is to be a leading, preferred service provider to our customer, and we aim to achieve this leadership position by building an innovative, enterprising, and technology-driven organization which will set the highest standards of service and business ethics ”

CORE VALUE  Customer satisfaction through •

Providing quality service effectively and efficiently

•

“Smile, it enhances your face value ” is a service quality stressed on periodic customer service Audits

 Maximization of stakeholder value  Success through Teamwork, integrity and People

Board of Directors Of KARVY GROUP

Chairman

: Mr. C Parthasarathy

Managing Director

: Mr. M Yugandhar

Director

: Mr. M S Ramakrishna

36

Principal Activities Of ‘KARVY GROUP’ •

Karvy Consultants Limited

– –

•

IT enabled services

Karvy Computershare Limited

– –

•

Depository Participant Services - NSDL / CDSL

Transfer agency services for corporates & mutual funds Registrar for IPO

Karvy Investor Services Limited

– – •

Merchant Banking Corporate Finance

Karvy Securities Limited –

•

Distribution of equity & other financial products 

Member - Hyderabad Stock Exchange



The Finapolis – Personal Finance Advisory Services

Karvy Stock Broking Limited –

Secondary Market Trading 

Member - National Stock Exchange & Trading on BSE



Member of the WDM segment on NSE



Research

Publications of Karvy  Karvy- THE FINAPOLIS

37



COMTRADE

38

• Karvy Profile Head Office

"KARVY HOUSE" 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad - 500 034, Andhra Pradesh, India. Tel : +91-40-23312454 Fax : +91-40-23311968 Email: [email protected]

Middle East - Representative Office

503, 5th Floor Al Musalla Towers Khalid Bin Waleed Road (Bank Street) Bur Dubai, UAE Phone: +9714-3978752/53 Fax: +9714-3978345 Person: Mr Siddharth Razdan Email : [email protected]

Bhavnagar Branch

134/135Madhavdarshan,Waghawadi Road,BHAVNAGAR-364002. Ph. 0278-252005-6 Email : [email protected]

39

Organization Chart Karvy Ltd.

Branch

Web Dealer

Franchise

Sales Executive

Sales Coordinator

Customer Care

Receptionist

40

Head

Karvy’s CORE SERVICES Karvy is one of India’s leading broking houses providing a complete life-cycle of investment solution.

Research Based Investment Advice

Training and Seminars

EQUITIES DERIVATIVES COMMODITIES

Technology Based Investment Tools

Investment and Trading Services

Integrated Demat Facility

41

SWOT Analysis

42

SWOT Analysis • Strength: 21 years of research and broking experience

 services over 16 million individual investors in various capacities  provides investor services to over 300 corporate  6 lakes customer s in this business spread across over 250 cities/towns in India.  Dedicated, Intelligent and Loyal staff  A positive image in the existing

• Weakness: Less awareness in the market.  Time consuming process for opening, resolving the problems of the customers, etc. A Service quality is not maintained accordingly how they are promoted

• Opportunity:•  Large potential market for delivery and intra-day transactions.  Open interest of the people to enter in to stock market for investing  Attract the customers who are dissatisfied with other brokers & DPs. An indirect opportunity generated by the market from its bullishness.

• Threats: Decreasing rates of brokerage in the market. A Increasing competition against other brokers & DPs.  Poor marketing activities for making the company known among the customers. A threat of loosing clients for any kind of weakness of the company. a Indirect threat from instable stock market, i.e., low/no profit of Karvy's clients would lead them to go for other broker/DP.

43

“SERVICES OF KARVY”

Karvy’s Services

Offline

Other Services

Online

Other Services: 

Dial-n-Trade



Mutual Fund



Commodity



Derivative



Depository Participants



Distribution of Financial Services



Advisory Services



Private Clients Group



Research Based Advices

Portfolio Management System

44

OFFLINE  Offline A/c is the A/c for the investors who are not familiar with the use of computer.  The A/C opening charges applied(One time) 

For 1st Year Demat A/C is Free, On 2nd Year AMC charge is applicable.

Online

•

Requirement for online trading • • •

Linked Bank Broking Linked Depository

Benefits of online trading • • • • • • • •

Freedom from paperwork Instant credit and transfer Trade Anywhere Timely Advice and access to research Real-time portfolio tracking After hour orders Market Alerts Instant quotes

45

•

DnT (Dial- n –Trade)

Dial n Trade is the name of the phone-trading facility offered by Karvy. A call center wholly dedicated to order placement / confirmation. Easy 2-step process for order placement. Step1. Enter your PHONE ID Step2. Enter your TPIN ID On successful dial, call gets transferred to call center executives. Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services. Creating a plethora of opportunities for the customer by opening up investment vistas is backed by research-based advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal. •

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success rate as a wealth management and wealth accumulation option. The difference between unpredictability and a safety anchor in the market is provided by in-depth knowledge of market functioning and changing trends, planning with foresight and choosing one’ options with care. This is what we provide in our Stock Broking services. We offer services that are beyond just a medium for buying and selling stocks and shares. Instead we provide services which are multi dimensional and multi-focused in their scope. There are several advantages in utilizing our Stock Broking services, which are the reasons why it is one of the best in the country. 46

We offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. More importantly, we make trading safe to the maximum possible extent, by ing for several risk factors and planning accordingly. We are assisted in this task by our in-depth research, constant and sound advisory facilities. Our highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result-oriented information on market trends, market analysis and market predictions. This crucial information is given as a constant to our customers, through daily reports delivered thrice daily; The Pre-session Report, where market scenario for the day is predicted, The Mid-session Report, timed to arrive during lunch break, where the market forecast for the rest of the day is given and The Post-session Report, the final report for the day, where the market and the report itself is reviewed. To add to this repository of information, we publish a monthly magazine “ Karvy; The Finapolis”, which analyzes the latest stock market trends and takes a close look at the various investment options, and products available in the market, while a weekly report, called “ Karvy Bazaar Baatein”, keeps you more informed on the immediate trends in the stock market. In addition, our specific industry reports give comprehensive information on various industries. Besides this, we also offer special portfolio analysis packages that provide daily technical advice on scripts for successful portfolio management and provide customized advisory services to help you make the right financial moves that are specifically suited to your portfolio. Our Stock Broking services are widely networked across India, with the number of our trading terminals providing retail stock broking facilities. Our services have increasingly offered customer oriented convenience, which we provide to a spectrum of investors, highnet worth or otherwise, with equal dedication and competence. But true to our spirit, this success is not our final destination, but just a platform to launch further enhanced quality services to provide you the latest in convenient, customerfriendly stock management. Over the years we have ensured that the trust of our customers is our biggest returns. Factors such as our success in the Electronic custody business has helped build on our tradition of trust even more. Consequentially our retail client base expanded very fast. To empower the investor further we have made serious efforts to ensure that our research calls are disseminated systematically to all our stock broking clients through various delivery channels like email, chat, SMS, phone calls etc. Our foray into commodities broking has been path breaking and we are in the process of converting existing traders in commodities into the more organized mainstream of trading in commodity futures, both as a trading and risk hedging mechanism. In the future, our focus will be on the emerging businesses and to meet this objective, we have enhanced our manpower and revitalized our knowledge base with enhances focus on Futures and Options as well as the commodities business. 47

• MUTUAL FUNDS Introduction: Everybody talks about mutual funds, but what exactly are they? Are they like shares in a company, or are they like bonds and fixed deposits? Will I lose all my money in funds or will I become an overnight millionaire? Big questions that get answer in just five minutes.

• Meaning: A mutual fund is a pool of money that is invested according to a common investment objective by an asset management company (AMC). The AMC offers to invest the money of hundreds of investors according to a certain objective - to keep money liquid or give a regular income or grow the money long term. Investors buy a scheme if it fits in with their investment goals, like getting a regular income now or letting the money accumulate over the long term. Investors pay a small fraction of their total funds to the AMC each year as investment management fees.

• Commodity 48

Organized futures market evolved in India by the setting up of "Bombay Cotton Trade Association Ltd." in 1875. In 1893, following widespread discontent amongst leading cotton mill owners and merchants over the functioning of the Bombay Cotton Trade Association, a separate association by the name "Bombay Cotton Exchange Ltd." was constituted. Futures trading in oilseeds was organized in India for the first time with the setting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading in groundnut , castor seed and cotton. Before the Second World War broke out in 1939 several futures markets in oilseeds were functioning in Gujarat and Punjab. There were booming activities in this market and at one time as many as 110 exchanges were conducting forward trade in various commodities in the country. The securities market was a poor cousin of this market as there were not many papers to be traded at that time. The era of widespread shortages in many essential commodities resulting in inflationary pressures and the tilt towards socialist policy, in which the role of market forces for resource allocation got diminished, saw the decline of this market since the mid-1960s. This coupled with the regulatory constraints in 1960s, resulted in virtual dismantling of the commodities future markets. It is only in the last decade that commodity future exchanges have been actively encouraged. However, the markets have been thin with poor liquidity and have not grown to any significant level. A three-pronged approach has been adopted to revive and revitalize the market. Firstly, on policy front many legal and istrative hurdles in the functioning of the market have been removed. Forward trading was permitted in cotton and jute goods in 1998, followed by some oilseeds and their derivatives, such as groundnut, mustard seed, sesame, cottonseed etc. in 1999. A statement in the first ever National Agriculture Policy, issued in July, 2000 by the government that futures trading will be encouraged in increasing number of agricultural commodities was indicative of welcome change in the government policy towards forward trading. Secondly, strengthening of infrastructure and institutional capabilities of the regulator and the existing exchanges received priority. Thirdly, as the existing exchanges are slow to adopt reforms due to legacy or lack of resources, new promoters with resources and professional approach were being attracted with a clear mandate to set up demutualized, technology driven exchanges with nationwide reach and adopting best international practices. Most of the existing Indian commodity exchanges are single commodity platforms; are regional in nature, run mainly by entities which trade on them resulting in substantial conflict of interests, opaque in their functioning and have not used technology to scale up their operations and reach to bring down their costs. But with the strong emergence of: National Multi-commodity Exchange Ltd., Ahmedabad (NMCE), Multi Commodity Exchange Ltd., Mumbai (MCX), National Commodities and Derivatives Exchange, Mumbai (NCDEX), and National Board of Trade, Indore (NBOT), all these shortcomings will be addressed rapidly. These exchanges are expected to be role model to other exchanges and are likely to compete for trade not only among themselves but also with the existing exchanges. 49

• Derivative The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors.

