EXECUTIVE SUMMARY

Anand Rathi Group, a leading financial services firm, has a robust presence in brokerage, wealth
management, and investment banking. The following executive summary outlines strategic
recommendations based on insights gathered during an internship focused on demat accounts, mutual
funds, and equity derivatives.

Key Highlights:

1. Service Portfolio: Anand Rathi Group offers a wide array of financial services encompassing
equity and commodity brokerage, portfolio management services (PMS), wealth management,
mutual funds distribution, insurance, and investment banking.
2. Market Presence: Established in 1994, the group has expanded its footprint across major cities
in India and has a growing presence in global financial markets. It operates through a network
of branches and offices, leveraging technology for efficient service delivery.
3. Client-Centric Approach: Known for its client-centric approach, Anand Rathi Group
emphasizes personalized advisory services tailored to meet the unique financial goals and risk
profiles of its clients. It aims to enhance client satisfaction through transparency, integrity, and
proactive communication.
4. Innovation and Technology: The group continuously invests in technology and innovation to
enhance operational efficiency and client engagement. This includes advanced trading
platforms, digital wealth management solutions, and AI-driven analytics for personalized
investment advice.
5. Regulatory Compliance: Committed to upholding the highest standards of regulatory
compliance, Anand Rathi Group adheres to SEBI guidelines and other regulatory requirements.
It prioritizes client security and data privacy through robust cybersecurity measures.

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 INDUSTRY OVERVIEW

Anand Rathi Finance is a pioneer in Indian financial services. With over 30 years of experience, the
Anand Rathi company has carved out a position in the financial services market.
The Anand Rathi Group is a prominent Indian financial services conglomerate with a diverse portfolio
of offerings. Founded in 1994 by Anand Rathi, the group has grown to encompass various sectors within
financial services including wealth management, investment banking, corporate advisory, brokerage
and distribution of equities, commodities, mutual funds, and insurance.
The group is headquartered in Mumbai, India, and has expanded its presence internationally as well. It
is known for its strong research capabilities and customer-centric approach in providing financial
solutions. Anand Rathi Wealth Services, a subsidiary of the group, specializes in wealth management
services catering to high-net-worth individuals and families.
Services Offered:
• Wealth Management: Provides personalized wealth management services to high-net-worth
individuals and families.
• Investment Banking: Offers services in mergers and acquisitions, private equity, capital
markets advisory, and restructuring.
• Broking and Distribution: Engages in equity, commodity, currency broking, and distribution
of financial products.
• Insurance: Provides insurance solutions including life, health, and general insurance products.
• Structured Products: Offers customized financial products catering to specific client needs.

Over the years, the Anand Rathi Group has established a reputation for reliability and expertise in the
financial sector, making significant contributions to India's financial markets and economy.

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 COMPANY BACKGROUND

The Anand Rathi group came into existence in year 1994.

• Mr. Anand Rathi and Mr. Pradeep Kumar Gupta laid the foundation of the Anand Rathi
Group.

• With roots over 30 years deep, we have carved a niche in the financial services sector. The
Anand Rathi Group offers a wide spectrum of services ranging from Investment services
across Asset classes to Private Wealth, Institutional Equities, Investment Banking, Broking
and NBFC.

• A customer-first approach coupled with digital innovation helps us contribute to the client’s
financial wellbeing.

• Holds Net worth of more than Rs. 2,500 Cr as on date with employee strength of more than
4,000

NETWORK STRENGTH

• Presence in over 370+ locations

• 1500+ direct employees

• 70+ own branches

• Strength of over 1500+ partner

• 5 lacs+ registered customer

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BANK PARTNERSHIP

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 INVESTMENT SERVICES

1.We call ourselves as “Investment Services” entity

2.We cater to the financial requirements of clients with a focused approach.

3.Provide Expert Research in various Asset classes like Equity, Commodities, and Currency

4.Offer wide array of products across various asset classes.

5.Offer high-tech digital apps and platforms as well as physical touch points through which Client
can Invest in desired asset class.

RESEARCH & ADVISORY

Finest Research Across Segments

Our team of experts perform research across all investment segments and provide timely decisive
reports that enable our clients to augment their portfolio and achieve investment goals

Investment Advisory
A personalized advisory service that is provided to the investor basis his portfolio. Our detailed
knowledge on investment and market educates the investor with requisite information which
supplements his investment decision.

