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INTRODUCTION The Indian experience in commodity futures market dates back to thousands of years. References to such markets in India appear in Kautialya’s ‘Arthasastra’. The words, “Teji”, “Mandi”, “Gali”, and “Phatak” have been commonly heard in Indian markets for centuries. The first organized futures market was however established in 1875 under the aegis of the Bombay Cotton Trade Association to trade in cotton contracts. Derivatives trading were then spread to oilseeds, jute and food grains. The derivatives trading in India however did not have uninterrupted legal approval. By the Second World War, i.e., between the 1920’s &1940’s, futures trading in organized form had commenced in a number of commodities such as – cotton, groundnut, groundnut oil, raw jute, jute goods, castor seed, wheat, rice, sugar, precious metals like gold and silver. During the Second World War futures trading was prohibited under Defense of India Rules. After independence, the subject of futures trading was placed in the Union list, and Forward Contracts (Regulation) Act, 1952 was enacted. Futures trading in commodities particularly, cotton, oilseeds and bullion, was at its peak during this period. However following the scarcity in various commodities, futures trading in most commodities were prohibited in mid-sixties. There was a time when trading was permitted only two minor commodities, viz., pepper and turmeric. Deregulation and liberalization following the forex crisis in early 1990s, also triggered policy changes leading to re-introduction of futures trading in commodities in India. The growing realization of imminent globalization under the WTO regime and non-sustainability of the Government support to commodity sector led the Government to explore the alternative of market-based mechanism, viz., futures markets, to protect the commodity sector from price-volatility. In April, 1999 the Government took a landmark decision to remove all the commodities from the restrictive list. Food-grains, pulses and bullion were not exceptions.
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Industry Profile The industry is a part of what is broadly termed as service sector. So before moving further
let us first have a look at services. Services are deeds,
processes and performances, and as such are intangible. Services are produced not only by service businesses but are also integral to the offerings of many manufactured-goods producers. It is important to note here that services and customer service are distinct concepts. For example India info line provides the service of online trading and broking to the customers. But when the customers call on toll free number of the company regarding any doubt or for any help, say regarding change of his correspondence address, they are provided customer service. Customer service is the service provided in support of the company core product. The broad definition of services implies that intangibility is a key determinant of whether an offering is service or not. However, actually very few products are purely intangible or totally tangible. It can be said that while services are more intangible than manufactured products. These can be understood through tangibility spectrum. Other than intangibility,
heterogeneity,
perishability,
non-transfer
of
ownership,
and
inseparability are some other important features of services. Service sector in India accounts for more than half of the GDP of India. The share of service sector in India’s GDP for the fiscal year 2008-2009 stood at 56%.This is a trend which is observed in developed economies only. Service sector growth in India witnessed a dramatic pace in 1980s and 1990s, especially so in 1990s. Between1950 to 2000 the share of services in the GDP increased by 21%, forty percent of that growth was seen in 1990s.This was primarily due to liberalization in the regulatory framework of the economy and this gave rise to innovation and increased exports from the service sector. Services or the ³tertiary sector´ of the economy covers a wide gamut of activities like trading, banking & finance, entertainment, real-estate.
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Genesis of Stock Market - Stock market is a market
where trading of
company stocks, other securities and derivatives take place. Stock exchanges are corporations or mutual organizations which are specialized in trading stocks and securities. The first security was issued publicly in Venice in the fourteenth century where the government made the first known issue of bonds. Merchants and landowners purchased
these securities as investments. In and
around 1750s, in England, traders of the shares of early companies would commonly meet in Jonathans Coffee House to trade shares and make business deals. Early share bids and offers were written on the walls of the coffee house and the trading process was highly unregulated, with insider trading forming the basis for most investment decisions. Trading club shad been formed by early 1770s,and in 1801 a group of traders raised 20,000 pounds to build the London Stock Exchange in Capel Court. A similar process was being witnessed in America as well. By the early1790 smerchantshad begun trading in shares and just as in London, these
early traders
often met at coffee houses. In 1792, a group of 24 brokers, each of whom had paid $400 for a ³trading seat´ signed the Buttonwood Tree Agreement. This agreement outlined the regulations under which. The shares could be bought and sold. These regulations formed the basis for trading rules that still exist today and led to the formation in 1817 of the New York Stock Exchange. In the early days brokers in the stock exchanges would use the method of ³open outcry´ for trading. By the late 1990s, however, most of the stock exchanges across the globe
had been automated. Today, the open outcry
method has become a thing of past. Today computer shave become very important in this regard. The order placed on internet by the clients are first processed and authorized through the stock broker’s computer system before being automatically placed on the stock exchanges computer system. Today, online trading and broking has not only found acceptance but is also gaining popularity. Stock market has become an industry in itself from such
humble origins. People like Warren Buffet
and Allen Soros have made their fortune by doing nothing but investing in capital market.