Depository Participants

The onset of the technology revolution in financial services Industry saw the emergence of Karvy as an electronic custodian ed with National Securities Depository Ltd (NSDL) and Central Securities Depository Ltd (CSDL). Karvy set standards enabling further comfort to the investor by promoting paperless trading across the country and emerged as the top 3 Depository Participants in the country in of customer serviced. Offering a wide trading platform with a dual hip at both NSDL and CDSL, we are a powerful medium for trading and settlement of dematerialized shares. We have established live DPMs, Internet access to s and an easier transaction process in order to offer more convenience to individual and 50

corporate investors. A team of professional and the latest technological expertise allocated exclusively to our demat division including technological enhancements like SPEED-e, make our response time quick and our delivery impeccable. A wide national network makes our efficiencies accessible to all.

About KARVY: •

Depository participant with both NSDL and CDSL

•

Over 4.6 lacks s being serviced from over 135 cities.

•

Among the Top 3 Depository Services providers in the country

•

Web enabled service to provide state of the art service delivery

Distribution of Financial Products The paradigm shift from pure selling to knowledge based selling drives the business today. With our wide portfolio offerings, we occupy all segments in the retail financial services industry. A 1600 team of highly qualified and dedicated professionals drawn from the best of academic and professional backgrounds are committed to maintaining high levels of client service delivery. This has propelled us to a position among the top distributors for equity and debt issues with an estimated market share of 15% in of applications mobilized, besides being established as the leading procurer in all public issues. To further tap the immense growth potential in the capital markets we enhanced the scope of our retail brand, Karvy – the Finapolis , thereby providing planning and advisory services to the mass affluent. Here we understand the customer needs and lifestyle in the context of present earnings and provide adequate advisory services that will necessarily help in creating wealth. Judicious planning that is customized to meet the future needs of the customer deliver a service that is exemplary. The market-savvy and the ignorant investors, both find this service very satisfactory. The edge that we have over competition is our portfolio of offerings and our professional expertise. The investment planning for each 51

customer is done with an unbiased attitude so that the service is truly customized. Our monthly magazine, Finapolis, provides up-dated market information on market trends, investment options, opinions etc. Thus empowering the investor to base every financial move on rational thought and prudent analysis and embark on the path to wealth creation.

About KARVY: •

•

•

Investments – Equity – Primary and Secondary – Fixed Income – Primary and Secondary – Fixed Deposits – Mutual Funds Loan Products – Housing and Car Loans – Personal and Professional Loans – Loan Against Securities Insurance – Life : LIC, Amp Sanmar, HDFC Standard, ICICI Prulife, Om Kotak, Metlife, Tata AIG, Birla Sunlife – General : New India, Tata AIG, Reliance, Royal Sundaram

• Advisory Services Under our retail brand ‘Karvy – the Finapolis', we deliver advisory services to a cross-section of customers. The service is backed by a team of dedicated and expert professionals with varied experience and background in handling investment portfolios. They are continually engaged in deg the right investment portfolio for each customer according to individual needs and budget considerations with a comprehensive system that focuses on trading customers' portfolios and providing valuable inputs, monitoring and managing the portfolio through varied technological initiatives. This is made possible by the expertise we have gained in the business over the years. Another venture towards being investor-friendly is the circulation of a monthly magazine called ‘Karvy - the Finapolis'. Covering the latest market news, trends, investment schemes and research-based opinions comes from experts in various financial fields. 52

• Private Client Group This specialized division was set up to cater to the high net worth individuals and institutional clients keeping in mind that they require a different kind of financial planning and management that will augment not just existing finances but their life-style as well. Here we follow a hard-nosed business approach with the soft touch of dedicated customer care and personalized attention. For this purpose we offer a comprehensive and personalized service that encomes planning and protection of finances, planning of business needs and retirement needs and a host of other services, all provided on a one-to-one basis. Our research reports have been widely appreciated by this segment. The delivery and modules have been fine tuned by giving our clients access to online portfolio information, constant updates on their portfolios as well as value-added advice on portfolio churning, sector switches etc. The investment recommendations given by our research team in the cash market have enjoyed a high success rate.

• Portfolio Management System

With the Karvy Team Managing Your Portfolio, you can be assured that your investments are in safe hands! We follow a multi-disciplined approach incorporating quantitative analysis, fundamental analysis and technical analysis. This multi-pronged approach enables us to provide riskcontrolled returns for you. Right from choosing the combination of stocks most suitable for you based on your risk appetite to monitoring their movements and discussing them with you at special events.

53

Achievements Among the Top 3 Depository Participants

Largest Independent Distributor for Financial Products

Amongst the Top 5 Stock Brokers (3.5% market share)

Largest Network of Branches & Business Associates

ISO 9002 Certified operations By DNV

Amongst Top 10 Investment Bankers

Adjudged as one of The Top 50 IT s in India by MIS Asia

Full fledged IT driven operations

India’s #1 Registrar & Securities Transfer Agent

54

55

56

MARKETING DEPARTMENT The main aim of marketing activities at Karvy is that the customer should get enough guidance to the company and how he can get the best service than any other stockbroker. There is an officer for handling the marketing activities followed by two executives and it is not limited to them but the other people are also having some responsibilities to increase the no. of clients and retain them by providing them the services needed by them. There are many services those are designed such that the specific target segments of the customers are covered and the products are positioned in the minds of customers as the best one in India. The services are as given below: Karvy is India's leading national network of stock-broking outlets. It is having the largest retail distribution chain in India. Karvy is not only a share-broking firm, but it avails of various services and other financial products to its clients.

1. Offline Trading facility 2. Online BSE and NSE executions (through BOLT, i.e. BSE Online Trading and NEAT, i.e. National Exchange Automated Trading) 3. Free access to investment advice from Karvy’s Research team. 4. Depository services: Demat and Remat transactions 5. Derivatives trading, i.e. Futures and Options (through NEAT F&O) 6. Internet based online trading. 7. Other investment products: Mutual Funds, RBI Bonds, Insurance, etc.

57

7 P’S OF KARVY • (1) PRODUCT Product Variety Karvy offers 3 types of online trading s for its customers specially designed according to their volume in share trading. Those 3 varieties are:  For retail investors  For high net worth investors with large and active equity portfolio who need to monitor and action swiftly  For high net worth investors dealing in derivative market. Quality Friendly, attractive & colourful Website. Design The website of Karvy namely www.karvy.com has been specially designed to facilitate its s to buy and sell shares in an instant at anytime and from anywhere they like. The site is friendly allowing even a layman to easily operate without any hassles. Features:  Karvy’s product comes with the following features:         

Trade execution in a fraction of a second! Single Screen Trading Terminal Real time streaming quotes. Price watch on any number of scripts. Hot keys similar to Brokers Terminal. Customized Alerts based on Multiple Parameters. Back up Facility to place trades on Direct Phone Lines. Intra day charts, updated live, tick-by-tick. Instant Order\ Trade Confirmation in the same window Live margin, position, marked to market profit & loss report. 58

                  

Competitive Brokerage. Flexibility to customize screen layout and setting. Facility to customize any number of portfolios & watch lists. Facility to cancel all pending orders at one click. Facility to square off all transactions at one click. Top Gainers, Top Losers, and Most Active, updated live. Index information; index chart, index stock information live. Market depth, i.e. Best 5 bids and offers, updated live for all scripts Online access to both s and DP. Live updated Order and Trade Book. Details of pending executed and rejected orders. Online access to Customer Service. 128 - bit super safe encryption. Facility to place after market orders Online fund transfer facility from leading Banks Online intra-day technical calls. Exhaustive database of over 2000 companies Historical charts and technical analysis tools. Last but not the least, ideas that help you to make money!!!

Services Karvy offers its customers, depository services and trade execution facilities for equities, derivatives and commodities backed with investment advice tempered by decades of broking experience. The teams of its dedicated analysts are constantly at work to track performance and trends. Dial-n-trade is also an exclusive service available to all Karvy customers for trading in shares via the telephone. On dialing the toll free number 1800-425-1900 and on entering the customers TPIN number, the customer will be directed to a telebroker who will buy or sell shares for him.

• (2) PRICE  Less Price One time registration fee

On Line 750 59

Off Line 300

Minimum brokerage Nil Charges –Quarterly

Nil

 Brokerage Karvy in its online business charges brokerage as follows: - In equity Market: On Trading: 0.1% (Total brokerage) On Delivery: 0.5% - In Derivative Market On Trading: 0.12% (Total brokerage) On Delivery: 0.1%  Service Tax 12.24% on Brokerage.  Custody Charge Re. 1 per script held per month.  Discounts For investors with High Net worth, there are slabs in brokerage rates.



