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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Project Report On Gauging the potential of Financial Services in Emerging Economies
Prepared By Bhavik Shah Roll No. 24 Steven Business school 2010-12 Submitted to: Under Guidance of:
Company Guide:
Dr. Himani Joshi
Mr. Pulkit Bakliwal
(Assistant Dean of Steven Business School)
(Business Associate of Motilal Oswal)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 DECLARATION BY STUDENT I take this opportunity to express my sense of profound gratitude to all the people who have been instrumental in making my training a great learning and rich experience.
I, Bhavik Shah, student of Post Graduate Program of Stevens Business School, Gandhinagar here by declare that the project work entitled ―Gauging the potential of Financial Services in Emerging Economies” with respect to MOTILAL OSWAL Securities Limited is an original and individual work submitted by me to Stevens Business School, Ahmedabad under the esteemed guidance of Mr. Pulkit Bakliwal, Mrs. Neha Patni and Dr. Himani Joshi.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 ACKNOWLEDGEMENT Here, I take this opportunity to humbly express our gratitude to all those concerned with Motilal Oswal Securities Limited. I would like to share the success of our project amongst the person who has directly and indirectly helped us to complete this project. In representing this report i would like to express my thank to Mr. Pulkit Bakliwal, Business Associate, Motilal Oswal Securities Limited for giving me the opportunity of having my internship at Motilal Oswal Securities Limited, and providing
his valuable guidance and
inspiration for the completion of project. I would also like to express my gratitude to Mr. Abhishek Pathak and Mrs. Neha Patni for his co-operation and guidance without which this project would never have been a success. I am also indebted to all the internal employees and fellow trainees of Motilal Oswal for providing consistent encouragement and congenial atmosphere to complete the project. I would express my sincere thanks to Dr. Himani Joshi and Stevens Business School for providing me necessary guidance and valuable instructions for the completion of this project. I would like to express my heartiest thanks to my family, parents and brother to extend their help as and when required. I would like to thank my friends for their support during my project.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
EXECUTIVE SUMMARY A project work is a mandatory requirement for the Master‘s degree in business Administration. As a student of MBA, it is an integral part of curriculum to undergo practical training at an organization. The industrial internship aims at exposing the young prospective to the actual business world. Without the practical exposure one cannot consider himself or herself as a qualified capable manager. During the project period student can learn through his own experience, the real situation corporate world and to put his theoretical knowledge into practice.
Hence to fulfill the requirement, we have completed our Two Months Internship in Motilal Oswal Securities Ltd. on the topic ―Gauging the Potential for Finance Sector in Emerging Economy/ Country‖ in financial market, given to me by my company guide.
A Financial Sector, with high peak growth, in emerging countries, I aimed to find such emerging country which has high potential to grow fast and have ample opportunity for any Indian Financial Service firm to have a platform to provide financial service in that country and can expand. Objective of project:1. To explore the opportunities for Indian Financial Firm in MENA countries. 2. To study the economic political & financial sector and condition of MENA countries.
As project‘s focus is to serve Indian Population residing in foreign country, we made a list of developing country with number of NRI population in that country. As the Interest rate and Tax rate play a vital role in any financial consideration, we select some of the country with high Indian population ratio and find the interest rate and tax rate of the country. Also demographics of Indian population and economic survey of country helped us to narrow down our list of countries. Then as an individual I got 3 countries for research project.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 TABLE OF CONTENT S.No.
Topic
Page No.
Title Page
1
Declaration
2
Acknowledgement
3
Executive Summary
4
Chapter 1
Introduction to Indian financial system
11
1.1
Introduction
12
1.2
Indian financial system: An introduction
12
1.2.1
Formal and informal financial sector
13
1.2.2
Indian Financial System
13
1.3
Components of formal financial system
14
1.4
Industry overview
19
1.4.1
Growth of financial sector in India
19
1.4.2
Growth of banking sector in India
19
1.4.3
Growth of capital market in India
20
1.4.4
Growth of insurance sector in India
20
1.4.5
Growth of venture sector in India
20
1.4.6
Opportunities for the financial sector in India
21
Chapter 2
Introduction of Motilal Oswal
22
2.1
History
23
2.1.1
Focus on Research
24
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 2.2
Motilal Oswal Products & Services
25
Chapter 3
Introduction of project
26
3.1
Finance sector and economic growth
28
3.2
Scope of study
30
3.3
Research objective
32
3.4
Sampling techniques
32
3.5
Research methodology
32
Chapter 4
Findings & conclusion
37
I
Guyana
38
4.1.1
Demographics
38
4.1.2
GDP growth rate
39
4.1.3
Inflation rate
40
4.1.4
Major source of income
40
4.1.5
Exchange & currency rate
40
4.1.6
Tax Structure
41
4.1.7
Type of political system
41
4.1.8
Major industries
41
4.1.9
Financial services
42
4.1.10
Banking services & products
43
II
Kenya
49
4.2.1
Demographics
49
4.2.2
GDP growth rate
50
4.2.3
Inflation rate
51
4.2.4
Major source of income
51
4.2.5
Exchange & currency rate
51
4.2.6
Tax Structure
52
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.2.7
Type of political system
53
4.2.8
Major industries
53
4.2.9
Financial services
53
4.2.10
Banking services & products
55
III
Kuwait
61
4.3.1
Demographics
61
4.3.2
GDP growth rate
62
4.3.3
Inflation rate
62
4.3.4
Major source of income
63
4.3.5
Exchange & currency rate
63
4.3.6
Tax Structure
64
4.3.7
Type of political system
65
4.3.8
Major industries
65
4.3.9
Indian companies in Kuwait
66
4.3.10
Financial services
66
4.3.11
Banking services & products
67
4.4
Conclusion
72
Chapter: 6
Other assignments
73
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER 1: INTRODUCTION TO INDIAN FINANCIAL SYSTEM
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.1 INTRODUCTION As a part of Industrial Internship Programme, I as an intern have given a project by the company Motilal Oswal. Project title “Gauging the Potential for Finance Sector in Emerging Economy/Country”. This project is all about grabbing the potential opportunities in the emerging countries. For selection process many variables are considered like Indian population in that country, Tax structure, Interest rate, Economy and existing Financial services which are discussed in same.
1.2 THE FINANCIAL SYSTEM: AN INTRODUCTION A financial system plays a vital role in the economic growth of a country. It intermediates between the flow of funds belonging to those who save a part of their income and those who invest in productive assets. It mobilizes and usefully allocates scarce resources of a country. A financial system is a complex, well integrated set of sub systems of financial institutions, markets, instruments and services which facilitates the transfer and allocation of funds, efficiently
and
Fig.1
The
effectively. Financial
•Commercial Banks •Insurance Companies •Mutual Funds •Provident Funds •Non Banking •Financial Companies
System
•Individuals •Businesses • Governments
Financial
Demanders
Institutions
of Funds
Suppliers of
Financial
Funds
Markets
•Individuals •Businesses •Governments
•Money Market •Capital Market
Book of Financial Management by Prasanna Chandra
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 The financial system provides a payment mechanism, enables the pooling of funds, facilitates the management of uncertainty, generates information for decentralized decision making, and helps in dealing with informational irregularity.
Financial intermediaries give advantages like diversification of investment, lowering transaction cost, provides economies of scale etc.
1.2.1 FORMAL AND INFORMAL FINANCIAL SECTORS The financial systems of most developing countries are characterized by co-existence and co-operation between the formal and informal financial sectors. The co-existence of these two sectors is commonly referred as ‗financial dualism‘. The formal financial sector is characterized by the presence of an organized, institutional and regulated system which caters to the financial needs of the modern spheres of economy; the informal financial sector is an unorganized, noninstitutional, and non-regulated system dealing with the traditional and rural spheres of the economy.
1.2.2 THE INDIAN FINACIAL SYSTEM The Indian financial system can also be broadly classified into the formal (organized) financial system and the informal (unorganized) financial system. The formal financial system comes under the preview of the Ministry of Finance (MoF), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and other regulatory bodies. The informal financial system consists of:
Individual moneylenders such as neighbours, relatives, landlords, traders, and storeowners.
Groups of person operating as ‗funds‘ or ‗associations‘. These groups function under a system of their own rules and use names such as ‗fixed fund‘, ‗association‘ and ‗saving club‘.
Partnership firms consisting of local brokers, pawnbrokers, and non-bank financial intermediaries such as finance, investment, and chit-fund companies.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.3 COMPONENTS OF THE FORMAL FINANCIAL SYSTEM The formal financial system consists of four segments or components. These are:- financial institutions, financial markets, financial instruments, and financial services which are in detailed explained below:
I.
FINANCIAL INSTITUTIONS
These are mediators that mobilize savings and facilitate the allocation of funds in an efficient manner. Following are the classification of financial institutions: Classification of Financial Institutions:
Banking and non-banking
Financial institutions can be classified as banking non-banking financial institutions. Banking institutions are creators and purveyor of credit while non-banking financial institutions are purveyor of credit.
Term finance
Financial institutions can also be classified as term-finance institutions such as the Industrial Development Bank of India (IDBI), the Industrial Credit and Investment Corporation of India (ICICI), the Industrial Financial Corporation of India (IFCI), the Small Industries Development Bank of India (SIDBI), and the Industrial Investment Bank of India (IIBI).
Specialized
Financial institutions can be specialized finance institutions like the Export Import Bank of India (EXIM), the Tourism Finance Corporation of India (TFCI), ICICI Venture, and the Infrastructure Development Finance Company (IDFC).
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Sectoral
Sectoral financial institutions such as the National Bank for Agricultural and Rural Development (NABARD) and the National Housing Bank (NHB).
Investment
Investment institutions in the business of mutual funds Unit Trust of India (UTI), public sector and private sector mutual funds and insurance activity of Life Insurance Corporation (LIC), General Insurance Corporation (GIC) and its subsidiaries are classified as financial institutions.
State-level
There are state-level financial institutions such as the State Financial Corporation‘s (SFCs) and State Industrial Development Corporation‘s (SIDCs) which are owned and managed by the governments.
II.
FINANCIAL MARKETS
A Financial Market is a market where financial assets are created and exchanged. There are different ways of classifying financial markets:
Fig. 2 Classification of financial markets: Nature of claim
Maturity of claim
Seasoning of claim
Timing of Delivery
Organisational Structure
Debt Market
Money Market
Primary Market
Cash or spot Market
Exchange traded Market
Equty Market
Capital Market
Secondary Market
Forward Of futures Market
Over the counter Market
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Regulatory Bodies
Two major regulatory bodies for financial system of India are government bodies they are:
Reserve Bank of India- Central banking authority of India Securities Exchange Board of India- Deals with Capital Market of India
III.
FINANCIAL INSTRUMENTS
A financial instrument is a claim against a person or an institution of payment, at a future date, of a sum of money and/or a periodic payment in the form of interest or dividend. The term ‗and/or‘ implies that either of the payments will be sufficient but both of them may be promised. Financial instruments represent paper wealth shares, debentures, like bonds and notes. Following are distinct features of financial instruments.
DISTINCT FEATURES OF FINANCIAL INSTRUMENTS
Marketable
Many financial instruments are marketable as they are dominated in small amounts and traded in organized markets. This distinct feature of financial instruments has enabled people to hold a portfolio of different financial assets which, in turn, helps in reducing risk. Savings and investments are linked through wide variety of complex financial instruments known as ‗Securities‘.
Tradeable
Financial securities are financial instruments that are negotiable and tradeable. Financial securities may be primary or secondary securities. Primary securities are also termed as direct securities as they are directly issued by the ultimate borrowers of funds to the ultimate savers. E.g. Equity shares and Debentures. Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Secondary securities are also referred to as indirect securities, as they are issued by financial intermediaries to the ultimate savers. E.g. Bank deposits, mutual funds units, and insurance policies. Financial instruments differ in terms of marketability, liquidity, reversibility, type of options, return, risk and transaction costs. Financial instruments help financial markets and financial intermediaries to perform the important role of channelizing funds from lenders and borrowers.
IV.
FINANCIAL SERVICES
These are those services that help with borrowing and funding, lending and investing, buying and selling securities, making and enabling payments and settlements, and managing risk exposures in financial markets. The major categories of financial services are funds intermediation, payments mechanism, provision of liquidity, risk management and financial engineering. Following are the needs and types of financial services for: NEEDS OF FINANCIAL SERVICES FOR:
Borrowing and funding
Lending and investing
Buying and selling securities
Making and enabling
Payments and settlements
Managing risk
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 TYPES OF FINANCIAL SERVICES
Insurance
A contract in which one party agrees to pay for another party's financial loss resulting from a specified event (for example, a accident, theft, or storm damage). Lease agreements generally require that you maintain vehicle accident and comprehensive insurance as well as liability insurance for bodily injury and property damage.
Mutual Fund
A mutual fund enables investors to pool their money and place it under professional investment management. The portfolio manager trades the fund's underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. There are more mutual funds than there are individual stocks.
Banking
Financial intermediary Institutions for receiving, lending, and safeguarding money as well as conduction other financial transactions. There are several types of banks: central banks, commercial banks, corporate banks, credit unions, savings banks, trust companies, finance companies, life insurers, investment banks, etc. Banks have drastically evolved throughout time, increasing their services but also becoming institutions that cater to greater numbers of people.
