Final Report

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CHAPTER – 1 INTRODUCTION TO STUDY

DEMATERIALIZATION:

Dematerialization is the process of converting the physical form of shares into

electronic form. Prior to dematerialization the Indian stock markets have faced several

problems like delay in the transfer of certificates, forgery of certificates etc.

Dematerialization helps to overcome these problems as well as reduces the transaction

time as compared to the physical segment. The article discusses the procedures,

advantages and problems of dematerialization.

The Indian Stock markets have seen a major change with the introduction of

depository system and scrip less trading mechanism. There were various problems like

inordinate delays in the transfer of share certificates, delay in receipt of securities and

inadequate infrastructure in banking and postal segments to handle a large volume of

application and storage of share certificates .To overcome these problems physical

dealing in securities should be eliminated . The Indian stock market introduced the

system of dematerialization recognizing the need for scrip less trading.

According to the Depositories Act, 1996, an investor has the option to hold

shares either in physical or electronic form .The process of converting the physical form

of shares into electronic form is called dematerialization or in short demats. The

converted electronic data is stored with the depository from where they can be traded. It

is similar to a bank where an investor opens an account with any of the depository

participants. Depository participant is a representative of the depository .The DP

maintains the investors securities account balances and intimates him about the status

of holdings.

ONLINE TRADING

Online Trading is an easy way to buy and sell shares from the comfort of one’s

place instead of trading through individual stockbroker and broking firms, the customer

can transact with the help of mouse click and his visits to the neighborhood broker will

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become a thing of the past. Even the older generation is adapting the online trading

route.

Find the right depository to provide with an online trading account can be difficult,

but many banks and companies offer excellent services for online trading. Our needs

will determine which online broker is best for us. Online trading brings in total

transparency between broker an investor in case of secondary market operation.

Whether we are buying a mutual fund, investing in commodities market or any other

transaction can be performed with minimal fuss. In India presently online trading can

take place through order routing system, which will route client orders to exchanges

trading system for execution of trade on stock exchange (NSE and BSE).

One of the measure attractions of online trading is the wealth of free commentary and

analysis about stock market and global economy. Any investor with an ounce of market

saviness can extract all the data needed to make trading decisions and complete the

trades. An important catalyst behind the emergence of thriving online brokerage system

has been the buoyant stock market. One can trade online with e-brokerage such as

ICICI Direct, HDFC Securities, India Bulls, Kotakstreet and India Info line’s 5paisa.com.

NEED OF STUDY:

With the emergence of the internet in everyday business, the significance of the online

stock market trading broker has gone up.

It can be done from home at any desired fixed hours of the investor.

The processing of the order is executed at proper timings as the servers of the

online trading portal are linked to the selected banks and stock exchanges though

out twenty four hours.

The investments made are safe and secured and profit is earned at proper time

without any dispute.

Online trading updates are also provided to the investors and also about the present

grade of their orders either through the interface or e-mail.

The investors increase shares and make development to the company..

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OBJECTIVES OF STUDY:

To Study & understood the concept of Online trading.

To know the time information & importance & the role played by the stock

exchanges in the process of online trading.

To know the reasons for the introduction of online trading and their Benefits.

To review the changes that Online trading brought when compared with the previous

systems.

RESEARCH METHODOLOGY OF THE STUDY:

DATA COLLECTION METHODS

The data collection methods include both the primary and secondary collection methods

Primary collection methods:

This method includes the data collection from the personal discussion with the

authorized clerks and members of the Net worth.

Secondary collection methods:

The secondary collection methods includes the lectures of the superintend of the

department of market operations and so on. Also the data collected from the news,

magazines of the Net worth and different books issues of this study. SCOPE OF STUDY:

The study is limited to “Demat and Online Trading”.

And since the year 2000, a big boom has been witnessed in the Indian stock Market when

the market showed the coming up of Online Trading System. Many Online stock trading

companies came but initially due to lack of Online Trading some Companies Vanished

and some survived. The Companies which are survived are getting the handsome returns

also attracting the foreign Investment Companies. Now a days this sector is facing cut-

throat Competition. And also provides huge growth prospects.

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LIMITATIONS OF STUDY:

A good report tells us the results of the study. But every project has its own Limitations.

These limitations can be in terms of:

There is lack awareness among people about investing in stock market. So people

who are aware of such things were found in specific areas for survey purposes.

Most people are comfortable with traditional system in small towns and like to trade

from their respective brokers, hence not providing their true opinions.

Most of people are not using technology and Internet is growing still it is not at the

required level.

Some of the respondents who did not do Online trading were able to respond only to

some questions.

Limitations towards Demat and online trading confined to keep the study in

manageable limits.

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CHAPTER – 2 REVIEW OF LITERATURE

INTRODUCTION

India Financial Market the India Financial market comprise of talks about the

primary market, FDIs, alternative investment options, banking and insurance and the

pension sectors, asset management segment as well. With all these elements in the

India Financial market, it happens to be one of the oldest across the globe and is

definitely the fastest growing and best among all the financial markets of the emerging

economies. The history of Indian capital markets spans back 200 years, around the end

of the 18th century. It was at this time that India was under the rule of the East India

Company. The capital market of India initially developed around Mumbai; with around

200 to 250 securities brokers participating in active trade during the second half of the

19th century.

Scope of the India Financial Market –The financial market in India at present is more

advanced than many other sectors as it became organized as early as the 19th century

with the securities exchanges in Mumbai, Ahmedabad and Kolkata. In the early 1960s,

the number of securities exchanges in India became eight – including Mumbai,

Ahmedabad and Kolkata. Apart from these three exchanges, there was the Madras,

Kanpur, Delhi, Bangalore and Pune exchanges as well. Today there are 23 regional

securities exchanges in India.

The financial market used to give financial services to the Industries . The NSE

provides exposure to investors into two types of financial Markets:

1. Capital market.

2. Money market.

Capital Market:

Refers to all the facilities and Institutional arrangements for borrowing and lending of

term funds. It does not deal in capital goods but is concerned with the raising of money

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capital. It consists of term lending institutions and investing Institutions which mainly

provide long term funds.

Capital market has its growth includes:

Gilt-edged Securities Market

Industrial Securities Market

Development Banks and

Financial Services.

Industrial Securities Market has been further divided into two markets they are:

A. Primary Market.

B.Secondary Market.

Primary Market: Refers to the raising of new capital in the form of shares and

debentures, while Secondary Market deals with securities already issued by

companies. Both the markets are important, but the new issues market is much more

important from the point of view of economic growth.

Secondary Market: The market where securities are traded after they are initially

offered in the primary market. Most trading is done in the secondary market. To explain

further, it is trading in previously issued financial instruments. An organized market for

used securities. Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond

markets, over-the-counter markets, residential mortgage loans, governmental

guaranteed loans etc

Secondary Market refers to a market where securities are traded after being initially

offered to the public in the primary market and/or listed on the Stock Exchange. Majority

of the trading is done in the secondary market. Secondary market comprises of equity

markets and the debt markets. For the general investor, the secondary market provides

an efficient platform for trading of his securities. For the management of the company,

Secondary equity markets serve as a monitoring and control conduit—by facilitating

value-enhancing control activities, enabling implementation of incentive-based

management contracts, and aggregating information (via price discovery) that guides

management decisions.

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Money market: Money Market is a market for short-term funds, which can be used for

overnights to one year duration. It also deals with the financial assets that constitute

near money which means that the assets can be converted into cash quickly with

minimum transaction cost and without a loss in value. It consists of commercial banks,

co-operative banks and other agencies which supply only short term funds. It consists of

Organized Money Markets. And Un Organized money markets

The Call Money Market, Treasury Bill Market, Collateral Money market,

Commercial paper and Certificate of deposits.

1850 Joint stock company came into existence

1860 Speculation and feverish dealing in securities

1875 Formulation of stock exchange of Mumbai

1894 Formulation of Ahmadabad stock exchange

INDIAN CAPITAL MARKET AT GLANCE 20th century

1908 Formulation of Calcutta stock exchange

1939 Formulation of Lahore and madras stock exchange

1940 Formulation of U.P and Delhi stock exchange

1956 Securities contract and regulation act enacted

1957 Scam of Haridas Mundhra

1988 Securities and exchange board of India set up

1991 Scam of MS Shoes

1992 SEBI given power Under SEBI act,1992

1993 Formation of National stock exchange

1995 HARSHAD MEHTA Scam

1995 SESA GOA Scam

1997 CRB scam

1998 BPL And Videocon Scam

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21st century

2000 Depositories came into existence (electronic form

of shares)

2001 Ketan Parekh scam

2002 Start of rolling settlement and banning of Badla

trading

2002 Introduction of T+3 settlement in April

2003 Introduction of T+2 settlement in April

2005 BSE Sensex touches all time high 6954 in January

2006 BSE Sensex touches all time high 12500,the highest

intraday fall of 1100

2007 BSE reaches the level of

2008 BSE touches all time high in January 2008

2008 Sensex saw its highest ever loss of 1,408 points at

the end of the session.

2008 Sexsex saw its 15 month low,from its all time high

2009 Sexsex saw its down trend & highest ever loss

because of Satyam case.

STOCK MARKETS IN INDIA:

A stock market is a marketplace where organized exchange (buying and selling) of

stocks or equities takes place. Indian stock markets are one of the most dynamic and

efficient stock markets in Asia. In terms of the make up and overall dynamics, the Indian

stock markets are at par with international standards. The two national exchanges

operating in India are the National Stock Exchange (NSE) and the Bombay Stock

Exchange (BSE). These exchanges are well equipped with electronic trading platforms

and handle large volume of transactions on a daily basis.

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DEFINATION OF STOCK EXCHANGE:

Stock exchange is an organized market place where securities are traded. These

securities are issued by the government, semi-government bodies, public sector

undertakings and companies for borrowing funds and raising resources. Securities are

defined as any monetary claims (promissory notes or I.O.U) and also include shares,

debentures, bonds and etc., if these securities are marketable as in the case of the

government stock, they are transferable by endorsement and alike movable property.

