summer project at jainam.

November 27, 2017 | Author: Soyeb Jindani | Category: Financial Markets, London Stock Exchange, Stocks, Stock Market, Securities (Finance)
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I’m Soyeb Jindani, a student of BHAGAWAN MAHAVIR COLLEGE OF MANAGEMENT, Which is affiliated to Veer Narmad South Gujarat University, Surat hereby declare that the project entitled “TECHNICAL ANALYSIS OF COMMODITY MARKET TAKING GOLD AND CRUDE OIL” at Jainam Share and Security pvt ltd., is the original work done by me and the information provided in the study is authentic to the best of my knowledge. This study report has not been submitted to any other institution or university for the award or any other degree and will not be submitted in near future.

This report is based on my personal opinion hence cannot be referred to legal purpose.

(Soyeb Jindani) Date:



Preservation, inspiration and motivation have always played a key role in the success of any venture. In the present world of competition and success, training is like a bridge between theoretical and practical working; willingly I prepared this particular Project. First of all I would like to thank the supreme power, the almighty god, who is the one who has always guided me to work on the right path of my life. I would like to thank Miss Shital Mehta for granting me permission to undertake the training in their esteemed organization.

I express my sincere thanks to Dr. A.S.Abani. (Director), Varun Dhingra (Lecturer) & others faculty members of M.B.A. department, for the valuable suggestion and making this project a real successful. I also thanks to Mr. Biranj Patel (Sr. Executive of HR), Chetna Bhandari (Marketing Manager) for their time-to-time guidance and support in completing the project. I also thank the other staff of Jainam who devoted their valuable time by helping me to complete my project. Last but not least, my sincere thanks to my parents and friends who directly or indirectly helped me to bring this project into the final shape. Soyeb Jindani DATE:


Executive Summary

“A good broker system must be able to cope with an extremely complex and dynamic environment.”

The microstructure of the stock market in which brokers work is highly dynamic and volatile. Many stocks are available to be bought and sold, each exhibiting its own patterns and characteristics that are highly unpredictable. With so many options and considerations that need to be taken into account, it is an extremely arduous task for a broker to investigate aspects of the stock market and consistently provide effective advice to their clients. The study is done at stock broking firm to understand nature and functions of the firm. Especially when the prices are being high and low within few seconds so at that time each core functions of firm affects the work environment of whole culture. Commodities are being traded since long years. To understand the predications about prices of commodities like Gold, Crude Oil, and other precious metals, the researcher has done study on technical analysis. For the purpose of the study, researcher has collected data of Gold M and Crude Oil from January 2007 to July 2009. After the data analysis it has been predicted that Gold M is still in bearish condition and at this time the investor should not enter into trading he or she should wait till it goes on bullish level. And about Crude Oil it has been analyzed that in near future prices of Crude Oil will be high so it is time of bull and so investor can take a advantage of it. In short, technical analysis is a forward-looking, graphical assessment tool that anticipates bi-directional value-levels of a price-series over a given time horizon.


This research will able to understand empower traders and investors with a basic knowledge of charting, trading-skills, and decision-making abilities. Secondly, to set such a value, one must ask to what degree the source of analysis is reliable, accurate, and consistent with one's specific trading preferences, and tolerance for risk. Finally, one must know to what extent one can expect to consistently profit from such analysis.


Index: Chapte


Page No.

r No. 1

Introduction to training 1.1

Introduction to training



Objective of Study



Benefit of Study



Introduction to industry


About company



Company profile



About department



Theoretical framework


Research methodology



Objective of the study



Problem identification



Assumption and benefits of study



Research design






Research tool used



Data collection



Limitation of the study



Data analysis



Findings, conclusion and suggestion










Introduction to Training.

This project report is prepared as result of summer training of M.B.A. (Full time) which was of 8 weeks from 21st May 2009 to 15th July 2009. The researcher has taken training at JAINAM SHARES CONSULTANT PVT LTD which is simply related with stock market. Hence it is Stock broking firm which deals with different market like Equity, Commodity, and Derivatives etc.



Objective of Study:

 To gain knowledge about different market such as capital market and its industry which is helpful in completing this report effectively.  To gain the knowledge about stock market and it operation.  To become familiarize with organization, which help in applying theoretical concepts into practical routine  To understand the working system of different department.  To get an experience of working environment.  To become part of professionalism.  To understand technical terms and its applications in study.  To understand of working of different departments and its connectivity with whole organization.  To gain the detailed knowledge of core functions like Marketing, Human Resources, Finance, Research.  To know how the scripts are being traded in Equity market, Derivatives, Commodity market.

1.3 Benefit of Study:  The research has gained some of the following benefit due to this study.  Got the knowledge about stock market and its operations. 9

 Learnt about different scrip.  Learnt about equity and derivatives and how the prices are being volatile.  The working of sensex and nifty its rules and regulation.  How to invest in different security and at what time investor should exit or enter in trading.  How the top management is handling whole organization structure.  Learnt some technical terms of stock market and its application in trading.  As researcher has done detailed study on technical analysis of commodity market so researcher has gained knowledge about technical terms of it.  And moreover the study of technical analysis helped to understand the price movements of commodities and how to predict price for near future.  Even because of the study uses of charts how to make different kinds of charts and after analysis of charts what would be interpretation of it the all things can be answered after the detailed study.



Introduction to the Industry: Financial System: The economy of each and every country in based on the sound financial system which helps in production, capital and economic growth by encouraging savings


habits, mobilizing savings from house holds and other segments and allocating savings into productive usage such as trade, manufacture, commerce etc. Thus, financial system provides bridge for surplus of the savers to be utilized by the deficit spending units. The financial system includes three basic elements:

Financial System Financial Markets Financial Intermediaries

Financial Instruments

Financial Market:












Money market

Short Term ( from Banks,FIs,FIIs, RBI Corporates,MF,Govt. one day to one year)

Capital market

Long Term (above Corporates,Banks, 12



one year)

FIs,FIIs, MF,Individuals

Forex market

Short Term Long Banks, Corporates, RBI forex Term Foreign authorized dealers currency funds

Credit market

Short Term Long Banks,FIs, Term Rupee funds Corporates

Financial Intermediaries Development Financial Institutions Commercial Banks Non banking financial Institutions Insurance Organisation

Financial Instruments Equity Shares Preference Shares Bonds Debentures etc…

Structure of Capital Market:



Capital market

Debt market

Equity market Primary market -public issues -private placement

Domestic Market

International market

Derivatives market

Secondary marketNSE, BSE, OTCEI, ISE, Regional Stock Exchange s

Primary segment

-exchange traded

Futures and options


Primary Market:



Secondary segment

For corporate enterprises, expansion, modernization, reorganization, and mergers require long-term funds to be raised through the issue of shares, debentures and bonds, all of which find their way to the secondary market through the new issue market. The term does not necessarily refer to newly issued stocks, although initial public offerings are the most commonly known new issues. Essentially, the function of the New Issue market lies in facilitating the transfer of investible funds to corporate organization. Initial issue of shares by new enterprises may substantially account for volume of activities in the new issue market and it has been so during the eighties and earlier at various times. Secondary Market: The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market. To explain further, it is trading in previously issued financial instruments. An organized market for securities examples are the New York Stock Exchange(NYSE), Bombay Stock Exchange(BSE), National Stock Exchange(NSE),bond market, over the counter markets, residential mortgage loans, governmental guaranteed loans etc. Role and Functions of Stock Exchange: 1. Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities. 2. Provides a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities. 3. Provides a physical location for buying and selling securities that have been listed for trading on that exchange. 4. Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules. 5. The exchange itself does not buy or sell the securities, nor does it set prices for them. 6. The exchange assures that no investor will have an undue advantage over other market participants. 7. This means that orders are executed and transactions are settled in the fastest possible way. 8. Investors make informed and intelligent decision about the particular stock based on information. 9. Listed companies must disclose information in timely, complete and accurate manner to the Exchange and the public on a regular basis.


History of Stock Market: The stock market has a long history. According to French historian Fernand Braudel, in 11th century Cairo, Islamic and Jewish traders had already established every form of trade association. They were knowledgeable about credit and payment methods. Braudel's suggestions negate the opinion that the Italians contrived these methods later. In 12th Century France, the courratiers de change dealt with managing and regulating the debts of agricultural communities on behalf of the banks. They can be referred to as the first brokers, because they only dealt with debts. The people of Flanders and the neighboring counties also implemented this idea, and Beurzen was soon introduced in Ghent and Amsterdam. In late 13th Century, commodity traders in Bruges gathered inside the house of a man named Van Der Beurse. In 1309, they were named the "Brugse Beurse," and institutionalized their unofficial meetings. The Bankers of Venice started trading in government securities in the middle of the 13th century. In 1351, the Government of Venice prohibited the spread of rumors done with the intention of decreasing government fund prices. During the 14th century, the Bankers of Pisa, Verona, Genoa, and Florence also started trading in government securities. This was possible because these independent city-states were governed by a group of influential citizens, and not by a duke. Later, joint stock companies were started in the Netherlands. This provided shareholders the opportunities to invest in business ventures and get a contribution of their profits or losses. In 1602, the Dutch East India Company issued their first shares through the Amsterdam Stock Exchange, and it was the first company to issue stocks and bonds. A stock exchange in London started trading stocks in 1688. The Amsterdam Stock Exchange (or Amsterdam Beurs) was the first stock exchange to introduce continuous trading in the earlier part of the 17th Century. According to Murray Sayle, the Dutch were the originators of short selling, option trading, debtequity swaps, merchant banking, unit trusts, and other speculative instruments. Stock markets are currently present in every developed and most developing countries, but the biggest stock markets are present in the United States, Canada, China (Hong Kong), India, UK, Germany, France, and Japan.


World History of Market: History of stock market trading in the United States can be traced back to over 200 years ago. Historically, The colonial government decided to finance the war by selling bonds, government notes promising to pay out at profit at a later date. Around the same time private banks began to raise money by issuing stocks, or shares of the company to raise their own money. This was a new market, and a new form of investing money, and a great scheme for the rich to get richer. A little further on the history timeline, more specifically in 1792, a meeting of twenty four large merchants resulted into a creation of a market known as the New York Stock Exchange(NYSE). At the meeting, the merchants agreed to meet daily on Wall Street to daily trade stocks and bonds. Further in history, in the mid-1800s, United States was experiencing rapid growth. By 1900, millions of dollars worth of stocks were traded on the street market. In 1921, after twenty years of street trading, the stock market moved indoors. History brought us the Industrial Revolution, which also played a role in changing the face of the stock market. New form of investing began to emerge when people started to realize that profits could be made by re-selling the stock to others who saw value in a company. This was the beginning of the secondary market, known also as the speculators market. This market was more volatile than before, because it was now fueled by highly subjective speculation about the company’s future. This was the pretext for appearance of such stock market giants as NYSE. History books tell us that the reason the NYSE is so highly regarded among stock markets was primarily because they only trade in the very large and well-established companies. It acted as a more stable investment alternative, for people interested in throwing their capital into the stock market arena. The smaller companies making up the stock market formed into what eventually became the American Stock Exchange (AMEX). Contrary to the 80-year old history, today the NYSE, AMEX, NASDAQ and hundreds of other exchange markets make a significant contribution to the national and global economy.