Meticulous investment assistance

Our extensive branch reach, phone an advisor initiative to call and trade facility allows the client to
seek valuable advice from the team of our experts by connecting with them and make the most of
every big investment opportunity.

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PRODUCT AND SERVICES

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 VISION / MISSION

VISION

“To be a leader in investment advisory, provide innovative financial solutions & be the first
choice for clients and employees”

MISSION

“We are client centric, with a clear focus on providing long-term value addition to clients,
while maintaining the highest standards of excellence, ethics & professionalism”

CORE VALUES

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 PROJECT DESCRIPTION

DEMAT ACCOUNT

What is Demat Account: Meaning, Types & Benefits

If you are already an investor who is active in the stock market, then you must probably be aware of
what a Demat account is. Most of us would have heard of Demat accounts in the past or when you are
going through anything related to the stock market. For those of you who are new to this field, this is
the right place for you to learn all about a Demat Account, Types of Demat account, and its benefits.

What is a Demat account?

Similar to a bank account, a Demat account is mandatory for all those who wish to invest and trade in
the stock market. This helps an investor to hold shares and securities in an electric format. The Word
Demat is the short form of Dematerialized account. You may wonder what is the use of a Demat
Account, well, if you have a Demat account it makes the process of holding investments like shares,
bonds, insurances much easier. It is much more organized than maintaining related papers and
documents.
Demat accounts are maintained by DPs or Depository participants in India. There are mainly two DPs:
NSDL or National Security Depository Limited and CDSL or Central Depository Securities Limited.
Demat accounts will keep proper track of all your investments such as shares, mutual funds, etc in one
place in a very organized manner. You can also start the account through intermediaries, stockbrokers,
etc. but with a fee depending on the customer’s requirements.
Often we tend to misplace things, especially bits of paper. Imagine what if we misplace one of our
investment documents, you will lose all your savings. In order to prevent this, a Demant account can
be very handy. It prevents us from misplacing any of our important investment papers and documents.
When you buy a share, the Demat account will convert it into Electronic form.

What is dematerialization?
It is the process of converting physical shares documents into an electronic format, as it is much easier
to handle and is accessible from anywhere around the world. Everyone who wishes to invest needs to
open an account with a Depository participant. The reason why dematerialization is mandatory is to
avoid the need for investors to physically handle the investment certificates and documents. This
allows them to have a hassle-free investment experience and the ease of tracking their holdings.

Types of Demat Account

Mainly there are three types of Demat accounts and they are:

1. Regular Demat Account: Regular Demat account is usually used by Indian citizens who
live in India who are willing to trade securities within India.

2. Repatriable Demat Account: Repatriable Demat accounts are usually used by non-
resident Indians(NRI) who wish to trade in the Indian Market. This enables them to transfer
money abroad. This type of account needs to be linked with NRE bank accounts.

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 3. Non-Repatriable Demat Account: Non-Repatriable accounts are also for non-
resident Indians. However, in this account, the funds cannot be transferred to other countries.
Unlike repatriable accounts, this type of account needs to be linked with an NRO bank
account.

Why do you need a Demat account?

Imagine that you are a person who is dealing with a lot of transactions every day and one day if you
just want to go back and recheck everything it would be a very difficult task, especially if you do not
have a record of it. Now imagine how useful it would be if all your transactions are recorded up to
date. This is exactly what a Demat account does. It serves as a depository for all the transactions you
have made in India.
When you buy and sell funds, shares, securities, it gets automatically updated in your Demat account
and so you never have to worry about losing documents. The regulatory firm SEBI wants everyone
willing to trade in Indian Securities to have a compulsory Demant account. A person without a Demat
account cannot trade in India in any circumstances. It is compulsory if you wish to participate in
securities trading in India.

