SAIF

A Project
A project report on
Report On:

Need of
financial
advisors for
equity
investors
(With special
reference to
India Infoline
Ltd)

Interim report SUBMITTED

BY:

SAIF AHAMAD
Roll no. – pgDM/09045
 Under the guidance of:

SURENDRA KUMAR NAGAR Mrs. NEERU SINGH

India Infoline Ltd. Faculty, I-

Business Institute

Gr. Noida Gr. Noida

I – BUSINESS INSTITUTE
35, Knowledge Park II, Greater Noida

DECLARATION

I, Mr. Saif Ahamad do hereby declare that the project report entitled
“NEED OF FINANCIAL ADVISORS FOR EQUITY
INVETORS” is a genuine research work undertaken by me and it has not
been published anywhere earlier.

This report is based on my personal opinion hence cannot be referred

to legal purpose.
 SAIF AHAMAD

Surendra Kumar Nagar

India Infoline Ltd (Franchisee)

Greater Noida

Certificate by the organization:

This is to certify that Mr. Saif Ahamad, pursuing PGDM at I -

Business Institute, Greater Noida has worked under my

supervision and guidance on his dissertation entitled “Need of

financial advisors for Equity investors” at India
Infoline Limited, Greater Noida from March 19th 2010 to
May 15th 2010. ” To the best of my knowledge this is an original
piece of work.

Preface

The present era is undoubtedly a management era. Management is an important function

in any organization. A management is one of the most important fields which are widely
used in every stage of life. The effective management can be achieved only by effective
management training and developing skill to understand the organizational level this
project work is a part of the course of PGDM and was done at India Infoline.

This project is prepared on the basis of awareness of India Infoline in market and
understanding the need of financial advisor to the investors.

India Infoline is world class financial service providing company who provides financial
solution to investors.
It consists of an integrated team consisting of highly qualified, versatile and experienced
finance professionals. This project helps me to better understanding of market and
financial products and their benefits.

Now I am feeling the great pleasure in delivering this project because of a better skill of
handling the situation and customer understanding.

Acknowledgement

I would like to express my sincere thanks to India Infoline Ltd., Greater Noida for giving
me the opportunity to carry out the Summer Internship Program in their organization.
The whole period spent with the organization has been of immense learning experience
about the Indian Stock Market.

Preparing a project of such a kind is not an easy task in itself and I am sincerely thankful
to all those people who helped me lot, in preparing and completing this project.

I am grateful to India Infoline Ltd. who has given me this opportunity to carry out the
project “Need of Financial Advisors for Equity Investors” A study on investor’s
perception and their behavior about equities.

I sincerely thank to Mr. Surendra Kumar Nagar (Company Guide, India Infoline Ltd) for
providing me this valuable learning opportunity.
I would also like to thank Mrs. Neeru Singh – Faculty Guide, I-Business Institute,
Greater Noida for her valuable guidance and insight amidst her busy schedule.

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.

index

I. Objective
II. Statement of The Study
III. Executive Summary

1. Introduction to Financial Advisors

1.1. Overview
1.2. Financial Planners
1.3. Financial Planning

2. Investments
2.1. Overview
2.2. Basic investment objectives
2.3. How to make investments

3. Types of Investments
3.1. Overview
3.2. Debt Instruments
3.3. Bonds
3.4. Mutual Funds
3.5. Equity
3.6. Insurance
3.7. Cash
3.8. Gold
3.9. Real Estate
 3.10. Home Loans

4. Company Profile
4.1 Introduction
4.2 The History of India Infoline
4.3 Corporate Structure
4.4 Product & Services
5. Performance Highlights
6. Business Review
7. Stock & Equity
8. Research Report
9. Findings & Conclusion
10.Recommendations
11.Annexure-1 (Questionnaire)
12.Annexure-2 (Bibliography)
 OBJECTIVE

➢ To study investor’s behavior towards different attributes such as risk, return,

liquidity etc. of investment in Equities.

➢ To study the issues and challenges that investors face while making investment in

share market.

➢ To study the preferences and perceptions of investors regarding various financial

products from the stable of India Infoline Ltd. so that the firm can benefit from
the findings of the report in launching any new investment product in future.

➢ To study the consumer’s perception in respect of investment in shares Trading.

➢ To study about Risk Management with the help of equities.

 RESEARCH STATEMENT

“To get an insight into the mind of investors regarding trading and investment in
Equities”

“To get an insight into the mindset of investors regarding the importance assigned to
different attributes such as risk, return, liquidity etc. of various investment channels such
as equities. In the report this tries to understand the investor’s behavior while trading.”

“To study the preferences and perceptions of investors regarding various financial
products from the stable of India Infoline Ltd. so that the firm can benefit from the
findings of the report in launching any new investment product in future.”
 EXCUTIVE SUMMARY

This project has been a great learning experience for me; at the same time it gave me
enough scope to implement my analytical ability. This project as a whole can be divided
into two parts:

✔ The first part gives an insight about the equity and its various aspects. It is purely
based on whatever I learned at India infoline. One can have a brief knowledge
about equity and all its basics through the project. Other than that the real
servings come when one moves ahead. Some of the most interesting questions
regarding stock & equity have been covered. Some of them are: why has it
become one of the largest financial intermediaries? How investors do choose
between stocks? Most popular stocks among equity investors, most lucrative
sectors for equity investors, a special report on Systematic Investment Plan, does
equity investment persists and the topping of all the servings in the form of
portfolio analysis tool and its application.
All the topics have been covered in a very systematic way. The language has
been kept simple so that even a layman could understand. All the datas have been
well analyzed with the help of charts and graphs.

✔ The second part consists of data and their analysis, collected through a survey
done on 100 people. It covers the topic” need of financial advisors for equity
investors”. The data collected has been well organized and presented. Hope the
research findings and conclusions will be of use. It has also covered why people
don’t want to go for financial advisors? The advisors can take further steps to
approach more and more people and indulge them for taking their advices.
1. Introduction to Financial Advisors

1.1. Overview

Planning for a secure financial future is not easy. Yet increasingly, individuals are in
charge of their own financial futures. Most are aware that planning is critical, yet
don’t the have time or the expertise to develop a plan and make the needed financial
decisions. So there arises a need for FINANCIAL ADVISORS to manage the
individual’s wealth and the whole process of managing this wealth is known as
Wealth Management.
There are a number of financial advisors offering a diverse portfolio of services to
suit different financial requirements of their clients. In order to accomplish the task,
these companies provide the assistance of professional financial advisors. These
financial advisors help individuals or corporate manage their wealth appropriately
through:

1.1.1. Investment Solutions: The financial planner helps the individuals diversify
their portfolio through alternative investment plans, mutual funds, equities,
and even save for retirement through annuities.

1.1.2. Financial Planning: Financial Planning is an exercise aimed to ensure

availability of right amount of money at the right time to meet the
individual’s financial goals.
Financial planners plan individual’s current expenditures and save for
future short-term or long-term goals by analyzing different options
available.

1.1.3. Retirement Planning: The financial planner guides their clients in planning
for their financial requirements after retirement, by helping them identify
goals, researching and analyzing different opportunities to secure funds and
make investments to suits their needs.

1.1.4. Wealth Management: It is a comprehensive service to optimize, protect and

manage the financial well-being of an individual, family or corporation. Its
basic definition covers advice on loans, investments and insurance to give a
broad picture of how individuals should best deploy their financial
resources. A broader picture may include tax advice, estate planning,
business planning, charity foundations and other financial needs.

Even though one of the most significant factors in our life is the state of our personal
finances, we rarely spend time on managing them since unlike businesses. The reason
being, we are not accountable to any one for our personal financial goals and results. As a result
we tend to get careless in our financial matters. I know we all understand the importance of
savings but let us not get confused between savings and investment. Mere savings (putting aside
a portion of earnings) do not insure or guarantee achievement of future financial goals.

It is important to save but more important is to invest your money. By merely stashing
away money into that neighborhood bank's savings account, you are neither making any
more money, nor preserving its value. The inflation rate at around 4-5 per cent p.a. in
excess of your bank savings account rate at 3.5 per cent p.a. mercilessly erodes your
wealth to that extent. The purchasing power of rupee keeps depreciating. So, to fight
against such depreciation one has to invest the money saved in assets that will help it
work for you and earn more than the erosion in value through inflation over a period of
time. That's just one of the primary reasons why each individual should invest. Another
more definitive reason is the 'Power of Compounding'. Put simply, it means that "Interest
on Interest is Interesting". Let me explain this by means of a simple example.

1.2. Financial Planner (Wealth Planner / Financial Advisor)

The financial planner helps identify various taxable and non-taxable investments. This is not a
comprehensive list of services. They may differ from one financial management company to
another. One can select the services according to their requirements, be it personal or
professional.

A financial planner work begins with a consultation with the client, from whom the
planner obtains information on the client’s finances and financial goals. The planner then
develops a comprehensive financial plan that identifies problem areas, makes
recommendations for improvement, and selects appropriate investments compatible with
the client’s goals, attitude toward risk, and expectation or need for a return on the
investment. Financial planners usually meet with established clients to update them on
potential investments and to determine whether the clients have been through any life
changes—such as marriage, disability, or retirement—that might affect their financial
goals.
Finding clients and building a customer base is one of the most important of a financial planner’s
job, because referrals from satisfied clients are an important source of new business. Many
planners also contact potential clients by giving seminars or lectures or meet clients through
business and social contacts.

1.2.1. Need for a financial planner:

Holistic in outlook: CFPs consider all circumstances, family needs, goals, values, and
aspirations, while making recommendations.

Professionals: CFPs protect privacy, strive to maintain the highest ethical standards and
continually enhance skills and credentials through continuing education.

Educational in nature: CFPs guide one through options and explain the clearly to help
make the best choices.
Committed to success: Holistic financial planning is a process, not an event, and commit
to adjusting plan as life goals change.

1.2.2. Role of Financial Planner’s

a) Defining your Goals - A planner will take note of and record all your financial
goals. You save for a variety of reasons: to buy a house and a car, to educate your
children, to set them up in business, to get them married, to go on vacations, and,
finally, to give yourself a comfortable life in retirement. But not all of us get around
to defining what ‘comfortable’ retirement means or ‘good’ education means in
money terms. The planner will help you work out the money value for each of your
goals. You might want Rs.30 lakh for a house today, Rs.5 lakh for a car next year,
Rs.10 lakh for your child’s education in 10 years, Rs.5 lakh for his marriage in 15
years and Rs.50 lakh for your retirement in 20 years. Additionally, you’ll set aside
money for contingencies–medical and other emergencies–all your life, perhaps in
cash or virtually as liquid. You also need insurance for yourself, your family and
your property.

b) Saving for them - Once these goals are written down, you can clearly see what
you need to save today to meet these goals. The concept of ‘savings’ changes–
from ‘something that’s left over’ to ‘something that you target every month’. The
planner helps with your budgeting by making you write down your income and
expenses in great detail. He helps you rationalize wasteful expenses and establish
a system of generating surpluses every month. Once you see the magnitude of
your investment goals and the need to save properly, the desire for the latest in
everything diminishes. In other words, planning is about creating wealth–and
managing it efficiently.

c) Covering Risk - The planner then assesses your insurance needs, which varies
from person to person and from age to age. As a young bachelor with no
dependants, you’ll need disability insurance rather more than life insurance, but
the minute you get married and you have a stay-at-home wife whom you support,
you need life insurance as well. When the kids come along and your old parents
too become your dependants, the outlay on your life insurance will have to
increase, as will that on disability. The planner will help you identify your
insurance needs, quantify them and then suggest policy options.

d) Planning for Retirement - The planner then looks at your retirement needs and
plans for the time when you’ll no longer be earning. Your contributions to your
EPF and PPF accounts will, of course, help you on that count–provided you’ve
been disciplined and not made withdrawals from these accounts halfway through.

A planner will help you quantify in money terms the ‘comfortable’ retirement
you dream of. He’ll then work out how much you need to save every month and
at what rate it needs to grow to hit the target. More important, the planner will
work with you to keep your short-term financial needs in check so that you don’t
touch your retirement funds at all. His job is to make you understand that
 retirement funds are only for the future, when you have no other source of
income, and that dipping into it prematurely is very risky.
e) Making It Happen - The planner has taken so long just to establish what you
want out of life in money terms; even now, the actual investment is two steps
away. The planner will now assess your ‘risk profile’. This is just a way to see
what level of risk you’re comfortable with. It would depend on your age and your
family circumstances. For example, a person in his mid-30s can take far greater
risk than a man in his 60s. Based on the goals, the savings and the risk profile, the
planner will then chart an ‘asset allocation’ strategy–that is, help you decide the
percentage of your total portfolio you want to put in different instruments:
property, equity, debt, or funds that invest in these assets.

f) Total Financial Solutions - A planner has a ‘big picture’ vision and is able to see
the inter-linkages of all your goals, expenses and investments. For example, if a
person is earning well and has a non-working wife with two kids, there’s no
problem if he takes a home loan and a car loan. But what if he dies next year? His
life insurance will take care of his family’s living expenses, but how will his
family pay off the loans? A planner would make provisions for such an
eventuality and increase the insurance amount to cover the debt as well. The
planner will also help you figure out what impact reducing a Rs.15,000 home
loan EMI to Rs.10,000 would have on your retirement kitty. And what impact
downgrading a Corsa to a Santro would have on your child’s education corpus.

g) The Balancing Act - A planner’s responsibility doesn’t, however, end with your
buying a product. He still has to hand-hold you, for instance, when the stock
market tanks or tops. Imprudent investors tend to buy when the market is high
and sell in a slump. The planner educates you on the merits of a long-term
approach and regular investing and helps you rebalance your portfolio. For
example, you may have agreed on a 60:40 equity-debt allocation, but a steady
rise in the stock market over a couple of years, which may increase the value of
your stocks portfolio, may skew your asset mix to 70:30 in favour of equity. That
high an exposure to equity may not be good for you, but left to yourself, you
might get carried away and withdraw completely from debt and hike the equity
component of your portfolio. The planner will step in to remind you of your risk
profile, your investment goals and your long-term approach. In rising markets,
financial planners do the work of circuit-breakers in the stock market: they
temper their clients’ unrealistic expectations and keep them on track.

1.3. Financial Planning

‘Financial planning’ is the process of charting out the money course of your life. It’s
like having a financial roadmap that guides your every step till you pass on the baton
to the next generation. In other words, it is a process in which an individual sets long-
term financial goals through investments, tax planning, asset allocation, risk
management, retirement planning and estate planning. Most of us approach our
financial lives like the disorganized traveler who gets to his destination eventually
 and perhaps even enjoys the rough ride. We think we have a clear roadmap in mind,
but our financial lives are marked by ad-hoc decisions and capitulation to the
temptations of the flavors of the financial season.