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Indian Stock Market, Indian stock market is regulated by SEBI (Securities and Exchange Board of India). It was established on April 12, 1988 as a non-statutory body
to
promote the growth of the of the securities
market
and
also
to
provide adequate investor protection. The SEBI was accorded a statutory recognition by an ordinance in the year 1992. Later the ordinance was replaced by an act. There are twenty-four stock exchanges in India, the major among them are BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). The NSE and BSE are equal in size in terms of Daily traded volume. Most key stocks are traded in both the exchanges. BSE is, however, older and more widely followed. Both the exchanges have switched over from open outcry to fully automated systems known as BOLT (BSE Online
Trading)
and
NEAT (National
Exchange
Automated
Trading).The origin of Indian securities market can be traced back to 1875, when 22 enterprising brokers sitting under a banyan tree established the Bombay Stock Exchange as "The Native Share& Stock Brokers' Association". Its index is known as SENSEX. Presently there are around four thousand stocks listed in BSE. It is the principal stock exchange in the country accounting for nearly 70 percent of the aggregate paid-up share capital of all the listed companies and 80percent of the aggregate market capitalization of the listed companies. The Board of Governors of BSE comprises 9elected directors, an executive director, three government nominees, an RBI nominee and five public representatives. While India has a long history of securities trading, the markets have not always kept pace with the changing trends and requirements for this industry to keep pace with its full potential. Particular issues of concern have had been lack of transparency, lack of fair and accessible and trading members, dated procedures and practices and long and uncertain settlement cycles. So some investors decided to address these issues and break the monopoly of BSE brokers. NSE, incorporated in 1992, was given recognition as a stock exchange in April 1993 and started operation in June 1994. It has been set-up as a public limited company, owned by the leading institutional investors in the country. Besides, there is OTCEI (Over-the-Counter Exchange of India). It was established in order to have faster transactions, greater liquidity in the market and a transparency in transactions. It was the first exchange in India to offer transparent and screen-based trading. Also, there is MCX or Multi-Commodity Exchange where the trading in S.V. COLLEGEOFENGINEERING 4
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commodities takes place. It is a demutualized nationwide
electronic multi
commodity futures exchange set up by Financial Technologies with permanent recognition from Government of India for facilitating online trading, clearing & settlement operations for futures market across the country. The Exchange started operations in November 2003. Major Player’s in India •
ICICI Direct- it is the online trading and broking arm of the ICICI Bank. Today it is a leading player in the market. It offers three kinds of online trading platforms to its customers. It has a very wide customer base. However, in recent times the firm had to suffer a lot owing to high and non-negotiable brokerage, and also because of some negative publicity.
•
Share Khan- it is online stock trading company of SSKI Group, provider of Indiabased investment banking and corporate finance service. Share Khan is one of the largest stock broking houses in the country. One of the greatest strengths of the firm is an exceptionally low brokerage charged by it. It has a very loyal customer base. It is known, particularly, for intra-day trading. They provide two kinds of online trading platform. However, they have lot of hidden rules, like one cannot trade through Share khan for scripts below Rs.20.
•
Religare - it is promoted by Ranbaxy Laboratories. It is involved inequity related services include online trading at BSE and NSE, Derivatives, commodities, IPO, Mutual fund, Investment banking and institutional broking services. Religare also provides its customers with three kinds of trading platforms.
