1.

2- INDUSTRY PROFILE

FINANCIAL SERVICES

Meaning of financial services

In general, all types of activities, which are of a financial nature, could be brought under the
term 'financial services'. The term financial services in a broad sense mean "mobilizing and
allocating savings". Thus, it includes all activities involved in the transformation of savings
into investment. Financial services can also be called 'financial intermediation’. Financial
services are the economic services provided by the finance industry, which encompasses a
broad range of organizations that manage money, including credit unions, banks, credit card
companies, insurance companies, accountancy companies, consumer finance companies,
stock brokerages, investment funds and some government sponsored enterprises.

IMPORTANCE AND ROLE OF FINANCIAL SERVICES

Banking financial services

Banking is an essential part of every successful business. It is important to know what the
benefits and services are of your banking institution so you can make the most out of your
business income. There are two types of banking activities they are:

INVESTMENT BANKING

Investment banks provide services and advice to corporations, investors, and other
individuals or institutions. These services are generally based on the intermediation between
issuers of capital and providers of capital, and include financial products ranging from debt or
equity issuance to advice on mergers and acquisitions.

Corporate Finance: Assisting businesses with their funding needs, typically in support of
relationship managers who are responsible for integrated client interaction.
 Capital Markets: Advising business on a variety of ways to access financial markets,
usually coordinating between corporate finance, sales & trading, and research.
 Mergers and Acquisitions: Assisting buyers or sellers of businesses with deal execution,
advising on the strategy, timing, value, and terms associated with such transactions.
 Public Finance: Assisting municipalities and other public-sector entities with their
financing needs.
 Sales/Trading: On behalf of clients or using the bank's own capital, selling, buying and
structuring financial products.
 Research: Providing industry, company, or product analysis to investors, typically in
support of sales & trading and wealth management areas.
 Wealth Management: Assisting individual investors with a variety of personal finance
decisions and investment choices.

COMMERCIAL BANKING

Commercial banks are typically in the business of taking deposits and making loans using
their own capital. Such loans are offered to both businesses and individuals, and there are a
number of related activities in support of the commercial banking product

 Relationship Management: Interacting with corporate, small business or individual

clients to market the bank's products and make sure client needs are addressed.
 Structuring/Underwriting: Using the bank's resources to package loans or related
financial products for clients, making sure that capital risks are adequately mitigated.
 Syndication & Sales: Offloading all or parts of underwritten loans to other financial
institutions, in support of structuring/underwriting and relationship management.
 Risk Management: Assisting clients and working with bank's internal resources to help
manage interest rate, foreign exchange and other market price exposure.
 Cash Management: Assisting corporations with the flows and short-term investment of
cash balances.

 Retail Banking: Working with individuals and small businesses to address their banking
needs at the branch level.
 Credit Cards, Mortgages, Student Loans, etc.: Marketing, structuring, packaging,
underwriting, and management of consumer credit products.

Financial intermediaries

An entity that acts as the middleman between two parties in a financial transaction. While a
commercial bank is a typical financial intermediary, this category also includes other
financial institutions such as investment banks, insurance companies, broker-dealers, mutual
funds and pension funds. Financial intermediaries offer a number of benefits to the average
consumer including safety, liquidity and economies of scale.

Financial institutions (intermediaries) perform the vital role of bringing together those
economic agents with surplus funds who want to lend, with those with a shortage of funds
who want to borrow. In doing this they offer the major benefits of maturity and risk
transformation. It is possible for this to be done by direct contact between the ultimate
borrowers, but there are major cost disadvantages of direct finance. Indeed, one explanation
of the existence of specialist financial intermediaries is that they have a related (cost)
advantage in offering financial services, which not only enables them to make profit, but also
raises the overall efficiency of the economy.

Types of Financial Intermediaries

 Banks
 Building societies
 Credit unions
 Financial advisers or brokers
 Insurance companies
 Collective investment schemes
 Pension funds

Financial institution

An establishment that focuses on dealing with financial transactions, such as investments,

loans and deposits. Conventionally, financial institutions are composed of organizations such
as banks, trust companies, insurance companies and investment dealers. Almost everyone has
deal with a financial institution on a regular basis. Everything from depositing money to
taking out loans and exchange currencies must be done through financial institutions.

Broadly speaking, there are three major types of financial institutions:

1. Depositary Institutions : Deposit-taking institutions that accept and manage deposits

and make loans, including banks, building societies, credit unions, trust companies,
and mortgage loan companies
2. Contractual Institutions : Insurance companies and pension funds; and
3. Investment Institutions: Investment Banks, underwriters, brokerage firms.

Financial market

A financial market is a market in which people and entities

can trade financial securities, commodities, and other fungible items of value at
low transaction costs and at prices that reflect supply and demand. Securities include stocks
and bonds, and commodities include precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized
markets (where only one commodity is traded). Markets work by placing many interested
buyers and sellers, including households, firms, and government agencies, in one "place",
thus making it easier for them to find each other. An economy which relies primarily on
interactions between buyers and sellers to allocate resources is known as a market
economy in contrast either to a command economy or to a non-market economy such as a gift
economy.

Types of Financial Markets

Capital markets which consist of:

 Stock markets, which provide financing through the issuance of shares or common stock,
and enable the subsequent trading thereof.
 Bond markets, which provide financing through the issuance of bonds, and enable the
subsequent trading thereof.

 Commodity markets, which facilitate the trading of commodities.

 Money markets, which provide short term debt financing and investment.
 Derivatives markets, which provide instruments for the management of financial risk.
 Futures markets, which provide standardized forward contracts for trading products at
some future month; also forward market.
 Insurance markets, which facilitate the redistribution of various risks.
 Foreign exchange markets, which facilitate the trading of foreign exchange.

FINANCIAL MARKET

A financial market is a broad term describing any marketplace where buyers and sellers
participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial
markets are typically defined by having transparent pricing, basic regulations on trading,
costs and fees, and market forces determining the prices of securities that trade.
Financial markets can be found in nearly every nation in the world. Some are very small, with
only a few participants, while others - like the New York Stock Exchange (NYSE) and the
forex (foreign exchange) markets - trade trillions of dollars daily.
Investors have access to a large number of financial markets and exchanges representing a
vast array of financial products. Some of these markets have always been open to private
investors; others remained the exclusive domain of major international banks and financial
professionals until the very end of the twentieth century.