Payment Period The transaction settlement date in the securities market is T+ 2 days i.e. the payment of the transaction taken place has to be made within two days of its occurrence.

 Credit Karvy allows its customers to trade up to 4 times i.e. by keeping 1/4th margin with them.

• (3) PROMOTION Online share trading is totally a new concept in Indian Market. Generally investor doesn’t like to come out from conventional way of share trading. Karvy has introduced this product in. The concept and Product are still new in the market. Therefore the company has undertaken extensive promotion campaign to create 60

awareness about the product. Karvy adopts the following tools for promoting the product

Advertising Company s its product through TV media on channels like CNBC, Print Media-in leading dailies and outdoors media. Besides attractive and colorful brochures as well as posters are used giving full details about the product. Mails are sent to people logging on to sites like moneycontrol.com and rediff.com. Also, stalls are opened up now and then at places where prospective customers can be approached. Prints and Broadcast ment  Karvy gives ment of the product of on-line through various media, through ment in various newspapers in different web site like 3iinfotech.com, monster.com.  Motion picture.  Brochure and leaflet  Karvy also distribute some brochure to the person who is interested in online trading.  Poster and booklets (value line)  Video Tapes  Give a live demonstration  Karvy also provide the facility to give live demonstration of the product online between the market hours between 10:30 am to 3:00 pm in the big companies like Reliance, ONGC, Hotel Galaxy, Rotary Club from where they except crowd to see the live demo of online trading service or from they can except a more customer or investor who can understand this product. Sales Promotion  Karvy participating in trade fairs like PCEXPO-2003 61

 Exhibition.  Karvy also provide some scheme which help to increase in sale the product.

Sales Force The Company has an aggressive sales force, which is given incentives, based on their sales. The sales force is given intensive training continuously.

Seminar The Company also arranges seminar in corporate world for creating awareness about the product. Recently, it had organized for a seminar in ONGC, IIM. Direct Marketing Company emphasizes more on direct marketing, as many people are still not aware of this new way of smart trading. For this, the company recruits and trains sales representatives so as to explain the product and solve customer queries related to the product. This is the most effective way to communicate the three-in-one concept which company offers.

Telemarketing This is another promotional tool company is using to boost up its sales. For this, the company collects the database of the people belonging to different professional segments.

• 4) PLACE Channels Karvy uses various channel alternatives to reach to its customers through  Internet  Tele Marketing 62

 Retail Share Shops  Franchisee Owners  Sales Force

Ground Network in India Coverage

Presence in 162 cities with a network of over 238 offices Over 450 NSE & BSE trading terminals spread across the country Around 6,000 active business associates across the country Over 3000 employees comprising of professionals & management graduates

Locations Karvy has the large chain of retail share shops in India. It has 238 Offices located in 162 cities all over India like Pune, Thane, Chennai, Kolkata, Banglore, Luckhnow, Darjleeng, Kanpur, Baroda, Midnapore, Surat, Delhi, Gaziabad, Hydrabad, Allahbad, etc.

63

• (5) PEOPLE Employees  Selection: Employees are selected on the basis of their experience and qualification as applicable to the job.  Training: Intensive training is provided to the employees till a week once they and even at times required after that.  Motivation: The employees are motivated through incentives they are provided. Research Team karvy has a team of dedicated analysts who have years of working experience in the industries that they track, and a proven track record in using their knowledge of the investment science to deliver results.

Customers, The heart of karvy is really treated loyally like the kings. The customer care, which comprises of highly trained executives are operating it from 9:30 to 11:00 p.m.

• (6) PHYSICAL EVIDENCE Office Environment: The ambience within the office is what can make the customer feel comfortable in trading. The cordial and friendly atmosphere at office is like a full time motivation for the employees. Interiors and Infrastructure:

64

The office is well furnished and has 14 computer terminals on which tickby-tick price movements of the securities are displayed.

• (7) PROCESS  In this service organization, the ways in which the customers receive delivery of the service constitutes the process. Here, the process involves adding ‘value’ or ‘utility’ so that the customers get full satisfaction for the money spent by them.  Here the process begins from the step when customer wants to open e-invest and ends when his is actually activated.  All Indian residents and NRI are eligible to avail this service.  Customers can open a karvy e-invest by filling a single application form. This form includes 9 agreements like 1. Main form with customer details 2. Agreement between karvy and client in respect of the ONLINE-INVESTMENT service offered. 3. Agreement between the Depository Participant and the client for providing the transaction statement through Internet. 4. Irrevocable power of attorney 5. Agreement between the DP and the person seeking to open an with the DP. 6. Maintenance of client’s on a running bases by KSBL. 7. Agreemen4 giving the right of lien on the credit balance of client in NSE trading. 8. Agreement giving the right of lien on the credit balance of client in BSE trading. 9. Risk disclosure document (cash segment) 65

Customer Satisfaction (Theoretical Framework): The only way towards leading the market and fighting tough with the competitors is: Customer Satisfaction.

“It is no longer enough to satisfy customers; you must delight them!”

-PHILIP KOTLER Just when you thought customer satisfaction was sured only by exceeding expectation, customer satisfaction rules are changing again. New horizons will alter how we think about customer satisfaction and will shape future of homebuilding. Here is a preview of what is to come. Stage 1: Customer Satisfaction Customer satisfaction is the first stage because it seeks only to meet customer expectations and avoid disappointment. The problem is that as you drive customers to lower their expectations, you drive them further away from what they actually want. Meeting or even exceeding customer expectations may not provide them with everything they want, but it is a requirement for moving to the stages beyond customer satisfaction. Stage 2: Customer Fulfillment “Customers … just want exactly what they want,” says Joseph Pine in his book, The Experience Economy. Since customers can not always get everything they want, they buy from the builder who minimizes the difference between what they want and what they expect to get – termed ‘Customer Sacrifice.’ The fulfillment strategy aims to reduce customer sacrifice by promising them what they want and backing the promise up with superior delivery capabilities. The winning builders in the customer fulfillment marketplace will have the capability to efficiently deliver exactly what customers want while providing extraordinary value. 66

Stage 3: Customer Delight Pleasant surprises delight customers. Surprises create transforming experiences unique to the builder who creates them. Breakstone Homes, a Florida luxury home builder, is opening an elaborate 14,000 square foot custom home design center. The center’s goal is to amaze customers with designs and material possibilities that allow customers to create homes that sur the home of their dreams. Breakstone is creating customer-transforming experiences impossible for their customers to duplicate elsewhere. Surprises during the homebuilding process delight customers of Shea Homes San Diego, an NHQ winner. Every customer is treated as an opportunity to create a rewarding relationship. “We get inside the mind of the customer to anticipate their needs before they even know what they want.” Says Diane Rivera. Like a well-scripted play, Shea employees provide pre-planned individual attention to customers with predictable results. At scheduled intervals construction personal s keep customers informed on the progress of their home and answer questions. Shea University seminars impress customers with unexpected attention to quality deals. 11 months after closing customers are surprised when Shea calls to schedule and inspection to find any items that they can fix while the home is under warranty. It is likely that you can find examples of customer satisfaction, fulfillment, and delight in your company. Use the experience to create new ideas that continue to drive your company beyond customer satisfaction.

Customer Touch with KARVY

67

INDUSTRY ANALYSIS USING PORTER’S 5 FORCES MODEL

POTENTIAL POTENTIAL ENTERANT ENTERANT Investmart Investmart Various Various Banks Banks Geojit Geojit Cipher Cipher UTI Securities UTI Securities Ltd. Ltd. Refco Refco Group Group Ltd. Ltd. IDBI IDBI Capital Capital Mkt. Mkt. Services Services Ltd. Ltd.

SUPPLIERS SUPPLIERS Web Web maintainers maintainers NSCL NSCL CSDL CSDL NSE NSE BSE BSE MCX MCX NCDEX NCDEX

BUYERS BUYERS COMPETITORS COMPETITORS ICICI ICICI Web Web Trade Trade Ltd Ltd Sharekhan Sharekhan Securities. Securities. Kotak Kotak Securities Securities Ltd Ltd India India Bulls Bulls HDFC HDFC Securities Securities Ltd Ltd Marwadi Marwadi Finance Finance Ltd Ltd

SUBSTITUTES SUBSTITUTES Mutual Mutual Funds Funds Insurance Insurance Bank Bank FD FD

68

Small Small Investors Investors Franchise/Business Franchise/Business Partners Partners HNI’s HNI’s MF MF Companies Companies HUF HUF Institutional Institutional Investors Investors

1. SUPPLIERS NSE & BSE are playgrounds where common an investor trade through stock broking houses, for which they have to take permission from NSE/BSE. NSE & BSE are under the purview of SEBI, that’s why stock broking houses like KSBL, have low bargaining power. But here there is one advantage that NSE/BSE have i.e. they cannot go for forward integration. MCX & NCDEX are stock exchanges which trade in commodities and derivatives. Here again stock broking houses have to follow rules and regulation of the same. Web maintainers are companies which maintain web sites & technical aspects of the same. Here stock broking houses like KSBL can have more bargaining power due to stiff competition among web maintaining companies. Web maintainers are companies who make and maintain software’s for stock broking houses. If say for example stock broking houses switches over to other web maintainers then that company cannot understand the mechanisms of software’s. So it is quite high switching cost.