Benefits/ Importance of a Demat account

Demat account is not just a regulatory requirement but it can benefit you in different ways. We will
now discuss the benefits of having a Demat Account.
• A safe Wallet: Demat account helps you to store securities in an electronic format. We need
not worry about misplacing your investment documents, theft, or fraudulent exchanges. They
also eliminate the possibility of fake signatures on investment documents.
• Ease of access: You can easily access your Demat from anywhere around the world using
your smartphone or laptop.
• Instant Trading: With the help of a Demat account you can process the securities transactions
instantly. The investors can seamlessly convert their physical certificates into digital and vice
versa instantly.
• Stores various investments: Once you have a Demat Account it’s not just the shares that you
can trade, instead, you can hold on to your multiple investments such as bonds, mutual funds,
government securities, etc.
• Convenience to store and transfer: Once you start a Demat account you can store any number
of shares and also you can monitor and the details of all the shares you hold in your Demat
account. You can swiftly transfer the shares while trading online.
• Market information: using your Demat account you can access all the live updates regarding
the stock market within a fraction of seconds. This includes information such as live price
charts, comparisons tools, and information on the investments you need to trade.
• No extra charges: To get a physical certificate of your investment, involves several additional
costs such as stamp duty, handling charges, and so on. By using a Demat account you can
eliminate such unnecessary expenses. Investors can now freely trade any number of securities
in any volume according to their choice without worrying about the duty charges. This also
allows the investors to trade freely without worrying about limiting the number of securities
to accommodate costs.
• No minimum trading requirements: In order to execute a trade there is no need to have a
minimum balance. This can reduce the pressure on dormant investors or long- who trade
term investors

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 occasionally. The Demat account holders can hold or freeze their accounts for a certain period
to control the credit and debit flow.
• Nomination: They provide the facility of nomination prescribed by the depository. In certain
cases when the investor expires, the shareholding can be transferred to the appointed
nominee.

Demat account details

To get started with a Demat account, it’s best for you to consult a stockbroker. You will be asked to fill
out an online account opening form. This is 100% paperless and can be filled within 15 minutes. You
just have to follow the instructions with ease.
• Open the account opening form.
• Enter the basic details like your name, email address, phone number, etc., and do not forget to
PAN number.
• Add your bank details.
• Attach all the KYC documents for identity and address verification.
• You should record a short clip of yourself for in-person verification.
• Through an Aadhar linked mobile number, you should E-sign the form.
Once your Demat account is opened, you will receive a set of identification documents.
1. DP identification code: It is an 8-digit code assigned by the central Depositories to all the
DPs.
2. Demat account number: It is a 16-digit unique combination of your DP Id and client ID. The
DPs use an 8-digit number to identify clients in their system.
3. Client master report: You will receive a copy of the client master report which will contain
your Demat account details. Ensure that all your correct details are submitted with your DPs.
4. Login and Password: At the time of opening your account you will be given a unique login
and password.
5. Power of attorney: The Power of Attorney will allow your broker to operate on your behalf. It
is similar to an authorization letter.
Once you open the Demat account, you start to buy, sell, and even apply for an IPO offering of a
company and so on. This is something like receiving an identity of your own in the stock market.

Is the Demat account safe?

Once your Demat account is activated, it is then monitored and regulated by SEBI. If you were a
target of fraudulent activity by the brokers, the regulatory firm can easily track down the defaulters.
You also need not worry about misplacing/theft of your physical investment documents as everything
is converted to the electric form. This means that a Demat account is fairly safe to kick start your
trading journey.

Why demand account is needed?

If you want to trade or hold shares on a delivery basis, then a Demat account is very necessary for
you. It is also important if you wish to buy or sell shares in the equity market. In the present times
where everything is becoming electronic and easily accessible, the Demat account is a step towards

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achieving the same. Once you have an account you need not physically handle any documents and
worry about losing them. Nowadays no one issues physical certificates and in such cases, the Demat
account is very important.

What is a bank Demant account?

A Demat account is very similar to a bank account where your share certificates and other securities
are held in an electronic format, instead of money.

What are the key features of a Demat account?

The key features of a Demat account include the following:
• Shares can be transferred easier.
• Shares can be dematerialized and rematerialized faster.
• It can be pledged as a security to avail loan.
• Demat accounts can be frozen.
• There are multiple access points.

KYC VERIFICATION

KYC ENQUIRY

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 MUTUAL FUND

WHAT IS A MUTUAL FUND?

Mutual funds are pooled investments managed by professional money managers. They trade
on exchanges and provide investors with access to a wide mix of assets selected for the fund.
A professional fund manager handles this mix of investments, and the fund's assets and goals
are detailed in the prospectus.
For those who deposit into their mutual funds from their pay checks, they offer automatic
investing and lower investment risk than buying stocks on your own because most funds have
diverse holdings.