The growth in the number of market participants led the government to decide that more regulation of the stock market was needed to protect those investing in stock. History was made in 1934, when following the Great Crash, Congress passed the Securities and Exchange Act. This act formed the Securities and Exchange Commission (SEC), which, through the rules set out by the act and succeeding amendments, regulates American stock market trading with the help of the exchanges. It also includes overseeing the requirements for a company to issue stock shares to the public and ensures that the company offers relevant information to potential investors. Although historically, investing in stocks was a “hobby” for the rich, an average person too soon came to realize the value of the investing in stocks vs. traditional assets like land or a house. Most stock markets around the world have undergone a process of steady evolution and have changed in relation to the process known as ‘globalization’. With information technology changing the way we do business all over the world it was but natural for stock markets to also integrate their functions in an IT enabled electronic environment. This has not just revolutionized the way companies raise money for expansion or new ventures but also brought about a level of transparency and ease in the functional areas of trade in shares that was never seen before.

The most famous stock markets of the world are:     

London Stock Exchange New York Exchange Tokyo Stock Exchange Hong Kong Stock Exchange Singapore Stock Exchange


New York Stock Exchange The New York Stock Exchange is a physical exchange, also referred to as a listed exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for socalled "program trading". The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock. The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.


From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant. Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions.


The London Stock Exchange Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.


Broking industry in India: The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: Primary market and the Secondary market. Some of the main characteristics of the brokerage industry include growth in ebroking, decline in brokerage fees, growing derivative market and growing derivative market and many more. There are several national as well as local players in stock trading services which are providing various services to their customers like online trading, portfolio management system, stock broking etc. They are helping the investors to take decision about where to invest because there is lots of Investment Avenue available with investors. Some of them are Motilal Oswal, India Infoline, Anandrathi, India bulls etc Lot of brokerage companies is moving towards consolidation with the smaller ones becoming either franchisee for the larger brokers or closing operations. There is an increasing demand for online trading due to consumer’s growing preference for Internet as compared to approaching the brokers. New forms of trading including T+2 settlement system, dematerialization etc are strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. An agent that charges a fee or commission for executing buys and sells orders submitted by an investor. The firm that acts as an agent for a customer, charge the customer the commission for its service. Roles similar to that of a stockbroker include investment advisor, financial advisor and probably many others. A stockbroker may or may not be also an investment advisor. A broker works for a brokerage firm (a sell-side institution). A trader works for a buy-side institution (mutual fund, investment advisory firm, insurance company,


etc.) or for himself. Brokers don't care what they sell and at what prices, as long as they get to sell a lot of it. Trades (professional ones anyway) work to make sure that they are transacting at the best possible price at the lowest possible cost.

Indian Capital Market: The Indian Capital Market is one of the oldest capital markets in Asia which evolved around 200 years ago.The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange(BSE). The National Stock Exchange of India Limited (NSE) is the largest stock exchange established in 1992 by Industrial Development Bank of India, Industrial Credi1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, in terms of daily turnover and number of trades, for both equities and derivative trading. The NSE's key index is the S&P CNX Nifty, known as the Nifty50, which is an index of fifty major stocks weighted by market capitalization.BSE and NSE represent themselves as synonyms of Indian stock market. The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is compiled based on the performance of the stocks of 30 financially sound benchmark companies. In 1990 the BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and 4000 figures in 1992. The reason for such huge surge in the stock market was the liberal financial policies announced by the then financial minister Dr. Man Mohan Singh. The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It came to public knowledge that Mr. Mehta, also known as the big-bull of Indian stock market diverted huge funds from banks through fraudulent means. He played with 270 million shares of about 90 companies. Millions of small-scale investors became victims to the fraud as the Sensex fell flat shedding 570 points.


To prevent such frauds, the Government formed The Securities and Exchange Board of India, through an Act in 1992. SEBI is the statutory body that controls and regulates the functioning of stock exchanges, brokers, sub-brokers, portfolio manager’s investment advisors etc. SEBI oblige several rigid measures to protect the interest of investors. Now with the inception of online trading and daily settlements the chances for a fraud is nil, says top officials of SEBI. Many foreign institutional investors (FII) are investing in Indian stock markets on a very large scale. The liberal economic policies pursued by successive Governments attracted foreign institutional investors to a large scale.Apart from FIIs, the non-resident Indians also invest hugely in the stock market.Diminishing returns from bank deposits and the facilities of online trading made them turn to stock markets and with the bull-run many have made a good fortune from stock markets. The initial public offers by Tata Consultancy Services, Maruti Udyog Limited, ONGC etc were big events in Indian stock market. Not only did they put a great show, but also took the stock market to newer heights. TCS is a big weight in the stock market from the day it was listed. Traditional heavy weights are Reliance, Tata, Bharati etc. Now new entrants like Biocon are also play significant roles in the market.


National Stock Exchange (NSE) National Stock Exchange of India (NSE) is India's largest Stock Exchange & World's third largest Stock Exchange in terms of transactions. Located in Mumbai, NSE was promoted by leading Financial Institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, NSE was recognized as a Stock exchange under the Securities Contracts (Regulation) Act-1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. NSE was set up with the objectives of •

Establishing nationwide trading facility for all types of securities

Ensuring equal access to investors all over the country through an appropriate telecommunication network

Providing fair, efficient & transparent securities market using electronic trading system

Enabling shorter settlement cycles and book entry settlements

Meeting International benchmarks and standards

NSE's markets NSE provides a fully automated screen-based trading system with national reach in the following major market segments:•

Equity OR Capital Markets {NSE's market share is over 65%}

Futures & Options OR Derivatives Market {NSE's market share over 99.5%}

Wholesale Debt Market (WDM)

Mutual Funds (MF)

Initial Public Offerings (IPO)


Bombay Stock Exchange (BSE) Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956. Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market. Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more than 4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z groups. The number of companies listed on the BSE at the end of December 1994 was 4,702.


Rapid Growth: The last decade has been exceptionally good for the stock markets in India. In the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investment, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s. Investor base continued to grow from domestic and international markets. The value of share trading witnessed a sharp jump too. Foreign institutional investment in Indian stock markets showed continuous rise reaching about USD 10bn in each of these years between FY04 to FY06. Stock markets became intensely technology and process driven, giving little scope for manual intervention that has been the source of market abuse in the past. Electronic trading, digital certification, straight through processing, electronic contract notes, online broking have emerged as major trends in technology. Risk management became robust reducing the recurrence of payment defaults. Product expansion took place in a speedy manner. Indian equity markets now offer, in addition to trading in equities, opportunities in trading of derivatives in futures and options in index and stocks. ETFs are showing gradual growth. Within five years of introduction of derivatives, Indian stock markets now are ranked first in stock futures and fourth in index futures. Indian stock markets are transaction intensive and thus rank among the top five markets in this regard. Stock exchange reforms brought in professional management separating conflicts of interest between brokers as owners of the exchanges and traders/dealers. The demutualization and Corporatisation of all stock exchanges is nearing completion and the boards of the stock exchanges now have majority of independent directors. Foreign institutions took stake in India’s two leading domestic stock exchanges. While NYSE Group led consortium took stake in the National Stock Exchange, Deutsche Börse and Singapore Stock Exchange bought equity in the Bombay Stock Exchange Ltd.


The Indian broking industry is one of the oldest trading industries that has been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. With the purpose of gaining a deeper understanding about the role of the Indian stock broking industry in the country’s economy, we present in this section some of the industry insights gleaned from analysis of data received through primary research. For the broking industry, we started with an initial database of over 1,800 broking firms that were contacted, from which 464 responses were received. The list was further short-listed based on the number of terminals and the top 210 were selected for profiling. 394 responses, that provided more than 85% of the information sought have been included for this analysis presented here as insights. All the data for the study was collected through responses received directly from the broking firms. The insights have been arrived at through an analysis on various parameters, pertinent to the equity broking industry, such as region, terminal, market, branches, sub brokers, products and growth areas. Some key characteristics of the sample 394 firms are: On the basis of geographical concentration, the West region has the maximum representation of 52%. Around 24% firms are located in the North, 13% in the South and 10% in the East 3% firms started broking operations before 1950, 65between1950-19an32%post1995 On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in Ahmedabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities. From this study, we find that almost 36% firm’s trade in cash and derivatives and 27% are into cash markets alone. Around 20% trade in cash, derivatives and commodities In the cash market, around 34% firm’s trade at NSE, 14% at BSE and 52% trade at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and 45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and 43% at both exchanges Majority of branches are located in the North, i.e. around 40%. West has 31%, 24% are located in South and 5% in East In terms of sub-brokers, around 55% are located in the South, 29% in West, 11% in North and 4% in East Trading, IPO’s and Mutual Funds are the top three products offered with 90% firms offering trading, 67% IPO’s and 53% firms


offering mutual fund transactions In terms of various areas of growth, 84% firms have expressed interest in expanding their institutional clients, 66% firms intend to increase FII clients and 43% are interested in setting up JV in India and abroad In terms of IT penetration, 62% firms have provided their website and around 94% firms have email facility.

Branches & Sub-Brokers: The maximum concentration of branches is in the North, with as many as 40% of all branches located there, followed by the Western region, with 31% branches. Around 24% branches are located in the South and East constitutes for 5% of the total branches of the total sample. In case of sub-brokers, almost 55% of them are based in the South. West and North follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total sub-broker.


Financial Markets in India: The financial markets have been classified as cash market, derivatives market, debt market and commodities market. Cash market, also known as spot market, is the most sought after amongst investors. Majority of the sample broking firms are dealing in the cash market, followed by derivative and commodities. 27% firms are dealing only in the cash market, whereas 35% are into cash and derivatives. Almost 20% firms trade in cash, derivatives and commodities market. Firms that are into cash, derivatives and debt are 7%. On the other hand, firms into cash and commodities are 3%, cash & debt market and commodities alone are 2%. 4% firms trade in all the markets.

In the cash market, around 34% firms’ trade at NSE, 14% at BSE and 52% trade at both exchanges. In the equity derivative market, 48% of the sampled broking houses are members of NSE and 7% trade at BSE, while 45% of the sample operate in both stock exchanges. Around 43% of the broking houses operating in the debt market, trade at both exchanges with 31% and 26% firms uniquely at NSE and BSE respectively.


