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Prepared By Bhavik Shah Roll No. 24 Steven Business school 2010-12 Submitted to: Under Guidance of: Dr. Himani Joshi (Assistant Dean of Steven Business School) Company Guide: Mr. Pulkit Bakliwal (Business Associate of Motilal Oswal)
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I, Bhavik Shah, student of Post Graduate Program of Stevens Business School, Gandhinagar here by declare that the project work entitled Gauging the potential of Financial Services in Emerging Economies with respect to MOTILAL OSWAL Securities Limited is an original and individual work submitted by me to Stevens Business School, Ahmedabad under the esteemed guidance of Mr. Pulkit Bakliwal, Mrs. Neha Patni and Dr. Himani Joshi.
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EXECUTIVE SUMMARY
A project work is a mandatory requirement for the Masters degree in business Administration. As a student of MBA, it is an integral part of curriculum to undergo practical training at an organization. The industrial internship aims at exposing the young prospective to the actual business world. Without the practical exposure one cannot consider himself or herself as a qualified capable manager. During the project period student can learn through his own experience, the real situation corporate world and to put his theoretical knowledge into practice.
Hence to fulfill the requirement, we have completed our Two Months Internship in Motilal Oswal Securities Ltd. on the topic Gauging the Potential for Finance Sector in Emerging Economy/ Country in financial market, given to me by my company guide.
A Financial Sector, with high peak growth, in emerging countries, I aimed to find such emerging country which has high potential to grow fast and have ample opportunity for any Indian Financial Service firm to have a platform to provide financial service in that country and can expand. Objective of project:1. To explore the opportunities for Indian Financial Firm in MENA countries. 2. To study the economic political & financial sector and condition of MENA countries.
As projects focus is to serve Indian Population residing in foreign country, we made a list of developing country with number of NRI population in that country. As the Interest rate and Tax rate play a vital role in any financial consideration, we select some of the country with high Indian population ratio and find the interest rate and tax rate of the country. Also demographics of Indian population and economic survey of country helped us to narrow down our list of countries. Then as an individual I got 3 countries for research project.
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effectively. System
Suppliers of Funds
Financial Markets
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Financial intermediaries give advantages like diversification of investment, lowering transaction cost, provides economies of scale etc.
INDUSTRIAL INTERNSHIP PROGRAMME 2011 1.3 COMPONENTS OF THE FORMAL FINANCIAL SYSTEM
The formal financial system consists of four segments or components. These are:- financial institutions, financial markets, financial instruments, and financial services which are in detailed explained below:
I.
FINANCIAL INSTITUTIONS
These are mediators that mobilize savings and facilitate the allocation of funds in an efficient manner. Following are the classification of financial institutions: Classification of Financial Institutions: Banking and non-banking
Financial institutions can be classified as banking non-banking financial institutions. Banking institutions are creators and purveyor of credit while non-banking financial institutions are purveyor of credit. Term finance
Financial institutions can also be classified as term-finance institutions such as the Industrial Development Bank of India (IDBI), the Industrial Credit and Investment Corporation of India (ICICI), the Industrial Financial Corporation of India (IFCI), the Small Industries Development Bank of India (SIDBI), and the Industrial Investment Bank of India (IIBI). Specialized
Financial institutions can be specialized finance institutions like the Export Import Bank of India (EXIM), the Tourism Finance Corporation of India (TFCI), ICICI Venture, and the Infrastructure Development Finance Company (IDFC).
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Sectoral financial institutions such as the National Bank for Agricultural and Rural Development (NABARD) and the National Housing Bank (NHB). Investment
Investment institutions in the business of mutual funds Unit Trust of India (UTI), public sector and private sector mutual funds and insurance activity of Life Insurance Corporation (LIC), General Insurance Corporation (GIC) and its subsidiaries are classified as financial institutions. State-level
There are state-level financial institutions such as the State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs) which are owned and managed by the governments.
II.
FINANCIAL MARKETS
A Financial Market is a market where financial assets are created and exchanged. There are different ways of classifying financial markets:
Maturity of claim
Money Market
Seasoning of claim
Primary Market
Timing of Delivery
Cash or spot Market Forward Of futures Market
Organisational Structure
Exchange traded Market
Over the counter Market
Equty Market
Capital Market
Secondary Market
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Two major regulatory bodies for financial system of India are government bodies they are:
Reserve Bank of India- Central banking authority of India Securities Exchange Board of India- Deals with Capital Market of India
III.
FINANCIAL INSTRUMENTS
A financial instrument is a claim against a person or an institution of payment, at a future date, of a sum of money and/or a periodic payment in the form of interest or dividend. The term and/or implies that either of the payments will be sufficient but both of them may be promised. Financial instruments represent paper wealth shares, debentures, like bonds and notes. Following are distinct features of financial instruments.
Many financial instruments are marketable as they are dominated in small amounts and traded in organized markets. This distinct feature of financial instruments has enabled people to hold a portfolio of different financial assets which, in turn, helps in reducing risk. Savings and investments are linked through wide variety of complex financial instruments known as Securities. Tradeable
Financial securities are financial instruments that are negotiable and tradeable. Financial securities may be primary or secondary securities. Primary securities are also termed as direct securities as they are directly issued by the ultimate borrowers of funds to the ultimate savers. E.g. Equity shares and Debentures.
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IV.
FINANCIAL SERVICES
These are those services that help with borrowing and funding, lending and investing, buying and selling securities, making and enabling payments and settlements, and managing risk exposures in financial markets. The major categories of financial services are funds intermediation, payments mechanism, provision of liquidity, risk management and financial engineering. Following are the needs and types of financial services for: NEEDS OF FINANCIAL SERVICES FOR: Borrowing and funding Lending and investing Buying and selling securities Making and enabling Payments and settlements Managing risk
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A contract in which one party agrees to pay for another party's financial loss resulting from a specified event (for example, a accident, theft, or storm damage). Lease agreements generally require that you maintain vehicle accident and comprehensive insurance as well as liability insurance for bodily injury and property damage. Mutual Fund
A mutual fund enables investors to pool their money and place it under professional investment management. The portfolio manager trades the fund's underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. There are more mutual funds than there are individual stocks. Banking
Financial intermediary Institutions for receiving, lending, and safeguarding money as well as conduction other financial transactions. There are several types of banks: central banks, commercial banks, corporate banks, credit unions, savings banks, trust companies, finance companies, life insurers, investment banks, etc. Banks have drastically evolved throughout time, increasing their services but also becoming institutions that cater to greater numbers of people. Shares
Shares are a term referred to the units of ownership interest provided to the stockholder or owner of a company. The term is often used in connection with the number of units issued to an owner of Common Stock or Preferred Stock. A stock is a certificate of ownership in a corporation. It is the same as a share.