They are tradable on the stock exchange. So are the case shares of companies. Under the Securities Contract Regulation Act of 1956, securities’ trading is

regulated by the Central Government and such trading can take place only in stock

exchanges recognized by the government under this Act. As referred to earlier there are

at present 23 such recognized stock exchanges in India. Of these, major stock

exchanges, like Bombay Stock Exchange National Stock Exchange,Inter-Connected

Stock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are

permanently recognized while a few are temporarily recognized. The above act has also

laid down that trading in approved contract should be done through registered members

of the exchange. As per the rules made under the above act, trading in securities

permitted to be traded would be in the normal trading hours (09:15 A.M to 3.30 P.M) on

working days in the trading ring, as specified for trading purpose. Contracts approved to

be traded are the following:

1) Spot delivery deals are for deliveries of shares on the same day or the next day as

the payment is made.

2) Hand deliveries deals for delivering shares within a period of 7 to 14 days from the

date of contract.

3) Delivery through clearing for delivering shares with in a period of two months from

the date of the contract, which is now reduce to 15 days.(Reduced to 2 days in

demat trading)

4) Special Delivery deals for delivering of shares for specified longer periods as may be

approved by the governing board of the stock exchange.

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Except in those deals meant for delivery on spot basis, all the rest are to be put

through by the registered brokers of a stock exchange. The securities contracts

(Regulation) rules of 1957 laid down the condition for such trading, the trading hours,

rules of trading, settlement of disputes, etc. as between the members and of the

members with reference to their clients.

HISTORY OF STOCK EXCHANGE IN INDIA

The origin of the Stock Exchanges in India can be traced back to the later half of

19th century. After the American Civil War (1860-61) due to the share mania of the

public, the number of brokers dealing in shares increased. The brokers organized an

informal association in Mumbai named “The Native Stock and Share Brokers

Association in 1875”.later evolved as Bombay stock exchange.

Increased activity in trade and commerce during the First World War and Second

World War resulted in an increase in the stock trading. The Growth of Stock Exchanges

suffered a set after the end of World War. World wide depression affected them most of

the Stock Exchanges in the early stages had a speculative nature of working without

technical strength. After independence, government took keen interest to regulate the

speculative nature of stock exchange working. In that direction, securities and Contract

Regulation Act 1956 was passed, this gave powers to Central Government to regulate

the stock exchanges. Further to develop secondary markets in the country, stock

exchanges established at Mumbai, Chennai, Delhi, Hyderabad, Ahmedabad and

Indore. The Bangalore Stock Exchange was recognized in 1963. At present there are

23 Stock Exchanges.

Till recent past, floor trading took place in all Stock Exchanges. In the floor

trading system, the trade takes place through open outcry system during the official

trading hours. Trading posts are assigned for different securities where by and sell

activities of securities took place. This system needs a face – to – face contact among

the traders and restricts the trading volume. The speed of the new information reflected

on the prices was rather than the investors.

The Setting up of NSE and OTCEI (Over the counter exchange of India with the

screen based trading facility resulted in more and more Sock exchanges turning

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towards the computer based trading. BSE introduced the screen based trading system

in 1995, which known as BOLT (Bombay on – line Trading. System).

FUNCTIONS OF STOCK EXCHANGE

Maintain Active Trading:

Shares are traded on the stock exchanges, enabling the investors to buy and sell

securities. The prices may vary from transaction to transaction. A continuous trading

increases the liquidity or marketability of the shares traded on the stock exchanges.

Fixation of Prices:

Price is determined by the transactions that flow from investors demand and the

supplier’s preferences. Usually the traded prices are made known to the public. This

helps the investors to make the better decision.

Ensures safe and fair dealings:

The rules, regulations and bylaws of the Stock Exchanges provide a measure of safety

to the investors. Transactions are conducted under competitive conditions enabling the

investors to get a fair deal.

Aids in financing the Industry:

A continuous market for shares provides a favourable climate for raising capital. The

negotiability and transferability of the securities, investors are willing to subscribe to the

initial public offering (IPO). This stimulates the capital formation.

Dissemination of Information:

Stock Exchanges provide information through their various publications. They publish

the share prices traded on their basis along with the volume traded. Directory of

Corporate Information is useful for the investor’s assessment regarding the

corporate. Handouts, handbooks and pamphlets provide information regarding the

functioning of the Stock Exchanges.

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Performance Inducer:

The prices of stocks reflect the performance of the traded companies. This makes the

corporate more concerned with its public image and tries to maintain good performance.

Self-regulating organization:

The Stock Exchanges monitor the integrity of the members, brokers, listed companies

and clients. Continuous internal audit safeguards the investors against unfair trade

practices. It settles the disputes between member brokers, investors and brokers.

REGULATORY FRAME WORK

This Securities Contract Regulation Act, 1956 and Securities and Exchange board

of India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier regulatory

structure comprising the ministry of finance, SEB1 and the Governing Boards of the Stock

Exchanges regulates the functioning of Stock Exchanges.

Ministry of finance:

The Stock Exchange division of the Ministry of Finance has powers related to the

application of the provision of the SCR Act and licensing of dealers in the other area.

According to SEBI Act, The Ministry of Finance has the appellate and the supervisory

power over the SEBI. It has powered to grant recognition to the Stock Exchange and

regulation of their operations. Ministry of Finance has the power to approve the

appointments of executives chiefs and the nominations of the public representatives in the

government Boards of the Stock Exchanges. It has the responsibility of preventing

undesirable speculation.

The Securities and Exchange Board of India

The Securities and Exchange Board of India even though established in the year

1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide

variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate the

business of Stock Exchanges, other security and mutual funds. Registration and

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regulation of market intermediaries are also carried out by SEBI. It has responsibility to

prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also

monitored by the SEBI has the multi pronged duty to promote the healthy growth of the

capital market and protect the investors.The Governing Board of stockexchanges: The

Governing Board of the Stock Exchange consists of elected members of directors,

government nominees and public representatives. Rules, by laws and regulations of the

Stock Exchange substantial powers to the executive director for maintaining efficient and

smooth day-to day functioning of Stock Exchange. The Governing Board has the

responsibility to maintain and orderly and well-regulated market.

The Governing body of the Stock Exchange consists of 13 members of which

A. Six members of the Stock Exchange are elected by the members of the Stock

Exchange.

B. Central Government nominates not more than three members.

C. The board nominates three public representatives.

D. SEBI nominates persona not exceeding three and

E. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM). The

retired member can offer himself for election if he is not elected for two consecutive years.

If a member serves in the governing body for two years consecutively, he should refrain

offering himself for another two years.

The members of the governing body elect the president and vice-president. It

needs to approval from the Central Government or the Board. The office tenure for the

president and vice-president is on year. They can offer themselves for re-election, if they

have not held for two consecutive years. In that case they can offer themselves for re-

election after a gap of one-year period.

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VARIOUS STOCK EXCHANGES IN INDA: List of Stock Exchanges in India

Bombay Stock Exchange

National Stock Exchange

Regional Stock Exchanges

Ahmedabad

Bangalore

Bhubaneswar

Calcutta

Cochin

Coimbatore

Delhi

Guwahati

Hyderabad

Jaipur

Ludhiana

Madhya Pradesh

Madras

Magadh

Mangalore

Meerut

OTC Exchange Of India

Pune

Saurashtra Kutch

UttarPradesh

Vadodara

AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY ARE:

1) NSE 2) BSE

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NATIONAL STOCK EXCHANGE

The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and

most advanced exchange with 1016 companies listed and 726 trading members.

Capital market reforms in India and the launch of the Securities and Exchange Board of

India (SEBI) accelerated the incorporation of the second Indian stock exchange called

the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE

has become the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another. The

Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital

Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options

segment began operating in 2000. Today the NSE takes the 14th position in the top 40

futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior

Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of

50 stocks from 25 different economy sectors. The Indices are owned and managed by

India Index Services and Products Ltd (IISL) that has a consulting and licensing

agreement with Standard & Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first

exchange in India that started trading stock on the Internet in 2000. The NSE has also

proved its leadership in the Indian financial market by gaining many awards such as

'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web

Award by CHIP magazine (1999).

The NSE is owned by the group of leading financial institutions such as Indian Bank or

Life Insurance Corporation of India. However, in the totally de-mutualized Exchange, the

ownership as well as the management does not have a right to trade on the Exchange.

Only qualified traders can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a

single platform, which is divided into three segments: Wholesale Debt Market (WDM),

Capital Market (CM), and Futures & Options (F&O) Market.

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The main objectives of NSE are as follows

1) 1). To establish a nation wide trading facility for equities, debt and hybrid instruments

2) 2). To ensure equal access investors all over the country through appropriate

communication network.

3) 3). To provide a fair, efficient and transparent securities market to investors using an

electronic communication network.

4) 4). To enable shorter settlement cycle and book entry settlement system.

5) 5). To meet current international standards of securities market.

6) Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,

Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India,

Punjab National Bank, Infrastructure Leasing and Financial Services, Stock Holding

Corporation fo India and SBE capital market are the promoters of NSE.

NSE Nifty:

The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for

large companies on the National Stock Exchange of India. S&P CNX Nifty is a well

diversified 50 stock index accounting for 22 sectors of the economy. It is used for a

variety of purposes such as benchmarking fund portfolios, index based derivatives and

index funds.

Nifty was developed by the economists Ajay Shah and Susan Thomas, then at

IGIDR. Later on, it came to be owned and managed by India Index Services and

Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's

first specialized company focused upon the index as a core product. IISL have a

consulting and licensing agreement with Standard & Poor's (S&P), who are world

leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices,

to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for

CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix

belongs to the US-based Standard & Poor's Financial Information Services.

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NSE other indices:

S&P CNX Nifty

CNX Nifty Junior

CNX 100

S&P CNX 500

CNX Midcap

S&P CNX Defty

CNX Midcap 200

BOMBAY STOCK EXCHANGE:

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;

popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in

Asia. It is located at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600

Indian companies listed with the stock exchange, and has a significant trading volume.

As of October2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US

$ 730 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a widely

used market index in India and Asia. As of 2005, it is among the 5 biggest stock

exchanges in the world in terms of transactions volume.

History:

An informal group of 22 stockbrokers began trading under a banyan tree

opposite the Town Hall of Bombay from the mid-1850s, 1875, was formally organized

as the Bombay Stock Exchange (BSE).In January 1899, the stock exchange moved into

the Brokers’ Hall after it was inaugurated by James M MacLean. After the First World

War, the BSE was shifted to an old building near the Town Hall. In 1956, the

Government of India recognized the Bombay Stock Exchange as the first stock

exchange in the country under the Securities Contracts (Regulation) Act.1995, when it

was replaced by an electronic (eTrading) system named BOLT,or the BSE Online

Trading system. In 2005, the status of the exchange changed from an Association of

Persons (AoP) to a full fledged corporation under the BSE (Corporatization and

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Demutualization) Scheme , 2005 (and its name was changed to The Bombay Stock

Exchange Limited).

