Summer Internship Project

RISK MANAGEMENT IN SHAREKHAN

Submitted in partial fulfillment of PGDM program

2012-14

Submitted by
Nupur Saitya
20/173

Company Mentor Faculty Mentor

Mr. Jaipal Singh Divya Jindal
Assistant Manager
Jhandewalan, New Delhi

Apeejay School of Management

New Delhi
July 2013

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Certificate by the student

CERTIFICATE

This is to certify that I _______________(Name of the student ) Roll No. _______________have

carried out my Summer internship in _______________(name of the organization ) in the area
____________. It is also certified that the work done by me is original with due references of
sources, and has not been submitted elsewhere for the award of any diploma or degree.

_____________________
Signature
Name of the Student

Date : _________________________
Countersigned by Faculty Mentor

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 ACKNOWLEDGEMENT

This project has been as a part of internship required during the completion of PGDM program. I
was involved with SHAREKHAN LIMITED, Jhandewalan, Karol Bagh, for 3 months, and I
come across a lot of people who put in their time and effort toward acclimatizing me to the
workings of their organizations.

I express my thanks to my company guide Mr. Jaipal Singh (Assistant Manager) , Mr. Vijay (
Senior Manager) who motivated me in all my efforts.

I would also like to thank Mrs. Divya Jindal (Professor) Mentor for supporting, guiding and
encouraging me during this project. I record my sincere thanks to her with deep gratitude.

I would also like to thanks Dr. Alok Saklani (Director of Apeejay School of Management)
provide me an opportunity to learn outside the class room. It was truly wonderful learning
experience. Last but not least, I express my gratitude to the entire staff of SHAREKHAN
LIMITED.

These past 3 months were of utmost importance as they added value towards my path of
knowledge. I would like to end this acknowledgement by thanking the customers and the people
at large with whom I have interacted during the course of my training.

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 EXECUTIVE SUMMARY

This Project named as Risk Management in Broking Firm, is carried out at Sharekhan ltd from
1st April to 31st June to analyze and understand the risk management of Stock Broking Firm
SHAREKHAN LIMITED.

Capital Market in India is an emerging market with a great potential Indian capital market has
got a strong foundation and therefore has gained a confidence of Indian investors as well as
Foreign Institutional Investors. In India there are two Stock Exchanges (National Stock
Exchange and Bombay Stock Exchange) through which securities are traded. Stock exchange is
a body formed for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities. An investor has to trade in stock market through a registered
stockbroker. A stock broker is a member of a recognized stock exchange who is permitted to do
trades on the floor of the exchange. ‘Study of Risk Management in Stock Broking Firm’ the title,
shows that the project revolves around the risks managed by Stock Brokers while handling their
Sub brokers, branches, franchisees and investors

Risk and uncertainty go together. However, risk and return have a direct relationship, higher the
risk, higher the chances of good return and vice versa. There is a growing competition between
brokerage in a post reform India. For investors is always to decide which brokerage to choose.

Research was carried out to find out how Sharekhan manage their risk .

Risk can be defined as “Possibility of suffering losses”

“The chance of something happening that will have an impact upon objectives. It is measured in
terms of consequences and likelihood”.

Risk management in a Broking Industry is a new concept in India, since it poses maximum risk
in the financial market, managing it was felt most essential by the regulatory bodies and
exchanges.

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In stock broking industry risks are high due to the volatility of the market. The risk may cause
due to its sub brokers, investor clients, branches etc. there are uncertainties about payments from
clients or from clients to sub brokers and then sub brokers to the broker. The high volatility of
the market may cause the clients or sub brokers not to make payments in specified time. Thus
brokers are always exposed to market risks, financial risks, credit risks, liquidity risk and
operational risks. To cope up with such events brokers have to collect certain amount of margins
and maintain the same with the exchange. To manage such risks Margin, Mark to Market
margin, Inspection, Insurance, is maintained.

Also, the brokers are allowed intraday turnover and gross exposure limits. Brokers
have to maintain minimum base capital and additional base capital with the exchange.
Exchanges, SEBI and NSCCL have taken steps like KYC, continuous
surveillance, mandatory audit etc. Thus, every broking firm has Risk Management department.
In Sharekhan Limited there is a surveillance department to deal with the risk management
activities.

This study suggests my own experience in Sharekhan Limited which is one of the leading
brokerage firms. Every company has to bear risk at some point of time in the organization so
Sharekhan Limited manages its risk very well. It has its own separate department for risk
management.

Through this report we were also able to understand, what our company’s (Sharekhan Limited)
positive and negative points the company’s hierarchy, its vision and mission, the product offer
my Sharekhan Limited. It provide live terminal known as trade tiger for online trading. We also
gave suggest to the company what improvement can be done for the benefits of the customers.

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 TABLE OF CONTENT

SR. PARTICULARS PAGE NO.

NO.
1. Acknowledgement 3
2. Executive Summary 4-5
3. Chapter 1 Area of Internship and Insight Gained 7-12
4. Chapter 2 Profile of the Organization 13-28
5. Chapter 3 Job Description and Functional Profile 29-32
6. Chapter 4 Learning Experience and Insight Gained 34-47
7. Chapter 5 Recommendation and Conclusion 48-52
8. Bibliography 53

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 CHAPTER 1
THE AREA OF INTERNSHIP AND LEARNING OBJECTIVE

The internship was conducted in Sharekhan from 1 April 2013 to 31 June 2013. It was a very
good experience. The internship comprises of finance training as well as marketing in which
there was the theoretical knowledge of Online Trading, and practical training for performing
online training and opening of demat account for prospective customers. The training was
provided on all products that sharekhan limited offers to the customers. It provides an exposure
of live capital market and other financial products. The training program is designed in such a
way it was easy to learn about the share market. Benefits after doing internship in sharekhan it
provided experience which can ultimately help in providing a good job opportunity. It is
important to know about the following terms:

Capital market

A capital market is a market for share, securities; where business enterprises or companies
and governments can raise long-term funds .Through capital market or security market people
who have idle resources can most efficiently transfer those recourses that have productive need
for them. Securities market provides channels for allocation of savings to investment and thereby
decouples these two activities. A Financial/capital market consists of investors (buyers of
securities), and borrowers (sellers of securities), intermediaries and regulatory bodies.