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With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailor-made products.
The insurance market is filled up with new players which has led to the introduction of several innovative insurance based products, value add-ons, and services. Many foreign companies have also entered the arena such as Tokio Marine, Aviva, Allianz, Lombard General, AMP, New York Life, Standard Life, AIG, and Sun Life.
The competition among the companies has led to aggressive marketing and distribution techniques.
The active part of the Insurance Regulatory and Development Authority (IRDA) as a regulatory body has provided to the development of the sector.
The venture capital sector in India is one of the most active in the financial sector inspite of the difficulty by the external set up.
Presently in India there are around 34 national and 2 international SEBI registered venture capital funds
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The distributed financial gain of the venture capital funds is not taxed. The financial gains are taxed after the investors receive as income.
They have more insurance and banking products introduced into the market to expand the spectrum which in turn would boost the growth of the sector.
Further nullification of the regulations has to take place in order to increase the competition and boost the growth of the financial sector to reach the US$ 51 billion mark.
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implementation of cutting-edge technology has enabled us to blossom into an over 1600 member team. Today they are a well diversified financial services firm offering a range of financial products and services such as Wealth Management, Broking & Distribution, Commodity Broking , Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Services and Principal Strategies. They have a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. Their headquartered is in Mumbai and as of March 31st, 2011, had a network spread over 611 cities and towns comprising 1,644 Business Locations operated by our Business Partners and us. As at March 31st, 2011, we had 709,041 registered customers.
Motilal Oswal Financial Services Ltd. (MOFSL) is a well-diversified, financial services company focused on wealth creation for all its customers, such as institutional and corporate clients, HNI and retail customers. Their services and product offerings include equity broking, commodity broking, and distribution of third party products, investment banking and venture capital management.
Mr. Motilal Oswal and Mr. Raamdeo Agrawal laid the foundation for MOFSL and initially conducted business as a sub-broking firm. Thus, began the expedition of building a professional organization with strong value systems, to provide investment advice to investors.
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In 2006, the Company placed 9.48% of its equity with two leading private equity investors based out of the US New Vernon Private Equity Limited and Bessemer Venture Partners. The company got listed on BSE and NSE on September 9, 2007. The issue which was priced at Rs.825 per share (face value Rs.5 per share) got a overwhelming response and was subscribed 27.18 times in confused market conditions. The issue gave a return of 21% on the date of listing. As of end of financial year 2008, the group net worth was Rs.7 bn and market capitalization as of March 31, 2008 was Rs.19 bn. Credit rating agency Crisil has assigned the highest rating of P1+ to the Companys short-term debt program. Shareholding Pattern at on 31st March, 2011. As of March 31st, 2011; the total shareholding of the Promoter and Promoter Group stood at 69.16%. The shareholding of institutions stood at 12.07% and non-institutions at 18.77%.
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Going beyond the standard quantitative indicators, Gelbard and Leite (1999) used measures of market structure, financial products, financial liberalization, institutional environment, financial openness, and monetary policy instruments to construct a comprehensive index for 38 subSaharan African countries, for 1987 and 1997. Similarly, Abiad and Mody (2003) created an index for a 24-year period from 1973 to 1996 for 35 countries. They examined six measures of policy liberalization in the areas of credit controls, interest rate controls, entry barriers, regulations and securities markets, financial sector privatization, and restrictions on international financial transactions. These more-detailed measures provide a richer description of financial development, and motivate our measures of financial development in the MENA region. There has been very little work on measuring and assessing financial sector development in the MENA region, mainly because of the paucity of data. Our analysis builds on three studies that have examined financial development in MENA and broadly mirrors their conclusions. Chalk, Jbili, Treichel, and Wilson (1996) found that the thirteen MENA countries included in their analysis have made significant progress in financial deepening. But in most of these
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countries, Jordan, Lebanon, Morocco, and Tunisia, have strengthened banking supervision and regulation, they have established up-to-date procedures to collect prudential information on a regular basis, and they inspect and audit banks. They have taken steps to conform to international Basel standards by increasing capital adequacy ratios and reducing nonperforming loans. However, success in the latter has been limited, and for most countries nonperforming loans remain in the range of 10 percent to 20 percent of total loans. Financial openness: MENA countries have gradually opened up their current as well as capital accounts. Nearly half the countries have open financial sectors, although many maintain restrictions on foreign ownership of assets and repatriation of earnings. Some countries continue to maintain parallel exchange markets and/or multiple currency rates. Institutional environment: In much of the MENA region, the quality of institutions, including the judicial system, bureaucracy, law and order, and property rights, is poor. For instance, in several countries, the judicial system is susceptible to political pressure and long delays, resulting in poor legal enforcement of contracts and loan recovery. Property rights enforcement also tends to be weak. This hinders commercial activity and investment, and hence growth. Source: http://faculty.som.yale.edu/mushfiqmobarak/financial%20sector%20development.pdf
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4. Now, individually I have 3 countries which are as follows: Guyana Kenya Kuwait
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It is the time for Indian Player to explore industry in foreign country, in this context we aimed to find such emerging country with dense Indian population with constraint of our variables. Following is the table of countries name and Indian Population in that country.