Shares
Shares are a term referred to the units of ownership interest provided to the stockholder or owner of a company. The term is often used in connection with the number of units issued to an owner of Common Stock or Preferred Stock. A stock is a certificate of ownership in a corporation. It is the same as a share.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.4 INDUSTRY OVERVIEW 1.4.1 GROWTH OF FINANCIAL SECTOR IN INDIA The growth of financial sector in India is nearly 8.5% per year (www.economictimes.com). The rise in the growth rate suggests the growth of the economy. The financial policies and the monetary policies are able to sustain a stable growth rate. The financial sector in India had an overall growth of 15%, which has exhibited stability over the last few years although several other markets across the Asian region were going through disorder. The development of the system pertaining to the financial sector was the key to the growth of the same. With the opening of the financial market variety of products and services were introduced to suit the need of the customer. The Reserve Bank of India (RBI) played a dynamic role in the growth of the financial sector of India. Analysis of Indian Financial Sector reveals that it is at present going through a phase of stable growth rate which is experiencing a upward swing. The rise can be maintained over a long period by keeping the inflation down. The major step towards opening up of the financial market further was the nullification of the regulations restricting the growth in the financial sector.
1.4.2 GROWTH OF BANKING SECTOR IN INDIA The banking system in India is the most extensive. The total asset value of the entire banking sector in India is nearly US$ 270 billion. The total deposits are nearly US$ 220 billion. Banking sector in India has been transformed completely. Presently the latest inclusions such as Internet banking and Core banking have made banking operations more users friendly and easy.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.4.3 GROWTH OF CAPITAL MARKET IN INDIA The ratio of the transaction was increased with the share ratio and deposit system. The removal of the pliable but ill-used forward trading mechanism. The introduction of InfoTech systems in the National Stock Exchange (NSE) in order to
cater to the various investors in different locations. Privatization of stock exchanges.
1.4.4 GROWTH IN THE INSURANCE SECTOR IN INDIA
With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailor-made products.
The insurance market is filled up with new players which has led to the introduction of several innovative insurance based products, value add-ons, and services. Many foreign companies have also entered the arena such as Tokio Marine, Aviva, Allianz, Lombard General, AMP, New York Life, Standard Life, AIG, and Sun Life.
The competition among the companies has led to aggressive marketing and distribution techniques.
The active part of the Insurance Regulatory and Development Authority (IRDA) as a regulatory body has provided to the development of the sector.
1.4.5 GROWTH OF VENTURE SECTOR IN INDIA
The venture capital sector in India is one of the most active in the financial sector inspite of the difficulty by the external set up.
Presently in India there are around 34 national and 2 international SEBI registered venture capital funds
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.4.6 OPPURTUNITIES FOR THE FINANCIAL SECTOR IN INDIA
The distributed financial gain of the venture capital funds is not taxed. The financial gains are taxed after the investors receive as income.
They have more insurance and banking products introduced into the market to expand the spectrum which in turn would boost the growth of the sector.
Further nullification of the regulations has to take place in order to increase the competition and boost the growth of the financial sector to reach the US$ 51 billion mark.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER 2: INTRODUCTION OF COMPANY
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 2.1 HISTORY Motilal Oswal Securities Ltd. (MOSL) was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices,
respect
for
professionalism,
research-based
value
investing and
implementation of cutting-edge technology has enabled us to blossom into an over 1600 member team. Today they are a well diversified financial services firm offering a range of financial products and services such as Wealth Management, Broking & Distribution, Commodity Broking , Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Services and Principal Strategies. They have a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. Their headquartered is in Mumbai and as of March 31st, 2011, had a network spread over 611 cities and towns comprising 1,644 Business Locations operated by our Business Partners and us. As at March 31st, 2011, we had 709,041 registered customers.
Motilal Oswal Financial Services Ltd. (MOFSL) is a well-diversified, financial services company focused on wealth creation for all its customers, such as institutional and corporate clients, HNI and retail customers. Their services and product offerings include equity broking, commodity broking, and distribution of third party products, investment banking and venture capital management.
Mr. Motilal Oswal and Mr. Raamdeo Agrawal laid the foundation for MOFSL and initially conducted business as a sub-broking firm. Thus, began the expedition of building a professional organization with strong value systems, to provide investment advice to investors.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Today, Motilal Oswal Financial Services Ltd. is a well-established brand among retail and institutional investors in India, with a presence in over 1533 business locations across over 487 cities. From a sub-broking firm, Motilal Oswal Financial Services Ltd. has today become a solid financial services company straddling a spectrum of businesses in the Financial services space. These businesses include Wealth Management, Institutional Equities, Investment Banking and Venture Capital Management.
In 2006, the Company placed 9.48% of its equity with two leading private equity investors based out of the US – New Vernon Private Equity Limited and Bessemer Venture Partners. The company got listed on BSE and NSE on September 9, 2007. The issue which was priced at Rs.825 per share (face value Rs.5 per share) got a overwhelming response and was subscribed 27.18 times in confused market conditions. The issue gave a return of 21% on the date of listing. As of end of financial year 2008, the group net worth was Rs.7 bn and market capitalization as of March 31, 2008 was Rs.19 bn. Credit rating agency Crisil has assigned the highest rating of P1+ to the Company‘s short-term debt program. Shareholding Pattern at on 31st March, 2011. As of March 31st, 2011; the total shareholding of the Promoter and Promoter Group stood at 69.16%. The shareholding of institutions stood at 12.07% and non-institutions at 18.77%.
2.1.1 Focus on Research Research is the solid foundation on which Motilal Oswal Securities advice is based. Almost 10% of revenue is invested on equity research and we hire and train the best resources to become advisors. At present they have a expert team of Research Analysts researching 25+ sectors and commodities. From a fundamental, technical and derivatives research perspective; Motilal Oswal's research reports have received wide coverage in the media (over a 1000 mentions last year). Their consistent efforts towards quality equity research have reflected in an increase in the ratings and rankings across various categories in the Asia Money Brokers Poll over the years. Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Their unique Wealth Creation Study, authored by Mr. Raamdeo Agrawal, Jt. Managing Director, is now in its 15th year. Investors keenly await this annual study for the wealth of information it has on the companies that created wealth during the preceding five years.
Following are the products and services offered by Motilal Oswal:
2.2 PRODUCTS & SERVICES OFFERED BY MOTILAL OSWAL Today Motilal Oswal is a well diversified financial services firm offering a range of financial products and services such as: Equity Derivatives Online Trading Commodities Mutual Funds Distribution IPO‘s Depository Services Portfolio Management Services Wealth Management
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER 3: INTRODUCTION OF PROJECT
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Gauging the potential of Financial Services in Emerging Economies
Background: (International Finance Sector and services) As countries in the Middle East and North Africa (MENA) consider ways to promote more rapid and lasting economic growth, further financial sector reform should be high on the agenda. Policies aimed at enhancing financial sector performance result in higher economic growth both theory and evidence support this proposition. A more developed financial system promotes efficiency and growth by reducing information, transaction, and monitoring costs. Research in this area is typically based on a broad cross section of countries, but comparatively little work has been done on (i) the specifics of financial development in the MENA region and (ii) measures of financial development that go beyond simple aggregate indicators. Going beyond simple aggregate indicators such as GDP is necessary to identify and prioritize among different areas of financial sector reform. The simple indicators, though easily available and open to to cross-regional and inter comparisons, do not necessarily capture what is broadly meant by financial sector development. Financial development is a multifaceted concept, encompassing not only monetary aggregates and interest rates (or rates of return) but also regulation and supervision, degree of competition, financial directness, institutional capacity such as the strength of creditor rights, and the variety of markets and financial products that comprise a nation‘s financial structure. In this study, we review what the economic literature says about financial development and growth and draw general lessons for macroeconomic and financial policy. After assessing financial sector development in the MENA region, we propose platform to our company to enhance their services. Drawing on recent research by the IMF on the MENA countries and also considering our requirement of different variables, we evaluate financial sector development and opportunity for Indian financial player to expand, by constructing an index that encompasses some of the themes: monetary policy, banking sector development, regulation and supervision,
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Non Banking Sector, Economic development, Tax structure and also focused on Indian population ratio. Overall, we find that the relative strength of MENA countries, as a group, include regulation and supervision as well as financial openness. But they need to do more to reinforce the institutional environment and to promote nonbank financial sector development. Based on our measurements, the MENA region performs better than most other developing country regions, but ranks far behind the industrialized countries and East Asia. However, within the MENA region there is substantial variation in the degree of financial development; some countries have advanced financial sectors, while for others progress in this area has been limited. The rest of the paper is organized as follows. We briefly review the literature on financial development and draw general overview of development in that region. Also we made a detailed study of our selected 9 countries to explore the opportunity to establish in that country. Further, we describe the data collected, and assess country details as per our required variables.
3.1 FINANCE SECTOR AND ECONOMIC GROWTH There is a large and still growing research literature on financial development and its relationship with growth. Although the precise relationship between financial development and growth continues to be debated, there is general agreement that financial repression, or governmentimposed restrictions and price distortions on the financial sector, can inhibit growth prospects. There is also agreement that macroeconomic stability is critical for the growth of financial sector services. Countries should adopt appropriate macroeconomic policies, encourage competition within the financial sector, and develop a strong and transparent institutional and legal framework for financial sector activities. In particular, there is a need for prudential regulations and supervision, strong creditor rights, and contract enforcement. Therefore, government decision-makers should eliminate financial repression conditions as well as facilitate and support the process of financial development as important elements of their policy package to stimulate and sustain economic growth. Understanding the impact of financial development on economic growth, or—as is our intention in this paper—assessing the development of the financial sector in the MENA region requires Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 good measures of financial development. Empirical work is usually based on indicators such as the ratios of liquid liabilities to GDP, deposit money bank assets to total banking sector assets, and credit to the private sector to GDP. As noted above, long time series of these measures are available for a wide range of countries allowing us to compare and analyze development across countries and over time. However, these simple measures do not necessarily capture the different structural and institutional details of what is broadly meant by financial development. The financial structure of a country is composed of a variety of markets and financial products, and it is difficult to conceive of a few measures that could adequately capture all relevant aspects of development. In addition, the simple quantitative measures may at times give a misleading picture of financial development. For instance, although a higher ratio of broad money (or M2) to GDP is generally associated with greater financial liquidity and depth, the ratio may decline rather than rise as a financial system develops because people have more alternatives to invest in longer-term or less liquid financial instruments.
Going beyond the standard quantitative indicators, Gelbard and Leite (1999) used measures of market structure, financial products, financial liberalization, institutional environment, financial openness, and monetary policy instruments to construct a comprehensive index for 38 subSaharan African countries, for 1987 and 1997. Similarly, Abiad and Mody (2003) created an index for a 24-year period from 1973 to 1996 for 35 countries. They examined six measures of policy liberalization in the areas of credit controls, interest rate controls, entry barriers, regulations and securities markets, financial sector privatization, and restrictions on international financial transactions. These more-detailed measures provide a richer description of financial development, and motivate our measures of financial development in the MENA region. There has been very little work on measuring and assessing financial sector development in the MENA region, mainly because of the paucity of data. Our analysis builds on three studies that have examined financial development in MENA and broadly mirrors their conclusions. Chalk, Jbili, Treichel, and Wilson (1996) found that the thirteen MENA countries included in their analysis have made significant progress in financial deepening. But in most of these Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 countries financial markets are thin and tightly regulated, government ownership is prevalent, and market forces play a limited role. Nashashibi, Elhage and Fedelino (2001) also found that most Arab countries had made progress over the past decade in financial reform, but were still at an early stage in the process. Their financial systems are dominated by commercial banks, and, in some, by public banks, and capital market development is hindered by legal, institutional, financial, and economic factors. In comparison, Jbili, Galbis, and Bisat (1997) concluded that the financial sectors in the Arab states of the Gulf Cooperation Council (GCC) are developed, technologically advanced, and more integrated into the world economy than in the rest of the MENA region. This finding reflects the substantial differentiation in the degree of financial development in the region.