BSE Sensex:

The BSE SENSEX (also known as the BSE 30) is a value-weighted index

composed of 30 scrips, with the base April 1979= 100. The set of companies which

make up the index has been changed only a few times in the last 20 years. These

companies account for around one-fifth of the market capitalization of the BSE.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-Weighted"

methodology of 30 component stocks representing a sample of large, well-established

and financially sound companies. The base year of SENSEX is 1978-79. The index is

widely reported in both domestic and international markets through print as well as

electronic media. SENSEX is not only scientifically designed but also based on globally

accepted construction and review methodology. From September 2003, the SENSEX is

calculated on a free-float market capitalization methodology. The "free-float Market

Capitalization-Weighted" methodology is a widely followed index construction

methodology on which majority of global equity benchmarks are based.

The growth of equity markets in India has been phenomenal in the decade gone by.

Right from early nineties the stock market witnessed heightened activity in terms of

various bull and bear runs. More recently, the bourses in India witnessed a similar

frenzy in the 'TMT' sectors. The SENSEX captured all these happenings in the most

judicial manner. One can identify the booms and bust of the Indian equity market

through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market hours

and displayed through the BOLT system, BSE website and news wire agencies.

SENSEX calculation:

SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this methodology, the level of index at any point of time reflects the total market

value of 30 component stocks relative to a base period. (The market capitalization of a

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company is determined by multiplying the price of its stock by the number of shares

issued by the company). An index of a set of combined variables (such as price and

number of shares) is commonly referred as a 'Composite Index' by statisticians. A single

indexed number is used to represent the results of this calculation in order to make the

value easier to work with and track over time. It is much easier to graph a chart based

on indexed values than one based on actual values. .

BSE - other Indices:

Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses

other stock indices as well:

BSE 500

BSE PSU

BSE MIDCAP

BSE SMLCAP

BSE BANK

The Securities and Exchange Board of India

The Securities and Exchange Board of India even though established in the year 1988.

Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide






capital market and protect the investors. The Governing Board of stock exchanges:

The Governing Board of the Stock Exchange consists of elected members of directors,

government nominees and public representatives. Rules, by laws and regulations of the

Stock Exchange substantial powers to the executive director for maintaining efficient

and smooth day-to day functioning of Stock Exchange. The Governing Board has the

responsibility to maintain and orderly and well-regulated market

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The Governing body of the Stock Exchange consists of 13 members of which Six

members of the Stock Exchange are elected by the members of the Stock Exchange.

F. Central Government nominates not more than three members.

G. The board nominates three public representatives.

H. SEBI nominates persona not exceeding three and

I. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM). The

retired member can offer himself for election if he is not elected for two consecutive years.

If a member serves in the governing body for two years consecutively, he should refrain

offering himself for another two years.

The members of the governing body elect the president and vice-president. It needs

to approval from the Central Government or the Board. The office tenure for the president

and vice-president is on year. They can offer themselves for re-election, if they have not

held for two consecutive years. In that case they can offer themselves for re-election after

a gap of one-year period.

SEBI GUIDELINES TO SECONDARY MARKETS:

The Securities and Exchange Board of India even though established in the year 1988.

Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide






capital market and protect the investors

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MANUAL MODE OF TRADING: TRADING PROCEDURE BEFORE ONLINE THE TRADING RING:

Trading on stock exchanges is officially done in the ring for a few hours from

11.00 A.M to 2.30P.M. Trading before or after official hour is called KERB TRADING. In

the trading ring space is provided for specified and non-specified sections. The

members of their authorized assistants have to wear a badge or carry with them identify

cards given by the exchange to enter the trading ring. They carry a Sauda book or

confirmation memos duly authorized by exchange. The stock exchanges operations at

floor level are highly technical in nature. Non-members are not permitted to enter into

stock market. Hence, various stages have to be completed in executing a transaction at

a stock exchange. The steps involved in the methods of trading have been given below:

A. CHOICE OF BROKER:

The prospective investor who wants to buy shares or the investor who wants to

sell his shares cannot enter into hall of the exchange and transact business. They have

to act through only member brokers. They can also appoint their bankers for this

purpose. Since, bankers can become members of stock exchange as per the present

regulations.

So, the first task in transacting business on stock exchanges is to choose a

broker of repute or banker. Such people’s can ensure prompt and quick execution of a

transaction at the possible price.

At present there are 4500 authorized brokers in ISE.

PLACEMENT OF ORDER:

The next step in planning of order for the purchase or sale of Securities with the broker.

The order is usually by telegram, telephone, letter, fax etc., or in person. To avoid delay

it is placed generally over the phone. The orders may take any one of the forms such as

at best order, limit order, immediate or cancel order, discretionary order, limited

discretionary order, open order and stop loss order.

22

ENTRY OF ORDER INTO THE BOOKS:

After receiving the order, the member enters them in his books and the purchase and sale

orders are distributed among his assistants to handle them separately in non-specified

and odd-lots.

EXECUTION OF ORDER:

Big brokers transact their business through their authorized clerk. Small ones out

their business personally. Orders are executed in the trading ring of the ISE.Thisworks

from 12:00 noon to 2:00 p.m discretionary order on all working days from Monday to

Friday and a special hour session on Saturday.

The floor of the stock exchange is divided into number of markets (pits) according

to the nature of security deal in. The authorized clerk/broker goes to the pit and jobbers

offer two way quotes for the scrips they deal in. they act as market makers and provide

liquidity to the market. The system has been designed to get the bet lids and offers from

the jobber’s book as well as the best buy and sell orders from the book. If the quotation is

not acceptable to the brokers, he may make a counter bid/offer.

Ultimately the bargains may be closed at a price mutually acceptable to both the

parties. In case the quotation is not acceptable to him, the broker may go to another

dealer and make a bargain. All bargains on the stock exchanges are settled by word of

mouth and there is no written contract signed immediately by the parties concerned. Once

the transaction is finalized, the deals are recorded in a Chaupri Rough notebook or

transaction note or confirmation memos. Soudha block books or confirmation memos are

provided by the stock exchange. The details are recorded in these books also. The prices

at which different scrips are traded on a particular day published on the next day in the

newspapers. An authorized representative of the stock exchange is also present in the

hall to supervise the trading.

PREPARATION OF CONTRACT NOTES

Usually, the authorized clerks enter the particulars of the business transacted

during a particular day in ‘Kacha Sauda Book’ they are transferred to ‘Pucca Sauda Book’,

which are maintained separately for the ready delivery contracts. Then the

23

broker/authorized clerk prepares a contract note. A contract note is a written agreement

between the broker and his client for the transaction executed. It contains the details of

the contract made for the purchase/sale of Securities, the brokerage chargeable, name of

the company, number of shares bought/sold, net rate, etc., it is prepared in a prescribed

from and a copy of it is also sent to the client.

PLACING ORDER WITH THE BROKER:

The next step is placing an order for the purchase/sale of securities with the broker.

The order is usually placed over telephone, fax. It can also take the form of telegram

or letter or in person. The order placed may be any of the following varieties (largely

classified on the basis of price limits that it imposes.).

AT BEST ORDER (OR) BEST RATE ORDER:

“Buy 1000 XYZ ltd.”, it does not specify any price. It means buy XYZ Ltd. Securities

at the prevailing market price. These are executed very fast as there is no price

limits.

LIMIT ORDER:

“Buy 100 XYZ Ltd. At Rs 100”, it is an order for the purchase of shares at a specified

price by the client.(Rs 100)

LIMITED DISCRETIONARY ORDER:

“Buy 1000 XYZ Ltd., around Rs.100”. it gives discretion to the broker. The price can

be a little above Rs 100. How much discretion is implied depends on how the broker

and client define around.

OPEN ORDER:

It is an order to buy or sell without fixing any time or price limit on the execution of

the order.

24

STOP LOSS ORDER:

“Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10”. It means buy 100 XYZ Ltd securities at

the market rate of Rs. 12 but if on the same day the price falls to Rs. 10 immediately

sell of the securities /shares. Thus an attempt is made to limit the loss of sudden

unfavorable shift in the market.

NET RATE ORDER:

“Buy 1000 XYZ Ltd. @Rs.30 net “would mean that the client is willing to buy 1000

XYZ Ltd. For no more than Rs.30 per security inclusive of brokerage payable to the

broker. Net rate is purchase or sale rate minus brokerage.

MARKET RATE ORDER:

Market rate is net rate plus brokerage for purchase and net minus brokerage for sale.

So, “Buy 1000 XYZ Ltd. @Rs.30 market” would mean that the client is willing to pay

Rs.30 plus brokerage for each security of XYZ Ltd.

DISADVANTAGES OF MANUAL TRADING:

1. Manual records are very difficult to be maintained safe

2. Manual records are subject to greater human error

3. Business can see itself in fines and penalties if records are lost

4. Manual records are easier to be falsified, modified, altered or vanished, as

compared to computerized records which become very safe when using passwords,

firewalls, and back-ups.

DEPOSITORY SYSTEM:

A "Depository" is a facility for holding securities, which enables securities transactions to

be processed by book entry. To achieve this purpose, the depository may immobilize the

securities or dematerialise them (so that they exist only as electronic records).India has

chosen the dematerialisation route. In India, a depository is an organisation, which holds

the beneficial owner's securities in electronic form, through a registered Depository

Participant (DP). A depository functions somewhat similar to a commercial bank. To avail

25

of the services offered by a depository, the investor has to open an account with a

registered DP.

BENEFITS OF DEPOSITORY SYSTEM:

In the depository system, the ownership and transfer of Securities takes place by means

of electronic book entries. At the outset, this system rids the capital market of the danger

related to handling of paper. NSDL provides numerous direct and indirect benefits, like:

Elimination of bad deliveries-in the depository environment, once holding of an investor

are Dematerialized, the question of bad delivery does not arise i.e. they cannot be hold

“under objection”.

Elimination of all risks associated with physical certificates-dealing in physical

Securities have associates security risks of stocks, mutilation of certificates, loss of

certificates during movements through and from the registrars, thus exposing the

investor to the cost of obtaining duplicate certificates and advertisement, etc.., This

problem does not arise in the depository environment.