Role of financial market

One of the important requisites for the accelerated development of an economy is the
existence of a dynamic financial market. A financial market helps the economy in the
following manner.
 Saving mobilization: Obtaining funds from the savers or surplus units such as household
individuals, business firms, public sector units, central government, state governments
etc. is an important role played by financial markets.
 Investment: Financial markets play a crucial role in arranging to invest funds thus
collected in those units which are in need of the same.
 National Growth: An important role played by financial market is that, they contributed
to a nation’s growth by ensuring unfettered flow of surplus funds to deficit units. Flow of
funds for productive purposes is also made possible.
 Entrepreneurship growth: Financial market contributes to the development of the
entrepreneurial claw by making available the necessary financial resources.
 Industrial development: The different components of financial markets help an
accelerated growth of industrial and economic development of a country, thus
contributing to raising the standard of living and the society of well-being.

Indian financial market

The financial market in India at present is more advanced than many other sectors as it
became organized as early as the 19th century with the securities exchanges in Mumbai,
Ahmedabad and Kolkata. In the early 1960s, the number of securities exchanges in India
became eight - including Mumbai, Ahmedabad and Kolkata. Apart from these three
exchanges, there was the Madras, Kanpur, Delhi, Bangalore and Pune exchanges as well.
Today there are 23 regional securities exchanges in India. The Indian stock markets till
MONTH have remained stagnant due to the rigid economic controls. It was only in 1991,
after the liberalization process that the India securities market witnessed a flurry of IPOs
serially. The market saw many new companies spanning across different industry segments
and business began to flourish. The launch of the NSE (National Stock Exchange) and the
OTCEI (Over the Counter Exchange of India) in the mid-1990s helped in

regulating a smooth and transparent form of securities trading. The regulatory body for the
Indian capital markets was the SEBI (Securities and Exchange Board of India). The capital
markets in India experienced turbulence after which the SEBI came into prominence. The
market loopholes had to be bridged by taking drastic measures.
Indian financial market helps in promoting the savings of the economy –helping to adopt an
effective channel to transmit various financial policies. The Indian financial sector is well
developed, competitive, efficient and integrated to face all shocks. In the Indian financial
market, there are various types of financial products whose price are determined by the
numerous buyers and sellers in the market. The other determined factor of the price of the
financial products is the market forces of demand and supply. The various types of Indian
market help in the functioning of the wide Indian financial sector.

Classification of Financial Markets: Organized Markets

There are standardized rules and regulations to be followed and all transactions are under
strict supervision and control by various regulatory bodies such as SEBI, RBI, IRDA, etc.
This results in high degree of institutionalization and a huge spread with the types of
instruments.

Types of Organized Market: -

1. Capital Market
 2. Money Market

Capital market

It is a market for financial assets which have a long or indefinite maturity. It includes
securities with long term maturity (i.e. above one year). The types of Capital Market are:

A. Industrial Securities Market

It comprises of the most popular instruments i.e. Equity shares, Preference shares, bonds and
debentures. It is a market where industrial concerns raise their capital by issuing appropriate
instruments. It is further sub-divided into two: -

1. Primary Market (New issue market)

2. Secondary Market (Stock Exchange)

Primary market

A market that issues new securities on an exchange. Companies, governments and

other groups obtain financing through debt or equity-based securities. Primary markets are
facilitated by underwriting groups, which consist of investment banks that will set a
beginning price range for a given security and then oversee its sale directly to investors. Also
known as "new issue market" (NIM).

The primary markets are where investors can get first crack at a new security issuance. The
issuing company or group receives cash proceeds from the sale, which is then used to fund
operations or expand the business. Exchanges have varying levels of requirements which
must be met before a security can be sold.

Once the initial sale is complete, further trading is said to conduct on the secondary market,
which is where the bulk of exchange trading occurs each day. Primary markets can see
increased volatility over secondary markets because it is difficult to accurately gauge investor
demand for a new security until several days of trading have occurred.

Initial public offer

The first sale of stock by a private company to the public. IPOs are often issued by smaller,
younger companies seeking the capital to expand, but can also be done by large privately-
owned companies looking to become publicly traded. In an IPO, the issuer obtains the
assistance of an underwriting firm, which helps it determine what type of security to issue
(common or preferred), the best offering price and the time to bring it to market. Also
referred to as a "public offering."

IPOs can be a risky investment. For the individual investor, it is tough to predict what the
stock will do on its initial day of trading and in the near future because there is often little
historical data with which to analyse the company. Also, most IPOs are of companies going
through a transitory growth period, which are subject to additional uncertainty regarding their
future values.

Recent IPOs in India

Initial Public Offer (IPO), is the first sale of shares by the privately-owned company to the
public. The companies going public raises funds through IPO's for working capital, debt
repayment, acquisitions, and a host of other uses.

Investor can apply for IPO Stocks by filling an IPO Application Form. These forms are
usually available with stock brokers for free. Investor can also apply for IPO Stocks online
through Online Stock Brokers like ICICI bank, Share Khan, and Reliance Money.

Follow on public offer (fops)

An issuing of shares to investors by a public company that is already listed on an exchange.

An FPO is essentially a stock issue of supplementary shares made by a company that is
already publicly listed and has gone through the IPO process.

FPOs are popular methods for companies to raise additional equity capital in the capital
markets through a stock issue. Public companies can also take advantage of an FPO issuing
an offer for sale to investors, which are made through an offer document. FPOs should not be
confused with IPOs, as IPOs are the initial public offering of equity to the public while FPOs
are supplementary issues made after a company has been established on an exchange.

Secondary market
The secondary market, also called aftermarket, is the financial market in which previously
issued financial instruments such as stock, bonds, options, and futures are bought and sold.
The term "secondary market" is also used to refer to the market for any used goods or assets,
or an alternative use for an existing product or asset where the customer base is the second
market

Functions of secondary market

 Provides regular information about the value of security.

 Helps to observe prices of bonds and their interest rates.

 Offers to investors liquidity for their assets.

 Secondary markets bring together many interested parties.

 It keeps the cost of transactions low.

Stock exchange

A stock exchange is a form of exchange which provides services for stock

brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide
facilities for issue and redemption of securities and other financial instruments, and capital
events including the payment of income and dividends. Securities traded on a stock exchange
include stocks issued by companies, unit trusts, derivatives, pooled investment products
and bonds. Stock exchanges often function as "continuous auction" markets, with buyers and
sellers consummating transactions at a central location, such as the floor of the exchange.

