A

PROJECT REPORT

ON

ON LINE TRADING

AT

NETWORTH STOCK BROKING LIMITED

A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT FOR THE

AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITED TO

JNTU HYDERABAD

BY

Mr. ………….

H.T.NO: ……………………….

………………………….college

(Affiliated to ……………….)

HYDERABAD

2011-2013

ABSTRACT

In previous days the stock exchange ‘hall’ is called a ‘floor’ is divided into a

number of markets according to the security which is being dealt with. The

authorized clerk goes to the particular part of the floor called the ‘pit’ and makes his

quotation for the purchase or sale according to the order. The dealer to whom the

quotation is given quotes his own price, if it does not suit the clerk, he asks for a

lower price to be quoted. When both the sides are satisfied, the price is settled and the

‘bargain’ is made usually, those bargains are orally settled, there is no return contract

between the two parties. The clerk usually note book which records all purchases on

the debit side and sales on the credit side. This is called a ‘Kuchaa Hissab’ for noting

down details.

In this system of trading in traditional stock exchanges of the transactions

between the dealer and the investor.

After invention of the ONLINE TRADING in stock exchange there is greater

transparency of trading.

INTRODUCTION

Technology has changed the landscape of the stock markets. They now don't

require a trading floor & can, from a single location anywhere can service investors

across the country.

Before screen based trading was introduce Regional Stock Exchange were

playing a very important role in the Capital Market as they were local investors. Now

they are all developed screens based trading is connecting floors with other stock

Exchanges.

When you place an order to buy or sell stock, you might not think about where

of how your broker will execute the trade. But where and how your order is executed

can impact the overall costs of the transaction, including the price you pay for the

stock. Here's what you should know about trade execution.

Definition

The increasingly popular activity of buying and selling securities over the

internet, or to a lesser extent, through a broker’s proprietary software.

Buying and selling securities using the Internet or broker-provided proprietary

software that works trough the Internet. Online trading is distinguished from Wireless

Trading, a nascent area of service where brokerage customers can trade via cell

phones, pagers, and hand-held organizers.

An account similar to a traditional bank account, holding cash and securities,

and is administered by an investment dealer.

An account held at a financial institution and administered by an investment

dealer that the account holder uses to employ a trading strategy rather than a buy-and-

hold investment strategy.

Though trading account are traditionally thought to hold only stocks, a trading

account can hold cash, foreign cash, securities and a number of other types of

investment.

Investors who use a number of trading strategies or have number of brokerage

accounts may separate their accounts in order to avoid confusion. One account may

be a registered account for their retirement savings, another account may be a buy-

and-hold account for their long-term stocks, another may be a margin account, and

another may be a trading account used for conducting day-trading activities.

TRADING PRACTICE

MANUAL MODE OF TRADING

Prior to introduction of Online Trading, trading, of shares used to be done

manually which process was very laborious and cumbersome with lot of paper work

at every stage right from order booking, order execution to Bank Office work. The

process involved the following steps:

Placing of the order by the client, order can be placed as limit order, best

market price or open order.

Entry in order book by the broker.

Execution of order.

Preparation of contract note.

Entry in settlement registrar, client registers. Actual delivery of shares by

brokers or clients.

Preparation of bill or order delivery note.

Entry in client ledger, scrip ledger.

Payments.

NSDI has also set-up a facility that enables brokers to deliver contract notes to

custodians and/or fund managers electronically. This facility called STEADY

(Securities Trading - Information Easy Access and Delivery) was launched by NSDI

on November 30, 2002. STEADY is a means of transmitting g digitally signed trade

information with encryption across market participants electronically, through

internet.

DRAWBACK OF THE MANUAL SYSTEM:

lack of Transparency

The scope for Manipulation and frauds

Time consuming

Technology is revolutionizing every field of human endeavor and activity.

The rapid growth in number, volume and value of securities in the Indian capital

market exposed the limitation of handling and dealing in securities in physical / paper

mode; he shortcomings of the market became manifest in terms of bed deliveries,

delays in transfer and irregular settlement etc.