1.3.1. Benefits of Financial Planning

A sound and meticulous Financial Planning will have following enumerated benefits:
• Sophisticated financial advice to cope with changing life situation
• Non-biased opinion on one’s insurance needs
• Help dealing with one’s retirement planning
• Optimum asset allocation and investment strategy formulation
• Efficient tax strategy and estate planning

1.3.2. Scope of Financial Planning

Sometimes it so happens that when one consulted with a financial advisor in the past
he felt that he was asked to buy something he didn’t fully understand. Maybe he felt
that products were recommended without consideration for his overall financial
situation. In cases like this, comprehensive, holistic, fee-only financial planning
eliminates such concerns. A person receives objective advice targeted to his needs
and goals.

One of the myths regarding financial planning is that only rich individuals and HNIs
can undertake this. This perception exists because most players in the market target
these people, as they are very profitable customers. However, anyone can use
financial planning. In fact, individuals should use effective financial planning to
build their wealth over the years. There are financial planners who service small
individuals too. However, individuals need to remember the financial planners charge
for the services they render, so they should be ready to pay for the advice.

2. Investments
2.1. Overview

The money you earn is partly spent and the rest is saved for meeting future expenses.
Instead of keeping the savings idle you may like to use savings in order to get return
on it in the future. This is called Investment. In other words, Investment is ‘the act of
committing money or capital to an endeavor with the expectation of obtaining an
additional income or profit.’

It's actually pretty simple: investing means putting your money to work for you.
Essentially, it's a different way to think about how to make money. There are many
different ways you can go about making an investment. This includes putting money
into stocks, bonds, mutual funds, or real estate (among many other things), or starting
your own business. Sometimes people refer to these options as "investment vehicles,"
which is just another way of saying "a way to invest." Each of these vehicles has
positives and negatives, which will be discussed later in the thesis. The point is that it
doesn't matter which method you choose for investing your money, the goal is
always to put your money to work so it earns you an additional profit. Even though
this is a simple idea, it's the most important concept in the current scenario to
understand.

2.2. Basic Investment Objectives

Investing is a conscious decision to set money aside for a long enough period in an
avenue that suits your risk profile. The options for investing our savings are
continually increasing, yet every single investment vehicle can be easily categorized
according to three fundamental characteristics - Safety, Income and Growth - which
also correspond to types of investor objectives. While it is possible for an investor to
have more than one of these objectives, the success of one must come at the expense
of others. Here we examine these three types of objectives, the investments that are
used to achieve them and the ways in which investors can incorporate them in
devising a strategy.

2.2.1. Safety
Perhaps there is truth to the axiom that there is no such thing as a completely safe
and secure investment. Yet we can get close to ultimate safety for our investment
funds through the purchase of government-issued securities in stable economic
systems, or through the purchase of the highest quality corporate bonds issued by
the economy's top companies. Such securities are arguably the best means of
preserving principal while receiving a specified rate of return. The safest
investments are usually found in the money market and include such securities as
Treasury bills (T-bills), certificates of deposit, commercial paper or bankers'
acceptance slips; or in the fixed income (bond) market in the form of municipal
and other government bonds, and in corporate bonds. It is important to realize
that there's an enormous range of relative risk within the bond market: at one end
are government and high-grade corporate bonds, which are considered some of
the safest investments around. At the other end are junk bonds, which have a
lower investment grade but possessing more risk than some of the more
speculative stocks.

2.2.2. Income
However, the safest investments are also the ones that are likely to have the
lowest rate of income return, or yield. Investors must inevitably sacrifice a degree
of safety if they want to increase their yields. This is the inverse relationship
between safety and yield: as yield increases, safety generally goes down, and vice
versa. Most investors, even the most conservative-minded ones, want some level
of income generation in their portfolios, even if it's just to keep up with the
economy's rate of inflation. But maximizing income return can be an overarching
principle for a portfolio, especially for individuals who require a fixed sum from
their portfolio every month.

2.2.3. Growth of Capital

Growth of capital is most closely associated with the purchase of common stock,
particularly growth securities, which offer low yields but considerable
opportunity for increase in value. Blue-chip stocks, by contrast, can potentially
offer the best of all worlds by possessing reasonable safety, modest income and
potential for growth in capital generated by long-term increases in corporate
revenues and earnings as the company matures.

2.2.4. Secondary Objectives

a) Cost of Inflation
One needs to invest wisely to meet the cost of Inflation. Inflation causes
money to lose value because it will not buy the same amount of a good or a
service in the future as it does now or did in the past. For example, if there
was a 6% inflation rate for the ext 20 years, a Rs.100 purchase today would
cost Rs.321 in 20 years. Remember to look at an investment’s ‘real’ rate of
return, which is the return after inflation. The aim of investments should be to
provide a return above the inflation rate to ensure that the investment does not
decrease in value. For example, if the annual inflation rate is 6%, then the
investment will need to earn more than 6% to ensure it increases in value.

b) Tax Minimization
An investor may pursue certain investments in order to adopt tax minimization
as part of his or her investment strategy. A highly-paid executive, for
example, may want to seek investments with favorable tax treatment in order
to lessen his or her overall income tax burden. Making contributions to an
IRA or other tax-sheltered retirement plan can be an effective tax
minimization strategy. By far, tax-saving is the most compelling reason for
investors to set aside money for the long term.

c) Marketability / Liquidity
Common stock is often considered the most liquid of investments, since it can
usually be sold within a day or two of the decision to sell. Bonds can also be
 fairly marketable, but some bonds are highly illiquid, or non-tradable,
possessing a fixed term. Similarly, money market instruments may only be
redeemable at the precise date at which the fixed term ends.

d) Retirement
Anyone who will retire needs to plan for it. There is more than one reason to
save for retirement. The all important reason is the rising cost of living. It’s
called inflation. If you start planning for retirement early on, you can bridge
the gap between what you have in your hand today and what you would like
to have when you retire. If you begin saving for retirement early on in your
life, you can set aside smaller amounts. You can also take on more risk by
investing larger amounts in equities i.e., stocks and equity funds. If you delay
saving for retirement, you will have to invest larger sums of money to save
for the same amount; also the share of equity investments as a portion of your
retirement savings will have to be lower. The older you are when you start,
the more risk averse you will have to be. Your retirement portfolio will
actually be a mix of stocks, debt securities, index funds and other money
market instruments. This mix will change as you do, moving increasingly
toward low-risk guaranteed investments as you age. Unless planned well,
retirement phase will be a downhill ride.

2.3. How to Make Investments

Having appreciated the need, objectives and types of investment, it is now time to
shift focus to the actual process of investing.
• Set investment objectives
• Access risk-profile
• Get the right asset allocation
• Select an investment advisor

3. Types of Investments
3.1. Overview
 There are many ways to invest your money. Of course, to decide which investment
vehicles are suitable for you, you need to know their characteristics and why they
may be suitable for a particular investing objective.

• Debt Market
• Bonds
• Mutual Funds
• Equity Market
• Insurance
• Cash
• Gold
• Real Estate
• Home Loans

Table 3.1: Types of Investments

3.2. Debt Instruments

Debt instruments protect your capital, therefore the importance of a solid debt portfolio.
This not only gives stability, but also offers you optimal returns, liquidity and tax
benefits. Debt products, besides safeguarding your capital, can be used to meet short,
medium and long-term financial needs.

3.2.1. Short-Term Options:

They are good for short term goals, you can look at liquid funds, floating rate funds and short-
term bank deposits as options for this category of investments. Liquid funds have retuned around
5% post-tax returns as compared to 5.6% post-tax that your one-year 8% bank fixed deposit
gives you. So, if you have funds for investment for over a period of one year, it is better to go in
for bank deposits. However, liquid funds are better, if your time horizon is less than one-year,
say around six months. This is because the bank deposit rates decrease proportionately with
lower periods, while liquid funds will yield the same annualized returns for any period of time.
Short-term floating rate funds can be considered at par to liquid funds for short term investments.

Fixed Maturity Plan (FMP):

If you know exactly for how much time you need to invest your surplus, a
smarter option is to invest in FMPs. They are shorter-tenured debt schemes
that buy and hold securities till maturity, thereby eliminating the interest rate
risk. Try and opt for FMPs that offer a double indexation benefit. Fund
houses usually launch double-indexation FMPs during the end of the
financial year so that they cover two financial year closings.

3.2.2. Medium & Long-Term Options:

These options typically offer low or virtually no liquidity. They are, however, largely
useful as income accumulation tools because of the assured interest rates they offer.
These instruments (small savings schemes) should find place in your long-term debt
portfolio.

3.3. Bonds

3.3.1. Overview
It is a fixed income instrument issued for a period of more than one year with the
purpose of raising capital. The central or state government, corporations and similar
institutions sell bonds. A bond is generally a promise to repay the principal along with a
fixed rate of interest on a specified date, called the Maturity Date. The main attraction of
bonds is their relative safety. If you are buying bonds from a stable government, your
investment is virtually guaranteed, or risk-free. The safety and stability, however, come
at a cost. Because there is little risk, there is little potential return. As a result, the rate of
return on bonds is generally lower than other securities.

3.3.2. Tax Saving Bonds

These are those bonds that have a special provision that allows the investor to
save on tax. Examples of such bonds are:
a) Infrastructure Bonds
b) Capital Gains Bonds
a. Rural Electrification Corporation (REC) Bonds
b. National Highway Authority of India (NHAI)
c. National Bank for Agriculture & Rural Development
c) RBI Tax Relief Bonds

3.4. Mutual Funds

3.4.1. Overview
A mutual fund is a body corporate registered with SEBI that pools money from
the individuals/corporate investors and invests the same in a variety of different
financial instruments or securities such as Equity Shares, Government Securities,
Bonds, Debentures, etc. The income earned through these investments and the
capital appreciations realized are shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
Mutual fund units are issued and redeemed by the Asset Management Company
(AMC) based on the fund’s net asset value (NAV), which is determined at the
end of each trading session.

Mutual funds are considered to be the best investments as on one hand it provides
good returns and on the other hand it gives us safety in comparison to other
investments avenues. Figure3.4 below describes broadly the working of a mutual
fund:-

Figure 3.1: Working of a Mutual Fund

3.4.2. Types of Mutual Funds

Mutual fund schemes may be classified on the basis of its structure and its
investment objective.

a) By Structure :
i . Open-Ended Funds
In an open-ended fund, investors can buy and sell units of the fund, at
NAV related prices, at any time, directly from the fund. This is called an
open ended fund because the pools of funds is open for additional sales
and repurchases. Open ended funds have to balance the interest of
investors who come in, investors who go out and investors who stay
invested.

ii. Closed-Ended Funds

A closed ended fund is open for sale to investors for a specific period,
after which further sales are closed. Any further transaction for buying the
units or repurchasing them, happen in the secondary markets, where
closed end funds are listed. In a closed ended fund, thus, the pool of funds
can technically be kept constant. Investors in closed end funds receive
either certificates or depository receipts, for their holdings in a closed end
mutual fund.

iii. Interval Funds

Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.

b) By investment objective
i. Growth Funds
The aim of growth funds is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
ii. Income Funds
The aim of income funds is to provide regular and steady income to
Investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures and Government securities. Income Funds
are ideal for capital Stability and Regular Income.
iii. Balanced Funds
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest
both in equities and fixed income securities in the proportion indicated in
their offer documents.
iv. Money Market Funds
 The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market.

v. Load Funds
A Load Fund is one that charges a commission for entry or exit. That is,
each time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2%.

vi. No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the
fund.

c) Other Schemes
i. Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax laws as the Government offers tax incentives for
investment in specified avenues. Investments made in Equity Linked
Savings Schemes (ELSS) and Pension Schemes are allowed as deduction
u/s 88 of the Income Tax Act, 1961.

3.5. Equity
3.5.1. Overview

Equities are often regarded as the best performing asset class vis-à-vis its peers
over longer time frames. However equity-oriented investments are also capable
of exposing investors to the highest degree of volatility and risk. There are a
number of factors, which affect the performance of equities ad studying and
understanding all of them on an ongoing basis, can be challenging for most.

Stock markets have always been a draw for investors for their ability to generate
wealth over the long-term. Fear, greed and a short-term investment approach act as
hurdles that frustrate the investor from achieving his/her investment goals. You
need to keep in mind the risk associated with the stocks. You also need to diversify
your equity portfolio i.e., include more stocks and sectors. This helps you diversify
your investment risk, so even if something were to go wrong with a stock/industry
in your portfolio, other stocks/industries should help you shore up your portfolio.
Two important resources that are critical to investing directly in stock markets are
quality stock research and a reliable and inexpensive stock broker. The first one –
research on stocks is the most critical input that investors need to identify before
they begin investing in stock markets. This is because even while you may have the
risk appetite for equities, you still need credible, stock market related research that
can help you make the right investment decision. The other important service
provider for you is the stockbroker; he is the one who helps you execute the
transaction over the stock exchange.

The good thing about the Indian market, riding on the back of an economy that has
grown by over 7% in the last two years, is that you can’t miss being part of growth
if you invest in the stock markets carefully. The bad part is the CHOICE! Of the
listed 4,758 stocks on BSE and the NSE, how do you even get close to taking a
call? Here comes the need of a financial advisor who can make your investment
decisions and monitor your funds. Clearly, as Indians earn more, save more and
accumulate more, financial advisors will play a crucial role in helping individuals
create, protect and manage wealth. The wealth managers are all set to shepherd
your financial future.
3.6. Insurance

3.6.1. Overview
Life insurance has traditionally been looked upon pre-dominantly as an avenue
that offers tax benefits while also doubling up as a saving instrument. The
purpose of life insurance is to indemnify the nominees in case of an eventuality
to the insured. In other words, life insurance is intended to secure the financial
future of the nominees in the absence of the person insured.