National stock exchange

The National Stock Exchange of India Ltd. (NSE) is an exchange located in the financial
capital of Mumbai, India. National Stock Exchange (NSE) was established in the mid-1990s
as a demutualised electronic exchange. NSE provides terminals, through which investors in
every nook and corner of India can trade. NSE has played a critical role in reforming the
Indian securities market and in bringing unparalleled transparency, efficiency and market
integrity.

Bombay stock exchange

BSE’s popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock
market benchmark index. Established in 1875, BSE Ltd. (formerly known as Bombay Stock
Exchange Ltd.), is Asia’s first & fastest Stock Exchange with the speed of 200 micro second
and one of India’s leading exchange groups. Over the past 139 years, BSE has facilitated the
growth of the Indian corporate sector by providing it an efficient capital-raising platform.
Popularly known as BSE, the bourse was established as "The Native Share & Stock Brokers'
Association" in 1875. BSE is a corporatized and demutualised entity, with a broad
shareholder-base which includes two leading global exchanges, Deutsche Bourse and
Singapore Exchange as strategic partners. BSE provides an efficient and transparent market
for trading in equity, debt instruments, derivatives, mutual funds. It also has a platform for
trading in equities of small-and-medium enterprises (SME).

More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed
members. The companies listed on BSE Ltd command a total market capitalization of USD 1.24

Trillion as of March 2014. It is also one of the world’s leading exchanges (3rd largest in
March 2014) for Index options trading.

Mcx stock exchange

MCX Stock Exchange Limited (MCX-SXAT) is an Indian stock exchange. It commenced

operations in the Currency Derivatives (CD) segment on October 7, 2008 under the
regulatory framework of Securities and Exchange Board of India (SEBI) and Reserve Bank
of India (RBI). The Exchange is recognised by SEBI under Section 4 of Securities Contracts
(Regulation) Act, 1956. In line with global best practices and regulatory requirements,
clearing and settlement is conducted through a separate clearing corporation, MCX-SXAT
Clearing Corporation Ltd. (MCX-SXAT CCL). At the end of June 2012, MCX-SX had 750
members and saw participation from 707 towns and cities across India. The Exchange
received permissions to deal in Interest Rate Derivatives, Equity, Futures & Options on
Equity and Wholesale Debt Segment, vide SEBI’s letter month July 10, 2012.MCX-SX was
granted the status of a “recognized stock exchange” by the Ministry of corporates
Affaires (MCA), Government of India on December 21, 2012. It received “commencement
certificate” from market regulator SEBI for trading in new segments such as Equity, Futures
and Options on Equity, Interest Rate Derivatives and Wholesale Debt Market on December
19, 2012.
Government Securities Market

It is also called gilt Edged Securities market. It is a market where government securities (G-
secs) are traded. In India there are many kinds of G-secs are traded. G-secs are sold through
Public Debt Office of the RBI. They offer a good source of raising inexpensive finance for
the government exchequer and the interest on these securities affect pricing and yields in the
market.

Long Term Loans Market

Commercial banks and development banks play a significant role in this market by supplying
long term loans to corporate customers. It is classified into 3 categories:

(i) Term Loans Market

(ii) Mortgages

(iii) Financial Guarantees Market.

Significance of Capital Markets

 Mobilisation of Savings and Acceleration of Capital Formation: -

In developing countries like India, the importance of capital market is self-

evident. In this market, various types of securities help to mobilize savings from
various sectors of population. The twin features of reasonable return and liquidity in
stock exchange are definite incentives to the people to invest in securities. This
accelerates the capital formation in the country.

 Raising Long - Term Capital: -

The existence of a stock exchange enables companies to raise permanent

capital. The investors cannot commit their funds for a permanent period but
companies require funds permanently. The stock exchange resolves this dash of
interests by offering an opportunity to investors to buy or sell their securities, while
permanent capital with the company remains unaffected.
  Promotion of Industrial Growth: -
The stock exchange is a central market through which resources are
transferred to the industrial sector of the economy. The existence of such an
institution encourages people to invest in productive channels. Thus, it stimulates
industrial growth and economic development of the country by mobilizing funds for
investment in the corporate securities.

 Ready and Continuous Market: -

The stock exchange provides a central convenient place where buyers and
sellers can easily purchase and sell securities. Easy marketability makes investment in
securities more liquid as compared to other assets.

 Technical Assistance: -
An important shortage faced by entrepreneurs in developing countries is technical
assistance. By offering advisory services relating to preparation of feasibility reports,
identifying growth potential and training entrepreneurs in project management, the
financial intermediaries in capital market play an important role.

 Reliable Guide to Performance: -

The capital market serves as a reliable guide to the performance and financial
position of corporate, and thereby promotes efficiency.

 Proper Channelization of Funds: -

The prevailing market price of a security and relative yield are the guiding
factors for the people to channelize their funds in a particular company. This ensures
effective utilisation of funds in the public interest.

 Provision of Variety of Services: -

The financial institutions functioning in the capital market provide a variety of
services such as grant of long term and medium-term loans to entrepreneurs,
provision of underwriting facilities, assistance in promotion of companies,
participation in equity capital, giving expert advice etc.
  Development of Backward Areas: -
Capital Markets provide funds for projects in backward areas. This facilitates
economic development of backward areas. Long term funds are also provided for
development projects in backward and rural areas.

 Foreign Capital: -
Capital markets makes possible to generate foreign capital. Indian firms are
able to generate capital funds from overseas markets by way of bonds and other
securities. Government has liberalised Foreign Direct Investment (FDI) in the
country. This not only brings in foreign capital but also foreign technology which is
important for economic development of the country.

 Easy Liquidity: -
With the help of secondary market investors can sell off their holdings and
convert them into liquid cash. Commercial banks also allow investors to withdraw
their deposits, as and when they are in need of funds.

 Revival of Sick Units: -

The Commercial and Financial Institutions provide timely financial assistance
to viable sick units to overcome their industrial sickness. To help the weak units to
overcome their financial industrial sickness banks and FIs may write off a part of their
loan.