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INDIAN STOCK MARKET OVERVIEW

A stock market or equity market is a public entity for the trading of company stock or shares
and derivatives at an agreed price; these are securities listed on a stock exchange as well as those
only traded privately.

Indian Stock Market consists of more than 20 Stock Exchanges. The Bombay stock exchange
(BSE) and National stock exchange (NSE) are the two primary exchanges in India. BSE and
NSE account for about 80% of the equity volume traded in India.

Bombay Stock Exchange

BOMBAY STOCK EXCHANGE - (BSE) (Bombay Share Bazaar) The Stock Exchange,
Bombay is a stock exchange located on Dalal Street , Mumbai and Is the oldest stock exchange
in Asia . The equity market capitalization of the companies listed on the BSE
was US$1 trillion as of December 2011, making it the 6th largest stock exchange in Asia and
the 14th largest in the world . The BSE has the largest number of listed companies in the world.

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As of March 2012, there are over 5,133 listed Indian companies and over 8,196 scrip on the
stock exchange, the Bombay Stock Exchange has a significant trading volume.

NATIONAL STOCK EXCHANGE

NATIONAL STOCK EXCHANGE - (NSE) The National Stock Exchange of India was set up
by Government of India on the recommendation of Pherwani Committee in 1991. It was
incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as
a stock exchange under the Securities Contracts (Regulation) Act, 1956. The National Stock
Exchange (NSE) is a stock exchange located at Mumbai, India. It is the 16th largest stock
exchange in the world by market capitalization and largest in India by daily turnover and number
of trades, for both equities and derivative trading. NSE has a market capitalization of
around US$985 billion and over 1,646 listings as of December 2011. Though a number of other
exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock
exchanges in India and between them are responsible for the vast majority of share transactions.
The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY an index of fifty major
stocks weighted by market capitalization.

PURPOSE - Stock markets basic role is to provide a platform for the masses of the country to
invest their savings and also as a source of funds for various organizations and institutions. It
provides an opportunity for any person to become a part-owner of the company by buying the
company’s shares. These shares can be sold and exchanged as well as used as collateral in
certain cases. One can deal in a variety of financial instruments in a stock market such as Equity

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which has already been explained, Future’s, Retail Debt, Wholesale Debt, Currency Future’s,
Derivatives, and Bonds etc. Trading can only be performed by a registered broker of the
respective stock one wants to deal in or through a broker.

Stocks

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 the security of the creditors in the business since it
cannot be withdraw 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. Buying a stock for the long
term means that you want to own part of a company and you think that in the future the company
will be profitable. If you buy stock in a company and the company perform well then the price of
the stock will rise and vice versa.

Stock Market

A stock market or equity market is a public market (a loose network of economic transactions,
not a physical facility or discrete entity) for the trading of company stock and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The size of the world stock market was estimated at about$36.6 trillion US at the
beginning of October 2008. The largest stock market in the United States, by market cap is the
New York Stock Exchange, NYSE, and while in Canada, it is the Toronto Stock Exchange. The
two main Stock Exchange of India is National Stock Exchange ( NSE) and Bombay Stock
Exchange (BSE).

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 LITERATURE REVIEW

This project is related to the Sharekhan Limited and Risk Management in Sharekhan. Sharekhan
is the stock broking firm of SSKI Group which is still running successfully. This broking firm
offers a wide range of products to its customers like equity and derivative trading, online trading,
Dial and trade, portfolio management services, IPO online, mutual funds and insurance.
The company provides the software which is known as Trade Tiger for doing online trading.
Trade Tiger is software of Sharekhan which is given to customers for trading. It enables its user

Online trading in equity and derivatives

Dial-n- Trade

Cash transfer

Order and trade confirmation

Live Terminal

Every company has to bear risk and to reduce the companies have risk management department.
Sharekhan also have risk management department to reduce the risk of its clients. The risk
management department performs the following;

 To maintain the margin of the customers

 Mark to Market margin is calculated at the end of the day on all open positions by
comparing transaction price with the closing price of the share for the day.
 Hedging
 Doing averaging in case of loss is more
 Taking stoploss to minimize the risk

Sharekhan provide online trading facility various products and services to the customers which
help them do trade easily. Sharekhan also knows how to minimize the risk of its customers that’s
why sharekhan have over 3 lacks customers all over the country.

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Learning Objectives

 To study about the capital market.

 To gain practical knowledge of the market.

 To study about the background of the company.

 To study the organization structure and the financial position of the company.

 To study the products and services of the company.

 To study about the procedure adapted to open demat account.

 To study about the swot analysis and competitive analysis of the company

 To understand the concept and types of risks

 To find out the risk involved in stock broking firm

 To study the measures to reduce the risk

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 CHAPTER-2
PROFILE OF THE ORGANISAGTION

PROFILE OF THE COMPANY

The name of the company is Sharekhan Limited. It was established in1925. It headquarters is
located in sharekhan SSKIA-206 Phoenix House Phoenix Mills Compound lower band Mumbai-
Maharashtra India-400013. The nature of business is to provide services to the customers. The
services are as follows;

Depository services

Online Services

Technical research

Its number of employees is over 3500. Website is www.sharekhan.com and slogan is “YOUR
GUIDE TO FINANCIAL JUNGLE.”