The purpose of buying a life insurance is to protect your dependants from any
financial difficulties in your absence. It helps individuals in providing them with
the twin benefits of insuring themselves while at the same time acting as a
compulsory savings instrument to take care of their future needs. Life insurance can
aid your family on a rainy day, at a time when help from every quarter is welcome
and of course, since some plans also double up as a savings instrument, they assist
you in planning for such future needs like children’s marriage, purchase of various
household items, gold purchases or as seed capital for starting a business.
Traditionally, buying life insurance has always formed an integral part of an
individual’s annual tax planning exercise. While it is important for individuals to
have life cover, it is equally important that they buy insurance keeping both their
long-term financial goals and their tax planning in mind. This note explains the role
of life insurance in an individual’s tax planning exercise while also evaluating the
various options available at one’s disposal.
Life is full of dangers, but with insurance, you can at least ensure that you and your
dependents don’t suffer. It’s easier to walk the tightrope if you know there is a
safety net. You should try and take cover for all insurable risks. If you are aware of
the major risk buy the right product, you can cover quite a few bases. The major
insurable risks are as follows:

• Life
• Health
• Income
• Professional Hazards
• Assets
• Outliving Wealth
• Debt Repayment

3.6.2. Types of Insurance Policies:

a) Term Plans
A term plan is the most basic type of life insurance plan. It is the most cost-
effective life insurance product. Unlike other plans that come with an
investment or savings component, term plans are products that cover only
your life. This means your dependents or nominees get the sum assured on
your death. A term plan offers life cover at a very nominal cost. This is due
 to the fact that term plan premiums include only mortality charges and sales
and administration expenses. There is no savings element.
b) Money Back Plan

A money back plan aims to give you a certain sum of money at regular intervals;
simultaneously it also provides you with life cover. Money back plans are
especially useful in case you need money at regular intervals for your child’s
education, marriage, etc.

c) Unit Linked Insurance Plans (ULIPs)

ULIPs basically work like a mutual fund with a life cover thrown in. They invest
the premium in market-linked instruments like stocks, corporate bonds and
government securities (gsecs). The basic difference between ULIPs and traditional
insurance plans is that while traditional plans invest mostly in bonds and gsecs,
ULIPs’ mandate is to invest a major portion of their corpus in stocks. However,
investments in ULIP should be in tune with the individual’s risk appetite. ULIPs
offer flexibility to the policy holder – the policy holder can shift his money
between equity and debt in varying proportions.

d) Pension / Retirement Plans

Planning for retirement is an important exercise for any individual. A

retirement plan from a life insurance company helps an individual insure
his life for a specific sum assured. At the same time, it helps him in
accumulating a corpus, which he receives at the time of retirement.

e) Endowment Plans

Individuals with a low risk appetite, who want an insurance cover, which will also
give them returns on maturity could consider buying traditional endowment plans.
Such plans invest most of their money in specified debt instruments like corporate
bonds, government securities (gsecs) and the money market.
3.7. Cash

3.7.1. Overview

Investors must hold a sufficient amount of their assets in cash i.e. in liquid form;
this will help them tide over unplanned expenditures and other contingencies.
Also one must remember that equity-oriented investments are made with a long-
term perspective and liquidating them to meet any contingency may prove to be
a loss-making proposition depending on the market conditions. Holdings in cash
include amount held in savings bank accounts, liquid funds and short-term fixed
deposits.

3.8. Gold

3.8.1. Overview

In India, gold has traditionally played a multi-faceted role. Apart from being used for
adornment purpose, it has also served as an asset of the last resort and a hedge
against inflation and currency depreciation. India has more than 13,000 tones of
hoarded gold, which translates to around Rs.6,50,000 crores. Gold is an asset class
that’s associated with safety. However, the ups and down that the yellow metal has
seen over the last few months, has made it look similar to other market investment
assets. This is due to an unprecedented demand for gold as an investment avenue
since the last couple of years.

Gold has attracted a high level of attention in last couple of years, with an image shift
from a non-volatile asset to a hot investment avenue. The future outlook for the metal
looks positive given its proven linear relationship with the crude oil and non-linear
with the US dollar. The much-awaited gold exchange-traded funds would provide a
very good vehicle to the investors and a sensible alternative to the current forms
available for investment.
3.9. Real Estate

3.9.1. Overview

Real estate is a great investment option, as it gives you capital appreciation and rental
income. It’s an investment option since it fights inflation. The fundamentals for
investing in property markets remain strong in India - relatively low interest rates,
strong capital flows, high employment growth, abundant liquidity, attractive
demographics (young population and migration from West), increase in affordability,
and a large supply of stock to keep up with demand and focus on quality. The price
you pay for a property should reflect the future rent/income at which you let it. As in
the stock market, the prices in real estate are also driven by sentiments. All that is
required to reverse a price movement is a change in sentiment.

Start saving for a home the moment you begin your career. Early acquisition helps you
to repay your home loan well within your working life. Also, the EMI as a percentage
of your salary decreases as your pay increases making the outflows more affordable. If
you lock into the interest rate for the loan, the interest outflow will be less than the
compounding effect of inflation.

You should be very clear about why you want to invest in real estate. It is a very good
tool for wealth creation but like all other assets, has its share of risks. Careful planning,
however, can minimize the risks.

3.10. Home Loans

3.10.1. Overview

A home loan helps one to buy more than just a home. Buying a property is perhaps
the single largest investment decision an individual has to make in his lifetime.
Therefore, he needs to plan for his finances well before he decides to invest a
significant amount of money in buying a home. However, the availability of home
loans has made life a lot easier for individuals today.
Housing property qualifies as a long-term asset for most individuals. It is usually
only once that an individual buys a house for himself after putting much thought
behind it. Property rates have risen dramatically in the last couple of years. It
therefore becomes imperative that individuals begin planning for their property
during the early stages in their careers. At a time when the cost of housing has gone
up, it is becoming increasingly difficult to fund the purchase of property entirely out
of one’s own finances. A home loan allows individuals to continue with their life and
build an asset without compromising too much on their lifestyle.

Company profile
4. Company profile
Introduction to IIFL
IIFL is the institutional equities division of India Infoline Ltd. (Bloomberg : IIFL IN), a
listed multi-services financial company with a market capitalisation of US$400 million.
With a team of 25 research analysts, a full-fledged sales and trading team, and an
experienced investment banking team, IIFL is rapidly emerging as one of the premier
institutional equities houses in India. Headquartered in Mumbai, IIFL has overseas offices
in Singapore and Dubai. Amongst its other businesses, India Infoline is one of the leading
players in the retail broking and insurance distribution, and is currently in the process of
scaling up its non-banking financial services and wealth management franchises. The
group has over 600 branches located all over India.

4.1 India Infoline Group

We are a one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.

Vision Statement :

Our vision is to be the most respected company in the financial services space.

India Infoline Group :

The India Infoline group, comprising the holding company, india infoline limited and its
wholly-owned subsidiaries, straddle the entire financial services space with offerings
ranging from equity research, equities and derivatives trading, commodities trading,
portfolio management services, mutual funds, life insurance, fixed deposits, goi bonds and
other small savings instruments to loan products and investment banking.
India Infoline also owns and manages the websites www.indiainfoline.com and
www.5paisa.com the company has a network of over 2100 business locations (branches
and sub-brokers) spread across more than 450 cities and towns. the group caters to
approximately a million customers.

India Infoline Group subsidiaries:

 • India Infoline Media and Research Services Limited

• India Infoline Commodities Limited

• India Infoline Marketing & Services

• India Infoline Investment Services Limited

• IIFL (Asia) Pte Limited

Our Global Presence:

USA, Dubai, Singapore
4.2 History

The India Infoline Group was originally incorporated on October 18, 1995 as
Probity Research and Services Private Limited at Mumbai under the Companies
Act, 1956 with Registration No. 11 93797. The IndiaInfoline Group commenced
its operations as an independent provider of information, analysis and research
covering Indian businesses, financial markets and economy, to institutional
customers. We became a public limited company on April 28, 2000 and the name
of the Company was changed to Probity Research and Services Limited. The name
of the Company was changed to India Infoline.com Limited on May 23, 2000 and
later to India Infoline Limited on March 23, 2001.

In 1999, The IndiaInfoline Group identified the potential of the Internet to cater to
a mass retail segment and transformed our business model from providing
information services to institutional customers to retail customers. Hence we
launched our Internet portal, www.indiainfoline.com in May 1999 and started
providing news and market information,
independent research, interviews with business leaders and other specialized features.

In May 2000, the name of our Company was changed to India Infoline.com
Limited to reflect the transformation of our business. Over a period of time, we
have emerged as one of the leading business and financial information services
provider in India.

In the year 2000, The India Infoline Group leveraged its position as a provider of
financial information and analysis by diversifying into transactional services,
primarily for online trading in shares and securities and online as well as offline
distribution of personal financial products, like mutual funds and RBI Bonds.
These activities were carried on by our wholly owned subsidiaries.

The India Infoline Group’s broking services was launched under the brand name
of 5paisa.com through its subsidiary, India Infoline Securities Private Limited
andwww.5paisa.com, the e-broking portal, was launched for online trading in July
2000. It combined competitive brokerage rates and research, supported by Internet
technology
Besides investment advice from an experienced team of research analysts, This
group also offers real time stock quotes, market news and price charts with
multiple tools for technical analysis.

Acquisition of Agri Marketing Services Limited ("Agri")

In March 2000, The IndiaInfoline Group acquired 100% of the equity shares of
Agri Marketing Services Limited, from their owners in exchange for the issuance
of 508,482 of our equity shares. Agri was a direct selling agent of personal
Milestones

1995

Incorporated as an equity research and consulting firm with a client base that included
leading FIIs, banks, consulting firms and corporates.

1999

Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilised capital from reputed private equity investors.

2000

Commenced the distribution of personal financial products; launched online equity

trading; entered life insurance distribution as a corporate agent. Acknowledged by
Forbes as ‘Best of the Web’ and ‘...must read for investors’.

2004

Acquired commodities broking license; launched Portfolio Management Service.

2005

Listed on the Indian stock markets.

2006

Acquired membership of DGCX; launched investment banking services.

2007

Launched a proprietary trading platform; inducted an institutional equities team; formed

a Singapore subsidiary; raised over USD 300 mn in the group; launched consumer
finance business under the ‘Moneyline’ brand.

2008

Launched wealth management services under the ‘IIFL Wealth’ brand; set up India
Infoline Private Equity fund; received the Insurance broking license from IRDA;
received the venture capital license; received inprinciple approval to sponsor a mutual
fund; received ‘Best broker- India’ award from FinanceAsia; ‘Most Improved
 Brokerage- India’ award from Asiamoney.

2009

Received registration for a housing finance company from the National Housing Bank;
received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &
Bradstreet.

4.3 Company Structure

India Infoline Limited is listed on both the leading stock exchanges in India, viz. the
Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also
a member of both the exchanges. It is engaged in the businesses of Equities broking,
Wealth Advisory Services and Portfolio Management Services. It offers broking
services in the Cash and Derivatives segments of the NSE as well as the Cash
segment of the BSE. It is registered with NSDL as well as CDSL as a depository
participant, providing a one-stop solution for clients trading in the equities market. It
has recently launched its Investment banking and Institutional Broking business.
A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to
clients. These services are offered to clients as different schemes, which are based on
differing investment strategies made to reflect the varied risk-return preferences of
clients.
India Infoline Media and Research Services Limited.

The content services represent a strong support that drives the broking, commodities,
mutual fund and portfolio management services businesses. Revenue generation is
through the sale of content to financial and media houses, Indian as well as global.

It undertakes equities research which is acknowledged by none other than Forbes as

'Best of the Web' and '…a must read for investors in Asia'. India Infoline's research is
available not just over the internet but also on international wire services like
Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India
Infoline is amongst the most read Indian brokers.

India Infoline Commodities Limited.

India Infoline Commodities Pvt Limited is engaged in the business of commodities
broking. Our experience in securities broking empowered us with the requisite skills
and technologies to allow us offer commodities broking as a contra-cyclical
alternative to equities broking. We enjoy memberships with the MCX and NCDEX,
two leading Indian commodities exchanges, and recently acquired membership of
DGCX. We have a multi-channel delivery model, making it among the select few to
offer online as well as offline trading facilities.

India Infoline Marketing & Services

India Infoline Marketing and Services Limited is the holding company of India
Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited.

(a) India Infoline Insurance Services Limited is a registered Corporate Agent with the
Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate
Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private
Life Insurance Company. India Infoline was the first corporate agent to get licensed
by IRDA in early 2001.

(b) India Infoline Insurance Brokers Limited is a newly formed subsidiary which will
carry out the business of Insurance broking. We have applied to IRDA for the
insurance broking licence and the clearance for the same is awaited. Post the grant of
license, we propose to also commence the general insurance distribution business.

India Infoline Investment Services Limited

Consolidated shareholdings of all the subsidiary companies engaged in loans and

financing activities under one subsidiary. Recently, Orient Global, a Singapore-based
investment institution invested USD 76.7 million for a 22.5% stake in India Infoline
Investment Services. This will help focused expansion and capital raising in the said
subsidiaries for various lending businesses like loans against securities, SME
financing, distribution of retail loan products, consumer finance business and housing
finance business. India Infoline Investment Services Private Limited consists of the
following step-down subsidiaries.

(a) India Infoline Distribution Company Limited (distribution of retail loan products)

(b) Moneyline Credit Limited (consumer finance)

(c) India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Pte Limited

 IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in
Singapore to pursue financial sector activities in other Asian markets. Further to
obtaining the necessary regulatory approvals, the company has been initially
capitalized at 1 million Singapore dollars.

1 Management Team

Mr. Nirmal Jain

Chairman & Managing Director

India Infoline Ltd.

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded
India’s leading financial services company India Infoline Ltd. in 1995, providing
globally acclaimed financial services in equities and commodities broking, life insurance
and mutual funds distribution, among others. Mr. Jain began his career in 1989 with
Hindustan Lever’s commodity export business, contributing tremendously to its growth.
He was also associated with Inquire-Indian Equity Research, which he co-founded in
1994 to set new standards in equity research in India.

Mr. R Venkataraman

Executive Director

India Infoline Ltd.

 R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B.
Tech (Electronics and Electrical Communications Engineering, IIT Kharagpur) and an
MBA (IIM Bangalore). He joined the India Infoline board in July 1999. He previously
held senior managerial positions in ICICI Limited, including ICICI Securities Limited,
their investment banking joint venture with J P Morgan of USA and with BZW and Taib
Capital Corporation Limited. He was also Assistant Vice President with G E Capital
Services India Limited in their private equity division, possessing a varied experience of
more than 16 years in the financial services sector.

1. The Board of Directors

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline
Ltd. comprises:

Mr Nilesh Vikamsey

Independent Director

India Infoline Ltd.

Mr. Vikamsey, Board member since February 2005 - a practising Chartered Accountant
and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB
International, headed the audit department till 1990 and thereafter also handles financial
services, consultancy, investigations, mergers and acquisitions, valuations etc; an ICAI
study group member for Proposed Accounting Standard — 30 on Financial Instruments
— Recognition and Management, Finance Committee of The Chamber of Tax
Consultants (CTC), Law Review, Reforms and Rationalization Committee and
Infotainment and Media Committee of Indian Merchants’ Chamber (IMC) and Insurance
Committee and Legal Affairs Committee of Bombay Chamber of Commerce and
Industry (BCCI).
Mr. Vikamsey is a director of Miloni Consultants Private Limited, HLB Technologies
(Mumbai) Private Limited and Chairman of HLB India.

Mr Sat Pal Khattar

Non Executive Director

India Infoline Ltd.