Of the brokers operating in the commodities market, 57% firms operate at NCDEX and MCX. Around 20% and 21% firms are solely in NCDEX and MCX respectively, whereas 2% firms trade in NCDEX, MCX and NMCE.


Current Scenario: The current consensus on India is very positive, and it is easy to find a real bull among major market participants. Investment by private corporate accountant for 41% of total investment in Indian economy in 2007-08. A significant proportion of corporate investment was financed by equity raised from domestic and overseas markets. To that extent total investment in Indian economy is directly influenced by the behavior of capital market. Total financial savings of India’s household were Rs. 5,53,000 crore in 2007-08, accounting for 48% of their total savings. Impact of budget 2009 on Indian capital market assumes specific significance. Average level of Sensex increase sharply from 9540 in January 2006 to 19,827 in December 2007. Indian company successfully raised equity resources of Rs. 1,31,000 crore from the capital market in 2007, while FIIS pumped in U.S. $ 18 billion in Indian equity market in 2007. As against this in 2008, Indian corporate could raise only Rs. 29,000 crore, while FIIs withdrew $ 12 billion from Indian market due to the serve global financial crisis. This has adversely affected total corporate investment in 2008, which has in turn lead to a significant slow down in industrial growth. Fortunately second quarter of 2009 has witnessed a remarkable recovery of global equity markets and, in this process of market recovery Indian equity market has outperform almost all leading global markets. During March to June 2009, Sensex has increased by 75% as compared to 39% growth in china and 23% in U.S. Indian market continues to outperform global capital markets, during the rest 2009, would succeed in attracting huge inflows of both foreign direct investment as well as FIIs investments. This would have a significant impact on short-term as well as long term prospects for the overall development of Indian economy. It would also enable the government to maximize resource mobilization through an aggressive disinvestment programme.


Future of Indian Market: India just keeps getting better and better. The economy is growing rapidly surpassing some of Asia’s biggest economies. India is now becoming the third largest country in Asia economically India has created the best growth story that happen over a long time. Although India is growing, there can still be corrections in the market. No matter how well a country is doing, there is always something that can be fixed. They would like to wait until the market is fixed to invest. When thinking about all of the bad things in the news that can affect the market in a negative way, think about the things that affect it in a positive way as well. You need to look at a market in the long-term. When seeing it in the short-term every market will look bad due to recent news. An investor needs to look past that. It is never guaranteed that you will make a lot of money when investing in market, including an emerging one. However, India is said to be number one in the world right now for investment opportunities. Remember, that even with India doing so well, there are always going to be flaws in the market, just like every market. Many things can happen in which India can lose the things it relies on. Any news related event that happens in any country will affect that countries market and sometimes other countries as well. India, having a very rapid growing economy is also a very expensive country in Asia. Many have high hopes for India and if investors invest in India, they would be buying into a country that has an excellent opportunity to make money over long-term.


Major Players of Brokers:














2.1 Jainam Share Consultants Pvt. Ltd. History:


Jainam Share Consultants Pvt. Ltd. was incorporated on 10th November 2003 and it is mainly carrying on the broking business in the equity market. The company has acquired memberships of the two major stock exchanges of India; National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE). The company is also registered as a Depository Participant (DP) with Central Depository Services (I) Ltd. (CDSL). The company’s registered office is situated at, M-5/6, Malhar Complex, Dumas Road, Ichchanath, Surat 395007. The company commenced its BSE operations from 4th October 2004 and its NSE operations from 17th March 2005. Since incorporation the company has been consistently growing with the present client base of around 11000+ clients. The company has approximately 80 outlets to cater to the needs of the investors for their equity trading in the stock exchanges.

Jainam Commodities Pvt. Ltd. Jainam Commodities Pvt. Ltd. was incorporated on 1st June 2005 and is mainly carrying on the broking business in the commodity market. The company has acquired memberships of the two major commodity exchanges of India viz. National Commodity & Derivatives Exchange Ltd. (NCDEX) and Multi-Commodity Exchange of India Ltd. (MCX) The Company’s registered office is situated at M-11, Malhar Complex, Dumas Road, Ichchanath, Surat 395007.

Board of Directors:



Dr. Jitendra Shah


Mr. Chirag Shah


Mr. Milan Parikh


Mr. Nipun Shah


Mrs. Pinal Shah


Mrs. Purna Shah

Business Network:  Head Office: At registered address, Surat.  Local Branches: 8 Branches in Surat city.  Regional Branches:  Rajkot  Bhavnagar  Mumbai

Jainam Organisation Hirearchy:


Board of Directors:



Shital Mehta



Hemal Zaveri

Chetna Bhandari

General Account & Banking

Demat a/c Mutual Fund

Kamlesh Patel

Customer care System/ technical

Dhawal Panchal



Rohan Mehta

Devesh Shah

Abhishek Shah Account Opening

RMS (Risk management system)

Nisha Dudhwala

Dilip Morakhia


Security & KYC Hetal Shah

It & Software Nikhil Tandel

Milestone of company:

Jainam Share Consultants Pvt. Ltd.


15th December

Acquired Membership of Central Depository service (India) Ltd.


23rd December

Acquired Membership of National Stock Exchange of India Ltd. (Cash Seg.)


17th December

Acquired Membership of National Stock Exchange of India Ltd. (F & O Seg.)


30th December

Acquired Membership of Bombay Stock Exchange Ltd. (Cash Seg.)


10th November

Company Registered

Jainam Commodities Pvt. Ltd. 2006

06th February

Acquired Membership of National Commodity and Derivatives Exchange of India Ltd.



08th December

Acquired Membership of Multi


Exchange of India Ltd. 2005

1st June

Company Registered




Five CORE VALUES of company: 1. Change 2. People Development


3. Security 4. Team Work 5. Integrity

Jainam Share Consultants Pvt. Ltd.

 Member: Bombay Stock Exchange Ltd. (BSE)

Trading Member ID: 2001 SEBI Registration No: INB011211639 (CM Segment)  Member: National Stock Exchange of India Ltd. (NSE) Trading Member ID: 12169 SEBI Registration No: INB231216939 (CM Segment) SEBI Registration No: INF231216939 (Derivatives Segment)  Member: Central Depository Services (I) Ltd. (CDSL) DP ID: 41500 SEBI Registration No: IN-DP-CDSL-322-2005

 Jainam Commodities Pvt. Ltd.  Member: Multi-Commodity Exchange of India Ltd. (MCX) Trading Member ID: 29735 FMC Registration No: MCX/TCM/CORP/0924 41

 Member: National Commodities & Derivatives Exchange Ltd. (NCDEX) Trading Member ID: 00738 FMC Registration No: NCDEX/TCM/CORP/0723

Core Strength of Jainam:

• • •

Milan Parikh who has excellent contacts and relationship with sub-brokers in surat. Nipun Shah has the knowledge that is needed to complete the difficult procedure of getting various memberships. Dr. Jitendra Shah – the senior and most respectable member of team Jainam who has the ability to motivate all to reach great heights.

Even the name ‘Jainam’ derived from the first letter of the above three directors.


• • •

Build long term relationship with customer by winning their trust. Give decided services to all customers by protecting their investment in volatile circumstances and adding value to their wealth. Integrate the best in technology, research and analysis into the business model ensuring growth not only in business but also in customer relationship.

Jainam Strengths:

• • • • •

Every customer is provided one stop solution for trading in the equities market and commodities market. Provisions of free, state of art research to all clients. Dedicated and experienced team for any type work, Inspiring and powerful leadership. Customer base of more than 14000+


Products and services of the company: Products Equity Derivatives Depository Services Commodities IPO -Initial Public Offerings Insurance Portfolio Tracking E-Trading Mutual Funds

General Information about company: No. of Employee


Working Hours

9:45 am to 6:15 pm

Lunch Time

20 minute during 12:00 noon to 2:00 pm

Salary Payment

5th of every month


Regular recording


As per its policy


Conduct & Discipline

High degree of discipline, positive conflict is good between employees

3.2 About Department:

Human Resource Department


Human Resources Department Structure:

Managing Director

Department Head

Senior Executive

Junior Executive

Junior Executive


Introduction: The JAINAM shares company’s HR department plays a significant role in day to day life activities. Its activities and functions are related with other departments. Discussion with HR manager: As Researcher has discussed with HR manager about how they are performing their task of HRM? She immediately told me that first they are considering two factors like GOAL and ACTIVITY. They are giving importance to each goal and activity.

Activities carried by HRD:

      

       

Attendance Management Personal file updating Leave Management Contract Management for labor  Maintaining Attendance Statutory Compensation Salary & Bonus Welfare Activity  Medical  Education  Health check up ISO Documentation HR Budget MIS Report Training and development Recruitment & Selection Induction and Orientation Performance Appraisal Separation


 Transfer  Resignation

Human Resource Systems support the mentioned driving forces in the following manner at Jainam Shares Consultant pvt. ltd:

 Salary and basic needs  Competitive with the industry  Parity within the organisation  Providing growth compared to the industry  Compensation strategy concentrated towards Retention of Employees  Work Environment  Employee engagement measurement  Policy formulation and its strict adherence • Administration policies • Performance management policies  Clarity of Job, Role, responsibility and accountability  Growth prospects  Career planning  Learning need identification  Opportunities to gain knowledge  Opportunities apply the knowledge gained.


1) Job Analysis: Definition of Job Analysis: The procedure for determining the duties and skill requirements of a job and the kind of person who should be hired for it They have suggest us a below uses of job analysis for their organization.


Uses of Job Analysis Information Job Analysis Job Description And Job Specification

Recruiting and


Job Evaluation—




Wage and Salary






Man Power Planning:

After doing job analysis they are always done a Manpower Planning. As we know that success of any organization depends upon the quantity and quality of its human resources. JAINAM has accepted a strategy of putting right person on the right job. They doing MPP as per the business plan. They are doing MPP for one year period.

They are using a technique of managerial judgment for the forecast of the future human resource. They are doing MPP on the basis of future supply of human


resource. They make assumption of future expected loss of human resource. They are done MPP on continuous basis.


Recruitment and Selection:

After doing Job analysis and HRP, they recruit and select the person as per job requirement. The below diagram shows hoe Job analysis and HRP helpful in Recruiting and Selection Every firm can hire a person after the Job analysis and HRP has been done.

Recruiting and Selection

Sources of recruitment: They generally use both the internal and external sources for the Recruitment.  Internal sources:

They generally use internal sources for Recruitment and Selection. They generally recruit the require person through Promotion and Transfer. They used past employee of company for the Recruitment  External sources:


As a external sources of Recruitment they used a service of a agency which are providing a skilled Human Resources. Currently they are Recruiting a persons from “MAFOIA consultancy Ltd.”

