CHAPTER-1

1.1 Introduction to Industry

Stocks
The stock or capital stock of a business entity represents the original capital paid into or invested
in the business by its founders. It serves as a security for the creditors of a business since it
cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the
assets of a business which may fluctuate in quantity and value. Buying a stock for the long term
means that you want to own part of a company and you think that in the future the company will
be profitable. If you buy stock in a company and the company performs well, the stock's price
should rise. If the company fails, then the stock should fail you, too and go down. Companies list
their stocks on the various stock exchanges located throughout the U.S. The stock exchanges
actually compete with each other for these listings, since companies that attract more trading
make more money for the stock exchange that listed it. Company stocks are assigned a "ticker",
or trading symbol by the listing exchange. You may notice some well-chosen tickers that are
easy to remember, like "DNA" for the company Genentech, a biotechnology firm. Or some
companies' ticker is the same as its name, Nike for example.

Stock market
A stock market or equity market is a public market (a loose network of economic transactions,
not a physical facility or discrete entity) for the trading of company stock and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The size of the world stock market was estimated at about $36.6 trillion US at the
beginning of October 2008. The total world derivatives market has been estimated at about $791
trillion face or nominal value, 11 times the size of the entire world economy. The value of the
derivatives market, because it is stated in terms of notional values, cannot be directly compared
to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the
vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is
offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid
securities are valued as marked to model, rather than an actual market price. The stocks are listed
and traded on stock exchanges which are entities of a corporation or mutual organization
specialized in the business of bringing buyers and sellers of the organizations to a listing of
stocks and securities together. The largest stock market in the United States, by market cap is the
New York Stock Exchange, NYSE, while in Canada, it is the Toronto Stock Exchange.
Trading
Historically, stock markets were physical locations where buyers and sellers met and negotiated.
With the improvement in communications technology in the late 20th century, the need for a
physical location became less important, as traders could transact from remote locations.
Participants in the stock market range from small individual stock investors to large hedge fund
traders, who can be based anywhere. Their orders usually end up with a professional at a stock
exchange, who executes the order. Some exchanges are physical locations where transactions are
carried out on a trading floor, by a method known as open outcry. This type of auction is used in
stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers
simultaneously. The other type of stock exchange is a virtual kind, composed of a network of
computers where trades are made electronically via traders. The shares of a company may in
general be transferred from shareholders to other parties by sale or other mechanisms, unless
prohibited. Most jurisdictions have established laws and regulations governing such transfers,
particularly if the issuer is a publicly-traded entity.

History
The two main stock markets of India are:-

National Stock Exchange(NSE)

Bombay stock exchange(BSE)

BSE:- At the end of the American civil war, the brokers who thrived out of this war in 1874,
found a place in a street, where they would easily assemble and transact business. This street is
nowadays, popularly known as DALAL STREET. In 1887, they formally established in
Bombay, and were known as Native Shares and Stock Brokers Association. In 1895, it
acquired a premise in the same street and finally was inaugurated in 1899 with the name Bombay
Stock Exchange (BSE).
India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin to
as far as 125 years when it started as a voluntary non-profit making association. You hear about
it any time it reaches a new high or a new low, and
you also hear about it daily in statements like 'The
BSE Sensitive Index rose 5% today'. Obviously,
stocks and stock markets are important. Stocks of
public limited companies are bought and sold at a
stock exchange. But what really are stock
exchanges? Known also as News on the stock
market appears in different media every day. he
stock market or bourse, a stock exchange is an
organized marketplace for securities (like stocks,
bonds, options) featured by the centralization of
supply and demand for the transaction of orders by
member brokers, for institutional and individual investors. The exchange makes buying and
selling easy. The need for stock exchanges developed out of early trading activities in
agricultural and other commodities. During the middle Ages, traders found it easier to use credit
that required supporting documentation of drafts, notes and bills of exchange. (Figure-1)
India's other major stock exchange National Stock Exchange (NSE), promoted by leading
financial institutions, was established in April 1993. Over the years, several stock exchanges
have been established in the major cities of India. There are now 23 recognised stock exchanges
Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai, Ahmedabad, Bangalore,
Bhubhaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur, Kochi, Kanpur, Ludhiana,
Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and Meerut.