Mr Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority
Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is
also a life trustee of SINDA, a non profit body, helping the under-privileged Indians in
Singapore. He joined the India Infoline board in April 2001. Mr Khattar is a Director of
public and private companies in Singapore, India and Hong Kong; Chairman of
Guocoland Limited listed in Singapore and its parent Guoco Group Ltd listed in Hong
Kong, a leading property company of Singapore, China and Malaysia. A Board member
of India Infoline Ltd, Gateway Distriparks Ltd — both listed — and a number of other
companies he is also the Chairman of the Khattar Holding Group of Companies with
investments in Singapore, India, UK and across the world.

Mr Kranti Sinha

Independent Director

India Infoline Ltd.

Mr. Kranti Sinha — Board member since January 2005 — completed his masters from
the Agra University and started his career as a Class I officer with Life Insurance
Corporation of India. He served as the Director and Chief Executive of LIC Housing
Finance Limited from August 1998 to December 2002 and concurrently as the
Managing Director of LICHFL Care Homes (a wholly owned subsidiary of LIC Housing
Finance Limited). He retired from the permanent cadre of the Executive Director of LIC;
served as the Deputy President of the Governing Council of Insurance Institute of India
and as a member of the Governing Council of National Insurance Academy, Pune apart
from various other such bodies. Mr. Sinha is also on the Board of Directors of Hindustan
Motors Limited, Larsen & Toubro Limited, LICHFL Care Homes Limited, Gremach
Infrastructure Equipments and Projects Limited and Cinemax (India) Limited.

Mr Arun K. Purvar

Independent Director

India Infoline Ltd.

Mr. A.K. Purvar – Board member since March 2008 – completed his Masters degree in
commerce from Allahabad University in 1966 and a diploma in Business Administration
in 1967. Mr. Purwar joined the State Bank of India as a probationary officer in 1968,
 where he held several important and critical positions in retail, corporate and
international banking, covering almost the entire range of commercial banking
operations in his illustrious career. He also played a key role in co-coordinating the work
for the Bank's entry into the field of insurance. After retiring from the Bank at end May
2006, Mr. Purwar is now working as Member of Board of Governors of IIM-Lucknow,
joined IIM–Indore as a visiting professor, joined as a Hon.-Professor in NMIMS and he
is also a member of Advisory Board for Institute of Indian Economic Studies (IIES),
Waseda University, Tokyo, Japan. He has now taken over as Chairman of IndiaVenture
Advisors Pvt. Ltd., as well as IL & FS Renewable Energy Limited. He is also working
as Independent Director in leading companies in Telecom, Steel, Textiles, Autoparts,
Engineering and Consultancy.

Company’s philosophy on Corporate Governance

The India Infoline Group is committed to placing the Investor First, by continuously striving
to increase the efficiency of the operations as well as the systems and processes for use of
corporate resources in such a way so as to maximize the value to the stakeholders. The Group
aims at achieving not only the highest possible standards of legal and regulatory
compliances, but also of effective management.
Committee
Audit Committee
Terms of reference & Composition, Name of members and Chairman: The Audit committee
comprises Mr Nilesh Vikamsey, Chairman of the Committee, Mr Sat Pal Khattar, Mr Sanjiv
Ahuja and Mr Kranti Sinha, three of whom are independent Directors. The Managing
Director, the Executive Director along with the Statutory and Internal Auditors are invitees to
the Meeting. The Terms of reference of this committee are as under: - To investigate into any
matter that may be prescribed under the provisions of Section 292A of The Companies Act,
1956 - Recommendation and removal of External Auditor and fixation of the Audit Fees. -
Reviewing with the management the financial statements before submission of the same to
the Board. - Overseeing of Company’s financial reporting process and disclosure of its
financial information. - Reviewing the Adequacy of the Internal Audit Function.
Compensation/ Remuneration Committee
Terms of reference & Composition, Name of members and Chairman: The Compensation /
Remuneration Committee comprises Mr Sanjiv Ahuja, Chairman of the Committee, Mr
Nilesh Vikamsey and Mr Kranti Sinha, all of whom are independent Directors. The Terms of
reference of this committee are as under: - To fix suitable remuneration package of all the
Executive Directors and Non Executive Directors, Senior Employees and officers i.e. Salary,
perquisites, bonuses, stock options, pensions etc. - Determination of the fixed component and
performance linked incentives alongwith the performance criteria to all employees of the
company - Service Contracts, Notice Period, Severance Fees of Directors and employees. -
Stock Option details: whether to be issued at discount as well as the period over which to be
accrued and over which exercisable. - To conduct discussions with the HR department and
form suitable remuneration policies.
Share Transfer and Investor Grievance Committee
Details of the Members, Compliance Officer, No of Complaints received and pending and
pending transfers as on close of the financial year. The committee functions under the
Chairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other
Members of the committee are Mr Sanjiv Ahuja, Independent Director and Mr R
Venkataraman, Executive Director. Ms Komal Parikh, Company Secretary is the Compliance
Officer of the Company.
4.5 Product & Services
Overview

We are a one-stop financial services shop, most respected for quality of its advice,
personalised service and cutting-edge technology.

Equities

Indiainfoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to Indiainfoline. Indiainfoline leveraged technology to bring the convenience of
trading to the investor’s location of preference (residence or office) through
computerized access. Indiainfoline made it possible for clients to view transaction costs
and ledger updates in real time.

PMS

Our Portfolio Management Service is a product wherein an equity investment portfolio

is created to suit the investment objectives of a client. We at Indiainfoline invest your
resources into stocks from different sectors, depending on your risk-return profile. This
service is particularly advisable for investors who cannot afford to give time or don't
have that expertise for day-to-day management of their equity portfolio.

Research

Sound investment decisions depend upon reliable fundamental data and stock selection
techniques. Indiainfoline Equity Research is proud of its reputation for, and we want
you to find the facts that you need. Equity investment professionals routinely use our
research and models as integral tools in their work.
They choose Ford Equity Research when they can clear your doubts.

Commodities

Indiainfoline’s extension into commodities trading reconciles its strategic intent to

emerge as a one-stop solutions financial intermediary. Its experience in securities
broking has empowered it with requisite skills and technologies. The Company’s
commodities business provides a contra-cyclical alternative to equities broking. The
Company was among the first to offer the facility of commodities trading in India’s
young commodities market (the MCX commenced operations only in 2003). Average
monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02
bn. The commodities market has several products with different and non-correlated
cycles. On the whole, the business is fairly insulated against cyclical gyrations in the
business.

Mortgages

During the year under review, Indiainfoline acquired a 75% stake in Moneytree
Consultancy Services to mark its foray into the business of mortgages and other loan
products distribution. The business is still in the investing phase and at the time of the
acquisition was present only in the cities of Mumbai and Pune. The Company brings on
board expertise in the loans business coupled with existing relationships across a
number of principals in the mortgage and personal loans businesses. Indiainfoline now
has plans to roll the business out across its pan-Indian network to provide it with a truly
national scale in operations.

Home Loans
Personal Loans
Get expert advice that suits your needs
Freedom to choose from 4 flexible options
Loan against residential and commercial to repay
property
Expert recommendations
Expert recommendations
Easy documentation
Easy documentation
Quick processing and disbursal
Quick processing and disbursal
No guarantor requirement
No guarantor requirement
Invest Online

Indiainfoline has made investing in Mutual funds and primary market so effortless. All
you have to do is register with us and that’s all. No paperwork no queues and No
registration charges.

INVEST IN MF
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-
depth research and advice from research house and tools configured as investor friendly.

APPLY IN IPOs
You could also invest in Initial Public Offers (IPO’s) online without going through the
hassles of filling ANY application form/ paperwork.

SMS

Stay connected to the market

The trader of today, you are constantly on the move. But how do you stay connected to
the market while on the move? Simple, subscribe to Indiainfoline's Stock Messaging
Service and get Market on your Mobile!

There are three products under SMS Service:

 Market on the move.
 Best of the lot.
 VAS (Value Added Service )

Insurance

An entry into this segment helped complete the client’s product basket; concurrently, it
graduated the Company into a one-stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach
and reach out to customers via our Network, Direct and Affiliate channels. Following
the opening of the sector in 1999-2000, a number of private sector insurance service
providers commenced operations aggressively and helped grow the market.

The Company’s entry into the insurance sector derisked the Company from a
predominant dependence on broking and equity-linked revenues. The annuity based
income generated from insurance intermediation result in solid core revenues across the
tenure of the policy.

Wealth Management Service

Imagine a financial firm with the heart and soul of a two-person organization. A world-
leading wealth management company that sits down with you to understand your needs
and goals. We offer you a dedicated group for giving you the most personal attention at
every level.

Newsletters

The Daily Market Strategy is your morning dose on the health of the markets. Five
intra-day ideas, unless the markets are really choppy coupled with a brief on the global
markets and any other cues, which could impact the market. Occasionally an investment
idea from the research team and a crisp round up of the previous day's top stories. That's
not all. As a subscriber to the Daily Market Strategy, you even get research reports of
Indiainfoline research team on a priority basis.

The Indiainfoline Weekly Newsletter is your flashback for the week gone by. A weekly
outlook coupled with the best of the web stories from Indiainfoline and links to
important investment ideas, Leader Speak and features is delivered in your inbox every
Friday evening.
 Equities

India Infoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to India Infoline. India Infoline leveraged technology to bring the convenience of
trading to the investor’s location of preference (residence or office) through
computerized access. India Infoline made it possible for clients to view transaction
costs and ledger updates in real time.

Over the last five years, India Infoline sharpened its competitive edge through
the following initiatives:

Multi-channel delivery model :

The Company is among the few financial intermediaries in India to offer a
complement of online and offline broking. The Companies network of branches also
allows customers to place orders on phone or visit our branches for trading.

Integrated middle and back office :

The customer can trade on the BSE and NSE, in the cash as well as the derivatives
segment all through the available multiple options of Internet, phone or branch
presence.

Multiple-trading options :
The Company harnessed technology to offer services at among the lowest rates in the
business.

Membership:
The Company widened client reach in trading on the domestic and international
exchanges.

Technology :
The Company provides a prudent mix of proprietary and outsourced technologies,
which facilitate business growth without a corresponding increase in costs.

Content :
The Company has leveraged its research capability to provide regular updates and
investment picks across the short and long-term.

Service :
Clients can access the customer service team through various media like toll-free
lines, emails and Internet- messenger chat for instant query resolution. The Companies
customer service executives proactively contact customers to inform them of key
changes and initiatives taken by the Company. Business World rated the Companies
customer service as Best in their survey of online trading sites carried out in
December 2003.

Key features :

Membership on the Bombay Stock Exchange Limited and the National Stock
Exchange

Registered with the NSDL as well as CDSL as a depository participant, providing

a one-stop solution for clients trading in the equities market

Broking services in cash and derivative segments, online as well as offline.

Presence across 350 cities and towns with a network of over 850 business
locations Equity client base of over 500,000 clients

Provision of free and world-class research to all clients.

Lons
Overview
They say you mustn't trust a man till you know his house. Everyone likes hearing people
say Wow, what a beautiful house you have! From cave dwelling, we have evolved and now
a house provides far more than just shelter...it also becomes a source of pride. A Housing
Loan is used as finance to help you buy or modify that perfect home.
The different Housing Loan products can be classified as:
 Home Loans & Home Extension Loans
 NRI Loans
 Land Loans
 Home Equity Loans

 What is a housing loan?  Repayment capacity

 Who can apply?
 General Terms and conditions
of a Housing Loan product.
 Charges applicable to housing
loan products.
 Credit documentation
 Legal documentation
 Tax Benefits
 Property Insurance

A. What is a housing loan?

They say you mustn't trust a man till you know his house. Everyone likes hearing people
say "Wow, what a beautiful house you have!" From cave dwelling, we have evolved and
now a house provides far more than just shelter...it also becomes a source of pride. A
Housing Loan is used as finance to help you buy or modify that perfect home. The different
Housing Loan products can be classified as:
Home Loan
Home Extension Loans
Home Improvement Loans
Land Loans
NRI Loans
Home Equity Loans
Short term Bridging Loans
Balance Transfer

B. Who can apply?

As long as you want to buy a house in India, you can apply for a Home Loan. You could be
a Resident Indian or an NRI; you could want to buy a property now or in the future, but
you may still apply for a Home Loan. In case you go with the last option and want to wait
before you consider nests, all you have to be sure of is the amount you are willing to spend
on this property and the HfIs will let you know your eligibility based on your income
which will help you plan out your budget. To find out your eligibility, please use our
calculator.

C. General Terms and Conditions of a Housing Loan Product

You are allowed to visit zoos on the condition that you do not feed the animals. When
you're 18, you are allowed to go for that late night party on the condition that someone
drops you home before 12. Every step we take requires condition to be fulfilled. Similarly,
these are the general terms & conditions of a Home Loan. For more details, please refer to
the individual product.
 LTV Ratio will not exceed a particular percentage. This percentage differs from
HFI to HFI and the components of the value of property are covered in Cost of
Property
 Elastic can be stretched only to a certain extent. The loan tenure also will not go
beyond 20 years. However, HFIs do provide for different tenures with different
terms and conditions.
 Your EMI normally does not exceed 50% of your Gross Monthly income.
 The total monthly payment towards all the loans you have availed of, including the
present one, will normally not exceed 50% of your Gross Monthly Income.
 Your loan eligibility is calculated using LTV, IIR and FOIR norms and the lowest
from the three is chosen.
 Your profile is considered by the HFI before your repayment capacity is judged.
  If the HFI insists on a personal guarantor, you need to provide one before the
disbursement of your loan.
 Your property should be both technically and legally clear before your loan can get
disbursed by the HFI.
 In case you have bought an under construction property, your loan will be partly
disbursed, as per the stages of construction and PEMI needs to be paid on it.
 The disbursement, in most cases, will be in the name of the builder or the seller or
the society or the development authority unless you have made some payment to
them.
 Repayment of the loan is either via Deduction Against Salary, Post Dated Cheques,
standing instructions or by cash / DD.
 You can either choose to repay the loan using the Annual rests or Monthly rests.

A. Charges applicable to Housing Loans

The different kinds of charges applicable to Home Loans are listed below:
 Upfront Fees
 Rate of Interest
 Legal and Technical Charges
 Stamp Duty and Registration Charges
 Personal Guarantee from Charges
 Cheque Bounce Charges
 Delayed Payment Charges
 Additional Charges
 Incidental Charges
 Prepayment Charges
 PDC Swapping Charges

A. Legal and technical charges :

Some HFIs charge you for the legal and technical checks undertaken on your documents
and property, by lawyers and the technical team of the HFI.
B. Stamp duty and registration charges:
If you go in for a registered mortgage, these charges incurred by the HFI are passed onto
you. Sometimes these charges are rather heavy depending on the State laws in the state
from where you purchase your property.