3.2 SCOPE OF STUDY Having collected and organized the data according to the above themes, an analysis suggests common strengths, trends, and weaknesses, and points to future areas for development. MENA countries in general perform reasonably well in regulation and supervision. The main findings for the MENA region, according to the themes, are summarized below. Monetary policy: For the most part, interest rates (or rates of return) are freely determined, indirect monetary policy tools are employed, and government securities exist. But the limited development or nonexistence of secondary markets for government securities hinders the broad use of open market operations by central banks. In addition, a few countries do not follow a comprehensive framework for designing and conducting monetary policy. Banking sector: In a few countries, such as many of the GCC countries, the banking sector is well developed, profitable, and efficient. But in about half the region, this is not case. In many of these countries, the banking sector is dominated by public sector banks, which are characterized by government intervention in credit allocation, losses and liquidity problems, and wide interest rate spreads (or spreads in rates of returns). In more than half the countries, the banking sector is highly concentrated, with assets of the three largest banks accounting for over 65 percent of total
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 commercial bank assets, and the entry of new banks is difficult. And in many parts of the region, there is an urgent need for developing modern banking and financial skills. Nonbank financial sector: In most of the region, the nonbank financial sector—comprising the stock market, corporate bond market, insurance companies, pension funds and mutual funds— needs further development. Where such markets exist, trading is usually quite limited. The development of these markets is complicated by legal limitations on ownership and the need for a clear and stable legislative framework. Regulation
and
supervision:
Many
MENA
countries,
such
as
the
GCC
countries, Jordan, Lebanon, Morocco, and Tunisia, have strengthened banking supervision and regulation, they have established up-to-date procedures to collect prudential information on a regular basis, and they inspect and audit banks. They have taken steps to conform to international Basel standards by increasing capital adequacy ratios and reducing nonperforming loans. However, success in the latter has been limited, and for most countries nonperforming loans remain in the range of 10 percent to 20 percent of total loans. Financial openness: MENA countries have gradually opened up their current as well as capital accounts. Nearly half the countries have open financial sectors, although many maintain restrictions on foreign ownership of assets and repatriation of earnings. Some countries continue to maintain parallel exchange markets and/or multiple currency rates. Institutional environment: In much of the MENA region, the quality of institutions, including the judicial system, bureaucracy, law and order, and property rights, is poor. For instance, in several countries, the judicial system is susceptible to political pressure and long delays, resulting in poor legal enforcement of contracts and loan recovery. Property rights enforcement also tends to be weak. This hinders commercial activity and investment, and hence growth. Source: http://faculty.som.yale.edu/mushfiqmobarak/financial%20sector%20development.pdf
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 3.3 RESEARCH OBJECTIVE The main objective of our project is as follow: 1. To study the economic, political and financial sector and condition of MENA countries. 2. To explore the opportunity for Indian financial firm in MENA countries (Selected 9 country)
3.4 SAMPLING TECHNIQUE Following variables are considered for our sample: 1. The country must be emerging economy. 2. Must have Indian Population 3. Financial sector is developing and must have many future development opportunity 4. Interest Rate and Tax system is studied. 5. Local Finance service providers and their products.
3.5 RESEARCH METHODOLOGY Method of data Collection: Source of data: The study is based on Secondary Data.
Study the Global Finance Service
Study the Emerging Country
Ratio of Indian Population in Emerging Country
Financial Sector structure in these countries.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Sampling Method:
1. On the basis of Indian population we have selected 40 countries. 2. Then on interest rate and tax rate we have selected 20 countries. 3. After considering all the variables lastly we have selected 9 countries.
Bahrain
United Arab Emirates (UAE except Dubai)
Dubai
Guyana
Kenya
Kuwait
Qatar
Saudi Arabia
Uganda
4. Now, individually I have 3 countries which are as follows:
Guyana
Kenya
Kuwait
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 TABLE.1
LIST OF COUNTRIES WITH INDIAN POPULATION
It is the time for Indian Player to explore industry in foreign country, in this context we aimed to find such emerging country with dense Indian population with constraint of our variables. Following is the table of countries name and Indian Population in that country. Country Name Australia Bahrain Belgium Canada China Denmark Figai France Germany Greece Guyana Indonesia Ireland Israel Italy Jamaica Japan Kenya Kuwait Lebanon Libya Malaysia Mauritious Myanmar Uganda UAE Nepal Netherlands New Zealand Oman Philippines Portugal Qatar Saudi Arabia Singapore South Africa Srilanka Thailand
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Indian Population 448000 350000 16000 1000000 67000 6500 314000 445000 75500 12000 322200 85000 19000 78000 71900 54000 22000 75000 579000 10000 15000 2050000 882000 256000 12000 1300000 600000 200000 1000000 557000 50000 800000 500000 1789000 580000 1218000 1600000 150000
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
From the above table, developing countries with more number of Indian people is selected. We have short listed 20 countries looking to the Indian population residing in all the above countries. Our main focus was to select emerging country to have detailed study of their economy and living standard o f NRI. From above 40 countries, we selected 20 countries and found their Interest rates and Tax rates
TABLE.2 COUNTRIES INTEREST RATES AND TAX RATES Countries Interest Rate (%) Tax Rate (%) Australia 4.75 30 Bahrain 2.15 Guyana 3.65 35-45 Indonesia 6.75 25 Israel 3 25 Kenya 6 30 Kuwait 5.5 15 Malaysia 3.7 25 Mauritius 4.01 15 Myanmar 10 30 Netherland 3.65 20-25 New Zealand 2.5 28 Oman 18 12 Portugal 9.19 25 Qatar 1.5 10 Saudi Arabia 3 20 Singapore 0.03 17 South Africa 5.5 28 Sri Lanka 7.9 35 Thailand 2.75 30 Above selected country is displayed below with their Interest rate and tax rate.Countries with low Interest rate are selected. Further study of economy and demographics of population is analyzed to know the potential of financial services in below selected 9 countries. Also the prevailing financial system in countries is taken into consideration.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 FINAL COUNTRIES TABLE.3 Country Name
Population
Interest rate
Tax Rate
(%)
(%)
1
Bahrain
3,50,000
2.15
-
2
UAE(Except Dubai)
1700000
0
0
3
Dubai
-
0
0
4
Guyana
3,20,000
3.65
35 to 45
5
Kuwait
5,79,000
5.5
15
6
Kenya
75000
6
30
7
Uganda
12000
30
30
8
Qatar
500000
1.5
10
9
Saudi Arabia
1789000
3
20
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER 4: FINDINGS & CONCLUSION
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
I.
GUYANA
4.1.1 DEMOGRAPHICS
Religion:
On religious affiliation indicates that approximately 57% of the population are Christian (of those, 17% are Pentecostal, 8% are Roman Catholic, 7% are Anglican, 5% are Seventh-day Adventist, and 20% belong to other Christian denominations). Approximately 28% are Hindu, 9% are Muslim (mostly Sunni), and 2% practice other beliefs (such as the Rastafarian and Baha'i faiths). An estimated 4% of the population does not profess any religion.
Indian Religion:
Most Indo-Guyanese are Hindus; substantial minorities are Muslims and Christians. Many of the Indians have roots from Uttar Pradesh, Bihar, Calcutta and Madras.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Indian Population: 3, 22,200 Income Profile:
Agriculture: 24.3% Industry: 24.7% Services: 51% (2010 est.)
Age/sex Profile:
0-14 years: 31.9% (male 120,981/female 116,654) 15-64 years: 63.3% (male 235,566/female 235,717) 65 years and over: 4.8% (male 14,801/female 21,049)
Language:
Official language(s) English Recognised regional languages Guyanese Creole, Portuguese, Hindi, Spanish, Akawaio, Macushi,Wai Wai, Arawak, Patamona,Warrau, Carib, Wapishiana,Arekuna
4.1.2GDP RATE Year
GDP - real growth rate Rank Percent Change Date of Information
2003
2.10 %
126
2004
.50 %
183
-76.19 %
2003 est.
2005
1.90 %
171
280.00 %
2004 est.
2006
-3.00 %
210
-257.89 %
2005 est.
2007
4.50 %
121
-250.00 %
2006 est.
2008
5.30 %
102
17.78 %
2007 est.
2009
3.00 %
128
-43.40 %
2008 est.
2010
2.30 %
78
-23.33 %
2009 est.
2011
2.50 %
139
8.70 %
2010 est.
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2002 est.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1.3 INFLATION RATE Year Inflation rate (consumer prices) Rank Percent Change Date of Information 2003
4.70 %
74
2002 est.
2004
5.70 %
66
21.28 %
2003 est.
2005
4.50 %
138
-21.05 %
2004 est.
2006
6.90 %
157
53.33 %
2005 est.
2007
6.00 %
146
-13.04 %
2006 est.
2008
12.30 %
206
105.00 %
2007 est.
2009
8.30 %
129
-32.52 %
2008 est.
2010
2.90 %
102
-65.06 %
2009 est.
2011
6.80 %
168
134.48 %
2010 est.
4.1.4 MAJOR SOURCE OF INCOME Gold, Sugar, Fishing/Shrimping, Rice farming, timber and Bauxite.
4.1.5 EXCHANGE &CURRENCY RATE Currency in Guyana: Guyanese dollar (GYD) if you convert 1 US Dollar into Guyanese Dollar you will end up with a total of 204.9500 Guyanese Dollar
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1.6 TAX STRUCTURE Guyana Income Tax Rate
Guyana Corporate Tax Rate
33.33%
35 or 45%
Guyana Sales Tax / VAT Rate
16%
4.1.7 TYPE OF POLITICAL SYSTEM Guyana's long-term political risk profile continues to improve under President Bharrat Jagdeo's administration, encouraging us to revise up the country's score in our long-term political risk ratings. Although significant structural issues continue to hurt the country's political outlook, strong support for the government's economic reforms mean Guyana is well-placed to capitalise on increasingly favourable external conditions, which should further reinforce the country's longer-term political outlook. President Bharrat Jagdeo's sound macro-economic management and astute diplomacy are boosting Guyana's prominence at both the regional and global level, and in our view this is having a positive impact on the country's political risk profile. In terms of our long-term political risk ratings, the country retains the lowest score out of the five major Caribbean economies, due to structural issues ranging from wide ethnic divisions to a relatively weak constitutional framework.
4.1.8 MAJOR INDUSTRIES According to Basdeo Mangru, by the first quarter of the 20th century, there were already 238 Indian jewellers; 445 shopkeepers; 845 hucksters; 259 milk-sellers; 12,465 rice farmers and 13,700 landed proprietors, agriculturists and cattle farmers.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1.9 FINANCIAL SERVICES Guyana improves supervision and access to financial services with IDB support The third and last programmatic IDB policy-based loan of $5 million will also improve payments system, enhance transparency and fight money-laundering Guyana will strengthen supervision and the regulatory frameworks of its financial system as well as boost transparency with the third and last programmatic policy-based loan of $5 million approved by the Inter-American Development Bank (IDB). The supervision capacity of the Bank of Guyana, increase dissemination of financial sector information, and support the implementation of legislation to combat money laundering and financing of terrorism. It is also supporting measures that will help expand access to financial services. Guyana is boosting efficiency with a framework for automated payments of public sector salaries and pensions, and also developing and implementing a system for a loss-sharing arrangement for large value transfers, consistent with international best practices. As part of the policy-based loan, Guyana has recently approved three pieces of legislation to strengthen oversight of the financial sector.
These regulations give the Central Bank the
authority to supervise the majority of non-bank financial institutions, made up mostly of insurance companies, builders and money transfer businesses. In an important step to increase access to credit, the government also passed this year the Credit Reporting Bill 2009, which provides the framework for the creation of a credit bureau in Guyana. With this third loan, the IDB has provided a total of $15 million since December 2008 of budget support to accompany reforms of Guyana‘s financial system. Half of this latest IDB financing is made up of a loan from the Bank‘s ordinary capital, with an amortization period of 30 years, a grace period of 6 years and a fixed interest rate. The other $2.5 million will come from the IDB‘s Fund for Special Operations. This portion will have amortization and grace periods of 40 years, and an interest rate 0.25 percent.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1.10 Banking Services and Products List of banks in Guyana 1. Bank of Baroda (GUYANA) Inc.
Personal Banking Deposits 1. Deposit Products & Services
Fixed
Current
Savings
2. Gen Next Services
Gen-Next Junior
Gen-Next Lifestyle
Gen-Next Power
Gen-Next Suvidha
3. Retail Loans
Home Loan
Home Improvement Loan
Loan Against Future Rent Receivables
Advance Against Securities
Baroda Career Development
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Loan
Two Wheeler Loan
Traders Loan
Baroda Ashray (ReverseMortgage Loan)
Home Loans to NRIs / PIOs
Interest Subsidy Scheme For Housing The Urban Poor (ISHUP)
Mortgage Loan
Education Loan
Auto Loan
Loan to Doctors
Personal Loan
Loan for financing Individuals for subscription to Public Issues /IPO
Business Banking
Deposits
Loans and Advances
Services
Corporate Banking
Wholesale Banking
Deposits
Loans and Advances Services o Appraisal & Merchant Banking o Cash Management & Remittance
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 NRI services in Bank of Baroda:
Products & Services Deposit Products
Foreign Currency Linked Rupee Deposits (FCLR) Scheme
Non Resident External (NRE) (RUPEE) Savings Account
Non Resident External (NRE) (RUPEE) Current Account
Non Resident External (NRE) (RUPEE) Fixed Deposits
Non Resident Ordinary Rupee Savings Account (NRO-SB)
Non Resident Ordinary Rupee Current Account (NRO-CA)
Non Resident Ordinary (NRO) (RUPEE) Fixed Deposits
Resident Fgn Currency A/c - for NRIs returning to India for settling in India
Resident Foreign Currency (Domestic) Account - for Resident Indians
Rupee Linked Foreign Currency Deposit (RLFCD) Scheme for NRIs
Deposit Products at overseas centres
Baroda Structured Deposit
Baroda Term Deposit
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Loan Facilities to NRIs
Housing Loans to NRIs / PIOs
Loans/Overdrafts Against Security of Non-Resident (RUPEE) Fixed Deposits
Loans Against FCNR (B) Deposits in Rupees
Loan Against FCNR (B) Deposits in Foreign Currency in India
Loan Facilities in Foreign Currency to Residents
Foreign Currency Loans In India (FCNR 'B' Loans)
Pre-Shipment/Post-Shipment Credit in Foreign Currency to Exporters
External Commercial Borrowing
Inbound Money Transfer Services
Rapid Funds2India
BarodaRemitXPress
Xpress Money
Money Gram
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
2.