The National Stock Exchange (NSE) followed by the Stock Exchange,

Mumbai (BSE) in 1995. first introduced electronic medium of trading.

There was a time when an individual investor had to go to an exchange trading

ring to have his order executed. Today the premier exchanges of the country want to

come to his doorstep, or rather his desktop. Relationship marketing is really gaining

momentum! The country's two biggest exchanges the BSE and the NSE have

embraced the Internet in an effort to leverage the power of this medium to reach out to

the hitherto untapped masses.

Says NSE former Managing Director, Mr. RH Patil; "Our internet initiative

is the line with our basic thrust which we have been following from day one,

when conceived as a national exchange with a mission to spread every where, To

reach out to close to investors as possible.

In India Geojit Securities, a leading brokerage house has the distinction

of being the offer online trading for cash as well as for derivatives.

INTERNET TRADING

Online trading is a process by which securities are traded over the Internet.

Online trading is available to anyone with access to an internet-enabled personal

computer. Online trading may be provided by internet-based brokerage companies

like Scot trade, as well as conventional brokerage firms like charles schwab. Online

trading functions in the same way as physical trading. However, online trading

provides individuals with the benefit of placing orders and making trades beyond the

normal trading hours. In addition, online trading tends to be a cheaper alternative

when compared to working with a professional broker. While online trading may be

more practical, many investors continue to opt for live brokers. For online trading

lacks the service and expertise commonly associated with brokers and financial

professionals. Today, many individuals investors engage in dynamic online trading,

called day trading, carrying out numerous narrowly spaced trades in order to generate

short term profit. Online trading is made possible by electronic communication

networks (ECN).

Online Trading With Brokers

Online trading is also useful for intra day trading. Now a days brokers also

proving terminal to their client at their home only this is internet trading we can say

with the help of the broker the investor or Speculator can get terminal at home and he

can deal with stock without concerning any broker.

This internet trading is very useful for making money and taking a quick

decision at home or office. This terminal is useful to knowing the exact present rate

of the share.

Brokerage refers to a licensed firm or an individual (known as a broker) that

buys and sells stocks for its clients. There are several types of brokerage: the choice of

brokerage depends upon how involved the individual investor wants to be. · Full

service brokerage - provides research and advice to clients and sometimes, financial

planning. This type of brokerage works for the investor with little or no inclination to

spend time researching stocks. An example of a full service brokerage is Salomon

Smith Barney. · Discount brokerage - provides fewer services and has lower

commission rates. With this type of brokerage, the client does more of the work. An

example of a discount brokerage is Charles Schwab. · Deep discount brokerage -

usually only executes trades and offers no or very few other services. The individual

investor is the most involved with this type of brokerage. An example of a deep

discount brokerage is Scottrade.

The act of placing buy/sell orders for financial securities and/or currencies with the

use of a brokerage's internet-based proprietary trading platforms. The use of online

trading increased dramatically in the mid- to late-'90s with the introduction of

affordable high-speed computers and internet connections.

Bearish Signal

When to sale

Sell before or at the beginning of the down trend.

Sell after the formation of double top.

Sell after formation of bear gap.

Sell before the formation of bear flag.

Sell at resistance line or to the resistance line.

Sell when the price of share falls below moving average chart.

Sell when number of declines is more than no of advances.

Sell when the share price shows down turn in momentum.

Sell when the price chart completed the formation of head and shoulder

pattern

Bullish Signal

When to buy

Buy after the formation of double bottom.

Buy after the formation of bull flag.

Buy after the formation of bull gap.

Buy when the share price falls above moving average chart.

Buy when advances are more than declines.

Buy at the formation of rising wedge.

Buy when the share price show upward turn in movements.

Buy when the price chart completes the formation of inverted head and

shoulder pattern.

OBJECTIVES OF THE STUDY

The objective of the study includes the study of the below mentioned aspects.

The know more about online trading trends in India.

To study about the backup measures with respect to primary communications

liabilities, in order to achieve network availability & connectivity back-up

options.

Knowing about the latest & future development in the stock exchange trading

system.

Clearly defining each & every term of the stock exchange trading products.