C. Personal Guarantee form charges:

A piece of paper signed does not have much value unless stamped and validated by the
concerned authority. That power of attorney document that you signed with your spouse
would not be credible unless signed on a Rs.100 stamp paper. Similarly, HFIs currently
charge you a minimum of Rs.100 to get the personal guarantee validated and stamped in
the eyes of the law.

D. PDC swapping charges:

In case you want to exchange the PDCs you gave the HFIs for EMI repayments because of
a change in bank accounts, a change in EMI amount, etc., the HFis might charge a flat fee
for it.

E. Repayment capacity

Your repayment capacity is judged according to your income and your income is
considered differently if you are salaried and differently if you are self-employed. Income
is used to calculate the amount of money that you will be able to shell out every month
towards your loan installment using IIR and FOIR norms. FOIR calculation also takes into
account the installments of loans you are currently repaying. The lower between the IIR
and FOIR is chosen as your maximum repayment capacity. This is then compared to the
loan amount that you have requested for and the loan eligibility as per LTV norms and the
lowest of these would be your final loan eligibility.

Salaried Self-employed
Any extra income on your salary slip Any non-recurring income that affects profit
(including overtime, etc.) is subtracted (like sale of asset) is subtracted.
50% of the average variable income over the Any non-recurring expense that adversely
last 6 months is added affects profits and was not capitalized (like
repairs and maintenance) is added

Any fixed cash or voucher payment that can 50% of the average depreciation of the last
be proved is added. two years is added.

HRA that can be received and is not being

received is added.

50% of the average annual income of the last

two years is added.

F. Credit Documentation

Would you trust any Tom, Dick or Harry with any matter at all? We all require a certain
assurance from people before we trust them; some sort of guarantee that they are
trustworthy. For HFIs this guarantee rests in the form of tangible documents. Credit
documents are required by all HFIs but vary in kind based on your occupation, employer,
qualifications, experience, etc. Credit documents can be classified as

G. Income documents:
: Money money money...no one can take a chance on the credibility of money matters
because at the end of the day, business is business. Almost everything about your loan is
based on your income and therefore proof regarding the same is required by the HFI to
ensure that no miscommunications occur.

H. Personal documents:
Previously, tribes and clans had passwords without which you could not enter into the
territory; as proof of who he was, King Solomon had a ring as identification. Throughout
history, proof of identity has been important as mistaken identity has never been
uncommon. To prevent any such shams, HFIs also require a set of documents, for a general
 Home Loan Product, identifying who you are.

He following list out all the documents needed. {under this line will be placed the
document sent separately as an excel sheet}

I. Legal Documentation

We might be living in the electronic age but that doesn't take away the importance and
monopoly of paper as everything to do with law will always be on paper. To stick by this
unwritten rule, there are legal documents that need to be submitted by you to the HFI for
mortgaging and these differ from state to state and also depend on your property type. The
following form a broad outline of the documents required and a detailed list can be found
here.
 Copy of the offer letter sent by the HFI, accepted by you.
 Title documents of the property which include
-Duly registered sale agreement.
-Receipts of your own contribution.
-Allotment letter
-Registration receipt
-If needed, land documents indicating ownership.
-Possession letter
-Lease agreement, if the property is bought from a development authority
-Mortgage deed if the HFI opts for a registered mortgage.
 No Objection Certificate from the developer, society or development authority
 Personal Guarantees, if required.
 Documents for alternate or additional security.
 Post dated cheques for the EMIs.
These documents do NOT cover the entire list needed and if it is a resale property, the
pertaining agreements, etc. will also need to be attached.

A. Tax Benefits
Tax benefits are currently available only under Home Loans and Home Extension loans.
The details are given under the respective sections.

B. Property Insurance

Some events are not in our hands and are completely unavoidable. Floods, drought and
storms uproot trees and destroy the land. Along with this the birds lose their homes and
while building a nest may not be that bad and the loss is not that great, the money that you
invest in your cosy home might just be washed away. For this reason insuring your
property is a good idea as you safeguard the asset against damage or loss.. Property
insurance is not compulsory though some HFIs insist on a mortgage redemption life
insurance policy and you will therefore get a reduced interest rate. Some of the points that
need to be noted regarding property insurance are:
 You can choose the tenure of your insurance.
 The premium is charged up front
 The longer your tenure, the greater the discounts insurance companies offer you.

1 Home Loans

Be a proud owner of your dream home with our home loan offer. We can help you
purchase your dream house. In this arrangement, the money can be used to purchase
residential property. The property can be a new or a re-sale property. Also some of you
would want to build an asset which you feel will appreciate over time. Moneyline will help
you fulfill these needs with minimal formalities and with a lot of thought.

A. Home Equity
Unlock the hidden value of your property with our Home Equity program which will allow
you to generate cash for your various financing needs ranging from paying off other loans,
credit card expenses, vacation with your family or financing your dream car. Moneyline
offers this program tailor made to suit your exact needs.
B. Balance Transfer
Already have a home loan? Want more money and possibly even reduce your interest
rates? We would be delighted to offer you a customized solution which would suit all your
needs. Transfer your existing outstanding loan amount from any financial institution and
enjoy more cash-in-hand to meet more of your current needs. We have a solution for each
of your needs.

 Home Loan amount between Rs 2 lacs to 2 crores

 Home Equity program to generate cash from property
 Easy repayment tenure up to 20 years
 Buy-out your existing housing loan at easy installments
 Loans for Home renovation purpose
 Attractive benefits for Balance Transfer options
1 Personal Loans

Your requirements may vary from money for children's school admission, daughter's
wedding, paying off another loan or for an international vacation, whatever the need and
urgency be, at Moneyline we have dedicated professionals who will work for you and
realize your exact requirements. Our attempt is to provide you with the cash in your bank
account at the shortest possible time and with minimum formalities.

 Loan amount between Rs 20,000 and Rs 20,00,000

 Easy application process and Quick approvals
 No guarantor required
 Single EMI option for consolidating all your multiple EMIs or outstandings

1 Home Loans & Home Extension Loans

 What is a Home Loan?

  What is a Home Extension Loan?
 What are the Terms and conditions for availing a Home Loan and Home Extension
loan?
 What are the Tax Benefits when availing Home Loans or Home Extension Loans?

A. What is a Home Loan?

Food, clothing and shelter are the basic necessities of life and we have evolved from the
cave dwelling types to more civilized times. Today, our houses are more for comfort than
for survival. So it is every individual's desire to build the coziest nest to live in. This is
where Home Loans come in.
Home Loans are finances taken from a Housing Finance Institution [HFI] to aid in the
buying and/or modification of your property. To avail of a Home Loan from an HFI, these
are the types of properties you can buy.
 A property under construction
 A constructed property
 Resale property
 Self construction or own construction

A. What is a Home Extension Loan?

Space is permanently an issue and we could always do with more of that. Home Extension
Loans are available for the very purpose of extending the built up area of a property. These
are some of the instances for which you could take an Extension Loan.
 To construct an additional room or floor by getting additional FSI granted.
 Using grills or sliding windows to enclose the balcony.
 Construction of a garden or garage in the building vicinity.
A. What are the Terms and conditions for availing a Home Loan and
Home Extension loan?
In a general Home Loan, the following are applicable.
B. Guidelines :
Your LTV cannot exceed 85% and the elements that are included in the value of property
are listed here. (Link to the Cost of Property).

Your loan duration usually does not exceed 20 years.

No one likes getting into the position where you have bitten off more than what you can
chew. Therefore, to ensure that your hard earned money doesn't disappear only in the
settlement of loans, normally not more than 50% of your GMI is alloted for the payment
for all loans, including the one that you have just taken.

To ensure that the above point is adhered to, your EMI will normally not exceed 50% of
your GMI. You can find out your probable EMI using this. (Link to the calculator).
Your loan eligibility is calculated using LTV norms, IIR norms and FOIR norms and the
lowest amongst them is chosen to determine your loan amount.
C. Loan necessities :
Free goods are restricted to those produced by Mother Nature herself. A music CD is not
very expensive to produce but the effort that goes into the production needs to be rewarded.
Similarly, for Home Loans also, there is a charge. This amount will either be a percentage
of the loan amount or a fixed amount once again based on the loan amount.

When we have important files on our computer, we always make sure we have back-up.
The same way, HFIs also like to have a back-up so that in case the loan cannot be repaid,
they do not lose out on the money. For this reason, most of them insist on Personal
Guarantors and in such a case, you need to provide one before the disbursement of your
loan.
D. Property :
It's better to be safe than sorry. Every HFI not only does a technical but also a legal check
on your property. For the technical check, the bank sends it's team for a site visit. A legal
check involves sending your docs to the bank's lawyer. Both these checks need to be
passed and cleared before your loan can get disbursed.
E. Disbursement :
Your disbursement kind depends on the type of property being purchased. If you are going
in for a property that is being constructed, disbursement occurs in parts as per the stage of
construction and simple interest or PEMI will be charged on the partly disbursed loans. A
ready or resale property has the loan disbursed at one go.

The cheque for disbursement is almost always in the name of the builder, seller, society or
developmental authority and will be in your name if you have already made a part payment
to the above mentioned people.
F. Post-Disbursement :
Repayment of the loan can either be via DAS, PDCs, SI or Cash/DD

Tax benefits can be availed of on your Home Loan and to facilitate this, the HFI will issue
interest certificates every year which need to be filed with your tax returns.

You have an option of either amortizing the loan using the monthly rest or annual rest.
These are the general terms and conditions for most HFIs regarding Home Loans & HELs.
There might also be specific terms and conditions that vary from HFI to HFI.

G. What are the Tax Benefits when availing Home Loans or Home
Extension Loans?

Under Sections 24 of the Income Tax Act, Home Loan customers can avail of tax benefits.
Tax benefits. These words bring a sparkle to every earning individual's eye. However, the
sweet path of reducing income tax paid also has constrictions..
Interest Deduction :As per the Budget of 2001-2002, the interest you pay on your loan
can be claimed as a deduction from your Gross Taxable Income if it is lower than 1,50,000.
If not, then 1,50,000 is taken as the deduction.
 H. TAX BENEFITS* FOR HOME LOAN APPLICANTS
[Using Interest Deduction]
I. SELF-EMPLOYED J. RENTED
Up to Rs.30,000

Property purchased
after March 31, 1998 But Up to Rs.75,000
before March 31, 1999

Property purchased
after March 31, 1999 But Up to Rs.1,00,000
before March 31, 2002

Property purchased
Up to Rs.1,50,000
after March 31, 2002

*The tax benefits you get on a self-occupied property will be acknowledged by your
employer before tax is deducted from your salary.

The whole interest can be set - off against any rental income received. If interest paid on
the housing loan is more than the rental income received on your property, then the excess
interest can be set off against your salary / business income by filing Income Tax Returns.
If the interest is less than the rental income, then the excess rent is added to your Gross
Taxable Income.

2 Land Loans

 What is a land loan?

 Are any additional documents required?
 What are the Tax Benefits I will get?
  What are the Terms and conditions of a Land Loan?

A. What is a land loan?

It is said that when you bake a cake from scratch, it is more satisfying than buying a baked
one. If you prefer and want to construct your own house, land loans are meant for you. To
put it simply, land loans finance your purchase of a plot of land on which you may either
begin construction immediately or wait a while before commencing. This loan is usually
availed of if you do not want to incur an immediate cash outflow. As there are difficulties
with documentation and the unwanted possibility of encroachments, not all HFIs offer land
loans.

B. What are the additional documents required for a land loan?

Apart from the usual documents needed for Home Loans, you also need to submit the
following docs.
 Original documents regarding land ownership.
 'No Encumbrance' certificate for the land.
 The layout / drawing of the plot's location, approved by the Town Planning
Authority.
 Revenue receipts and land records for the plot of land.
 Tax receipts for taxes paid by the owner of the plot of land.

A. What are the Tax benefits I gain?

As of now there are no tax benefits for Land loans but once your land loan is converted to a
Home Loan for the construction of your house, all the tax benefits are applicable.
B. What are the general terms and conditions that are a part of
Land Loans?

The general terms and conditions applicable to Land loans are as given below:
1) Most HFIs insist that the purchase of land is from a development authority or society
and some also allow purchase from developers. Purchase of land from an individual owner
is not usually financed by HFIs.
2) The land has to be developed and boundaries must be clearly demarcated. The location
of land is also extremely important and most HFIs only finance those plots that are within
the limits of the Concerned Municipal Corporation.
3) The maximum loan tenure offered by a HFI for the purchase of land is 10 years and they
either charge around 1% of the loan amount as fee, or they charge a flat amount.
4) Limits regarding the maximum and minimum loan amount lent for plot purchase are
demarcated by HFIs and differs from HFI to HFI depending on the schemes they offer.
5) Age norms, eligibility calculations and repayment of land loans are similar to those of
normal Home Loans.
6) The limit on the LTV ratio financed for land purchase varies from HFI to HFI from
anywhere between 70% to 80%.
7) Depending on the type of land, some HFIs insist on additional/collateral security, while
for most, loan security occurs in the form of an equitable mortgage by taking deposit of the
original title deeds of the plot of land.
8) As always, unless you have paid a sum to buy the land, the disbursement is in favour of
the seller of the plot. Normally, HFIs do not offer loans to plots of land purchased over six
months ago.
9) The rate of interest on a land loan is usually similar to the rate of interest charged on
regular Home Loans.

2 Home Equity Loans

  What is a Home Equity Loan?
 What is the difference between a Home Loan and a Home Equity Loan?
 Who can apply for a Home Equity Loan?
 What are the additional documents required for a Home Equity Loan?
 What are the Terms and conditions for a Home Equity Loan

A. What is a Home Equity Loan?

Pawning your guitar to get your sister that cycle she wanted is a touching thing to do. It
helps you use the value of something you own to get something you want, without having
to sell that object. Home Equity Loans work on similar lines and is available to fund those
who already own a property. It is therefore a mortgage given against your property and can
be used by you to meet any of your financial needs as long as you declare and give it in
writing that the funds you receive will be used for legal purposes only and you can't even
use this amount for speculation purposes. All this is to prevent any arm wrestling with the
law and have a cleaner process.

B. What is the difference between a normal Home Loan and a Home

Equity Loan?

Home Loans Home Equity Loans

Loan is for property that has to be purchased Loan is for already purchased property
End use of loan is monitored to make sure End use of loan is not monitored so the funds
you use the money only for the purchase of can be utilized to meet any financial
the property. requirements.

Agreement value is taken as benchmark as it Property needs to be value by the

is finance for the property. government or reliable valuer as the property
is already purchased.

C. Who can apply for a Home Equity Loan?

The requirements for a Home Equity Loan are similar to those of a Home Loan except that
it is not yet available for NRIs.

D. What are the additional documents required for a Home Equity

Loan ?