Sharekhan is one of the leading retail brokerage of SSKI Group which was running sucessfully
since 1922 in the country. It is the retail broking arm of the Mumbai-based SSKI Group, which
has over eight decades of experience in the stock broking business. Sharekhan offers its
customers a wide range of equity related services including trade execution on BSE, NSE,
Derivatives, depository services, online trading, investment advice etc.

The firm’s online trading and investment site - www.sharekhan.com - was launched on
Feb 8, 2000. The site gives access to superior content and transaction facility to retail customers
across the country. Known for its jargon-free, investor friendly language and high quality
research, the site has a registered base of over one lakh customers. The number of trading
members currently stands at over 3 Lacs. While online trading currently accounts for just over 2

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per cent of the daily trading in stocks in India, Sharekhan alone accounts for 32 per cent of the
volumes traded online.

The content-rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best-of-breed technology and superior
market information. The objective has been to let customers make informed decisionsand to
simplify the process of investing in stocks.

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable application
that emulates the broker terminals along with host of other information relevant to the Day
Traders. This was for the first time that a net-based trading station of this caliber was offered to
the traders. In the last six months SpeedTrade has become a de facto standard for the Day
Trading community over the net.

Sharekhan’s ground network includes over 588 centres in 148 cities in India, of which 32
are fully-owned branches.

Sharekhan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun Microsystems,
Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial
Technologies India Ltd, Spider Software Pvt Ltd. to build its trading engine and content. The
Morakhiya family holds a majority stake in the company. HSBC, Intel & Carlyle are the other
investors.

With a legacy of more than 80 years in the stock markets, the SSKI group ventured into
institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading
players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of
the market in each of these segments. SSKI’s institutional broking arm accounts for 7% of the

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market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional
portfolio investment in the country. It has 60 institutional clients spread over India, Far East, UK
and US. Foreign Institutional Investors generate about 65% of the organization’s revenue, with a
daily turnover of over US$ 2 million. The Corporate Finance section has a list of very prestigious
clients and has many ‘firsts’ to its credit, in terms of the size of deal, sector tapped etc. The group
has placed over US$ 1 billion in private equity deals. Some of the clients include BPL Cellular
Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shopper’s Stop.

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VISION AND MISSION

VISION

To be the best retail broking brand in the retail business of stock marketing

MISSION

To educate and empower the individual investor to make better investment better decision
through the quality advice and superior services

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 SHAREKHAN SERVICES

EQUITIES & DERIVATIVES

PORTFOLIO MANAGEMENT

DEPOSITORY SERVICES

COMMODITIES RESEARCH

IPO, MUTUAL FUNDS

Source- Sharekhan’s website

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 ORGANIZATIONAL STRUCTURE

CVC Group(Citi Venture Capital)

Director CEO Director

(Jaipdeep Arora) (Tarun Shah) (Shankar Valiya)

Online business head

(Kalyanraman)

AVP-Mumbai Online

(Sanjay Batale)

Territory Manager

Assistant Manager

Sales Executive

Trainees

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PRODUCTS & SERVICES OFFERED BY SHAREKHAN

Sharekhan’s equity related services include trade execution on BSE, NSE, Derivatives, commodities,
depository services, online trading and investment advice. Trading is available in BSE and NSE. Along
with Sharekhan.com website, Sharekhan has around 510 offices (share shops) in 170 cities around the
country.

 Equity & Derivatives trading

 Fundamental research
 Online services
 Share shops
 Commodities trading
 Portfolio management services (PMS)
 Dial- in trade
 Mutual fund advisory
 Insurance

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Source- Sharekhan’s website

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Documents Required

 As per KYC guidelines there needs to be photo identity and address proof of the
customer. The required documents are mentioned below:-
Identity proof Residence/ Address Proof
 Passport Passport
 Pan card Voter’s ID
 Driving License Driving License(valid)
 Voter’s ID Bank statement(latest)
 MAPIN UIN Card Telephone Bill(latest)
Electricity Bill (latest)
Ration Card
Flat Maintenance Bill (latest)
Insurance Policy (latest)
Leave-License/Purchase
Agreement (latest)

 2 Photographs
 A copy of Pan Card
 Two cheques drawn in favor of Sharekhan Limited, one for the account opening fees and
the other for the margin money( the minimum margin money is RS 5000/-)
 A cancelled cheque should be given by the client if he provides Saving Bank Statement
as a proof for correspondence address.

Charge structure
Fee structure for general individual:-

CHARGE CLASSIC ACCOUNT SPEED TRADE

ACCOUNT
Account opening Rs 750/- Rs 1000/-
Brokerage Intraday- 0.10% Intraday- 0.10%
Delivery- 0.50% Delivery-0.50%

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REASONS TO CHOOSE SHAREKHAN LIMITED

Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia
Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award.
Ever since it launched Sharekhan as its retail broking division in February 2000, it has been
providing institutuonal-level research and broking services to individual invcestors.

Technology
With our online trading account you can buy and sell shares in an instant from any PC with an
internet connection. You will get access to our powerful online trading tools that will help you
take complete control over your investment in shares.

Accessibility
Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION servies for investors.
These services are accessible through our centres across the country (Over 588 locations in 148
cities) over the internet (through the website www.Sharekhan.com) as well as over the Voice
Tool.

Knowledge
In a business where the right information at the right time can translate into direct profits, you get
access to a wide range of information on our content-rich portal, Sharekhan. You will also get a
useful set of knowledge-based tools that will empower you to take informed decisions.

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Convenience
You can call our Dial-N-Trade number to get investment advice and execute your transactions.
We have a dedicated call-centre to provide this service via a Toll Free Number 1800-22-7500 &
1800-22-7050 from anywhere in India.

Customer Service

Our customer service team will assist you for any help that you need relating to transactions,
billing, Demat and other queries. Our customer service can be contracted via a toll-free number,
email or live chat on www.Sharekhan.com.