Citizens Bank Guyana Inc
Products
Saving Account
Loans
ATM Money card
Tele banking
Remote Banking
Night Depository
Utility Payments
3. Demerara Bank Limited
Products and Services
Saving
Deposit account
Chequing Account
Money master
Safety deposit boxes
Night Deposit
Phone Banking
Foreign Exchange
Loans and Over drafts
American Express
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
4. Guyana Bank for Trade and Industry Limited
Products and Services GBTI offers a wide range of products and services including:
Deposit Accounts
Financing Facilities (loans)
Foreign Trade
Card Services
Telephone Banking
Safe Keeping
Night Depository
Utility Payments
Payroll Processing
5. G.N.C.B. Trust Corporation
6. Globe Trust & Investment Co. Ltd
7. Globe Trust & Investment Co. Ltd
8. Guyana National Co-operative Bank
9. New Building Society Ltd
10. Republic Bank Guyana Limited
11. Scotiabank Guyana
All these banks Provides same kind of Products as above.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
II. KENYA
4.2.1DEMOGRAPHICS
Religion:
Protestant 45%, Roman Catholic 33%, Muslim 10%, Indigenous beliefs 10%, Other 2%
Indian Religion:
Hinduism, Islam, Sikhism
Indian Population: 75,000 Income Profile:
agriculture 75%, Industry and services25% (2007 est.)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Age/sex Profile:
Total population is reported as 41.07 million as of June 2011, with an age structure of: 0–14 years: 42.3% (male 8,300,393/female 8,181,898) 15–64 years: 55.1% (male 10,784,119/female 10,702,999) 65 years and over: 2.6% (male 470,218/female 563,145)
Language:
The Kenyan official national language is English, and it is wide spoken. There also another national language, Kiswahili. Both Languages are taught throughout the country. But Indian speaks English, Punjabi, Gujarati, and Hindustani.
4.2.2 GDP RATE Year GDP - real growth rate Rank Percent Change Date of Information 2003
.80 %
167
2004
1.50 %
160
87.50 %
2003 est.
2005
2.20 %
162
46.67 %
2004 est.
2006
5.80 %
74
163.64 %
2005 est.
2007
5.70 %
80
-1.72 %
2006 est.
2008
7.00 %
53
22.81 %
2007 est.
2009
1.70 %
163
-75.71 %
2008 est.
2010
2.60 %
74
52.94 %
2009 est.
2011
4.00 %
85
53.85 %
2010 est.
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2002 est.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.2.3 INFLATION RATE: Year Inflation rate (consumer prices) Rank Percent Change Date of Information 2003
1.90 %
166
2002 est.
2004
9.80 %
39
415.79 %
2003 est.
2005
9.00 %
183
-8.16 %
2004 est.
2006
10.30 %
193
14.44 %
2005 est.
2007
10.50 %
191
1.94 %
2006 est.
2008
9.70 %
190
-7.62 %
2007 est.
2009
26.30 %
215
171.13 %
2008 est.
2010
9.30 %
189
-64.64 %
2009 est.
2011
4.20 %
121
-54.84 %
2010 est.
4.2.4 MAJOR SOURCE OF INCOME Small-scale consumer goods (plastic, furniture, batteries, textiles, clothing, soap, cigarettes, flour), agricultural products, horticulture, oil refining; aluminum, steel, lead; cement, commercial ship repair, tourism.
4.2.5 EXCHANGE &CURRENCY RATE The currency unit in Kenya is the Kenyan shilling (KES), comprising 100 cents (c). Coins are available in denominations of 5c, 10c, 50c and 1 and 5 shillings. KSh 65 per US Dollar (Equiv. stated as 0.0154 US dollar per Kenya Shilling).
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.2.6 TAX STRUCTURE Tax Year: Tax year is the calendar year. Kenya Income Tax Rate
30%
Kenya Corporate Tax Rate
30%
Kenya Sales Tax / VAT Rate
16%
Kenya personal income tax rates are progressive up to 30%, as follows:
Yearly income (Kshs)
Tax Rate
0 to 121,968
10%
121,969 to 236,880
15%
236,881 to 351,792
20%
351,793 to 466,704
25%
Over 466,704
30%
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.2.7 TYPE OF POLITICAL SYSTEM The political system of Kenya is characterized by democratic republic government whereby the President is both chief of state as well as head of government. There is also a vice president and members of the Cabinet who make up the executive branch. The powers of the government in Kenya are distributed among the executive, the legislature and the judiciary. In the political system of Kenya, the judiciary is independent of the executive and the legislature.
4.2.8 MAJOR INDUSTRIES More recent investments by Indian corporates in businesses in Kenya include Essar (telecom and refining), Bharti Airtel (telecom), Reliance (petroleum retail); Tata (Africa) (automobiles, IT, pharmaceuticals, etc.). Several Indian firms including KEC, Kalpataru Power Transmission Ltd., Kirloskar Brothers Ltd., Mahindra & Mahindra, Thermax, Emcure, Dr. Reddy, Cipla, Cadila, TVS and Mahindra Satyam, etc., have a business presence in Kenya as do the Bank of India and bank of baroda
Small-scale consumer goods (plastic, furniture, batteries, textiles, clothing, soap, cigarettes, flour), agricultural products, horticulture, oil refining; aluminum, steel, lead; cement, commercial ship repair, tourism
4.2.9 FINANCIAL SERVICES The financial sector has grown considerably in importance throughout the 1990s, increasing its value contribution to the economy from KSh7, 069 million in 1991 to KSh9,843 million in 1996. In terms of GDP contribution, the financial sector accounted for 8.2 percent of GDP in 1991 and 10.1 percent in 1996. In the year 2011, approximately 81,000 Kenyans worked in the financial sector.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 As of the beginning of 1998, the highly diversified financial sector in Kenya consisted of the Central Bank of Kenya, 53 domestic-and foreign-owned commercial banks, 15 non-bank financial institutions, 2 mortgage finance companies, 4 building societies, and numerous insurance companies and other specialized financial institutions. The banking sector is dominated by 4 large banks, which aggregately control 50 percent of all bank assets and 52 percent of bank deposits. The largest bank, the state-owned Kenya Commercial Bank, accounts for 17 percent of bank assets and 18 percent of bank deposits. The multinational Barclays Bank, with 16 percent of bank assets and 15 percent of bank deposits, is next in line, followed by the state-owned National Bank of Kenya and the multinational Standard Chartered Bank, each respectively boasting 8 percent of bank assets and 9 percent of bank deposits.
The Nairobi Stock Exchange, which handles 61 listed firms, was established in 1954. In January 1995, the stock market, including stock-brokerage, was opened up for foreign direct participation, although there is a 40 percent limit on foreign ownership. Market capitalization has recently manifested considerable growth, increasing from US$1.89 billion in 1995 to US$2.08 billion in 1998. The Kenya banking system is supervised by the Central Bank of Kenya (CBK). As of late July 2004, the system consisted of 43 commercial banks (down from 48 in 2001), several non-bank financial institutions, including mortgage companies, four savings and loan associations, and several score foreign-exchange bureaus. Two of the four largest banks, the Kenya Commercial Bank (KCB) and the National Bank of Kenya (NBK), are partially government-owned, and the other two are majority foreign-owned (Barclays Bank and Standard Chartered). Most of the many smaller banks are family-owned and -operated
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.2.10 Banking services & products Following are Banks of Kenya:
1. ABC Bank (Kenya)
Retail & SME Banking Account
Trade Banking
Treasury
Corporate Banking Business Advisory
SME Banking Product
Asset Financing.
Deposit a/c
Project Financing Treasury Products Trade Finance Cash Management Solutions FOREX Credit Facilities Supply Chain Financing. Investment Accounts.
2. Bank of India
Products Current Deposits Saving Bank Deposits Term Deposits Call Deposits Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
3. Barclays Bank
Consumer Banking
Corporate banking
Treasury
Loans
Transactional Banking
Forex
Accounts
Asset Finance
Risk Management Solution
Barclay card
Trade Finance
Investment Services
Retail Internet Banking
4. Citibank
Products & Services Cash Mangement Electronic Banking Trade Service Treasury Citi Services Corporate Finance
5. Commercial Bank of Africa
Corporate
Treasury
Business
Investment
Personal
banking
Banking
Corporate
Corresponding
Deposits
Banking
Banks
product
Institutional
Exchange/
Loan Product
Banking
Deposit rates Accounts
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 6. Cooperative Bank of Kenya
7. Credit Bank
8. Diamond Trust Bank
9. Gulf African Bank
10. I&M Bank
11. Imperial Bank Kenya
12. Kenya Commercial Bank
13. Middle East Bank Kenya
14. National Bank of Kenya
15. NIC Bank
16. Oriental Commercial Bank
17. Prime Bank (Kenya)
All the Local Banks provides same kind of products and services
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 18. Standard Chartered Bank
Priority Banking
Personal Banking
Comprehensive Wealth Accounts and Deposits
Savings Accounts
Business Plus Account
Management Services
Special Privileges for Business Current Account
SME Banking
Business Premium Account
owners
Access to a World of Privileges
Business Priority Account
Fee Waiver, discounts and My Dream Account
Diva Account
Executive Account
Preferential Rates
Automated Banking Services
Investment Services
Junior Account Fixed Deposit and Call Deposit
Credit Cards o
Emirates Standard Chartered Platinum MasterCard
o
Emirates MasterCard Gold & Classic Credit Card Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 o
Visa Gold & Classic Credit Card
Services o
Branch Banking Hours
o
Automated Banking Lobby
o
Phone Banking
o
Online Banking
o
SMS Banking
e-Statements
Loans Personal Loan
NRI Banking Introducing Standard Chartered NRI Services – specially designed for Global Indians. India is one name that evokes thousands of emotions and nostalgic feelings amongst all NonResidents Indians, irrespective of the part of India they belong to. At Standard Chartered we understand how much your heart desires to be with your loved ones back home and support them in every need. So we have the pleasure in introducing our specially designed NRI Services to meet your financial commitments. Following are the available comprehensive NRI services:
Dedicated NRI desk
NRE/NRO/FCNR Fixed deposits
Indian Investment products
Global Investment Products
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Insurance Advisory
Indian Home Loans
Loans against property
Home Assist
No minimum Balance requirement in NRE account
Competitive conversion rate for Rupee remittances
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
III. KUWAIT
4.3.1 DEMOGRAPHICS Religion:
Muslim 85% (Sunni 70%, Shia 30%), other (includes Christian, Hindu, Parsi) 15%
Indian Religion:
For Indians :-Islam. Sunnis are in majority. About 30% are Shias.
Indian Population: 5, 79,000 Income Profile:
Oil and oil-related products
Age/sex Profile:
0-14 years: 25.8% (male 348,816/female 321,565) 15-64 years: 72.2% (male 1,153,433/female 720,392) 65 years and over: 2% (male 25,443/female 25,979) (2011 est.)
Language:
Kuwait's official language is Arabic, and English is the second language.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.2 GDP RATE Year
GDP - real growth rate Rank Percent Change Date of Information
2003
-2.00 %
199
2002 est.
2004
4.60 %
67
-330.00 %
2003 est.
2005
6.80 %
35
47.83 %
2004 est.
2006
8.30 %
26
22.06 %
2005 est.
2007
12.60 %
7
51.81 %
2006 est.
2008
4.70 %
120
-62.70 %
2007 est.
2009
8.50 %
21
80.85 %
2008 est.
2010
-4.60 %
181
-154.12 %
2009 est.
2011
3.20 %
115
-169.57 %
2010 est.
4.3.3 INFLATION RATE Year Inflation rate (consumer prices) Rank Percent Change Date of Information 2003
2.00 %
159
2004
1.20 %
184
-40.00 %
2003 est.
2005
2.30 %
72
91.67 %
2004 est.
2006
4.10 %
123
78.26 %
2005 est.
2007
3.00 %
84
-26.83 %
2006 est.
2008
5.50 %
133
83.33 %
2007 est.
2009
10.60 %
155
92.73 %
2008 est.
2010
4.00 %
129
-62.26 %
2009 est.
2011
3.80 %
107
-5.00 %
2010 est.
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2002
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.4 MAJOR SOURCE OF INCOME Kuwait has an open economy with proven crude oil reserves of about 96 billion barrels (15 km³), i.e. about 10% of world reserves.
Petroleum accounts for nearly half of GDP, 90% of export revenues, and 5% of government income. Export of oil marked the beginning of the new era in which oil sector began to play a key role in the growth of National economy.
Kuwait has limited arable land, which limits the agricultural development. Fisheries serves as the major food source locally available. Kuwait is a great importer of food imports.
About 75% of potable water must be distilled or imported.
Industry plays an important role in economic development in Kuwait as it supplies goods and services to the nation.
The government is playing an important role in encouraging the expansion of industry by giving loans, providing infrastructure facilities and by supporting the newly established industries.