2. BUYERS There are various types of investors who trade through stock broking houses like KSBL, which includes investors like small investors, medium net worth investors, business partners, institutional investors and mutual fund companies. Here the bargaining power of stock broking houses depends on how big the investor is. So here we can say that bargaining power of stock broking houses is high in case of small investors & HUF. While its moderate in HNI/MNI’s and business partners. While its less in case of mutual fund companies and institutional investors. There is competitive buzz in stock broking industry, competitors are offering low brokerage and best services with added feature. So switching cost is pretty much less. So the buyer can easily switch over to competitors product.

69

3. Entry Barriers Huge capital: - Capital is necessary not only for fixed facilities but also for customer’s credit and absorbing start up losses. To start a stock broking house, one needs huge capital for technology up gradation and skilled manpower. Technology: - Technology for stock broking houses is life saving device. Stock broking requires huge capital to make their products friendly, which in turn requires capital to employ skilled manpower. Thus, technology could be one of the entry barriers. Regulatory Constraints: - Obtaining a license is a tedious job for a stock broking house. It should comply with the regulation of the governing bodies like SEBI, NSDL, etc. For a stock broking houses to plunge into the stock broking industry, it needs to have some kind of financial background and expertise. Thus, regulators constraints could be an entry barrier. Experience curve: - The core competency in this industry is the services which are provided to the end-s and the research based activities which includes “TIPS”, fundamental as well as technical script analysis. Also the most important thing which helps already established firms is-“TRUST” which people would be having on firms like Karvy, SSKI, India Infoline, etc. this is very difficult for new companies to imitate. Network:- the “Reach” to the customer is the key factor in the industry. The network of the companies like Karvy Motilal Oswal, Sharekhan, ICICI is very efficient and spreded all over India. It will take time for a new entrant to establish such a huge network (e.g. Marwadi), which say that, ”Network can come up as most difficult entry barrier to overcome.” Expected Retaliation: - Whenever a new player comes in the industry, the old companies have an option to reduce the prices of their product. This kind of practice is called expected Retaliation which is also possible in this industry in of less brokerage rates and reduced opening charges. E.g. before the entry of so many new companies

4. COMPETITORS The company is facing the competition from local as well as national level players. The local players provide facility for off-line trading while the national players like Sharekhan, ICICIdirect.com and www.kotakstreet.com, HDFC Security provide online trading services. There are also other big names like Indiabulls, India Infoline and Marwadi encircles the company form both the sides by providing online and off-line trading with competitive services. 70

5. POTENTIAL ENTRANT Few entrants, which may take away the share of current players. The potential entrant in Bhavnagar city like Invest mart, Jeojit and Cipher which are coming in near future. Nationalized banks are also thinking to enter in this field by tying up with broking houses. E.g. Bank Of Baroda.

6. SUBSTITUTES Here substitutes are such instruments which can be used instead of investing in shares The instruments like Bank FD, insurance, mutual funds are the substitutes. If the use of this instruments increase this may be disadvantage for the stock broking houses. The companies and banks which are having these instruments can plunge into this industry. Banks are planning to jump while others may come.

71

COMPETITIVE ANALYSIS Follower: The followers are just blindly following the other player which is leader and challengers. The players like Sharekhan, Motilal Oswal, HDFC Securities, and Kotakstreet are the followers.

LEADER: Karvy has highest no. of Sub Brokers (15000) in all over India. Largest registrar to issue : > 700 issues ICICIdirect.com is a leader in the online which is having 1, 24,000 in the country. While in offline Sharekhan is leading with 64,000 offline s

NICHER: ICICIdirect.com and Kotakstreet.com are the two stock broking houses which are focusing only on online investors.

CHALLENGER: Sharekhan, Kotakstreet and Indiabulls come under this head. Indiabulls is also challenging with low brokerage rates and class one service.

72

SEVEN ‘S’ MODEL

Structure

Systems

Strategy

Super ordinate

Goals

Style

Skills

Staff

73



STRUCTURE:

Karvy is flexible in of making temporary structural changes to cope up with specific strategic tasks without any hassles. If need arises, the top management can assign the role to any of its employees which it considers capable and skillful. 

STRATEGY:

Karvy believes not only in developing the strategies but also in its successful execution.



SYSTEMS:

This constitutes of all the training and development systems, estimating budgets and the ing system of Karvy.



STYLE:

Style refers to all the symbolic actions undertaken by top managers of Karvy and its influence on the subordinates.



STAFF:

Karvy values its employees as its assets and therefore carefully trains and motivates them by giving them incentives at regular intervals. Talented employees are assigned as mentors and given real responsibility and moved into higher positions. 

SKILLS:

The term skills refer to those activities organizations do best and for which they are known. Karvy is known for its timely advice (suggestions/tips), which it caters to its customers and it boasts of 70-90% strike rates in booking recommendations.

74



SUPERORDINATE GOALS:

This refers to guiding concepts, values and aspirations that unite an organization in some common purpose. It provides the customers the best service as it believes in customer satisfaction and retention.

75

76

FINANCE DEPARTMENT Like Blood is the most important in our body, in business Finance is the blood of any business. Finance is needed for all the activities like production or services as well as their distribution. The finance department directly influences all the functions of the other departments. Also finance has to give equal importance to all departments. Finance is that istrative area or set of istrative function in an organization, which relate with the arrangements of cash & credit so that they organization may have the means to carry out its objective as satisfactorily as possible. Karvy has special s department for separate calculation of pay-in and pay-out of funds according to the client's Profit/Loss. Finance management is done at Karvy is done by managing the stocks in the Demat s and funds in the margin & trading s Finance is the lifeblood of an organization to continue its activities and the finance management at Karvy can be divided into two major parts viz. DP (depository participation) and s management, which are shown in the figure given below.

Finance

DP



DP is treated as a separate department at Karvy and is covered in the back office management in the organization structure. In simple words, DP means providing the facility to the clients for managing the stock bought/sold by them. DP covers two major terminologies viz. settlements and the auctions which is a part of managing Demat . Settlements as defined by SEBI (Securities Exchange Board of India) are T+2, currently and it means that the Demat of the clients are prone to be sufficient for selling a script with no debit at all, i.e., the must have the sold

77

Amount of stock have to fulfill the settlement after two days from trade-day. The settlements for Day-Traders is not needed because they buy/sell stocks in that particular day, only the delivery trades are needed to be settled because if you sell 1000 shares of, say SAIL then your must have the stock before you sell it or it must be there in your Demat before the next day's trading begins (market opens). Generally, the timings are 9:30 and 3:00 as a deadline for the client and he must provide the stock for giving a delivery to the buyer. The chart shows the total transaction between two clients.

C

E

DP (Karvy)

DP(anyone)

C

The Settlement between two Clients The chart shows the process that the request for selling and buying es through the DPs of the respective clients and finally the exchanges like Marwadi becomes the controlling intermediary for the delivery of stocks and this process is done in two days. Nowadays, as banks are becoming fast for E-Fund Transfer (EFT) and Phone-banking is getting more popularity, SEBI is thinking to make the financial market of India to have a maximum speed of transactions just like the other nations in the world and proposing for T+l settlement scheme but the system is not enough competent for that thing. But soon or later we will have such a settlement system in India, as said by Mr. J. N. Bajpai, chairman of SEBI. The client, if not capable of providing the delivery of say, 1000 shares of SAIL then the Auctions are initiated by the exchanges and the client has to pay for the price prevailing in the market with 4-5% penalty. The penalty can go on maximum to 20% more than the market price of the sold stock. Generally, it is known as a buying auction and a same kind of auction is for selling the stock for which the buyer was proved unable to pay the price is carried out by exchange, known as the selling auction. And a debit or credit note is provided in the respective case of auction to the clients, i.e., for buying auction debit note is given on the T+4 basis and in case of selling auction the credit note is given on T+5 basis. There are two types of auctions called as Internal auctions & Market auctions, the internal auctions are defined as the auctions carried out between the other shops of Karvy and market auctions are those as explained earlier, the auction carried out in the market.. This is all about settlements but now switch to funds management or s management at Karvy. The s are different that is the margin a/c for deposits of the client and trading a/c for which Profit/Loss are settled. The collection of funds from the clients who had a debit balance or made a loss are made on the next day of trading and 78

the payments to the profiting traders are made after two days of trading because the cheques are received from H/O and then pay-out is done and Pay-in is as explained that amounts to be taken from the clients. In this way, s are managed but in case if the client is unable to pay, the deposit from the margin a/c is cut down to the payments and in case if a client is having a credit balance in F&O trading though he had a debit balance in cash-NSE & BSE trading, a JV request is sent to H/O for totaling the three balances. The main aim for s management is that the clients must have a credit or no debit on the next day. The DP services provided by Karvy are falling under the regulation of NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited), organizations governed by SEBI to regulate the depository services in the interest of the investors. So the financial market in India is governed by Ministry of finance under which two major bodies viz. SEBI & RBI are covered and under RBI the banks and other financial institutions are covered while SEBI covers the exchanges, NSDL & CDSL and the whole DP service providers with the brokers to the investors at the lower end of the financial market. In this way we have gained a meaningful knowledge about India's financial market and its structure from this training at Karvy. In this way, the finance function is carried out at Karavy by following the guidelines given by SEBI. And the company is a private limited one with its own policies for disclosing its financial statements, so we are not able to give any figures for showing the financial position of the company.