Once again, the documents required for an HEL are the same as those required for a normal
Home Loan. There are only three additions to this list of documents.

Firstly, you also need to hand over a photocopy of the property documents before the
sanction.

Secondly, you need a valuation report stating the value of the property, as examined by the
valuer appointed by the HFI.

Lastly, the assurance that you will not spend the money on illegalities, etc. need to be given
in a declaration as per RBI norms.
E. What are the Terms and conditions of a Home Equity Loan?

The term no strings attached can only be used while selling sandals and as is everything
about life, these are the terms and conditions of HEL, apart from those for normal Home
Loans also.
1) Even though the loan can be utilized to meet any personal requirement of yours, you
cannot use it for illegal motives and most HFIs ask you to write down your plans with their
cash. This might not be a good time to bring up your child hood desire to burst a chemical
bomb
2) The tenure for this loan will be less than that of the residual age of the property and will
range from between 5 to 10 years.
3) NRIs cannot avail of HELs for the time being.
4) While the loan eligibility amount calculation remains similar to normal Home Loans, the
LTV ratio would be 50% to 60% as compared to the 85% of normal Home Loans.
5) An HFI will make use of a valuer to determine and report the value of the property. The
lower between the market valuation & that of the valuer is chosen as a basis on which the
loan amount is calculated using the LTV ratio method.
6) The disbursement of the loan amount is always in your favour.

2 Related Documents

A. Personal Information

App form Application form of the financier duly filled and signed
by the applicant and co - applicants.

Photo Photograph of the applicant and co - applicants.

B. Financial Information
Saving History Updated bank statements of the operating accounts and salary
account for the last six months.

Income  Latest salary slip of the previous month

document  Form 16 provided by the employer

A. For Salaried Employees

 Appointment letter
 Salary certificate on the employer's letter head
 Proof of cash reimbursements made
 Last 6 months salary slip if var. inc. is a part of salary.
 Last three years audited Profit & Loss accounts

A. For Self-Employees

 Three years audited Balance Sheet

 Advance Tax challans, if applicable
 Last three years personal ITR duly acknowledged
 Last three years business ITR duly acknowledged
 Partnership deed of the partnership firm
 Memorandum of Association of the company
 Articles of Association of the company
 Updated bank statements of the business accounts for the last
six months.
 Business profile covering details on promoters, their
background, number of factories / branches and employees,
nature of business activity, list of major suppliers and clients
 and annual turnover of the previous year.
 Proof of occupancy of the establishment from where the
business is being carried out.

A. For Shippies

 Voyage salary slips for the last one year

 Continuous Discharge Certificate

1 Auto Loan EMI

Taking an Auto Loan? Check how much will be your EMI

100000
Loan amount (Rs.)

36 Months
Tenure

15
Interest rate
%

Monthly Reducing balance

In case of any advance emi's...

1
No. of adv EMIs

In case of any security deposit

20
Deposit as % of loan
 15
Interest on deposit(%)

Yearly
Compounding Frequency

Clear

Your auto loan EMI comes to Rs. 3,405 p.m.

Effective monthly reducing rate

This tool converts flat rate into effective monthly reducing rate. The effective rate of
interest depends on the quoted flat rate

Input

3
Repayment period (years)

9.9
Simple(Flat interest rate %)

2
Processing Charges(% of loan)

Result

The effective monthly reducing rate of interest will be 19.21%

The IRR will be 21 %

2 Housing Loan EMI

Taking a Housing Loan? Check how much will be your EMI
 100000
Loan Amount (Rs.)

15
Interest rate
%

20
Tenure

Result

Your housing loan EMI comes to Rs. 1316 p.m.

Explanation

The EMI (Equated Monthly Installment) is fixed for the tenure of loan. Your EMI has two
components: principal and interest.

In the initial years, the interest component is higher which decreases with time and the
principal component increases with time. EMI depends on the loan amount, interest rate and
tenure of loan.

Saving Tax from Housing Loan

Check how your housing loan on a new house purchase can save tax

Input
 Jan

I started repaying loan in

1999

20
Loan tenure
years

13
Rate of interest
% p.a.

Monthly
Rest

35.1
Marginal Tax Rate
%

Tax
Tax saved saved
Principal Interes
Year on on Total Tax Saved
Paid t Paid
Principal Interes
t
1998-
268 3247 54 1140 1193
1999
1999-
1161 12898 232 4527 4759
2000
2000-
1322 12737 264 4471 4735
2001
2001-
1504 12555 301 4407 4708
2002
2002-
1712 12347 342 4334 4676
2003
2003-
1948 12111 390 4251 4641
2004
2004-
2217 11842 443 4157 4600
2005
2005-
2523 11536 505 4049 4554
2006
2006-
2871 11188 574 3927 4501
2007
2007- 3267 10792 653 3788 4441
2008
2008-
3718 10341 744 3630 4373
2009
2009-
4231 9828 846 3449 4296
2010
2010-
4815 9243 963 3244 4208
2011
2011-
5480 8579 1096 3011 4107
2012
2012-
6237 7822 1247 2746 3993
2013
2013-
7097 6961 1419 2443 3863
2014
2014-
8077 5982 1615 2100 3715
2015
2015-
9192 4867 1838 1708 3547
2016
2016-
10461 3598 2092 1263 3355
2017
2017-
11905 2154 2381 756 3137
2018
2018-
9995 549 1999 193 2192
2019

3 Education Loan EMI

Planning to take a loan for your child's education, check your monthly payouts

5,00,000
Education Loan (Rs.)

2
Loan Period
Years

8
Loan Interest Rate
%

Clear

Result
 22,614

The EMI comes to Rs.

4 Child Wedding Loan EMI

Planning for your child's wedding, check your monthly payouts on taking a loan

600000
Loan Amount (Rs.)

1
Loan Period
Years

8
Loan Interest Rate
%

Clear

Result

52,194

The EMI for your child wedding loan will be Rs.

5 PERFORMANCE HIGHLIGHTS – Financial Year, 2009-10
Overall consolidated financial performance
 Annual Income at Rs11,239 mn, up 28% yoy
 PBT and PAT at Rs3,547 mn and Rs2,320 mn, up 62% yoy and 60% yoy
respectively
 EBIDTA margin for the year was 39% as compared to 33% in the previous year

Broking
 Average daily turnover up 57% in FY10 to Rs35 bn
 Overall market share in NSE was 3.8% in FY10
 Commodities brokerage registers 47% increase yoy

Life Insurance
 Life insurance distribution income at Rs536 mn, up 11% yoy
 In FY10, the relative share of pension products have increased from 32% to 35%

Investment Banking
 During the year, our Investment Banking team advised and managed more than 10
transactions including the Cox & Kings IPO, Infinite Computer Solutions IPO and
the Gammon India QIP
  Income from Investment Banking increased 16 times to Rs 388 mn, as against Rs 23
mn in FY09

Credit and Finance

 Book size in FY10 increased to Rs16.3 bn from Rs9.6 bn
 Loan growth likely to accelerate in the next year on the back of improving macro-
economic scenario

Wealth Management
 Assets under advisory over Rs 50 bn – spanning over 1,000 families
 Wide gamut of products meeting risk - return profiles for all segments

Financials: Over the years

Income (Rs. Mn)

Return on average equity (%)

Profit After Tax (Rs. Mn)

EBITDA Margin (%)

Financial Highlights – Financial Year, 2009-10

Rs. Mn FY10 FY09 Y-Y
Income from operations 11228.9 8,750.7 28.3%
Other income 9.9 24.2 (59.7%)
Total Income 11,238.8 8,775.0 28.1%
A.Direct cost 1,675.9 1,211.7 38.3%
B,Employ cost 3,179.0 2,737.0 16.1%
C.Administration expenses 2,010.8 1,903.6 5.6%
EBITDA 4,373.1 2922.7 49.6%
Interest 291.4 331.8 (12.2%)
Depreciation & amortization 534.6 396.o 35.0%
Profit/Loss Before Tax 3,547.1 2,194.9 61.6%
Provision for taxation 1,206.7 621.5 94.2%
Profit/Loss after tax before minority 2,340.3 1,573.4 48.8%
Minority Interest 20.6 125.2 (83.6%)
Profit/Loss After Tax 2,319.8 1,448.2 60.2%

Financial Highlights: Jan – Mar Quarter, 2009-10

Rs. Mn Q4FY10 Q4FY09 Y-Y Q3FY10 Q-Q

Income from operations 3094.7 1678.7 84.4% 2,893.8 6.9%

Other income 3.2 2.6 21.1% 3.5 (8.3%)
Total Income 3,097.9 1,681.3 84.3% 2,897.3 6.9%
A.Direct cost 505.1 195.9 157.8% 423.8 19.2%
B,Employ cost 971.8 632.6 53.6% 828.3 17.3%
C.Administration expenses 592.0 416.3 42.2% 516.4 14.6%
EBITDA 1,029.0 436.5 135.7% 1,128.9 (8.9%)
Interest 118.3 22.8 417.8% 10.4 1041.4%
Depreciation & amortization 119.0 122.7 (3.1%)1 150.0 (20.7%)
Profit/Loss Before Tax 791.7 290.9 172.2% 968.5 (18.2%)
Provision for taxation 268.4 31.2 760.3% 341.7 (21.5%)
Profit/Loss after tax before minority 523.3 259.8 101.5% 626.8 (16.5%)
Minority Interest 1.3 6.9 (81.3%) 31.8 (95.9%)
Profit/Loss After Tax 522.0 252.9 106.5% 595.0 (12.3%)

6 Business Review
Equities
 Market share on NSE maintained at 3.8% in FY10
 Average daily turnover up 57% yoy in FY10 to Rs35.02bn
 Present in over 2,300 business locations through branches and sub-brokers
 IIFL Securities Pte Ltd, our Singapore-based subsidiary, received in-principle
approval for Securities Trading and Clearing memberships from Singapore Exchange
(SGX)
 Our first Global Investors’ Conference at Mumbai - ‘Enterprising India’ had a
participation of more than 450 Fund Managers, over 70 corporates, world renowned
economists and thought leaders

Equities broking (Cash & FAO) in Rs. mn

 IIL market share on NSE

Research
 150+ stocks under coverage
 Our in-depth, thematic research has been well received. Our recent research reports
include:
An on-the-ground assessment of NREGA and how it is transforming 'Rural India'
The Great Collapse: How China’s high-speed rail network will transform travel in
the country
A perspective on India's spirit of enterprise – 'Enterprising India', conveyed through
interviews with 41 enterprising Indians
China Oil - study of our large neighbour’s quest for energy security
 Market Mantra, our daily comprehensive retail product covers market outlook, latest
news, economy snapshot, personal finance insights, event notes, management meets,
research ideas, etc

Insurance
 Life insurance distribution income for the year stood at Rs536.4 mn, up 11.4% yoy
 In FY10, the relative share of pension products have increased from 32% to 35%
 The private sector insurance companies witnessed a marginal volume growth (est
7% yoy)
 Uncertain regulatory environment can result in head winds for the industry

Credit and Finance

 The loans portfolio as on March 31, 2010 stood at Rs16.3 bn
 In FY10, mortgages contribute to 42% of the lending book, followed by margin
funding, LAS and personal loans at 36%, 16% and 6% respectively
 Net NPAs on the books continue to remain less than 1%
 Loan growth likely to accelerate on the back of improving macro-economic scenario
Wealth Management
 Assets under advisory over Rs 50 bn – spanning
over 1,000 families
  Successfully sold real estate NCD transactions to large
non-institutional clients
 Innovative products structured on the fixed income side
including NCDs, NABARD, Structured Notes and colending
transactions
 Have been building a robust platform covering various
products supported by an advisory

Investment Banking
 Income from Investment Banking stood at Rs 387.8 mn, as against Rs23.3 mn at the
end of FY09
 Sole BRLM for the ongoing Rs774.4 mn Talwalkars IPO
 During the year, our team advised and managed more than 10 transactions including
the IPOs of Cox & Kings, Infinite Computer Solutions and the QIPs of KSK Energy
Ventures and Emami
Stock & equity
 7 It’s All About Stock & Equity

Equity (Finance)
In accounting and finance, equity is the residual claim or interest of the most junior class
of investors in assets, after all liabilities are paid. If valuations placed on assets do not
exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity
(or stockholders' equity, shareholders' funds, shareholders' capital or similar terms)
represents the remaining interest in assets of a company, spread among individual
shareholders of common or preferred stock.
At the start of a business, owners put some funding into the business to finance assets. This
creates liability on the business in the shape of capital as the business is a separate entity
from its owners. Businesses can be considered to be, for accounting purposes, sums of
liabilities and assets; this is the accounting equation. After liabilities have been accounted
for, the positive remainder is deemed the owner's interest in the business.
This definition is helpful to understand the liquidation process in case of bankruptcy. At
first, all the secured creditors are paid against proceeds from assets. Afterward, a series of
creditors, ranked in priority sequence, have the next claim/right on the residual proceeds.
Ownership equity is the last or residual claim against assets, paid only after all other
creditors are paid. In such cases where even creditors could not get enough money to pay
their bills, and nothing is left over to reimburse owners' equity. Thus owners' equity is
reduced to zero. Ownership equity is also known as risk capital, liable capital and equity.

7.1 Equity investments

Equity investments generally refers to the buying and holding of shares of stock on a stock
market by individuals and firms in anticipation of income from dividends and capital gain
as the value of the stock rises. It also sometimes refers to the acquisition of equity
(ownership) participation in a private (unlisted) company or a startup (a company being
created or newly created). When the investment is in infant companies, it is referred to as
venture capital investing and is generally understood to be higher risk than investment in
listed going-concern situations.
The equities held by private individuals are often held via mutual funds or other forms of
pooled investment vehicle, many of which have quoted prices that are listed in financial
newspapers or magazines; the mutual funds are typically managed by prominent fund
management firms (e.g. Schroders, Fidelity Investments or the Vanguard Group). Such
holdings allow individual investors to obtain the diversification of the fund(s) and to obtain
the skill of the professional fund managers in charge of the fund(s). An alternative, usually
employed by large private investors and pension funds, is to hold shares directly; in the
institutional environment many clients who own portfolios have what are called segregated
funds as opposed to, or in addition to, the pooled e.g. mutual fund alternative.
A calculation can be made to assess whether an equity is over or underpriced compared
with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the
ratio of the dividend yield of an equity and that of the long-term bond.