Country Name Australia Bahrain Belgium Canada China Denmark Figai France Germany Greece Guyana Indonesia Ireland Israel Italy Jamaica Japan Kenya Kuwait Lebanon Libya Malaysia Mauritious Myanmar Uganda UAE Nepal Netherlands New Zealand Oman Philippines Portugal Qatar Saudi Arabia Singapore South Africa Srilanka Thailand Indian Population 448000 350000 16000 1000000 67000 6500 314000 445000 75500 12000 322200 85000 19000 78000 71900 54000 22000 75000 579000 10000 15000 2050000 882000 256000 12000 1300000 600000 200000 1000000 557000 50000 800000 500000 1789000 580000 1218000 1600000 150000
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From the above table, developing countries with more number of Indian people is selected. We have short listed 20 countries looking to the Indian population residing in all the above countries. Our main focus was to select emerging country to have detailed study of their economy and living standard o f NRI. From above 40 countries, we selected 20 countries and found their Interest rates and Tax rates
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I.
GUYANA
4.1.1 DEMOGRAPHICS
Religion:
On religious affiliation indicates that approximately 57% of the population are Christian (of those, 17% are Pentecostal, 8% are Roman Catholic, 7% are Anglican, 5% are Seventh-day Adventist, and 20% belong to other Christian denominations). Approximately 28% are Hindu, 9% are Muslim (mostly Sunni), and 2% practice other beliefs (such as the Rastafarian and Baha'i faiths). An estimated 4% of the population does not profess any religion.
Indian Religion:
Most Indo-Guyanese are Hindus; substantial minorities are Muslims and Christians. Many of the Indians have roots from Uttar Pradesh, Bihar, Calcutta and Madras.
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4.1.2GDP RATE
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 GDP - real growth rate Rank Percent Change Date of Information 2.10 % .50 % 1.90 % -3.00 % 4.50 % 5.30 % 3.00 % 2.30 % 2.50 % 126 183 171 210 121 102 128 78 139 -76.19 % 280.00 % -257.89 % -250.00 % 17.78 % -43.40 % -23.33 % 8.70 % 2002 est. 2003 est. 2004 est. 2005 est. 2006 est. 2007 est. 2008 est. 2009 est. 2010 est.
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35 or 45%
16%
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authority to supervise the majority of non-bank financial institutions, made up mostly of insurance companies, builders and money transfer businesses. In an important step to increase access to credit, the government also passed this year the Credit Reporting Bill 2009, which provides the framework for the creation of a credit bureau in Guyana. With this third loan, the IDB has provided a total of $15 million since December 2008 of budget support to accompany reforms of Guyanas financial system. Half of this latest IDB financing is made up of a loan from the Banks ordinary capital, with an amortization period of 30 years, a grace period of 6 years and a fixed interest rate. The other $2.5 million will come from the IDBs Fund for Special Operations. This portion will have amortization and grace periods of 40 years, and an interest rate 0.25 percent.
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Personal Banking
Deposits 1. Deposit Products & Services Fixed Current Savings
2. Gen Next Services Gen-Next Junior Gen-Next Lifestyle Gen-Next Power Gen-Next Suvidha
3. Retail Loans Home Loan Home Improvement Loan Loan Against Future Rent Receivables Advance Against Securities Baroda Career Development
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Home Loans to NRIs / PIOs Interest Subsidy Scheme For Housing The Urban Poor (ISHUP) Mortgage Loan Education Loan Auto Loan Loan to Doctors Personal Loan Loan for financing Individuals for subscription to Public Issues /IPO
Business Banking
Deposits Loans and Advances Services
Corporate Banking
Wholesale Banking Deposits
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Foreign Currency Linked Rupee Deposits (FCLR) Scheme Non Resident External (NRE) (RUPEE) Savings Account Non Resident External (NRE) (RUPEE) Current Account
Resident Fgn Currency A/c - for NRIs returning to India for settling in India
Rupee Linked Foreign Currency Deposit (RLFCD) Scheme for NRIs Deposit Products at overseas centres Baroda Structured Deposit
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2.
Products
Saving Account Loans ATM Money card Tele banking Remote Banking Night Depository Utility Payments
Products and Services Saving Deposit account Chequing Account Money master Safety deposit boxes Night Deposit Phone Banking Foreign Exchange Loans and Over drafts American Express
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II. KENYA
4.2.1DEMOGRAPHICS
Religion:
Protestant 45%, Roman Catholic 33%, Muslim 10%, Indigenous beliefs 10%, Other 2%
Indian Religion:
Indian Population: 75,000 Income Profile: agriculture 75%, Industry and services25% (2007 est.)
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Tax Rate
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Small-scale consumer goods (plastic, furniture, batteries, textiles, clothing, soap, cigarettes, flour), agricultural products, horticulture, oil refining; aluminum, steel, lead; cement, commercial ship repair, tourism
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The Nairobi Stock Exchange, which handles 61 listed firms, was established in 1954. In January 1995, the stock market, including stock-brokerage, was opened up for foreign direct participation, although there is a 40 percent limit on foreign ownership. Market capitalization has recently manifested considerable growth, increasing from US$1.89 billion in 1995 to US$2.08 billion in 1998. The Kenya banking system is supervised by the Central Bank of Kenya (CBK). As of late July 2004, the system consisted of 43 commercial banks (down from 48 in 2001), several non-bank financial institutions, including mortgage companies, four savings and loan associations, and several score foreign-exchange bureaus. Two of the four largest banks, the Kenya Commercial Bank (KCB) and the National Bank of Kenya (NBK), are partially government-owned, and the other two are majority foreign-owned (Barclays Bank and Standard Chartered). Most of the many smaller banks are family-owned and -operated
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Retail & SME Banking Account SME Banking Product Deposit a/c Asset Financing. Project Financing Treasury Products Trade Finance Cash Management Solutions FOREX Credit Facilities Supply Chain Financing. Investment Accounts. Corporate Banking Business Advisory
Trade Banking
Treasury
2. Bank of India
Products Current Deposits Saving Bank Deposits Term Deposits Call Deposits
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3. Barclays Bank
4. Citibank
Products & Services Cash Mangement Electronic Banking Trade Service Treasury Citi Services Corporate Finance
Treasury
Investment banking
Accounts
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7. Credit Bank
All the Local Banks provides same kind of products and services
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Personal Banking
Priority Banking
Savings Accounts
Diva Account
Investment Services
o o
e-Statements
NRI Banking Introducing Standard Chartered NRI Services specially designed for Global Indians. India is one name that evokes thousands of emotions and nostalgic feelings amongst all NonResidents Indians, irrespective of the part of India they belong to. At Standard Chartered we understand how much your heart desires to be with your loved ones back home and support them in every need. So we have the pleasure in introducing our specially designed NRI Services to meet your financial commitments. Following are the available comprehensive NRI services:
Dedicated NRI desk NRE/NRO/FCNR Fixed deposits Indian Investment products Global Investment Products
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Insurance Advisory Indian Home Loans Loans against property Home Assist No minimum Balance requirement in NRE account Competitive conversion rate for Rupee remittances
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III. KUWAIT
4.3.1 DEMOGRAPHICS
Religion: Muslim 85% (Sunni 70%, Shia 30%), other (includes Christian, Hindu, Parsi) 15% Indian Religion: For Indians :-Islam. Sunnis are in majority. About 30% are Shias.