•
5 Paisa stock trading- 5paisa is Online Stock Trading Company of India Info line Securities Private Ltd., Owner of popular business portal Indiainfoline.com. Besides high quality investment advice from an experienced research team, the site offers real time stock quotes, market news and multiple tools for technical analysis. It is also known for its very low brokerage charges. However, it also has many hidden charges. In addition to these there are other players also like
•
Reliance
•
Motilal Oswal
Money,
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India Bulls, and
•
Karvy. The last of these was the first player to enter the online trading and broking in India but it has not been as successful as others.
Company Profile
INDIA INFOLINE (IIFL)
The IIFL (India Infoline) group, comprising the holding company, India Info line Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, Go I bonds and other small savings instruments. IIFL recently received an inprinciple approval for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL also received membership of the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is one of India’s leading online destinations for personal finance, stock markets, economy and business.
IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most improved brokerage, India’ in the Asia Money polls. India Info line was also adjudged as ‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equity research, IIFL’s research is acknowledged by none other than Forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia’. Our research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers.
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A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. All our offices are connected with the corporate office in Mumbai with cutting edge networking technology. The group caters to a customer base of about a million customers, over a variety of mediums viz. online, over the phone and at our branches.
Mile stones 1995 Commenced operations as an Equity Research firm 1997 Launched research products of leading Indian companies, key sectors and the economy Client included leading FIIs, banks and companies 1999 Launched www.indiainfoline.com 2000 Launched online trading through www.5paisa.com Started distribution of life insurance and mutual fund 2003 Launched proprietary trading platform Trader Terminal for retail customers S.V. COLLEGEOFENGINEERING 7
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2004 Acquired commodities broking license Launched Portfolio Management Service 2005 Maiden IPO and listed on NSE, BSE 2006 Acquired membership of DGCX Commenced the lending business 2007 Commenced institutional equities business under IIFL Formed Singapore subsidiary, IIFL (Asia) Pvt Ltd 2008 Launched IIFL Wealth Transitioned to insurance broking model 2009 Acquired registration for Housing Finance SEBI in-principle approval for Mutual Fund Obtained Venture Capital license 2010 Received in-principle approval for membership of the Singapore Stock Exchange S.V. COLLEGEOFENGINEERING 8
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Received membership of the Colombo Stock Exchange. 2011 IIFL Received Best Equity Broker Award by the Indian financial Ministry.
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Corporate Governance Committees Audit Committee The Audit Committee of the Company comprises of Mr. Nilesh Vikamsey (Independent Director & Chairman of the Committee), Mr. Kranti Sinha (Independent Director) and Mr. R Venkataraman (Executive Director). The Managing Director, the Executive Director along with the Statutory Auditors and Internal Auditors are invitees to the Meeting. The scope of the Audit Committee includes the references made under Clause 49 of the Listing Agreements as well as Section 292A of the Companies Act, 1956, besides the other terms that may be referred by the Board of Directors. The Broad terms of reference of the Audit Committee are: •
To supervise the financial reporting process and all financial results;
•
To review statements and disclosures and recommend the same to the Board;
•
To review the adequacy of internal control systems of the Company, including the scope and performance of the internal audit function; review of related party transactions; review the performance of internal and statutory auditors with management and fix their remuneration;
•
To hold discussions with statutory auditors on the nature and scope of audit; ensure compliance with all applicable accounting standards; ensure compliance with the listing and other legal requirements and the Company’s financial and risk management policies and
•
To ensure compliance with the statutory requirements The minutes of the Audit Committee Meetings form part of the agenda papers
circulated
for the Board Meeting. The Company Secretary of the Company acts as the Secretary to the Committee.
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Compensation/ Remuneration Committee The Compensation/ Remuneration Committee comprises of Mr. Kranti Sinha (Independent Director & Chairman of the Committee), Mr. Nilesh Vikamsey (Independent Director) and Mr. A K Purwar (Independent Director). The Broad Terms of the Compensation/ Remuneration Committee are as follows: • To review and make recommendations on annual salaries, perquisites, performance linked bonus, stock options, pensions and other employment conditions of Executive and Non-Executive Directors and senior employees. • To conducts discussions with the HR department and lays down suitable remuneration policies for the employees. • To administer the Company’s Stock Option plans. Share Transfer and Investor Grievance Committee The Share Transfer and Investor Grievance Committee comprises of Mr. Kranti
Sinha,
Independent Director as the Chairman of the Committee and Mr. Nirmal Jain
and Mr. R.
