ABOUT US

SMC is one of the leading and experienced brokerage house having its corporate office in Delhi , besides offices in Mumbai, Kolkata and a mammoth network of more than 500 offices spread across the country.

Member of NSE, BSE, F&O, NCDEX, MCX, DGCX, Clearing Member in NSE Derivative Segment & DGCX and ISO 9001: 2000 certified DP for shares and commodities.

We offer large avenues of Investment Solutions, catering to all classes of Investors.

Promoted and lead by a team of professionals having rich experience in the capital markets of more than 15 years.

Providers of one of the best trading platforms to trade in NSE, BSE, NCDEX, MCX and DGCX.

We have the most advanced, hitech inhouse R&D wing equipped with some of the best people, process and technology resources providing complete research solutions on Equity, Commodities, IPOs and Mutual Funds.

SMC has expanded, globally by acquiring Trading & Clearing Membership of Dubai Gold and Commodity Exchange(DGCX).

SMC is contributing one of the highest average daily turnover in NSE, F&O, BSE, NCDEX &MCX.

Dedicated and highly motivated workforce of more than 1000 personnel drawn from diverse academic backgrounds, such as CA, CS, ICWA, M.B.A and IT.

VISION

  

To be a global major in providing complete investment solutions, with relentless focus on investor care, through superior efficiency and complete transparency.  

CORE VALUES

 

 

FOUNDERS & PROMOTERS BEHIND OUR SUCCESS

 

Mr. Subhash Chand Aggarwal Mr. Mahesh Chand Gupta

Mr. Subhash Chand Aggarwal, Chairman and Managing Director of SMC Global Securities Ltd. and Mr. Mahesh Chand Gupta, Chairman and Managing Director of SMC Comex (P) Ltd. are the founders and promoters of SMC. Both are chartered accountants. They are an embodiment of professional excellence. They are the visionaries who planted the sapling of the giant tree called SMC. With rock solid reserve and firm commitment, they have shaped their vision to reality. They have a rich experience of more than 20 years in the capital market. Their exceptional

leadership skills and outstanding commitment has made SMC as one of the leading investment solutions and services provider. They both assign top priority to the principles of transparency, honesty and integrity in all our dealings.

Both of them are professionals to the core. Their specialization in risk management and surveillance and their disciplined style of working is an inspiration to the workforce of SMC. Their experience of the securities as well as the commodity market and their leadership qualities has made SMC a force to reckon with.

 

PRODUCTS AND SERVICES

Equity Trading.

Derivative Trading.

Commodities Trading.

Commodities Trading in International Markets through DGCX.

Mutual Fund & IPO Distribution.

Depository Services (ISO 9001:2000) for Shares & Commodities.

Real time Internet Trading.

Web based accounting.

Research support to the clients through SMS and E-mails.

Clearing Services for Trading Members in NSE F&O and DGCX..  

WHY SMC

Investor care is of paramount importance at SMC.

We offer large avenues of investment solutions for all classes of investors under one roof.

Our experience is one of our prized possession. We have an experience of more than 15 years wherein we have grown phenomenally.

Mammoth network of offices and our nation wide presence, ensures personal touch and easy accessibility to investors across the country.

One of the most competitive brokerage structure.

Hassle free trading experience.

Timely advice along with research support to the clients through SMS and E-MAILS on EQUITIES, DERIVATIVES, COMMODITIES, IPOs and Mutual Funds.

 

 

 

GROWTH

The following bar diagrams show the manifold increase in the client base achieved by SMC in the last few years and also the turnover across securities as well as commodities markets.

 

 

 

 

 

OUR APPROACH

VALUE FOR INVESTOR'S TRUST: We value the trust reposed in us by our clients and are committed to uphold it at all cost.

INTEGRITY AND HONESTY: We at SMC are men of integrity and believe in transparency and discipline.

PERSONALIZED ATTENTION: Our most valued asset is our relationship with the clients, which we have built by giving personalized attention to all our clients.

NETWORK WHICH WORKS: We have a vast network extending to 130+cities but we ensure that it WORKS for the investors in terms of accessibility, convenience and hassle free trading experience.

RESEARCH BASED ADVISORY SERVICES: We offer proactive and timely world-class research based advice and guidance to our clients so that they can take informed decisions.

 

 

 

 

 

Investment at your finge

 

r tips

 

Equity & Derivative Trading

SMC Trading Platform offers online equity & derivative trading facilities for investors who are

looking for the ease and convenience and hassle free trading experience. We provide ODIN Application, which is a high -end, integrated trading application for fast, efficient and reli

able execution of trades. You can now trade in the NSE and BSE simultaneously from any destination at your convenience. You can access a multitude of resources like live quo

tes, charts, research, advice, and online assistance helps you to take informed decisions. You can also trade through our branch network by registering with us as our client. You can

also trade through us on phone by calling our designated representatives in the branches where you are registered as a client.

Clearing Services

Being a clearing memb

er in NSE (F&O, Currency), BSE(F&O, Currency),MCX, MCX-SX, NCDEX,and DGCX. We are clearing massive volumes of trades of our trading members in this segment.

Comm

odity Trading

SMC is a member of 3 major national level commodity exchanges, i.e National Commodity and Derivative Exchange(NCDEX), Multi Commodity Exchange (M

CX) and National Multi Commodity Exchange of India(NMCE) offers you trading platform of NCDEX, MCX and NMCE. You can get Real-Time streaming quotes, place orders and wat

ch the confirmation, all on a single screen. We use technology using ODIN application to provide you with live Trading Terminals. In this segment, we have spread our wings glo

bally by acquiring Membership of Dubai Gold and Commodities Exchange. We provide trading platform to trade in DGCX and also clear trades of trading members being a clearin

g member.

Distribution of Mutual Funds & IPOs

SMC offers distribution and collection services of various schemes of all Major Fund houses and IPOs through its mammoth net

work of branches across India . We are registered with AMFI as an approved distributor of Mutual Funds. We assure you a hassle free and pleasant transaction experience when you invest in

mutual funds and IPOs through us. We are registered with all major Fund Houses including Fidelity, Franklyn Templeton etc. We have a distinction of being leading distributors of

IPOs.Shortly we will be providing the facility of online investment in Mutual Funds and IPOs

Online back office support

To provide robust back office support backed by excelle

nt accounting standards to our branches we have ensured connectivity through FTP and Dotnet based Application. To ensure easy accessibility to back office accounting reports to our

clients, we have offered facilities to view various userfreindly, easily comprehendible back office reports using the link My SMC Account.

SMC Depository

We are ISO 9001:2000 cert

ified DP for shares and commodities. We are one of the leading DP and enjoy the trust of more than 5.5 lacs investors. We offer a quick, secure and hassle free alternative to holding the

securities and commodities in physical form. We are one of the few Depository Participants offering depository facilities for commodities. We are empanelled with both

NCDEX & MCX.

SMC Research Based Advisory Services

Our massive R&D facility caters to the need of Investors, who are continuously in need of opportunities for striking

rich rewards on their investment. We have one of the most advanced, hitech inhouse R&D wing with some of the best people, process and technology resources providing

complete research solutions on Equity, Commodities, IPOs and Mutual Funds. We offer proactive and timely world class research based advice and guidance to our clients so that the

y can take informed decisions. Click on Research to unveil the treasure.

SMC Investor Awareness Forum

Our dedicated team of professionals is conducting investor me

et/seminars across India . We believe that a well-informed investor is an empowered investor. We also seek your feedback on our services in these Investor meets.

Investment at your finger tips

 

 

Equity & Derivative Trading

SMC Trading Platform offers online equity & derivative trading facilities for investors who are looking for the ease and convenience

and hassle free trading experience. We provide ODIN Application, which is a high -end, integrated trading application for fast, efficient and reliable execution of trades. You can no

w trade in the NSE and BSE simultaneously from any destination at your convenience. You can access a multitude of resources like live quotes, charts, research, advice, and online ass

istance helps you to take informed decisions. You can also trade through our branch network by registering with us as our client. You can also trade through us on phone by calli

ng our designated representatives in the branches where you are registered as a client.

Clearing Services

Being a clearing member in NSE (F&O, Currency), BSE(F&O,

Currency),MCX, MCX-SX, NCDEX,and DGCX. We are clearing massive volumes of trades of our trading members in this segment.

Commodity Trading

SMC is a member

of 3 major national level commodity exchanges, i.e National Commodity and Derivative Exchange(NCDEX), Multi Commodity Exchange (MCX) and National Multi Commodity Exc

hange of India(NMCE) offers you trading platform of NCDEX, MCX and NMCE. You can get Real-Time streaming quotes, place orders and watch the confirmation, all on a single scr

een. We use technology using ODIN application to provide you with live Trading Terminals. In this segment, we have spread our wings globally by acquiring Membership of Du

bai Gold and Commodities Exchange. We provide trading platform to trade in DGCX and also clear trades of trading members being a clearing member.