Indian Population: 5, 79,000 Income Profile: Age/sex Profile: Oil and oil-related products 0-14 years: 25.8% (male 348,816/female 321,565) 15-64 years: 72.2% (male 1,153,433/female 720,392) 65 years and over: 2% (male 25,443/female 25,979) (2011 est.) Language: Kuwait's official language is Arabic, and English is the second language.
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Petroleum accounts for nearly half of GDP, 90% of export revenues, and 5% of government income. Export of oil marked the beginning of the new era in which oil sector began to play a key role in the growth of National economy.
Kuwait has limited arable land, which limits the agricultural development. Fisheries serves as the major food source locally available. Kuwait is a great importer of food imports.
Industry plays an important role in economic development in Kuwait as it supplies goods and services to the nation.
The government is playing an important role in encouraging the expansion of industry by giving loans, providing infrastructure facilities and by supporting the newly established industries.
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Kuwait tax planning services: - (corporate and personal tax). We advise clients on latest corporate and income tax rates in Kuwait, and assist our clients to prepare and submit Kuwait tax returns. Healy Consultants' Kuwait tax planning services include advice on Kuwait company formation, and this is one of our core Kuwait tax planning services. The correct corporate structure is essential to ensure international business is conducted tax-efficiently and legitimately when starting a business in Kuwait. International tax planning :- (tax minimising & wealth managment). Keeping abreast of international tax legislation is at the heart of a successful tax minimisation strategy. Healy Consultants' tax experts keep clients informed of regulatory changes in Kuwait before they can have any negative impact, and is therefore one of our most valuable Kuwait tax planning services. Additionally, our Kuwait wealth management services can legally help clients minimise international tax liabilities. Companies incorporated in jurisdictions such as Kuwait pay no tax on revenues sourced outside the country. Many countries have also signed double taxation treaties with other countries to prevent taxes levied twice on the same income, profit, capital gains or inheritance. Our Kuwait wealth management services also take into account confidentiality and privacy concerns. Tax Year: Tax year is the calendar year.
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Approximately 300 associations exist within the Indian community in Kuwait, representing a variety of regional, professional and cultural interests. Of these, 133 Associations are presently registered with the Embassy. Cultural events are organised regularly by these associations through the year, to which leading Indian artistes are often invited.
There are 17 Indian Schools in Kuwait affiliated to the Central Board of Secondary Education, New Delhi.
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4.3.10FINANCIAL SERVICES
Overview The banking system in Kuwait consists of the Central Bank of Kuwait, ten domestic banks and five branches of foreign banks (HSBC Bank Middle East, BNP Paribas, Citibank, the National Bank of Abu Dhabi and Bank of Bahrain and Kuwait). In addition to the 13 commercial banks, there are two specialized banks in Kuwait, the Industrial Bank of Kuwait and Kuwait Real Estate Bank.
The Kuwait Finance House and Boubyan Bank are the only licensed deposit-taking institutions offering a full range of Islamic banking products. In terms of both assets and capital, the market is dominated by the National Bank of Kuwait. The National Bank of Kuwait has the most extensive international banking presence, with subsidiaries and branch offices in Bahrain, Iran, Jordan, Lebanon, London, New York, Paris, Qatar, Geneva, Saudi Arabia, Singapore, Thailand and Vietnam, and acquired Credit Bank of Iraq in May 2005. Despite the governments effort to divest its ownership in the banking sector, a number of local banks continue to have substantial government ownership. At present there are five branches of different foreign banks operating in Kuwait and foreign investment in local banks is limited. The emergence of foreign banks and the acquisition by Bahrains Ahli-United Bank of a 75% stake in the Bank of Kuwait & the Middle East appear to mark a move towards greater internationalization of the Kuwaiti banking sector.
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Provides retail banking, corporate banking (loans, letters of credit, payment services), treasury & investment services (foreign exchange & interest rates services & advice); has a retail banking network of 13 branches in Kuwait, and one in Dubai
Treasury
International
Cards
Trading and Commercial Unit Contracting unit Services Unit SME unit
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Bank offering personal banking, corporate banking, Tijari funds, investment services etc; operates the second largest domestic network comprising 48 branches
Personal Banking
Corporate Banking
Checking Account
Online Banking
Investment Fund
Deposit Rates
Trade Finance
India Fund
India Fund
Fund Objective To achieve superior returns over the medium to longer term horizon.
Fund Strategy The Fund are invested its assets in indian equity markets Available surplus cash is invested in all type of liquid Money Market instruments.
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Fund Description Open-ended Fund. Life of the Fund is 10 years. Fund's capital will be in the range of KD 5 Million to KD 100 Million. Minimum subscription is 500 Units (and in multiples of 100 units thereafter).
Subscription / Redemption Weekly Subscription; applications can be submitted up to Monday (NAV Day) not later than 1 PM. Redemption is available twice a month. (on 2nd and 4th Monday). Redemption applications must be submitted 7 working days prior to prescribed day.
Fee Subscription fees : 1.00% Redemption fees : 0.25% Management fees : 1.50% Custody fees : 0.10%
Client Assurance CBK Capital will maintain a minimum 5% investment in the Fund at all times.
Target Clients The Fund is open to all Kuwaiti nationals, Expatriates,Corporations and Institutions.