Interview: After recruiting a necessary employee for the job they select a right person who has all necessary skills and ability to do job. They select a person through a Interview process. Interviews are taken by a HR Manager of the JAINAM and by the Manager of respected department in which the person is required.

Test during Interview: If any special test is required during interview, they are planning to put it in action for checking the abilities of applicant.

Final placement: After the test and final interview call over, right person at right place to be placed in the JAINAM by the HR manager.

Induction training: As new employee is placed in the organization, the following are some important task which is done to make him/her familiar with the organization. As I have joined the organization for the purpose of my MBA summer training, they have consider me as a new employee of the firm and given me induction manual to be familiarize with the JAINAM.

Purpose of Induction Manual:

1. 2. 3. 4.

To make familiar with organization and its culture Accelerate socialization process for the individual. Aware of responsibilities and privileges. Integrate with the organization.


The Organization expects the following from their employees,

1. We need to clearly define roles, goals and rules to be most efficient. 2. We meet deadlines and issue reports on time. 3. Have confidence in your skills and it is good to seek advice. No one knows it all. 4. We will GRIP (Goals Roles Issues Process) our problems and challenges, we will not let them fester. 5. We must work co-operatively as equals and support each other. 6. Careful, calm rational, respectful communication is key, no raised voices. 7. Respect each other’s ideas and views. 8. We support independent thinking and opinion with reasons up and down the organization. 9. We expect people to voice their disagreement. 10. Positive conflict is good. 11. Continue to be open about our feeling and assumptions. 12. Avoid issues of personalities, prestige, point scoring, put downs, negative cements, fear and what did they say about me? Move on. 13. The decision maker must listen, seek input and explain rationale behind decisions. 14. Once a decision is made irrespective of your view, you implement it with good will. As it is company’s decision.


Terminal Process:

Most involuntary separations are due to poor performance, poor attendance, or violation of some other company policy. 

Acts: Two acts are following as HR acts 1. Provident fund act 1952 2. ESIC- Employees’ state insurance act 1948:

"An Act to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto."

Marketing & Sales Department:


Marketing & Sales Department:

Introduction: Marketing is so basic that it cannot be considered as a separate function. Marketing has been defined in various ways. The definition that serves our purpose best is as follows: “marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others.”


This definition of marketing rests on the following core concepts, needs, wants& demands, products, value, cost & satisfaction, exchange and transactions, relationship and networks, markets and marketers and prospects.

“Marketing management is the process of planning and executing the conception, pricing, promotion & distribution of ideas, good and services to create exchanges that satisfy individual and organizational goals.” This definition recognizes that marketing management is a process involving analysis, planning, implementation and control; that it covers goods, services and ideas; that it rests on the notion of exchange, and that he goal is to produce satisfaction of the parties involved.

Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving the desired responses from the other parties. Marketing management has the task of influencing the level; timing and composition of demand in a way that will the organization achieve its objectives. Marketing management is essentially demand management. This department was started before one year in the organization. Discussion with manager: When Researcher talked to marketing manager, Chetna Bhandari who has 10 years experience in share broking firm, about requirement of this department in the company , she replied like “ on demand of 300 sub brokers and to make easy transactions and to facilitate them, they have established the marketing and sales department last year”

Functions of department: 1. 2. 3. 4. 5. 6. 7.

Taking reverences from sub brokers. Making call for appointment to explain detailed information. Fixing meeting with client and sharing information. Problem solving of clients and sub brokers. Meeting with existing sub brokers in 15 days. Meeting with new clients in every week. For potential consumers they are appointing one special guide



When Researcher asked her about advertisement and its rules, she said that if the firm wants to put single banner they need to take permission from SEBI. If there are any changes in the matter immediately they have to inform to SEBI about changes.

Strategy: She said about the strategy to stabilize their firm in this competitive environment. In her words “If we think that ANGEL, SHARE KHAN and other big firms are our competitors then we will not be able to survive in the market. So we believe that we, ourselves are competitors of the firm”

Promotion Method:

1. Telephone & E-mail:

 Customer Satisfaction Measures.  E-mail and Telephonic Complaint.  By appointing employee to special customers.  Order Conformation.  By giving daily reports about market and industry to customers.

Distribution Channel: Zero Level:


Jainam Shares consultant

Direct customer

Indirect customer



One level:

Jainam Shares consultant

Direct customer (Sub-brokers)

Indirect customer (Clients)


IT & Software department:

IT & Software department:

This department was stared before 2 months. Discussion with manager: 58

When Researcher talked to in charge of the department Mr. Nihkil Tandel about the need for staring this department, he explained me the various reasons like,

Reasons for establishment of the department: 1. To build, stabilize, and deploy IT services, applications, and infrastructure improvements in the most efficient way possible. 2. Software service problem was in very high degree 3. To become self dependent in making software for the business 4. In future to apply for innovations and creative ideas in business for growth and expansion of the firm 5. To facilitate the A/C & trading department 6. To solve it problems quickly. 7. Reliability and security of business plan 8. Asset protection 9. Restoration of a service to health when things go wrong The department is still in underdevelopment process. Top management is supporting as best to make it efficient for making all processes of the firm.


KYC (know your client) department & DP:

KYC (know your client) department & DP: The department plays significant role in the stock market transaction and in company.

Introduction: 60

In order to prevent identity theft, identity fraud, money laundering, terrorist financing, etc, the RBI had directed all banks and financial institutions to put in place a policy framework to know their customers before opening any account. This involves verifying customers' identity and address by asking them to submit documents that are accepted as relevant proof. Mandatory details required under KYC norms are proof of identity and proof of address. Passport, voter's ID card, PAN card or driving license are accepted as proof of identity, and proof of residence can be a ration card, an electricity or telephone bill or a letter from the employer or any recognised public authority certifying the address. Some banks may even ask for verification by an existing account holder. Though the standard documents which are accepted as proof of identity and residence remain the same across various banks, some deviations are permitted, which differ from bank to bank. So, all documents shall be checked against banks requirements to ascertain if those match or not before initiating an account opening process with any bank. Thus opening a new bank account is no longer a cake walk. Those are the basic requirements of KYC to identify a customer at the account opening stage.

DP department: Demat refers to a dematerialized account.

Introduction: Just as one have to open an account with a bank if he/she want to save his/her


money, make cheque payments etc, one need to open a demat account if one want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. One have to approach the DPs (remember, they are like bank branches), to open one’s demat account.Let's say one’s portfolio of shares looks like this: 40 of Infosys, 25 of Wipro, 45 of HLL and 100 of ACC.All these will show in one’s demat account.So don’t have to possess any physical certificates showing that one own these shares. They are all held electronically in your account. As one buy and sell the shares, they are adjusted in one’s account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions. Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more. So a demat account is a must for trading and investing. Process to start DP: Look for a DP to have an account with most banks are also DP participants, as are many brokers. One can choose your very own DP. A broker is separate from a DP. A broker is a member of the, who buys and sells shares on his behalf and on behalf of his clients. A DP will just give you an account to hold those shares. One do not have to take the same DP that your broker takes. You can choose your own. But many brokers offer special incentives in the form of lower charges for opening demat accounts with their DPs. Get one’s documents in place Once you approach your DP, you will be guided through the formalities of opening an account. One must fill up an account opening form and sign an agreement with one’s DP. The DP will ask for some documents as proof of one’s identity and address. Check with them what they require. For instance, some may accept a driver's license, others may not. Here is a broad list (One won't need all of them though):


• PAN card • Voter's ID • Passport • Ration card • Driver's license • Photo credit card • Employee ID card • Bank attestation • IT returns • Electricity/ Landline phone bill

While they only ask for photocopies of the documents, they will need the originals for verification. One shall have to submit a passport size photograph on which you sign across. How many shares one need to have to open an account When opening an account with a bank, one need a minimum balance.

Not so with a demat account. A demat account can be opened with no balance of shares.And there is no minimum balance to be maintained either. You can have a zero balance in your account.

Charges for it:


The charges for account opening, annual account maintenance fees and transaction charges vary between DPs. To get a comparative idea, visit the websites of NSDL and CDSL. Nomination: By filling up the nominee form while opening the demate account. After starting Dp: When one open an account, the DP will allot a unique BO ID (Beneficial Owner Identification) Number, which one need to quote for all future transactions. If you want to sell your shares, you need to place an order with one’s broker and give a 'Delivery Instruction' too one’s DP. The DP will debit one’s account with the number of shares sold. One will receive the payment from one’s broker. If one want to buy shares, inform one’s broker about your Depository Account Number, so that the shares bought are credited into one’s account. Difference between a depository and a depository participant: A depository is a place where the stocks of are held in electronic form. The depository has agents who are called depository participants (DPs). Think of it like a bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals. There are only two depositories in India -- the National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL). There are over a 100 DPs. Changes of Bank account details: Since in the depository system monetary benefits on the security balances are paid as per the bank account details provided by you at the time of account opening,


you must ensure that any subsequent change in bank account details is informed to your DP immediately. Closing or Transfer: One can submit account closure request to your DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account. Freeze or locking account: One can freeze or lock one’s account for any given period of time, if so desired. Accounts can be frozen for debits (preventing transfer of securities out of accounts) or for credits (preventing any movements of securities into accounts) or for both.


Customer Care Department:

Customer Care Department: Definition


Customer Care is the processing of meeting (and exceeding) your customer expectations of service. Mission of the department: “One satisfied customer is more valuable than 5 lakh rs, Advertisement”.

Objectives of Customer Care • • •

create a culture of customer focus creating rapport and building loyalty achieving customer satisfaction

They are committed to providing customers with efficient, local, support to help them achieve the maximum benefit from their solution. They have structured their business so that, no matter where customers are located, they have direct access to local sales, support and management to ensure they are responsive to all customers' needs - not just product maintenance. The objectives/functions of the Customer Relations Strategy are to: • • • • • • • • • • • • •

Provide customers and staff with clear standards and expectations Ensure all customer contact reaches an appropriate conclusion Minimize incidences of repeat contact Seek to provide a seamless service for customers Provide equal and easy access to our services at a time, place and channel that meet the needs of residents, businesses and other stakeholders Cater for customers needs irrespective of age, gender, physical or financial ability, ethnic origin, race, religion or geographical location Provide a prompt, courteous and knowledgeable response to all customer enquiries. Equip our staff to provide customers with an excellent standard of service Enable our customers to provide feedback easily, through complaints, customer surveys, etc Use customer compliments, comments and complaints to drive improvements to service Improve the speed, quality and consistency of response to enquiries by having our information in a format that can be easily accessed Integrate customer care into mainstream service provision Continually increase the level of resources going into front line services


It is their belief that by meeting these objectives they will: • •

Delight the customer by providing excellent standards of service Maximize satisfaction with the quality of the service provided

Developing Customer Care strategies:


Finance Department

Finance Department:



The primary purpose of any business is to earn profits. To earn profit, the business has to produce goods or render services. To do either, management of business must have adequate supply of funds. It is the responsibility of the finance department to ensure the supply of the needed funds. Financial management is the application of planning and control to the finance function of a business to ensure that the funds needed are raised and used effectively for its benefits. Financial management means procurement of funds at minimum cost and its effective use in order to maximize the wealth of shareholders.