Function of Finance Department  Raising Find  Allocation of Fund  Receivable  Insurance  Salary

79

80

HUMAN RESOURCE DEPARTMENT Human resource is the crucial resource that a company can use to grow with the work or the employees. HRM activities at Karvy start from induction to the specific job training and are done by H/O at Hyderabad. H/O takes a written test and selection interview for filling up vacancies in branches but the recruitment is done by the branch itself and the selection is performed by H/O from the screened applicants. Any new recruit is firstly inducted to the company and sent to T & D department that is covered under HRD and T & D programmers makes employees aware about all the activities/jobs within the department he/she is to be recruited. Suppose if, I would be recruited for finance department then the finance related employees are known to me with their work profiles, that is, what they really do? Then the specific job training is provided at H/O and the person has to keep in touch with the concerned department at H/O on internet because he/she has to solve many conflicts arising in the investor's mind and to have an up-to-date information regarding the procedures and any new facilities or policies to resolve the problems of the clients. It is a must for each employee because the employee is the people by whom the company gets its customers and retains them. HRP (Human Resource Planning), HRIS (Human Resource Information System), Recruitment & Selection, Career planning and development, Assessment & development of employees for Performance appraisal, etc. activities of managing the HR at Karvy is maintained in a way to meet the requirements. The corporate culture at Karvy is maintained in such a way that the people are helpful to each other and eager to get the work done as soon as possible with a cooperative thinking. An additional Rs. 10000 is provided for each outlet of Karvy to motivate its employees by performance appraisal and also the heads of each departments and braches has to go through a 3606 performance appraisal for maintaining the consistency in growth of the company. In the end we can say that the human resource of Karvy is a best managed and used for the continuous growth and development of the company for its future plans to be achieved time-to-time.

81

• Confidentiality Agreement On ing Karvy it is imperative for all employees to sign and abide by a confidentiality agreement, which is legally binding. It is an agreement stating both during and after employment all data pertaining to any businesses involving Karvy is to be kept confidential and protected and not to be shared with anyone. Information relating to the company's business, dealings, methods, appointments, practices, transactions, designs and processes or affairs is of substantial value and shall be treated as being confidential, whether or not it is individually identified as confidential. It is the subject of reasonable efforts to maintain its secrecy and is being provided and disclosed to you solely for use in connection with your employment by the company. This agreement also binds employees to uphold all ethical practices espoused by the company.

KARVY’S massage to all This handbook has been designed to communicate to our team the various Human Resource (HR) policies/practices that we are trying to institutionalize in our organization. This handbook disseminates information on all the KSBL (Karvy) policies, procedures, benefits and responsibilities of the employees. The policies have been designed with a focus on introducing market aligned HR practices at Karvy while meeting the needs of individual employees and addressing their concerns. This handbook is not an agreement or contract of employment and therefore need not be construed as a contract. The management of Karvy reserves the right to modify this handbook from time to time at its sole discretion. This handbook is for internal circulation only. We would request you to read, understand and comply with all the provisions of this handbook. If you need any clarifications or further information on any aspect of this handbook, you can get in touch with your immediate superior or the HR team. We welcome you to the Karvy family and hope your association with us is mutually EXCITING, FUN FILLING and CHALLENGING!!

82

•

KARVY’S Belief and Expectations

Our vision at Karvy is "to empower the investor to make better investment decisions through quality service and superior advice." Karvy believes in and promote a culture that:

 Stimulates the employees' drive to excel  Nurture their entrepreneurial spirit by providing them exposure to challenging work opportunities and imparting autonomy to function effectively  the employees to deliver by incorporating practices aimed at  Employee development/skill acquisition  Enhancing transparency and trust, being non-discriminative to any practice/procedure/system  Establishing norms towards enforcing discipline in the organisation as regards work etiquettes  Promotes collaboration and team spirit amongst the employees Acknowledges and rewards individual and team contribution through appropriate rewards, recognition and compensation Build a sense of ownership across the organisation for adherence to risk and compliance procedures amongst all employees and channel partners.

What Karvy Expect from their team? In our industry, relationships with clients are highly critical. Developing customer focused solutions and managing their expectations effectively and delighting them is the key to our success. Karvy believes that an Engaged & Committed workforce is indispensable for high quality customer service. Karvy is in an industry that is governed by stringent regulations and non-compliances can lead to financial loss and loss of goodwill. They expect there team to function in tandem with the organization and the management to inculcate a strong discipline across the organization At Karvy we believe in having a strong performance-oriented culture. We are convinced that this is the best way to encourage employees to set high performance standards and goals that are tracked, and performance that is evaluated to decide the rewards. Karvy strongly believe in employee development and growth. In this competitive environment, Karvy expect there employees to be abreast of the external changes and take initiatives to adopt the new changes. As part of there HR initiatives, they will identify training needs, design appropriate training programmes and conduct them on regular basis. 83

ING FORMALITIES Karvy welcomes all employees and is confident that this association will be mutually enriching and challenging. It is essential for the HR team to keep record of your personal and professional information to enable speedy processing of information and planning relating to areas such as tax and medical insurance as well as allowing us to assist you in the time of emergency. In this regard we request all new employees to please furnish HR with the following information. The documentation needed falls into three primary categories: personal information, ing report and other forms.

• Personal Information For the personal record of the employee the following documents should be submitted to the HR team on the day of ing:          

Duly completed Application Form Two port size photographs Proof of date of birth Copy of educational certificates: graduation/post graduation/diplomas/NCFM certificates (wherever applicable) Relieving certificate from the previous employer, if applicable Proof of last drawn salary Medical examination reports Bank details Insider Trading Agreement (only for designated employee) Confidentiality Agreement

84

• ing Report In addition the employee is required to fill out a ing Report as per the format attached in the annexure.

• Other Forms The following forms/agreements also need to be completed: • • • • • •

Medi-claim insurance application form Provident Fund transfer/application form Provident Fund nomination form Gratuity nomination form Accident Insurance nomination form Tax estimate/Savings declaration form

• Induction:

Induction forms an integral part of Karvy's culture. The induction programmes are designed with the following objectives:

Provide an overview of the company's business and product portfolio. • Enable the new employee to understand the work culture and processes/systems. Provide an opportunity to interact with his/her superiors/colleagues and enable him to understand them better. •

•

During induction, employees are: • • •

Provided their own workspace Given a copy of this Employee Handbook Introduced to assignments related to their role

85

• Induction Process

The function heads along with the HR team designs the induction programme. The duration of the induction programme varies from two days to a week depending upon the role on the new er. The induction programme in the company covers three broad areas:

I. About Karvy  Introduction to Karvy: vision, business, products and clientele  Organisation structure: key functions and their abilities, function heads  IT systems and policies

II. HR philosophy and practices  Karvy values  Overview of HR policies, systems and practices  Overview of risk & compliance practices

III. About the job  Key responsibilities and expectations of the job  Goal setting and performance measurements

• Leave and Holiday At KSBL we have established a set of leave rules that are legally compliant and that provide for reasonable leave requirements of employees, giving them the opportunity to Maintain a work-life balance.

• Leaves at KSBL KSBL provides the following types of leaves/holidays:   

Holidays Privilege leave Maternity leave 86



Paternity leave

• Leave ing year The year for calculation of leave would be the same as the financial year—April 1st to March 31st. Pro rata adjustments will be made to bring entitlements in line with this. The current leave policy will be valid up to 31st March 2007 and the revised policy that is listed below will be effective 1st April 2007.

• Detailed Guidelines A. Holidays The company will declare a list of 12 holidays every year based on the holidays declared by the exchanges, bank holidays and regional festivals. Please your function head or branch head for the current list.

B. Classification of leave & eligibility Leave type a. Privilege leave b. Paternity leave c. Maternity leave

No of days (annual) 25 working days 2 working days 12 weeks

a. Privilege leaves (PL) - All confirmed employees - All employees on probation/trainees will be eligible for one working day leave per month. On confirmation, the leave balance will be updated on a prorated basis. Accumulation 15 days per year, up to maximum 45 days

Eligibility

Encashment Privilege leave can be encased only at the time of retirement or

resignation. The leave balance up to maximum of 45 days will be encased as per the basic salary at the time of encashment and all excess leave will lapse.

b. Paternity leave (PL) For all male employees. Leave taken for the birth of first two children. Scope Two working days Eligibility Accumulation Not applicable 87

Encashment Not applicable

• Leave planning and application KSBL encourages employees to plan their leave carefully in order to meet the needs of the employees and the company. You must fill out the Leave Application Form when requesting time off, which must be signed and approved by your manager/supervisor. Employees are encouraged to actively communicate leave plans and details to their supervisors so that all team can adjust their schedules. The company will try at all times to meet any reasonable requests for leave; however consideration of your co-workers and any existing Leave of all types availed in the month must be updated on the leave card. Till leave cards are provided, an e-mail with the approval of leave by the immediate manager must be sent to HR and Payroll for easy tracking and updating in monthly payroll.

• Leave Between Holidays The company does not permit its employees to take leave prefixed and suffixed to the holidays. For instance if a holiday is on Friday and a weekly off on Sunday, then the employee is not supposed to take leave on Saturday. In case the employee takes leave on Saturday, then all three days, i.e. Friday, Saturday and Sunday, will be considered as leave.

• Leave Extensions The company does not encourage extensions of leave. They will be granted only if the employee communicates such an intention in writing only in unforeseen circumstances at the discretion of the management.

• Leave Without Pay Any leave availed in excess of the entitlement will be treated as leave without pay and proportionate salary will be deducted for the same. The company does not encourage employees to take leave without pay. The leave without pay can be waived off only in unforeseen circumstances at the discretion of the management

88

OTHER BENEFITS Karvy contribute towards enhancing their employees' and their families' life by extending benefits that are of relevance and importance to their employees.