Investment Advice

Sharekhan has dedicated research teams of more than 30 people for fundamental and technical
researchs. Our analysts constantly track the pulse of the market and provide timely investment
advice to you in the form of daily research emails, online chat, printed reports and SMS on your
mobile phone.

Benefits

 Free Depository A/c

 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual purchases.
 24x7 Voice Tool acess to your trading account.
 Personalised Price and Account Alerts delivered instantly to your Cell Phone & E-mail
address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Anytime Ordering.

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COMPETITIVE ANALYSIS

Follower:

 The followers are those who just blindly follows other players who are leaders and chalengers.
 The players like 5 Paisa, Motilal Oswal, HDFC securities, Kotak street are the followers.

Leaders:

 ICICI Direct is a leader in the online account which is having 1,24,000 accounts in the country.
 While in offline account sharekhanis leading with 64000 offline accounts.

Nicher:

 ICICI Direct.com and Kotakstreet.com are the two stock brocking houses which are focusing
only on online investors.

Chalenger:

 Sharekhan, Kotakstreet and India bulls come under this head.

 Sharekhan challenges competitors by providing quality services and research based advice.
 Indiabulls is also challenging with low brokerage rates and class one services.

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 SWOT ANALYSIS

STRENGTH

 It is a pioneer in online trading with an over of Rs 400 corers and more than 800 people
working in the organization.
 SSKI the parent company of sharekhan has more than eight decades of trust and
credibility in the Indian market.
 Sharekhan provides multi-channel access to all its customers through a strong online
presence with www.sharekhan.com 250 share shops in 130 cities and a call centre based
Dial-n-Trade facility.
 Easier access to the customer due to braded share shops in 120 cities.

WEAKNESS
 Localized presence due to insufficient investments for country wide expansion
 Less emphasis on customer retention
 Promotional activities conducted by the company are not at par with other firms.

OPPORTUNITIES
 With the booming capital market it can successfully launch new services and raise its
client’s base.
 It can easily tap the retail investors with small saving through promotional channels like
print media, disclosure mails etc.
 As interest on fixed deposits with post office and banks are all time low, more small
investors are entering into stock market.

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THREATS
 Lack of sufficient branch- offices for speedy delivery of services
 Other players are providing margin funds to investors on easy terms where as there is not
such facility in sharekhan.
 More and more players are venturing into this domain which can further reduce the
earnings of sharekhan.

RESEARCH SECTION IN SHAREKHAN LIMITED

Sharekhan limited has its own in house Research Organization which is known as value line. It
comprises a team of experts who constantly keep a eye on the share market and do research on
the various aspects of the share market. Generally the research is based on the Fundamentals and
Technical analysis of different companies and also taking into account various factors relating to
the economy.

As a customer of sharekan limited one receives daily 5-6 Research Reports on their emails which
they can use as tips for investing in the market. These reports are named as Punter Report, Eagle
Report, Investor Eye Report and High noon Report.

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SOURCE – Sharekhan’s Website

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CURRENT CHALLENGES OF SHAREKHAN

Sharekhan faced lots of challenges. Some of the challenge that it face are

 Retaining its customers is a big challenge of Sharekhan.

 Updating its Online Trade Software TRADE TIGER and make sure that it always work is another
challenge.
 As the broking firms are increasing number of competitors of Sharekhan are also rising. Facing
competitions from all these firms and maintaining its position is another challenge of Sharekhan.
Some of the main competitors of Sharekhan are Angel Broking , Religare, Kotak Securities, India
Bulls, Reliance Money , HDFC Securities, ICICIdirect.com , Bajaj Capital , Motilal Oswal , India
Infoline.

AWARDS AND ACHIEVEMENTS

 A rated among the top 20 wired companies along with Reliance, HUJI, Infosys etc. by
‘Business Today” January 2004 edition.
 Awarded “Top Domestic Brokerage House” four times by Euro Money and Asai Money.
 Pioneers of online trading in India amongst the top 3 online trading websites from India.
Most preferred financial destination amongst online broking customers.
 India’s mot preferred brokers within 5 yrs “ Awaaz Customers Award 2005”
 The team has completed over US$5 billion worth of deals in the last 5 years -
making it among the most significant players raising equity in the Indian
market.
 SSKI, a veteran equities solutions company has over 8 decades of experience in
the Indian stock markets. If we experience their language, presentation style,
content or for that matter the online trading facility, we'll find a common
thread; one that helps us make informed decisions and simplifies investing in
stocks.

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FUTURE PLAN

 200000 plus retail customers being serviced through centralized call centers / web
solutions.
 Branches / Semi branches servicing affluent / aggressive traders through high skills
financial advisor.
 250 independent investment managers / franchisee servicing 50000 highly valued clients.
 New initiatives Portfolio Management Services and commodities trading.

SPREADING ITS WINGS OVERSEAS

NRI SERVICES- ONE STOP SHOP FOR ALL INVESTMENT NEEDS

 Online trading platform for NRIs for Equities and Mutual Funds

 Our first representative office in Dubai

 Dedicated Relationship Manager for advisory services and Operational issues

 Simplified transactions statement

 Customized research reports

 Daily Market updates

 Access to research newsletters/ reports

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 CHAPTER -3
JOB DESCRIPTION AND FUNTIONAL PROFILE

A job description sets out the purpose of a job, where the job fits into the organization structure,
the main accountabilities and responsibilities of the job and the key tasks to be performed A job
description is usually developed by conducting a job analysis, which includes examining the
tasks and sequences of tasks necessary to perform the job. The analysis considers the areas of
knowledge and skills needed for the job. A job usually includes several roles. The job description
might be broadened to form a person specification or may be known as Terms of Reference

There was a 3 months training in sharekhan limited. In this training there were lot of things to
learn about Sharekhan, organizational structure, history of Sharekhan, products, Sharekhan
research reports, trading techniques, clients, demat account, online trading accounts, learned how
to buy and sell shares through these online terminals, sales technique, Sharekhan’s brokerage.