4.3.5 EXCHANGE &CURRENCY RATE The Kuwaiti Dinar (KD) exchange rate policy is controlled by the Central Bank of Kuwait. Kuwaiti Dinar subdivided into 1000 fils is freely convertible. 1 KD = US$ 3.59 (approx); 1 KD = Rs. 162 (approx)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.6 TAX STRUCTURE Kuwait Income Tax Rate
0%
Kuwait Corporate Tax Rate
15%
Kuwait Sales Tax / VAT Rate
0%
Kuwait tax planning services: - (corporate and personal tax). We advise clients on latest corporate and income tax rates in Kuwait, and assist our clients to prepare and submit Kuwait tax returns. Healy Consultants' Kuwait tax planning services include advice on Kuwait company formation, and this is one of our core Kuwait tax planning services. The correct corporate structure is essential to ensure international business is conducted tax-efficiently and legitimately when starting a business in Kuwait. International tax planning :- (tax minimising & wealth managment). Keeping abreast of international tax legislation is at the heart of a successful tax minimisation strategy. Healy Consultants' tax experts keep clients informed of regulatory changes in Kuwait before they can have any negative impact, and is therefore one of our most valuable Kuwait tax planning services. Additionally, our Kuwait wealth management services can legally help clients minimise international tax liabilities. Companies incorporated in jurisdictions such as Kuwait pay no tax on revenues sourced outside the country. Many countries have also signed double taxation treaties with other countries to prevent taxes levied twice on the same income, profit, capital gains or inheritance. Our Kuwait wealth management services also take into account confidentiality and privacy concerns. Tax Year: Tax year is the calendar year.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.7 TYPE OF POLITICAL SYSTEM The State of Kuwait is a constitutional emirate with a parliamentary system of government. Kuwait gained independence from the UK on June 19, 1961. Its constitution, which combines aspects of both presidential and parliamentary systems of government, was approved and put into effect in 1962.
4.3.8 MAJOR INDUSTRIES According to the Kuwaiti Ministry of Interior, there are approximately 640,000 Indians, who constitute the largest expatriate community in Kuwait. The Indian community is regarded as the community of first preference among the expatriates in Kuwait. Kuwait views India as a fast growing economy and a source of highly qualified professional and technical personnel. A large proportion of the Indian expatriates are unskilled and semi-skilled workers. Professionals like engineers, doctors, chartered accountants, scientists, software experts, management consultants, architects; skilled workers like technicians and nurses; semi-skilled workers; retail traders and businessmen are also present in the Indian community. The total remittance from Kuwait to India is estimated to be upwards of US$ 3.5 billion annually.
Approximately 300 associations exist within the Indian community in Kuwait, representing a variety of regional, professional and cultural interests. Of these, 133 Associations are presently registered with the Embassy. Cultural events are organised regularly by these associations through the year, to which leading Indian artistes are often invited.
There are 17 Indian Schools in Kuwait affiliated to the Central Board of Secondary Education, New Delhi.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.9 INDIAN COMPANIES IN KUWAIT Indian companies have made a name for themselves in Kuwait. Telecommunication Consultants India Ltd. (TCIL) has bagged contracts worth US$ 100 million since liberation. The Southern Petrochemical Industries Corpn. (SPIC) has formed a local joint venture, Gulf SPIC Contracting Co and has formed a local joint venture, Gulf SPIC Contracting Co and has been handling some important projects in the oilsector. M/S Larsen & Toubro Ltd., are active in Kuwait‘s petrochemicals and construction sectors. Some Indian companies from the medical, IT and Insurance and banking sector have been operating successfully in Kuwait.
4.3.10FINANCIAL SERVICES Overview The banking system in Kuwait consists of the Central Bank of Kuwait, ten domestic banks and five branches of foreign banks (HSBC Bank Middle East, BNP Paribas, Citibank, the National Bank of Abu Dhabi and Bank of Bahrain and Kuwait). In addition to the 13 commercial banks, there are two specialized banks in Kuwait, the Industrial Bank of Kuwait and Kuwait Real Estate Bank.
The Kuwait Finance House and Boubyan Bank are the only licensed deposit-taking institutions offering a full range of Islamic banking products. In terms of both assets and capital, the market is dominated by the National Bank of Kuwait. The National Bank of Kuwait has the most extensive international banking presence, with subsidiaries and branch offices in Bahrain, Iran, Jordan, Lebanon, London, New York, Paris, Qatar, Geneva, Saudi Arabia, Singapore, Thailand and Vietnam, and acquired Credit Bank of Iraq in May 2005. Despite the government‘s effort to divest its ownership in the banking sector, a number of local banks continue to have substantial government ownership. At present there are five branches of different foreign banks operating in Kuwait and foreign investment in local banks is limited. The emergence of foreign banks and the acquisition by Bahrain‘s Ahli-United Bank of a 75% stake in the Bank of Kuwait & the Middle East appear to mark a move towards greater internationalization of the Kuwaiti banking sector. Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.3.11Banking Products and Services Kuwait 1. The Industrial Bank of Kuwait
Financial institution that provides loans to industrial projects and agriculture
Industrial Finance
Long term Industrial Loans
Islamic Industrial Finance
Corporate Banking Treasury & Direct Investment Managed Protfolios
2. Al Ahli Bank of Kuwait (ABK)
Provides retail banking, corporate banking (loans, letters of credit, payment services), treasury & investment services (foreign exchange & interest rates services & advice); has a retail banking network of 13 branches in Kuwait, and one in Dubai
Retail
Corporate Banking
Accounts
Investment units
Loans
Financial Institutions
Treasury
International
Unit Cards
Trading and Commercial Unit Contracting unit Services Unit SME unit
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 3. Commercial Bank of Kuwait (CBK)
Bank offering personal banking, corporate banking, Tijari funds, investment services etc; operates the second largest domestic network comprising 48 branches
Personal
Corporate
Tijari Fund
Rates &
Banking
Banking
(Fund
market
Management) Checking
Online
Investment
Foreign
Account
Banking
Fund
Exchange Rates
Saving
Treasury
GCC Equity
Deposit
Account
Services
Fund
Rates
CBK Cards
International
Islamic Fund
Credit Term
Trade
Deposits
Finance
India Fund
Loans
India Fund Fund Objective • To achieve superior returns over the medium to longer term horizon.
Fund Strategy • The Fund are invested its assets in indian equity markets • Available surplus cash is invested in all type of liquid Money Market instruments. Stevens Business School (2010-12)
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Fund Description • Open-ended Fund. • Life of the Fund is 10 years. • Fund's capital will be in the range of KD 5 Million to KD 100 Million. • Minimum subscription is 500 Units (and in multiples of 100 units thereafter).
Subscription / Redemption • Weekly Subscription; applications can be submitted up to Monday (NAV Day) not later than 1 PM. • Redemption is available twice a month. (on 2nd and 4th Monday). Redemption applications must be submitted 7 working days prior to prescribed day.
Fee • Subscription fees : 1.00% • Redemption fees : 0.25% • Management fees : 1.50% • Custody fees : 0.10%
Client Assurance • CBK Capital will maintain a minimum 5% investment in the Fund at all times.
Target Clients • The Fund is open to all Kuwaiti nationals, Expatriates,Corporations and Institutions. Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4. Gulf Bank
Safat-headquartered bank; activities include retail banking, corporate banking, treasury & investment management and international banking; has branches in Hawalli, Al-Hajra, Ahmadi, Farwaniya, Mubarak Al-Kabeer etc
Personal Banking
Priority Banking
Business Banking
Corporate & Institutional
Accounts
Banking Products
B- Account
Corporate Advisory
Credit cards
Priority Benefits
Credit Facilities
Treasury
Loans
Investment
Business Services
Saving and In vestment Day and Night Services
5. National Bank of Kuwait (NBK)
Commercial bank; services offered include retail banking, corporate finance, project finance, underwriting, initial public offerings, advisory and financing services for BOT projects etc
6. Jordan Kuwait Bank
Bank jointly set up in 1976 by Jordianian, Kuwaiti and other Arab investors; has branches in Jordan, Algiers, Cyprus and Nablus; offers individual and corporate banking, and treasury services
Products and services
Individual
Corporate
Correspondent bank
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Treasury Market
Margin Dealing
Treasury Operations
Custodial Services
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.4CONCLUSION: Kuwait is one of the strongest in MENA region benefiting from a robust financial profit and strong support mechanism. Kuwait has stable growth in its GDP except 2007, and has tended to negative in 2010 because of financial crisis. Also the inflation rate is normal. Government of Kuwait follows an open economy. The banking sector is in the evolvement phase experimenting increasing diversification & product innovation. The banking system‘s strengthens from supportive government policy & is further assisted by higher than average capitalization. In the government friendly economy & rising financial sector, Indian firm can establish in Kuwait to provide financial services and also various NRI services to 5,00,000 NRI‘s residing over there.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER 6: OTHER ASSIGNMENTS
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Project report on Awareness about “E-Trading Platform” in Financial Market. For MOTILAL OSWAL SECURITIES LTD.
Prepared By Bhavik Shah Niyati Patel Shikha Agrawal
Under Guidance of:
Company guide:
Dr. Himani Joshi
Mr. Pulkit Bakliwal
(Assistant Dean)
(Business Associate)
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EXECUTIVE SUMMARY It is well evident that work experience is an indispensable part of every professional course. In the same manner practical training is must for each and every individual who is undergoing with management course. Without the practical exposure one cannot consider himself or herself as a qualified capable manager. During the project period student can learn through his own experience, the real situation of market and corporate world and to put his theoretical knowledge into practice. Hence to fulfill the requirement, we have completed our Two Months Internship in Motilal Oswal Securities Ltd. on the topic Awareness about ―E-trading Platform‖ in financial market, given to us by our company guide.
Being new to the Stock Market, we have engrossed fully into the sector where we were told to understand the basic of stock market, the effect of recession on this sector, also we were told to analyze the market, that people prefers online trading and also to analyze their investment pattern, which would be helpful for the company to find a suitable target population.
We were also told to make calls and generate the investors for the company. Some time we have to extract the information from our sources because no one is there waiting for you it‘s actually you, which have to make things happen in your favor. Every day have its own experience and a short-term goal. So after coming in corporate world as a fresher we realized that here no one is free to spoon feed you the realities of corporate world, so we learn this lines that let the dreams of today determine the opportunities of tomorrow and we inculcated the same positive attitude in to us so that we would work there effectively and efficiently.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 TABLE OF CONTENTS S.No.
Topic
Page No.
Title Page
74
Executive Summary
75
Chapter 1
Overview Of Industry
79
1.1
Introduction to Broking Industry
80
1.2
Overview of Indian stock market
83
1.3
Primary insights of broking industry
84
1.4
Major players in the industry
87
Chapter 2
Introduction of Motilal Oswal
91
2.1
Motilal Oswal Products & Services
92
Chapter 3
Introduction to the project
105
3.1
Objective of project
107
3.2
Limitations of project
107
Chapter 4
Research Methodology
108
4.1
Methodology used for this Project
109
Chapter 5
Data Analysis
110
Basic Tables
111
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 5.1
Hypothesis
112
5.2
Relation between gender and investment pattern
113
5.3
Relation between education and investment pattern
114
5.4
Occupation and investment pattern
115
5.5
Awareness of various investment avenues based on age group
116
5.6
Frequency of income group respondents
120
5.7
Frequency of influencing factors
120
5.8
Ranks of various investment avenues
125
Chapter 6
Recommendations
130
6.1
Recommendations
131
6.2
Training
132
Annexure
134
Survey Questionnaire
134
Bibliography
136
1
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
CHAPTER: 1 OVERVIEW OF INDUSTRY
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.1 Introduction to Broking Industry Equity Broking Industry: A Financial Analysis Companies selected for this financial analysis comprise listed (excluding Z group companies) and unlisted securities broking houses. These companies were further screened and selected based on the availability of audited financials for FY10. Every company in the sample has generated a portion of income from brokerage services during FY10. To focus solely on performance of the equity broking industry, we excluded companies that operate in insurance or commodity broking. Thus, the final sample comprises 33 companies including 16 listed ones. To capture the dynamic nature of the broking industry, we have categorized these companies as large (र 3,500 mn or more), medium (between र 500 mn and र 3,500 mn), and small companies (less than र 500 mn) based on broking income. Turnover in the cash and derivatives segment recovered significantly in FY10. The cash segment, which slumped almost 25% during FY09, grew 43.2% to र 55.2 trillion1. Turnover in the NSE cash market surged 50% to र 41.4 trillion while that in the BSE cash market increased 25.3% to र 13.8 trillion. (SEBI annual report 2009-10)
Turnover in the equity derivatives market jumped 60.3% to र 176.6 trillion in FY10. NSE remained the dominant exchange with more than 99% share in equity derivatives turnover. The NSE‘s average daily turnover increased significantly by 59.1% y-o-y to र 720.97 bn during the fiscal.
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Improvement in cash and equity derivatives turnover of the BSE and NSE in FY10 translated into healthy income growth of 20.8% to र 54,983 mn for the sample broking companies. Large companies constituted 64.7% of the overall income while mid-size and small ones accounted for 26.8% and 8.5% respectively. Three financial services segment (fund-based services, fee-based services and treasury operations) are the key sources of operational income for the sample broking companies. Fee-based services, including broking services, contributed to 83.8% of these companies‘ income. Overall fee-based services of the sample broking companies grew by a healthy 31.8% to र 46,064.4 mn during the fiscal. On the other hand, income from fund-based services (10.4% share) and treasury operations (4.2% share) declined 15.5% and 0.3% respectively.
