Internship Report On Involvement of Margin Rules in Bangladesh capital market

Internship Report On Involvement of Margin Rules, 1999 in Bangladesh capital market and Its impact on DSE Index

Capital market ensures economic development of a country since it serves as the channel of funds from savers to borrowers. The capital market of Bangladesh is in growing form. Index represents the overall performance of the capital market. As this report has been prepared based on the topic “Evolvement of Margin Rules, 1999 in Bangladesh capital market & its impact on DSE Index”, analysis on the origination of margin rules, directives as well as effects of those directives are revealed throughout the report.

This internship report consists of five chapters. First chapter has been prepared to describe origin, scope, methodology and limitation of the report. Second chapter has been organized with an introduction of Bangladesh capital market & establishment of SEC.

Third chapter is prepared emphasizing on the historical background of introducing Margin rules in Bangladesh capital market in 1999. The present scenario of Margin Rules including all the directives till January, 2011 is also provided in this chapter.

Analysis of chapter four has discovered the impact of margin rules & directives on the market index. Fifteen directives were published during sixteen months-from October, 2009 to January, 2011.This sixteen months has been considered as post directive period. For the convenience of analysis January, 2009 to September, 2009-these nine months were considered as pre directive period. Analysis has exposed that average DGEN growth in pre directive period was 1.9% and in post directive period was 6.389%. In spite of this fact the study also revealed that fluctuation of indices continued over the post directive period. Indices had to face downturn for average 20%-40% days of total trading days during the sixteen months. However, it has been evident from the trends of DSE indices that Margin Rules & directives had a mixed impact on market indices.

Chapter five is the last and final episode of the report to describe the findings of the report in short. The report is concluded stating the fact that directives relating to margin loan play important role in stabilizing and disciplining the market as well as ensure better market index.

As per requirements of MBA program in Finance department of University of Dhaka, this report is titled “Evolvement of Margin Rules, 1999 in Bangladesh capital market & its impact on DSE Index”. According to internship placement at Securities and Exchange Commission (SEC), this topic is relevant to my little organizational experience. This report reflects practical experience at the Securities and Exchange Commission (SEC) during the internship period.

This report is the outcome of my experience at the Securities and Exchange Commission (SEC) during the internship period. The whole internship procedure including this report preparation is an attempt to provide me an orientation to a real life business situation in which I could observe and evaluate the use and applicability of the theoretical concepts, which were taught in the classroom. As a student of finance department, I preferred to complete my internship program in an Institution like Securities and Exchange Commission (SEC).

Objectives of the report
Broad Objectives
The broad objective of the study is to portray the evolvement and extent of Margin Rules, 1999 in Bangladesh Capital market. Besides, the report is prepared with a view to examining the impact of Margin Rules on DSE indices especially on DSE General Index.

Specific Objectives:
i) To assess the role & necessity of Margin Rules in growing capital market of Bangladesh.
ii) To identify the national, legal and institutional frameworks of Margin Rules those restrict or benefit the capital market.
iii) To get analyze the effects of Margin Rules on market index.
iv) To reveal the challenges and weaknesses of prevailing Margin Rules.
v) To address the issue of Margin Rules’ directives, their impact, ambiguity and misuses.

 Scope of the report
This report analyzes a brief of historical background of margin rules that is how this rule was originated in our country and what were the purposes/reasons behind the origination of this rule and impact of margin rules on DSE indices. This report allows me a broader scope to get a fundamental idea about margin Rules 1999 and an opportunity to analyze how margin rules contributes to DSE index construction.

To complete the report required data & information will be collected from mainly two sources:
Primary Sources
§ Face to face conversation with the respective officers and Staff of SEC.
§ Oral interview of the responsible officers.
§ Relevant document’s studies as provided by the officers concerned.
§ Observation of departments of SEC.
Secondary Sources
§ Annual report of the SEC.
§ Monthly review of SEC.
§ Different publications regarding Stock Exchanges and capital market.
§ Extensive literature search on the basis of these documents of publication.
§ Relevant websites.
Some other tools and techniques are used to prepare the report. These include various graphs, tables, charts, trend analysis and so on. For the convenience of analysis data are used for latest FY based on availability. For analyzing the data both subjective judgments, qualitative & quantitative factor analysis has been experimented. Averaging procedure was used to present a clear comparison scenario. There were two steps in analysis - (i) Index scenario after the directives were published (ii) Comparison between post and Pre directive index scenario. For analysis I have used indices on daily basis of post directive sixteen months. And for pre directive period I have used index data for nine months.