SERVICES AVAILABLE IN DEPOSITORY SYSTEM: NSE AND BSE. NSDL: NATIONAL SECURITY DEPOSITORY LIMITED

Although India had a vibrant capital market which is more than a century old, the

paper-based settlement of trades caused substantial problems like bad delivery and

delayed transfer of title till recently. The enactment of Depositories Act in August 1996

paved the way for establishment of NSDL, the first depository in India. This depository

promoted by institutions of national stature responsible for economic development of the

country has since established a national infrastructure of international standards that

handles most of the securities held and settled in dematerialized form in the Indian

capital market.

Using innovative and flexible technology systems, NSDL works to support the

investors and brokers in the capital market of the country. NSDL aims at ensuring the

safety and soundness of Indian marketplaces by developing settlement solutions that

26

increase efficiency, minimize risk and reduce costs. At NSDL, we play a quiet but

central role in developing products and services that will continue to nurture the growing

needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank accounts. Transfer of ownership of

securities is done through simple account transfers. This method does away with all the

risks and hassles normally associated with paperwork. Consequently, the cost of

transacting in a depository environment is considerably lower as compared to

transacting in certificates.

Promoters / Shareholders

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the largest

development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India

and National Stock Exchange of India Limited (NSE) - the largest stock exchange in

India. Some of the prominent banks in the country have taken a stake in NSDL.

Promoters

Industrial Development Bank of India Limited (Now, IDBI Bank Limited)

Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit

Trust of India)

National Stock Exchange of India Limited

Other Shareholders

State Bank of India

Oriental Bank of Commerce

Citibank NA

Standard Chartered Bank

HDFC Bank Limited

The Honkong and Shanghai Banking Corporation Limited

Deutsche Bank

Dena Bank

27

Canara Bank

Union Bank of India

CDSL: CENTRAL DEPOSITORY SERVICES LIMITED:

A Depository facilitates holding of securities in the electronic form and enables

securities transactions to be processed by book entry by a Depository Participant (DP),

who as an agent of the depository, offers depository services to investors. According to

SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible

to act as DPs. The investor who is known as beneficial owner (BO) has to open a demat

account through any DP for dematerialization of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be

obtained through the DP. The DP is required to provide the investor, at regular intervals,

a statement of account which gives the details of the securities holdings and

transactions. The depository system has effectively eliminated paper-based certificates

which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers

an efficient and instantaneous transfer of securities.CDSL was promoted by Bombay

Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India,

Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of

India and Centurion Bank.

Promoters &shareholders

CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with

Bank of India, Bank of Baroda, State Bank of India and HDFC Bank. BSE has been

involved with this venture right from the inception and has contributed overwhelmingly to

the fruition of the project. The initial capital of the company is Rs.104.50 crores. The list

of shareholders with effect from 11th December, 2008 is as under.

28

Sr. No.

Name of shareholders Value of holding (in Rupees Lacs)

% terms to total equity

1 Bombay Stock Exchange

Limited

3,825.46 36.61

2 Bank of India 1,000.00 9.57

3 Bank of Baroda 1,000.00 9.57

4 State Bank of India 1,000.00 9.57

5 HDFC Bank Limited 1,500.00 14.36

6 Standard Chartered Bank 750.00 7.18

7 Canara Bank 674.46 6.45

8 Union Bank of India 200.00 1.91

9 Bank of Maharashtra 200.00 1.91

10 The Jammu and Kashmir Bank

Limited

200.00 1.91

11 The Calcutta Stock Exchange

Association Limited

100.00 0.96

12 Others 0.08 --

TOTAL 10,450.00 100.00

DEMATERIALIZATION

29

Dematerialization is a process by which physical shares of investors are

converted to an equivalent number of Securities in electronic form and credited in the

investor’s account with his Depository Participant.

Dematerialized trading is now compulsory for all investors. Beginning of first week

of January 1999, investor can trade in specific scripts in the Demoralization form. They

can provide and receive delivery only in a Dematerialized form and share certificate will

not be changed for these scripts.

A depository is an organization where Securities of shareholder are held in the

electronic form at the request of the shareholder through Depository Participant (DPs).

The system is comparable to that in a bank. If an investor wants services offered by a

depository, he would have to open an account with it through a DP- similar to opening an

account with any other branches of the bank in order to avail of its services.

Dematerialization is a process by which physical certificates of an investor are

taken back by the company/registrar and actually destroyed and an equivalent number of

Securities are credited in the depository account of those investors. A Depository

Participant is investor’s agent in the system. He maintains investor’s Securities account

and intimates the status of holdings from time to time to the investor.

FEATURES OF DEMAT:

In case you want to convert your existing shares into Demat format, you can view

securities available for Demat

You can view the details of your transactions including settlement date, pay in date,

pay out date using the View Settlement calendar option

OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF TRADES:

All the trades executed at the exchanges are settled by the clearing member (CM),

as in the case of Securities in the physical form. To settle trades in Demat segment each

CM should open one clearing account with any of the DP.

The procedure for opening clearing accounts is:

Approach a DP.

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Fill up an account opening form.

Sign on an agreement with the DP.

Application is forwarded to NSDL by DP.

NSDL allots a number identified as CM-BP-ID.

DP opens account and an account number is providing along with CM-BP-ID to the

clearing member.

After opening an account with the DP the investor should surrender the physical

certificates held in his name to a depository participant. These certificates will be sent to

the respective companies where they will be cancelled after dematerialization and will

credit the investors account with the DP. The securities on dematerialisation will appear

as balances in the depository account. These balances can be transferred like the

shares held in physical form. Dematerialised shares are in the fungible form and do not

have any distinctive or certificate numbers .The securities in the demat can again be

converted into physical form which is called as rematerialisation.

Safety to the investor

Securities Exchange Board of India (SEBI) has laid down certain rules and

regulations for getting registered as a depository participant. With the

recommendation of the Depository and SEBI's own independent evaluation a DP will

be registered under SEBI.

The investors account will be credited/debited by the DP only on the basis of valid

instruction from the client.

The system driven mandatory reconciliation is done between the DP and NSDL.

Periodic inspections of both DP and R&T agent are conducted by NSDL

The data interchange between NSDL and its business partners is protected by

standard protection measures such as encryption.

No direct communication links exist between two business partners and all

communications are routed through NSDL.

A statement of account is received periodically by the investors. NSDL sends

statement of account to a random sample of investors a s a counter check.

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The investor has the right to approach NSDL if the grievances of the investors are

not resolved by the concerned DP.

Advantages of dematerialization:

There is no risk due to loss on account of fire, theft or mutilation.

There is no chance of bad delivery at the time of selling shares as there is no

signature mismatch.

Transaction costs are usually lower than that in the physical segment.

The bonus /rights shares allotted to the investor will be immediately credited into his

account.

Share transactions like sale or purchase and transfer/transmission etc. can be

effected in a much simpler and faster way.

A safe and convenient way to hold securities

Immediate transfer of securities;

No stamp duty on transfer of securities;

Elimination of risks associated with physical certificates such as bad delivery, fake

securities, delays, thefts etc.;

Reduction in paperwork involved in transfer of securities;

Reduction in transaction cost;

No odd lot problem, even one share can be sold;

Nomination facility;

Change in address recorded with DP gets registered with all companies in which

investor holds securities electronically eliminating the need to correspond with each

of them separately;

Transmission of securities is done by DP eliminating correspondence with

companies;

Automatic credit into demat account of shares, arising out of

bonus/split/consolidation/merger etc.

Holding investments in equity and debt instruments in a single account.

32

33

Disadvantages of Demat account -

There is no as such disadvantage of Demat account. And even if there is any

disadvantage of Demat account than by law, In India we Must have to use Demat

accounts to do share transactions.

A. Procedure for purchasing dematerialized securities

The procedure for purchasing dematerialized securities is also similar to the

procedure for buying physical securities.

1. Investor instructs DP to receive credits into his account in the prescribed form. There

may be one time standing instruction or separate instruction each time to receive

credits.

2. Investor purchases securities in any of the stock exchanges linked to depository

through a broker.

3. Broker receives payment from investor and arranges payment to clearing

corporation.

4. Broker receives credit to securities in clearing account on the payout day.

5. Broker gives instructions to DP to debit clearing account and credit client’s account.

Investor receives shares into his account by way of book entry.

B. Procedure of selling dematerialized securities

The procedure for selling dematerialized securities in stock exchanges is similar

as selling physical securities. The only major difference is that instead of delivering

physical securities to the broker, the investor instructs his DP to debit his demat account

with the number of securities sold by him and credit the brokers clearing account. The

procedure for selling dematerialized securities is given below:

1. Investor sells securities in any of the stock exchange linked to depository through a

broker.

2. Investor instructs his DP to debit his demat account with the number of securities

sold and credit the broker’s clearing account.

34

3. Before the pay-in-day, broker of the investor transfers the securities to clearing

corporation.

4. The broker receives payment from the stock exchange.

5. The investor receives payment from the broker for sale of securities in the same

manner as received in case of sale of physical securities.

The Evolution of Stock Brokers with Online Trading

An online stock broker is an investor’s means of buying and selling shares via the

Internet, just like a regular stock broker, wherein an individual or a brokerage firm acts

as one’s link to the stock exchange. Are such services necessary? Is it, after all, not true

that anyone can engage in online trading today, and that it is possible to invest in

stocks with one’s own computer?

The fact is, only a registered (SEBI) stock broker can buy and sell shares in the

stock market. Such an individual is registered on one or many stock exchanges and is

authorized to transact on behalf of others. Apart from that, an online stock broker is very

valuable to investors who are not technically inclined and have no or little prior

knowledge of stock trading. Such investors can use their own online stock trading

accounts to obtain necessary information and place online trades at any time of the day.

Others, however, still require a human interface - a real person who will place trades on

their behalf.

INTRODUCTION TO ONLINE TRADING

The Internet revolution has been changing the fundamentals of our society. It

shapes the way we communicate and the way we do business. It brings us closer and

closer to vital sources of information. It provides us with means to directly interact with

service-oriented computer systems tailored to our specific needs; therefore, we can

serve ourselves better by making our own decisions. This prevailing shift of the

business paradigm is reshaping the financial industry and transforming the way people

invest.

35

In the old days, because of the limitations of communications technology, Wall Street

was the center for most of the Stock Exchange and Brokerage firms. Today, at this

millennial transition, investors can use revolutionary Internet Client-Server technology to

trade stocks nearly anywhere, anytime, independent of brokers' fees and service

limitations.