NSE:-
With the liberalization of Indian economy it was found necessary to lift the Indian
stock markets on par with the international standards. The NSE was incorporated in 1992 by
industrial development bank of India, industrial credit and Investment Corporation of India,
industrial finance corporation of India, all insurance corporations, selected commercial banks
and others.
NSE is Indias leading stock exchange covering more than 160 cities and towns across the
country. It provides the modern fully
computerized trading system designed to offer
investors across the country a safe and easy way
to invest to liquidate investment and
securities.Investors in many areas of country did
not have the same access and opportunity to
trade so there arise the need for setting up the
national stock exchange. The NSE network has
been designed to provide equal access to
investors from anywhere in India and to be
responsive to their needs.
(Figure-2)
On its recognition as a stock exchange under the Securities Contract Act, 1956 in April 1993,
NSE started operations in the Wholesale Debt Market (WDM) segment in June 1994. Capital
market (equities) segment commenced operations in November 1994, and operations in
derivative segment started in June 2000.NSE started trading in the capital market segment on
November3, 1994 and within one year became the largest exchange in India, in terms of volumes
transacted. During the year 2005-06 NSE reported, a turnover of Rs 1,569,556 crores in the
equity segment. In 12th century France the courratiers de change were concerned with managing
and regulating the debts of agricultural communities on behalf of the banks. Because these men
also traded with debts, they could be called the first brokers. A common misbelief is that in late
13th century Bruges commodity traders gathered inside the house of a man called Van der
Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until
then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp
where those gatherings occurred; the Van der Beurze had Antwerp, as most of the merchants of
that period, as their primary place for trading. The idea quickly spread around Flanders and
neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam. In the middle of the
13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian
government outlawed spreading rumors intended to lower the price of government funds.
Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during
the 14th century. This was only possible because these were independent city states not ruled by
a duke but a council of influential citizens. The Dutch later started joint stock companies, which
let shareholders invest in business ventures and get a share of their profits - or losses. In 1602,
the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was
the first company to issue stocks and bonds.

Online trading
Online trading is simply buying and selling assets through a brokerage's internet-based
proprietary trading platforms. The use of online trading increased dramatically in the
mid- to late-'90s with the introduction of affordable high-speed computers and internet
connections.

Stocks, bonds, mutual funds, ETFs, options, futures, and currencies can all be traded
online.

Also known as e-trading or self-directed investing.

Traditionally, investors and traders have to call their brokerage firms to make a trade for
them. If John wanted to purchase 50 shares of Intel, he would call his broker with a buy
order request. The broker would let John know the market price and confirm the
purchase order. If the investor is making a limit order, the broker has to confirm the limit
price, how long to keep the order open for, what account to purchase the shares in (if
John has multiple investment accounts), etc. The investment representative must also
confirm the commission costs for making the trade. When all has been established, the
broker would place the trade in the system which is linked to trading floors and exchanges,
such as the New York Stock Exchange (NYSE) or the NASDAQ. The client would receive
a trade confirmation by mail and a monthly or quarterly statement of account showing a
list of his investments. If John wanted to transfer some cash from his trading account to
his checking account, and vice versa, he would also have to call in to make that
transaction request.

Today, with the advent of the internet in the digital era, more and more investors are
using online trading platforms offered by their brokers for DIY (do-it-yourself) investing.
The online trading platforms serve as a hub with multiple tools for the investor or trader.
The investor can place buy and sell orders; place market, limit, stop, stop-loss, and
stop-limit orders; check the status of an order; view real-time stock quotes; read news
on companies; view the list of securities currently held through the dashboard; etc. An
investor can also access his or her investment statements, confirmation statements,
and investment tax forms using the online system. Most discount brokerages that are
affiliated with banks also provide added convenience for their digital clients by linking
their bank accounts to their investment accounts. This way, an investor can easily
initiate a transfer between accounts held under the same financial institution.

The advent of online trading has reduced costs for both investors and discount brokers.
To encourage people to do their investing themselves, brokers have lower commissions
for trades placed online than for trades placed over the phone with a representative. It is
not uncommon to pay somewhere between $4.95 to $9.99 for an online trade; same
trade which would cost about $29.99 if made over the phone. The lower fees have also
made the capital markets accessible to a wider range of people who may not have been
able to afford the higher commission fees of a personal advisor or over-the-phone trade.
As brokers transition into automated trading, they save costs on their ends from hiring
fewer human representatives.

Another benefit of online trading is the improvement in the speed of which transactions
can be executed and settled, because there is no need for paper-based documents to
be copied, filed and entered into an electronic format. When an investor enters an order
online, the order is placed in a database which checks for the best price by searching all
the market exchanges that trade the stock in the investor's preferred currency. The
exchange with the best price matches the buyer with a seller and sends the
confirmation to both the buyers broker and the sellers broker. All this is done within
seconds of placing a trade, compared to making a phone call which has to go through
several confirmation steps before the rep can enter the order.