Types of Mutual Funds

There are multiple ways in which mutual funds can be categorized, for example, the way they are
structured, the kind of securities they hold, their investment strategies, etc. The Securities and
Exchange Board of India (SEBI) has classified mutual funds based on where they invest, some of
which we have listed below.

Based on the structure:

1. Open-ended funds are mutual funds that allow you to invest and redeem investments at
any time, i.e. they are perpetual in nature. They are liquid in nature and don’t come with a
specific investment period.

2. Close-ended schemes have a fixed maturity date. You can only invest at the time of the new
fund offer and redemption can only be done on maturity. You cannot purchase the units of a
close-ended mutual fund whenever you please.

Based on asset classes:

1. Equity Mutual Funds invest at least 65% of their assets in stocks of companies listed on
the stock exchange. They are more suitable as long-term investments (> 5 years) as stocks can
be volatile in the short term. They have the potential to offer higher returns but also come
with high risk.

2. Debt Mutual Funds primarily invest in fixed-income instruments like Government

securities, corporate bonds, and other debt instruments. They are not affected by stock market
volatility and hence, can offer more stable returns compared to equity mutual funds. The types
of debt mutual funds are differentiated on the basis of the maturity period of the securities
they hold.

3. Hybrid Mutual Funds invest in both equity and debt in varying proportions depending on
the investment objective of the fund. Thus, hybrid funds give you diversified exposure to
various asset classes. Hybrid funds are categorized on the basis of their allocation to equity
and debt.

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- Equity Schemes
SEBI has decided total 11 categories under Equity Schemes but a mutual fund company can only have
10 categories and it has to choose between Value or Contra. Still 10 categories looks bit high but I
think it’s fair considering the possible variations in the strategy. To make this easier SEBI has also
defined meaning of Large Cap, Mid Cap and Small Cap.
• Large Cap: Top 100 companies in terms of market capitalization
• Mid Cap: 101st- 250th companies in term of market capitalization
• Small Cap: 251st company onwards in terms of market capitalization

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How to invest in mutual funds ?

1. Sign up using email and OTP in any platform.

2. Select fund. Enter the investment amount. Choose the investment type: one-time (lump sum)
or SIP.
3. Enter PAN, and full name, and verify mobile number.
4. Enter bank account details and select the payment mode. In the case of SIP, set up a mandate.
5. Follow the KYC process, which includes a selfie and a live video. Provide essential details
and eSign.
6. The transaction is processed on verification of KYC documents.

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What are the documents required to invest in mutual funds?

The documents for KYC (Know Your Client) include proof of address and proof of identity. Here is a
list of officially valid documents (OVD) admissible.

PROOF OF IDENTITY:
1. PAN Card (Mandatory)
2. Voter ID Card
3. Driving License
4. Passport
5. Aadhaar Card
6. Any other valid identity card issued by the Central or State Government
ZPROOF OF ADDRESS
1. Voter ID Card
2. Driving License
3. Passport
4. Ration Card
5. Aadhaar Card
6. Bank account statement or bank passbook
7. Utility bills like electricity or gas bills

Mutual Fund Objectives

Mutual funds seek to fulfil the following objectives for their unitholders:
• Diversification: It is usually advised not to put all your eggs in one basket. Doing so can
disproportionately increase your risk. Mutual funds are inherently diversified. They diversify
across securities, assets, and even geographies. Hence, they help lower the risk.
• Capital protection: Some mutual funds, such as money-market funds and liquid funds, aim
to protect your capital. However, while they are relatively safer, they also have lower returns.
• Capital growth: Certain mutual funds, such as equity funds, focus on growth to protect your
investment against inflation. These funds invest in stocks and have higher returns but also
come with higher risks.
• Saving tax: A certain class of mutual funds, called equity-linked savings schemes (ELSS) or
tax-saving funds, also provide income-tax deductions up to Rs 1.5 lakh in a financial year in
the old income-tax regime.

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Mutual Fund Selection
Based on several parameters. These include return expectation, risk tolerance, and investment horizon.
There are different parameters to consider for fund selection, including expense ratio, past
performance, fund manager experience, and assets under management.
Once you, as an investor, do your research, you will have a clear idea as to where you want to invest.
And what type of category or funds.

