IPS Academy

Institute of Business Management & Research

Indore (M.P.)

“Internal Exam Assignment: Nov. 2023”

Class & Course & Spl. (Only for MBA III (FT):
Sec.: c
Computer Code:
59993
Roll No: 24
Date: November 5, 2023

Submitted By: Submitted To:

Student Name: Faculty Name:

Khushi jain Dr. Ruchi mantri

 ASSIGNMENT OF IFS

Que.1 Meet a stock broker of your choice and discuss the role played by him/ her and the major
activities that he/she undertakes. Also discuss major changes that have taken place in the arena of
brokerage houses in the recent times. Write a note on your meeting.

Ans - ROLE OF STOCK BROKER

Stock brokers play a crucial role in financial markets. They act as intermediaries between
investors and the stock exchange, facilitating the buying and selling of stocks and other securities.
Stock brokers provide various services:
1. Advising clients : Stock brokers provide investment advice to clients based on their financial
goals, risk tolerance , and market trends.
2. Executing traders : they execute buy and sell orders on behalf of clients , ensuring
transactions are completed efficiently and at the best available prices .
3. Market research : brokers analyze market trends , company financials, and economic factors
to provide clients with insights for making informed investment decisions.
4. Portfolio management : They help clients build and manage investment portfolios ,
diversifying assets to minimize risk and maximize returns.
5. Compliance : Brokers must stick to regulatory requirements and ensure that clients
investments comply with legal and industry standards.
6. Customer service : They maintain relationships with clients , addressing inquiries , providing
updates on investments , and offering guidance as needed.
7. Risk management : Brokers assess and manage risks associated with different investment
options , helping clients make choices aligned with their risk tolerance.
8. Continuous learning : keeping up to date with market trends , financial products , and
regulations is essential for brokers to provide relevant and accurate advice to clients .
9. Sales and marketing : Brokers may engage in sales and marketing activities to attract new
clients and expand their customer base .
10. Communication : communication is very significant in every sector. It heps in making
goodwill and create a long term connection with the other . as brokers need to explain
complex financial concepts and investment.

Stock brokers play avital role in the financial ecosystem , bridging the gap between investors
and the stock market while ensuring transactions are conducted professionally and ethically.

MAJOR ACTIVITIES OF STOCK BROKER

Stock brokers engage in various activities related to buying , selling ,and managing securities
on behalf of their clients . these activities include:

1. Research and analysis : brokers analyze market trends , company financials , and
economic data to provide recommendations to clients .
2. Financial advisory : brokers offer financial advice , suggesting investment strategies,
asset allocation , and specific investment opportunities.
3. Trading technology: brokers used advanced trading platforms and technologies to
execute traders swiftly and efficiently.
4. Continuous education : brokers continuously update their knowledge about financial
markets, investment products, and trading strategies to provide the best service to their
clients.

MAJOR CHANGES IN THE BROKERAGE HOUSES

In recent times , the brokerage industry has witnessed significant changes due to
advancements in technology , regulatory reforms , and evolving customer preferences .
there are some major changes that have taken place in the arena of brokerage houses :
 1. Digital transformation: The rise of digital technologies has led to the automation of
many brokerage services. Online trading platforms and mobile apps have become
prevalent , allowing investors to trade and manage their portfolios from anywhere at
any time.
2. Commission free trading: several brokerage firms have shifted to a commission free
trading model , eliminating trading fees for stocks ,ETFs, and options.
3. Robo advisors: Robo advisors use algorithms to provide automated , low cost
investment management services. They create diversified portfolios based on clients
risk tolerance and financial goals .
4. Fractional shares : brokerages now offer the ability to buy fractional shares of stocks
and ETFs . this allow investors to invest in high priced stocks with smaller amounts of
money, promoting accessibility and diversification.
5. Social trading: social trading platforms enable investors to follow and copy the trades
of experienced traders.
6. Enhanced securities: with the increase in cyber threats , brokerage houses have
invested heavily in cybersecurity measures to safeguard clients personal and
financial information.
7. Focus on education: brokerages are investing in educational resources to empower
investors with knowledge about financial markets and investment starategies.
8. Regulatory changes : Regulatory reforms , such as the introduction of MiFID in
Europe reg BI in the united states , have aimed to enhance transparency , disclosure ,
and investor protection standards in the brokerage industry.

Que.2 Meet the bank manager of your choice and discuss the different project appraisal methods
that are used by the banks for evaluating the proposals for sanction of loans. Write a note on your
discussions.