Distribution of Mutual Fun

ds & IPOs

SMC offers distribution and collection services of various schemes of all Major Fund houses and IPOs through its mammoth network of branches across India . We are regi

stered with AMFI as an approved distributor of Mutual Funds. We assure you a hassle free and pleasant transaction experience when you invest in mutual funds and IPOs through us. We are

registered with all major Fund Houses including Fidelity, Franklyn Templeton etc. We have a distinction of being leading distributors of IPOs.Shortly we will be providing the faci

lity of online investment in Mutual Funds and IPOs

Online back office support

To provide robust back office support backed by excellent accounting standards to our branches

we have ensured connectivity through FTP and Dotnet based Application. To ensure easy accessibility to back office accounting reports to our clients, we have offered facilities to view

various userfreindly, easily comprehendible back office reports using the link My SMC Account.

SMC Depository

We are ISO 9001:2000 certified DP for shares and commodities. We

are one of the leading DP and enjoy the trust of more than 5.5 lacs investors. We offer a quick, secure and hassle free alternative to holding the securities and commodities in physical

form. We are one of the few Depository Participants offering depository facilities for commodities. We are empanelled with both NCDEX & MCX.

SMC Research Bas

ed Advisory Services

Our massive R&D facility caters to the need of Investors, who are continuously in need of opportunities for striking rich rewards on their investment. We

have one of the most advanced, hitech inhouse R&D wing with some of the best people, process and technology resources providing complete research solutions on Equity

, Commodities, IPOs and Mutual Funds. We offer proactive and timely world class research based advice and guidance to our clients so that they can take informed decisions. Click

on Research to unveil the treasure.

SMC Investor Awareness Forum

Our dedicated team of professionals is conducting investor meet/seminars across India . We believe that

a well-informed investor is an empowered investor. We also seek your feedback on our services in these Investor meets.

“A journey of a thousand miles always begins with one wise step”Buying and selling of shares is now just a click away with SMC’s state-of-the-art Online Trading facility.

 Avail an unmatched advantage from the SMC E-broking Platform. One of the leading and experienced brokerage houses in India now presents internet based trading services. Now, discover the world-class convenience of investing anywhere, anytime !

 To provide seamless services to our customers we have categorized our services on the basis of our customer’s investment needs. So, choose the Online Trading Account that is best suited to your profile :

 

This account allows you to trade through our website www.smcindiaonline.com and is most suited to Retail investors who are not frequent traders. It is most economical and convenient product for online trading and does not require any software installation. Our website also has a Call n’ Trade Service that enables you to buy and sell shares by

 

This account is ideal for Active traders who transact frequently during day’s trading session to capitalize on intra-day price movements. In this product, real time streaming quotes facility is available on browser interface.

 

 This account is an application based privileged online trading product, which is meant for clients who are actively involved in the stock market and do the bulk trading. It offers comprehensive facilities on a single screen, similar to that of a broker’s terminal, thus providing greater ease and time advantage, to the investors.

calling our Trading Call Center at 011-30111444, extension 333.

 "The National Stock Exchange is not in any manner answerable, responsible or liable to any person or persons for any acts of omission or commission, errors, mistakes and/or violation, actual or perceived, by us or our partners, agents, associates etc., of any of the Rules, Regulations, Bye-Laws of the National Stock Exchange, SEBI Act or any other laws in force from time to time. The National Stock Exchange is not answerable, responsible or liable for any information on this Website or for any services rendered by us, our employees, and our servants.""The Stock Exchange, Mumbai is not in any manner answerable, responsible or liable to any person or persons for any acts of omission or commission, errors, mistakes and/or violation, actual or perceived, by us or our partners, agents, associates etc., of any of the Rules, Regulations, Bye-Laws of the Stock Exchange, Mumbai, SEBI Act or any other laws in force from time to time. The Stock Exchange, Mumbai is not answerable, responsible or liable for any information on this Website or for any services rendered by us, our employees, and our servants."

Trading DemoDistinct Features

Online Fund Transfer. Trade in NSE, BSE and F&O on a single screen. Real Time Streaming Quotes. Instant Order/Trade confirmation in the same window. Online connectivity to Back Office Reports. Online IPO facility. Back up facility to place Trades through our trading call center.

 

 

 Indian Network | Overseas Network 

SMC's diverse network ensures that its investors avail of prompt services whenever they might need them. SMC has a presence in all the major cities of the country. The contact addresses of SMC Regional offices, across India are given below.   

 SMC - CORPORATE OFFICE   

11/6B, Shanti Chamber,Pusa Road,New Delhi-110005Tel.: 91-11-30111000Fax: 91-11-25754365E-mail:smc@smcindiaonline.com

   

 SMC - REGIONAL OFFICES   Delhi-Daryaganj8B, 9B & 17, Netaji Subhash Marg, Daryaganj, New Delhi-110002, Tel.: 91-11-30111333Fax: 91-11-23263297E-mail: smc@smcindiaonline.com

Chennai2A, 2nd Floor, Mookambika Complex No 4, Lady Desikachari Road, Mylapore, Chennai-600004Tel.: 91-44-42108069, 42088256Fax: 91-44-24661798E-mail: mylapore@smcindiaonline.com

Mumbai1st Floor, Dheeraj Sagar,Opp. Goregaon Sports Club,Link Road Malad(W), Mumbai-400064,Tel.: Tel: 91-22-67341600,Fax: Fax: 91-22-28805606,E-mail: smcmumbai@smcindiaonline.com

Kolkata18, Rabindra Sarani, Poddar Court, Gate No-4,4th Floor, Kolkata-700001Tel.: 91-33-39847000Fax: 91-33-39847004Email: kolkata@smcindiaonline.com

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COMMODITY GLOSSARY

AAGDP – Agricultural Gross Domestic Product.

AGMARK: Agricultural Marking.

Arbitrage: Simultaneous buying and selling of the same asset in different markets in order to capitalize on variations in price between those markets .

Ask price: Lowest price at which a dealer is willing to sell a commodity.

Assayer: Assayer is an authorized entity (person/institution) that certifies and grades the commodities that are delivered in exchange accredited warehouses.

BBackwardation: In futures market, when a commodity is in shortage, causing near month contract to sell at a premium and distant month contract to sell at a discount i.e. spot price of the commodity is higher than the forward price.

Bandhani: An Indian form of trading in which the contract price is not allowed to go beyond floor and ceiling prices, set on the first day, throughout the life of the contract, thus restricting excessive volatility.

Basis: Basis is price difference between a cash contract and a futures contract.

Beneficiary Account: A beneficiary account is a Demat account in the name of an Individual (single or jointly). Such an account could also be in the name of a Corporate, a partnership firm, a society and a trust. It is similar to a bank account. This account is to be used for transacting in commodity balances held by the account holder at Exchange accredited warehouses. These commodity balances would have been – in a physical process set up – represented through a warehouse receipt.

Bid Price: The highest price at which a dealer is willing to buy commodities .

Bid – Offer/Ask spread: The difference between the price at which a dealer is willing to buy ( Bid ) and sell ( Offer/Ask ) a commodity .   Bid will be lower of the two prices and offer price the higher. Also known as impact cost.

BIS: Bureau of Indian Standards.

Bullion: The generic word for gold and silver.

Buying forward: Buying commodities at a specified price for delivery at a future date.

CCash commodity: The actual physical product on which a futures contract is based. This product can include agricultural commodities, financial instruments and the cash equivalents of index futures.

Close out price: Close out price is the rate at which settlement of short delivery of commodities is completed.

Closing Price: The price at the end of the day's trading on a commodity market.

Commodity: A physical substance, such as food, grains, and metals, which is interchangeable with other products of the same type.

Commodity Deposit Form (CDF): The client has to fill up the Commodity Deposit Form (CDF) and submit the same to the warehouse along with the assayer's report after which the assayer gives a report of the quality of the commodities .The Commodity Deposit Form is available with the warehouse.

Commodity exchange: A commodity exchange is an association, or a company or any other body corporate organizing futures trading in commodities.

Commodity spreads (or straddles): Commodity spreads measure the price difference between two different contracts, usually futures contracts.

Contango: Market scenario when the forward price of a commodity is higher than the spot price.

Convergence: The tendency of difference between spot and futures contract to decline continuously, so as to become zero on the date of maturity.