Venkataraman as the Members. The Broad terms of reference of the Share Transfer and Investor Grievance
Committee
are as follows: •
Share / Debenture Transfers
•
Non Receipt of Annual Report and Balance Sheet
•
Non Receipt of Interest / Dividend payments
•
Non Receipt of Duplicate Share Certificates
•
Transfer and Transmission (with or without legal representation) of shares / debentures
•
Any other grievances of the shareholder with Company
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IIFL at International IIFL-S INGAPORE IIFL (ASIA) PVT LTD. 20, COLLVER QUAY, #21-03, TUNG CENTRE, SINGAPORE-049319, TEL + 656511-6160 FAX + 65 6224-0650 IIFL-DUBAI 304, 3rd Floor, Mustafa building Opp. Musalla Towers, Bur Dubai UAE 241294 Tel +971-4-3553118 Fax+971-4-3553188 IIFL-USA IIFL Inc. 28W, 44th street, 16th floor, New York S.V. COLLEGEOFENGINEERING 12
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PRODUCTS and Services offered by IIFL in India:
Equities IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depository participant and provides broking services in the cash, derivatives and currency segments, online and offline. IIFL is a dominant player in the retail as well as institutional segments of the market. It recently became the first Indian broker to get a membership of the Colombo Stock Exchange and is also the first Indian broker to have received an inprinciple approval for membership of the Singapore Stock Exchange. IIFL’s Trader Terminal, its proprietary trading platform, is widely acknowledged as one of the best available for retail investors. Investors opt for IIFL given
it
unique
combination
of
superior Service, cutting-edge proprietary Technology, Advice powered by worldacclaimed research and its unparalleled Reach owing to its over 2500 business locations across over 500 cities in India. Commodities
IIFL offers commodities trading to its customers vide its membership of the MCX and the NCDEX. Our domain knowledge and data based on in depth research of complex paradigms of commodity kinetics, offers our customers a unique insight into behavioral patterns of these markets. Our customers are ideally positioned to make informed investment decisions with a high probability of success. Credit and finance
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IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage loans, margin funding, and loans against shares) comprise 94% of the loan book. The Company has discontinued its unsecured products. It has robust credit processes and collections mechanism resulting in overall NPAs of less than 1%. The Company has deployed proprietary loan-processing software to enable stringent credit checks while ensuring fast application processing. Recently the company has also launched Loans against Gold.
Insurance IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life Insurance Co. Ltd.’s corporate agent. Later, it became an Insurance broker in October 2008 in line with its strategy to have an ‘open architecture’ model. The Company now distributes products of major insurance companies through its subsidiary India Info line Insurance Brokers Ltd. Customers can choose from a wide bouquet of products from several insurance companies including Max New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life, Birla Sun life, Life Insurance Corporation, Kotak Life Insurance and others Wealth Management Service IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and corporate clients under the ‘IIFL Private Wealth’ brand. IIFL Private Wealth is managed by a qualified team of MBAs from IIMs and premier institutes with relevant industry experience. The team advises clients across asset classes like sovereign and quasi-sovereign debt, corporate and collateralized debt, direct equity, ETFs and mutual funds, third party PMS, derivative strategies, real estate and private equity. It has developed innovative products structured on the fixed income side.
Investment Banking IIFL’s investment banking division was launched in 2006. The business leverages upon its DAILY strength of research and placement capabilities of the institutional and retail sales teams. Our SETTLEMENT experienced investment PRICE banking team possesses the skill-set toFINAL manage all kinds of investment banking transactions. Our close interaction with investors as well as corporates SETTLEMENT S.V.PRICE COLLEGEOFENGINEERING HANDLE Fundamental DAILY PRICE Analysis FLUCTUATION
DAILY SETTLEMENT OF SETTLEMENT FOR ALLTYPES TRADES
Technical Analysis
HANDLE FINAL FINAL SETTLEMENT SETTLEMENT OF
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