I. Employee Marriage Gift Policy We believe that our employees are part of a large Karvy family. Just as employees are an integral part of all the developments and celebrations of Karvy, we too would like to be a part of one of the most important event in the life of our employee—Marriage.

II. Medi-claim Policy Karvy provides Medi-claim cover to all employees. The detailed information on the policy, relevant processes and the TPA (Third Party ) appointed by the company is attached in the annexure.

Coverage and limits The Company bears the cost of insurance for all employees as per following limits:

Monthly CTC Up to Rs25,000 per month Above Rs25,000 per month

Coverage Rs100,000 Rs150,000

Employees have the option of covering their dependents under this policy for any amount not exceeding the limit for the employee; however the cost of the same will have to be borne by individual employees.

III. Term Insurance Policy Karvy provides term insurance cover (death in case) to all employees. The details of the coverage are as mentioned below:

Annual CTC Up to Rs100,000 Up to Rs300,000 Up to Rs800,000 Up to Rs1,500,000 Above Rs1,500,000

Coverage Rs200,000 Rs500,000 Rs1,000,000 Rs2,000,000 Rs4,000,000

89

•

Term of Employee

Probation All regular full-time employees will undergo a six-month probation period as specified in the appointment letter. The probation period helps the organization to assess the employee's on-the-job performance and his cultural fit with the organization. Either party may give 15 days' formal notice of separation of employment at any time during probation.

Confirmation Completion of the probationary period should not be construed as confirmation till such time that the confirmation review process is completed. The employee's immediate superior at the conclusion of the probation period shall conduct a formal performance review for confirmation. The performance review shall include self-, performance review by the managers with specific suggestions for improvement. An official letter will be issued in case of confirmation. In case the performance is not satisfactory, the probation period can be extended for three months. The confirmation appraisal format is attached in the annexure. Either party may give a minimum of 30 days' formal notice of separation of employment at any time after confirmation.

• Transfer Policy Transfers become essential in the spate of growing business requirements. To meet them appropriately, the Company may decide to transfer any employee to any location based on the business requirements. With the purpose to facilitate the same, it is essential to have a transfer policy in place. It is necessary for the company to assist employees in this process. All employees of the organization will be covered under this policy. The employee will be communicated in writing regarding his / her transfer and other relevant information i.e. reporting authority, work responsibilities etc

• Mode of travel for self and family 90

Fare for self, spouse and the company on producing the tickets will reimburse two dependent children at actuals. The mode of travel remains the same as per employees’ eligibility in the Travel Policy.

• Post-transfer expenses The employee and his / her family will be eligible for Hotel stay at the new location as per eligibility under the Travel policy. The total period of hotel stay post transfer with family will not exceed 5 days.

• Transport of Goods The employee will be eligible for reimbursement of cost of one truckload of personal belonging on actual from his current location to the transferred location. However, the employee is required to submit quotations from minimum two transporters and needs to have pre-sanction for the expense. Transport allowance will include packing, loading and unloading charges and insurance . The insurance should not exceed Rs.10,000. In case of function heads / branch heads / Managers, the company will reimburse additional cost of transportation of one car on actual. However, the employee is required to submit estimated cost and needs to have pre-sanction for the expense.

• Temporary Transfer If an employee is deputed to any other location/ office for a minimum period of one month and not exceeding six months, it will be considered a temporary transfer. An employee on temporary transfer will be eligible for a monthly Deputation Allowance equivalent to 25% of his current CTC and the same will be paid along with the monthly salary. Any temporary transfer exceeding six months will be considered as permanent transfer and all benefits associated with temporary transfer will cease to be applicable.

• Personal Conduct 91

Karvy’s business is dependent on there reputation and the level of trust that is reposed in us by our customers. However this calls for a very high inclination towards adherence to regulations and being ethical in all our dealings. They believe each and every employee's behavior needs to reflect our philosophy. The onus is on each and every member to refrain from any illegal, dishonest or unethical conduct and report to the management any incidents of malicious nature occurring around him.

• Employee Responsibilities The job performance and personal conduct of each employee directly affect the image and reputation of Karvy. Employees are required to observe the following guidelines to maintain ethical standards:  Ensure there is no theft, embezzlement, misappropriation of funds, false entries in any book report or statement with intent  To defraud and falsify the expense s is a cause for immediate dismissal.  It is the responsibility of each employee to report to the management any knowledge that a crime has been or will be committed. Not reporting is a cause for immediate dismissal. A client's confidential information must not be divulged to third parties except with proper authority from the client and the immediate superior.  An employee will not discuss nor enter into agreements with competitors concerning Karvy's dealings, prices/services etc.  Karvy’s physical properties, information and influence will not be used for the private advantage of any employee or other person.  Outside activities must be acceptable and compatible with the employee's identity with Karvy. This includes the prohibition of business and personal investments, and outside employment, any of which would create a conflict of interest.  Employees must not accept from or give to clients and suppliers personal gifts; or accept bequests, commissions or fees of any nature from clients; or borrow from clients or suppliers.

92

Recruitment & Selection process

Give the ment Receiving application Shortlist the candidate (who are qualified) Interview call Interview Selection of candidate Offer letter ing the organization

93

Man Power Planning Employee of Karvy (Bhavnagar Branch) Branch Manager Web Dealer On line Dealer Off line Dealer Commodity Dealer  Marketing  Customer Care  Sales Coordinator  Receptionist  Department  Office boy

1 2 3 2 6 1 1 2 2 2 -----------------22

94

95

96

Conversion Process The main aim of it is to make profit with customer satisfaction. The conversion of Inputs, works as the Karvy earn brokerage from the customers. The profits are generated from getting a higher return on the invested amount of money than the amount payable to the customers. The process is facilitated by a centralized computer system in which the data is stored and recovered for the whole INDIA and it is having the U at the H/O in Hyderabad. Karvy is regulating the brokerage rates all over India by keep watch on each transaction done from the branch office. The data of a customer will be stored in the central computer and all facilities such as bills, credit/debit reports etc. are provided by that computer to all customers on-line on the Internet. The conversion process is also facilitated by some adjustments to the inputs and then the random fluctuations are also handled in the process and lastly the monitoring of the process is done and a is given to do the adjustments for the process as indicated in the figure given.

Outputs Outputs are those services generated by Karvy with the help of the inputs and using the conversion process. These services are as listed in the figure below.

97

Operations Strategy at KARVY

Operation strategy at KARVY

     

Quality Reliability Flexibility Creditability Dependability Efficiency

Facility Mission Process Capacity Automation structure Centralization Regulation of Operation Service Specificity

Maximum possible serving capability

Facility Vertical Integration Infrastructure size,

Supplier

Location, Focus on locating serving center

control, Customer control,

Plan and Work force Quality control R & D, T & D

Operations strategies are implemented in Karvy as shown in the chart given above and the main points of consideration are Efficiency, Dependability, Quality and Flexibility. The points demand a facility mission that is made up of process, capacity, facilities, vertical integration, and infrastructure facilities provided to get the desired outputs as per the plan.

98

Transaction cycle

Decision to trade

Funds or Securities

Placing Order

Trade Execution

Transaction Cycle

Settlement of trades

Clearing of Trades

99

PRODUCTION TO DERIVATIVES Introduction to derivatives The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors.

Derivatives Defined Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the "underlying". Example :A very simple example of derivatives is curd, which is derivative of milk. The price of curd depends upon the price of milk, which in turn depends upon the demand, and supply of milk. See it this way. The price of Reliance Triple Option Convertible Debentures (Reliance TOCD) used to vary with the price of Reliance shares. And the price of Telco warrants depends upon the price of Telco shares. Do American depository receipts/ global depository receipts of ICICI, Satyam and Infosys traded on stock exchanges in the USA and England have their own values? No. They draw their price from the underlying

100

Shares traded in India. Consider how the value of mutual fund units changes on a day-today basis. Don't mutual fund units draw their value from the value of the portfolio of securities under the schemes? Aren't these examples of derivatives? Yes, these are. And you know what, these examples prove that derivatives are not so new to us. Nifty options and futures, Reliance futures and options, Satyam futures and options etc are all examples of derivatives. Futures and options are the most common and popular form of derivatives. In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines "derivative" to include 1. A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. 2. A contract, which derives its value from the prices, or index of prices, of underlying securities. Derivatives are securities under the SC (R) A and hence, the regulatory framework under the SC (R) A governs the trade in derivatives.

History of Derivatives The derivatives markets has existed for centuries as a result of the need for both s and producers of natural resources to hedge against price fluctuations in the underlying commodities. Although trading in agricultural and other commodities has been the driving force behind the development of derivatives exchanges, the demand for products base on financial instruments - such as bonds, currencies, stocks and stock indices—have now far outstripped that for the commodities contracts. India has been trading derivatives contracts in silver, gold, spices, coffee, cotton and oil etc for decades in the gray market. Trading derivatives contracts in organized market was legal before Morarji Desai's government banned forward contracts. Derivatives on stocks were traded in the form of Teji and Mandi in unorganized markets. Recently futures contract in various commodities was allowed to trade on exchanges. In June 2000, National Stock Exchange and Bombay Stock Exchange started trading in Futures on Sensex and Nifty. Options trading on Sensex and Nifty commenced in June 2001. Very soon thereafter trading began on options and futures in 31 prominent stocks in the month of July and November respectively. The market lots keeps on changing from time to time. The minimum quantity you can trade in is one market lot.