CCI - Cotton Corporation of India

CIF - Cost, Insurance & Freight

DDelivery: The tender and receipt of the actual commodity or in the case of agricultural commodities, warehouse receipts covering such commodity, in settlement of a futures contract. Some contracts settle in cash (cash delivery), in which case open positions are marked to market on the last day of the contract based on the cash market close.

Delivery date:  The day in the month that commodities on a futures contract have to be delivered.

Delivery month: Specified month within which delivery may be made under the terms of a futures contract.

Delivery notice: A notice of a clearing member's intention to deliver a stated quantity of a commodity in settlement of a short futures position.

FF.A.O . - Food and Agriculture Organisation

FCI - Food Corporation of India

FMC: Forward Market Commission is the Regulatory Authority in India for commodity futures trading.

Forward price: The fixed price at which a specified amount of a commodity is to be delivered on a fixed date in the future.

FREIGHTEX: Freightex is an index on NCDEX that represents simple average of the freight rates per tonne across high-density routes for a distance of 1000 kilometers.

FUTEXAGRI: Futexagri is an equal- weighted index of commodities traded on NCDEX based on the price of near month future contracts.

Futures contract: An agreement to buy or sell a fixed quantity of a specified commodity , for delivery at a fixed date in the future at a fixed price.  Futures contracts are standardised agreements traded on Futures Exchanges.

G

GDP - Gross Domestic Product

GNP - Gross National Product

IICAR: INDIAN COUNCIL OF AGRICULTURAL RESEARCH.  

IFFCO: Indian Farmers Fertiliser Cooperative Limited.

ISIN: ISIN is the Commodity Identification Number by which each commodity along with its specific details is uniquely represented.  

MMCX: Multi Commodity Exchange of India is a de-mutualised online commodity exchange of India promoted by Financial Technologies (I) Ltd, SBI, Fidelity International, NSE, NABARD, HDFC Bk, SBI Life Insurance Co., Union Bank of India, Canara Bk, Bank of India, Bank of Baroda and Corporation Bank.

MSCCGMF - Maharashtra State Co-operative Cotton Growers Marketing Federation.  

MSP - Minimum Support Prices.

NNABARD: National Bank for Agriculture and Rural Development.

NAFED - National Agricultural Co-operative Marketing Federation of India Limited.

NBOT: National Board of Trade (NBOT) is a national multi-commodity exchange located at Indore.

NCDEX: National Commodity and Derivative Exchange of India is a de-mutualised online commodity exchange of India promoted by NSE, ICICI Bk, LIC, PNB, CRISIL, NABARD IFFCO and Canara Bk.

NCDEXRAIN: NCDEXRAIN is a rainfall index of NCDEX which tell us what percentage of cumulative normal expected rainfall (till the date of the index) it has actually rained taking into consideration average actual rainfall at both Colaba and Santa Cruz weather stations in Mumbai.  

NMCE: National Multi Commodity Exchange is the first De-Mutualised Electronic Multi-Commodity Exchange of India located at Ahmedabad was granted the National status on a permanent basis by the Government of India and operational since 26th November 2002.

NNP - Net National Product

OOffer price: Lowest price at which a dealer is willing to sell a commodity.

OCEIL: Online Commodity Exchange India Ltd. is a national multi-commodity exchange located at Ahmedabad.

Open interest: The number of open or outstanding contracts on a commodity exchange for which the holders are still obligated to the commodity exchange concerned. No offsetting sale or purchase has yet been made against it. Open interest is used as an indicator of the level of commercial activity in a particular futures contract.

Open position: A long or short trading position that is not yet closed.

PPDS: Public Distribution System.

Pool Account:? Member pool account is a Demat account opened by Trading Members and / or Clearing Members of commodity exchanges. This account is opened to facilitate the pay-in and payout process .

RRally:  A considerable rise in the value of a commodity market after a decline.

SShort position: Position resulting from a short selling strategy.

Short selling: A strategy in which a speculator sells a commodity that he or she does not own in order to profit from a falling market.  The speculator will borrow the commodity from a third party and then immediately sell on to the buyer .

Speculator: A trader who takes an outright long or short position in the market.

Spot market: A market in which commodities are bought and sold for cash and immediate delivery.

Spread: The difference between current bid and offer ( ask ) prices for a commodity. 

Settlement date: The date on which a contract must be fully paid for and delivered.

Settlement price: In futures markets, the price that is set by the exchange at the end of each trading day and which is used by the clearing house to market open positions and assess margin calls.

TTrade date: The date on which a trade is executed for a specified value date  

UUnique Client Code: This code is allotted to all members of exchange that will tell you about all details of clients.

WWarehouse receipt: A warehouse or depository receipt is issued when delivery takes place on a commodity exchange. It specifies the grade and quantity of commodities.

COMMODITY TRADING FAQ

What are commodity exchanges?  

Commodity exchanges are institutions, which provide a platform for trading in ‘commodity futures' just as how stock markets provide space for trading in equities and their derivatives. They thus play a critical role in robust price discovery where several buyers and sellers interact and determine the most efficient price for the product. Indian commodity exchanges offer trading in ‘commodity futures' in a number of commodities. Presently, the regulator, Forward Markets Commission allows futures trading in over 55 commodities. There are 3 national level and 18 regional level commodity exchanges in India .

Trading Commodity Futures. A Timeline -------

1875        Bombay Cotton Trade Association Established

1900        Future Trade in Oil Seeds Started

1920        Gold and Silver Futures Trading started in Bombay

1939        Cotton Derivatives banned by Government

1952        FCRA passed, ban on cotton futures removed

1953        Forward Market Commission Established

1955        Gold and Silver futures trading banned by Government

1980        Govt. removed ban on selected commodities like cotton, Jute, potatoes etc.

1994        Kabra Committee recommended removal of ban on futures trading for most commodities

2001        Govt. extended the list of commodities allowed for futures trading.

2003        NCDEX&MCX established.

What are the benefits in futures trading in commodities in Exchanges?

Base Value can never be Zero (or negative) i.e Low risk as compared to Equitites. Provides the best opportunity mainly Gold and Silver to hedge against Inflation and Calamities. Futures trading in commodities results in transparent and fair price discovery on account of large scale participations of entities associated with different value chains and reflects views and expectations of wider section of people related to that commodities. This also provides effective platform for price risk management for all segments of players ranging from the producers, the traders, processors, exporters/importers and the end users of the commodity. Commodity as a portfolio diversifier: Commodity as an asset class possesses low correlation with equity and debt markets which makes it attractive as a portfolio diversifier. Also, long term volatility witnessed in commodity markets is lower than those witnessed in equity markets.

What are the unique features of national level commodity exchanges?

The unique features of national level commodity exchanges are:

They are demutualized, meaning thereby that they are run professionally and there is separation of management from ownership. The independent management does not have any trading interest in the commodities dealt with on the exchange. They provide online platforms or screen based trading as distinct from the open outcry systems (ring trading) seen on conventional exchanges. This ensures transparency in operations as everyone has access to the same information. They allow trading in a number of commodities and are hence multi-commodity exchanges. They are national level exchanges which facilitate trading from anywhere in the country. This a corollary of being an online exchange.

Which are the major regional commodity exchanges in India ?

BATINDA COMMODITY & OIL EXCHANGE LTD. THE BOMBAY COMMODITY EXCHANGE THE RAJKOT SEEDS OIL AND BULLION MERCHAT THE KANPUR COMMODITY EXCHANGE THE MEERUT AGRO COMMODITY EXCHANGE THE SPICES AND OILSEEDS EXCHANGE (SANGI) AHEMDABAD COMMODITY EXCHANGE VIJAY BEOPAR CHAMBER LTD. (MUZAFFARNAGAR) INDIA PEPPERS AND SPICE TRADE ASSOCIATION ( KOCHI ) RAJDHANI OILS AND SEEDS EXCHANGE ( DELHI ) THE CHAMBER OF COMMERCE (HAPUR) THE EAST INDIA COTTON ASSOCIATION (MUMBAI) THE CENTRAL COMMERCIAL EXCHANGE ( GWALIOR ) THE EAST INDIA JUTE & HESSIAN EXCHANGE OF INDIA (KOLKATA) FIRST COMMODITY EXCHANGE OF INDIA ( KOCHI ) BIKANER COMMODITY EXCHANGE LTD. ( BIKANER ) THE COFEE FUTURE EXCHANGE LTD. ( BANGALORE ) E SUGAR INDIA LTD. (MUMBAI)

Which are the most prominent commodity exchanges across the world?

1. Chicago Board of Trade (CBOT ) 2. Chicago Mercantile Exchange (CME)

3. New York Board of Trade (NYBOT)

4. New York Mercantile Exchange (NYMEX)

5. London Metal Exchange (LME)

6. London International Financial Futures Options Exchange (LIFFE)

7. The Tokyo Commodity Exchange (TOCOM)

8. Kuala Lumpur Commodity Exchange (KLCE)

9. Bursa Malaysia Derivatives Exchange.

Who are the likely participants in the market?