7.2 Accounting
In financial accounting, it is the owners' interest on the assets of the enterprise after
deducting all its liabilities.[1] It appears on the balance sheet / Statement of Financial
Position[2], one of the four primary financial statements.
Ownership equity includes both tangible and intangible items (such as brand names and
reputation / goodwill).
Accounts listed under ownership equity include (example):
 Preferred stock
 Share capital, common stock
 Capital surplus
 Stock options
 Retained earnings
 Treasury stock
 Reserve (accountings)

7.2.1 Book value

The book value of equity will change in the case of the following events:
Changes in the firm's assets relative to its liabilities. For example, a
profitable firm receives more cash for its products than the cost at
which it produced these goods, and so in the act of making a profit it is
increasing its assets.
 Depreciation. Equity will decrease, for example, when machinery
depreciates, which is registered as a decline in the value of the asset,
and on the liabilities side of the firm's balance sheet as a decrease in
shareholders' equity.
Issue of new equity in which the firm obtains new capital increases the
total shareholders' equity.
Share repurchases, in which a firm gives back money to its investors,
reducing on the asset side its financial assets, and on the liability side
the shareholders' equity. For practical purposes (except for its tax
consequences), share repurchasing is similar to a dividend payment, as
both consist of the firm giving money back to investors. Rather than
giving money to all shareholders immediately in the form of a dividend
payment, a share repurchase reduces the number of shares (increases
the size of each share) in future income and distributions.
Dividends paid out to preferred stock owners are considered an expense
to be subtracted from net income[citation needed](from the point of view of the
common share owners).
Other reasons. Assets and liabilities can change without any effect being
measured in the Income Statement under certain circumstances; for
example, changes in accounting rules may be applied retroactively.
Sometimes assets bought and held in other countries get translated
back into the reporting currency at different exchange rates, resulting in
a changed value.

7.3 Shareholders' equity

When the owners are shareholders, the interest can be called shareholders' equity;[3] the
accounting remains the same, and it is ownership equity spread out among shareholders. If
all shareholders are in one and the same class, they share equally in ownership equity from
all perspectives. However, shareholders may allow different priority ranking among
themselves by the use of share classes, and options. This complicates both analysis for
stock valuation, and accounting.
The individual investor is interested not only in the total changes to equity, but also in the
increase / decrease in the value of his own personal share of the equity. This reconciliation
of equity should be done both in total and on a per share basis.
 Equity (beg. of year)
 + net income inter net money you gained
  − dividends how much money you gained or lost so far
 +/− gain/loss from changes to the number of shares outstanding.more
or less
 = Equity (end of year) if you get more money during the year or less or
not anything

7.4 Market value of shares

In the stock market, market price per share does not correspond to the equity per share
calculated in the accounting statements. Stock valuations, often much higher, are based on
other considerations related to the business' operating cashflow, profits and future
prospects; some factors are derived from the accounting statements. Thus, there is little or
no correlation between the equity seen in financial statements and the stock valuation of
the business.

7.5 Real estate equity

Individuals can also use market valuations to calculate equity in real estate. An owner
refers to his or her equity in a property as the difference between the market price of a
property and the liability attached to the property (mortgage or home equity loan).

Stock
The stock or capital stock of a business entity represents the original capital
paid into or invested in the business by its founders. It serves as a security for
the creditors of a business since it cannot be withdrawn to the detriment of the
creditors. Stock is distinct from the property and the assets of a business
which may fluctuate in quantity and value.

1. Shares
The stock of a business is divided into shares, the total of which must be stated at the time
of business formation. Given the total amount of money invested in the business, a share
has a certain declared face value, commonly known as the par value of a share. The par
value is the de minimis (minimum) amount of money that a business may issue and sell
shares for in many jurisdictions and it is the value represented as capital in the accounting
of the business. In other jurisdictions, however, shares may not have an associated par
value at all. Such stock is often called non-par stock. Shares represent a fraction of
ownership in a business. A business may declare different types (classes) of shares, each
having distinctive ownership rules, privileges, or share values.
Ownership of shares is documented by issuance of a stock certificate. A stock certificate is
a legal document that specifies the amount of shares owned by the shareholder, and other
specifics of the shares, such as the par value, if any, or the class of the shares.

2. Usage
Used in the plural, stocks is often used as a synonym for shares.[1] Traditionalist demands
that the plural stocks be used only when referring to stock of more than one company are
rarely heard nowadays.
In the United Kingdom, South Africa, and Australia, stock can also refer to completely
different financial instruments such as government bonds or, less commonly, to all kinds of
marketable securities.[2]

3. Types of stock
Stock typically takes the form of shares of either common stock or preferred stock. As a
unit of ownership, common stock typically carries voting rights that can be exercised in
corporate decisions. Preferred stock differs from common stock in that it typically does not
carry voting rights but is legally entitled to receive a certain level of dividend payments
before any dividends can be issued to other shareholders.[3][4] Convertible preferred stock is
preferred stock that includes an option for the holder to convert the preferred shares into a
fixed number of common shares, usually anytime after a predetermined date. Shares of
such stock are called "convertible preferred shares" (or "convertible preference shares" in
the UK)
New equity issues may have specific legal clauses attached that differentiate them from
previous issues of the issuer. Some shares of common stock may be issued without the
typical voting rights, for instance, or some shares may have special rights unique to them
and issued only to certain parties. Often, new issues that have not been registered with a
securities governing body may be restricted from resale for certain periods of time.
Preferred stock may be hybrid by having the qualities of bonds of fixed returns and
common stock voting rights. They also have preference in the payment of dividends over
common stock and also have been given preference at the time of liquidation over common
stock. They have other features of accumulation in dividend.
4. Stock derivatives
A stock derivative is any financial instrument which has a value that is dependent on the
price of the underlying stock. Futures and options are the main types of derivatives on
stocks. The underlying security may be a stock index or an individual firm's stock, e.g.
single-stock futures.
Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on
the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock
index futures are generally not delivered in the usual manner, but by cash settlement.
A stock option is a class of option. Specifically, a call option is the right (not obligation) to
buy stock in the future at a fixed price and a put option is the right (not obligation) to sell
stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to
the underlying stock of which it is a derivative. The most popular method of valuing stock
options is the Black Scholes model.[5] Apart from call options granted to employees, most
stock options are transferable.

5. History
During Roman times, the empire contracted out many of its services to private groups
called publicani. Shares in publicani were called "socii" (for large cooperatives) and
"particulae" which were analogous to today's Over-The-Counter shares of small
companies. Though the records available for this time are incomplete, Edward Chancellor
states in his book Devil Take the Hindmost that there is some evidence that a speculation in
these shares became increasingly widespread and that perhaps the first ever speculative
bubble in "stocks" occurred.[citation needed]
The first company to issue shares of stock after the Middle Ages was the Dutch East India
Company in 1606. The innovation of joint ownership made a great deal of Europe's
economic growth possible following the Middle Ages. The technique of pooling capital to
finance the building of ships, for example, made the Netherlands a maritime superpower.
Before adoption of the joint-stock corporation, an expensive venture such as the building
of a merchant ship could be undertaken only by governments or by very wealthy
individuals or families.
Economic historians find the Dutch stock market of the 1600s particularly interesting:
there is clear documentation of the use of stock futures, stock options, short selling, the use
of credit to purchase shares, a speculative bubble that crashed in 1695, and a change in
fashion that unfolded and reverted in time with the market (in this case it was headdresses
instead of hemlines). Dr. Edward Stringham also noted that the uses of practices such as
short selling continued to occur during this time despite the government passing laws
against it. This is unusual because it shows individual parties fulfilling contracts that were
not legally enforceable and where the parties involved could incur a loss. Stringham argues
that this shows that contracts can be created and enforced without state sanction or, in this
case, in spite of laws to the contrary.

6. Shareholder

Stock certificate for ten shares of the Baltimore and Ohio Railroad Company.

Main article: Shareholder

A shareholder (or stockholder) is an individual or company (including a corporation) that

legally owns one or more shares of stock in a joint stock company. Both private and public
traded companies have shareholders. Companies listed at the stock market are expected to
strive to enhance shareholder value.
Shareholders are granted special privileges depending on the class of stock, including the
right to vote on matters such as elections to the board of directors, the right to share in
distributions of the company's income, the right to purchase new shares issued by the
company, and the right to a company's assets during a liquidation of the company.
However, shareholder's rights to a company's assets are subordinate to the rights of the
company's creditors.
Shareholders are considered by some to be a partial subset of stakeholders, which may
include anyone who has a direct or indirect equity interest in the business entity or
someone with even a non-pecuniary interest in a non-profit organization. Thus it might be
common to call volunteer contributors to an association stakeholders, even though they are
not shareholders.
Although directors and officers of a company are bound by fiduciary duties to act in the
best interest of the shareholders, the shareholders themselves normally do not have such
duties towards each other.
However, in a few unusual cases, some courts have been willing to imply such a duty
between shareholders. For example, in California, USA, majority shareholders of closely
held corporations have a duty to not destroy the value of the shares held by minority
shareholders.
The largest shareholders (in terms of percentages of companies owned) are often mutual
funds, and, especially, passively managed exchange-traded funds.

7. Application
The owners of a company may want additional capital to invest in new projects within the
company. They may also simply wish to reduce their holding, freeing up capital for their
own private use.
By selling shares they can sell part or all of the company to many part-owners. The
purchase of one share entitles the owner of that share to literally share in the ownership of
the company, a fraction of the decision-making power, and potentially a fraction of the
profits, which the company may issue as dividends.
In the common case of a publicly traded corporation, where there may be thousands of
shareholders, it is impractical to have all of them making the daily decisions required to
run a company. Thus, the shareholders will use their shares as votes in the election of
members of the board of directors of the company.
In a typical case, each share constitutes one vote. Corporations may, however, issue
different classes of shares, which may have different voting rights. Owning the majority of
the shares allows other shareholders to be out-voted - effective control rests with the
majority shareholder (or shareholders acting in concert). In this way the original owners of
the company often still have control of the company.

A. Shareholder rights
Although ownership of 50% of shares does result in 50% ownership of a company, it does
not give the shareholder the right to use a company's building, equipment, materials, or
other property. This is because the company is considered a legal person, thus it owns all
its assets itself. This is important in areas such as insurance, which must be in the name of
the company and not the main shareholder.
In most countries, boards of directors and company managers have a fiduciary
responsibility to run the company in the interests of its stockholders. Nonetheless, as
Martin Whitman writes:
...it can safely be stated that there does not exist any publicly traded
company where management works exclusively in the best interests of
OPMI [Outside Passive Minority Investor] stockholders. Instead, there
are both "communities of interest" and "conflicts of interest" between
stockholders (principal) and management (agent). This conflict is
referred to as the principal/agent problem. It would be naive to think
that any management would forgo management compensation, and
management entrenchment, just because some of these management
privileges might be perceived as giving rise to a conflict of interest with
OPMIs.

Even though the board of directors runs the company, the shareholder has some impact on
the company's policy, as the shareholders elect the board of directors. Each shareholder
typically has a percentage of votes equal to the percentage of shares he or she owns. So as
long as the shareholders agree that the management (agent) are performing poorly they can
elect a new board of directors which can then hire a new management team. In practice,
however, genuinely contested board elections are rare. Board candidates are usually
nominated by insiders or by the board of the directors themselves, and a considerable
amount of stock is held or voted by insiders.
Owning shares does not mean responsibility for liabilities. If a company goes broke and
has to default on loans, the shareholders are not liable in any way. However, all money
obtained by converting assets into cash will be used to repay loans and other debts first, so
that shareholders cannot receive any money unless and until creditors have been paid
(often the shareholders end up with nothing).

B. Means of financing
Financing a company through the sale of stock in a company is known as equity financing.
Alternatively, debt financing (for example issuing bonds) can be done to avoid giving up
shares of ownership of the company. Unofficial financing known as trade financing usually
provides the major part of a company's working capital (day-to-day operational needs).

8. Trading
The shares of a company may in general be transferred from shareholders to other parties
by sale or other mechanisms, unless prohibited. Most jurisdictions have established laws
and regulations governing such transfers, particularly if the issuer is a publicly-traded
entity.
The desire of stockholders to trade their shares has led to the establishment of stock
exchanges. A stock exchange is an organization that provides a marketplace for trading
shares and other derivatives and financial products. Today, investors are usually
represented by stock brokers who buy and sell shares of a wide range of companies on the
exchanges. A company may list its shares on an exchange by meeting and maintaining the
listing requirements of a particular stock exchange. In the United States, through the inter-
market quotation system, stocks listed on one exchange can also be traded on other
participating exchanges, including the Electronic Communication Networks (ECNs), such
as Archipelago or Instinet.
Many large non-U.S companies choose to list on a U.S. exchange as well as an exchange
in their home country in order to broaden their investor base. These companies must
maintain a block of shares at a bank in the US, typically a certain percentage of their
capital. On this basis, the holding bank establishes American Depositary Shares and issues
an American Depository Receipt (ADR) for each share a trader acquires. Likewise, many
large U.S. companies list their shares at foreign exchanges to raise capital abroad.
Small companies that do not qualify and cannot meet the listing requirements of the major
exchanges may be traded over the counter (OTC) by an off-exchange mechanism in which
trading occurs directly between parties. The major OTC markets in the United States are
the electronic quotation systems OTC Bulletin Board (OTCBB) and the Pink OTC Markets
(Pink Sheets) where individual retail investors are also represented by a brokerage firm and
the quotation service's requirements for a company to be listed are minimal. Shares of
companies in bankruptcy proceeding are usually listed by these quotation services after the
stock is delisted from an exchange.

A. Buying
There are various methods of buying and financing stocks. The most common means is
through a stock broker. Whether they are a full service or discount broker, they arrange the
transfer of stock from a seller to a buyer. Most trades are actually done through brokers
listed with a stock exchange.
There are many different stock brokers from which to choose, such as full service brokers
or discount brokers. The full service brokers usually charge more per trade, but give
investment advice or more personal service; the discount brokers offer little or no
investment advice but charge less for trades. Another type of broker would be a bank or
credit union that may have a deal set up with either a full service or discount broker.
There are other ways of buying stock besides through a broker. One way is directly from
the company itself. If at least one share is owned, most companies will allow the purchase
of shares directly from the company through their investor relations departments.
However, the initial share of stock in the company will have to be obtained through a
regular stock broker. Another way to buy stock in companies is through Direct Public
Offerings which are usually sold by the company itself. A direct public offering is an
initial public offering in which the stock is purchased directly from the company, usually
without the aid of brokers.
When it comes to financing a purchase of stocks there are two ways: purchasing stock with
money that is currently in the buyer's ownership, or by buying stock on margin. Buying
stock on margin means buying stock with money borrowed against the stocks in the same
account. These stocks, or collateral, guarantee that the buyer can repay the loan; otherwise,
the stockbroker has the right to sell the stock (collateral) to repay the borrowed money. He
can sell if the share price drops below the margin requirement, at least 50% of the value of
the stocks in the account. Buying on margin works the same way as borrowing money to
buy a car or a house, using the car or house as collateral. Moreover, borrowing is not free;
the broker usually charges 8-10% interest.