Money market

Definition:

According to the RBI, "The money market is the centre for dealing mainly of short
character, in monetary assets; it meets the short-term requirements of borrowers and provides
liquidity or cash to the lenders. It is a place where short term surplus investible funds at the
disposal of financial and other institutions and individuals are bid by borrowers, again
comprising institutions and individuals and also by the government."
These definitions help us to identify the basic characteristics of a money market. A money
market comprises of a well-organized banking system. Various financial instruments are used
for transactions in a money market. There is perfect mobility of funds in a money market.
The transactions in a money market are of short-term nature.

Functions of Money Market

Money market is an important part of the economy. It plays very significant functions. As
mentioned above it is basically a market for short term monetary transactions. Thus, it has to
provide facility for adjusting liquidity to the banks, business corporations, non-banking
financial institutions (NBFs) and other financial institutions along with investors.

The major functions of money market are given below: -

 To maintain monetary equilibrium. It means to keep a balance between the demand

for and supply of money for short term monetary transactions.
 To promote economic growth. Money market can do this by making funds available
to various units in the economy such as agriculture, small scale industries, etc.
 To provide help to Trade and Industry. Money market provides adequate finance to
trade and industry. Similarly, it also provides facility of discounting bills of exchange
for trade and industry.
 To help in implementing Monetary Policy. It provides a mechanism for an effective
implementation of the monetary policy.
 To help in Capital Formation. Money market makes available investment avenues for
short term period. It helps in generating savings and investments in the economy.

Money market provides non-inflationary sources of finance to government. It is possible by

issuing treasury bills in order to raise short loans. However, this does not lead to increases in
the prices. Apart from those, money market is an arrangement which a common MONTHs
banks and financial institutions dealing in short term monetary activities such as the demand
for and supply of money.

Money market instruments

 Government securities
A government security is a bond or other type of debt obligation that is issued by a
government with a promise of repayment upon the security's maturity MONTH. Government
securities are usually considered low-risk investments because they are backed by the taxing
power of a government. The primary reason that most government securities are issued is to
raise funds for government expenditures.

Types of government securities

 Treasury bills are short-term securities issued by the federal government. There
maturity periods range from days to 52 weeks. These securities are sold at a discount
rate and will be paid at face value, which is how the investors make their money.

 Treasury notes are government securities with maturity periods longer than treasury
bills. There maturity periods can be two, three, four, five, seven, and ten years. Interest
is paid every six months.

 Treasury bonds are long-term investments with a maturity period of 30 years. Interest
is paid every six months.

 Treasury inflation protected securities (TIPS) are securities that are protected from
inflation as the principal increases if there is inflation and decreases if there is deflation
as measured by the Consumer Price Index. They have maturities of five, ten, and 30
years. Interest is paid every six months.

 Municipal bonds are government securities issued by a state or local government that
are usually issued to support special projects like building schools and other public
buildings. There are two general types of municipal bonds. Public purpose bonds are
tax-exempt, while private purpose bonds are taxable unless specifically exempted from
taxation. The tax-exempt status means that the interest earned on the bonds are not
subject to taxation, which can be attractive to certain investors.

 Treasury bills are short-term money market instrument that mature in a year or less
than that. The purchase price is less than the face value. At maturity the government
pays the Treasury bill holder the full-face value. The Treasury Bills are marketable,
affordable and risk free. The security attached to the treasury bills comes at the cost of
very low returns.

Types of treasury bills

In India there are two types of treasury bills via:

1. Ordinary or regular

2. ’ad hoc’ or known as ‘ad hocs’

Ordinary treasury bills are issued to the public and other financial institutions for meeting the
short-term financial requirement of the government. These bills are freely marketable and
they can be bought and sold at any time and they have secondary market also

On the other hand, ad hoc are always issued in favour of RBI only. They are not sold through
tender or auction. they are purchased by the RBI on top and the RBI is authorized to issue
currency notes against them. they are marketable sell them back to the RBI.

 Certificates of deposits
A certificate of deposit is a promissory note issued by a bank. It is a time deposit that
restricts holders from withdrawing funds on demand. Although it is still possible to
withdraw the money, this action will often incur a penalty.

A CD bears a maturity MONTH, a specified fixed interest rate and can be issued in any
denomination. CDs are generally issued by commercial banks and are insured by the FDIC
(federal deposit insurance corporation). The term of a CD generally ranges from one month
to five years.

Corporate actions

Any event that brings material change to a company and affects its stakeholders. This
includes shareholders, both common and preferred, as well as bondholders. These events are
generally approved by the company's board of directors; shareholders are permitted to vote
on some events as well.

When a publicly-traded company issues a corporate action, it is initiating a process that will
bring actual change to its stock. By understanding these different types of processes and their
effects, an investor can have a clearer picture of what a corporate action indicates about a
company's financial affairs and how that action will influence the company's share price and
performance.
Corporate actions are typically agreed upon by a company's board of directors and authorized
by the shareholders. Some examples are stock splits, dividends, mergers and
acquisitions, rights issues and spin offs.

Stock Splits
As the name implies, a stock split (also referred to as a bonus share) divides each of the
outstanding shares of a company, thereby lowering the price per share - the market will adjust
the price on the day the action is implemented. A stock split, however, is a non-event,
meaning that it does not affect a company's equity, or its market capitalization. Only the
number of shares outstanding change, so a stock split does not directly change the value or
net assets of a company.

Dividends
There are two types of dividends a company can issue: cash and stock dividends. Typically,
only one or the other is issued at a specific period of time (either quarterly, bi-annually or
yearly) but both may occur simultaneously. When a dividend is declared and issued, the
equity of a company is affected because the distributable equity (retained earnings and/ or
paid-in capital) is reduced. A cash dividend is straightforward.

Rights issues

A company implementing a rights issue is offering additional and/or new shares but only to
already existing shareholders. The existing shareholders are given the right to purchase or
receive these shares before they are offered to the public. A right issue regularly takes place
in the form of a stock split, and can indicate that existing shareholders are being offered a
chance to take advantage of a promising new development.

Mergers and Acquisitions

A merger occurs when two or more companies combine into one while all parties involved
mutually agree to the terms of the merge. The merge usually occurs when one company
surrenders its stock to the other. If a company undergoes a merger, it may indicate to
shareholders that the company has confidence in its ability to take on more responsibilities.
On the other hand, a merger could also indicate a shrinking industry in which smaller
companies are being combined with larger corporations.