Primarily there are three classes of participants viz., Hedgers, Speculators andArbitrageurs.

HEDGER: Hedging is buying and selling futures contracts to offset the risks of changing underlying market prices. Thus, it helps in reducing the risk associated with exposures in underlying market by taking a counter- positions in the futures market. For example, the hedgers who either have security or plan to have a commodity is concerned about the movement in the price of the underlying before they buy or sell the commodity . Typically, he would take a short position in the Futures markets, as the cash and futures price tend to move in the same direction as they both react to the same supply/demand factors.

SPECULATOR: A person who trades commodities, with a higher-than-average risk, in return for a higher-than-average profit potential. Speculators take large risks, especially with respect to anticipating movements, in the hopes of making quick, large gains.

ARBITRAGEUR: Since the cash and futures price tend to move in the same direction as they both react to the same supply/demand factors, the difference between the underlying price and futures price is called as basis. Basis is more stable and predictable than the movement of the prices of the underlying or the Futures price. Thus, arbitrageur would predict the basis and accordingly take positions in the cash and future markets.

Hedgers

Producers – farmers Consumers – refineries, food processing companies

Speculators

Brokerage houses Retail investors

People involved in commodity spot trading

Arbitrageurs

Brokerage houses People trading in commodity spot markets

Warehousing companies

What are spot and futures prices?

Spot price is the price in the cash market (where one buys and sells goods ‘on the spot' just as we make purchases from a shop by paying cash) while future prices are prices of the same commodity at a future date. Therefore, if the spot price of gold is Rs 6000/10 gms today, the 1-month future price would be Rs 6050, while the 2-month future price would be Rs 6100. The difference between spot and futures prices is the cost of carry i.e. interest cost, storing, insurance etc. Normally futures prices are higher than spot prices. The exception is when the futures prices are lower than the spot price, which is called ‘backwardation'. This situation is more common in case of agricultural commodities where due to the arrival of crop on certain future dates, the future prices would be lower than the current spot price.

How do I begin? Please Explain in brief.

To begin trading in commodity futures you must:

Select a broker: A trustworthy, reliable, efficient, effective, innovative broker, having membership of both the exchanges (MCX and NCDEX) would be in your interest. Information about self: Having selected us as your broker, you will be asked to provide information that is personal and financial. A member client agreement would be signed between the broker and yourself.

Depositing the margin: In order to trade futures contracts, you have to deposit margins in cash with us. There are two types of margins namely, initial margin and mark to market margin  

1. Initial margin: Initial margin is set by the exchange on basis of volatility in the particular commodity and is a percentage of the contract.

2. Mark to market margin: At the end of the day, the contract is marked to market, meaning your account is credited or debited based on the profit / loss made during the session.

Resarch: Its important that the client has access to necessary information for trading in commodities. Futures are time-based products and not long term investments. Hence, they are sensitive to day to day happenings in the global markets. It is required that you are well informed about the developments in specific commodities across the world and also in India.

Explain in detail about the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX)?

The following points explain you at length about NCDEX&MCX.

NCDEX is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It has commenced its operations on December 15, 2003.

NCDEX is a nation-level, technology driven de-mutualized on-line commodity exchange with an independent Board of Directors and professionals not having any vested interest in commodity markets. It is committed to provide a world-class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency.

NCDEX is regulated by Forward Market Commission in respect of futures trading in commodities. Besides, NCDEX is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations, which impinge on its working.

NCDEX is located in Mumbai and offers facilities to its members in more than 550 centres

throughout India . The reach will gradually be expanded to more centres.

Online Screen based Future Trading in about 45 Commodities presently.

More than 100 commodities proposed in near future.

Daily average turnover of more than Rs. 4, 000 Crores.

Daily average turnover expected to be more than Rs.16, 000 Crores in a years time and more than Rs. 25,000-30,000 Crores in 4-5 years.

Excellent hedging tools against price risk.

All trades backed by Trade Guarantee Fund of respective commodity exchanges thus almost no risk of default.

Worldwide largest consumer of traditional form of investment.

Low margins on trade as compared to equity market.

Online spot trading, future trading in option and commodity indices are also to be introduced in near future.

Delivery in Demat Form.

About MCX

MCX an independent and de-mutulised multi commodity exchange has permanent recognition from Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country. Key shareholders of MCX are Financial Technologies ( India ) Ltd., State Bank of India, HDFC Bank, State Bank of Indore, State Bank of Hyderabad, State Bank of Saurashtra, SBI Life Insurance Co. Ltd., Union Bank of India , Bank of

India , Bank Of Baroda, Canara Bank, Corporation Bank.

Headquartered in Mumbai, MCX is led by an expert management team with deep domain knowledge of the commodity futures markets. Through the integration of dedicated resources, robust technology and scalable infrastructure, since inception MCX has recorded many first to its credit.

Inaugurated in November 2003 by Shri Mukesh Ambani, Chairman & Managing Director, Reliance Industries Ltd, MCX offers futures trading in the following commodity categories: Agri Commodities, Bullion, Metals- Ferrous & Non-ferrous, Pulses, Oils & Oilseeds, Energy, Plantations, Spices and other soft commodities .  

What are the margin requirements?

INITIAL MARGIN

Initial margin based on “Value at Risk” Model (VaR) to estimate worst loss that can happen for a time horizon 99% confidence level SPAN® is the system used for margin calculation. Volatility is one of the inputs to the SPAN calculationsEWMA/ J.P.Morgan Risk Metrics methodology for calculation of volatility will be adopted. Similar procedure is followed in most international exchanges like CBOT, CME, NYMEX, NYBOT, TOCOM, LME, LIFFE

Minimum Initial Margin for each commodity traded by the Client.

Mark- to- market Margin

All open positions will be marked-to-market at the daily settlement price at the end of the day Client has to bring mark-to-market (MTM) margin to be through funds transfer the next day.  

What are the types of Settlement?

This is diagrammatically explained below:

Q. Explain the settlements mechanism in the commodity markets?

 

 

Explain the Settlement Scenarios?

The following flowchart explains the probable scenarios.

Q. How do I calculate memberwise and clientwise open positons?

Have a look at the table:

 

  Member A Member B

 Client 1 Client 2 Client 3

Contract X Contract Y Contract X Contract Y

Day 1 400 S 700 B 400 S 200 B 500 S

Day 2 - 400 S 400 B 200 B  

Date of Expiry 400 S 300 B - 400 B 500 S

OPEN POSITION Contract X 400 S Contract Y 400 B

Contract Y =500 S- 400 B =100 S

 

Q. Explain the Delivery Process.

Procedures for Delivery :

– Open a Beneficiary Demat account

Information required for Delivery :

– Commodity code

– Quantity

– Location/branch preference for physical receipt/delivery of commodities

– Demat IndicatorDelivery process requires

Delivery process requires:

– Delivery information submitted on Expiry date.

– This is done through the delivery request window on the Trading Terminal.

– Matching delivery information is obtained.

Validation of delivery information:

– On Client’s Net Open Position

– On Delivery lot for commodity

– Excess quantity rejected and cash settled.

– Matched delivery information.

Matching parameters:

– Commodity

– Quantity

– Location

– Branch

– Matching limited to the total warehouse capacity

– Settlement through Depository.

– Settlement Schedule in Settlement Calendar.

Q. Explain the settlement pay-in and pay-out mechanism.

Pay-in

• Commodities

– Seller ensures Demat of commodities prior to Pay-in

– Instruction to DP by seller to move commodities to Clearing Member Pool Account

– Pay-in of commodities on Settlement Date thru Clearing member pool account

• Funds

– Pay-in of funds – Thru the Clearing bank of the Member on the Pay-in day.

Pay-out

• Commodities

– Credit given into the Buyer member CM Pool A/c

– Instruction by Member to transfer from CM pool to buyer client’s Demat account

– Subsequent Remat of commodities and physical movement handled by buyer

• Funds

– Funds pay-out is done into the designated bank account of the Member with the Clearing bank.

Ipo faq

  IPO CLASS ROOM    

 

   

 

 

Master Students

Alright, we all know that to meet the requirement of fund for various purposes like for a new expansion project, working capital requirement, to pay off debt, to enhance the production capacity, product diversification or replacement of machinery, etc., the company searches various sources of financing.

Sir, today's discussion is on IPO i.e. Initial Public Offering, but before discussing that topic, we are eager to know basic background of it.

“ Source of financing ” means from where fund can be raised.