101

• Types of

Derivative as a term conjures up visions of complex numeric calculations, speculative dealings and comes across as an instrument which is the prerogative of a few ‘smart finance professionals’. In reality it is not so. In fact, a derivative transaction helps cover risk, which would arise on the trading of securities on which the derivative is based and a small investor can benefit immensely. “A derivative security can be defined as a security whose value depends on the values of other underlying variables.” Very often, the variables underlying the derivative securities are the prices of traded securities”

Derivatives and futures are basically of 3 types: 

Forwards and Futures



Options



Swaps

DERIVATIVES DERIVATIVES

Options Options

Put Put

Futures Futures

Call Call

Swaps Swaps

Interest Interest Rate Rate

Commodit Commodit yy

Security Security

102

Forwards Forwards

Currency Currency

FORWARDS: A forward contract is the simplest mode of a derivative transaction. It is an agreement to buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No cash is exchanged when the contract is entered into. Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to buy it outright. He can only buy it 3 months hence. He, however, fears that prices of televisions will rise 3 months from now. So in order to protect himself from the rise in prices Shyam enters into a contract with the TV dealer that 3 months from now he will buy the TV for Rs 10,000. What Shyam is doing is that he is locking the current price of a TV for a forward contract. The forward contract is settled at maturity. The dealer will deliver the asset to Shyam at the end of three months and Shyam in turn will pay cash equivalent to the TV price on delivery.

FUTURES:

It is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price through exchange traded contracts. A Future represents the right to buy or sell a standard quantity and quality of an asset or security at a specified date and price. Futures are similar to Forward Contracts, but are standardized and traded on an exchange, and are valued, or "Marked to Market” daily. The Marking to Market provides both parties with a daily ing of their financial obligations under the of the Future. Unlike Forward Contracts, the counterparty to a Futures contract is the clearing corporation on the appropriate exchange. Futures often are settled in cash or cash equivalents, rather than requiring physical delivery of the underlying asset. Parties to a Futures contract may buy or write Options on Futures.

103

•

OPTIONS:

An option is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date. ‘Option’, as the word suggests, is a choice given to the investor to either honor the contract; or if he chooses not to walk away from the contract. There are two kinds of options: Call Options and Put Options. A Call Option is an option to buy a stock at a specific price on or before a certain date. When you buy a Call option, the price you pay for it, called the option , secures your right to buy that certain stock at a specified price called the strike price. If you decide not to use the option to buy the stock, and you are not obligated to, your only cost is the option . Put Options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies. With a Put Option, you can "insure" a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus, "damages" your asset, you can exercise your option and sell it at its "insured" price level. If the price of your stock goes up, and there is no "damage," then you do not need to use the insurance, and, once again, your only cost is the . Technically, an option is a contract between two parties. The buyer receives a privilege for which he pays a . The seller accepts an obligation for which he receives a fee.

CALL

OPTIONS

Call options give the taker the right, but not the obligation, to buy the underlying shares at a predetermined price, on or before a predetermined date. Call Options-Long & Short Positions When you expect prices to rise, then you take a long position by buying calls. You are bullish. When you expect prices to fall, then you take a short position by selling calls. You are bearish.

PUT OPTIONS A Put Option gives the holder of the right to sell a specific number of shares of an agreed security at a fixed price for a period of time.

104

Put Options-Long & Short Positions When you expect prices to fall, then you take a long position by buying Puts. You are bearish. When you expect prices to rise, then you take a short position by selling Puts. You are bullish. CALL OPTIONS

PUT OPTIONS

If you expect a fall in price(Bearish)

Short

Long

If you expect a rise in price (Bullish)

Long

Short

105

• Requirement of Karvy Branch Infrastructure Karvy SB/ AP is required to invest in infrastructure and take care of the recurring expenses. The set-up should be as follows: 1. Minimum 400 sq. ft of office space 2. Connectivity- BSE, NSE, MSC, NCDEX (details with cost attached) 3. Proper infrastructure (Latest PC’s, UPS, etc.) 4. At least 2 certified and trained dealers – to start with 5. At least 5 sales executives – to start with

Operations 1. Billing: Centralized billing system where the end client will receive contract of Karvy. 2. Certification: For Cash, F&O, Commodity, Internet terminal and Depository Services operations, you will have to produce the requisite NCFM certification. 2. Compulsory DP and digital contract: The client would compulsorily need to open DP s with Karvy with mandatory POA and Digital Contracts. 3.

Risk Management: 1. 100% risk of the business is borne by the Karvy SB/ AP 2. Client wise risk monitoring- upfront margins required for placing orders 3. Responsibility of managing client’s risk, collection 4. Payment of delay pay-in charges in case not borne by client

Compliance: Business will fully compliant with the requirements of regulators- SEBI, Exchanges 1. SEBI/ Exchange registration must to commence the business 2. NCFM certification (NSE Cash, F&O, DP and NCDEX) 3. Client registration must before trade execution 4. No Third party payments and securities, Cash Transactions, unauthorized transfer of funds from one client to other 5. All marketing and brand norms to be adhered to completely.

106

107

METHODOLOGY

Research Objective The main objective of the study is to analysis the CUSTOMER BUYING PREFERENCES and their potential market among the people of Bhavnagar City.

SAMPLING DESIGN Sampling design is one of the most important aspects where the design must be appropriate in order to have the desired result. Sampling design includes various aspect and they are as follows: •

Sampling Area

:

Bhavnagar city

•

Sample Population

:

above 15,000

•

Sample Size

:

200

Methods: The method used in the research (survey) is of probability type as we are unaware about the results. It can be either of the side. It is area of Bhavnagar city under which we have to conduct the research.

108

The research is based on Convenience Method s. and the take the sample from to various stock broking company.

•

ERROR o Some of the respondents were not giving the proper attention on the questioner and they were marking without reading the questions. So from these respondents we were not able to get the proper and accurate data. Although to minimize the error effect we have removed such type of respondent’s responds and not taken them in calculations. o Some questions are related to each other so some error may occur due to the diversification of the meaning. To minimize the error we made the questionnaire as simple as possible and avoid multiple questions. o Fear of consequences To minimize the error we ensure them to keep their identity in confidential.

109

RESEARCH DESIGN:

Research

:

Descriptive & Objective

Data Source

:

Primary data

Research Method

:

Survey Method

Research Technique

:

Questionnaire

Type of Questionnaire

:

Structured

Type of Questions

:

Closed & Open ended Questions

No of Questions

:

11

Place

:

Bhavnagar city

Data Collection

110

The research is conducted with the help of questionnaire therefore the main source of information is the response of the respondents and this can be considered as a primary method of collecting the data.

• Limitations The limitations of the study are as follow: :

Personal Bias: Individuals may have personal bias towards particular investment option so they may not give correct information and due to which the

Analyst Ability: Analysis is totally depending on surveyors and analyst ability. So the personal bias or inability may affect the result of the survey. Area: 111

The area was limited to Bhavnagar City only, so we cannot know the degree of the literacy outside the city.

112

• General information

Gender Male 185

Female 15

Gender 8% male female 92%

Finding :From the research conducted I found that there are 92% of the total who have fill question are male. And remaining are female. So we can say it is male dominating field. Recommendation: As per the result we can say that 92% of the total is male and interested as well as investing in stock market. They can provide some facilities and good environment to women also. So, that segment also can be covered.

113

•

Age 21-35 112

36-50 63

Above - 50 25

Age 13% 21-35 36-50 56%

31%

51-65

Finding: There are 56% people who belong to age group of 21-35 and more than 31% are from 36-50 and remaining are the other age group. Recommendation: These means is most of the investor are of young age. So company should focus on this age group.

114

• Income 50,000-1lacks 1lacks-2lacks Above 2lacks 74 101 25

Income 12% 37%

50,000-1lacks 1lacks-2lacks aboove 2lacks

51%

Finding :From our research nearly 37% people are earning less than 1lacks it has been found that there are 51% people in the income group of 1lack to 2lacks and and the reaming are more than 2lacks.

Recommendation: The result show that there are almost 63% people whose income Rs. 1 lack and above. So the company should focus on this two income group because they are position invest there surplus money in various investment pattern available in market.

115

• Occupation

Professional 32

Pvt. Firm 64

Businessmen Govt. officer 40 30

Other 34

Occupation 64

er of fic

sin es sm en Bu

ir m t. F Pv

on al es si pr of

30

34

Series1

ot he r

40

32

G ov t.

70 60 50 40 30 20 10 0

Finding: All most 67% of the total is working with either in pvt. Firm or in govt. firms or doing there own business and remaining 33% are professional people and might be student also. Recommendation: From the result, we can predict that people working with Govt. will have field income and people working with pvt. Firm will be having higher pay scale and businessman who are in one or another business will be knowing the important of risk as well as benefit that can be enjoyed after taking risk. So the company must concentrate in these three groups because they will be potential investor for tomorrow.

116

Q.1

Do you invest your surplus money in saving Instrument?

Yes 200

No 0

Q-1 0% Yes No 100%

Finding: There are 100% people; those are 200 out of 200 are regularly investing in various investing options. Recommendation: As per the result, we can say that company has a whole bunch of people, who believes that if they invests their money in any of the investment pattern, it will going to grow and in addition to that they believes that investments are necessary to earn more money. So for these people if proper information is given to them about the company product and about share market, they may invest in share market.

117

Q.2

F.D 152

If YES, Where do you invest your saving?

