You are on page 1of 18

RISK MANAGEMENT IN CASE OF A BROKING FIRM AND ITS INVESTORS WITH SPECIAL REFERENCE TO RELIGARE SECURITIES

SNEHA SONAL Roll No. 10DF036

INTRODUCTION TO COMPANY
 Religare is A Financial Services Company in India, offering a wide range of financial product and services.  They are offering broking services to more than 7 lacs clients using both, offline and online platform through a nation wide branch network of 2092 locations across 557 cities and towns.  Religare is an emerging markets financial services group with a presence across Asia, Africa, Middle East, Europe, and the Americas

MISSION:To be the leading emerging markets financial services

group driven by innovation, delivering superior value for all stakeholders globally

OBJECTIVE
 To get familiar with the working of a broking

firm i.e., Religare Securities Limited.


 To understand the various risks involved.  To know how to manage the risk from the

Religare point of view & its investors.


 To know the perception of the customer

about the DEMAT account

METHODOLOGY
 Survey was conducted to study the

impact of

Demat account  Questionnaire was prepared consisting of close ended and open ended questions for the customers  Sample size 100 customers  For analysis of the data graphs are drawn

LIMITATION
 The study is conducted in Ranchi only,

which restricted the scope of study.  The study is conducted to understand with respect to the risks involved in broking firm and investors, which is the part of equity share market.

RISK MANAGEMENT
 Risk management is the process of identifying

the level of risk that an individual wants, measuring the level of risk & monitoring the new actual level of risk so that it continues to be aligned with the desired level of risk. The process is continuous and may require alterations in any of these activities to reflect new policies, preferences, and information

RISK MANAGEMENT IN RELIGARE


In respect of Broking firm NSE introduced for the first time in India Risk control measures. These measures were taken to reduce the brokers risks. NSE has specified different margins for different instruments like stocks future and options Daily margins payable by members consists of the following: 1)Value at risk margins (VaR margins), & 2)Mark to Market margins

Value at risk margins (VaR margins)


 VaR Margin is a margin intended to cover the largest loss that can been countered on 99% of the days (99% Value at Risk). For liquid securities, the margin covers one-day losses while for illiquid securities; it covers three-day 91 losses so as to allow the clearing corporation to liquidate the position over three days.

Mark to Market Margin


 Mark to market loss is calculated by marking each transaction in security to the closing price of the security at the end of trading Contract size is 100 quintals . For example:  The current price is Rs 600 per quintal  The broker would require the investor to deposit funds in what is called a margin account  The broker calls investor to deposit Rs 6,000 as initial margin when the contract is entered into

Mark-to-Market margin
Trading Day price Daily gain/loss (180) (460) 40 (450) (470) (260) 150 (640) (20) (470) (230) 160 Cumulative gain/loss (180) (640) (600) (1050) (1520) (1780) (1630) (2270) (2290) (2760) (2990) (3150) Margin Account balance 5820 5360 5400 4950 4480 5740 5890 5250 5230 4760 4530 4370 1630 1520 Margin call

2 3 4 5 6 9 10 11 12 13 16 17

600 598.20 593.6 594 589.5 584.8 582.2 583.7 577.3 577.1 572.4 570.1 568.5

Risk in respect of investors


 There are some common types of risks that investors faced:a) Market Risk b) Inflation Risk c) Country Risk d) Foreign-Exchange Risk

Risk Management in respect of investors


 Portfolio Risk Management:

1.Determine your overall cut-loss level. Usually your portfolio should not lose more than 10% of your capital. 2. Diversify your investment in at least six or more different stocks. 3. Know your overall risk tolerance before building up the portfolio. 4.Act quickly when you see your risk limits exceeded. 5. Close out the entire portfolio if it loses to your overall stop-loss level

CANCLUSION
 This study concludes that the working of a

broking firm is a very risky job.  Broking business is a client based business.  The risk prevailing in the business is recognized therefore an efficient risk management department is essential in every broking firm

SUGGESTION
 An organization should have a risk management

function that is independent of its trading staff i.e., personnel responsible for the risk management function should be separate from trading floor personnel.  Senior management should regularly evaluate the risk management procedure in place to ensure they are appropriate and sound.  Senior management should also foster and participate in active discussions with the board of directors, sub directors, sub brokers, franchisee, staff of risk management function and investors regarding procedures for measuring and managing risk.

Cont
 Risk management or control function should

be able to produce a risk management report that highlights positions, limits and excess on a basis commensurate with trading activity. This report should be sent to senior management reviewed, signed and returned to control staff.  Auditors should perform a comprehensive review of risk management annually, emphasizing segregation of duties and validation of data integrity.  The designated compliance officer should perform a review of trading Practices annually

reference
 I.M.pandey, Financial Management,  Websites:

www.nse.com www.religare.co.in www.religareonline.com