Try to understand the tree chart given below;

Whenever a company needs funds, it finds generally two ways to raise funds i.e. to raise debt and second is to raise equity.

The debt capital of a company may consist of either Debenture or Bonds, which are issued to the public for subscription, or Term loan, which are obtained directly from the banks and financial institutions.

No., SEBI has not given the definition of issue. But the company Act, 1956, tell us; “ an issue becomes public if its results in allotment to more than 50 persons ”

Then it becomes “Private Placement”

Initial Public Offering (IPO) is an offer by an unlisted company by either a fresh issuance of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer's securities.

What do you mean by source of financing???

Sir, we are not clear about it ….

Explain a little regarding debt…

SEBI has defined the term “ISSUE”……..

If issue results in allotment to less than 50 persons …then…

What is the Initial Public Offering?

What is Right Issue? Sir….

Rights Issue (RI) is a process of raising funds when a listed company proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP). guidelines which inter-alia include pricing, disclosures in notice etc.

A Follow On Public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

What is Preference Issue?…. sir

What is FPO…Sir?

Any company can bring IPO in the market. Is it right Sir?

No, it is wrong, SEBI has laid down eligibility norms for accessing the primary market through IPO.

Yes, SEBI (DIP) guidelines have provided certain exemptions from the eligibility norms. The following are eligible for exemption from entry norms.

•  Private Sector Banks

(b) Public sector banks

(c) An infrastructure company whose project has been appraised by a PFI (Private Finance Initiative) or IDFC or IL&FS or a bank which was earlier a PFI and not less than 5% of the project cost is financed by any of these institutions.

There is no eligibility norms for a listed company making a Right Issue as it is an after made to the existing shareholders who are expected to know about their

Any entity can be out of these three norms to access primary market?

Is there any norm for Rights Issue? ……

company.

Maximum amount of Issue size has been told previously in the Entry Norms:I of Primary Market. Whereas minimum amount of issue size of a company making a public issue or a listed company making a rights issue of value of more than Rs.50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI's observation letter is three months only ie. the company has to open its issue within three months period.

After three months, observation letter will be invalid; thereafter company can not open the issue for public subscription.

The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. Many amendments have been carried out in the same in line with the market dynamics and requirements. In 2000, SEBI issued “Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000” which is a compilation of all circulars organized in chapter forms. These guidelines and amendments thereon are issued by SEBI India under section 11 of the Securities and Exchange Board of India Act, 1992. SEBI (Disclosure and investor protection) guidelines 2000 are in short called DIP guidelines. It provides a comprehensive framework for issuances by the companies.

To gain full knowledge regarding the Draft Offer Document, you should know the differences among Offer Document, Draft Offer Document, RHP, and an Abridged Prospectus.

Is there any guideline regarding minimum and maximum amount of issue size?……

If any company does not open its public issue within three month after getting observation letter from SEBI, Then what SEBI does for it! sir…

Sir, whenever you talk on SEBI, you refer to “DIP” guidelines. Tell us something about it.

Sir, You said that the company making a public issue or listed company making a right issue is required to file a Draft Offer Document. Sir, what is the Draft Offer Document?

 

“Abridged Prospectus” means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.

To get a clear picture about it, you should know the intermediaries in an Issue and role of a lead manager in Pre and Post Issue.

In the course of conversation, we are realizing, in the issue process Lead Managers play an important role, but we are still in the dark about the presence of Lead Manger. Who are they, why they come, and what kind of role they play in the issue networld. Please pave the way……

But the merchant bankers shall be responsible for ensuring that these agencies appointed by them fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company .

A Merchant banker possessing a valid SEBI registration in accordance with the SEBI (Merchant Bankers) Regulations, 1992 is eligible to act as a Book Running Lead Manager to an issue.

The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‘Underwriter' as syndicate

Who are BRLM???

Who are Syndicate Members?…..

members. The syndicate members are mainly appointed to collect the entire bid forms of the issue.

 

Master Students

It is available on our site (www.smcindiaonline.com). In addition to this, SEBI brings out a monthly bulletin that is available at bookstores. A digital version of the same is available on the SEBI website under the “News/Publications” section. The Bulletin contains all the relevant historical figures of intermediary issue and intermediary particulars during the given period placed against historical figures.

Lets have an Example.

Offer Price Opening Date Closing Date Lot Size (nos in Shares)

Suni Hitec Ltd 100 1st Feb 8th Feb

Suzlon Energy Ltd 490-510 2st Feb 9th Feb

No at all… As per Clause 8.8.1, Subscription list for public issues shall be kept open for at least 3 working days and not more than 10 working days. In case of Book built issues, the minimum and maximum period for which bidding will be open is 3 – 7 working days extendable by 3 days in case of a revision in the price band. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days. As per clause 8.8.2., Rights issues shall be kept open for at least 30 days and not more than 60 days.

The issue of Sunil Hitech Ltd is called “Fixed Price Offer” and the issue of Suzlon Ltd comes under “Price discover through book building Process”. The offer price range of Suzlon Energy Ltd is called Price Band. But always price brand of the issue does not refer to the issue under book building, you have to confirm whether issue is under book building or fixed pricing offer through Red Herring Prospectus. You can see practical example of Sakuma

Sir, in the first class, we have discussed the brief overview of IPO / FPO, now we are willing to see IPO/ FPO from the point of view of investor.

Where can one get data on primary issues? (Issuer, Total Issues, Issue Size, The Intermediaries, etc., during a given period)

It is compulsory; issue will remain open for 7 days…..

Sir, we see offer price of Sunil Hitech is Rs.100 but offer price of Suzlon Energy Ltd is Rs.490 and Rs.510. We are not clear about it.

Exports Limited.

An issuer company is allowed to freely price the issue. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI / ROCs.

“ Book Building ” means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover price for securities.

Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at ‘cut-off'. After the bidding process is complete, the ‘cut-off' price is arrived at on the lines of Dutch auction. The basis of Allotment is then finalized and letters allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process.

As the red herring prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen

What is the Fixed Price Offer?….

What does “price discovery through book building process” mean?

How does Book Building work???

What is Price Band?…

days.

It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.

In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut off price”. This is decided by the issuer and LM after considering the book and investors' appetite for the stock. SEBI (DIP) guidelines permit only retail individual investors to have an option of applying at cut off price.

See the Example:

  Cut off Price

Sunil Hitech Ltd 100

Suzlon Energy Ltd. 510

After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIBs), Retail, etc. The over subscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The over subscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.

The allotment to the Qualified Institutional Buyers (QIBs) is on a discretionary basis. The discretion is left to the Merchant Bankers who first disclose the parameters of judgment in the Red Herring Prospectus. There are no

Who decides the price Band?….

Sir, you told “only the Retail Investors have the option of bidding at “Cut Off” price.” What does it mean? Sir…

Sir, we are not clear about basis of Allotment in the process of book Building. Please clarify it….

Sir, is there any preference while doing the allotment?…..

objective conditions stipulated as per the DIP Guidelines. The Merchant Bankers are free to set their criteria and mention the same in the Red Herring Prospectus.

On the other hand, In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) are in the ratio of 35: 15: 50 respectively.

In case the book built issues are made pursuant to the requirement of mandatory allocation of 60% (Norm II of Entry to the primary market) to QIBs in terms of Rule 19(2)(b) of SCRR the respective figures are 30% for RIIs and 10% for NIIs. This is a transitory provision pending harmonization of the QIB allocation in terms of the aforesaid Rule with that specified in the guidelines.

Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional Buyer' shall mean:

a. Public financial institution as defined in section 4A of the Companies Act, 1956;

b. Scheduled commercial banks;

c. Mutual funds;

d. Foreign institutional investor registered with SEBI;

e. Multilateral and bilateral development financial institutions;

f. Venture capital funds registered with SEBI.

g. Foreign Venture capital investors registered with SEBI.

h. State Industrial Development Corporations.

i. Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA).

j. Provident Funds with minimum corpus of Rs.25 crores

k. Pension Funds with minimum corpus of Rs. 25 crores)

Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.

How is QIB defined as?…..

How is the Retail Investor defined as?

‘Retail individual investor' means an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000.

A company making an issue to public can reserve some shares on “allotment on firm basis” for some categories as specified in DIP guidelines. Allotment on firm basis indicates that allotment to the investor is on firm basis. DIP guidelines provide for maximum % of shares, which can be reserved on firm basis. The shares to be allotted on “firm allotment category” can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.

Reservation on Competitive Basis is when allotment of shares is made in proportion to the shares applied for by the concerned reserved categories. Reservation on competitive basis can be made in a public issue to the Employees of the company, Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company, Indian Mutual Funds, Foreign Institutional Investors (including non resident Indians and overseas corporate bodies), Indian and Multilateral development Institutions and Scheduled Banks.