Spin Offs
A spin off occurs when an existing publicly-traded company sells a part of its assets or
distributes new shares in order to create a newly independent company. Often the new shares
will be offered through a rights issue to existing shareholders before they are offered to new
investors. Depending on the situation, a spin-off could be indicative of a company ready to
take on a new challenge or one that is restructuring or refocusing the activities of the main
business.

Broking firms

A brokerage firm, or simply brokerage, is a financial institution that facilitates the buying and
selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele
of investors who trade public stocks and other securities, usually through the firm's
agent stockbrokers. A traditional, or "full service," brokerage firm usually undertakes more
than simply carrying out a stock or bond trade. The staffs of this type of brokerage firm is
entrusted with the responsibility of researching the markets to provide appropriate
recommendations and in so doing they direct the actions of pension fund managers
and portfolio managers alike. These firms also offer margin loans for certain approved clients
to purchase investments on credit, subject to agreed terms and conditions. Traditional
brokerage firms have also become a source of up-to-MONTH stock prices and quotes.

A discount broker or an online broker is a firm that charges a relatively small commission by
having its clients perform trades via automated, computerized trading systems rather than by
having an actual stockbroker assist with the trade. Most traditional brokerage firms offer
discount options and compete heavily for client volume due to a shift towards this method of
trading.

Growth of broking firms

The Growth of Stock Broking Companies Lures More Retail Investors. The booming stock
markets and growing retail investors in equity and share trading business help Indian stock
broking companies to expand their network into more cities and towns to lure investors into
their folds. Experts say the broking business will continue to grow in future because of the
changing economy and the high-quality performance by the Indian corporate sector. With the
entrance of a number of corporate sectors, no doubt the industry has achieved size and scale.
Many retail investors are also entering new fields of activity such as commodity broking,
mutual fund products and insurance schemes. It has been witnessed in last 6 to 7 years that
the expansion of stock broking companies hit the IPO market to raise funds and guard
the fall of stock broking industry. Many public sector banks are also entering into this
business. While IDBI capital markets, the broking arm of IDBI, is diversifying into retail
broking business, many current players including Kotak Securities, Anagram and ICICI
Direct corner, MotilalOswal, and Karvy have acquired one fourth of the total equity market
turnover. India has two big stock exchanges named Bombay Stock Exchange (BSE) and
National Stock Exchange (NSE) and few small exchanges where shares and equities are
traded. An investor can trade stocks in any of the stock exchanges in India, but all the stock
brokers’ trade online only in BSE and NSE. They are registered member of the stock
exchange and can register a client to one or more stock exchanges. They take commissions
(brokerages) for their service that vary from broker to broker. An investor has to take the help
of a stock broker to trade stocks because they only can directly buy and sell shares in Stock
Market.
 1.3- COMPANY PROFILE

HEDGE EQUITIES
Hedge Equities is one of the leading Financial Services Company in India. It is
a Kochi based stock broking company. It offers equity, futures, options, depository services,
commodity broking and mutual funds distribution to its customers. Hedge Equities also
provides research services in the field of economic research, result expectations, IPO, mutual
fund, derivative and other special reports. It is a Public Company incorporated on 17
December 2007. It is classified as Indian Non-Government Company and is registered at
Registrar of Companies, Mumbai. Its authorized share capital is Rs. 150,000,000 and its paid-
up capital is Rs. 137,804,992. It is involved in another financial intermediation. This group
includes financial intermediation other than that conducted by monetary institutions.

The company is a member in the cash and derivative market segments of NSE and only of
cash segment in BSE. It is also registered as a DP with CDSL. Hedge Equities provides
commodity broking through its associate company, Hedge Commodities Ltd which is a
member of MCX. The company has an extensive and growing network of 180 offices.

The company was launched by the renowned Actor Mohanlal during August 2008, in
association with Fedex Securities, Kozhikode-based Baby Marine Exports, Smart Financial,
Thakker Group and SM Hedge of Videocon. He is the brand ambassador and one of the
directors of the company. It had a net worth of Rs. 8 crores at the beginning, which shortly
reached Rs. 10 crores. The company had 16 branches in the first phase and planned to
establish 45 new branches all over South India by the end of that year. Now, the company is
having a Global Outlook blended with a Local Flavour and backed with a growing network
of over 120 service outlets, 450 qualified employees, and over 200 support associates. It is
the trust and goodwill of over 20,000 satisfied customers. The main focus of the firm is South
India. The company targeted about 500-700 clients and a business of Rs 300 crore of assets
under management from Kerala in the first year of operations. It is specialized in offering a
wide range of financial products, tailor made to suit individual needs. As a first step to make
their presence Global, Hedge Equities have initiated operations in Middle East to cater to the
vast Non-Resident Indian (NRI) population in that region. Ever since their inception, they
have spanned their presence all over India through their Meticulous Research, High Brand
Awareness, and Intellectual Management and Extensive Industry knowledge. People at
Hedge believe in creating a new breed of Investors who take judicious decisions through
them.

Hedge Equities is a coming together of over 25 years of cutting-edge experience of its

founders in various industries backed with a strong expertise in global financial markets. The
Board comprises of veterans from six power houses in their respective fields: Fedex
Securities (a leading merchant banker), Baby Marine Exports, Thakker Developers, Smart
Financial, S.M. Hegde (CFO, Videocon Industries), and Padmashree Mohan Lal. It
endeavours to become a well reputed financial services super-mart catering to the evolving
needs and unique requirements of our clientele, and partnering with them to Build, Manage,
and grow their Wealth.

Hedge believes in the philosophy of educating and empowering potential

investors. Studies have revealed that only 3% of the population in Kerala is aware of the
investment opportunities in the stock market and invests in stocks as compared to 40% in
Mumbai and Gujarat. The company's emphasis will be to utilize the potential of this largely
untapped segment. They are basically targeting the small investors and are confident that they
will be able to guide those investors in the best possible manner. They want to be a revelation
to them since the business here in Kerala is still in its infancy. They say that it is the age of
the smart investor. It’s time the company stops working for money and make money work for
us. The company aims in giving financial freedom to customers.

VISION
'Evolving into a financial supermarket which will be a one stop shop for all financial
solutions.'

Ever since its inception, Hedge Equities has been a household name among
the masses owing their success to timely Professional financial assistance to their clients.
This aptly articulates their vision.