Risk
A significant criterion for selection of mutual funds is analysing the associated risk.
Risk comes from not knowing what you are getting into. Before choosing a mutual fund, the investor
should analyse the risk associated with the investment. And he/she has to check if the risk is
comfortable.
Equity mutual fund investments are subject to market fluctuations. Therefore, an equity-oriented
portfolio could witness volatility as well in the short term. But note that the returns can be
substantially higher than other types of funds. These types of funds might be suitable for long-term
aggressive investors.
Debt mutual funds are comparatively more stable. However, the returns could be lower than equity
funds. These might be suitable for conservative investors. You can follow the table below to
understand the category you fall into based on the time horizon and your risk profile to select the
appropriate mutual fund for yourself.

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Liquidity
Another factor that one should consider to look into while feeling how to select mutual funds for SIP,
is liquidity.
Investors should know when he/she may require the investment. That is, if the need is in the near
future, it’s not for equity mutual funds. This is because it may not provide the expected return.
If you can stay with the investment for one year or more, then equity mutual funds can generate the
expected returns. This is also important because compounding works best when money is left
untouched for long periods of time. So, if you want to raise money for a short period, go for liquid
funds.

Investment Strategy
While identifying how to select best mutual fund, most investors ignore the aspect of investing
strategy. But it holds a crucial place in the success of your investment portfolio.
An investment strategy is also referred to as the investment approach. It is a strategy that the fund
houses adopt to make all the investment decisions. If the investment strategy of the fund house is not
in line with your investment philosophy, then a conflict of interest will arise. And ultimately leading
to you exiting the investments at undesirable prices.

Fund Performance
Fund performance matters. It should be considered for a reasonable time frame. This is to ensure that
the investments have gone through multiple market cycles. This would enable consistent returns over
a period.
In case the fund has not been able to beat its benchmark over three, five, seven or ten years, it is
reasonable to believe that the fund might not be a good investment.
While evaluating a fund’s performance, it is important to check the performance details of the fund
manager or the fund management team. A strong, stable, experienced Fund management team with
reasonable tenure and a proven track record would prove beneficial for investors.

Expense Ratio
The expense ratio is the commission or the fee charged by the investors for the proper management of
their investments. It is basically the fund manager’s fee that is levied upon all investors to ensure
profits across the investments.
As an investor, you must target mutual funds that have a lower expense ratio. This is because, the
percentage may seem quite small but when calculated across your total investment portfolio, it will
have a larger impact.
The expense ratio is a derivative of Assets Under Management, and it is believed that the higher the
AUM, the lower the expense ratio.

Entry And Exit Load

Entry load refers to the fee charged by fund houses from investors.
Exit load refers to the fee charged at the time of exiting a mutual fund scheme. This is chargeable only
if investors exit within a short period. This is to discourage quick exit and immediate outflow of cash
from fund houses.
The entry load has, however, been removed by most fund houses.

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As an investor, you must look out for mutual fund schemes that have zero or minimal entry and exit
load.

Taxes
When you as an investor make money (returns) from your investment, it is taxable as per the Income
Tax Act.
When equity fund units are redeemed, the returns are taxable as per the period of holding.
For equity funds, Long Term Capital Gains (holding period of 12 months and above) are taxed at
10% over and above the exemption limit of Rs 1 Lakh.
Short Term Capital Gains (holding period of less than 12 months) are taxed at 15%.
For Debt funds, an indexation benefit is available for capital gains realized.
(For these funds, a holding period of 36 months or more is considered as long term. Any holding
period that is less than 36 months is treated as short term, and the gains are taxable).

Direct Plans
There are two types of plans available for a mutual fund scheme: direct and regular.
Direct and regular Mutual Funds are different versions of the same plan.
In the case of direct, investors can directly buy required NAV units from a concerned fund house. In
the case of regular, the units have to be purchased through a commissioner or broker.
A key difference between the two is that returns are slightly higher in a direct Mutual Fund as no
commission expenses are incurred. This commission varies between 1-1.25%, depending upon the
asset management company and brokerage firm.
In the case of regular Mutual Funds, the concerned Asset Management Company (AMC) pays a
commission to the brokerage firm to increase its clientele. This reduces the principal amount of
investment, thereby reducing the total returns generated.

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 UNDERSTANDING FINANCIAL MARKET

Financial Markets include any place or system that provides buyers and sellers the means to trade
financial instruments, including bonds, equities, the various international currencies, and derivatives.
Financial markets facilitate the interaction between those who need capital with those who have capital
to invest.