Trading is done through live terminal known as Trade Tiger. Trade Tiger is software of
Sharekhan which is given to customers for trading. It enables its user

Online trading in equity and derivatives

Dial-n- Trade

Cash transfer

Order and trade confirmation

Live Terminal

In order to gain more of the practical knowledge it is important to interact with customers for
opening a demat account in sharekhan. In order to sell demat account some market work was
done. Selling requires identifying the prospective client and then trying to convince them.

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Placement of order

The next step is to place the order of buying and selling of the shares. The orders are placed by
me after analyzing the share market. The orders may take any form such as at best order, limit
order, cancel order and stop loss order.

WORK ENVIRONMENT

 It was a 3months experience as a summer trainee. It was a learning experience in

corporate world.
 The managerial staff was highly supportive in allotted work.
 They guide us with the knowledge of hedging tools to manage the risk in share market
and minimize our loss and how we can maximize our profit.

DAY TO DAY ACTIVITIES

 Reach Sharekhan Limited Office at 9 a.m.

 Do online trading on Trade Tiger Software.
 On some days we also used to go outside to find the prospective customers and do the
marketing of Sharekhan.
 In between the trading we used to do the calling to various prospective customers and
persuade them to open the Demat Account in Sharekhan.
 Visit the client place to take the cheque and complete all the formalities which are
required to open the Demat Account.

AREA ASSIGNED

 I covered areas in Delhi, Sector 18 Noida, Udyog Vihar Gurgaon.

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 REPORTING RELATIONSHIP

 Reporting Time : 9 a.m

 Reporting to : Mr. Jaipal Singh
(Assistant Manager)

NICE EXPERIENCE

Good place for freshers

Supportive members

Good atmosphere to work at.

Friendly & adaptable

JOB CHALLENGES

 In every field there are job challenges. Likewise some challenges in this organization were also
there but the good thing was with hardwork and sincerity it was easy to face all this challenges.
The challenges which were faced are as follows:

 Knowing about the organization and completing assignments on time, making the best
presentations among all my colleagues as allotted by our mentor was a challenge.

 Understanding the Share market and learning how to do the trading was also one of the
challenges which were faced in Sharekhan. This field is totally new and no one knows about in

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 detail. Learning things like how to place order? How to sell the order? How to place the bid?
When to place the bid? On what amount I had to sell and buy the currency, equities?

 Making profit in trading was another challenge and learning how to minimize the loss by
knowing the concept of hedging, stoploss.

 Fulfilling the target to open 3 accounts was really very challenging. As most of the people had a
fear of sharemarket as they think that in sharemarket people always had to bear loss. Finding the
prospective client and persuading them is really very challenging.

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 CHAPTER-4
LEARNING EXPERIENCE AND INSIGHT GAIN

 The type of training in internship was On the Job Training. On the Job Training means
learning practical and implementing it in the day to day work of the organisation.
 During the SIP in the company learned many things and implemented.
 The training was of 2 weeks in the Share Market along with 16 classmates. The training
include learning about the Share Khan practices and services. The powerpoint
presentation was used by sharekhan for teaching the trainees.
 Learned about various products of sharekhan which it offers to its customers
the products are as follows:

 Online trading account

Sharekhan provide two types of trading account:

 Classic account (For beginners and medium investor)

 Speed trade (For heavy investor)

Are you an investor Are you an active trader?

The classic account enables you to trade speed trade is a next generation online
online through our website and gives you our trading product that brings the power of
research content. your broker’s terminal to your PC.

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  Sharekhan classic account

The classic account is a sharekhan online trading account, through which you can buy and sell shares
through our website www.sharekhan.com in an instant.

Along with enabling access for you to trade online, the CLASSIC ACCOUNT also gives you our Dial-n-
Trade service. With this service, all you have to do is dial 1-600-22-7050 to buy and sell shares using you
phone.

 Free trading through phone (Dial-n-trade)

a. Two dedicated numbers for placing your orders with your cell phone or landline.
b. Automatic funds transfer with phone banking(for Citibank and HDFC bank
customers)
c. Simple and secure interactive voice response based system for authentication
d. Get the trusted, professional advice of our telebrokers
e. After hours order placement facility between 8.00 am and 9:30 am

ii) Integration of: Online trading + saving bank + Demat Account.

iii) Instant cash transfer facility against purchase and sale of shares
iv) IPO investments
v) Instant order and trade confirmations by email
vi) Single screen interface for cash and derivatives

 Sharekhan Speed Trade Account

This account is for active traders who trade frequently during the day’s trading session.

Following are few popular features of speed trade account.

a. Single screen interface for cash and derivatives

b. Real time streaming quotes with instant order execution & confirmations
c. Hot keys similar to a traditional broker terminal
d. Alerts and reminders

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 e. Back up facility to place trades on Direct Phone lines

 DIAL-N-TRADE

Along with enabling access for your trade online, the CLASSIC and TRADE-TIGER ACCOUNT also
gives you our Dial-ntrade serives. With this service, all you have to do is dial our dedicated phone lines 1-
800-22-7500, 3970-7500.

 PORTFOLIO MANAGEMENT SERVICES

1. ProPrime: - Research & Fundamental Analysis.

2. ProTech: - Technical Analysis.

-Thrifty Nifty

-Beta Portfolio

3. ProArbitrage: - Exploit price analysis

 IPO ON-LINE

You can apply all the forthcoming ipo online hasselfree, paperless and time saving work.