MISSION

“To create an ethical and sustainable financial services platform for the
customers and partner them to build business, to provide employees with meaningful work,
self-development and progression, and to achieve a consistent and competitive growth in
profit and earnings for the shareholders and staff.”

PROMISE OF HEDGE

 To our Customers: We exist to serve and meet your needs. Our focus is to create an
ethical and sustainable financial services platform that places your unique needs over
and above everything else.

 To our Employees: We will provide our employees with a meaningful and rewarding
career with emphasis on self-development and career progression.

 To our Shareholders: We will spare no efforts to achieve a consistent and competitive

growth in earnings and profitability.

ADVANTAGES OF HEDGE

 At Hedge Equities, the needs of our Customers stand before everything else.

 SEBI Registered Portfolio Manager with a dedicated Wealth Management Services

desk that aims to provide objective guidance tailored to meet each customer’s
individual needs.

 Strong Research Team backed with best of breed data mining and analysis.

 Industry leading technology solutions that make portfolio administration simpler and
cost effective.
  A Global Outlook blended with a Local Flavour and backed with a growing network
of over 120 service outlets, 450 qualified employees, and over 200 support associates.

 The Trust and Goodwill of over 20,000 satisfied customers.

 Member of BSE, NSE, MCX, MCXSX, NMCE, NCDEX and Depository Participant
in CDSL

 Rated as the top brand by the investor community of Asianet channel

 Growing overseas presence with operations in Middle East and an expanding

presence in the European region and North America.

PROMOTERS

 Fedex Securities (a leading merchant banker)

Fedex Securities Ltd. (Fedex), a Category I Merchant Banker, is managed by a team

of professionals drawn from the Banking Industry. Fedex is a closely held Company.
The Management of the Company is vested with a team of Ex Bankers with vast exposure
and experience in Financial Services with emphasis on Merchant Banking, Investment and
Treasury Management and Corporate financing. FedEx is into arranging of project finance,
working capital, private placement of Debt, Equity and Foreign Currency Loans. FedEx is
also into structuring and arranging of foreign and domestic collaborations/ Jt. Ventures and
financial packages.

 Baby Marine Exports

Baby marine group, A name globally known in the seafood industry for its quality
and consistency. The group is the first ever producer of organic shrimp in India, and the
world's first producer of organic fresh water shrimp (scampi). It has a network that sources
the finest sea produce from the Indian ocean and aquaculture farms. Baby Marine
Group is sprinkled in the South Eastern and Western coasts of India, in the picturesque
locations of the states of Kerala, Karnataka and Goa with its Head Office at Cochin, the
commercial capital of God’s own country. These Seafood Processing establishments are the
creation of Mr. K.C. Ninan, the founder of Baby Marine Group since its inception in 1977.
Since then the Group has grown from strength to strength and made its mark in the Seafood
business worldwide.

 Thakker Developers

Starting of as a land developer and builder in 1962, Thacker groups diversified into a
commercial production of agricultural and horticultural products, housing real estate
marketing plantation etc. They have provided shelter to more than 40000 families by offering
residential plots and premises. Thacker developers is the flagship company of the group. It
was established as private limited in 1987 and later went to become the only public limited
company in North Maharashtra engaged in housing, commercial, construction and land
development. The company is also a class 1 contractor registered with the Public Work
Department, Govt of Maharashtra.

 Smart Financial

Smart financial entered the financial market only in 1992 but over this brief span has
covered a niche for itself by becoming the leading financial provider. The company offer
guidance to investors as equities, commodities, mutual fund’s portfolio management services
and insurance. It offers complete range of financial solutions that encompasses every sphere
of life.

 S.M. Hedge (CFO, Videocon Industries)

Mr. S.M. Hedge, a chartered accountant by profession is the Chief Finance Officer of
the Indian Multinational Videocon International and has been at helm of affairs for the last 20
year.

 Padmashree Mohan Lal

Mohanlal Viswanathan Nair (born 21 May 1960), better known as Mohanlal, is an

Indian actor, producer and occasional singer best known for his work in Malayalam films.
Film critics, contemporaries, and other experts consider him as one of the greatest actors
in Indian cinema for his versatile and natural acting. Widely regarded as a cultural icon, he
also holds a matinee idol status in the popular culture of Kerala.

MANAGEMENT

Alex K Babu - Managing Director

 Alex Babu is the Founder & Managing Director of Hedge Equities. He has
over 9 years of experience in equity research and fund management with considerable
experience across all market capitalizations. He is a specialist in mid-cap and infra stock
selection. Ever since joining the Hedge Family, he has been designing, developing and
implementing the strategic plan for the company in the most cost effective and time efficient
manner. He was also instrumental in establishing and assembling a strong research team with
equal emphasis on macroeconomic, industrial, and company level research.

Bhuvanendran- CEO

‘Professionalism augmented by profound vision’ is a perfect phrase to

describe Bhuvanendran. His rich experience spanning 20 years with the leading names in the
Indian financial services industry, is often camouflaged by his youthful appearance, till Mr.
Bhuvanendran opens up his favourite subject-Money matters. Bhuvanendran is a talented and
introspective writer whose creativity has been capitalized by various financial journals. He is
also in the limelight for a market related show which aims at quenching the financial queries
of professionals and investors in a leading Malayalam television channel

Bobby J Arakunnel – COO

Mr. Bobby has been responsible for the entire operations of Hedge Equities
ever since its inception. He has proved his versatility by showcasing excellent Man-
Management and Marketing Activities and is well versed in all aspects of Indian Financial
Markets. In the last 12 years, he has worked with all the major players in the financial service
sector of the country which has added oodles to his workmanship

Mr. Raj Krishnan - Director

In his 15+ year career in Finance & Operations, Raj Krishnan has served in
varied roles such as CEO, COO, Investor, and Entrepreneur. At Hedge Equities, he works
with a team

That employs both top-down macroeconomic and industrial research, as well as a bottom-up
equity valuation process to identify and analyse great businesses selling well below their
intrinsic values.

Mr. Mohanlal – Director

 This Honorary Lieutenant Colonel's brand image and brimming popularity has
helped Hedge Equities to create awareness amongst small investors in retail segment to invest
in stocks. Versatility and a natural flair for donning complex characters have won him
numerous accolades not to speak of some unforgettable films contributed by him. A
Multifaceted personality, whose inspiring attitude, has helped him to take up Business world
with a storm.