SOCPE OF THE STUDY

SEBI in September 1996 has issued guidelines to the stock exchanges to go

for online trading procedure by the end of the year 1996. Following its directions

ASIT C.MEHTA has installed the online trading system. The major need for this

study is to know the effectiveness of the online system in comparison with the

outcry or mock trading to study its advantages and recommend for beneficial and

effective use of the system.

LIMITATIONS:

The study is only up to the extent of online trading of the stock exchange.

The study is restricted to selected companies.

RESEARCH DESIGN AND METHODOLOGY

RESEARCH

Research is process in which the researcher wishes to find out the end result

for a given problem and thus the solution helps in the future course of action.

Redman and Mory defines research as a “systematized effort to gain new knowledge”.

RESEARCH DESIGN

A research design is the arrangement of conditions for collection and analysis

of data in a manner that aims to combine relevance to the research purpose with

company in procedure. In fact, the research design is the conceptual structure with

which research is conducted; it constitutes the blue print for the collection,

measurement and analysis of data.

RESEARCH DESIGN USED IN THE STUDY

Descriptive Research

Investigations whose purpose is to provide precise descriptions of variables

and their relationships; surveys are frequently used as designs for descriptive research.

SOURCES OF DATA

There are two sources of data

a. Primary data

b. Secondary data

Primary Data:

This method is includes the data collected from he personal discussions with

the authorized dealers and members of the company.

Secondary Data:The Secondary data is collected through annual reports and statements

available with NOL.

INDUSTRY PROFILE

INTRODUCTION 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 trade able on the stock exchange, So is the case with the shares of the

companies.

Under the securities Contract Regulation Act of 1956, securities trading are

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, 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 contracts should be done through

registered members of the Exchange. As per the rules made under the above act,

trading in securities permitted to be trade would be in the normal trading hours (10

A.M to 4 P.M) on working days in the trading ring, as specified for trading purpose.

Contracts approved to be traded are the following:

a. Spot delivery deals are for delivery of shares on the same day or the next day

as the payment is made.

b. Hand delivery deals for delivering shares within a period of 7 to 14 days form

the date of contract.

c. Delivery through clearing for delivering shares within a period of two months

from the date of the contract, which is now reduced to 15 days.

d. Special Delivery deals for delivering of shares for specified longer periods as

may be approved by the governing board of the Stock Exchange.

Except in those deals meant for delivery on a 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 treading

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

members with reference to their clients.

HISTORY OF STOCK EXCHANGES IN INDIA

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

of 19 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 tin Mumbai named "The Native Stock and Share Brokers

association in 1875"

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

interest to regulate the speculative nature of stock exchange working. In that

direction, securities and Contract Regulation Act 1956 was passed, this gave powers

of Central Government to regulate the stock exchanges. Further to develop secondary

makes in the country, stock exchanges are Mumbai, Chennai, Delhi, Hyderabad,

Ahmadabad 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 the 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 then the investors.

The setting up of NSE and OTCEI (Over the counter change of India with the

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

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

in 1995, which known as BOLT (Bombay on - Line Trading System).

Madras Stock Exchanges introduced Automated Network Trading System

(MANTRA) on October 7, 1996 Apart from Bombay Stock Exchanges has introduced

screen based trading.

FUNCTION 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 liquidly or marketability or 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

favorable 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.

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’s brokers, investors and brokers.

REGULATORY FRAME WORK :

This Securities Contract Regulation Act, 1956 and securities and Exchange

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

retaliatory structure comprising the ministry of finance, SEBI 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 Exchanges and regulation of their operations. Ministry of

finance has the power to approve the appointments of executive chiefs and the

nominations of the public representatives in the Governing 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

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: The Governing Board of the Stock exchange consists

of elected members 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

Six members of the stock exchange are elected by the member of the stock

exchange.

Central Government nominates not more then three members.

The board nominates three public representatives.

SEBI nominates persons not exceeding three and

The Stock Exchange appoints One Executive Director.

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

The retired members can offer himself for election if he is not elected for two

consecutive years. If a member serves in the governing body for two year

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 and Central Government or the Board. The office tenure for

the president and vice-president is on year. They can offer themselves for re-

elections, if for re-election after a gap of one-year period.