For getting IPO/ FPO form you can get it from SMC Premises in Kolkata, Delhi , Mumbai, and many other States,(Please log in www.smcindiaonline.com for further details.). In addition , the form for applying/bidding of shares is available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue.

As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in the dematerialized form. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.

What is the firm allotment in book building Process?

Can the company making public offer of FPO reserve the portion of the issue on competitive basis?

We are clear about the issue price and book building process, now we can confidently invest in the IPO/FPO. Where can I get a from for applying or biding for the share?

Is it compulsory for me to have a Demat Account?

The procedure of open a Demat A/C is available on our site (www.smcindiaonline.com) .The FAQs relating to demat have been covered in the Investor Education section of the SEBI website in a separate head. They are available on the http://investor.sebi.gov.in/faq/dematfaq.html.

A company proposing to issue capital to public through the on-line system of the stock exchange for offer of securities can do so if it complies with the requirements under Chapter 11A of DIP Guidelines. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process. An investor may place his/her bids through the online terminal offered by the some of the brokers.

Yes. The investor can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing of revising the bids shall be completed within the date of closure of the issue.

No, Syndicate Member cannot receive outstation cheque with the form of an IPO/FPO. Investor can draw “DD” or Cheque, which is “At Par”.

The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. The investor can retain this as a sufficient proof that the bids have been taken into account.

In case of fixed price issues, the investor is intimated about the CAN (Confirmatory Allotment Note)/Refund order within 30 days of the closure of the issue. In case of book built issues, the basis of allotment is finalized by the Book Running lead Managers within 2 weeks from the date of closure of the issue. The registrar then ensures that the demat credit or refund as applicable is completed within 15 days of the closure of the issue. The listing on the stock exchanges is done within 7 days from the finalization of

What is the procedure for opening a demat account?

What is e-IPO?

Can I change / Revise my bid”?

Can Syndicate Member/Trading Member receive outstation cheque for applying shares of an IPO / FPO?

What proof can bidder request from a trading member or a syndicate member for entering bids?

Can I know the number of shares that would be allotted to me?

the issue.

In the case of book-built issues, the exchanges (BSE/NSE) display the data regarding the bids obtained (on a consolidated basis between both these exchanges). The data regarding the bids is also available category wise. After the price has been determined on the basis of bidding, the statutory public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued.

The investor is entitled to receive a Confirmatory Allotment Note (CAN) in case he has been allotted shares within 15 days from the date of closure of a book Built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book built issue.

The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally, it would be around 3 weeks after the closure of the book built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.

Most of the issue complaints pertain to non-receipt of refund or allotment, or delay in receipt of refund or allotment and payment of interest thereon. These complaints shall be made to the post issue Lead Manager, who in turn will take up the matter with registrar to redress the complaints. In case the investor does not receive any reply within a reasonable time, investor may complain to SEBI, Office of investors Assistance.  

Master Students

Which are the reliable sources for me to get information about response to issues?

How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?

How long will it take after the issue for the shares to get listed?

What is the recourse available to the investor in case of issue complaints?

Today's discussion is on IPO Model: Part III, basically in this section we are going to discuss research part of IPO generally done by one analyst to find out best issue.

We are totally unaware in this part. Kindly discuss this matter from the basic background of analysis particularly in case of IPO Analysis ……

Ok, All right, we have already discussed the basic background of issue (IPO/FPO) and investor awareness regarding IPO/FPO in full swing. Now what we are going to discuss that is no required to know for general investor but, on the other hand, an analyst should have depth knowledge of previous two sections, otherwise all efforts of discussion in this section will not bear any fruitful results in real sense.

Our agenda of this module will be like that:

However, an analyst should be very clear some terms which she / he may come across can see while doing analysis of an IPO / FPO in their professional practice.

Factors to be considered by an analyst while doing research.

At first he/she can download draft offer document. The draft offer documents are put up on the website of SEBI under Reports/Documents section. The final offer documents that are filed with SEBI/ROC are also put up for information under the same section. Copies of the draft offer documents in hard copy form may be obtained from the office of SEBI, Mittal Court, ‘A' wing, Ground Floor, 224, Nariman Point, Mumbai – 400021 on a payment of Rs.100 or from SES, LMs etc. The soft copies can be downloaded from the SEBI website under Reports/Documents section. Some LMs also make it available on their web sites for download. The final offer documents that are filed with SEBI/ROC can also be downloaded from the same section of the website of SEBI.

The SEBI Manual is a SEBI authorized publication that is a comprehensive databank of all relevant Acts, Rules, Regulations and Guidelines that are related to the functioning of the Board. The details pertaining to the Acts, Rules, Regulations, Guidelines and Circulars are placed on the SEBI website under the “Legal Framework” section. The periodic updates are uploaded onto the SEBI website regularly.

SEBI does not recommend any issue nor does it take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document.

How analyst can start his analysis?

Sir, if an analyst wants to get details of Rules and Regulation of SEBI regarding the issue. Can analyst get it?…

Does SEBI recommend an issue?

The document is prepared by an independent specialized agency called Merchant Banker, which is registered with SEBI. They are required to do through due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. In case, analysts have any information about the issuer or its directors or any other aspect of the issue, which in analysts' view is not factually reflected, analysts may send their complaint to Lead Manager to the issue or to SEBI, Division of Issues and Listing.

The Lead Managers state that they have examined various documents including those relating to litigation like commercial disputes, patent disputes, disputes with collaborators etc. and other materials in connection with the finalization of the offer document pertaining to the said issue; and on the basis of such examination and the discussions with the Company, its Directors and other officers, other agencies, independent verification of the statements concerning the objects of the issue, projected profitability, price justification, etc., they state that they have ensured that they are in compliance with SEBI, the Government and any other competent authority in this behalf.

Such as…… Underwriter agreement, Green Shoe option..

Generally two types of agreement can be heard in the market i.e. Hard Underwriting, and Soft Underwriting.

Hard Underwriting

Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk, which is much higher in soft underwriting.

 Soft underwriting

Soft underwriting is when an underwriter agrees to buy the

What is the amount of faith that an analyst can lay on the contents of the documents? And whom should analyst approach if there is any ambiguity?

What is the due diligence?

What is the underwriter agreement?

Sir, you told us in the beginning of the lecture, investor should know some terms generally used in red herring prospectus; what are these?….

shares at later stages as soon as the pricing process is complete. He then, immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond the control that can affect the underwriter's ability to place the shares with the buyers.

This is mechanism for stabilizing post-listing price of the issue. To understand Green Shoe Option process is of great important for an analyst. At first I would like to clarify or present it from the reason of applying it.

The cause of applying Green shoe Option

The management of the issuer is not so confident about issue price what they are claiming from the investors due to high offer price compared to the peer groups in the market.

See an Example:

Company Price Market Cap. (Rs.inCr.)

Shree Renuka Sugars Limited 300* 700**

Bajaj Hindustan Ltd 214.45 2494.78

Balramopur Chini Mill Ltd 89.85 2082.74

*Price brand 250-300 ,**Estimated

You see, Shree Renuka sugars Ltd is claming high price against the lower market capitalization from the market compared to share price and market capitalization of its peer group. As a result the management of the issuer (Shree Renuka Sugars Ltd) exercises the Green Shoe Option under chaper VIII A of the SEBI Guidelines.

Green Shoe Option is!

A Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP Guidelines, which is granted to a company to be exercised through a Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size.

Let's understand the framework of exercise of Green Shoe Option…

What is the Green Shoe Option? Sir…

See further clarification of Green Shoe Option.

Issuer appoints Green Shoe Lender and Stabilizing Agent. (Say SRSL has appointed JM Morgan Stanley Private Limited as stabilizing agent for performance of the role of stabilizing agent And Murkumbi Industries Private Limited as Green Shoe Lender.)

Issuer makes stabilizing agreement with Green Shoe Lender and Stabilizing Agent in respect of fees of Stabilizing Agent and Green Shoe Lender other is quantity of loaned shares in numbers from Green Shoe Lender (if need). (See an example of Sree Renuka Sugars Limited)

Stabilizing agreement with Green Shoe Lender and Stabilizing Agent .

 

Post the bid/Issue closing date; the company in consultation with the BRLM shall take a decision relating to the exercise of the Green Shoe Option.

In the event, it is decided that the Green Shoe Option shall be exercised, the company in the consultation with the Stabilizing agent, shall make over allotment.

The allocation of overallotment share shall be pro rata with respect to the proportion of allotment in the issue to various categories (see an example, 60:10:30 =QIB: NIB: Retailer has been

predefined in the Green Shoe Option section in RHP of Renuka Sugars Ltd).