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Safat-headquartered bank; activities include retail banking, corporate banking, treasury & investment management and international banking; has branches in Hawalli, Al-Hajra, Ahmadi, Farwaniya, Mubarak Al-Kabeer etc
Personal Banking
Priority Banking
Business Banking
Accounts Credit cards Loans Saving and In vestment Day and Night Services
Commercial bank; services offered include retail banking, corporate finance, project finance, underwriting, initial public offerings, advisory and financing services for BOT projects etc
Bank jointly set up in 1976 by Jordianian, Kuwaiti and other Arab investors; has branches in Jordan, Algiers, Cyprus and Nablus; offers individual and corporate banking, and treasury services
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EXECUTIVE SUMMARY
It is well evident that work experience is an indispensable part of every professional course. In the same manner practical training is must for each and every individual who is undergoing with management course. Without the practical exposure one cannot consider himself or herself as a qualified capable manager. During the project period student can learn through his own experience, the real situation of market and corporate world and to put his theoretical knowledge into practice. Hence to fulfill the requirement, we have completed our Two Months Internship in Motilal Oswal Securities Ltd. on the topic Awareness about E-trading Platform in financial market, given to us by our company guide.
Being new to the Stock Market, we have engrossed fully into the sector where we were told to understand the basic of stock market, the effect of recession on this sector, also we were told to analyze the market, that people prefers online trading and also to analyze their investment pattern, which would be helpful for the company to find a suitable target population.
We were also told to make calls and generate the investors for the company. Some time we have to extract the information from our sources because no one is there waiting for you its actually you, which have to make things happen in your favor. Every day have its own experience and a short-term goal. So after coming in corporate world as a fresher we realized that here no one is free to spoon feed you the realities of corporate world, so we learn this lines that let the dreams of today determine the opportunities of tomorrow and we inculcated the same positive attitude in to us so that we would work there effectively and efficiently.
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Chapter 5
110 111
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6.1 6.2
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Turnover in the equity derivatives market jumped 60.3% to 176.6 trillion in FY10. NSE remained the dominant exchange with more than 99% share in equity derivatives turnover. The NSEs average daily turnover increased significantly by 59.1% y-o-y to 720.97 bn during the fiscal.
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Improvement in cash and equity derivatives turnover of the BSE and NSE in FY10 translated into healthy income growth of 20.8% to 54,983 mn for the sample broking companies. Large companies constituted 64.7% of the overall income while mid-size and small ones accounted for 26.8% and 8.5% respectively. Three financial services segment (fund-based services, fee-based services and treasury operations) are the key sources of operational income for the sample broking companies. Fee-based services, including broking services, contributed to 83.8% of these companies income. Overall fee-based services of the sample broking companies grew by a healthy 31.8% to 46,064.4 mn during the fiscal. On the other hand, income from fund-based services (10.4% share) and treasury operations (4.2% share) declined 15.5% and 0.3% respectively.
Growth in total income of broking companies was largely led by income from broking services, whose share in total income increased from 66.4% in FY09 to 74.9% in FY10. Large companies, which have a much more diversified business compared with mid-size and small broking firms, generated 72.9% of total income through broking in FY10. Aggregate broking income of these companies grew 34.1% y-o-y to 25,934.2 mn during the fiscal. Mid-size broking companies generated the highest proportion (78.6%) of income through broking during
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The investment break-up of broking companies reveals that substantial proportion of their investments is in equity shares and mutual funds. Large broking companies invested almost 75% of their total investments ( 25,122.9 mn) in equity shares during FY10. The book value of
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Broking activities are emerging in a number of cities other than the main ones and the metros. Backed by the growing broking culture across the country and the onset of IT has enabled many equity broking firms to broaden their network across the country. Almost 34% of the terminals in the sample are based in the Western region where Mumbai holds maximum representation, followed by Ahmedabad at 11%. In the southern region, Chennai, Hyderabad and Bengaluru account for 5% of the terminals, whereas in the North, Delhi has maximum share at 17%, followed by Kolkata at 11% in the eastern region. Other cities such as Vadodara, Jaipur and Pune have 3%, 4% and 5% shares respectively.
http://www.dnb.co.in/EquityBroking2010/Equity_Broking_Industry.asp
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Name Terminals Sub Brokers No. of Employees No. of Branches Name Terminals Sub Brokers No. of Employees No. of Branches Name Terminals Sub Brokers
IL&FS Investmart Limited 1644 NA 1900 294 Motilal Oswal Securities 7923 890 2193 63 Reliance Money 2428 1494
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 2.1 Motilal Oswal Products and Services
Today Motilal Oswal is a well diversified financial services firm offering a range of financial products and services such as
Equity Derivatives Online Trading Commodities Mutual Funds Distribution IPOs Depository Services Portfolio Management Services Wealth Management
EQUITY
In keeping with its tradition of personalized service, Motilal Oswal Securities Limited
provides Customized Equity Advisory Group to clients based on their profile. Equity Research is an inherent strength of MOS. Converting that research to advice is the main function of Equity Advisory. Investors are presented with well researched opportunities in companies which will grow in both market perceived value and growth. Alongside, the trading fraternity is catered to with ideas induced by Technical analysis and news flow analysis. The investment ideas identified by the research team are presented and communicated with conviction to our clients by our advisory team.
Our advisory team has highly trained equity professionals, who act as your Equity
Advisor. MOS Equity Advisor proactively helps you take informed equity investment decisions and build a healthy portfolio giving the best fit to your investment and trading needs.
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MOS Equity Advisors are equipped with the knowledge and prudence making sure that
every rupee deployed works the hardest it can. Your advisors play the part of a guide ushering you on a swift wealth creation ride. The sheer strength of our advisory creates synergy for seamless flow of Investment support.
To improve the overall experience while the clients interact with our advisors, we have
implemented a contact centre solution, Drishti, in our dealing room. Among other benefits, this solution helps advisors to manage their client base more efficiently and effectively. The system provides a single number contact to all our clients as well as a single click auto-dial for advisors without having to remember their contact details.