INSTRUMENT FOR TRADED ON THE STOCK EXCHANGE:

The instruments traded are securities that are quoted after being listed by the

companies that issued them to the public. The securities issued by the central and

state government, semi-government bodies are also listed and quoted on the Stock

Exchanges as per the rules. The broker members are eligible to deal in them also. In

fact some members specialized in Government securities market, but public are not in

general interested in these securities, and they are less attractive to the public, banks,

financial institutions, insurance companies etc, deal in Government securities market.

But for individual investors, corporate securities are relevant as they higher rate of

interests and higher returns due to capital appreciation and dividends.

The corporate securities in which individual investors are invested and are

traded on the exchanges are as follows:

Equity Shares: These are ownership capital and have a variable dividend,

depending on the net earnings and dividend policy of the company. The prices of

these shares vary widely and with a face value of Rs. 10/- (or Rs.50/- or Rs.100/-)

they are normally quoted at a premium, which leads to capital appreciation.

Preference Shares: These are also ownership capital but with a fixed

dividend, now a days preference shares are not popular and have no public interest in

them; only financial interests hold them.

Convertible or Partly Convertible Debentures: The debentures are popular only if

they are convertible into equity shares after a period. Non-convertible debentures

carry a fixed rate of interest. But as there is now no ceiling on such interest rates, they

have also become attractive to the investors. They have to choose only good

companies with a good credit rating so that there would be no problem in getting there

interest warrants and repayment of principal. Convertible are now popular both with

companies and investors as they have advantages of both fixed income up to a period

and capital appreciation later on due to conversion into equity.

STOCK EXCHANGES

The stock markets in India are regulated by the central government

under the Securities Contracts (Regulation) Act, 1956 which provides for the

recognition of stock exchanges, supervision and control of recognized stock

exchanges, regulation of contracts in securities, listing of securities, transfer of

securities, and many other related functions. The Securities and Exchange Board of

India Act, 1992 provides for the establishment of the Securities and Exchange

Board of India (SEBI) to protect investors’ interest in securities and promote and

regulate the securities market.

BOMBAY STOCK EXCHANGE

Trading in securities has been in vogue in India for a little over 200

years. Dealing in securities dates back to 1793, most of them being transactions in

loan securities of the East India Company. Rampant speculation was a common

feature even during those times. The broking community prospered as there was

high rise in prices which led to a share mania during 1861-65. This bubble burst in

1865 when the American Civil War ended. The brokers realized that investor

confidence in securities market could be sustained only by organizing themselves

into a regulated body with defined rules and regulations. This realization resulted in

formation of ‘The Native Share and Stock Brokers’ Association’ which later came

to be known as Bombay Stock Exchange. In 1875, these brokers assembled at a

place, now called Dalal Street.

Bombay Stock Exchange is a voluntary, non-profit-making association

of broker members. It emerged as a premier stock exchange after 1960s. The

increased pace of industrialization caused by the two world wars, protection to the

domestic industry, and government’s fiscal policies aided the growth of new issues

which, in turn, helped the BSE to prosper. BSE dominated the Indian capital

market by accounting for more than 60 per cent of the all-India turnover.

Carry Forward Deals, or Badla

The carry forward system, or badla, was a unique feature of the Indian stock

exchanges, particularly of BSE. Badla was a unique selling proposition of the BSE.

Badla provided the facility for carrying forward the transaction from one settlement

to another. In simple terms, it was the postponement of the delivery of or payment

for the purchase of securities from one settlement period to another.

Badla MechanismBadla was allowed in the specified group of shares of BSE. This specified

group was also known as the forward group as one could buy or sell shares in it

without physical delivery. The carry forward session (badla session) was held on

every Saturday at BSE.

THE NATIONAL STOCK EXCHANGE OF INDIA

The stock markets witnessed many institutional changes in the 1990s. One of

them was the establishment of NSE, a modern stock exchange which brought with it

the best global practices.