Mr. Krishnadas – Director

Managed by a team of ex-bankers, FedEx is a SEBI registered category 1

merchant banker. Mr. Krishnadas with his 20 Years’ experience in commercial and
investment banking is concentrating on non-fund-based activities like structuring, tie up of
project financing, financial restructuring, investment banking, corporate and advisory
services through Fedex Securities. With offices at Nariman Point and Vile Parle East,
Mumbai, state of the art infrastructure and qualified manpower to conduct the business,
Fedex Securities envisages a phenomenal growth in this sector for its clients.

Mr. Pradeep Kumar C – Director

A leading Textile exporter of Kerala whose 20 years of experience in this field

has made him a veteran we all look up to. His vision, augmented by his hard work and
commitment has helped him to be a strong player in the field of Exporting. Starting from a
root level, he has travelled the hard way to reach this phenomenal position in Garment
Industry which has supplemented him to expand his domain to foreign locations as well.

BUSINESS VERTICLES

 Hedge finance

Hedge finance has chalked out extensive, long term plans for the comprehensive growth of
the company. With parent company’s wide client base and advanced infrastructure, Hedge
Finance is heading towards achieving a loan book position of Rs 100 Crore within the first
three months of operations.

Hedge equities a leading player in the financial markets is all set to leave its mark in the
NBFC sector with the launch of Hedge Finance. The Indian Non-Banking Finance
Companies (NBFCs) constitutes a reasonable big chunk of the country’s overall financial
system. It is estimated that the NBFCs as a whole account for 9.1% or Rs. 4 trillion of assets
of the entire financial system in India. NBFC industry today is a more mature, developed and
promising since the days of inception and is destined to shape the future of India. It is in such
a time that Hedge Finance has burst into the scene and creating waves in the sector. Backed
by Hedge Equities, which is a coming together of over 25 years of unparalleled experience of
business leaders in various industries, Hedge Finance is all set to be one of the tops Non-
Banking Finance Company in the country.

 Hedge school of applied economics

Hedge School of Applied Economics (HSAE) is the first ever educational venture dedicated
to creating a class of high-end investment professionals across India. Our faculties’ role does
not end with the program; we continue to mentor interested candidates so that they stay
abreast and develop an ongoing understanding on the evolving dynamics in the financial
markets. The programs are designed for students, financial professionals and investors who
would be the advocates of smart investments. Scholarship opportunities are available to
qualified candidates, which are subjected to interviews and assessments of the course
coordinators.

 Hedge OHARI- the magazine

Hedge Ohari is a monthly finance magazine that provides its readers comprehensive
knowledge and insight about the various aspects of financial planning and the entire spectrum
of investment and wealth creation methods, viz. stock market, mutual fund, real estate, gold,
bonds, banking and so on. The magazine’s content includes articles, features and interviews
about the diverse areas related to finance and business. Sections such as industry, business
management, agriculture, education, automobile, brand equity, success mantras, insurance,
lifestyle, gadgets, and cinema enrich the magazine’s contents from cover to cover. They are
mainly focusing on the read for those readers of Malayalam who are on the lookout of rich
advice to gain insights into the methods of systematic financial planning and investment and
follow a planned way of investing to realize their objectives. Moreover, every issue of the
magazine presents the best reading experience to readers who like to follow the latest trends
in finance and business they have the readership of over two lakh Malayalees in Kerala and
other parts of the country. Its readership includes eminent people from all walks of life,
including policy makers, corporate honchos, political leaders, film stars, professionals,
bureaucrats, investors, youngsters, students etc. they have the circulation 40000 copies per
month

ORGANIZATIONAL STRUCTURE
UNDER THE GM

REGIONAL ORGANIZATIONAL STRUCTURE

CORPORATE SOCIAL RESPONSIBILITY

Being a responsible corporate citizen, Hedge equities has initiated a non-profit movement,
“Hedge Yuva”, which focuses on educating the masses about Stock Market. The movement
has also formulated various scholarship programs for young and dynamic youth.

SERVICES OFFERED

 Online trading

Hedge equities have a large network of branches with online terminals of NSE and BSE
in the capital market and Derivative segments. The clients are assured of prompt order
execution through dedicated phones and expert dealers at us

 Internet Trading

Hedge equities offers internet trading through their site. One can trade through the
internet from the comforts of your office or home, anywhere in the world. The dedicated IT
systems ensure service up time and speed, making internet broking through Hedge equities
hassle-free. Using the easiest facility provided by NSDL, our clients can transfer the shares
sold by them online without delivery instruction slips. Additionally, digitally signed contract
notes can be sent to clients through E-mail.

 Depository Services

Hedge offers trading in the futures and options segment of the National Stock Exchange
(NSE). Through the present derivative trading an investor can take a short-term view on the
market for up to a three months’ perspective by paying a small margin on the futures segment
and a small premium in the options segment. In the case of options, if the trade goes in the
opposite direction the maximum loss will be limited to the premium paid.

 Knowledge Centre

Knowledge centre activities are intended to provide systematic and structured services mainly
to new investors and also to young aspirant aiming for a career in financial markets. The
centre has three functional areas: the publication division, the training centre, and wealth
management advisory service which provides complete investment solutions to investments
through knowledge based personalized services.

 Equity Research
 Hedge equities constantly strive to deliver insightful research to enable pro-active
investment decisions. The research department is broadly divided into two divisions-
Fundamental Analysis Group (FAG) and Technical Analysis Group (TAG). Our fundamental
analysts are continuously scanning the entire economy for discovering what they call the
hidden gems in stock market terminology and present it to our clients for profitable
investments. A good fundamental analysis

Team has the capability to identify emerging businesses before such businesses become the
talk of the street and we are proud to say we have one such fundamental analysis team.
Timing the market has always been the most difficult task for all analysts and our Technical
Analysis Group has merged to predict the market movements well in advance using complex
analytical methods including Elliot Wave Theory. We are equipped with cutting-edge
technologies for technical

Charting which assist our technical analysts to predict both upside and downside movements
efficiently for the benefit of our clients.

 Portfolio Management Services (PMS)

Hedge equity is a SEBI-approved portfolio manager offering discretionary and non-

discretionary schemes to its clients. Hedge equities’ portfolio management team keeps track
of the markets on a daily basis and is exposed to a lot of information and analytic tools which
an investor would not normally have access to. Other technicalities pertaining to shares like
dividends, rights, bonus, buy-back, Mergers and Acquisitions and are also taken care of by
us. Maximize your returns by opting for our PMS scheme.