Types of Financial Markets

1. Stock market
The stock market trades shares of ownership of public companies. Each share comes with a price, and
investors make money with the stocks when they perform well in the market. It is easy to buy stocks.
The real challenge is in choosing the right stocks that will earn money for the investor.
2. Bond market
The bond market offers opportunities for companies and the government to secure money to finance a
project or investment. In a bond market, investors buy bonds from a company, and the company returns
the amount of the bonds within an agreed period, plus interest.
3. Commodities market
The commodities market is where traders and investors buy and sell natural resources or commodities
such as corn, oil, meat, and gold. A specific market is created for such resources because their price is
unpredictable. There is a commodities futures market wherein the price of items that are to be delivered
at a given future time is already identified and sealed today.
4. Derivatives market
Such a market involves derivatives or contracts whose value is based on the market value of the asset
being traded. The futures mentioned above in the commodities market is an example of a derivative.

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 EQUITY DERIVATIVE

Basics of Derivatives A derivative is a contract or a product whose value is derived from the value of
some other asset known as the underlying.
Derivatives are based on a wide range of underlying assets. These include:

• Metals such as Gold, Silver, Aluminium, Copper, Zinc, Nickel, Tin, Lead, etc.

• Energy resources such as Oil (crude oil, products, cracks), Coal, Electricity, Natural Gas, etc.

• Agri commodities such as Wheat, Sugar, Coffee, Cotton, Pulses etc., and

• Financial assets such as Shares, Bonds and Foreign Exchange.

Factors influencing the growth of derivative market globally

Over the last five decades, the derivatives market has seen a phenomenal growth. Many derivative
contracts were launched at exchanges across the world. Some of the factors driving the growth of
financial derivatives are:

• Increased fluctuations in underlying asset prices in financial markets.

• Integration of financial markets globally.
• Use of latest technology in communications has helped in reduction of transaction costs.
• Enhanced understanding of market participants on sophisticated risk management tools to
manage risk.
• Frequent innovations in derivatives market and newer applications of products.

Products in the Derivatives Market

Forwards
It is a contractual agreement between two parties to buy/sell an underlying asset at a certain future date
for a particular price that is pre-decided on the date of contract. Both the contracting parties are
committed and are obliged to honour the transaction irrespective of the price of the underlying asset at
the time of delivery. Since forwards are negotiated between two parties, the terms and conditions of
contracts are customized. These are Over-the-counter (OTC) contracts.
Futures
A futures contract is similar to a forward, except that the deal is made through an organized and
regulated exchange rather than being negotiated directly between two parties. Futures are also
standardized contracts (in terms of their lot size, maturity date, etc.) so that they can be traded on the
exchange. Indeed, we may say futures are exchange traded forward contracts.
Options
An Option is a contract that gives the right, but not an obligation, to buy or sell the underlying on or
before a stated date and at a stated price. While the buyer of an option pays the premium and buys the

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right, the writer/seller of an option receives the premium with the obligation to sell/ buy the underlying
asset, if the buyer exercises his right.
Swaps
A swap is an agreement made between two parties to exchange cash flows in the future according to a
prearranged formula. Swaps are, broadly speaking, a series of forward 13 contracts. Swaps help market
participants manage risks associated with volatile interest rates, currency exchange rates and
commodity prices.

Market Participants
There are broadly three types of participants in the derivatives market - hedgers, traders (also called
speculators) and arbitrageurs. An individual may play different roles in different market circumstances.
Hedgers
They face risk associated with the prices of underlying assets and use derivatives to reduce their risk.
Corporations, investing institutions and banks all use derivative products to hedge or reduce their
exposures to market variables such as interest rates, share prices, bond prices, currency exchange rates
and commodity prices.
Speculators/Traders
They try to predict the future movements in prices of underlying assets and based on the view, take
positions in derivative contracts. Derivatives are preferred over underlying asset for trading purpose, as
they offer leverage, are less expensive (cost of transaction is generally lower than that of the underlying)
and are faster to execute in size (high volumes market).
Arbitrageurs
Arbitrage is a deal that produces profit by exploiting a price difference in a product in two different
markets. Arbitrage originates when a trader purchases an asset cheaply in one location and
simultaneously arranges to sell it at a higher price in another location. Such opportunities are unlikely
to persist for very long, since arbitrageurs would rush into these transactions, thus closing the price gap
at different locations.