Definition: Online Trading

The act or practice of buying and selling securities over the Internet. Generally

speaking, online trading occurs when an investor makes an order to a broker online; the

broker then executes the order through the ordinary means. Online trading became

more common in the 1990s as more brokerages offered their services online, often for a

small fee rather than a commission on the trade.

Online trading should be distinguished from electronic trading, which occurs on

an exchange. See also: Discount brokerage. Online trading in India is the internet based

investment activity that involves no direct involvement of the broker. There are many

leading online trading portals in India along with the online trading platforms of the

biggest stock houses like the National stock exchange and the Bombay stock

exchange. The total portion of online share trading India has been found to have grown

from just 3 per cent of the total turnover in 2003-04 to 16 per cent in 2006-07

Facilities of the online trading in India:

The investor has to register with an online trading portal and get into an

agreement with the firm to trade in different securities following the terms and conditions

listed down on the agreement. The order processing is done in correct timings as the

servers of the online trading portal are connected to the stock exchanges and

designated banks all round the clock. They can also get updates on the trading and

check the current status of their orders either through e-mail or through the interface.

Brokerage also provides research content on their websites, such that the clients can

take their own decisions on stocks before investing.

36

Products and services of the online trading in India:

Varieties of financial products and services of the online trading are available in India

such as:

Life insurance

Equities,

Portfolio management

Mutual funds

Loans

General insurance

Share trading

Commodities trading

Financial planning.

National stock exchange and Bombay stock exchange:

In spite of many private stock houses at present involved in online trading in India, the

NSE and BSE are among the largest exchanges. They handle huge daily trading

volumes, supporting large amounts of data traffic, and possessing a countrywide

network. The automated online systems used for trading by the national stock exchange

and the Bombay stock exchange are the NIBIS or NSE's Internet Based Information

System and NEAT for the national stock exchange and the BSE Online Trading system

or BOLT for the Bombay stock exchange.

Online trading is termed as selling products or good services through Internet.

Customers willing to purchase the product should provide the credit card details and

personal contact information online and once the payment is being made the product

is shipped to the address of the customer as provided earlier generally after two

business days.

The product is shipped to the customer from the retailer only.

Online trading is treated as the most effective process to make money with the help

of Internet by sitting at home only.

But is not easy and simple as it requires constant supervision and once people

attains the appropriate skill can gain profit in huge amount.

37

In order to make a business successful a plan need to be prepared first then multiple

sources of income policy should be opened so that the plan at later time should be

incorporated in to the business.

Companies provide Online Trading in India:-

Online Trading in India

:: India Stock

:: A1 Technology Online Trading

:: Best online trading

:: Bonanza Online Trading

:: BullishIndian.com Online Trading

:: Express Computer Online Trading

:: Geojit Securities Online

:: ICICI Online Trading

:: Indiabulls Online

:: India Insurance

:: BSEIndia

:: JV Financial Online

:: Kotak Securities Online Trading

:: Mansukh Securities Online Trading

:: Quote.com Online Trading

:: SHCL Online Trading

:: STC Online Trading

:: Technical Analysis Trading

:: Union Bank of India Online Trading

:: Best Online Trading

FEATURES OF ONLINE TRADING: The Online Trading is having many features which

make it most suitable for the investors to go for. Some of these features are as follows:

Features of information.

The Internet can provide a new sense of control over your financial future. The amount

of investment information available online is truly astounding. It's one of the best

aspects of being a wired investor. For the first time in history, any individual with an

Internet connection can:

Know the price of any stock at any time

Review the price history of any stock in chart format

Follow market events in-depth

Receive a wealth of free commentary and analysis about stock markets and the

global economy

Conduct extensive financial research on any company

38

Control of your money:

One of the great appeals of using an online trading account is the fact that the

account belongs to you, and is under your direct control. When you want to buy or sell

stock, you no longer need to call your broker on the phone; hope that he is in the office

to place your order; possibly argue with the broker about the order; and hope that the

transaction is executed instantly.

Access to Market:

At the most basic level, an online trading account gives you more agility in buying

and selling stocks. This is through sophisticated information streams, dedicated trading

platforms and sophisticated tools for accessing the markets.

Ensures the best price for Investor:

Every broker house aims at providing the investor with the best price available.

Also due to the high level of transparency with regard to display of information relating

to the specific stocks and company profiles, you will be able to get the best quote for

your orders.

Offers grater transperancy:

Online trading offers you greater transparency by providing you with an audit trail. This

involves a complete integrated electronic chain starting from order placement, to

clearing and settlement and finally ending with a credit into your depository account. All

these stages are subject to inspection, thus bringing in transparency into the system. Enables hassle free trading:

Online trading integrates your bank account, your trading account and your demat

accounts, which leads to easy and paperless trading for you.

Allow Instant trade execution

You as an Investment online customer will be able to execute the entire trading

transaction, right from logging on to our site, to the execution and settlement of your

bank account, in a very short period of time.

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Provides a level playing field

Trading on the net, gives even the smallest retail investor access to information

that earlier was available only to the big traders. This provides a level playing field for all

investors in the securities market.

Reduces the settlement of risk

This method of trading reduces the settlement risk for the investor, as in this case

all short sell orders are squared off at the specified cut-off time and not allowed to be

carried forward.

In the case of a demat account your demat account is checked by us before

executing your sell transaction. This reduces the settlement risk for the buyer, who is

assured of the delivery of the securities and for you as a seller of the securities

Instant order trade confirmations

Every trade is confirmed immediately and you will receive an on-screen

confirmation following every trade with full details for your records. This avoids costly

errors that would have been discovered when it is too late.

Integrated Accounts

Your Bank, Depository and online account are integrated for your convenience.

Various broking houses provide access to many of the popular banks.

Provides a level playing field

Broking houses work hard to keep our account and personal information secure.

From updated security technology to advanced fraud prevention measures, they have

the people and tools in place to provide a strong defense against electronic scams and

fraud.

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BENEFITS OF ONLINE BROKING 1) Less Costly:

The most significant advantage of the Online broking is the cost reduction in the

brokerage. Due to the power of the Internet one has the privilege of becoming the

clients of really large brokerages with the benefits of enjoying the low charges hithelio

before enjoyed only by the big players. As the DP account has got linked to the trading

account most players do not charge a minimum transaction cost thus truly allowing one

to buy a single share and achieve meaningful rupee price averaging whatever be your

buying power.

2) Peace of Mind:

One can never have complete peace of mind but online investing does away with

the hassles of filling up instruction slips, visits to the broker for handing over these slips

and consequent costs.

3) Keeping Records:

The site one trades on keeps a record of all transactions down to unexecuted

orders and cancelled orders thus keeping one abreast of all your transactions 24 hours

a day. No paperwork means more time at one’s disposal for research and analysis.

4) Access to Information and investment Tools:

Most online investing sites have a wealth of information for their registered

members. This includes research reports, results, analysis and even gossip and the

buzz in the market.

5.) Unparalleled Liquidity:

The. bank account linked with the trading account invariably has an A TM free.

Most partner banks offer Internet banking as well. This results in one’s money becoming

available to him whenever he like from his trading account. Conversely in case he spot

an opportunity in the market he can immediately allocate money from his savings

account to his trading account and make profits.

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6.) Unparalleled Safety:

Most sites are secure using 128-bit algorithms -highest available commercially

anywhere in the world. Moreover even if somebody broke in and tampered with one’s

account the money from the stocks he sold or the stock bought from the money in his

account is in his account only.

7.) Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as in this case

no Short sale is possible i.e. the seller will not be able to sell the securities unless he

has their actual possession. In the case of a demat account (required for an online

transaction), when a seller wants to sell the securities, his demat account is checked by

the Depository Participant before executing the sale transaction. This reduces the

settlement risk for the buyer, who is assured of the delivery of the securities.

8.) Offers greater transparency:

Online trading gives greater transparency to the investors by providing them an

audit trail. This involves a complete integrated electronic chain starting from order

placement, to clearing and settlement and finally ending with a credit to the depository

account of the investor. All these stages are subject to inspection, thus bringing in

transparency into the system.

9.) Ease of trade:

It is the ease of doing the trade through net, with a click of mouse, one can buy

or sell any share that is dematerialized. Other than the above-mentioned advantages,

Internet trading provides some additional advantages to the investors, brokers and also

helps the nation to channelize the resources. Net trading would increase competition in

the market hence increase in the bargaining power of the investors. The entire

communication between the investor, broker and exchange would take place within

milliseconds.

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PROBLEMS OF ONLINE BROKING

There is a flip side to everything and online trading is no exception.

Chart

Source:- www.lse.co.in

27% Loyality is of traditional broker

23% people says that online trading is more costly than manual trading.

21% people not prefer online trading because of lack of knowledge.

So, the main problems of online trading are as follows: 1.) "Server not found":

This may appear on one’s screens when he is desperately trying to get out of an

unprofitable position. Some of the online sites are providing a telephone number for use

in case their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

Recently ICICI Direct had a connectivity problem with the NSE for two and half-

hours during trading hours. This problem is rare but be alive to its possibility.

3.) Cyber attack:

In the event of a malicious attack on the systems of one’s broker he is protected

only if the company is taking proper precautions against such attacks and if proper

21%

23%

27%

11%

14%

4%

More Costly

Lack Of Knowledge

Loyalty to Traditional Broker

Lack of Trust

Slow Speed

Other

43

backup is regularly been taken. He may like to choose a brokerage that has a stated

security policy and contingency plan in place.

4.) Non-availability of a seamless interface:

As a client one will access the NSE through a server of the online brokerage and

this may involve queuing delays. If a number of client access the server the server takes

its own time sending the orders to the NSE server. He must check out the

seamlessness of this interface before selecting an online brokerage. The faster the

orders are processed the more seamless is the interface.

5.) Non- availability of personalized advice:

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to

do so. If he want advice on a particular stock in his portfolio he may not even be able to

get that.

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are trading

on margin. That is where the brokerage firm lends you money by leveraging his

account, allowing him to buy a large amount of securities by putting up only a small

amount of money. He may have forgotten what he read in the small print of his

agreement, but the brokerage firm has the right to change the maintenance margin

requirements without any warning or notice to him. In fact, the firm has the right to

liquidate his securities holdings (and it can pick and choose which ones) without any

notice to one if he fail to meet the margin call. And there he was leveraged to the hilt,

hoping to hit a home run when he discovered that he is required to make a large deposit

that he cannot make. The next thing one know, the firm is selling off his securities at a

point in time that is not the best for him. These are the perils of trading on margin.