B. Selling
Selling stock is procedurally similar to buying stock. Generally, the investor wants to buy
low and sell high, if not in that order (short selling); although a number of reasons may
induce an investor to sell at a loss, e.g., to avoid further loss.
As with buying a stock, there is a transaction fee for the broker's efforts in arranging the
transfer of stock from a seller to a buyer. This fee can be high or low depending on which
type of brokerage, full service or discount, handles the transaction.
After the transaction has been made, the seller is then entitled to all of the money. An
important part of selling is keeping track of the earnings. Importantly, on selling the stock,
in jurisdictions that have them, capital gains taxes will have to be paid on the additional
proceeds, if any, that are in excess of the cost basis.

C. Stock price fluctuations

The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like
all commodities in the market, the price of a stock is sensitive to demand. However, there
are many factors that influence the demand for a particular stock. The field of fundamental
analysis and technical analysis attempt to understand market conditions that lead to price
changes, or even predict future price levels. A recent study[12] shows that customer
satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is
significantly correlated to the market value of a stock. Stock price may be influenced by
analyst's business forecast for the company and outlooks for the company's general market
segment.

D. Share price determination

At any given moment, an equity's price is strictly a result of supply and demand. The
supply is the number of shares offered for sale at any one moment. The demand is the
number of shares investors wish to buy at exactly that same time. The price of the stock
moves in order to achieve and maintain equilibrium.
When prospective buyers outnumber sellers, the price rises. Eventually, sellers attracted to
the high selling price enter the market and/or buyers leave, achieving equilibrium between
buyers and sellers. When sellers outnumber buyers, the price falls. Eventually buyers enter
and/or sellers leave, again achieving equilibrium.
Thus, the value of a share of a company at any given moment is determined by all
investors voting with their money. If more investors want a stock and are willing to pay
more, the price will go up. If more investors are selling a stock and there aren't enough
buyers, the price will go down.
Note: "For Nasdaq-listed stocks, the price quote includes information on
the bid and ask prices for the stock."
Of course, that does not explain how people decide the maximum price at which they are
willing to buy or the minimum at which they are willing to sell. In professional investment
circles the efficient market hypothesis (EMH) continues to be popular, although this theory
is widely discredited in academic and professional circles. Briefly, EMH says that
investing is overall (weighted by a Stdev) rational; that the price of a stock at any given
moment represents a rational evaluation of the known information that might bear on the
future value of the company; and that share prices of equities are priced efficiently, which
is to say that they represent accurately the expected value of the stock, as best it can be
known at a given moment. In other words, prices are the result of discounting expected
future cash flows.
The EMH model, if true, has at least two interesting consequences. First, because financial
risk is presumed to require at least a small premium on expected value, the return on equity
can be expected to be slightly greater than that available from non-equity investments: if
not, the same rational calculations would lead equity investors to shift to these safer non-
equity investments that could be expected to give the same or better return at lower risk.
Second, because the price of a share at every given moment is an "efficient" reflection of
expected value, then—relative to the curve of expected return—prices will tend to follow a
random walk, determined by the emergence of information (randomly) over time.
Professional equity investors therefore immerse themselves in the flow of fundamental
information, seeking to gain an advantage over their competitors (mainly other
professional investors) by more intelligently interpreting the emerging flow of information
(news).
The EMH model does not seem to give a complete description of the process of equity
price determination. For example, stock markets are more volatile than EMH would imply.
In recent years it has come to be accepted that the share markets are not perfectly efficient,
perhaps especially in emerging markets or other markets that are not dominated by well-
informed professional investors.
Another theory of share price determination comes from the field of Behavioral Finance.
According to Behavioral Finance, humans often make irrational decisions—particularly,
related to the buying and selling of securities—based upon fears and misperceptions of
outcomes. The irrational trading of securities can often create securities prices which vary
from rational, fundamental price valuations. For instance, during the technology bubble of
the late 1990s (which was followed by the dot-com bust of 2000-2002), technology
companies were often bid beyond any rational fundamental value because of what is
commonly known as the "greater fool theory". The "greater fool theory" holds that,
because the predominant method of realizing returns in equity is from the sale to another
investor, one should select securities that they believe that someone else will value at a
higher level at some point in the future, without regard to the basis for that other party's
willingness to pay a higher price. Thus, even a rational investor may bank on others'
irrationality.

A. Arbitrage trading
When companies raise capital by offering stock on more than one exchange, the potential
exists for discrepancies in the valuation of shares on different exchanges. A keen investor
with access to information about such discrepancies may invest in expectation of their
eventual convergence, known as arbitrage trading. Electronic trading has resulted in
extensive price transparency (efficient market hypothesis) and these discrepancies, if they
exist, are short-lived and quickly equilibrated.
Research report
 8 RESEARCH METHODOLOGY

The methodology section is the blue print for researcher activity and specifies bow the
investigator intents to study the people or describe social settings. In other words the
methodology section make explicit the study desire and constitutes the “how to do it”
phase.

I have put my best possible effort to do this research and collect the necessary information
to learn about this topic thoroughly.

Objective of research;

The main objective of this project is concerned with getting the opinion of people
regarding stock & equity and what they feel about availing the services of financial
advisors.
I have tried to explore the general opinion about equity. It also covers why/ why not
investors are availing the services of financial advisors.
Along with it a brief introduction to India’s largest financial intermediary, INDIA
INFOLINE has been given and it is shown that how they operate in stocks deptt

Scope of the study:

The research was carried on in the Northern Region of India. It is restricted to Greater Noida
where I have visited people randomly nearby my locality, different shopping malls, small
retailers etc.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.
Research has been done by primary data collection, and primary data has been collected by
interacting with various people. The secondary data has been collected through various
journals, websites and some special publications of INDIA INFOLINE.

Sampling:

✔ Sampling procedure:

The sample is selected in a random way, irrespective of them being investor or not or
availing the services or not. It was collected through mails and personal visits to the
known persons, by formal and informal talks and through filling up the questionnaire
prepared. The data has been analyzed by using the measures of central tendencies
like mean, median, mode. The group has been selected and the analysis has been
done on the basis statistical tools available.

✔ Sample size:

The sample size of my project is limited to 100 only. Out of which only 67 people
attempted all the questions. Other 33 not investing in Equities/Stock Market
attempted only 2 questions.

✔ Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

✔ Limitation:
 ➢ Time limitation.

➢ Research has been done only at Greater Noida.

➢ Some of the persons were not so responsive.

➢ Possibility of error in data collection.

➢ Possibility of error in analysis of data due to small sample size.

DATA ANALYSIS

1. Do you invest your money to grow?

Yes 88

No 12

Interpretation :

88% of the respondents say yes they invest there money to grow. This is because the

respondents who’s income is above 10000 are investing their money to grow.
2. ANALYSIS OF THE PREFERRED INVESTMENT AREA

The investment was broadly divided into five areas, mainly-Bank deposits. Shares, Mutual
Fund ,Real Estate and insurance plans.

Following observations can be made on the basis of above analysis:

Bank Deposits being the most preferred area, 43% respondents out of hundred invested
in bank deposits.

The second preferred area was Shares as 27% respondents were investing in the share
market.

Then preferred area was the Mutual Funds with 13% of respondents

Real estates were the least preferred area i.e. only 7%

3. ANALYSIS OF THE FACTORS AFFECTING THE INVESTMENT

The factors are categorized in to four parameters to know the purpose of investment made by
the investor.
 52% respondents go invests for higher returns.

29% respondents prefer Moderate Return for their investments.

15% prefer moderate risk.

Only 4% for Low risk.

4. ANALYSIS OF THE REQUIREMENT OF EXPERTISE

No. of Respondents

Yes
93

No 7
 93% respondents say yes, they required expertise knowledge.

7% respondents say no.

5. AWARENESS RELATED TO EQUITY OR STOCK MARKETS

KNOWLEDGE PERCENTAGE

Complete 8

Partial 75

Nil 17

TOTAL 100

COMMENT
On that basis, we conclude that 17% people know nothing about the securities investments
and 75% people have partial knowledge about it, so, some promotional activities are
required for increasing the awareness about security market.
6. Customer interested towards Share Market

TOTAL – 100

INTERESTED IN SHARE MARKET- 25%

NOT INTERSTED IN SHARE MARKET – 75%

7. CUSTOMERS HOLDING DEMAT A/C

ACCOUNTS PERCENTAGE

Yes 33

No 67
TOTAL- 100

COMMENT

Only 33% respondents have de-mat and trading account

and remaining 67% says no because they don’t know why
shares move up and down.

8. CUSTOMERS HOLDING DEMAT & TRADING A/C IN DIFFERENT BROKING

FIRMS

T0TAL CUSTOMERS – 100

The graph indicates distribution of number of customers of different broking firms among
hundred customers who are already having demat account.
9. ACCORDING TO YOU WHICH IS THE MOST SUITABLE STAGE TO INVEST
IN EQUITY OR SHARE MARKET?

Stages No. of Respondents

Young Unmarried 41

Young Married 24

Married With Older Children 16

Pre Retirement 19

10. ANALYSIS OF PERSONS AVAILING THE SERVICES OF PERSONAL

FINANCIAL ADVISORS
 Yes 64

No 36

TOTAL- 100

Out of 100 only 64% of respondents avails the services of financial advisers.

11. CUSTOMER SEGMENTATION

TOTAL -100

ONLINE CUSTOMERS - 30%

OFFLINE CUSTOMERS - 70%

Among the 100 customers who are having demat account in various
broking firms the pie chart shows that 30% of the customers are doing
online trading, and 70% of the customers are offline trading in the share
market.

12. ANALYSIS OF THE FACTORS FOR BROKING HOUSE

These factors are categorized into brokerage, Information provided by them the exposure
limit or loan facility provided by them and their Brand Name.

44% respondents choose their broking house on basis of information provided by them.

28% prefer by the exposure limit and the loan facility provided to them.

12% by the brokerage charge by the broking house.

16% by Brand Name.

9 Findings and Conclusions

✔ At the survey conducted upon 100 people, 66 are already equity investors or are
interested to invest in future and the remaining 34 are not interested in it. So there is
enough scope for the advisors to convert those 34 participants into investors through
their convincing power and great communication skills.
✔ Now, when those 34 people were asked about the reason of not investing in equity or
stock market, then most of the people held their ignorance responsible for that. They
lacked knowledge and information about the equity & stocks. Whereas just 10 people
enjoyed investing in other option. For 18 people, the benefits arousing from these
investments were not enough to drive them for investment in Equities and 12 people
expressed no trust over the fund managers’ decision. Again the financial advisors can
tap upon these people by educating them about mutual funds.
✔ Out of the 66 persons who already have invested in equity or stock market are
interested to invest, only 18% have sound knowledge of Equity/Stocks, 34% people
are aware of only the schemes in which they have invested. 27% possess partial
knowledge whereas 21% stands nowhere in knowledge about Equity.
✔ When asked about the most alluring feature of Equity or Stock, most of them opted
for diversification, followed by reduction in risk, helps in achieving long term goals
and helps in achieving long term goals respectively.
✔ Most of the investor preferred to invest at a young unmarried stage. Even 24%
persons were ready to invest at a stage of young married with children but person
with older children avoid investing due to increased expenses. But again the number
rose to 19% at pre-retirement stage.
✔ Out of them 64 were already availing the services of financial advisors whereas 36
didn’t. When asked about the expertise of financial advisors which they liked most?
31 of them favored portfolio review and investment recommendation, followed by
planning to achieve long term goals, managing assets in retirement and access to
specialists in area such as tax planning.

10 RECOMMENDATIONS

➢ INDUCTION PROGRAMS must be held for the sales teams before letting them go
into the field. In these induction classes the experienced sales staff employees should
share their valuable live experiences and knowledge, which they have experienced
while in field.

➢ Weekly magazines must be published and distributed to the investors that can help
them for making better investments.

➢ Sales team must be fully equipped with latest technology such as using Laptop that
can be used for making presentation to the customers especially to the corporate
clients about their product and services provided by them.

➢ Make your site user friendly so that more and more people know about trading and
do the same also.

➢ Advertisement through Canopy, help to generate leads.

➢ Company should advertise with a concern that has a brand name in the market.
 ANNEXURE-1

Name………………………………………….

Occupation……………………………………

Contact No…………………………………....

SURVEY QUESTIONNAIRE
Q1. Do you invest Your Money to grow?
a. Yes
b. No

Q2. Where do you prefer to invest your money?

a) Bank Deposits
b) Shares
c) Mutual Funds
d) Real estate
e) Insurance Plans
Q3. Do you prefer to invest in shares?
a) Yes
b) No

Q4. If yes, out of following, which intermediating company would you go For?
a) Kotak Securities
b) Indiabulls
c) India Infoline
d) HDFC
e) Reliance money
f) Sharekhan

Q5. If no, Why you have not invested in Share Market?

a. Risk
b. Lack of Knowledge
c. Return Factor

Q6. What would you like more?

a. More benefits
b. More security
c. Others, Please specify

Q7. How do you trade in Share Market?

a. Hedging
b. Speculation
c. Investment

Q8. If you trade with India Infoline, then why?

a. Services
b. Investment Tips are good
c. Brokerage
d. Brand Name
e. Expertise Knowledge
Q9. According to you which is the most suitable stage to invest in equity?

a. Young unmarried stage

b. Young Married with children stage
c. Married with older children stage
d. Pre-retirement stage

Q10. Are you availing the services of personal financial advisors?

a. YES [ ]
b. NO [ ]

Q11. If yes, what is the major reason for using financial advisors?

a. Want help with asset allocation

b. Don’t have time to make my own investment decision
c. To explain various investment options
d. Want to make sure I am investing enough to meet my financial goals

Q12. If no, what is the major reason for not using financial advisor?

a. Have access to all resources needed to invest on own

b. Believe advisors are too expensive
c. Unsure how to find a trustworthy advisor
d. Want to be in control of own investment

Q13. How much risk do you prefer in Investment Plans?

a. High Risk
b. Moderate Risk
c. Low Risk

Q14. Do you consider Inflation a significant risk?

a. Yes
b. No

Q15. What is the most important service parameter that you look for while trading.
 a) Information
b) Speed
c) Quality
d) Other

Any recommendation / Suggestion

ANNEXURE-2
Bibliography
Websites:

www.indiainfoline.com

www.5paisa.com

www.moneycontrol.com

www.yahoofinance.com

www.economictimes.com

www.rediffmoney.com
www.bseindia.com

www.nseindia.com

www.investopedia.com

www.wikipedia.com

Newspapers & journals :

The Economic Times

Business Standard

Business India

Financial Report of India Infoline (Annual 2009-10)

Investors India

Books:

Financial Management, Khan & Jain

C.R. Kothari, Operation Research

NCFM (Study material)