The company’s Finance department is divided into two parts:  Account Department  Banking Department

Functions of Account Department:  Payment of expenses.  Final accounts.  All types of taxes.  Auditing and statutory auditing. (Quarterly)

 Daily or time to time banking match.  Pay in pay out.  Collection of check and entry maintenance.  Enquiry and third party check.

Functions of Banking Department:  Capital Structure maintenance  Pay in pay out of checks with exchanges.


 Maintenance of OD  Fulfillment of necessary requirement of department of financial needs.


Research Department:

Introduction: In the firm of share broking organization research department plays crucial role for time to time updates and other technical services for clients as well as internal purpose.


The Jainam shares consultants’ pvt ltd is providing the following technical services.

Technical Services:

Intra-day Calls For day traders’ Jainam provides intraday calls with entry, exit and stop loss levels during the market hours and our calls are flashed on our terminals. Our analysts continuously track the calls and provide the recommendations according to the market movements. Past performance of these calls in terms of profit/loss is also available to our associates to enable them to judge the success rate.

Posting Trading Calls Jainam’s “Position Trading Calls” are based on a through analysis of the price movements in selected scripts and provides calls for taking positions with a 10 - 15 days time span with stop losses and targets. These calls are

also flashed on our

terminals during market hours.

Derivative strategies:

Our analyst take a view on the NIFTY and selected scripts based on derivatives and


technical tools and devise suitable “Derivative Strategies” , which are flashed on our terminals and published in our

derivative reports.

Daily Services: Market Outlook at 9:30 AM A crisp pre-market report that arms our clients with sensitive information before the opening bell. Key corporate developments, policy announcements, geopolitical news and views are analyzed for their impact on the market.

Technical Report at 6:00 PM This report analyses trading patterns, historical background, market position of key stocks and offer short term (1 to 5 days) as well as medium term (10 to 20 days) views. Tracking individual scripts as well as the Sensex and Nifty, its insight cuts through the market maze.

Derivative Analysis Report The report provides FII activity in derivative segments, change in open interest, put call ratio, cost of carry of stock and index based derivative products. Our derivative analysts use the above tolls to project the movement during the next trading sessions





Technical Analysis:



The methods used to analyze securities and make investment decisions fall into two



categories: fundamental





Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company or a commodity. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components.


Technical analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

The field of technical analysis is based on three assumptions: 1.

The market discounts everything.


Price moves in trends.


History tends to repeat itself.

1. The Market Discounts Everything.

A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that


the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market. 2. Price Moves in Trends.

In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption.

3. History Tends To Repeat Itself.

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

Technical Analysis: The Use of Trend One of the most important concepts in technical analysis is that of trend. A trend is really nothing more than the general direction in which a security or market is headed. Take a look at the chart below:


It isn't hard to see that the trend in is up. However, it's not always this easy to see a trend:

A More Formal Definition

In any given chart, you will probably notice that prices do not tend to move in a straight line in any direction, but rather in a series of highs and lows. In technical analysis, it is the movement of the highs and lows that constitutes a trend. For example, an uptrend is classified as a series of higher highs and higher lows, while a downtrend is one of lower lows and lower highs.

Types of Trend

There are three types of trend:  Uptrend


 Downtrend  Sideway When each successive peak and trough is higher, it's referred to as an upward trend. If the peaks and troughs are getting lower, it's a downtrend. When there is little movement up or down in the peaks and troughs, it's a sideways or horizontal trend. Trend Lengths: Along with these three trend directions, there are three trend classifications. A trend of any direction can be classified as a long-term trend, intermediate trend or a short-term trend. In terms of the stock market, a major trend is generally categorized as one lasting longer than a year. An intermediate trend is considered to last between one and three months and a near-term trend is anything less than a month. A longterm trend is composed of several intermediate trends, which often move against the direction of the major trend. If the major trend is upward and there is a downward correction in price movement followed by a continuation of the uptrend, the correction is considered to be an intermediate trend. The short-term trends are components of both major and intermediate trends. In Figure to get a sense of how these three trend lengths might look.

Trend lines:


A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. Drawing a trendline is as simple as drawing a straight line that follows a general trend. These lines are used to clearly show the trend and are also used in the identification of trend reversals. In Figure, an upward trendline is drawn at the lows of an upward trend. This line represents the support the stock has every time it moves from a high to a low. Notice how the price is propped up by this support. This type of trendline helps traders to anticipate the point at which a stock's price will begin moving upwards again. Similarly, a downward trendline is drawn at the highs of the downward trend. This line represents the resistance level that a stock faces every time the price moves from a low to a high.

The Importance of Trend It is important to be able to understand and identify trends so that you can trade with rather than against them. Two important sayings in technical analysis are "the trend is your friend" and "don't buck the trend”. Technical Analysis: Support and Resistance Once understand the concept of a trend, the next major concept is that of support and resistance. You'll often hear technical analysts talk about the ongoing battle between the bulls and the bears, or the struggle between buyers (demand) and 80

sellers (supply). This is revealed by the prices a security seldom moves above (resistance) or below (support).

In Figure, support is the price level through which a stock or market seldom falls (blue arrows). Resistance, on the other hand, is the price level that a stock or market seldom surpasses (red arrows).

These support and resistance levels are seen as important in terms of market psychology and supply and demand. Support and resistance levels are the levels at which a lot of traders are willing to buy the stock (in the case of a support) or sell it (in the case of resistance). When these trendlines are broken, the supply and demand and the psychology behind the stock's movements is thought to have shifted, in which case new levels of support and resistance will likely be established. Role Reversal

Once a resistance or support level is broken, its role is reversed. If the price


falls below a support level, that level will become resistance. If the price rises above a resistance level, it will often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted, causing the breached level to reverse its role. For a true reversal to occur, however, it is important that the price make a strong move through either the support or resistance.

In Figure, the dotted line is shown as a level of resistance that has prevented the price from heading higher on two previous occasions (Points 1 and 2). However, once the resistance is broken, it becomes a level of support (shown by Points 3 and 4) by propping up the price and preventing it from heading lower again. The Importance of Support and Resistance Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing. For example, if a trader identifies an important level of resistance that has been tested several times but never broken, he or she may decide to take profits as the security moves toward this point because it is unlikely that it will move past this level. Support and resistance levels both test and confirm trends and need to be monitored. Technical Analysis: The Importance of Volume Introduction: Volume is simply the number of shares or contracts that trade over a given period of time, usually a day. The higher the volume, the more active the security. To


determine the movement of the volume (up or down), chartists look at the volume bars that can usually be found at the bottom of any chart. Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do.

Importance of Volume:

Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume.

Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. Technical Analysis: Moving Averages


A moving average is the average price of a security over a set amount of time. By plotting a security's average price, the price movement is smoothed out. Once the day-to-day fluctuations are removed, traders are better able to identify the true trend. Types of Moving Averages  Simple Moving Average (SMA):

This is the most common method used to calculate the moving average of prices. It simply takes the sum of all of the past closing prices over the time period and divides the result by the number of prices used in the calculation. For example, in a 10-day moving average, the last 10 closing prices are added together and then divided by 10.

Many individuals argue that the usefulness of this type of average is limited because each point in the data series has the same impact on the result regardless of where it occurs in the sequence. The critics argue that the most recent data is more important and, therefore, it should also have a higher weighting. This type of


criticism has been one of the main factors leading to the invention of other forms of moving averages.  Linear Weighted Average:

This moving average indicator is the least common out of the three and is used to address the problem of the equal weighting. The linear weighted moving average is calculated by taking the sum of all the closing prices over a certain time period and multiplying them by the position of the data point and then dividing by the sum of the number of periods.  Exponential Moving Average (EMA):

This moving average calculation uses a smoothing factor to place a higher weight on recent data points and is regarded as much more efficient than the linear weighted average. Having an understanding of the calculation is not generally required for most traders because most charting packages do the calculation for you. The most important thing to remember about the exponential moving average is that it is more responsive to new information relative to the simple moving average.

Introduction to charts: A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots.


Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "securities" refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis.

Types of Charts: There are three main types of charts that are used by investors and traders depending on the information that they are seeking and their individual skill levels. The chart types are: the line chart, the bar chart, the candlestick chart.


 Line Chart:

The most basic of the three charts is the line chart because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

 Bar chart:

The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal


dash. The opening price on a bar chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right. A bar that is colored red signals that the stock has gone down and colored blue it means it has gone up.

 Candlestick Charts:

The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. White (clear) candlesticks form when the close is higher than the


open and black (solid) candlesticks form when the close is lower than the open. The white and black portion formed from the open and close is called the body (white body or black body). The lines above and below are called shadows and represent the high and low.

Technical Analysis: Chart Patterns A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals. There are two types of patterns within this area of technical analysis, reversal and continuation. A reversal pattern signals that a prior trend will reverse upon


completion of the pattern. A continuation pattern, on the other hand, signals that a trend will continue once the pattern is complete. These patterns can be found over charts of any timeframe.  Head and Shoulders:

This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend. In Figure, there are two versions of the head and shoulders chart pattern. Head and shoulders top (shown on the left) is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders (shown on the right) is the lesser known of the two, but is used to signal a reversal in a downtrend.

 Cup and Handle:

A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is



In Figure, this price pattern forms what looks like a cup, which is preceded by an upward trend. The handle follows the cup formation and is formed by a generally downward/sideways movement in the security's price. Once the price movement pushes above the resistance lines formed in the handle, the upward trend can continue.

 Double Tops and Bottoms:


This chart pattern is another well-known pattern that signals a trend reversal - it is considered to be one of the most reliable and is commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. This pattern is often used to signal intermediate and long-term trend reversals.

In the case of the double top pattern, the price movement has twice tried to move above a certain price level. After two unsuccessful attempts at pushing the price higher, the trend reverses and the price heads lower. In the case of a double bottom, the price movement has tried to go lower twice, but has found support each time. After the second bounce off of the support, the security enters a new trend and heads upward.

Price Channel:

Bound by a lower and upper trendline, the price channel is a continuation pattern that either slopes up or down as the price action is being maintained within 92

established and sloping resistance and support lines. A negative or downwardly sloping channel is considered bearish while a positive or upwardly sloping channel is comparatively bullish. In this instance, traders will wait to buy when the price action touches support as a rebound is expected. Conversely, sellers will take a sell position after a touch of resistance.