CHARGE STRUCTURE

Fee structure for general individual:-

CHARGE CLASSIC ACCOUNT SPEED TRADE

ACCOUNT
Account opening Rs 750/- Rs 1000/-
Brokerage Intraday- 0.10% Intraday- 0.10%
Delivery- 0.50% Delivery-0.50%

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PRODUCT DETAILS

Online Trading:

CLASSIC ACCOUNT: A/C Opening charges: Rs. 750/-

DEMAT A/C free for first year and Rs.400 from 2nd year onwards (Annual Maintenance charges).
Trading through website Live terminal. No brokerage commitment required. NSE and BSE online. Both
Cash & F&O.

EXPOSURE : 10 TIMES for Intraday (ON MARGINE MONEY)

: 4 TO 6.7 TIMES for 5 days (ON MARGINE MONEY)

Online IPO's available

We have tie up with Nine banks for online fund transfering i.e. HDFC, ICICI, IDBI, CITI, Union
Bank of India, Oriental Bank of Commerce, INDUSIND, UTI bank , Bank of india, Deutsche Bank
& Yes Bank for online money transfer.

 Meanwhile we were suppose to bring documents to open our Demat Account the
documents are mentioned above . After the training of about the company and the the
industry, they provided theoritical knowledge of how to trade in currency(futures),
equity, derivatives( futures and options)
 Learned to calculate the brokerage of different transactions.
 After the theoritical knowledge was over, the demat account was opened for practical
knowlege of the trading online in the Share Market.
 The target was given to open Demat accounts. So the survey of about 100 people was
done to fill the questionaire. And after the anaysis of the findings there were 20 people
who were interested to open accounts . But they were not ready to open their accounts
now.
 The rest of the tenure of my SIP , did trading in all the possible markets and gained
knowledge of how the market fluctuate and its ups and down.

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 Inshort the following things are:

 Importance of information technology in the field of stock broking is immense.

 The terminal through which the brokers buy and sell shares is software that completely
depends on the internet. For sharekhan this terminal has been designed by the software
company. Buying and selling through internet is fast. As soon as the prices of the shares
goes up or comes down then they can be sold or purchased instantly within seconds.
 In sharekhan limited. I have learned a lot relating to the finance, learned the meaning of
words that are mostly used in the share market.
 Learned about various product of sharekhan limited, learned various aspects regarding
share market.
 Learned how to use online trading terminal
 Learned about various product used in the share market especially demat account.
 Got the practical knowledge of the market
 Learned some marketing techniques also by convincing people to open a demat account.

INSIGHT GAINED
 Information plays a vital role in share market
 It was also observed that many broking houses offering internet trading allow clients to
use their conventional system as well just to ensure that they do not lose them.
 The no of players is increasing at a steady rate and today there are over a dozen of
brokerage houses who have opted to offer not trading to their customers and prominent
 among them as sharekhan.
 Many people are also getting aware about the share market so they are started investing
in share market which include equity, commodity and currency market.

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RESEARCH METHODOLOGY

During this project the necessary inputs taken were primary as well as secondary. The primary
data collection and secondary data collection form an integral part of the study. This is explained
below.

Primary Data

Primary research consists of a collection of original primary data. It is often undertaken after the
researcher has gained some insight into the issue by reviewing secondary research or by
analyzing previously collected primary data. It can be accomplished through various methods,
including questionnaires and telephone interviews in market research, or experiments and
direct observations in the physical sciences, amongst others.

For this report the primary data is collected from the following source
 Discussion with surveillance department officers
 Discussion with managers
 Discussion with sub brokers
 Discussion with employees of the organizations

Secondary Data

Secondary data, is data collected by someone other than the user. Common sources of secondary
data for social science include censuses, organizational records and data collected through
qualitative methodologies or qualitative research. For this study the data is collected from the
following sources

 Books related to risk management and capital market

 Magazines related to the stock market
 Website related to risk management and stock market

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RISK MANAGEMENT IN SHAREKHAN LIMITED

What is risk management?

Risk management is the structured approach towards managing the uncertainties. Risk
management involves risk identification and risk assessment. Further to avoid the unpredictable
outcomes arising out of risk, the risk can be avoided, reduced or transferred. However, best
possible solution has to be chosen to tackle the risk.

The objective of the Risk management function is to ensure that all risks, which threaten the
business of Stock and Share Markets, are recognized, controlled and reduced to an acceptable
level while all applicable regulatory requirements of the various regulatory authorities are
complied with.

To manage risks like value at risk margin, mark to market margin and extreme loss margin is
maintained. Also the brokers are allowed intraday turnover and gross exposure limits. Brokers
have to maintain minimum base capital and additional base capital with the exchange. Exchanges
like SEBI and NSCCL have taken steps like know your client, continuous surveillance,
mandatory audit etc. Thus every risk broking firm has risk management department.

Risk vs. Return

The risk and return go hand in hand. They have a direct relationship. Higher the risk, higher is
the possibility of better returns and lower the risk, lower is the possibility of better returns.
Investors’ personality, lifestyle, and their financial position play a big role on how much risk
they can comfortably bear. The risk/return tradeoff is the balance, an investor must decide on
between the desires for the lowest possible risk for the highest possible returns. It is important to
keep in mind that low levels of uncertainty (low risks) are associated with low potential return
and high levels of uncertainty (high risks) are associated with high potential returns.

The diagram given below explains the relationship between risks and return. As the risk
increases the probability of getting higher returns also increases and vice versa.

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 Low risk

Low return

Higher risk

High return

Returns

Risk

Ways to deal with Risk

Ways to deal with Risk Avoid Retain Reduce Transfer

(a) Avoid the Risk

Avoidance of risk includes not performing an activity that could carry risk. Avoidance may seem
the answer to all risks, but avoiding risks also means losing out on the potential gain that
accepting the risk may have allowed. Not entering a business to avoid the risk of loss also
avoids the possibility of earning profit.