7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to

investors looking for an insight into the market. Many would not like to rely on research

44

reports, which are there for all. So, net investors will have to do their own research and

take their own decision, whether wild or wise.

8.) Increased charges:

Some of the brokers are of the view that they would have to provide advisory

services to the customers. But with increased volumes, they will have to follow the

international practice of charging a little more than the normal charges from a customer

looking for personal advice.

WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING

Several broking houses now offer online trading facilities. You can trade online

with e-brokerages such as ICICI Direct, Kotakstreet, India bulls, India info line’s

5paisa.com and HDFC securities.

If you are already comfortable trading with your regular broker, here are few

reasons why you may consider switching to trading online, or at least another avenue of

trading. an obvious advantage of online trading is that your transaction would be

virtually paperless. Your trading account would be linked to your demat and bank

account, ensuring a smooth transaction process. This is especially helpful in the extent

T+2 settlement system, where you have just two days to settle your transaction.

The normal process of issuing of delivery note, in case of a sale, or arranging for a

payment in case of purchaser of shares, is all taken care of the minute your order is

executed online. The absence of manual intervention ensures that you are completely in

control of all transaction.

There is also little room for error, as your order is always confirmed before it is

executed. You can also make better decision as you have a clear record of all your

previous transaction. When you trade offline, a demat statement is normally sent to you

only on a quarterly basis .keeping track of your portfolio can be a hassle in such a case.

The inter net can provide a new sense of control over your financial future. The amount

of investment information available online is truly astounding. Its one of the best aspect

of being a wired investor for the first time in history, any individual with an internet

connection can:

45

Know the price of any stock at any time

Review the price history of any stock in chart format

Follow market events in-depth

Receive a wealth of free commentary and analysis about stock markets and

globe economy.

Conduct extensive financial research on any company

Talk with other investors around the world

At investsmart you can get real-time stock quotes, daily roundups of the stock market,

experts commentary, and a deep community of fellow investors.

Convenience is probably the greatest advantage online trading offers investors. if don’t

have time to trade during market hours ,perhaps you are at work, you can log on the

web-trading site and place your order offline, during off market hours. Your order would

join the queue and be expected the next day. You would need to enjoy a good

relationship with your broker, for you to be able to reach him in the late hours. For non-

resident Indians (NRI), trading online is perhaps their easiest option to invest in the

Indian stock markets.

What is more, the time difference, in some cases, can work to their advantage .Antony,

an NRI-based in New York, places his order in the evening after work, when it is day

time India and the markets are open. We also have access to considerable information

online. By just logging on to ICICI direct online, for instance, we can get the latest news,

market information and company research.

Moreover, if our connection is maddeningly slow and we want to get your order

executed immediately, most e-brokerages also provide a facility to trade offline by

placing our order via the phone.

46

PROCEDURE FOR ON-LINE TRADING:

An Investor interesting in trading through Internet shall such as filling the account

opening form of -broker, copies of identity proof have to, firstly register himself with an

Internet brokerage firm. Some formalities, copy of residence proof are made to register

himself with the e-trader. Secondly, the investor would be required to open a bank

account with a scheduled bank and sufficient balance should be kept in the account.

Thirdly he would be required to open account with a depository participant because only

dematerialized shares can be traded on Internet.

So, generally following steps are followed while doing the trading through the Internet:

The client places order via the net by logging on to his

Broker’s site.

The broker accepts and executes the order and places it with the exchange

The exchange accepts the order after checking the share limit for the day.

The broker makes the payment either directly via the client bank account or pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through the demat or via e-mail.

47

Step-I:

Those investors interested in doing the trading over Internet system, that is,NEAT - ISX

(NSE), should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a personal

identification number (PIN).

Step-3:

Actual placement of an order, Using the place order window as under can then place an

order:

(a) First by entering the symbol and series of stock and other parameters such as

quantity and price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity. Step-4:

It is the process of review. Thus, the investor has to review the order placed by clicking

the review option. He may also re-set to clear the values.

Step-5:

After the review has been satisfactory; the order has to be sent by clicking on the send

option.

Step-6:

The investor will receive an "Order Confirmation" 'message along with the order number

and the value of the order.

Step- 7:In case the order is rejected by the Broker or the Stock Exchange for certain

reasons such as invalid price limit, an appropriate message will appear at the bottom of

the screen. At present, a time lag of about ten seconds is there in executing the trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some brokers will

take some advance payment from the, investors and will fix their trading limits. When

the trade is executed, the broker will ask the investor for transfer of funds by the

investor to his account.

48

CLIENT BROKER STOCK EXCHANGE

Places an order on the net on the broker’s

website through the distinctive I.D. code

Accepts the order, Checks the client’s Identity and places the order with the

stock exchange

Accepts the order after checking the scrip limit

of the broker for the day

The settlement of the deal (buy/sell order) gets reflected in his Demat account.

The client is intimated about the execution of

the deal by e-mail. Pays the broker

pending physical delivery.

Pays the

Exchange

though his owns account and

receives it from the client account.

Receives the money and

completes the settlement

When was online trading introduced in INDIA?

Online trading started in India in February 2000 when a couple of brokers started

offering an online trading platform for their customers.

THE MECHANICS OF ONLINE TRADING

The benefits of investor due to Online Investing: a) Independence and freedom due to enjoyed by an individual access to the markets:

This is conceivably the greatest advantage of online brokerages. A novice

investor with an Internet connection can know there all time stock quotes, historical

stock price trends, have a handle on market events, access vast amounts of economic

and market analysis, do research on firms, and interact with other investors via forums

49

or chat rooms. This, in combination with time, can transform even the most novice

investor with an active interest in investments into a knowledgeable and powerful

investor.

b) Elimination of the “middle man”:

Investing online gives the investor a sense of control over their wealth. Buying

and selling of stock no longer requires another individual to carry it out. It saves the

investor the added worries that come with busy phone lines; broker not being in, etc.

when wanting to do an important trade. It can be done whenever and wherever by the

Investor themselves.

c) Elimination of Losses on account of Brokers:

Most brokers live on commissions, hence the tactics used by them are in the

favor of the broker first, the brokerage house next and finally the client. Online

brokerages pay financial advisors a fixed salary, thus eliminating the chance for an

investor doing unnecessary trades for the benefit of the brokerage firm and the broker.

d) Inexpensive and affordable commission charges:

Commissions per trade online are much lower than when compared to that

charged by traditional brokerage houses like Merrill Lynch, etc. This is the fulcrum on

which online brokerages leverage. Cheap transaction costs along with the immense

amount accessible online are the biggest reasons for the clients to move online.

traditional brokerage houses

e) Internet as an InformationSuperhighway:

Information related to stocks, company Fundamentals, etc., which were once

only available to licensed brokers, are now at the finger tips of anyone and everyone.

Online brokerages are inconstant endeavor to bridge the gap between the investor and

the market.

50

f) Diverse range of investment products and choices:

Online brokerages are offering more Products to the consumer, so as to give the

consumer a wider choice and also to accommodate consumers that have niche tastes.

Investors can invest in stocks, bonds, mutual funds, mortgages.

g) Speed of trade execution:

Keeping time in mind, online trading is much quicker – as far as accessibility and

availability to investment information and execution of trades areconcerned. Online

have decreased the time for total completion of a trade from the regular T+3 days to a

matter of minutes.

The costs borne by an Individual Investor from Online Investing a) Technical Reliability:

The greatest disadvantage of online trading is the inability of a network to be fail-

safe. Computers in spite of the technological advances are by no means perfect. There

are various things that could go wrong like failure to log on to the network, network

blackout due to failure power, server crash resulting in site failure, traffic overload thus

causing site freeze. Site freeze can happen on extremely demanding days with large

amounts of orders going over the networks.

b) The investor is alone: Another disadvantage may be the penalty of a bad

investment. The do it yourself attitude that empowers the investor over his own money,

can give a sense of autonomy previously not experienced when dealing with traditional

brokerages. But it can also

spell investment failure.

The Limitations of Online Investing to an individual investor:

Besides advantages and disadvantages, there exists the possibility of limitations of what

online brokerages can do for an individual investor. Though the Internet has allowed

more players into the investment playing field, some investors like the institutional

51

investors still have an advantage over the individual investors in spite of the Internet and

all its advantages. It can be assertively said, “Size does matter”.

Firstly, because of the sheer size of resources and contacts, institutional investors

almost always get exclusive access to the hottest Initial Public Offering (IPO) deals

before it goes into the markets. Individual investors usually gain access to these stocks

after the initial price gain is already lost. Online brokerages do offer IPO deals –provided

the trading account has between $100,000 to $500,000.

Client Broker Relationship Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable information

about clients, which would facilitate risk evaluation of clients.

Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and rights.

This agreement should also inter alia, the minimum service standards to be maintained

by the broker for such service specified by SEBI/Exchange for the internet based

trading from time to time. Exchange will prepare a model agreement for this purpose.

The broker agreement with clients should not have any clause that is less

stringent/contrary to the conditions stipulated is the model agreement.

Investor Information:

The broker web site providing the internet based trading facility should contain

information meant for investor protection such as rules and regulations affecting client

broker relationship arbitration rules, investor protection rules etc. The broker web site

providing the Internet based trading facility should also provide and display prominently,

hyper link to the web site/page on the web site of the relevant stock exchange (s)

displaying rules/ regulations/ circulars. Ticker/quote/order book displayed on the web-

site of the broker should display the time stamp as well as source of such information

against the given information.

52

Order/Trade Confirmation: Order/Trade confirmation should also be sent to the

investor through email at client’s discretion at the time specified by the client in addition

to the other made of display of such confirmation of real time basis on the broker web

site. The investor should be allowed to specify the time interval on the web site itself

within which he would like to receive this information through email. Facility for

reconfirmation of orders which are larger than that specified by the member's risk

management system should be provided on the internet based system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service provided by

brokers to ensure a minimum level of service. Exchange should have separate cell

specifically to handle Internet trading related complaints. It is desirable that exchanges

should also have facility for on-line registration of complaints on their web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the trading limits

of clients, and exposures taken by clients. Brokers must set predefined limits on the

exposure and turnover of each client. The broker systems should be capable of

assessing the risk of the client as soon as the order comes in. The client should be

informed of acceptance/rejection of the order within a reasonable period. In case

system based control rejects an order because of client having exceeded limits etc., the

broker system may have a review and release facility to allow the order to pass through.