It is up to an investor or trader to do his due diligence on a broker before opening an

online trading account with the company. Before an account is opened, the client will be
asked to fill out a questionnaire about his or her investment and financial history to
determine what type of trading account is suitable for the client. If the investor has little
knowledge about the different types of securities and trading strategies in the financial
world, a simple cash account will be opened for him for doing simple buy and sell orders
on stocks, mutual funds, bonds, and ETFs. On the other hand, a sophisticated trader
who would like to implement various trading techniques will be given a margin account in
which he can buy, short, and write securities such as stocks, options, futures, and
currencies.

Not all securities are available to be traded online, depending on your broker. Some
brokers require that you call them to place a trade on any stocks trading on the pink
sheets and select stocks trading over-the-counter. Also, not all brokers facilitate
derivatives trading in commodities and currencies through their online platforms. For
this reason, it is important that the trader understands what a broker offers before
signing up with the trading platform.
1.1 Introduction to Company
Sharekhan is one of the top retail brokerage houses in India with a strong online trading
platform. The company provides equity based products (research, equities, derivatives,
depository, margin funding, etc.). It has one of the largest networks in the country with 704 share
shops in 280 cities and Indias premier online trading portal www.sharekhan.com. With their
research expertise, customer commitment and superior technology, they provide investors with
end-to-end solutions in investments. They provide trade execution services through multiple
channels - an Internet platform, telephone and retail outlets.
Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to
remain the largest shareholder. It is the retail broking arm of the Mumbai-based SSKI
[SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group.
SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of
more than 80 years in the stock markets, the SSKI group ventured into institutional broking and
corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional
broking and corporate finance activities.
Sharekhan offers its customers a wide range of equity related services including trade execution
on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice,
Commodities, etc.
Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is
having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking
Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. The Company's
online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000.
This site gives access to superior content and transaction facility to retail customers across the
country. Known for its jargon-free, investor friendly language and high quality research, the
content-rich and research oriented portal has stood out among its contemporaries because of its
steadfast dedication to offering customers best-of-breed technology and superior market
information.
Share khan has one of the best states of art web portal providing fundamental and statistical
information across equity, mutual funds and IPOs. One can surf across 5,500 companies for in-
depth information, details about more than 1,500 mutual fund schemes and IPO data.
One can also access other market related details such as board meetings, result announcements,
FII transactions, buying/selling by mutual funds and much more.
THE COMPANY

Name of the company: Sharekhan ltd.

Year of Establishment: 1925

Headquarter: Sharekhan SSKI

A-206 Phoenix House
Phoenix Mills Compound
Lower Parel Mumbai - Maharashtra, INDIA- 400013

Nature of Business: Service Provider

Services: Depository Services, Online Services and Technical Research.

Number of Employees: Over 3500

Website: www.sharekhan.com

Slogan: Your Guide to The Financial Jungle.

Vision
To be the best retail brokering Brand in the retail business of stock market.

Mission
To educate and empower the individual investor to make better investment
decisions through quality advice and superior service.

Sharekhan is infact-
Among the top 3 branded retail service providers
No. 1 player in online business
Largest network of branded broking outlets in the country serving more than
7, 00,000 clients.

Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan
to take advantage of the growing consumer demand for financial services products in India
through investments in research, pan-Indian branch network and an outstanding technology
platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique
position to understand and leverage the growth of the financial services sector.
SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with
strong research-driven focus. Their team members are widely respected for their commitment to
transactions and their specialized knowledge in their areas of strength.
AWARDS AND ACHIEVEMENTS
- SSKI has been voted as the Top Domestic Brokerage House in the research
category, twice by Euromoney Survey and four times by Asiamoney Survey.

- Sharekhan Limited won the CNBC AWARD for the year 2004.

The team has completed over US$5 billion worth of deals in the last 5 years - making it among
the most significant players raising equity in the Indian market. SSKI, a veteran equities
solutions company has over 8 decades of experience in the Indian stock markets.
If we experience their language, presentation style, content or for that matter the online trading
facility, we'll find a common thread; one that helps us make informed decisions and simplifies
investing in stocks. The common thread of empowerment is what Sharekhan's all about!
"Sharekhan has always believed in collaborating with like-minded Corporate into forming
strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan
Limited.
Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.
Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he
says that investing in stocks should not be confused with trading in stocks or a portfolio-based
strategy is better than betting on a single horse, it is something that is spoken with years of
focused learning and experience in the stock markets. And these beliefs are reflected in
everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial
services power house, with strong presence in Retail equities Institutional equities Investment
banking.
In delhi it is having the branches at netaji subash place and Nehru place. We have been given the
centre at netaji subash place.