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1
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..
3
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.
4
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.
5
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
6
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.
7
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
8
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.
9
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.
10
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
11
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.
12
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
13
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
15
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.
16
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.
17
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
18
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
19
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
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
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 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
20
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
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
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
21
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.
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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
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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.
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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
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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
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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
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CHAPTER – 7 FINDINGS FROM THE STUDY
1. For how long you have been trading with on line-trading?
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.
4. How often do you trade?
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.
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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.
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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.
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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.
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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
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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………………….
1. For how long you have been trading with on line-trading?
(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
4. How often do you trade?
(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