Online Motilal Oswal Investment Services offers you a state-of-the-art Online Trading
Why F&O:
Since derivatives instrument provide good leverage opportunity, it is a great tool for speculation. Leverage is a double edge sword for which one requires an equity advisor. Our advisors will also help you with various strategies like Bull Spread, Bear Spread, Cover call writing, hedging strategies etc. This is to help you to make better trading returns. The
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Easy to use interface for first time investors Trade from any internet connected PC Multiple scrips with refresh option (static)
Screenshot is for illustrative purpose only Feature-rich Platform Screenshot is for illustrative purpose only Single window order placement with instant confirmation Trade from any internet connected PC Tick-by-Tick market watch (BSE/NSE/F&O)Shortcut keys for faster access
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Single window order placement with instant confirmation Tick-by-Tick market watch (BSE/NSE/F&O) Shortcut keys for faster access
Mobile
Live streaming quotes Directly buy/sell from market watch Modify/Cancel facility for pending orders Access live advice from Motilal Oswal Instant access to Top Gainers, Losers & Traded Value along with indices Market Depth of scrip selected Synchronized position whether order/trade done from Mobile/Web/Desktop/Call N Trade
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COMMODITIES
Ever since the dawn of civilization commodities trading have become an integral part in the lives of mankind. The very reason for this lies in the fact that commodities represent the fundamental elements of utility for human beings. Over the years commodities markets have been experiencing tremendous progress, which is evident from the fact that the trade in this segment is standing as the boon for the global economy today. The promising nature of these markets has made them an attractive investment avenue for investors. Earlier investors invested in those companies, which specialized in the production of commodities. This accounted for the indirect investments in commodity assets.
WHY COMMODITIES
The commodity based products offer a huge array of benefits that include offering risk-return trade-offs to investors, providing information on market trends and assisting in framing asset allocation strategies. Commodity investments are always considered as defensive because during the times of inflation, which adversely affects the performance of stocks and bonds, commodities provide a defense to investors, maintaining the performance of their portfolios. Commodity markets have a huge potential in the Indian context particularly because of the agribased economy. With the government's initiative for agricultural liberalization, commodities' trading in India has gained increased momentum in activities. To increase the efficiency of the markets the Forward Markets Commission (FMC), the governing body of
commodities trading in India has taken several initiatives for the establishment of national level multi-commodity exchanges in India.
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Solid Research: Client at MOCBPL gets access to the best of research in the form of Daily Fundamental and Technical Research Reports on highly traded commodities. One Stop Shop: MOCBPL provides end-to-end advice for all the commodities to all our prestigious individual investors. Privileged customers also get exclusive & customized advice.
Dual Membership: MOCBPL has membership to MCX and NCDEX exchanges which gives the clients to take advantage of the dual exchange trading facility provided by us.
Personalized
Service: We
provide
personalized
service
through dedicated
relationship managers for quick and efficient execution of transactions and for regular follow ups.
MUTUAL FUNDS
Investments can seem complicated and mystical. Since all the traditional investment avenues like bank deposits, RBI Bonds, NSC, KVP etc are becoming unattractive with the interest rate falling continuously, one needs to look for other investments alternatives. Mutual funds offer the ideal platform to participate in the Equity & Debt market indirectly through professional management.
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Mutual funds are becoming the most popular investment vehicles offering various kinds of schemes with different investment objectives. Investments through Mutual funds are one of the safest, easiest and convenient ways of making successful investments. The investments are in congruence to the laid down investment objectives securing the goals & objectives of the unit holders.
At Motilal Oswal Securities Ltd, we understand the importance of financial goals of our privileged clients and provide you comprehensive solutions to all your financial needs. Through our tailor made portfolios, we serve your needs better and help you make informed investment decisions. Our dedicated Mutual fund desk gives you Solid advice backed services thus giving you the edge that you always wanted. At Motilal Oswal, we offer two distinct modes of investment to suit your specific needs. The client may choose to apply online for Mutual Funds or call up one of our relationship managers to help you place orders in Mutual Fund schemes. Mentioned below is a brief description of the services that we offer to our clients: Need based advisory, fully backed with solid research. Dedicated Mutual fund advisors to understand your needs and help you build a tailor made portfolio. Monthly review of portfolios. Monthly Fact-sheet covering our analysis of various funds. Knowledge sharing through educational seminars and workshops
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In a book building public issue the bids are received at different price levels and the demand for the issue is built up over a period of time. Depending upon
the bids received at different price levels the issue price is ascertained. In a fixed price issue the issue price is pre ascertained by the issuer. Book Building means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicit and built up and the price of the security is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover the price for securities. In case of a fixed price issue the issue price is fixed.
ONLINE IPO
MOSL facilitates the IPO application for all of its clients through online platform. Using the Online IPO service, an existing can apply for the IPO using the online facility.
Source: https://onlinetrade1.motilaloswal.com/
DEPOSITORY SERVICES
In the times of T+2 having a de-mat account linked to your trading account becomes really convenient. The non-trading clients can also avail of MODES.
Today MODES is available at all business locations of Motilal Oswal. In terms of number of accounts MODES is the second biggest Depository Participant in CDSL with over 150,000 accounts. The trust they have in Motilal Oswal is reflected by their cumulative holding in MODES worth over Rs. 3400 crores.
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Holder of a MODES account receives regular account reports and an efficient service at all times. Clients having holdings over Rs. 10 lakhs receive special SMS service. They get recommendations on their holdings based on Motilal Oswal Research rated the "Most Independent Research - Local Brokerage" by Asia Money Brokers Poll 2006.
BENEFITS
As an investor you will enjoy many benefits if you buy and sell shares in the depository mode. The following are some of the benefits you will enjoy: No bad deliveries No risk of loss, mutilation or theft of share certificates No stamp duty for transfer of shares Reduced paper work Fast settlement cycles Low interest rates on loans granted against pledge of dematerialized securities by banks Low margin on securities pledged with banks Increase in liquidity of your securities because of faster transfer and registration of securities in your account Instant disbursement of non-cash benefits like bonus and rights into your account
Regular account status updates available from MODES at any point of time.