Ans - PROJECT APPRAISAL METHODS

Banks use various project appraisal methods to evaluate loan proposals and assess their
viability . here are some common methods :

1. Net present value ( NPV) : NPV calculates the present value of expected cash flows generated
by the project, minus the initial investment . A positive NPV indicates a potentially
profitable project.
2. Internal rate of return ( IRR) : IRR is the discount rate at which the net present value of cash
flows from the project equals zero. Banks typically prefer projects with higher IRR , as they
offer better returns.
3. Payback period : payback period estimates the time it takes for the initial investment to be
recovered from the projects cash inflows . shorter payback periods are generally preferred,
as they signify quicker returns on investment.
4. Profitability index : PI is the ratio present value of future cash flows to the initial investment.
5. Accounting rate of return : ARR calculates the average annual accounting profit from the
project divided by the initial investment . banks use this method to aasess the projects
profitability based on accounting figures .
 6. Sensitivity analysis : banks analyze how changes in project variables ( such as costs , sales, or
interest rates) impact the projects financial viability.
7. Risk assessment : banks evaluate the risks associated with the project , including market
risks, operational risks, and financial risks .
8. Comparative analysis : banks compare the proposed project with similar projects in the
industry to gauge its feasibility and competitiveness. This comparative analysis provides
valuable insights into market standards and trends.

Que.3 what is the role of’ primary markets in the financial system of a country? discuss the role
played by different primary market facilitators.

Ans – PRIMARY MARKET: - Primary markets refer to financial markets where new securities, such as
stocks and bonds, are issued to the public for the first time. In these markets, companies or
government entities raise capital by offering their securities to investors. this process is known as an
initial public offering (IPO) for stocks or a bond issuance for bonds. Primary markets provide
businesses with the opportunity to raise funds for expansion, research, and other projects, while
investors can purchase these newly issued securities.

ROLE OF PRIMARY MARKET

1. Capital raising – companies and governments use the primary market to raise capital for
various purposes, such as expanding operations, funding research and development, or
reducing debt. By issuing stocks or bonds, they can secure the necessary funds from
investors.
2. Facilitating investment – Investors, both institutional and individual, participate in primary
market offerings to purchase newly issued securities. these investments provide them with
opportunities for potential capital gains and income.
3. Price discovery – the price of securities in the primary market is determined through the
process of book building or other methods. This price discovery mechanism helps establish
the initial market value of the securities, which sets the benchmark for their future trading in
the secondary market.
4. Boost economic growth – by enabling businesses to raise funds, the primary market supports
economic growth. companies can undertake new projects, invest in technology, and create
jobs, contributing to the overall development of the economy.
5. Enhancing transparency – companies going public are required to disclose essential
information about their financial health, business plans, and risks in the prospectus. This
transparency fosters investor confidence and ensures that investors can make informed
decisions.
6. Supporting innovation – the primary market allows innovative and growing companies to
access funding, encouraging entrepreneurship and fostering innovation. Startups and
technology firms using primary market to raise capital for research and development,
helping drive technological advancements.
7. Diversification of investment portfolios: for investors, the primary market offers
opportunities to diversify their investment portfolios. by participating in IPOs or new bond
issuances, investors can spread their investments across different assets, reducing risk.
 ROLE PLAYED BY PRIMARY MARKET FACILITATORS

There are several facilitators play distinct roles to ensure the smooth issuance and
distribution of new securities. There are the key primary facilitators and their roles:

1. Investment banks – investment banks are crucial players in the primary market. they
assist companies and governments in structuring the securities, determining the issue
price and underwriting the offering. it also helps in marketing the securities to potential
investors, ensuring a successful issuance.
2. Issuing companies / governments: These entities are the issuers of the securities.
companies issue stocks or bonds to raise capital for various purposes, while governments
issue bonds to finance public projects. Their role involves deciding the type and quantity
of securities to be issued and providing necessary information to investors.
3. Underwriters – underwriters are financial institutions they are investment banks, that
agree to purchase the entire issue of securities from the issuing company at a
predetermined price. Underwriter guarantee the issuer a specific amount of money,
regardless of whether all the securities are sold to investors.
4. Regulatory authorities – regulatory bodies, such as the securities and exchange
commission (SEC) in the United States or the financial conduct authority (FCA) in the
United Kingdom, oversee the primary market activities.
5. Legal advisors – It includes law firms specializing in securities law, assist issuing
companies in preparing legal documents, such as the prospectus. They ensure that issuer
complies with all legal requirements and regulations governing the issuance of securities.
6. Auditors and accountants – It play a role in the primary market by reviewing the financial
statements of the issuing company. Their assessments provide assurance to investors
about the accuracy and reliability of the financial information presented in the
prospectus.
7. Credit rating agency – in the case of bonds, credit rating agencies assess the
creditworthiness of the issuer. They assign credit ratings indicating the issuers’ ability to
meet its financial obligations. These ratings influence investors decisions to participate in
the primary market offerings.
8. Retail and institutional investors – both retail investors and institutional investors
participate in the primary market by purchasing newly issued securities.