Significance of Derivatives
Like other segments of Financial Market, the derivatives market serves the following specific functions:

• It helps in improving price discovery based on actual valuations and expectations.

• It enables the transfer of various risks from those who are exposed to risk but have a low risk
appetite to participants with a high risk appetite. For example, hedgers want to give away the
risk whereas traders are willing to take risk.
• It enables the shift of speculative trades from the unorganized market to the \organized market.
Risk management mechanism and surveillance of activities of various participants in the
organized space provide stability to the financial system.

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 LIMITATIONS

Mutual Funds:
1. Fees and Expenses: Mutual funds often charge management fees, administrative expenses, and
potentially sales loads. These fees can erode overall returns over time.
2. Market Risk: Despite diversification, mutual funds are still subject to market fluctuations. Poor
performance of underlying assets can lead to losses, especially in volatile markets.
3. Liquidity Risk: Unlike stocks, which can be traded throughout the day, mutual funds typically
have their prices calculated once a day after the market closes. This lack of intra-day liquidity
may limit the ability to quickly access funds.
4. Performance Variability: Fund performance can vary significantly based on the fund
manager's decisions, economic conditions, and market trends. Past performance does not
guarantee future results.
5. Tax Implications: Investors may be liable for taxes on capital gains and dividends distributed
by mutual funds, which can impact overall returns.

Derivatives:
1. Complexity and Risk: Derivatives can be highly complex financial instruments, requiring a
deep understanding of their mechanics and potential risks. Incorrect usage or hedging strategies
can lead to substantial losses.
2. Leverage: Many derivatives allow investors to control a larger position with a smaller amount
of capital (leverage). While this amplifies potential gains, it also magnifies potential losses.
3. Counterparty Risk: Derivatives involve contracts between parties, introducing counterparty
risk. If the counterparty fails to full fill its obligations, it could lead to financial losses.
4. Market Liquidity: Some derivative markets may lack liquidity, making it difficult to enter or
exit positions at desired prices, especially in times of market stress.
5. Regulatory Changes: Derivatives markets are subject to regulatory changes and oversight,
which can impact trading conditions, margin requirements, and overall market access.

Demat Accounts:
1. Maintenance Fees: Demat accounts may charge annual maintenance fees, transaction fees, and
other charges, which can add up over time.
2. Dependence on Infrastructure: Access to demat accounts relies on technological
infrastructure, internet connectivity, and regulatory compliance, which can occasionally be
disrupted.
3. Risk of Fraud: Although demat accounts are generally secure, there is always a risk of
unauthorized access or fraud, especially if account information is compromised.

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 4. Limited Services: While demat accounts facilitate electronic holding of securities, they may
have limitations on the types of securities that can be held or the services they offer compared
to physical certificates.
5. Account Closure Procedures: Closing a demat account can sometimes involve paperwork and
administrative processes, which may be cumbersome and time-consuming.

MITIGATIONS

Mitigating Mutual Fund Limitations:

1. Research and Due Diligence: Conduct thorough research on mutual funds before investing.
Compare fees, expenses, historical performance, and risk factors across different funds to make
informed decisions.
2. Cost Management: Choose mutual funds with lower expense ratios and avoid funds with front-
end or back-end loads if possible. Consider index funds or ETFs as they often have lower fees.
3. Diversification: Spread investments across different asset classes and fund categories to reduce
concentration risk. Ensure that your portfolio is well-diversified based on your risk tolerance
and investment goals.
4. Regular Monitoring: Monitor the performance of your mutual funds regularly and review your
portfolio periodically. Rebalance as necessary to maintain your desired asset allocation and risk
profile.
5. Tax Efficiency: Be mindful of tax implications. Consider investing in tax-efficient funds or
using tax-advantaged accounts like IRAs or 401(k)s to minimize tax liabilities on capital gains
and dividends.
6. Understand Fund Objectives: Choose funds that align with your investment objectives and
time horizon. Understand the fund manager's strategy and track record in managing similar
market conditions.