P.O 112

200

Insurance 117

M.F 134

Commodity 44

152

150

112

Derivative 10

Other 36

156

134

117

Equity 156

100

Series1

44

50

10

36

O th er

e tiv De riv a

Eq ui ty

od ity

.F

Co m m

M

In su ra nc e

P. O

F. D

0

Findings: People might be investing in more than one investment option. Result also shows similar trend because they are people who may investing in bank FD or in equity or any other combination. Recommendation: If we look at figure, there are many persons investing in bank FD and post office savings, which reveals that these people believe in fixed return at a lower risk, but now days there are increasing number of people who are investing in insurance, equity and in mutual funds. Still there are many persons who want to have fixed return on their investment so the company should explain them about the importance, benefit if they invest in stock market and the return of investment, which is going to be higher in stock market than any other.

118

Q.3 Which stock market would you prefer to carry out your transaction?

STOCK 156

COMMODITIES 28

BOTH 16

8% 14% Stock Commodity Both 78%

Findings: Once there are many options available for the people for the investment purpose and there are many exchanges for trading. Figure shows that most of the people trading with STOCK and their figure is nearly about 156 each while remaining prefer COMMODITIES and BOTH. Recommendation: If we look at KARVY, it is providing the facility of investing in all these exchanges so the company should also focus on MCX as well as NCDEX, which are considered to be emerging markets and its benefits to the people who are investing in other options including stock markets so that they can increase their business.

119

Q.4 If you select broker or agent than which broking company selects you?

Share khan 71

Karvy 55

ICICI 14

Marwadi 19

Kotak security 25

Other 16

Q.4 80

71 55

60 40 20

14

19

ICICI

Marwadi

25

Series1 16

0 Share khan

Karvy

Kotak security

Other

Findings: The result shows that 72 people out of the total prefer Share khan as their broker and the almost same figure is for Karvy also. Next challenger is Kotak Security where 12% people prefer it to trade with it. Remaining are with other companies. Recommendation: We can see that Share khan is their (Karvy’s) main competitor, which maximum number of people preferring. And KOTAK Security can come close and can give challenge. Therefore in order to come on the top position, Karvy must provide its existing customer better services, viable advises because this will increase their faith in Karvy.

120

Q.5 What does influence you to invest your amount? Independently 160

Broker 129

News paper 40

Internet 25

Tax consultant 46

200 150 100

Series1

50

Ta x

co ns ul ta nt

In te rn et

pa pe r Ne ws

Br ok er

In de pe nd e

nt ly

0

Findings: There are different means of communication to your message to the general people. With the help of these means, company can market its products. There are 32% people who prefer broking firm for their decision making, next comes is the independent decision makers, 40% out of total number. Others take their decision with the help of news Channel, news paper as well as tax consultant. Recommendation: If the company wants to increase their customer base, the marketing of the company’s products should be done in an effective manner so that more and more people come to the broking firm for their investment. It should also use news channel, newspaper and Internet medium for their product marketing so that they have more scope of expanding their business.

121

Q.6 purpose?

Which style would you prefers most for the trading

Online 28

Offline 172 Q.6

14% Online Offline

86%

•

Finding: -

The result shows that the in 172 people mainly prefer most offline and 28 people are preferred online.

Recommendation: There are more people who prefer offline trading which on the other hand increasing company burden books record and formality but therefore in order to reduce this burden the company should focus on online trading it should have easy operating of online trading so the customer can easy operate it. And also make them understand about the benefit of online trading like fast processing, the customer will not have to come down the offline can performance his/her transaction from anywhere.

122

Q.7 Name of any 2 Stock Broking Company?

Share khan

1

Karvy

2

India Bulls

3

Kotak street

4

Marwadi

5

ICICI Direct

6

Angel Broking

7

This question was put in the Questionnaire to know the customer’s mindset and which company they know or whom they like to give first preference. This question will give idea whether they know Karvy or not. The result showed that most of the people in Bhavnagar know Share khan very well and next comes is Karvy. So this is a positive sign for Karvy and so the first task is to convince these people to invest with Karvy. And attract more people

123

Q.8

Which of these you would like to go for trading in future?

Equity 80

Derivative 75

Commodity 45

Q.8

23% 39%

Equity derivative Commodity

38%

Findings: No one can predict the future because it is uncertain. This question was put in the Questionnaire to know in which market they will invest in future time, because it will give idea about the people’s mindset. Result showed that there are increasing number of people who will invest in commodities as well as future and options. In number it is around 60% so it is good for the company. Recommendation: The recommendation can be given to the company is that the company must focus on all the products which are offered to its existing customers as well as proper guidance must be given to potential customers to increase their business. Also the investment in Commodity and Derivative is safe as compared to stock markets and the return is also good for the investors.

124

Q.9

How many % of your surplus amount do you invest?

0-25 % 28

26-50 % 90

9%

51-75 % 64

14%

76-100 % 18

0-25 % 26-50 %

32%

51-75 % 45%

•

76-100 %

Findings:

By observing result, we can say that most of the people take moderate risk and invest near about 50%, half of the surplus amount in stock market. And very less number of people takes more risk or wants more return after investment more than 75% of surplus amount.

•

Recommendation:

So, every company have try to provide more satisfactory services to customer and more concentrate to give them good returns against their investment. After all every body want to earn more income from their investment and it is possible when they invest more or total surplus money. 125

Q.10 Which investing?

are the constraints that you

Risk taking ability Fund facility Return on invt. 102 75 53

might consider

Time Duration 60

while

Company invt. Position 24

Q.10 120 100 80 60 40 20 0

102 75 53

60

Series1 24

Risk taking ability

Fund facility

Return on invt.

Time Duration

Company invt. Position

Findings: This is probably the most important question of the questionnaire; the result of this question is that most of the people think of (RISK TAKING ABILITY) because it is the most crucial constraint. Next comes is the facilities given to them under the funds and also the ROI (return on investment). There are other factors also like time duration of their investment and Company reputation in the market. Recommendation: As we saw it in the results that most of the people see How much of risk involve if they do investment in any of the market. So the company must do activities which yields maximum return so that they take more risk and which cab balance the uncertainty. They must provide all the possible facilities to its customer so that they remain with the company only and also help in expanding their business. Now a day’s people want services also and therefore it must be the main focus of the company because if not provided to the people, they are surely going to leave the company.

126

Q.11 Suggestion________________________________________________________

Finally overall suggestion was asked to the respondents to know what they want and if they are already with Karvy then what changes are to be made and whether they are satisfied with the services of the company? The response got from them reveals following points: 1. Return on Investment is must but the risk also should be minimizing at the same time. 2. No one loves to loose its hard earned money therefore it should be invested in safer place. 3. Services are must for them and therefore the company must also concentrate on this aspect. 4. Good advisory services, secrecy of the data given to the company as well as every people must treated as they all are equal i.e. no biasness. 5. Charges of the services provided to them should be reasonable and viable. 6. Finally, last but not the least the company should maintain good relations with the people to have deal for a longer period.

127

Conclusion

Karvy has enough number of branches all over India and therefore it is a great advantage for the company and the company also planning to expand its network. Karvy also provides the facility of trading in almost all the exchanges and therefore whatever the customer demands the company has in its package. The company also has a very good research team at its Head Office and this is meant for the better working as well as for the customer of Karvy only. The company also has the advantage of the existing customers where their level of faith and their view about the company to the outside world will be a helping hand for the company to expand its business. Karvy has various products and services in its portfolio, so for the people they have variety of options to choose from, therefore it should market its product in such a manner that more and more people come to Karvy and deal with the company. From the research conducted, that the customer are satisfied with the company services and there is a competition from the Share khan therefore the company should regularly check its various departments and make continuous changes required.

128

Bibliograph y

Reference Books: Philip Kotler, The Millennium Edition, “marketing Management”, Prentice Hall of India Pvt Ltd., New Delhi Cooper, 8th edition, “Business Research Methods”, Tata McGraw-Hill Publishing Company Ltd., New Delhi

129

K. Aswathapa, 3rd edition “Human Resource and Personnel Management”, Tata McGraw-Hill Publishing Company Ltd., New Delhi Websites: www.karvy/about.asp Dt.-18/07/07 www.bseindia/about.asp www.nseindia.com www.mcx.com www.ncdex.com

ANNEXURE

STUDY OF CUSTOMER BUYING PREFERENCE Name:Gender:-

Male

Age group: -

21-35

Income:-

50000-100000 100000-200000 2, 00,000 above

Occupation:-

Professional Govt. Employee Other

Q.1

Female 36-50

51-65

Businessmen Pvt.Firm

Do you invest your surplus money in saving Instrument? Yes

No

130

Above 66

Q.2

If YES, Where do you invest Your saving? Bank F.D Post office Insurance Mutual Fund Others

Q.3

Derivative Commodities

Which market would you prefer to carry out your transaction?

STOCK

Q.4

Equity

COMMODITIES

If you select broker or agent than which broker company select you? Share Khan ICICI Direct

Q.5

BOTH

Karvy Marwadi

Kotak Street Other

What does influence you to invest your amount? Independently Broker/Agent News Papers Internet Tex Consultant Why______________________________________________________________

Q.6

Which style would you prefer most for the trading purpose? Online

Q.7

Name of any 2 Stock Broking Company? 1__________

Q.8

Offline

2___________

Which of these you would like to be in for trading?

131

Equity Q.9

51-75% 76-100%

Which are the constraints that you might consider while investing? Risk Taking ability Time Duration

Q.11

Commodity

How many % of your surplus amount do you invest? 0-25 % 26-50%

Q.10

Derivatives

Fund Facility Return On Invest Company Investment position

Suggestions: __________________________________________________

132