Motilal Oswal Asset Management Company (MOAMC) is part of the Motilal Oswal Group and a 100% subsidiary of Motilal Oswal Securities Ltd. The Board of Directors of MOAMC comprises of eminent personalities with varied experience including Mr. Raamdeo Agarwal, who is the co-founder of the Group. Mr. Nitin Rakesh, CEO, has rich and varied experience of more than 15 years. His focus has been on investment management and operations and has worked in multiple areas including asset management, transaction processing, offshore fund structuring and venture capital.
The PMS business was under MOSL since inception in 2003 till October 2010, when the PMS business was moved to the AMC with the objective of consolidating all Assets Based and Investment Management Based businesses under one legal entity.
At Motilal Oswal Asset Management Company, we believe in creating superior investment products that revolve around sound investing principles and leverage on the engrained principles of Knowledge First and Innovation. Our endeavour is to constantly evolve and develop investment solutions that embrace our two core philosophies of being Focused & Disciplined.
We are one of the leading PMS Service Providers, with Assets under Management of Rs.13 billion (as on December 2010) with a customer base of 5,450 and a 4 member fund team managing funds across a number of strategies as given below. Our core principles are value based investing aimed at providing long term wealth creation for investors.
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Professional Management:
The service offers professional management of your equity investments with an aim to deliver consistent return with an eye on risk.
Risk Control:
Well defined investment philosophy & strategy acts as a guiding principle in defining the investment universe. We have a very robust portfolio management software that enables the entire construction, monitoring and the risk management processes.
Convenience:
Our Portfolio Management Service relieves you from all the administrative hassles of your investments. We provide periodic reports on the performance and other aspects of your investments.
Transparency:
You will get account statements and performance reports on a monthly basis. Thats not all; web access will enable you to track all information relating to your investment on daily basis. A password protected web login, will enable your to access details your investment on click of a button. The following portfolio reports are accessible online: Performance Statements Portfolio Holding Reports Transactions Statements Capital Gain/Loss Statements
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WEALTH MANAGEMENT
Motilal Oswal Securities ltd added Life Insurance during April 2008 to our Wealth Management Portfolio thereby filling the gap in our basket of the products and thus providing comprehensive financial planning to our clients covering not all wealth creation solutions, but also wealth protection through proper risk management process. With complete emphasis on the solution providing, we approach our clients, not merely with insurance product per se, but with module (life profiler) to help our clients with objective based planning for life, identify and understand the various risk attached to his/her life and later advising you with appropriate customized solution. MOSL through our insurance partners offers insurance coverage and wealth creation opportunities to meet your different financial goals during the various stages of your life. The plans offer you the control to manage your protection and investment in one account. It is designed to remove your worries and making you secure in the knowledge that you and your loved ones are protected against any untoward events.
Life is about living it to the fullest. About reaching for a higher goal. At different stages of your life you have different goals; whether it is owning the home you've always dreamed of, giving your children the best or just having the financial freedom to enjoy your golden years.
Financial planning for individual, family and business wealth creation and management needs. These are provided to customers through our Wealth Management service called Purple.
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Although the project aims at making an in-depth market research but there are some practical limitations regarding the methodology followed & the overall procedure. These can be summed up under the following points -- Our survey was restricted only for the people of Satellite area. The sample taken for this research might not represent the whole population. Since the survey is conducted exclusively on personal view of the respondent may make lead to some biasness in the results. Some people do not want to give correct details required in the questionnaire. It is also possible that some people might have given false or misleading information. Many people doubted the fact that the information given by them would be kept strictly confidential. Many people gave unauthentic information to hide their ignorance.
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 4.1 Methodology used for the project
This project followed a simple & systematic methodology.
: Introduction of Motilal Oswal by our company guide. : Questionnaire Designing : Location Details : Data collection : Tele calling : Final report preparation : Final report submission.
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Annual Income
Frequency Valid < 100000 100000 to 300000 300000 to 500000 > 500000 Total 98 135 113 54 400
Occupation
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Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio N of Valid Cases 34.399
a
Df 4 4
35.013 400
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 12.73.
Here we try to find the relation between Different age group respondents and their investment pattern. From the graph we can see, the younger age group prefer Online trading, as they are upgraded with new technologies and internet. In 26 to 30 and 31 to 35, Age group, only 30% of respondents prefer for online trading. No doubt this ratio will increase to more than 50% within 5 years, as technology has paved the growth path in India. Respondents above 40 age group they mainly do offline trading.
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Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Continuity Correctionb Likelihood Ratio Fisher's Exact Test N of Valid Cases 400 1.978
a
Df 1 1 1
1.522 2.084
.172
.107
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 14.07. b. Computed only for a 2x2 table
In our survey, we get only 42 females respondents and 358 males, 35% of total respondent of male prefer to do online trading and rest do offline trading. These results indicate that there is no significant relationship between the investment pattern and gender (chi-square with one degree of freedom, p = 1.978, Significant assumption= 0.160).
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INDUSTRIAL INTERNSHIP PROGRAMME 2011 5.3 Relation between Education and Investment Pattern?
Ho: There is no significant relation between Education and Investment pattern. H1: There is significant relation between Education and Investment pattern.
Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 6.787a 7.808 4.314 400 df 2 2 1 sided) .034 .020 .038
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 10.39.
Here out of 400 respondents, which are categorized based on their education and their investment decision? In column of Undergraduate, only 4 people prefer online trading and 27 prefers offline trading. Same as in Graduates 68 prefers online trading and 133 prefers offline trading. Lastly in Post Graduates also 62 prefers online trading and 106 prefers offline trading. Overall we can say that only 133 people prefer online trading and 265 people prefers offline trading.
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Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 23.965
a
df 3 3 1
a. 2 cells (25.0%) have expected count less than 5. The minimum expected count is .34.
Here from 400 respondents, Students which are of young age prefer to do online trading. While many our client falls in Business and Service class.
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The chi square table show that the Ho (null hypothesis) is rejected that is there is significant relation between Occupation and Investment patter.
There is no doubt that respondents are fully aware about fixed deposits, irrespective of age group.
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 8.55.
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The respondents of younger age group are of combined opinion about their awareness level. Other than that all other groups are adequately aware about the PMS.