Contract Notes:

Contract notes must be issued to clients as per existing regulations, within 24 hours of

the trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as III the case

of existing system, brokers using Internet based systems for routing client orders will

53

also not be allowed to cross trades of their clients with each other. All orders must be

offered to the market for matching.

It is emphasized that in addition to the requirements mentioned above, all existing

obligations of the broker as per current regulation will continue without changes.

Exchanges may also like to specify more stringent standards as they may deem fit for

allowing Internet based trading facilities to their brokers.

Enforcement: A separate working group has been set to look into the surveillance and

enforcement related issues arising due to Internet based securities trading. However,

general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices Regulations,

1995) would apply to all transactions involving securities or financial services,

regardless of the medium.

STOCK MARKET TRADING ON INTERNET

The major events that will take place in the Indian Capital Market are introduction of

index-based futures trading on internet. Trading on internet means that the investor’s

will actually buy and sell the stocks on-line through the net. A committee was setup by

SEBI to develop regulatory parameters for use internet trading. SEBI approved the

report on the committee. SEBI decided that internet trading could take place in India

within the existing legal framework through use of order routing system, which will route

order from client to brokers, for trade execution on registered stock exchanges. The

broad also took note of the recommended minimum technical standards for ensuring

safety and security of transaction between clients and brokers, which will be forced by

the respective stock exchanges.

Easier transaction processing

Profit in time: Investor can make profits by selling shares when the going is good. They

do not have to instruct their brokers on the cut off price to sell shares.

Ease and transparency: Since the broking, bank and demat account are all

electronically connected, all transaction get updated, demat account shows the latest

54

stockholding statement while the bank account shows the balance amount after buying

or selling of shares.

Precaution: Check for hidden costs of broker’s age. Beware of net seamstress. Never

double click the mouse during execution of trade avoids cyber cafes and change

password regularly.

Less fees: shares traded online require no human intervention to match buys and sells.

This means that commission costs are cut dramatically for the frequent investor. Market timings:

Trading on the derivatives segment takes place on all days of the week (except

Saturdays and Sundays and holidays declared by the Exchange in advance). The

market timings of the derivatives segment are:

Normal Market / Exercise Market Open time : 09:55 hours

Normal market close : 15:30 hours

Set up cut of time for Position limit/Collateral value : till 15:30 hrs

Trade modification end time / Exercise Market : 16:15 hours

Internet Based Trading through Order Routing Systems

Internet based trading on conventional exchanges, uses the Internet as a medium for

communicating client orders to the exchange, through broker web sites. Broker’s web

sites may serve a variety of functions. These may include;

Allowing the clients to directly trade through investors;

Advertise the broker dealers’ services to potential investors;

Offer market information and investment tools similar to those offered by information

vendor or SRO web sites;

Offer real-time or delayed quote information, continuously update quotes while the

user visits other sites, or allow investors to create a personal stock ticker;

Provide market summaries and commentaries, analyst reports and trading strategies

and market data on currencies, mutual funds, options, market indices and news; and

Offer investors access to portfolio management tools and analytic programs;

55

Information on commission and fees; and

Account information and research reports.

In an Order Routing system, a broker offering Internet trading facility provides an

electronic template for the customer to enter the name of the security, whatever it is to

be bought or sold, the quantity and whatever the order is a market or limit order. Once

the broker’s system receives this information.

56

CHAPTER – 3 COMPANY’S PROFILE

SMC Global is one of the largest and most reputed Investment Solutions Company that

provides a wide range of services to its substantial and diversified client base. Founded

in 1990, by Mr. Subhash Chand Aggarwal and Mr. Mahesh Chand Gupta, SMC, is a full

financial services firm catering to all classes of investors. The company is having its

corporate office in New Delhi with regional offices in Mumbai, Kolkata, Chennai,

Ahemdabad, Cochin, Hyderabad, Jaipur plus a growing network of more than 1250

offices across over 350 cities/towns in India and overseas office in Dubai.

Enabling shorter settlement cycles and book entry settlements systems, and

meeting the current international standards of securities market.

HISTORY OF SMC

SMC acquired membership of the Delhi Stock Exchange in 1990 and later in 1995

became a trading member of NSE. In 2000 the company became a member of BSE and

a depository participant of CDSL India Ltd. In the same year, the company acquired the

Trading & Clearing Membership of NSE Derivatives and the memberships of leading

commodity exchanges i.e. NCDEX and MCX in subsequent years. In 2006, SMC

expanded globally and acquired the Trading & Clearing Membership of Dubai Gold and

Commodity Exchange (DGCX). In the same year, the company also started its

57

Insurance Broking division, IPO & Mutual Fund Distribution Division and its Merchant

Banking division.

Mission

Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate

communication network,

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and

meeting the current international standards of securities market.

Vision

“Their vision is to be the most respected company in the financial services space”.

PRODUCT AND SERVICES OF SMC

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 now 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 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 member in NSE (derivative) segment we are clearing massive volumes

of trades of our trading members in this segment.

58

Commodity Trading

SMC is a member of two major national level commodity exchanges, i.e National

Commodity and Derivative Exchange and Multi Commodity Exchange and offers you

trading platform of NCDEX and MCX. You can get Real-Time streaming quotes, place

orders and watch 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 globally 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 clearing 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 network 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 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

MC Depository

They are ISO 9001:2000 certified DP for shares and commodities. We are one of the

leading DP and enjoy the trust of more than 40,000 investors. We offer a quick, secure

and hassle free alternative to holding the securities and commodities in physical form.

They are one of the few Depository Participants offering depository facilities for

commodities. We are empanelled with both NCDEX & MCX.

59

SMC Research Based Advisory Services

Their 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

Their 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.

PROBLEMS OF THE ORGANIZATION

Lack of Techno Savvy people and poor Internet penetration: -

Since most of the people are quite experienced and also they are not techno

savy. Also Internet penetration is poor in India.

Some respondents are unwilling to talk: --

Some respondents either do not have time or willing does not respond, as they

are quite annoyed with the phone call.

Lack of Career Opportunities

Limitations of online trading

Competition

Technical Problem

60

COMPETITION INFORMATION ICICIDIRECT.COM

Products and Services

A product for every need: ICICIdirect.com is the most comprehensive website,

which allows you to invest in Shares, Mutual funds, Derivatives (Futures and

Options) and other financial products. Simply put we offer you a product for every

investment need of yours.

ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an Affiliate of ICICI

Bank Limited and the Website is owned by ICICI Bank

Limited

Product & Services: Trading in shares: ICICIdirect.com offers you various options while trading in shares.

Cash Trading: This is a delivery based trading system, which is generally done with the

intention of taking delivery of shares or monies.

Margin Trading: You can also do an intra-settlement trading up to 3 to 4 times your

available funds, wherein you take long buy/ short sell positions in stocks with the

intention of squaring off the position within the same day settlement cycle. (ONLY for

intraday)

INDIA BULLS

India bulls Group is one of the top business houses in the country with business

interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex and Power

sectors. India bulls Group companies are listed in Indian and overseas markets and

have a market capitalization of over USD 7 billion. The Net worth of the Group exceeds

USD 2.5 billion. India bulls Group companies enjoy highest ratings from CRISIL, a

61

subsidiary of Standard and Poor’s. India bulls has been conferred the status of a

“Business Super brand” by The Brand Council, Super brands India.

India bulls Financial Services is an integrated financial services powerhouse providing

Consumer Finance, Housing Finance, Commercial Loans, Life Insurance, Asset

Management and Advisory services. India bulls Financial Services Ltd is amongst 68

companies constituting MSCI - Morgan Stanley India Index. India bulls Financial is also

part of CLSA’s model portfolio of 30 Best Companies in Asia. India bulls Financial

Services signed a joint venture agreement with Sogecap, the insurance arm of Societé

Generale (SocGen) for its upcoming life insurance venture. India bulls Financial

Services in partnership with MMTC Limited, the largest commodity trading company in

India, is setting up India’s 4th Multi-Commodities Exchange.

ABHIPRA

Beginning as a Broking House, we grew into Business House. We broadened our horizons and stepped into the field of Depository, Stock Broking, Full-Fledged Money Changing Services, Category I Registrar & Transfer Agent, Commodity Trading, Online Trading (Equity, F&O & Commodity), e-Return Intermediary. Abhipra today commands the status of being one of the leading Depository Participants of Northern India in Private Sector. Moreover, Abhipra has Trading Terminal Outlets

for NSE & BSE spread to almost every nook & corner of Northern India.

Abhipra Capital Limited is also empanelled as a Depository Participant with one of the premier Commodity bourse, Nationa l Commodit ies a nd Deriva tives Ex change Limite d (NCDE X) . So a c lient now ca n open Commodity De mat Acc ount wit h us At Abhipra, we offer our clients far more than merely a comprehensive range of financial services. We offer them ideas, innovations, and solutions with extra-ordinary results. We feel that quality is an essential ingredient in bui lding successful businesses. Not only do products and services need to be of high quality, but potential customers also need to have assurance that the products will be of high quality. This is evidenced

from the fact that Abhipra is a ISO 9001 (Quality Assurance Systems) Registered Company.

KOTAK SECURITIES:-

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and

distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's leading

financial institutions, offering complete financial solutions that encompass every sphere

of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to

investment banking, the group caters to the financial needs of individuals and corporate.

62

Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both

The Bombay Stock Exchange and the National Stock Exchange of India Limited.

The company has four main areas of business:

Institutional Equities,

Retail (equities and other financial products),

Portfolio Management and

Depository Services.

MOTILAL OSWAL:-

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just

two people running the show. It has established itself as the Best Local Brokerage

House in India (Asia Money Brokers’ Poll 2005). Their Institutional Equity Division

combines the efforts of the Research and Sales & Trading departments to best serve

clients' needs. Consistent delivery of high quality advice on individual stocks, sector

trends and investment strategy has established them as a reliable research unit

amongst leading Indian as well as international investors.

63

CHAPTER – 4 RESEARCH METHODOLOGY

The basic task of research is to generate accurate information for use in

decision making. Research can be defined as the systematic and objective process of

gathering, recording and analyzing data for aid in making business decisions.

There are basically two techniques adopted for obtaining information:

Primary Data. Secondary Data.

Primary Data is gathered specifically for the project at hand through personal

interviews with the accounts officers.

Secondary Data is previously collected and assembled for some project other

than the one at hand. It is gathered and recorded by someone else prior to current

needs of the researcher. It is less expensive than the primary data.