Growth in total income of broking companies was largely led by income from broking services, whose share in total income increased from 66.4% in FY09 to 74.9% in FY10. Large companies, which have a much more diversified business compared with mid-size and small broking firms, generated 72.9% of total income through broking in FY10. Aggregate broking income of these companies grew 34.1% y-o-y to र 25,934.2 mn during the fiscal. Mid-size broking companies generated the highest proportion (78.6%) of income through broking during Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 FY10. Their broking income grew a healthy 39.8% y-o-y to र 11,573 mn. Broking income of small broking companies grew the fastest among the rest, increasing 40.8% to र 3,665.9 mn. Robust performance of large, mid-size and small broking companies in the broking segment led to overall growth of 36.2% to र 41,173.1 mn in broking income of the sample companies.
Overall profit of broking companies soar; small companies see a turnaround Aggregate profit of the broking companies eroded more than 60% and 70% at the operating (EBIDTA) and net (PAT) levels, respectively, in FY09 because of repercussions of the global financial crisis on the Indian stock market. The profit trend changed for the companies with overall profit at the operating level growing 86% to र 19,990 mn during FY10. Operating profit of the large companies, which contributed almost 72% to overall operating profit of the sample, grew 53% to र 14,369.4 mn during the year. Aggregate operating profit of mid-size companies, which slumped 83% to र 1,293.6 mn during FY09, jumped more than three times to र 4,747.1 mn in FY10. Small broking companies also saw substantial growth from र 52.8 mn in FY09 to र 341.7 mn in FY10. Overall net profit of the sample broking companies increased substantially by 178% to र 10,965.2 mn during FY10. Net profit of the large firms increased 95% to र 8,131.3 mn while that of mid-size ones increased more than 20 times from र 109.2 mn in FY09 to र 2,492.2 mn during the year. Small companies, which had recorded a loss of र 330.6 mn at the net level during FY09, saw a turnaround, recording profit of र 341.7 mn.
The investment break-up of broking companies reveals that substantial proportion of their investments is in equity shares and mutual funds. Large broking companies invested almost 75% of their total investments (र 25,122.9 mn) in equity shares during FY10. The book value of Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 investments in equity shares by a large company declined 1.8%. Investments made through mutual funds, on the other hand, increased 51.2% y-o-y to र 7,646.6 mn during the same period. Mid-size broking houses invested 50.2% and 47.3% of their total investment in equity shares and mutual funds, respectively. Their book value of investments in equity shares and mutual funds increased 0.3% and 18.2% to र 1,672.8 mn and र 1,577.7 mn respectively. The investment value of small companies grew the fastest among broking companies. The total book value of their investments in equity shares and mutual funds increased 16.1% and 316.6% to र 1,349.8 mn and र 695.3 mn, respectively.
1.2 An overview of the Indian stock market The Indian economy is one of the fastest growing in the world, despite only moderate growth seen during FY09. After slow growth of 6.7% during FY09, the economy bounced back to a long-term growth rate of 7.4% in FY10, as per Central Statistical Organisation (CSO) advance estimates. Recovery in GDP growth was broad based, except for agriculture. Seven out of eight sectors/sub-sectors showed growth of 6.5% or higher. Industry output, which was affected by the cyclical slowdown, international commodity price shocks in FY08, and the global recession in FY09, recovered substantially in FY10. Along with the recovery in industry and core infrastructure sectors, upturn in business and consumer confidence reflected in the revival of consumption and investment demand. The overall improvement in the global economic and financial conditions also boosted the external economy, with the revival in exports and capital flows.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Trading frequency improves in both BSE and NSE Liquidity in the stock markets is measured by trading frequency of listed stocks at the BSE and NSE. The number of securities listed at end-Mar 2010 was 8,072 at BSE. At NSE, the number of securities listed was 1,359 as on Mar 31, 2010. Trading frequency improved YoY at both the stock exchanges in FY10. During FY10, the number of securities traded in the BSE was 3,371 compared with 3,246 in FY09. Similarly, the number of securities traded on the NSE was higher y-o-y at 1,401 in FY10 compared with 1,301 in FY09. The percentage share of securities traded at BSE above 100 days marginally increased from 87.2% in FY09 to 88.6% in FY10. At NSE, this percentage decreased from 97.8% in FY09 to 92.9% in FY10. The percentage share of securities traded for less than 10 days was 4.1% at the BSE and 0.9% at the NSE in FY10.
1.3 Primary Insights of Broking Firms in India The Indian equity broking industry has gained momentum in terms of scope and scale. The industry has tremendous opportunities as India moves toward adding another trillion in GDP. Competition in the broking space has intensified with entry of new firms and recognized brands with strong balance sheets. With the Indian securities market experiencing rapid growth and financial integration gaining speed, the role of intermediation will strengthen further. However, in the long term, quality and maturity of services would determine the success and sustainability of firms in this industry. Key factors driving growth and success in the broking industry would be distribution networks, diversification of services, expertise and research, transparency and disclosure, and compliance and market integrity. Technology will be one of the key growth drivers since ability to scale up businesses and engage customers and yet manage costs can only be possible with state-of-the-art technology in place. Customers require access to latest information and analytical tools, to engage effectively in the capital markets due to the real-time environment in which we operate. D&B India has sought to provide coverage of the Indian equity brokerage industry through this publication. This section provides key insights into this important segment of the financial Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 services industry. The information collected from firms profiled in this edition has been analysed to provide a understanding on various operational aspect of these firms such as reach, access, employees and markets served. The sample of firms for this study comprises those that had responded with the requisite information to questionnaires administered by D&B India.
More than 50% of companies are engaged in three market segments Most of the sample companies have operations in different market segment besides equity cash. Majority of the companies are engaged in three market segments, with companies operating in cash, equity derivative and currency futures constituting 50.8% of the overall sample. Moreover, 17% of the companies have operations in four market segments. Of these companies, majority of them operated in cash, equity derivatives, debt as well as currency futures. Companies dealing in all market segments comprising of equity cash, equity derivatives, debt, currency futures and commodities amounted for only 1.6% of the entire market segment of the profiled companies Broking companies that operate in the cash, equity derivatives as well as currency future segments formed approximately 49% of the sample companies. Those operating in cash, equity derivatives, and debt and currency future segments accounted for approximately 11% of the sample companies.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Western region has highest number of companies Following the trend of previous year‘s studies in 2008 and 2009, the western region continues to be the biggest region in terms of broking companies. More than 50% companies, that form a part of the current publication, were based in western India (Gujarat, Maharashtra and Dadra & Nagar Haveli). City-wise, Mumbai leads the pack with 41% companies, followed by Ahmedabad Rajkot, Vadodara and Surat.
Broking activities are emerging in a number of cities other than the main ones and the metros. Backed by the growing broking culture across the country and the onset of IT has enabled many equity broking firms to broaden their network across the country. Almost 34% of the terminals in the sample are based in the Western region where Mumbai holds maximum representation, followed by Ahmedabad at 11%. In the southern region, Chennai, Hyderabad and Bengaluru account for 5% of the terminals, whereas in the North, Delhi has maximum share at 17%, followed by Kolkata at 11% in the eastern region. Other cities such as Vadodara, Jaipur and Pune have 3%, 4% and 5% shares respectively.
http://www.dnb.co.in/EquityBroking2010/Equity_Broking_Industry.asp
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.5 Major Players in the Industry Among all the Indian brokerage companies, the top 10 Brokerage Firms in India can be listed as below: Name
Kotak Securities Limited
Terminals
4320
Sub Brokers
910
No. of Employees
4008
No. of Branches
350
Name
Karvy Stock Broking Limited
Terminals
1700
Sub Brokers
19000
No. of Employees
3910
No. of Branches
581
Name
Indiabulls
Terminals
2876
Sub Brokers
NA
No. of Employees
5873
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522 No. of Branches
Name
IL&FS Investmart Limited
Terminals
1644
Sub Brokers
NA
No. of Employees
1900
No. of Branches
294
Name
Motilal Oswal Securities
Terminals
7923
Sub Brokers
890
No. of Employees
2193
No. of Branches
63
Name
Reliance Money
Terminals
2428
Sub Brokers
1494
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 No. of Employees
2037
No. of Branches
142
Name
India Infoline
Terminals
173
Sub Brokers
173
No. of Employees
NA
No. of Branches
605
Name
Angel Broking Limited
Terminals
5715
Sub Brokers
NA
No. of Employees
284
No. of Branches
NA
Name
Anand Rathi Securities Limited
Terminals
1527
Sub Brokers
320
No. of Employees
4566
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 No. of Branches
220
Name
Geojit
Terminals
627
Sub Brokers
247
No. of Employees
343
No. of Branches
314
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CHAPTER: 2 INTRODUCTION TO MOTILAL OSWAL
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 2.1 Motilal Oswal Products and Services
Today Motilal Oswal is a well diversified financial services firm offering a range of financial products and services such as Equity Derivatives Online Trading Commodities Mutual Funds Distribution IPO‘s Depository Services Portfolio Management Services Wealth Management
EQUITY In keeping with its tradition of personalized service, Motilal Oswal Securities Limited
provides Customized Equity Advisory Group to clients based on their profile. Equity Research is an inherent strength of MOS. Converting that research to advice is the main function of Equity Advisory. Investors are presented with well researched opportunities in companies which will grow in both market perceived value and growth. Alongside, the trading fraternity is catered to with ideas induced by Technical analysis and news flow analysis. The investment ideas identified by the research team are presented and communicated with conviction to our clients by our advisory team. Our advisory team has highly trained equity professionals, who act as your Equity
Advisor. MOS Equity Advisor proactively helps you take informed equity investment decisions and build a healthy portfolio giving the best fit to your investment and trading needs.
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Centralized Advisory Desk (CAD) The MOS Equity Advisory Group is based in Mumbai at largest dealing and advisory floor of India. This centralized advisory team caters to peculiar Investment need of every HNI & MNI client and business partner; in a seamless, speedy and reliable manner using state-of-the-art technology and telecommunication infrastructure.
MOS Equity Advisors are equipped with the knowledge and prudence making sure that
every rupee deployed works the hardest it can. Your advisors play the part of a guide ushering you on a swift wealth creation ride. The sheer strength of our advisory creates synergy for seamless flow of Investment support. To improve the overall experience while the clients interact with our advisors, we have
implemented a contact centre solution, Drishti, in our dealing room. Among other benefits, this solution helps advisors to manage their client base more efficiently and effectively. The system provides a single number contact to all our clients as well as a single click auto-dial for advisors without having to remember their contact details. Online Motilal Oswal Investment Services offers you a state-of-the-art Online Trading
platform that gives you
DERIVATIVES Futures &Options (F&O): Futures & options are derivatives, which use equity as their underlying. Hence our Equity Advisory Group (EAG), will also act as your advisors for F&O & help you take informed decisions while trading in these derivative instruments.
Why F&O: Since derivatives instrument provide good leverage opportunity, it is a great tool for speculation. Leverage is a double edge sword for which one requires an equity advisor. Our advisors will also help you with various strategies like Bull Spread, Bear Spread, Cover call writing, hedging strategies etc. This is to help you to make better trading returns. The Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Equity Advisor doesn‘t stop at just that, he goes a step further to ensure that your trades are settled and traded with proper margin in your account in a timely manner. This allows us to give you a convenient single window service and your advisor becomes the single point contact for all your equity related matters. You can avail of our services from all our Business locations and through E broking across India, as in equities
ONLINE TRADING Web Features of Web Trading Platform Simple, yet Powerful
Easy to use interface for first time investors
Trade from any internet connected PC
Multiple scrips with refresh option (static)
Screenshot is for illustrative purpose only Feature-rich Platform
Single window order placement with instant confirmation
Screenshot is for illustrative
Trade from any internet connected PC
Tick-by-Tick market watch (BSE/NSE/F&O)Shortcut keys for faster access
purpose only
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Desktop Features of Desktop Trading Application
Single window order placement with instant confirmation
Tick-by-Tick market watch (BSE/NSE/F&O)
Shortcut keys for faster access
Screenshot is for illustrative purpose only
Mobile
Features of Mobile Trading
Live streaming quotes
Directly buy/sell from market watch
Modify/Cancel facility for pending orders
Access live advice from Motilal Oswal
Instant access to Top Gainers, Losers & Traded Value along with indices
Market Depth of scrip selected
Synchronized position whether order/trade done from Mobile/Web/Desktop/Call N Trade
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 CALL N TRADE Features of Trading on Phone (Call N Trade)
All our customers enjoy Call N Trade services at no additional cost.
COMMODITIES Ever since the dawn of civilization commodities trading have become an integral part in the lives of mankind. The very reason for this lies in the fact that commodities represent the fundamental elements of utility for human beings. Over the years commodities markets have been experiencing tremendous progress, which is evident from the fact that the trade in this segment is standing as the boon for the global economy today. The promising nature of these markets has made them an attractive investment avenue for investors. Earlier investors invested in those companies, which specialized in the production of commodities. This accounted for the indirect investments in commodity assets.