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The above graphs of awareness levels of all age group are self explanatory. From the bird view point, we can say that the awareness level of investment avenues is satisfactory in survey of our respondents.
Here there are people who are classified in different income groups are as follows: 24.5% respondents- less than 1,00,000 33.8% respondents- 1,00,000-3,00,000 28.3% respondents- 3,00,000-5,00,000 13.5% respondents- more than 5,00,000
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Here respondents are not so much influenced by advisors to invest; only 18.5% people are influenced and 81.5% are not influenced by them for the same.
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Influencing factor Television Cumulative Frequency Valid Not Selected Selected Total 286 114 400 Percent 71.5 28.5 100.0 Valid Percent 71.5 28.5 100.0 Percent 71.5 100.0
Here 28.5% respondents are influenced by television and 71.5% people are not influenced by the same.
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Influencing factor word of mouth Cumulative Frequency Valid Not Selected Selected Total 345 55 400 Percent 86.3 13.8 100.0 Valid Percent 86.3 13.8 100.0 Percent 86.3 100.0
Here only 13.8% respondents are influenced by word of mouth and 86.3% are not influenced by the same.
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Influencing factor Friends and Family Cumulative Frequency Valid Not Selected Selected Total 81 319 400 Percent 20.3 79.8 100.0 Valid Percent 20.3 79.8 100.0 Percent 20.3 100.0
Here 79.8%respondents are more influenced by the decision of friends and family, 20.3% are not influenced by the same.
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any other influencing factor Cumulative Frequency Valid Not Selected Capital Mkt Magazine Own Total 366 1 33 400 Percent 91.5 .3 8.3 100.0 Valid Percent 91.5 .3 8.3 100.0 Percent 91.5 91.8 100.0
Here in others option 8.3%respondents do investment by their own knowledge and 3% respondents are influenced by Capital Market Magazine.
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Test Statisticsa N Chi-square Df Asymp. Sig. a. Friedman Test 400 1879.692 8 .000
36 to 40 > 40 Total
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
Rank of Post
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
Rank of Shares
dime ns ion 1
21 to 25 26 to 30 31 to 35 36 to 40
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38 400 99 94 119 50 38 400 99 94 119 50 38 400 99 94 119 50 38 400 99 94 119 50 38 400 96 92 116 48 34 386
198.93
36 to 40 > 40 Total
Rank of NSE
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
Rank of PPF
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
Rank of others
21 to 25 26 to 30 31 to 35
dime ns ion 1
36 to 40 > 40 Total
Test Statisticsa,b
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Here there is an assumption Lower the mean rank means higher rank is given by the respondent to that product. The overall Preferences for the product as per the rank given by respondents are as below: Ranks 1 2 3 4 5 6 7 8 Products Fixed Deposits Shares IPOs PPF Post Mutual Funds PMs NSE
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CHAPTER: 6 RECOMMENDATIONS
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Our most of respondents falls in age group range from 21-35 i.e. 78% of total respondents. The respondents of 26-35 age groups are most active in trading and investment, but they mostly prefer to do offline trading as they are less familiar with the latest technology.
On the other hand age group of 21-25 do prefer more online trading as they are fully familiar with the technology. While respondent above 40 are inactive with technology.
Here Motilal Oswal should focus on 21-35 age groups also it should provide aid to 26-35 age groups to go through online training.
In present days people prefer self investment decision but days are not far that demand of Wealth advisor will arise. Therefore, to grab upcoming market Motilal Oswal should make regular advertisements of advisory counseling which will help them in future and also they should focus on branding.
Looking to all above, we can say that, the Shares, IPOs and Mutual Funds are upcoming investment avenue and ready to grab the financial market. To make easy trading through online aid or training is to be provided to clients and online trading procedure should make easy to operate.
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As internet facility is gauging its space in each and every field. Why the Share trading get behind? Now days, almost all share trading firms have entered into Online Trading of Shares. Online facility of share trading is new beginning which is to be learned and trained to clients. We were assigned the work of Market Survey and we had to provide information of products and facility provided by MO, we were given the training of Online Terminal. There are two types of trading takes place (1) Offline trading and (2) Online Trading. Offline Trading is also called as Call and Trade. While online trading is done by clients from their personal terminal. Online Terminal It is also known as LITE. Further it is divided into 2 types: (i) (ii) Desktop Mobile
Desktop - Online terminal: Terminal which operates in computer and client can trade through its computer with its login ID. It works best on high speed internet connections. And it is best suitable for investors and traders who want live market watch and faster execution.
Mobile Online Terminal: We get online information of shares price and trading facility on mobile phone with assess of internet facility. It is useful for people who do not want to sit on computer. But the drawback is it has lower speed as compare to desktop speed.
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ANNEXURE 1
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(We are interns of Motilal Oswal, doing survey to know the market penetration level about ETrading.) 1. Name: ________________________________________.
Gender:
Male
Female
E-mail ID: ___________________________________. Contact No: ______________________. Age: Occupation: 21 to 25 Student 26 to 30 31 to 35 Business Service 36 to 40 above 40
Others please
specify__________________. Education: Annual Income: Less than 1,00,000 3,00,000 to 5,00,000 1,00,000 to 3,00,000 Above 5,00,000 Under Graduate Graduate Post Graduate
2. How much percent do you save from your annual income? Less than 5% 5% to 10% 10% to 15% Above 15%
3. How much percent of return do you expect from your investment? Below 8% 8% to 12% 12% to 15% Above 15%
4. Rank to various avenues of investment? (1 highest & 8 -lowest ) Fixed deposits Shares PPF Portfolio Management Services (PMS) IPOs Mutual Funds Post NSC Others please specify__________________.
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5. How much are you aware about following avenues of investment? (Tick mark in following column)
Investment Avenues Fixed deposits Portfolio Management Services (PMS) Post Shares IPOs PPF Mutual Funds NSC
Low
Medium
High
6. Who influences your investment decision? Advisors Friends & Family Television Word of Mouth
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Websites
www.wikipedia.com www.nseindia.com www.sebi.org www.motilaloswal.com www.moneycontrol.com www.valuenotes.com www.bseindia.com
Besides this, data was also collected from the literature survey of the companys Documents and by the way of Discussions.
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