Secondary data was collected from Local Stock Exchange of Shimla

Scope of study:

The study is limited to surrounding areas of Shimla Stock Exchange ,

Data Collection:

Data is collected from secondary sources.

Sources of data collection are:

1) Shimla Stock Exchange

2) www.nseindia.com

3) www.bseindia.com 4) www.on-linetrading.com

64

For the successful research the manipulation of certain things, concepts, and

symbols for the purpose of generalization is inevitable. Research is simply the pursuit of

truth with the help of the study.

65

CHAPTER – 5 DATA ANALYSIS AND INTERPRETATIONS

1. For how long you have been trading with on line-trading?

(a) 1 year

(b) 2 year

(c) 3 year

(d) 4 year

Sample size 100

According to this survey we find that 44% people says that we are investing the money

online from one year and 26% people says that we are investing the money online from

2 years and 19% to 11% people says that we are investing money online from 3 to 4

year. so we can say that now online trading is very popular in the modern market.

05

1015202530354045

YEAR

1 year

2 year

3 year

4 year

66

2. How will you describe your experience with on-line trading till date?

(a) very easy to operate

(b) very difficult to operate

(c) not secure

(d) Any other

Sample size 100

According to this survey we find that 60% of people find very easy to operate and 15%

people find diffcuilt two operate and 10% and 15% people find no secure and any other.

so we can say that online trading is very simple to operate and easy to understand.

0

10

20

30

40

50

60

Experience

I find it very easy to operate

I find it very difficult to operate

I feel it is not secure

Any other

67

3. What amount of money you invest normally ?

(a) 50000

(b) 100000 to 150000

(c) 150000 to 2000000

(d) Any other amount

Sample size 100

According to this survey we find that 35% of people invest money normally 50000 and

28% of people invest money 100000to150000 and 23% and 14% of people invest

money between 150000to200000 and any other. So we can say that the people are not

invest more money in the share market because there is a great risk involved while

doing the trading.

0

5

10

15

20

25

30

35

Money

50000

100000to150000

150000to200000

Any Other

68

4. How often do you trade?

(a) Daily

(b) Weekly

(c) Monthly

(d) More than one month

Sample Size 100

According to this survey we find that 10% of people do trade Daily and 40% people do

trade weekly and 32% and 18% people do trade month and more than month. So we

can say that people are generally invest in stock market weekly basis.

0

5

10

15

20

25

30

35

40

Time

daily

weekly

monthly

more than 1 month

69

5. Which trading you prefer?

(a) On line trading

(b) Manual trading

(c) Both

Sample Size 100

According to this survey we find that 20% people prefer online trading and 32%

people prefer offline trading rest of 48% people prefers both. So we can say that mostly

people are awareness about the on line trading and because of this reason the mostly

people are optimizing offline trading.

05

101520253035404550

Relationship

On line trading

Offline trading

Both

70

6. Whether online trading settled in Indian investor psyche

(a) Yes

(b) No

Sample Size 100

According to this survey we find that 30% people says yes and 70% people says no. so

we can find that on line trading is not settled in the Indian psyche because some people

are not experience towards online trading.

0

10

20

30

40

50

60

70

Settleled

Yes

No

71

7. What shortcomings do you feel in Indian On-Line trading ?

(a) Lack of awareness the investors about on-line trading

(b) Shortage of domestic technical expertise

(c) Shortage Of Infra structure

(c) any other

Sample Size 100

According to this survey we find that 15% of people says lack of awareness 49% says

Shortage of expertise and 14% people says Shortage Of Infra structure and 22% says

any other. So we can say that mostly people are shortage of experience about the

Indian derivatives market or share market.

05

101520253035404550

Shortcomings

Lack of awareness

Shortage of expertise

Shortage Of Infra structure

any other

72

8. Which media would you prefer the most for investment?

(a) T.V

(b) Newspaper

(c) Magazines

(D) Journals

According to this survey we find that 55% people Prefer T.V and 25% people prefer

newspaper and 10% people prefer magazines and 10% people prefer journals. So we

can suggest that mostly people are very easily grapped the knowledge through T.V.

0

10

20

30

40

50

60

Media

T.V

Newspaper

Magazines

Journals

73

CHAPTER – 7 FINDINGS FROM THE STUDY


According to this survey we find that 44% people says that we are investing the

money online from one year. 11% people says that we are investing money online from

4 year. so we can say that now online trading is very popular in the modern market.

2. How will you describe your experience with on-line trading till date?

According to this survey we find that 60% of people find very easy to operate.

and15% people find no secure. so we can say that online trading is very simple to

operate and easy to understand 3. What amount of money you invest normally ?

According to this survey we find that 35% of people invest money normally

50000. 14% of people invest money between 150000to200000. So we can say that the

people are not invest more money in the share market because there is a great risk

involved while doing the trading.


According to this survey we find that 10% of people do trade Daily. 18% people

do trade more than month. So we can say that people are generally invest in stock

market weekly basis.

5. Which trading you prefer?

According to this survey we find that 20% people prefer online trading and 32%

people prefer offline trading. So we can say that mostly people are awareness about the

on line trading and because of this reason the mostly people are optimizing offline

trading.

74

6. Whether online trading settled in Indian investor psyche

According to this survey we find that 30% people says yes and 70% people says

no. so we can find that on line trading is not settled in the Indian psyche because some

people are not experience towards online trading.

7. What shortcomings do you feel in Indian derivatives market?

According to this survey we find that 37% of people says lack of awareness 49%

says Shortage of expertise and 14% people says any other. So we can say that mostly

people are shortage of experience about the Indian derivatives market or share market.

8. Which media would you prefer the most for investment?

According to this survey we find that 41% people Prefer T.V and 39% people

prefer newspaper and 20% people prefer magazines. So we can suggest that mostly

people are very easily grapped the knowledge through T.V.

9. How did you come to know about Bonanza Portfolio Ltd.?

.

75

10. The USP of Bonanza Portfolio Ltd.

11. Biggest Competitor of Bonanza Portfolio Ltd.

76

1. The most preferred product at Bonanza

2. The areas of improvement for Bonanza Portfolio Ltd.

77

3. How often do you attend the training Session organized in the company?

4. The Reasons for not attending the Training Sessions

78

CHAPTER – 8 CONCLUSION FROM THE STUDY

Online trading is the new concept in the stock market. In India, online trading is

still at its infancy stage. Online trading has made it easy to trade in the stock market as

now people can trade while sitting at their home. Now stock market is easily accessible

by the people. There are some problems while doing the trade through the internet.

Major problem faced by online trader is that the investors are loyal to their traditional

brokers, they rely upon the suggestions given by their brokers. Another major problem

is that the people don't have full knowledge regarding online trading. They find it difficult

to trade themselves, as a wrong entry made by them, can bring them huge losses.

Nevertheless to say that online trading has the bright future as the percentage of

the trade done through online trading is increasing day by day.

79

CHAPTER – 9 LIMITATIONS OF THE STUDY

Despite of the training my level best, there were still some limitation which I think

remains there to draw fruitful conclusion. There were some practical problem which

come across and could not be properly death with

The advisory services being promised by the brokers would be of little use to

investors looking for an insight into the market.

As a client one will access the NSE through a server of the online brokerage and

this may involve queuing delays

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to

do so. If he want advice on a particular stock in his portfolio he may not even be

able to get that.

80

CHAPTER – 10 RECOMMENDED SUGGESTIONS

The introduction of the Internet has surprisingly changed our way of life as a

society. It has defined the way we do business and the way we correspond. The

Internet has opened many opportunities for online trading. The financial industry

revolves around the Internet. Every thing is just a few clicks away. This makes online

trading most convenient. But there are still investors who prefer the old fashion way of

offline trading and they mainly prefer offline trading for security reasons.

Internet has introduced a way for consumers to manage their money online. Not to

mention, Internet has transformed the way investment companies operate their

business and has made it easy for private investors to gain straight access to a range of

different markets and online tools that were at one point only reserved by the use of

investment professionals. Consumer investing and online trading has dramatically

changed over the last decade. Online trading dynamically continues to be redefined.

Services have expanded to include integrated management of additional financial

accounts. Not to mention, it has subsequently expanded in conjunction with ground-

breaking improvements to the traditional trading interface, such as telephone interface

systems.

Of course, online trading has many pros. There are several wonderful reasons to invest

online and consider online trading.

1. Money saving opportunities The amount of money you save depends primarily

on the online brokerage firm that you choose. No two firms are the same. There

may be different regulations, similar to bank regulations. There are minimum

deposits required that must be maintained. As mentioned above, this will depend

on the online brokerage firm.

2. Instant online access You can gain instant access to your account, the value of

your portfolio updates immediately before your eyes.

81

3. Enter online trades at anytime You can enter online trades at anytime and from

anywhere. This is very convenient if you live in a different time zone than the

country you are trading in. Not to mention, it is especially fit for investors with

busy schedules.

4. With online trading you are in charge You are in control of your investments. No

sales pitches and no hassle. You decide where to invest your money.

82

BIBILOGRAPHY

BOOKS

C. R. Kothri, Research Methodology, Vishwa Prakshan

MAGAZINES

Business World

LSE’s Magazine

INTERNET SITES

www.nseindia.com

www.bseindia.com

www.on-linetrading.com

www.sebi.gov.in

www.lse.co.in

83

PROPOSED QUESTIONNAIRE

Dear respondent,

I am student of MBA. I am working on the project of “On-Line Trading & Stock

Broking”. You are requested to fill the questionnaire to enable, to undertake the study

on the said Project.

Name……………………….

Occupation………………

Address ……………………

Phone no………………….


(a) 1 year (b) 2 year

(c) 3 year (d) 4 year

2 .How will you describe your experience with on-line trading till date?

(a) very easy to operate

(b) very difficult to operate

(c) not secure

(d) Any other

3. What amount of money you are invested normally ?

(a) 50000 (b) 100000 to 150000

(c) 150000 to 2000000 (d) Any other amount


(a) Daily (b) Weekly

84

(c) Monthly (d) More than one month

5. In which trading you will prefer?

(a) Online trading (b) offline trading

(c) Both

6. According to you online trading setteled in Indian investor psyche

(a) Yes (b) No

7. What shortcomings do you feel in Indian On-line Trading ?

(a) Lack of awareness the investors about on-line trading

(b) Shortage of domestic technical expertise

(c) Shortage Of Infra structure

(d) If any other

8. Which media would you prefer the most for investor?

(a) T.V (b) Newspaper

(c) Magazines (d) Journals

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