(b) Retain the Risk

Retention of risk involves accepting the loss when it occurs. Risk retention is a viable strategy
for small risks where the cost of insuring against the risk would be greater over time than the
total losses sustained. All risks that are not avoided or transferred are retained by default. This
41
includes risks that are so large that they either cannot be insured against or the premiums would
be infeasible.

(c) Reduce the Risk

Reduction in risk involves methods that reduce the severity of the loss or the likelihood of the
loss from occurring. Outsourcing could be an example of risk reduction. For example, a
company may outsource its manufacturing of hard goods to another company, while handling
the business management itself. This way, the company can concentrate more on business
development without worrying much about the manufacturing process.

(d) Transfer the Risk

Risk transference causes another party to accept the risk, typically by contract or hedging.
Insurance is one type of risk transfer which uses contracts.Liability among construction or other
contractors is very often transferred this way. Such transference of risk may include certain cost
like insurance premium.

Process of Risk Management

Identify the areas of risk

Search for and locate the areas where there can be risk before they become the actual problems for the
organization.

Analyze the risk

Transform the risks data into decision-making information. Evaluate impact, probability and time frame
of it and classify the risks, and prioritize them.

Plan

On the basis of the data evaluated, plan for the management of risk Planning is done according to whether
the risk is to be avoided, retained, reduced or transferred.

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Control

Find out any deviations or variance and correct for the same during the execution of risk mitigation plan.

Communicate

Communicate the internal and external information and feedback to the project on the risk activities,
current risks, and emerging risks.

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 MEASURES TAKEN BY BSE FOR RISK MANAGEMENT

Certain steps or measures are taken by BSE towards the reduction of risks of stock brokers.

 Know your client (KYC)

According to know your client scheme the member brokers of the exchange are
required to obtain detailed information of clients prior to commencement of any transactions
with new clients. A similar procedure is also to be followed for existing clients. This information
is to be made available to the exchange authorities whenever called for. In case the member
broker fails to furnish the same, it may result in penalties to the member brokers.

 Surveillance / Inspection

Surveillance / Inspection department carries out inspection of themember brokers records and
keep a regular check on the activities of member brokers as well as sub brokers as regards the
compliance of the risk management procedures.

 Insurance

The exchange presently has in place insurance policies to protect

itself in the event of losses on account of fire, damage to computer systems and a comprehensive
policy that covers risks faced by the exchange, its member brokersand the clearing houses.

The risks covered under the basic cover of the policy are detailed as below.

 Verification of shares members’ office

The exchange has outlined the process i.e. in case the transaction in a script with one particular
client in a settlement exceeds Rs. 10 lacs then the member has to send the photocopies of the
transfer deeds and the share certificates to the company / registrar for verification of the material
particulars. The basic idea behind the introduction of this procedure is to prevent the fake /
forged / stolen shares from being introduced in the market

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MEASURES TO REDUCE THE RISK

Stock broking firm is highly exposed to the financial risks. Since it poses maximum risk in the
financial markets, risk management in stock broking firms was felt most essential by the
exchanges and its regulatory bodies. National Stock Exchange introduced for the first time in
India, risk containment measures that were common internationally but were absent from the
Indian Securities Market. NSCCL has also put in place a comprehensive risk management
system, which is constantly upgraded to pre-empt market failures. These measures were taken to
reduce the risks at brokers’ end. SEBI has also suggested certain measures to manage the risks
borne by the brokers.

 Margins

There is a lot of uncertainty in the movement of share prices. This uncertainty leading to risk is
sought to be addressed by margining systems by stock markets. Suppose an investor, purchases
1000 shares of ‘ABC’ company atRs.100 on July 1, 2008. Investor has to give the purchase
amount of Rs.1, 00,000 (1000 x 100) to his broker on or before July 2, 2008. Broker, in turn,
has to give this money to stock exchange on July 3, 2008. There is always a small chance that the
investor may not be able to bring the required money by required date. As an advance for buying
the shares, investor is required to pay a certain portion (margin) of the total amount of
Rs.1,00,000 to the broker at the time of placing the buy order. Stock exchange in turn collects
similar amount from the broker upon execution of the order. This initial token payment is called
margin. For every buyer there is a seller and if the buyer does not bring the money, seller may
not get the money. Margin is levied on the seller also to ensure that the gives the shares sold to
the broker who in turn gives it to the stock exchange.

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  Mark to Market Margin (MTM Margin)

Mark to Market margin is calculated at the end of the day on all open positions by comparing
transaction price with the closing price of the share for the day. In the above example a buyer
purchased 1000 shares @ Rs.100 at 11 am on July1, 2008. If close price of the shares on that day
happens to be Rs.75, then the buyer faces a notional loss of Rs.25, 000 on his buy position. In
technical terms this loss is called as MTM loss and is payable by July 2, 2008 (that is next day of
the trade). Incase price of the share falls further by the end of July 2, 2008 to Rs. 70, then
buy position would show a further loss of Rs.5, 000. This MTM loss is payable. In case, on a
given day, buy and sell quantity in a share are equal, that is net quantity position is zero, but
there could still be a notional loss / gain (due to difference between the buy and sell values), such
notional loss also is considered for calculating the MTM payable.

MTM Profit/Loss = [(Total Buy Qty X Close price) - Total Buy Value] - [Total Sale Value -
(Total Sale Qty X Close price)]

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TECHNIQUES TO REDUCE RISK FOR INVESTOR

 Hedging

Hedging means reducing or controlling risk. It is a transfer of risk without buying insurance
policies. It consists of the purchase or sale of equal quantities of the same or very similar
commodities in two different markets at approximately the same time, with the expectation that a
future change in price in one market will be offset by an opposite change in the other market.
This technique is basically used in Derivatives Markets ( Future and Options) For example if you
own a stock that you are worried will decline in price, you can "hedge" your position by either
buying put options on the stock or by selling call options on the stock. So if the price of stock
will decrease, the value of the put options will increase, thereby offsetting part of the loss
incurred in the stock. Similarly, a call option will decline in value as the price of the stock falls.
So if you sold call options, with the hope that they expire worthless, the money you received for
selling the options (called the option premium) would partially offset the losses from your long
position in the stock. Generally, this strategy is not recommended as to reduce their investment
risk because an individual may sometimes end up losing on both sides. Rather, if you own a
stock and it's time to sell, then sell it at the market. This is the best way to limit your investment
risk.