Major Uses of Moving Averages:

Moving averages are used to identify current trends and trend reversals as well as to set up support and resistance levels.

Moving averages can be used to quickly identify whether a security is moving in an uptrend or a downtrend depending on the direction of the moving average.


Another method of determining momentum is to look at the order of a pair of moving averages. When a short-term average is above a longer-term average, the trend is up. On the other hand, a long-term average above a shorter-term average signals a downward movement in the trend.

Moving average trend reversals are formed in two main ways: when the price moves through a moving average and when it moves through moving average crossovers. The first common signal is when the price moves through an important moving average. For example, when the price of a security that was in an uptrend falls below a 50-period moving average, like in Figure 4, it is a sign that the uptrend may be reversing.

The other signal of a trend reversal is when one moving average crosses through another. For example, as you can see in Figure 5, if the 15-day moving average crosses above the 50-day moving average, it is a positive sign that the price will start to increase.


If the periods used in the calculation are relatively short, for example 15 and 35, this could signal a short-term trend reversal. On the other hand, when two averages with relatively long time frames cross over (50 and 200, for example), this is used to suggest a long-term shift in trend.

Another major way moving averages are used is to identify support and resistance levels. It is not uncommon to see a stock that has been falling stop its decline and reverse direction once it hits the support of a major moving average. A move through a major moving average is often used as a signal by technical traders that the trend is reversing. For example, if the price breaks through the 200-day moving average in a downward direction, it is a signal that the uptrend is reversing.

Moving Average Convergence:


The moving average convergence divergence (MACD) is one of the most well known and used indicators in technical analysis. This indicator is comprised of two exponential moving averages, which help to measure momentum in the security. The MACD is simply the difference between these two moving averages plotted against a centerline. The centerline is the point at which the two moving averages are equal. Along with the MACD and the centerline, an exponential moving average of the MACD itself is plotted on the chart. The idea behind this momentum indicator is to measure short-term momentum compared to longer term momentum to help signal the current direction of momentum.

MACD= shorter term moving average - longer term moving average In Figure 2, one of the most common buy signals is generated when the MACD crosses above the signal line (blue dotted line), while sell signals often occur when the MACD crosses below the signal.

Relative Strength Index


The relative strength index (RSI) is another one of the most used and wellknown momentum indicators in technical analysis. RSI helps to signal overbought and oversold conditions in a security. The indicator is plotted in a range between zero and 100. A reading above 70 is used to suggest that a security is overbought, while a reading below 30 is used to suggest that it is oversold. This indicator helps traders to identify whether a security’s price has been unreasonably pushed to current levels and whether a reversal may be on the way.

The standard calculation for RSI uses 14 trading days as the basis, which can be adjusted to meet the needs of the user. If the trading period is adjusted to use fewer days, the RSI will be more volatile and will be used for shorter term trades. Stochastic Oscillator

The stochastic oscillator is one of the most recognized momentum indicators used in technical analysis. The idea behind this indicator is that in an uptrend, the price should be closing near the highs of the trading range, signaling upward


momentum in the security. In downtrends, the price should be closing near the lows of the trading range, signaling downward momentum.

The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two lines. The first line is the %K, which is essentially the raw measure used to formulate the idea of momentum behind the oscillator. The second line is the %D, which is simply a moving average of the %K. The %D line is considered to be the more important of the two lines as it is seen to produce better signals. The stochastic oscillator generally uses the past 14 trading periods in its calculation but can be adjusted to meet the needs of the user.

Pivot Point Analysis: Pivot Points offer the trader a method of determining support and resistance for a given time frame. Pivots can be used with any time frame, daily, weekly, monthly, even any intra-day chart. A common technique is to calculate Pivots for a variety of time frames using common levels as a way of developing confidence parameters. There are five basic parameters calculated in Pivot Point Analysis. They are the Pivot (P), 1st Resistance (R1), 2nd Resistance (R2), 1st Support (S1) and 2nd Support (S2).These levels are used in much the same manner as you would trendline support and resistance levels. 98

First here is the mathematical formula where P= Pivot point; C= Close: H= High: and L= Low. The Pivot point number is the high, low; close added up and then divided by three. P= (H+L+C)/3= pivot point. Now for the first resistance level take the pivot point number times two and then subtracts the low. (Px2)-L=Resistance 1 For the second resistance, take the pivot point number add the high and then subtract the low. P+H-L= Resistance2

For the first support take the pivot point number times two and then subtracts the high. (Px2)-H = Support 1 For the second support, take the pivot point number subtract the high and then add the low. P-H+L= Support 2 All right, now that we have that established we can see it is a detailed formula. So let’s try to simplify it. Consider the Pivot Point as the average of the previous sessions trading range combined with the closing price. The numbers of support and resistance that are calculated indicate the potential ranges for the next time frame based on the past weight of the markets strength or weakness derived from the calculations of the high, low and distance from the close of those points. Pivot Point analysis is also used for identifying breakout points from the support and resistance numbers.

Commodity and Commodities market

Introduction: India, a commodity based economy where two-third of the one billion population depends on agricultural commodities, surprisingly has an under developed commodity market. Unlike the physical market, futures markets trades in


commodity are largely used as risk management (hedging) mechanism on either physical commodity itself or open positions in commodity stock. For instance, a jeweler can hedge his inventory against perceived short-term downturn in gold prices by going short in the future markets. The article aims at know how of the commodities market and how the commodities traded on the exchange. The idea is to understand the importance of commodity derivatives and learn about the market from Indian point of view. In fact it was one of the most vibrant markets till early 70s. Its development and growth was shunted due to numerous restrictions earlier. Now, with most of these restrictions being removed, there is tremendous potential for growth of this market in the country.

Commodity: A commodity may be defined as an article, a product or material that is bought and sold. It can be classified as every kind of movable property, except Actionable Claims, Money & Securities. Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim


to understand the equity markets, may find commodities an unfathomable market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. In fact, the size of the commodities markets in India is also quite significant. Of the country's GDP of Rs 13, 20,730 crore (Rs 13,207.3 billion), commodities related (and dependent) industries constitute about 58 per cent. Currently, the various commodities across the country clock an annual turnover of Rs 1, 40,000 crore (Rs 1,400 billion). With the introduction of futures trading, the size of the commodities market grows many folds here on.

Commodity Market: Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market. Table:

Turnover in Financial Markets and Commodity Market S

(Rs in Crores) Market segments





2004-05 (E)

1 2 3

Government Securities Market 1,544,376 (63) 2,518,322 (91.2) 2,827,872 Forex Market 658,035 (27) 2,318,531 (84) 3,867,936 Total Stock Market Turnover 1,374,405 (56) 3,745,507 (136) 4,160,702

(I+ II) I National Stock Exchange (a+b) 1,057,854 (43) 3,230,002 (117) a)Cash 617,989 1,099,534 b)Derivatives 439,865 2,130,468 II Bombay Stock Exchange (a+b) 316,551 (13) 515,505 (18.7) a)Cash 314,073 503,053 b)Derivatives 2,478 12,452 4 Commodities Market NA 130,215 (4.7) Note: Fig. in bracket represents percentage to GDP at market prices

(91) (124.4) (133.8)

3,641,672 (117.1) 1,147,027 2,494,645 519,030 (16.7) 499,503 19,527 500,000 (16.1)

Source: SEBI bulletin (

It’s EVOLUTION IN INDIA Bombay Cotton Trade Association Ltd., set up in 1875, was the first organized futures market. Bombay Cotton Exchange Ltd. was established in 1893 following the widespread discontent amongst leading cotton mill owners and merchants over functioning of Bombay Cotton Trade Association. The Futures trading in oilseeds started in 1900 with the establishment of the Gujarati Vyapari Mandali, which carried on futures trading in groundnut, castor seed and cotton. Futures' trading in wheat was existent at several places in Punjab and Uttar Pradesh. But the most notable futures exchange for wheat was chamber of commerce at Hapur set up in 1913. Futures trading in bullion began in Mumbai in 1920. Calcutta Hessian Exchange Ltd. was established in 1919 for futures trading in raw jute and jute goods. But organized futures trading in raw jute began only in 1927 with the establishment of East Indian Jute Association Ltd. These two associations amalgamated in 1945 to form the East India Jute & Hessian Ltd. to conduct organized trading in both Raw


Jute and Jute goods. Forward Contracts (Regulation) Act was enacted in 1952 and the Forwards Markets Commission (FMC) was established in 1953 under the Ministry of Consumer Affairs and Public Distribution. In due course, several other exchanges were created in the country to trade in diverse commodities.

Structure of Commodity Market:

Different types of commodities traded:


World-over one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following:  Precious Metals: Gold, Silver, Platinum etc  Other Metals: Nickel, Aluminum, Copper etc  Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds.  Soft Commodities: Coffee, Cocoa, Sugar etc  Live-Stock: Live Cattle, Pork Bellies etc  Energy: Crude Oil, Natural Gas, Gasoline etc

Different segments in Commodities market: The commodities market exits in two distinct forms namely the Over the Counter (OTC) market and the Exchange based market. Also, as in equities, there exists the spot and the derivatives segment. The spot markets are essentially over the counter markets and the participation is restricted to people who are involved with that commodity say the farmer, processor, wholesaler etc. Derivative trading takes place through exchange-based markets with standardized contracts, settlements etc. Leading commodity markets of world


Some of the leading exchanges of the world are New York Mercantile Exchange (NYMEX), the London Metal Exchange (LME) and the Chicago Board of Trade (CBOT). Leading commodity markets of India The government has now allowed national commodity exchanges, similar to the BSE & NSE, to come up and let them deal in commodity derivatives in an electronic trading environment. These exchanges are expected to offer a nation-wide anonymous, order driven, screen based trading system for trading. The Forward Markets Commission (FMC) will regulate these exchanges.









commence business in this regard. They are: Multi Commodity Exchange (MCX) located at Mumbai. National Commodity and Derivatives Exchange Ltd (NCDEX) located at Mumbai. National








National Multi Commodity Exchange (NMCE) located at Ahmedabad. Turnover on Commodity Futures Markets (Rs. In Crores) Exchange


2004-05 Half



NCDEX 1490 54011 NBOT 53014 51038 MCX 2456 30695 NMCE 23842 7943 ALL EXCHANGES 129364 170720 Source:

Volumes in Commodity Derivatives Worldwide

Commodity Futures Trading in India

Introduction: Derivatives as a tool for managing risk first originated in the Commodities markets. They were then found useful as a hedging tool in financial markets as well. The basic concept of a derivative contract remains the same whether the underlying happens to be a commodity or a financial asset. However there are some features, which are very peculiar to commodity derivative markets. In the case of financial derivatives, most of these contracts are cash settled. Even in the case of physical settlement, financial assets are not bulky and do not need special facility for storage. Due to the bulky nature of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing. Similarly, the concept of varying quality of asset does not really exist as far as financial underlyings are concerned.