 Commodity Trading

One can trade in futures like gold, silver, crude oil, rubber etc and take advantage of the
extended trading hours (10 am to 11 pm) in commodities trading.

 Mutual Funds, Bonds etc

Hedge equities also offer Mutual funds and bonds. One can select from a wide range of
Mutual funds and bonds available in the market today.
  Currency Trading

Currency derivatives can be described as contracts between the sellers and buyers, whose
values are to be derived from the underlying assets, the currency amounts. These are basically
risk management tools in force and money markets used for hedging risks and act as
insurance against unforeseen and unpredictable currency and interest rate movements.

Any individual or corporate expecting to receive or pay certain amounts in foreign currencies
at future MONTH can use these products to opt for a fixed rate- at which the currencies can
exchanged now itself. Currency derivatives serve the purpose of financial risk management
encompassing various market risks. An upfront premium is payable for buying a derivative.

Currency futures will bring in more transparency and efficiency in price discovery, eliminate
counterparty credit risk, provide access to all types of market participants, offer standardized
products and provide transparent trading platform.

 Hedge school of applied economics

Hedge Equities initiates Hedge School of Applied Economics with the sole objective of
moulding highly qualified investment professionals in the state. It is in fact a company itself
floated by Hedge Equities with the parent holding cent percent stake. It is a knowledge
initiative of hedge Equities. The initiative has now developed into a movement imparting
financial freedom at individual and organizational level and thus building a financially strong
India.

Through the various activities of Hedge School, they facilitate the students, youths and new
investors who wish to explore career as well as investment opportunities in the sector. It
offers a set of structured courses which enables the incumbents to build a better career in the
financial industry and take informed investment decisions.

AREA OF OPERATION:

Hedge Equities has 130 branches in India and one branch in Dubai, UAE.

 106 branches in Kerala

 06 branches in Karnataka
  07 branches in Maharashtra

 01 branch in Tamilnadu.

Hedge Equities registered office is at Mumbai and Corporate office is in Kaloor, Kochi and
their regional offices are in Bangalore and Hyderabad. There are 117 employees in their Head
office, 8-10 employees in their Regional office and 4-5 employees in each branch.

MAIN COMPETITORS:

 Geojit BNP Parbas

 JRG Securities

 Religare

 Muthoot Securities

 Share wealth

 MotilalOswal

 Anandrathi

 Angel Brocking

DEPARTMENTAL PROFILE

I. Client Relation Department: -

The client relation department assists the client or customer top open an account in HEDGE
EQUITIES (p) Ltd securities. This department is also known as the front office. A client has
to open two types of accounts to trade and own securities in the NSE & BSE.

II. Finance Department: -

Thus, a department, to organize financial activities may be created under the direct control of
the board of directors. Finance manager will decide the major financial policy methods.
Lower levels can delegate the other routine activities.

III. Marketing Department: -

The major functions of marketing department are:

 Business associate development: The Company takes up the marketing activities of

the various branches. It ensures an efficient marketing arena at its various branches.
The company encourages better relations in its branches and promotes for the
development of various marketing strategies.

 Brand promotion: An important function of marketing department is to promote the

name of the company.

 Investment promotion: The main clients of the company were its investors. Hence the
marketing department tries to capture as many investors as possible to encourage
them to invest.

 Delivery promotion: Intraday trading is not always profitable and might involve a lot
of risk hence the company promotes for delivery were the shares are kept to be sold
for a later MONTH analysing the profitability factors.

IV. Systems Department: -

The systems department is playing a vital role in the day operations of the company. It is
through the systems department that the clients can avail the facilities of Internet trading.
Optic fibre cables and high bandwidth connections from the Hedge Equities (P) Ltd office to
the ISP, a dedicated server and back-up ISDN connections were maintained directly by the
systems department. For the purpose of trading they have made use of two software namely
ODIN (Open Dealers Integrated Network).

V. Human Resources Department: -

Human resource is often considered as the back bone of an organization even in this age of
advanced automation and mechanization. Since virtual organizations are not very much
popular in our part of the world, it is very important to any organization to have a HR
department. The presence of an excellent HR department increases the efficiency of an
organization considerably. Human resource management is defined as asset of practices,
policies and programmes designed to maximize both personal and organizational goals.

 a). Training and induction: The selected employees will undergo three days
continuous induction. During this period, he will undergo training with all the
department of Hedge Equities (P) Ltd Securities (India) Pt. Ltd. There will also be
classroom induction also within 3 months.

 b). Wages and Salary Administration: The wages and salaries of the employees were
fixed and granted by the HR department with consent of the finance department.

 c). Performance Appraisal: It was human resources department which gives the
promotion to all employees, making transfers and taking disciplinary actions if
needed.

 d). Grievance Handling: The grievance of employees was received only through
proper channels i.e., through the particular department heads. The HR department
will make solutions to the complaints as per the rules and regulations of the
company.

VI. Trading Department: -

The department deals with the trading related activities of the company. The trading refers to
the buying and selling of shares. This department is the most important part of the
organization. There are two types of trading. They are:

 Online Trading: -
 These are the trading terminal of the organization. Each computer of the department is termed
as the trading terminal. Each terminal is assigned with NCFM certified dealers, who is in
charge of each portal will do the trade according to the client request. The terminal is
managed by either NEAT (National Exchange for Automated Trading) software or ODIN
(Open Dealers Integrated Network) software. The client can also place his through written
request or through the telephone, in this the order will be place d by the dealer.

 Internet Trading: -

It is a facility provides by the company in order to trade the securities from his convenient
place like his office, home etc. the order will be placed by the client itself, and he can make
changes before the trade is done for changing the price, cancellation of the order.

VII. Delivery and Depository Department: -

Delivery refers to the share that bought on particular day are not sold on that day itself and
holding of the share for an appreciation in the value of the security and to trade it on a future
MONTH. Deliver Instruction Slip: it is a slip the client should fill and gave to the dealer
regarding the purchase of the share.

VIII. Equity Research Department: -

The function of the department is to study the details regarding the share or securities and to
make prediction regarding the future performance of the company. The following types of
approaches done through this department:

i) Fundamental analysis ii) Technical analysis.