 

Case: I

In the event the Equity Shares lying to the credit of the GSO Demat Account at the end of the Stabilization Period but before the transfer to the Green Shoe Lender is less than the Over Allotment Shares, upon being notified by the Stabilizing Agent and the equivalent amount being remitted to the issuer from the GSO Bank Account, the issuer shall receive within four (4) days of the receipt of notice from the Stabilizing Agent of the end of the Stabilization Period.

The issue will allot new Equity Shares in dematerialized form in an amount equal to such shortfall to the credit of the GSO Demat Account within 5 days of the end of the Stabilization Period. The newly issued Equity Shares shall be returned by the Stabilizing Agent to the Green Shoe Lender in final settlement of Equity Shares borrowed.

 

Even if you understand the process of exercise of Green Shoe Option but your confidence still not built until you can't see the basis of allotment of Shree Renuka Sugars Ltd and H T Medial Limited.

Basis of allotment of Shree Renuka Sugars Limited

The Issue received 54299 applications for 54967992 equity shares resulting in 14.24 times subscription. The details of the application received in the Issue from Qualified Institutional Buyers, Non-Institutional and Retail Investor categories are as under:

Category No. of Applications No. of Shares Subscription

Qualified Institutional Buyers 72 40360380 17.42

Non Institutional Investors 252 7273600 18.84

Retail Investors 53975 7334012 6.33

 

Basis of allotment of H T Media Limited

The Issue received 151,291 applications for 145,131,964 equity shares resulting in 18.87 times subscription. HT Media has decided to exercise the Green Shoe Option. The details of the application received in the Issue from Qualified Institutional Buyers, Non-Institutional and Retail Individual Investor categories are as under:

Category No. of Applications No. of Shares Subscription

Qualified Institutional Investors 117 131,496,864 31.33

Non Institutional Investors 628 2,524,343 3.60

Retail Individual Investors 150,546 11,110,757 5.29

 

There is no concrete answer about it. Analyst to analyst it differs. But generally there are few common factors to be considered by analyst in analysis of IPO/FPO.

ISSUE

Is the offer an FPO/IPO? If FPO, get a close look at the data of share prices/ volumes in the recent period. Is the offer a fixed price or a book building issue?

There is no reservation for QIB and NIB in a fixed price issue. 50% of the issue is reserved for retail investors (in book building it is 35%)

Underwriter

“The best IPOs get done by the largest, best known underwriters”- by Linda R.

Sir, we are in a position to understand properly about Green Shoe Option. If we are going to analysis the IPO / FPO…how to do it …sir

Killan, IPO Analyst with John Hancock Funds.

Keep in mind some underwriters are best known for their work within specific sectors (Say Technology IPOs,- Morgan Stanley

Investors should keep in mind that it doesn't mean that top underwriters don't have clunker IPOs- Say John Goldman, IPO Analyst

Examine the basis of The Company

Product / Services of the Company:

Cyclical Favour of the season Upstream / Downstream Market outlook

Customer:

Over dependence on one or a few customers Diversification of customer group Too many-fixed price, long term contracts with customers.

Financial:

No. of the year in the business. Size of the company Growth rate Market share and growth Look at Fixed assets, investment, loan and advances Positive cash flow and negative cash flow PAT

Ratios:

EPS

EPS measures the earnings a company makes for each share in existence. A higher EPS is counted as better than low EPS as it means investors are earnings bigger

profits for every shares.

P/E Ratio

P/E ratio indicates whether company is cheap or expensive. As a rule, the higher the P/E, the fasters its earnings are growing but if the P/E is high compared with other companies in the same sector, it could also mean the shares are overvalued.

The ratio enables any business to be compared with anther, or against the P/E on the entire market.

Objects of Issue:

Finance a new project. Undertake expansion. Working Capital Expenditure. Repayment of debt. Do acquisition. Open branches.

Financing the objecs of issue:

Is entire cost being financed by the present issue? Is company committing any internal accruals to the project? Is appraisal of any relevance?

The executive of the company Family controlled or board based. No. of Independent directors. Key directors in terms of experience. Experience in same business / industry. Promoters holding pre and post issue.

Risk factors

Serious litigation about the brand or trademark by others can affect the company. Are there any internal defaults / litigation against the company or its promoters? Criminal proceeding against the promoters. Check out record of past defaults of company. Identify critical internal risk factors such as family dispute, company, any agreement of sale for final out put of the company to only one customer. (say final product of GVKPIL directly bought by APDISCOM.) Identify critical external risk factors such as over dependency of one industry, impact of Govt. rule and regulation regarding the sector if it changes.

Mutual Fund FAQ

What is Mutual Fund?

Mutual Fund is a body corporate that pools the money from individual/corporate investors and invests the same on behalf of the investors /unit holders, in various investment avenues like equity shares, Government securities, Bonds, Call money markets etc., as per the pre-specified objective and distributes the profits earned from such investment. In India, Mutual Funds are registered with the Securities and Exchange Board of India (SEBI).

Are mutual funds risk free?

No. The investment in Mutual Funds are subject to market risks like investment in stock or any other investment avenues though in less proportion since it is managed by stock and debt market professionals.

That means Mutual Funds are like Stocks?

Actually Mutual Fund is a basket of stocks and other investment instruments. In mutual funds, investor gets a diversified portfolio instead of a single stock with a limited amount of money

What kind of returns MF provides?

There are two types of returns that a mutual fund provides:

Income - This refers to the income received out of profit earned by the Mutual Fund and is termed as dividends.

Capital Gains - This refers to the appreciation in your invested money resulting from increase in prices of the securities at which the fund was invested.

How can I purchase/sell my units of Mutual Funds?

You can invest in MFs in following ways:  

Upcoming MFs - Through NFOs (New Fund Offers). Ongoing MFs - Through current NAV of a mutual Fund.  

As per SEBI, all closed-ended funds have to be necessarily listed on a recognized stock exchange where an investor can sell or purchase their units. In case of open-ended Mutual Funds, the units can be purchased or sold to the Mutual Fund directly.

Our site, www.smcindiaonline.com provides you all the current relevant information about those.  

What is the NAV?  

The current value of investment of a scheme can be known from the NAV (Net Assets Value). The NAV in real sense measures the value of net assets invested in the scheme (Gross assets -Gross

Liabilities)                                         

  NAV   = 

Total Assets - Total Liabilities  

No. of Units Outstanding

 

=

Market Fair value of scheme investments + Receivables +Accrued income 

    + other assets - Accrued Expenses- Payables-Other liabilities            

 Number of outstanding Units.  

Is there any charge in purchase and selling of a mutual Fund?  

Generally the Investment company i.e. Assets Management Company charges loads while purchasing and selling a scheme.  There are two types of Loads, which are generally paid by investors i.e. Entry Load and Exit Load.  

Entry Load - Charged at the time of purchasing of units. At the time of buying you are required to pay NAV and a fixed percentage of it. This fixed percentage is the entry load.  

Exit Load - Charged at the time of selling of units. At the time of selling what you will get is the NAV minus a fixed percentage of it. This fixed percentage is the exit load.  

What is a no load fund?

A no-load fund is one that does not charge an entry or exit load. In such schemes, the investors can enter or exit at prevailing NAV and no additional charges are payable on purchase or sale of units.

What are the different types of Mutual Funds?

The mutual funds are categorized on the following basis:  

Maturity Period 

Open Ended Scheme - These schemes do not have fixed maturity period. Investors directly deal with investment company for redemptions and investments. Investors can buy and sell units at NAV at related price.  

Close Ended Scheme - These schemes have stipulated maturity period (ranging from 2 to 15 Yrs). Investors can invest in these schemes at the time of initial issue during the initial offering period

and thereafter sell / buy the units of the scheme on the stock exchange where they are listed.   

Investment Objective  

Growth / Equity Oriented Scheme - The objective of these funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their funds in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.    

Income / Debt Oriented Scheme - The objective of these funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. The NAV of such funds are affected because of fluctuation in interest rate.  

Balanced Fund - The objective of these funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in pre specified proportion. These are appropriate for investors looking for moderate growth with some regular income.  

Money Market or Liquid Fund - The objective of these funds is to provide liquidity, preservation of capital and moderate income. These schemes invest exclusively in short-term instruments such as treasury bills, certificates of deposit, commercial papers and call money, government securities, etc. Returns on these schemes are low as the risk involved is also low.  

Gilt Fund - These funds invest exclusively in government securities. Government securities have no default risk. NAV of these schemes are subject to fluctuations due to change in interest rates and other economic factors.  

Index Funds - These funds follow the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of the index so chosen. NAV of such schemes would move in accordance with the move in the index. The move may not be exactly the same because of the technical inefficiency known as "tracking error".