However in the case of commodities, the quality of the asset underlying a contract can vary largely. This becomes an important issue to be managed. Benefits to Industry from Futures trading  Hedging the price risk associated with futures contractual commitments.  Spaced out purchases possible rather than large cash purchases and its storage.  Efficient price discovery prevents seasonal price volatility.  Greater flexibility, certainty and transparency in procuring commodities would aid bank lending.  Facilitate informed lending.  Hedged positions of producers and processors would reduce the risk of default faced by banks.  Lending for agricultural sector would go up with greater transparency in pricing and storage.  Commodity Exchanges to act as distribution network to retail agri-finance from Banks to rural households.  Provide trading limit finance to Traders in commodities Exchanges. Benefits to Exchange Member  Access to a huge potential market much greater than the securities and cash market in commodities.  Robust, scalable, state-of-art technology deployment.  Member can trade in multiple commodities from a single point, on real time basis. 107

 Traders would be trained to be Rural Advisors and Commodity Specialists and through them multiple rural needs would be met, like bank credit, information dissemination, etc.

Chapter 4 Research Methodology



Objective of Study:

Each research study has its own specific purpose. It is like to discover to Question through the application of scientific procedure. But the main aim of our research to find out the truth that is hidden and which has not been discovered as yet.  To make investment decisions.  To determine the trend of commodity like Gold and Crude Oil.  To forecast future financial price movements.  To take an approach that what is “likely” to happen in price over time.  To understand emotions of market by using market itself.  To understand the chart patterns and technical terms and how decisions are being made with the help of it.

4.2 Problem identification:

Research always starts with a problem. In this study, the problem statement is “Technical Analysis of commodity market taking Gold and Crude Oil.”


4.3 Assumptions and benefits of study: The field of technical analysis is based on three assumptions: 1. The market discounts everything. 2. Price moves in trends. 3. History tends to repeat itself.

Benefits of study:  This study will help those investors who are interested in commodity trading in future.  Technical analysis focuses on price movement. The primary focus of

technical analysis is on the movement of prices. Charts show how prices are moving (or not moving), when prices are trending, and the strength of those trends. Volume, oscillators and momentum give a clearer picture of market action. And this information can be obtained at a glance.  Trends are easily found. Taking a look at a moving average line quickly

displays a price that is trending or stuck in a range. Whether it is up, down, or sideways, a chart can quickly display a currency that is exhibiting a trend. Trends are critical to technicians because a currency is likely to continue moving in the direction of the trend. Charts show them clearly and quickly.  Patterns are easily identified. One of the basic tenets of market action is

that it repeats itself in clear, unmistakable patterns. Using charts helps the trader to find patterns and predict price movements based on these patterns. Like star constellations, patterns can be complex and complicated. Head-andshoulders patterns, rounding tops and bottoms, ascending and descending triangles, and double and triple tops are proven patterns that many currency prices will follow. Hence, they have strong predictive powers. They can be impossible to detect without using a chart.


 Charting is quick and inexpensive. Computers have relieved us from the

burden of performing complex mathematical operations. The Internet has a wealth of different technical indicators available that can help the trader to make more profitable and more reliable trades. Many brokers offer these types of technical indicators to their clients as part of their package. Technical analysis is less time consuming and less costly than fundamental analysis. It can be performed in less than five minutes and the services are very often offered for free or at a nominal cost.  Charts provide a wealth of information. Charts and indicators can

provide a huge amount of information in only a few moments. Trends are easily found. Support and resistance levels are quickly identified. Momentum, volatility, and trading patterns appear quickly and easily. There are more than fifty kinds of indicators and they each provide information on different aspect of how a currency is moving. This information is critical to technicians to make sound and profitable trades.

4.4 Research design: “A research design is the arrangement of conditions for collections and analysis of data in a manner that aims to relevance to the research purpose with economy in procedure. In fact, research design is the conceptual structure within which research is conducted; it constitutes the blue print for collection, measurement and analysis of data.” A number of different design approaches exist; they may be exploratory study, formal study, causal, cross sectional, descriptive etc. For this study Researcher has chosen DESCRIPTIVE research design.

4.5 Sampling: 

Sample Design: Selecting Commodity market for analysis.

Sample Size: Selecting Gold and Crude Oil data of last three years.

4.6 Research tools: 

Secondary data: last three years of Gold and Crude Oil.

Software: Meta stock Professionals


Charts: RSI, MACD, BAR, EMA.

4.7 Data collection: Secondary data sources:  Internet  Books

4.8 Limitation of study: Below are the five ways that technical analysis can fail.  Geopolitical events.  Economic data.  Natural disasters.  Acts of terrorism.

 Internal Conflict or war.




Introduction to Chart of Gold:  In the chart, First top part is showing Relative Strength Index of Gold for January 2007 to first week of July 2009.  The middle part of the chart is showing MACD (Moving Average Convergence and Divergence) of Gold for January 2007 to first week of July 2009.  The bottom part of the chart contains three parts as follows. Bar chart of crude oil for January 2007 to first week of July 2009. 2.

(Exponential Moving Average) 30 days EMA (Blue line) (Short term) and 100 days EMA (Red line) (Long term).

Volume of Gold for the same period.






 Analysis of Bar Chart and EMA:  Last week of August 2007 Let us have a look at what the 3 years bar chart pattern of Gold is indicating: The 30 days EMA crosses 100 days EMA from downside by giving a buy signal at a price of around 9500, which is long-term bullish crossover. The 14 days RSI is already in strong buy mode, Volumes accompanying the breakout are encouraging, MACD is also in positive zone and thereby has given the confirmation to a bullish outlook that led to the sharp high from 9500 to above 13000.

 Last week of November 2008 On the daily chart 30 days EMA is still above the 100 days EMA from upside, by giving a sell signal at a price of around 13500, which is long-term bullish crossover. The 14 days RSI is already in strong buy mode, Volumes accompanying the breakout are encouraging, MACD is also in positive zone and thereby has given the confirmation to a bullish outlook that led to the sharp high from 13500 to above 16000 high.

 Last week of June 2009 As we see on the chart after accumulating between14000 to 15000 for last 3 months, stock had broken out from trading range with lower volumes and MACD is going negative and RSI also indicating same thing. RSI is in the middle range which suggest that Gold is still negatively pressured, forming consecutive bearish crossover.


 Analysis of RSI:  Sell period: RSI shows the Sell period as it reaches to 70, in the following time. •

For year 2007. 1. Whole month of February.

2. Last week December. •

For year 2008.

Last week of January. Mid week of March. Last three weeks of September. Last two weeks of November. Last week of December. •

For year 2009.

Last week of January. 

Over Bought Zone: RSI shows the Over Bought zone as it reaches above 70, in the following time •

For year 2007. 3. Whole month of September.

4. Last three weeks of October. 5. First week of November.

For year 2008.

First two weeks of January. Last week of February. Mid week of March. •

For year 2009.

Mid week of February.


 Buy Period: RSI shows the Buy period as it reaches to 30, in the following time •

For year 2007. 1. First week of January. 2. Last week of April. 3. Last week of June 4. First week of July.

For year 2008. 1. Ending of March. 2. Ending of April. 3. Second week of September.

For year 2009. 1. First three week of March.

 Over Sold Zone: RSI shows the Over Sold Zone as it reaches Below 30, in the following time •

For year 2007. 1. Last three week of May.

For year 2008.

First two week of April. •

For year 2009. There is no over sold zone till June 2009.


Introduction to Chart of Crude Oil:  In the chart, First top part is showing Relative Strength Index of Crude oil for January 2007 to first week of July 2009.  The middle part of the chart is showing MACD (Moving Average Convergence and Divergence) of Crude oil for January 2007 to first week of July 2009.  The bottom part of the chart contains three parts as follows. 1. Bar chart of crude oil for January 2007 to first week of July 2009. 2. (Exponential Moving Average) 30 days EMA (Blue line) (Short term) and 100 days EMA (Red line) (Long term) 3. Volume of Crude Oil for the same period.






 Analysis of Bar Chart and EMA:  Last week of June 2007 Let us have a look at what the 3 years bar chart pattern of Crude Oil is indicating: The 30 days EMA crosses 100 days EMA from downside by giving a buy signal at a price of 2860, which is long-term bullish crossover. The 14 days RSI is already in strong buy mode, Volumes accompanying the breakout are encouraging, MACD is also in positive zone and thereby has given the confirmation to a bullish outlook that led to the sharp high from 2860 to above 6000.  Last week of October 2008 On the daily chart 30 days EMA crosses 100 days EMA from upside, by giving a sell signal at a price of 4600, which is long-term bearish crossover. The 14 days RSI is already in selling mode as it is heading lower, MACD is in negative zone and Volumes too are very high showing delivery base selling in market that led to the sharp decline in price of the script from high 4600 to 1600 low.

 First Week of July 2009 As we see on the chart after accumulating between 2500 to 3500 for last 3 months, stock had broken out from trading range with higher volumes and 30 days EMA also sustaining above 100 days EMA which again shown a bullish sign. RSI and MACD both indicators also confirms the signal. After the 1st target the stock has corrected a bit we recommended to still hold for a target as July 2008.


 Analysis of RSI:  Sell period: RSI shows the Sell period as it reaches to 70, in the following time •

For year 2007. 1. In last two week of March. 2. Mid week of June. 3. Last week of November and December.

For year 2008.

First week of January. Mid week of February. Whole April month. First and last of week June. Last week of July. •

For year 2009.

Last three weeks of March. First week of May and June.  Over Bought Zone:

RSI shows the Over Bought zone as it reaches above 70, in the following time •

For year 2007. 1. Mid week of July. 2. Second week of September. 3. Last week of October. 4. First week of November.

For year 2008.

Last week of February. First two week of March.


Whole May month. •

For year 2009.

Last week of May. Second week of June.  Buy Period: RSI shows the Buy period as it reaches to 30, in the following time •

For year 2007. 1. First week of March. 2. Third week of August. 3. First week of December.

For year 2008. 1. Third week of January. 2. Last week of June. 3. Last three weeks of October. 4. Whole November month.

For year 2009. 1. Mid week of January. 2. Second week of February.

 Over Sold Zone:

RSI shows the Over Sold Zone as it reaches below 30, in the following time •

For year 2007. 1. First three weeks of January.

For year 2008. 1. Second week of October.

For year 2009. There is no over sold zone till June 2009.