WHY COMMODITIES The commodity based products offer a huge array of benefits that include offering risk-return trade-offs to investors, providing information on market trends and assisting in framing asset allocation strategies. Commodity investments are always considered as defensive because during the times of inflation, which adversely affects the performance of stocks and bonds, commodities provide a defense to investors, maintaining the performance of their portfolios. Commodity markets have a huge potential in the Indian context particularly because of the agribased economy. With the government's initiative for agricultural liberalization, commodities' trading in India has gained increased momentum in activities. To increase the efficiency of the markets
the
Forward
Markets
Commission
(FMC),
the
governing
body
of
commodities trading in India has taken several initiatives for the establishment of national level multi-commodity exchanges in India.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 WHY MOCBPL? Motilal Oswal Commodities Broker Pvt. Ltd. (MOCBPL) is a fully owned subsidiary of Motilal Oswal Financial Services Ltd. and has been providing commodity trading facilities and related products and services on MCX and NCDEX. Besides access to the best of research in the form of Daily Fundamentals & Technical Reports on highly traded commodities, our clients also get access to our exclusive Customized Trading Advice on both the trading platforms. A Unique Experience
Solid Research: Client at MOCBPL gets access to the best of research in the form of Daily Fundamental and Technical Research Reports on highly traded commodities.
One Stop Shop: MOCBPL provides end-to-end advice for all the commodities to all our prestigious individual investors. Privileged customers also get exclusive & customized advice.
Dual Membership: MOCBPL has membership to MCX and NCDEX exchanges which gives the clients to take advantage of the dual exchange trading facility provided by us.
Personalized
Service: We
provide
personalized
service
through dedicated
relationship managers for quick and efficient execution of transactions and for regular follow ups.
MUTUAL FUNDS Investments can seem complicated and mystical. Since all the traditional investment avenues like bank deposits, RBI Bonds, NSC, KVP etc are becoming unattractive with the interest rate falling continuously, one needs to look for other investments alternatives. Mutual funds offer the ideal platform to participate in the Equity & Debt market indirectly through professional management.
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Mutual funds are becoming the most popular investment vehicles offering various kinds of schemes with different investment objectives. Investments through Mutual funds are one of the safest, easiest and convenient ways of making successful investments. The investments are in congruence to the laid down investment objectives securing the goals & objectives of the unit holders.
At Motilal Oswal Securities Ltd, we understand the importance of financial goals of our privileged clients and provide you comprehensive solutions to all your financial needs. Through our tailor made portfolios, we serve your needs better and help you make informed investment decisions. Our dedicated Mutual fund desk gives you Solid advice backed services thus giving you the edge that you always wanted. At Motilal Oswal, we offer two distinct modes of investment to suit your specific needs. The client may choose to apply online for Mutual Funds or call up one of our relationship managers to help you place orders in Mutual Fund schemes. Mentioned below is a brief description of the services that we offer to our clients:
Need based advisory, fully backed with solid research.
Dedicated Mutual fund advisors to understand your needs and help you build a tailor made portfolio.
Monthly review of portfolios.
Monthly Fact-sheet covering our analysis of various funds.
Knowledge sharing through educational seminars and workshops
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 IPO’S Introduction Book Building and Fixed Price Issue are the two types of Initial Public Offerings (IPOs) through which
a
public
company
can
raise
money
in
the
capital
market.
In a book building public issue the bids are received at different price levels and the demand for
the
issue
is
built
up
over
a
period
of
time.
Depending
upon
the bids received at different price levels the issue price is ascertained. In a fixed price issue the issue price is pre ascertained by the issuer. ―Book Building‖ means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicit and built up and the price of the security is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover the price for securities. In case of a fixed price issue the issue price is fixed.
ONLINE IPO MOSL facilitates the IPO application for all of its clients through online platform. Using the Online IPO service, an existing can apply for the IPO using the online facility. Source: https://onlinetrade1.motilaloswal.com/
DEPOSITORY SERVICES In the times of T+2 having a de-mat account linked to your trading account becomes really convenient. The non-trading clients can also avail of MODES.
Today MODES is available at all business locations of Motilal Oswal. In terms of number of accounts MODES is the second biggest Depository Participant in CDSL with over 150,000 accounts. The trust they have in Motilal Oswal is reflected by their cumulative holding in MODES worth over Rs. 3400 crores. Stevens Business School (2010-12)
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Holder of a MODES account receives regular account reports and an efficient service at all times. Clients having holdings over Rs. 10 lakhs receive special SMS service. They get recommendations on their holdings based on Motilal Oswal Research rated the "Most Independent Research - Local Brokerage" by Asia Money Brokers Poll 2006.
BENEFITS
As an investor you will enjoy many benefits if you buy and sell shares in the depository mode. The following are some of the benefits you will enjoy:
No bad deliveries
No risk of loss, mutilation or theft of share certificates
No stamp duty for transfer of shares
Reduced paper work
Fast settlement cycles
Low interest rates on loans granted against pledge of dematerialized securities by banks
Low margin on securities pledged with banks
Increase in liquidity of your securities because of faster transfer and registration of securities in your account
Instant disbursement of non-cash benefits like bonus and rights into your account
Regular account status updates available from MODES at any point of time.
PORTFOLIO MANAGEMENT SERVICES Managing investments in equities requires time, knowledge, experience and constant monitoring of stock market. Given the unpredictable nature of the equity market it requires solid experience and strong research to make the right decision in the right direction at the right time. That's where
the
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Motilal Oswal Asset Management Company (MOAMC) is part of the Motilal Oswal Group and a 100% subsidiary of Motilal Oswal Securities Ltd. The Board of Directors of MOAMC comprises of eminent personalities with varied experience including Mr. Raamdeo Agarwal, who is the co-founder of the Group. Mr. Nitin Rakesh, CEO, has rich and varied experience of more than 15 years. His focus has been on investment management and operations and has worked in multiple areas including asset management, transaction processing, offshore fund structuring and venture
capital.
The PMS business was under MOSL since inception in 2003 till October 2010, when the PMS business was moved to the AMC with the objective of consolidating all Assets Based and Investment
Management
Based
businesses
under
one
legal
entity.
At Motilal Oswal Asset Management Company, we believe in creating superior investment products that revolve around sound investing principles and leverage on the engrained principles of Knowledge First and Innovation. Our endeavour is to constantly evolve and develop investment solutions that embrace our two core philosophies of being Focused & Disciplined.
We are one of the leading PMS Service Providers, with Assets under Management of Rs.13 billion (as on December 2010) with a customer base of 5,450 and a 4 member fund team managing funds across a number of strategies as given below. Our core principles are ―value based investing‖ aimed at providing long term wealth creation for investors.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 BENEFITS
Professional Management: The service offers professional management of your equity investments with an aim to deliver consistent return with an eye on risk.
Risk Control: Well defined investment philosophy & strategy acts as a guiding principle in defining the investment universe. We have a very robust portfolio management software that enables the entire construction, monitoring and the risk management processes.
Convenience: Our Portfolio Management Service relieves you from all the administrative hassles of your investments. We provide periodic reports on the performance and other aspects of your investments.
Constant Portfolio Tracking: We understand the dynamics of equity as an asset class, so we track your investments continuously to maximize the returns.
Transparency: You will get account statements and performance reports on a monthly basis. That‘s not all; web access will enable you to track all information relating to your investment on daily basis. A password protected web login, will enable your to access details your investment on click of a button. The following portfolio reports are accessible online:
Performance Statements
Portfolio Holding Reports
Transactions Statements
Capital Gain/Loss Statements
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Dedicated Relationship Manager: Your Relationship manager will help you carefully understand your financial goals and advise you the right product mix. The relationship managers, the one point contact will bestow personalized service and ensure that you receive periodic updates and account performance reports. Source: www.motilaloswal.com
WEALTH MANAGEMENT Motilal Oswal Securities ltd added Life Insurance during April 2008 to our Wealth Management Portfolio thereby filling the gap in our basket of the products and thus providing comprehensive financial planning to our clients covering not all wealth creation solutions, but also wealth protection through proper risk management process. With complete emphasis on the solution providing, we approach our clients, not merely with insurance product per se, but with module (life profiler) to help our clients with objective based planning for life, identify and understand the various risk attached to his/her life and later advising you with appropriate customized solution. MOSL through our insurance partners offers insurance coverage and wealth creation opportunities to meet your different financial goals during the various stages of your life. The plans offer you the control to manage your protection and investment in one account. It is designed to remove your worries and making you secure in the knowledge that you and your loved ones are protected against any untoward events.
Life is about living it to the fullest. About reaching for a higher goal. At different stages of your life you have different goals; whether it is owning the home you've always dreamed of, giving your children the best or just having the financial freedom to enjoy your golden years.
Financial planning for individual, family and business wealth creation and management needs. These are provided to customers through our Wealth Management service called ‗Purple‘.
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CHAPTER: 3 INTRODUCTION TO THE PROJECT
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Being a reputed company in the business it is of utmost importance for Motilal Oswal to be aware of what is going on in the market, what is expected of them and how are they performing and do they need any improvements. So, to cover all these areas a detailed analysis of all this aspects has been done. The project revolves around the whole financial market business. Through this project, an effort towards understanding and throwing more light on every aspect related to the business has been undertaken. It will surely help Motilal Oswal in getting a detailed insight into the business and developing marketing strategy in such a way that most can be reaped from the market of franchisee integration. Not only that, it was tried to give the business a new dimension in terms of approaching the sub-broker to generate leads which may in turn help in getting larger market share. The project had two market research parts Market survey of financial product. Awareness about the E-trading platform in financial market. Besides that the marketing strategies used by other companies in same business was studied and suggestions were drawn to develop an effective strategy. Besides these major issues many other issues were taken care of in this report.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 3.1 Objective of the project To know the awareness in customers about ―E-Trading Platform‖ and to find their investing pattern.
3.2 Limitations of the project
Although the project aims at making an in-depth market research but there are some practical limitations regarding the methodology followed & the overall procedure. These can be summed up under the following points -- Our survey was restricted only for the people of Satellite area. The sample taken for this research might not represent the whole population. Since the survey is conducted exclusively on personal view of the respondent may make lead to some biasness in the results. Some people do not want to give correct details required in the questionnaire. It is also possible that some people might have given false or misleading information. Many people doubted the fact that the information given by them would be kept strictly confidential. Many people gave unauthentic information to hide their ignorance.
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CHAPTER: 4 RESEARCH METHODOLOGY
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1 Methodology used for the project This project followed a simple & systematic methodology.
Schedule of the Project: The Timeline decided for the project: 25th April – 28th April
: Introduction of Motilal Oswal by our company guide.
29th April – 30th April
: Questionnaire Designing
30th April – 1st May
: Location Details
2nd May – 30th May
: Data collection
st
th
31 May – 4 June
: Tele calling
4th June – 12th June
: Final report preparation
13th June
: Final report submission.
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CHAPTER: 5 DATA ANALYSIS
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Basic Table Age group
Frequency Valid
Percent
Valid Percent
Cumulative Percent
21 to 25
99
24.8
24.8
24.8
26 to 30
94
23.5
23.5
48.3
31 to 35
119
29.8
29.8
78.0
36 to 40
50
12.5
12.5
90.5
> 40
38
9.5
9.5
100.0
Total
400
100.0
100.0
Annual Income
Frequency Valid
< 100000
Percent
Valid Percent
Cumulative Percent
98
24.5
24.5
24.5
100000 to 300000
135
33.8
33.8
58.3
300000 to 500000
113
28.3
28.3
86.5
54
13.5
13.5
100.0
400
100.0
100.0
> 500000 Total
Occupation
Frequency Valid
Percent
Valid Percent
Cumulative Percent
Student
59
14.8
14.8
14.8
Business
97
24.3
24.3
39.0
Services
243
60.8
60.8
99.8
Other
1
.3
.3
100.0
Total
400
100.0
100.0
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 5.1 HYPOTHESIS Ho: There is no significant relation between Age and the Investment pattern. H1: There is significant relation between Age and the Investment pattern.
Chi-Square Tests Value
Df
Asymp. Sig. (2-sided)
Pearson Chi-Square
34.399
a
4
.000
Likelihood Ratio
35.013
4
.000
N of Valid Cases
400
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 12.73.
Here we try to find the relation between Different age group respondents and their investment pattern. From the graph we can see, the younger age group prefer Online trading, as they are upgraded with new technologies and internet. In 26 to 30 and 31 to 35, Age group, only 30% of respondents prefer for online trading. No doubt this ratio will increase to more than 50% within 5 years, as technology has paved the growth path in India. Respondents above 40 age group they mainly do offline trading. Stevens Business School (2010-12)
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 And in this null hypothesis is rejected.
5.2 Relation between Gender and Investment pattern?
Chi-Square Tests
Value
Df
Asymp. Sig. (2-
Exact Sig. (2-
Exact Sig. (1-
sided)
sided)
sided)
Pearson Chi-Square
1.978
a
1
.160
Continuity Correctionb
1.522
1
.217
Likelihood Ratio
2.084
1
.149
Fisher's Exact Test N of Valid Cases
.172
.107
400
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 14.07. b. Computed only for a 2x2 table
In our survey, we get only 42 females respondents and 358 males, 35% of total respondent of male prefer to do online trading and rest do offline trading. These results indicate that there is no significant relationship between the investment pattern and gender (chi-square with one degree of freedom, p = 1.978, Significant assumption= 0.160).