What are Tax Saving Schemes?

Investment in these schemes offers tax rebates to the investors

under specific provisions of the Income Tax Act, 1961. Equity Linked Saving Schemes (ELSS) are the schemes that offer tax saving. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any other equity-oriented scheme. 

What is dividend stripping?

It is a technique used by various investors as a mode of tax avoidance. When the dividend is paid out of scheme, the NAV gets decreased by same amount so that there is no absolute loss or gain on account of dividend declaration. So the decreased NAV results in capital loss to the investors that can be used to offset any other capital gains and hence tax can be avoided. The income received from the mutual fund in the form of dividend is tax free in the hands of investors. To avoid such practice, regulatory authorities have made it mandatory to be in the scheme for at least three months prior and past of the ex dividend date in order to offset capital gain against capital losses.  

What are the different types of plans that any mutual fund scheme offers?

That depends on the strategy of the concerned scheme; there are generally three broad categories of plans available. A dividend plan provides a regular payment of dividend to the investors. A reinvestment plan is a plan where the declared dividends are reinvested in the scheme itself at the prevailing NAV. A growth plan is one where no dividends are declared and the investor only gains through capital appreciation in the NAV of the scheme.  

Which plan should I choose?

Depending upon your investment object, risk appetite, your profile, your age, income responsibilities etc. For example a young person having lesser responsibilities will prefer the growth scheme whereas retired person prefer dividend plan. For any assistance visit our site (www.smcindiaonline.com).

What are the benefits of investing in MF?

The benefits involved in investing in Mutual Funds are as given below:

Professional Management  - For an average investor, it is a very tedious job to decide in what securities to enter, how much to purchase and when to exit. When you purchase a mutual fund, you are entitled to the professional fund manager who manages your money. It is the fund manager who decides what to buy for you, when to buy it and when to sell. These decisions are backed by the research on economy, industries and companies. Obliviously, you are required to pay, for the professional expertise you are using, in

terms of the expense ratio or entry load or exit load.

Limited Fund - If you have limited amount of money with you, you can buy stocks of one or few companies. While putting your money in Mutual Fund you can purchase a bunch of stocks with the same amount of money.  

Diversification - When you put your money across several securities, your risk is reduced to a great extent. A mutual fund is able to diversify more easily than an average investor. Unsystematic risk can be reduced fully with the aid of diversification.

Liquidity - The units can be easily sold at ongoing NAV.

Choice - You can choose out of various schemes that suit your needs depending upon your risk appetite.

Regulated Environment - SEBI is the regulatory authority of Mutual Funds in India.

What are the rights of a unit holder in a mutual fund?

The following are the rights available to the unit holders of mutual funds:  

 Unit holders have a proportionate right as a beneficial owner of the assets of the scheme and to the income of the scheme.

 Unit holders are entitled to receive dividend warrants within 42 days of the date of declaration of the dividend.

 Unit holders are entitled to receive redemption cheques within 10 working days from the date of redemption.

 75% of the unit holders with the prior approval of SEBI can terminate AMC of the fund.

 75% of the unit holders can pass a resolution to wind-up the scheme.  

What is a Systematic Investment Plan (SIP) and how does it operate?

Systematic investment plan is a plan whereby an investor contributes a fixed amount periodically at the prevailing NAV. The units so purchased are credited to investor's account. Today many funds are offering this facility.

Two major benefits an investor gets from the systematic investment plan (SIP) are:  

1.   Investors need not pay lump sum amount at one point of time.

2.   The plan provides the benefits of rupee-cost averaging. During falling markets, at lower prices you will get more units for the same money.  During rising markets, at higher prices you will get lesser units for the same money.  Research shows that with the help of rupee cost average an investor always gets benefited by ending up with low cost of purchase.

What is a Systematic withdrawal Plan (SWP) and how does it operate?

Through SWP investors can redeem sums at a monthly or quarterly frequency by giving a one-time instruction to the mutual fund. The investor may choose to regularly withdraw either a fixed sum or just the appreciation part of investment. With the help of SWP an investor gets the following advantages:

Investor gets regular funds inflow from their investments. Investors can automatically book their gains at a regular

interval.  

How to analyse a mutual fund scheme?  

There are various factors to be considered to analyse a mutual fund scheme. There are various parameters that need to be taken into account like corpus, returns, asset allocation, different types of risk, etc. SMC provides a periodical report on various mutual funds after an in depth analysis.

What are the risks associated with investment in Mutual Funds?

The following risks are involved with investment in Mutual Funds :  

Market risk- If the overall stock markets fall on account of macro economic factors, the value of stock holdings in the fund's portfolio can drop, thereby impacting the NAV.  

Non-market risk- Any negative news about an individual company can adversely affect its stock price, which can affect fund's NAV if the fund holding that stock in its portfolio. This risk can be reduced by having a diversified portfolio that consists of a wide variety of stocks drawn from different industries.  

Interest rate risk- The risk is mainly found in debt oriented funds. The debt securities are subject to the risk of interest rate fluctuation in the country. When interest rates rise, then the value of a debt security decreases and hence adversely affecting the NAV and returns of the scheme.  

Credit risk- When the funds invest in corporate debts, they run the risk of the corporates defaulting on their interest and principal payment obligations and when that risk crystallizes, it leads to a

fall in the value of the debt causing the NAV of the fund to take a beating.

What is NFO?

NFO stands for New Fund Offer. Often an investment company offers new funds to the public having opening date and closing date for investing. Investors can invest in that scheme within that time period (between open date of fund and close date of fund). This kind of fund offer is called New Fund Offer.

What are the investment styles of the Fund Manger?  

The investment style of any fund manager can be broadly of two types:  

Active Investment- Is a systematic and proactive approach to investment that involves the constant review of the portfolio of the fund. The basic aim behind such investing style is to beating the market. This investing style is based on the argument that markets are not efficient and at any point of time there is scope to earn abnormal profits through an active investment style.  

Passive Investment- This investment style is exactly opposite of the active portfolio management. In this style, the portfolio manager assumes that markets are efficient and all information is already analyzed and reflected in the prices of share and there is no scope of finding any undervalued stock.

What is the expenses ratio and how it is important?

In order to manage a fund, there are certain expenses like administrative expenses, operating expenses, management fee ,etc, that are required to incurred. The expense ratio refers to the expenses incurred on the total deployable fund available. A low ratio is considered to be good. As the size of the fund increases, the expense ratio decreases.

Is there any minimum and maximum amount to be invested in mutual fund?

Generally, Investors can invest in NFO with a minimum investment of Rs.5000, thereafter multiple of Rs.5000. There is no prescribed maximum amount for investing in Mutual Fund.  

Is there any lockin period?

No, generally investors cannot face any lock in period for investing in Mutual Fund. But, investors seeking tax benefit by investing in mutual fund, can invest in ELSS (Equity-Linked-Savings Schemes), then investors are subject to 3 yrs lock in period to avail tax

benefit.

What is Sharpe Ratio of mutual funds?

Sharpe Ratio of Mutual Fund /Portfolio is a measure of risk-adjusted return of the investment i.e. this ratio will determine how much return you are getting per unit of risk in investment.

 Sharpe Ratio  =  

 Average return on Portfolio-Risk free rate of return       

Standard Deviation of portfolio return.  

This ratio will tell you whether the return is due to efficient optimal portfolio diversification or due to excess risk taken by fund managers. Some Mutual Funds having return higher than its peer groups do not necessarily due to optimization of funds but due to additional risk associated with it. That's why higher the Sharpe Ratio

better is the mutual fund/ Portfolio from the investor point of view.

What is Treynor Ratio of mutual funds?

Treynor Ratio also known as Reward-to-Variability-Ratio is a measure of risk-adjusted return of the investment based on systematic risk (i.e. that portion of total risk which cannot be diversified). This ratio will determine return on investment per unit of market risk.  

                            

Treynor Ratio =   Average return on Portfolio-Risk free

rate of return       Beta of portfolio

This ratio is similar to Sharpe Ratio with the difference that Sharpe Ratio takes total risk (standard deviation of portfolio return) into consideration while Treynor Ratio concentrates only on Systematic Risk/undiversifiable risk, which is denoted by Beta of the portfolio. Higher the Treynor Ratio better is the mutual fund/ Portfolio for the investor.  

What is the maximum amount an AMC can charge as initial expenses from investors?  

SEBI has put a cap on the limit of initial expenses charged by AMC from investors. When an AMC is launching a new fund, maximum amount they can charge is 6% of total corpus collected from investors i.e. if total corpus is Rs1, 00,00,000 they can charge only Rs6, 00,000 from investors that can be amortized over 5 years.