CHAPTER 6 Findings, Conclusions and suggestions


 Findings: As base on study, there are some findings such as…  Gold 2007-2009 •

There is up and down in the year 2007 in gold. And it is following head and shoulder pattern of chart.

In year 2008, the gold was in bullish crossover in some of the month.

Where in staring of 2009, it was highest high in last three years.

Where in 2007 it was highest low.

And as in last three months of chart May to July 2009; MACD is continuously going downtrend by showing negative effect. Which suggest traders and investors should be ready for bearish crossover for future.

Even the RSI for last three months may to July 2009; it is neither in buy nor in sell position.

Even number of volumes for Gold is also declining in the last three months.

 Crude Oil 2007-2009 •

The prices of Crude oil have gone highest high in year July 2008.

And highest low was in staring of 2009.

At the end of June 2009, RSI is showing same position as gold.

No. of Volume for Crude Oil is increasing in last three months may to July 2009.

Moreover MACD is in its Positive direction or trend.

So it leads to the hope for highs of Crude oil in future.


 Conclusions: Technical analysis has its strengths, most importantly its timeliness. Technical analysis is concerned with what is actually happening in a market. This discipline also has its weaknesses, namely its reliance, for the most part, on normal probabilities and repetition in trading patterns. It should be remembered that volume can sometimes sputter for reasons unrelated to market momentum. Volume, for example, is typically light ahead of market holidays or in the advent of key report or statistical releases. Volume The volume section of the chart indicates the number of commodity contracts changing hands on a given day. The greater the volume, the higher the vertical bar on the chart. Volume is a useful measure of the strength of price movements. High volume tends to confirm a price trend, while low volume warns of flagging trading interest, creating doubt regarding the viability of the prevailing trend. It should be remembered that volume can sometimes sputter for reasons unrelated to market momentum. Volume, for example, is typically light ahead of market holidays or in the advent of key report or statistical releases.

In Summary 

Technically, gold's chart indicates:

Prices: an intermediate-term downtrend following a failure to score new highs in early July • RSI: a continuing downtrend • MACD: a continuing downtrend(negative) • Volume/Open Interest: a recent shift to bearish sentiment, matching the strength of the market's previous bullish conviction. Technically, Crude oil's chart indicates: •

• • • •

Prices: an intermediate-term uptrend following a success to score new highs in early July RSI: a continuing uptrend MACD: a continuing uptrend (positive) Volume/Open Interest: a recent shift to bullish sentiment, matching the strength of the market's previous bearish conviction.



Based on the charts and explanation above, there are some suggestions like...  In Gold, general trend is going downward, so it is advisable to investors for making new buy or stop loss.

 In Crude oil, the trend is going upward so investors can make profitable contracts in future.

 Investor and Traders should get knowledge about technical terms and

chart patterns to sustain their loss.

 The firm like Jainam is providing daily technical services to their sub brokers and clients so this type of approach should be taken care to make aware about the current market and its analysis.

 The trading of commodity is being done through the time of Jesus where he has said in the bible about wheat traded so it is not a new that commodities are being trade. But there is lack of knowledge about the commodity market and its analysis which can be fulfilled by this type of technical analysis.


 Bibliography: 


Reference Books: •

Security analysis and portfolio management 14th edition V.K. Bhalla (for technical analysis)

Business Research Methodology J.K. Sachdeva Himalaya Publishing House.

Software: Meta Stock Professionals



 List of Person Contacted in Organization:

Sr. No.



Contact No.


Mr. Kamlesh Patel

Head of Dp



Ms. Vibhati Arya




Mr. Hardik Shah

Research Exe.



Mr. Rohan Mehta

Research Manager



Mrs. Jigna Patel




Mrs. Chetna Bhandari

Marketing Manager



Mr. Devesh Shah

Commodity Head



Miss Rupal Pachhayaa

Trading Officer



Mr. Nikhil Tandel

IT Exe.



Mr. Mahavir Shah

Mutual Fund Exe.



Mr. Dhawal Panchal

Customer Care Head



Miss Shital Mehta

HR head



Mr. Biranj Patel

HR Seniro Exe.



 Weekly Reports Week No: 1 Start date: 21st may 2009

End date: 23rd may 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 1. On Thursday (Dt.. 21/5/2009) History of Jainam Share Consultant Pvt. Ltd. &

information about BSE 2. On Friday (Dt. 22/5/2009) Discussion about various department of Jainam pvt. Ltd. 3. On Saturday (Dt. 23/5/2009) Holiday from organization

Project Report Progress: 1. Some portion of Industry profile.

Submitted To: Varun Dhingra Date of reporting: 23rd may, 2009


Week No: 2 Start date: 25th may 2009

End date: 30th may 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 3. 4. 5. 6. 7. 8.

On Monday (Dt.. 25/5/2009) Visiting HR department On Tuesday (Dt. 26/5/2009) HR department activities, Role of HR manager On Wednesday (Dt. 27/5/2009) Reading Induction manual On Thursday (Dt. 28/5/2009) Visiting Marketing Department On Friday (Dt. 29/5/2009) Marketing Dept. functions and other information On Saturday (Dt. 30/5/2009) Holiday from organization

Project Report Progress: 1. Some portion of Industry profile. 2. Company profile 3. Department like HR and marketing

Submitted To: Varun Dhingra Date of reporting: 30th may, 2009


Week No: 3 Start date: 1st June 2009

End date: 6th June 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 2. 3. 4. 5. 6. 7.

On Monday (Dt. 1/6/2009) Visiting IT department On Tuesday (Dt. 2/6/2009) Visiting R & D department On Wednesday (Dt. 3/6/2009) Visiting Mutual Fund department On Thursday (Dt. 4/6/2009) Visiting Mutual Fund department On Friday (Dt. 5/6/2009) Discussion of Various topics for Project report On Saturday (Dt. 6/6/2009) Holiday from organization

Project Report Progress: (Cumulating Work) 1. 2. 3. 4.

Industry profile. Company profile Department like HR and marketing Department like. (a) Marketing (b) IT (c) R&D (d) Mutual Fund

Submitted To: Varun Dhingra Date of reporting: 6th June, 2009


Week No: 4 Start date: 8th June 2009

End date: 13th June 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 8. On Monday (Dt. 8/6/2009) Visiting customer care department 9. On Tuesday (Dt. 9/6/2009) Visiting commodity department 10. On Wednesday (Dt. 10/6/2009) Visiting MCX 11. On Thursday (Dt. 11/6/2009) Visiting DP department 12. On Friday (Dt. 12/6/2009) Visiting KYC department 13. On Saturday (Dt. 13/6/2009) Holiday from organization Project Report Progress: (Cumulating Work) 1. 2. 3. 4. 5.

Industry profile. Company profile Department like HR and marketing Department like. (a) Marketing (b) IT (c) R&D (d) Mutual Fund Department like (a) Customer care (b) Commodity (c) KYC & DP

Submitted To: Varun Dhingra Date of reporting: 13th June, 2009


Week No: 5 Start date: 15th June 2009

End date: 20th June 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 14. On Monday (Dt. 15/6/2009) Visiting Security department 15. On Tuesday (Dt. 16/6/2009) Visiting General A/C department 16. On Wednesday (Dt. 17/6/2009) Visiting A/C & Banking Department 17. On Thursday (Dt. 18/6/2009) Visiting Collection department 18. On Friday (Dt. 19/6/2009) Visiting Marketing & Sales Department 19. On Saturday (Dt. 20/6/2009) Holiday from organization Project Report Progress: (Cumulating Work) 1. 2. 3. 4. 5.

Industry profile. Company profile Department like HR and marketing Department like. (a) Marketing (b) IT (c) R&D (d) Mutual Fund Department like (a) Customer care (b) Commodity (c) KYC & DP

Submitted To: Varun Dhingra Date of reporting: 20th June, 2009


Week No: 6 Start date: 22nd June, 2009

End date: 27th June, 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 20.On Monday (Dt.. 22/6/2009) study on detailed topic on commodity market 21. On Tuesday (Dt. 23/6/2009) study on detailed topic on commodity market 22. On Wednesday (Dt. 24/6/2009) study on detailed topic on commodity market 23. On Thursday (Dt. 25/6/2009) study on detailed topic on commodity market 24. On Friday (Dt. 26/6/2009) study on detailed topic on commodity market 25. On Saturday (Dt. 27/6/2009) Holiday from organization

Project Report Progress: (Cumulating Work) 1. 2. 3. 4.

Industry profile. Company profile Department like. (a) Marketing (b) IT (c) R&D (d) Mutual Fund (e) HR Department like (a) Customer care (b) Commodity (c) KYC & DP

Submitted To: Varun Dhingra Date of reporting: 27th June, 2009


Week No: 7 Start date: 29th June, 2009

End date: 04th July, 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 26. On Monday (Dt.. 29/6/2009) study on detailed topic on commodity market 27. On Tuesday (Dt. 30/6/2009) study on detailed topic on commodity market 28.On Wednesday (Dt. 01/7/2009) study on detailed topic on commodity market 29. On Thursday (Dt. 02/7/2009) study on detailed topic on commodity market 30.On Friday (Dt. 03/7/2009) study on detailed topic on commodity market 31. On Saturday (Dt. 04/7/2009) Holiday from organization

Project Report Progress: (Cumulating Work) 1. 2. 3. 4. 5.

Industry profile. Company profile Department like. (a) Marketing (b) IT (c) R&D (d) Mutual Fund (e) HR Department like (a) Customer care (b) Commodity (c) KYC & DP Collection of Secondary Data.

Submitted To: Varun Dhingra Date of reporting: 4th July, 2009


Week No: 8 Start date: 6th July, 2009

End date: 11th July, 2009

Roll No: 14 Name of the student: Soyeb R. Jindani

Officer in charge in the company: Mr. Biranj Patel Contact No: 9375798005

Work completed in this Week: 32. On Monday (Dt.. 6//2009) study on detailed topic on technical analysis of gold and crude oil 33. On Tuesday (Dt. 7/7/2009) study on detailed topic on technical analysis of gold and crude oil 34. On Wednesday (Dt. 8/7/2009) study on detailed topic on technical analysis of gold and crude oil 35. On Thursday (Dt. 9/7/2009) study on detailed topic on technical analysis of gold and crude oil 36. On Friday (Dt. 10/7/2009) study on detailed topic on technical analysis of gold and crude oil 37. On Saturday (Dt. 11/7/2009) Holiday from organization

Project Report Progress: (Cumulating Work) a) b) c) d)

Chapter 1 Industry profile Chapter 2 Company profile Chapter 3 Theoretical Framework – Technical analysis Chapter 4 Research , Data collection , data presentation

Submitted To: Varun Dhingra Date of reporting: 11th July, 2009


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