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 5.3 Relation between Education and Investment Pattern? Ho: There is no significant relation between Education and Investment pattern. H1: There is significant relation between Education and Investment pattern.
Chi-Square Tests Asymp. Sig. (2Value
df
sided)
Pearson Chi-Square
6.787a
2
.034
Likelihood Ratio
7.808
2
.020
Linear-by-Linear Association
4.314
1
.038
N of Valid Cases
400
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 10.39.
Here out of 400 respondents, which are categorized based on their education and their investment decision? In column of Undergraduate, only 4 people prefer online trading and 27 prefers offline trading. Same as in Graduates 68 prefers online trading and 133 prefers offline trading. Lastly in Post Graduates also 62 prefers online trading and 106 prefers offline trading. Overall we can say that only 133 people prefer online trading and 265 people prefers offline trading.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 In chi square tests we find that Ho is Rejected that is H1 is accepted and there is significant relationship between the variables (chi-square with 2 degrees of freedom, P= 6.787 and significant assumption = .034).
5.4 Occupation and Investment Pattern? Ho: No significant relation between Occupation and Investment Pattern. H1: Significant relation between Occupation and Investment Pattern.
Chi-Square Tests Asymp. Sig. (2Value
df
sided)
Pearson Chi-Square
23.965
a
3
.000
Likelihood Ratio
22.920
3
.000
Linear-by-Linear Association
16.547
1
.000
N of Valid Cases
400
a. 2 cells (25.0%) have expected count less than 5. The minimum expected count is .34.
Here from 400 respondents, Students which are of young age prefer to do online trading. While many our client falls in Business and Service class.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 No. of
% of total
% of Each class
respondents
respondents
respondents
Business
97
8%
30%
Service
243
17.25%
28.39%
The chi square table show that the Ho (null hypothesis) is rejected that is there is significant relation between Occupation and Investment patter.
5.5 Awareness of various Investment avenues based on Age group? Age group * Awareness of Fixed Deposits
There is no doubt that respondents are fully aware about fixed deposits, irrespective of age group.
Age group * Awareness of PMS Chi-Square Tests Asymp. Sig. (2Value
df
sided)
Pearson Chi-Square
9.822a
8
.278
Likelihood Ratio
9.876
8
.274
N of Valid Cases
400
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 8.55.
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The respondents of younger age group are of combined opinion about their awareness level. Other than that all other groups are adequately aware about the PMS.
Age group * Awareness of Post
Age group * Awareness of Shares
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Age group * Awareness of IPO's
Age group * Awareness of PPF
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Age group * Awareness of Mutual Fund
Age group * Awareness of NSE
The above graphs of awareness levels of all age group are self explanatory. From the bird view point, we can say that the awareness level of investment avenues is satisfactory in survey of our respondents.
5.6 Frequency of Income group respondents? Stevens Business School (2010-12)
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Here there are people who are classified in different income groups are as follows: 24.5% respondents- less than 1,00,000 33.8% respondents- 1,00,000-3,00,000 28.3% respondents- 3,00,000-5,00,000 13.5% respondents- more than 5,00,000
5.7 Frequency of Influencing Factors?
Frequency of Influencing Factor Advisor:
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Influencing factor Advisor Cumulative Frequency Valid
Not Selected Selected Total
Percent
Valid Percent
Percent
326
81.5
81.5
81.5
74
18.5
18.5
100.0
400
100.0
100.0
Here respondents are not so much influenced by advisors to invest; only 18.5% people are influenced and 81.5% are not influenced by them for the same.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Frequency of Influencing Factor Television:
Influencing factor Television Cumulative Frequency Valid
Percent
Valid Percent
Percent
Not Selected
286
71.5
71.5
71.5
Selected
114
28.5
28.5
100.0
Total
400
100.0
100.0
Here 28.5% respondents are influenced by television and 71.5% people are not influenced by the same.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 Frequency of Influencing Factor Word of Mouth:
Influencing factor word of mouth Cumulative Frequency Valid
Not Selected Selected Total
Percent
Valid Percent
Percent
345
86.3
86.3
86.3
55
13.8
13.8
100.0
400
100.0
100.0
Here only 13.8% respondents are influenced by word of mouth and 86.3% are not influenced by the same.
Frequency of Influencing Factor Friends and family:
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Influencing factor Friends and Family Cumulative Frequency Valid
Not Selected
Percent
Valid Percent
Percent
81
20.3
20.3
20.3
Selected
319
79.8
79.8
100.0
Total
400
100.0
100.0
Here 79.8%respondents are more influenced by the decision of friends and family, 20.3% are not influenced by the same.
Frequency of Influencing Factor Other Factors:
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
any other influencing factor Cumulative Frequency Valid
Not Selected
Percent
Valid Percent
Percent
366
91.5
91.5
91.5
1
.3
.3
91.8
Own
33
8.3
8.3
100.0
Total
400
100.0
100.0
Capital Mkt Magazine
Here in others option 8.3%respondents do investment by their own knowledge and 3% respondents are influenced by Capital Market Magazine.
5.8 Ranks to Various Investment Avenues? Ranks Mean Rank Rank of Fixed Deposit
3.45
Rank of Portfolio Management
6.95
Rank of Post
6.16
Rank of Shares
4.00
Rank of IPO
4.33
Rank of NSE
7.99
Rank of PPF
4.81
Rank of Mutual Fund
6.25
Rank of others
1.08
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Test Statisticsa N Chi-square
400 1879.692
Df Asymp. Sig.
8 .000
a. Friedman Test
Ranks Age group Rank of Fixed Deposit
N
Mean Rank
21 to 25
99
167.16
26 to 30
94
228.95
31 to 35
119
229.50
36 to 40
50
176.40
> 40
38
157.89
Total
400
dime ns ion 1
Rank of Protfolio
21 to 25
99
204.01
Management
26 to 30
94
196.42
31 to 35
119
202.76
36 to 40
50
214.91
> 40
38
175.41
Total
400
dime ns ion 1
Rank of Post
21 to 25
99
202.12
26 to 30
94
194.91
31 to 35
119
212.32
36 to 40
50
187.75
> 40
38
189.87
Total
400
dime ns ion 1
Rank of Shares
21 to 25
99
243.82
26 to 30
94
182.09
31 to 35
119
174.47
36 to 40
50
212.47
dime ns ion 1
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
Rank of IPO
> 40
38
Total
400
198.93
21 to 25
99
236.08
26 to 30
94
158.63
31 to 35
119
188.38
36 to 40
50
229.25
> 40
38
211.49
Total
400
dime ns ion 1
Rank of NSE
21 to 25
99
201.48
26 to 30
94
202.04
31 to 35
119
205.89
36 to 40
50
195.85
> 40
38
183.37
Total
400
dime ns ion 1
Rank of PPF
21 to 25
99
193.24
26 to 30
94
232.36
31 to 35
119
198.05
36 to 40
50
183.56
> 40
38
170.59
Total
400
dime ns ion 1
Rank of Mutual Fund
21 to 25
99
164.10
26 to 30
94
237.02
31 to 35
119
206.73
36 to 40
50
215.75
> 40
38
165.43
Total
400
dime ns ion 1
Rank of others
21 to 25
96
194.51
26 to 30
92
192.50
31 to 35
116
192.50
36 to 40
48
192.50
> 40
34
198.18
Total
386
dime ns ion 1
Test Statisticsa,b
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Chi-square
Rank of
Rank of
Rank
Fixed
Protfolio
Rank of
Rank of
Rank of
Rank of
Rank of
Rank of Mutual
of
Deposit
Management
Post
Shares
IPO
NSE
PPF
Fund
others
32.778
3.003
2.506
23.875
27.144
1.516
11.813
24.684
5.702
4
4
4
4
4
4
4
4
4
.000
.557
.644
.000
.000
.824
.019
.000
.223
Df Asymp. Sig. a. Kruskal Wallis Test
b. Grouping Variable: Age group
Here there is an assumption – Lower the mean rank means higher rank is given by the respondent to that product. The overall Preferences for the product as per the rank given by respondents are as below: Ranks
Products
1
Fixed Deposits
2
Shares
3
IPO‘s
4
PPF
5
Post
6
Mutual Funds
7
PMs
8
NSE
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 A product which has given higher rank by different age group is as follows:
Respondents of above 40 age ranked Fixed Deposits as their most reliable investment avenue.
PMS is also highly ranked by the same age group as they have earned throughout their life and have enough money to make investment in PMS.
Post is ranked by 30-40 age groups.
Shares which are highly volatile are most ranked by 31-35 age groups.
IPO another volatile investment avenue is ranked by 26-30 age groups.
NSC & PPF is ranked by above 40 age group.
Mutual Fund, as said many investors come together with a small amount to invest, is ranked by younger age group i.e. 21-25.
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CHAPTER: 6 RECOMMENDATIONS
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 6.1 RECOMMENDATIONS
Our most of respondents falls in age group range from 21-35 i.e. 78% of total respondents. The respondents of 26-35 age groups are most active in trading and investment, but they mostly prefer to do offline trading as they are less familiar with the latest technology.
On the other hand age group of 21-25 do prefer more online trading as they are fully familiar with the technology. While respondent above 40 are inactive with technology.
Here Motilal Oswal should focus on 21-35 age groups also it should provide aid to 26-35 age groups to go through online training.
In present days people prefer self investment decision but days are not far that demand of Wealth advisor will arise. Therefore, to grab upcoming market Motilal Oswal should make regular advertisements of advisory counseling which will help them in future and also they should focus on branding.
Looking to all above, we can say that, the Shares, IPO‘s and Mutual Funds are upcoming investment avenue and ready to grab the financial market. To make easy trading through online aid or training is to be provided to clients and online trading procedure should make easy to operate.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 6.2Training Motilal Oswal Financial Services Ltd. (MOFSL) is a well-diversified, financial services company focused on wealth creation for all its customers, such as institutional and corporate clients, HNI and retail customers. Our services and product offerings include equity broking, commodity broking, and distribution of third party products, investment banking and venture capital management.
As internet facility is gauging its space in each and every field. Why the Share trading get behind? Now days, almost all share trading firms have entered into ―Online Trading of Shares‖. Online facility of share trading is new beginning which is to be learned and trained to clients. We were assigned the work of ―Market Survey‖ and we had to provide information of products and facility provided by MO, we were given the training of ―Online Terminal‖. There are two types of trading takes place (1) Offline trading and (2) Online Trading. Offline Trading is also called as Call and Trade. While online trading is done by clients from their personal terminal. Online Terminal It is also known as LITE. Further it is divided into 2 types: (i) (ii)
Desktop Mobile
Desktop - Online terminal: Terminal which operates in computer and client can trade through its computer with its login ID. It works best on high speed internet connections. And it is best suitable for investors and traders who want live market watch and faster execution.
Mobile – Online Terminal: We get online information of shares price and trading facility on mobile phone with assess of internet facility. It is useful for people who do not want to sit on computer. But the drawback is it has lower speed as compare to desktop speed.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
ANNEXURE 1
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 QUESTIONNAIRE
(We are interns of Motilal Oswal, doing survey to know the market penetration level about ETrading.) 1. Name: ________________________________________.
Gender:
Male
Female
E-mail ID: ___________________________________. Contact No: ______________________. Age:
21 to 25
Occupation:
26 to 30
Student
31 to 35 Business
36 to 40
Service
above 40
Others please
specify__________________. Education:
Under Graduate
Graduate
Post Graduate
Annual Income: Less than 1,00,000
1,00,000 to 3,00,000
3,00,000 to 5,00,000
Above 5,00,000
2. How much percent do you save from your annual income? Less than 5%
5% to 10%
10% to 15%
Above 15%
3. How much percent of return do you expect from your investment? Below 8%
8% to 12%
12% to 15%
Above 15%
4. Rank to various avenues of investment? (1 –highest & 8 -lowest ) Fixed deposits
Portfolio Management Services (PMS)
Post
Shares
IPO‘s
NSC
PPF
Mutual Funds
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Others please specify__________________.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011
5. How much are you aware about following avenues of investment? (Tick mark in following column)
Investment Avenues
Low
Medium
High
Fixed deposits Portfolio Management Services (PMS) Post Shares IPO‘s PPF Mutual Funds NSC
6. Who influences your investment decision? Advisors Friends & Family
Television
Word of Mouth
Others please specify _______________________.
7. Which mode of transaction do you prefer? Online
Offline
8. Would you like to have Wealth Advisor Services? Yes
No
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 BIBLIOGRAPHY Books Market Research by Naresh Malhotra and Satyabhusan Dash. Business Research Methodology by William Zikmund . The Indian Financial System by Bharti V Pathak Financial Management by Prasanna Chandra
Websites www.wikipedia.com www.nseindia.com www.sebi.org www.motilaloswal.com www.moneycontrol.com www.valuenotes.com www.bseindia.com
Besides this, data was also collected from the literature survey of the company‘s Documents and by the way of Discussions.
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