 Averaging

Averaging is another way to reduce the risk of an investor. Averaging is the process of buying
additional shares in a company at lower prices than you originally purchased. For example if you
own 10 lots in JPY Currency ( Yen ) at price 61.75 and the price of JPY is decreasing then you
can again buy 10 lots of JPY at price 61.05 in order do its averaging.

A basic calculation for average inventory would be:

(Current Inventory + Previous Inventory) / 2

The market price which you will get is

47
61.75*10+61.05*10/20 = 61.4

Now 61.4 will be your new market price instead of 61.75 which is the previous price.

 Stop loss

Stop-loss is a widely used term in investment circles. As the name says, it is a price level at
which one should stop or limit his losses in a position. Investing or trading is like gambling when
one looks at from the outcome perspective. When a person gambles or speculates, he does not
know what the outcome will be. He would hope the outcome to be in his favor but it could very
well go against him. The same thing goes for investing or trading. When someone buys a stock,
he might be thinking, and to a great extent hoping, that the stock price would go up, but it could
very well go down. So what should a person do if the prices go contrary to one's expectations?

There are two alternatives: (i) He can continue to hold it believing, and hoping, that it will
ultimately go up; or (ii) He can blame the unexpected mess on his wrong selection, bad
judgment, bad timing or on circumstances/development beyond his control or imagination,
and… get out of the position and to get exit from that position an investor use the technique
known as stoploss.

Stop losses are the same as a stop limit order, in terms of online trading, stop losses are a price
you set at which your shares will sell automatically. Stop losses greatly reduce the risk involved
in trading shares. Whenever you buy (go long) or sell (short) a share, brokerage accounts allow
you attach stop losses for free to a share.

For example If you own 20 lots of dollar in currency market at dollar 56.75 but it goes down then
an investor can use the strategy known as stoploss in order to minimize his loss. He can set a
price say at dollar 52.5 where his shares will sell automatically and his loss will get minimize.

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 CHAPTER-5

RECOMMENDATION AND CONCLUSION

CONCLUSIONS

Working with Sharekhan Ltd. to online trading and to study the risk management was a great experience.
The activities of online trading and risk management are the heart of barking industry and they should be
taken care of.

As you know prices of shares in Indian stock market change very swiftly, they are very volatile and
unpredictable too. Therefore, broking firm is a very risky business and chance of financial losses lies in
almost each and every activity of the business. However, with the margin system and use of advanced
technology the transparency of market is growing.

Therefore, to conclude it can be noted that though the business of stock broking is always exposed to the
risk of loss of money but such risk can be managed and reduced through technical analysis and having a
good knowledge of stock market and by strictly adhering to the rules and regulations mentioned by
exchanges, SEBI and NSCCL. This will not only reduce the risk but also organization run smoothly and
grow further.

Through this project I came to a conclusion that Sharekhan is one of the best broking houses among all
the other firms existing in India have changed dramatically over 3 to 4 years. New and advanced
technologies have barriers and have brought the countrywide market to doorsteps.

The introduction of on-line trading would influence the investors resulting in an increase in the business
of the exchange. It has helped the brokers handling a vast amount of transactions and this can be an
efficient trading delivering, settlement system with adequate protection to investors.

49
Due to investors of online trading there has been greater benefit to the investors as they could sell/buy
shares as and when required and that to with online trading.

The broker’s has a greater scope than compared to the earlier times because of invention of online trading.

The concept of business has change today, this is a service oriented industry hence the survival would
require them to provide the possible service to the clients.

RECOMMENDATIONS

 The exchange should take steps to educate investors about their rights and duties.

 The exchange authorities should increase the investor’s confidence.

 The exchange authorities should be vigilant to curb wide fluctuations of price.

 Necessary steps should be taken by the exchange to deal with the situations arising due to break
down in online trading.

 Every stock broking firm must have a risk management department to keep a strict watch on
market.

 Employees with proper qualifications must be appointed as brokers or sub brokers so that such
qualified staff help in reducing mistakes and errors as they have a proper understanding of the
procedure.

 The clients should be asked to call dealers on the phones only on which the conversation can be
recorded. Thus, clients’ calls on personal phones should be avoided. It helps to reduce the

50
 miscommunication and conflicts between client and broker.

 All the documents along with applications for client and sub broker must be verified thoroughly
and all the requirements (e.g. Letter from bank, copy of passbook, signature, letter of landlord in
case of tenant etc) must be fulfilled.

 The senior officers of brokers must visit periodically to keep a check and understand their
problems.

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 Some suggestions to Sharekhan Ltd.

 It needs to open more branches to be a topper in market because it has a low distribution network.
 Link as many account as client wants to for online banking.
 Need to tie up with major banks like SBI, Allahabad, and bank of Baroda etc.
 The company should focus on customer satisfaction only not on just taking money from their
pockets.
 Some promotional activities are required for the awareness of the customer.
 Seminars should be held for providing information to prospective and present customers.

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 BIBLIOGRAPHY

Websites:

www.sharekhan.com

www.economictimes.com

www.bseindia.com

www.nseindia.com

www.investopedia.com

www.sebi.gov.in

www.wikipedia.com

Newspapers:
The Times of India
The economic times
Business Standard

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