Mitigating Derivatives Limitations:

1. Education and Training: Gain a thorough understanding of derivatives and their underlying
assets before trading. Take advantage of educational resources, seminars, and simulations to
practice trading strategies.
2. Risk Management: Implement strict risk management practices, including setting stop-loss
orders, diversifying positions, and limiting leverage. Only use derivatives for hedging or
speculative purposes within your risk tolerance.
3. Counterparty Due Diligence: Evaluate the creditworthiness and reliability of counterparties
when trading derivatives. Choose reputable brokers and clearinghouses to minimize
counterparty risk.

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 4. Liquidity Analysis: Consider the liquidity of the derivative market and the specific contract
you're trading. Avoid illiquid markets or contracts that may have wide bid-ask spreads and
difficulty in execution.
5. Stay Informed: Stay updated on regulatory changes and market conditions that could impact
derivative trading. Understand margin requirements, settlement procedures, and regulatory
obligations.

Mitigating Demat Account Limitations:

1. Choose a Reliable Provider: Select a reputable depository participant (DP) for your demat
account. Research their track record, customer service reputation, and security measures.
2. Security Measures: Implement strong security practices for your demat account, such as using
complex passwords, enabling two-factor authentication, and monitoring account activity
regularly.
3. Understand Fees and Charges: Review and understand the fees and charges associated with
your demat account. Choose accounts with competitive fee structures and avoid unnecessary
expenses.
4. Regular Monitoring: Monitor your demat account statements and transaction history regularly
for any discrepancies or unauthorized activities. Report any suspicious activity to your DP
immediately.
5. Closure Procedures: Understand the procedures and requirements for closing a demat account
if necessary. Ensure all holdings are transferred or sold appropriately before initiating the
closure process.

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 KEY FINDINGS OF THE PROJECTS

Demat Accounts:
• Comparison of different types of demat accounts available to investors.
• Analysis of the process and benefits of converting physical shares to electronic format.
• Evaluation of the security measures and regulatory compliance requirements associated with
demat accounts.

Mutual Funds:
• Examination of the performance of various types of mutual funds (e.g., equity, debt, hybrid)
over a specific period.
• Assessment of the impact of expense ratios and other fees on the overall returns of mutual fund
investments.
• Identification of investor preferences and trends in mutual fund selection based on risk appetite
and investment goals.

Equity Derivatives:
• Overview of different types of equity derivatives (e.g., futures, options) and their applications
in hedging and speculation.
• Analysis of the risk-return profiles of equity derivatives compared to direct equity investments.
• Exploration of trading strategies and market dynamics specific to equity derivatives, including
leverage and volatility considerations.

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 LEARNINGS

Documentation and Record Keeping: Learn the importance of accurate documentation and
record-keeping practices in maintaining demat accounts.
Regulatory Compliance: Understand the regulatory framework governing demat accounts in
India, including guidelines issued by SEBI (Securities and Exchange Board of India) and the
Depositories Act. Learn about KYC (Know Your Customer) norms
Understanding Financial Products: Gain knowledge of demat accounts, mutual funds, and
equity derivatives, including their features, benefits, and practical applications in investment
strategies.
Risk Management: Acquire skills in assessing and managing risks associated with financial
instruments such as equity derivatives, including strategies for hedging and mitigating risk
exposure.
Analytical Skills: Enhance your analytical abilities by conducting research, analysing market
data, and evaluating investment opportunities across different asset classes.
Security Measures: Appreciate the importance of security measures implemented to protect
demat accounts from unauthorized access and fraud.
A practical exposure of financial world.

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 RECOMMENDATION

• Provision for Class Room training for the new investors for the above reason same
thing to boost their moral and to give them something related to the market will help them.
Also, some tips can also be given to these investors during the session as a precaution.

Enhance Client Education and Awareness:

• Develop educational materials and workshops to educate clients about the benefits of
demat accounts, mutual funds, and equity derivatives.

Enhance Customer Service and Support:

• Establish a dedicated customer service team equipped to handle inquiries, resolve issues, and
provide timely support to clients regarding demat accounts and investment-related queries.
Expand Digital Engagement and Services:
• Improve the user experience of online platforms used for managing demat accounts and
trading securities.

Enhanced Client Engagement:

• Develop a client-centric approach with personalized advisory services and educational

workshops.

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 BIBLIOGRAPHY

• https://anandrathi.com/
• https://www.investopedia.com
• Mrs Mayanka Verma (manager)

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