The National Stock Exchange (NSE) becomes operational in the capital

market segment on third November 1994 in Mumbai. The genesis of the NSF lies in

the recommendations of the pharwani committee (1991). Apart from the NSE it had

recommended for the established of National Stock market system also, the

committee pointed out some major defects in the Indian Stock market. The defects

specified are.

Luck of liquidity in most of the markets in terms of depth and breadth.

Lack of ability to develop markets for debt.

Lack of infrastructures facilities and outdated trading system.

Lack of transparency in the operations that affect investor's confidence.

Outdated settlement system that are inadequate to cater to the growing

volume, leading to delays.

Lack of single market due to the inability of various stock exchanges to

function cohesively with legal structure and regulatory framework.

The main objectives of NSE are the follows:

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

hybrids.

To ensure equal access investors all over the country through appropriate

communication network.

To provide a fair, efficient and transparent securities market to investors using

an electronic communication network.

To enable shorter settlement cycle and book entry settlement system.

To meet current international standards of securities market.

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

Canara Bank, Corporation Bank, Indian, Oriental Bank of commerce. Union Bank of

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

Holding Corporation of India and SBI capital market are the promoters of NSE.

MEMBERSHIP: Membership is based on factors such as capital adequacy,

corporate structure, track record, education, experience etc. admission is a two - stage

process with applicants requiring going through a written examination followed by an

interview. A committee consisting of experienced people from the industry to assess

the applicant's capability to operate as an exchange member, interviews candidates.

The exchange admits members separately to whole self Debt Market (WDM) segment

and the capital market segment. Only corporate members are admitted on the debt

market segment whereas individuals and firms are also eligible on the capital market

segment. Eligibility criteria for trading membership on the segment of WDM are as

follows.

The persons eligible to become trading members are bodies

corporate, companies institutions including subsidiaries of banks

engaged in financial services and such other persons or entities as

may be permitted from time to time by RBI/SEBI

The whole - time directors should possess at least two years

experience in any activity related to banking or financial services

or treasury.

The whole - time directors should possess at least two years

experience in any activity related to banking or financial services

or treasury.

The applicant must possess a minimum net worth of Rs. 2crores.

The applicant must be engaged solely in the business of securities

and must not be engaged in any fund- based activities.

The eligibility criteria for the capital market segment are:

A. Individuals, registered firms, bodies corporate, companies and such other

persons may be permitted under SCRA, 1957.

B. The applicant must be engaged in the business of securities and must not be

engaged in any fund-based activities.

C. The minimum net worth requirements prescribed are as follows:

i. Individual and registered firm - Rs. 75 Lakes.

ii. Corporate bodies - Rs.100Lakhs.

iii. In the case of registered partnership firm each partner should

contribute at least 5% of the minimum net worth requirement of the

firm.

D. A corporate trading member should consist only of individuals (maximum of

4) who should directly hold at least 405 of the paid-up capital in case of listed

companies and at least 51% IN CASE OF OTHER COMPANIES.

E. The minimum prescribed qualification of graduation and two years experience

of handling securities as broker, sub-broker, authorized assistant, etc must be

fulfilled by

i. Minimum two directors in case the applicant is a corporate.

ii. Minimum two partners in case of partnership firms and

iii. The individual in case of individual or sole proprietary concerns.

The two experienced director in a corporate applicant or trading member should hold

minimum of 5% of the capital of the company.

COMPANY PROFILECOMPANY PROFILE

COMPANY PROFILE

Incorporated in 1993, Net worth Stock Broking Limited (NSBL) has been a

listed company at Bombay Stock Exchange (BSE), Mumbai since 1995.

A Member, at the National Stock Exchange of India (NSE) and Bombay Stock

Exchange, Mumbai (BSE) on the Capital Market and Derivatives (Futures & Options)

segment, NSBL has been traditionally servicing Institutional clients and in the recent

past has forayed into retail broking, establishing branches across the country.

Presence is being marked in the Middle East, Europe and the United States too, as

part of our attempts to cater to global markets. We are a Depository participant at

Central Depository Services India (CDSL) with plans to become one at National

Securities Depository (NSDL) by the end of this quarter. We have our customers

participating in the booming commodities markets with our membership at the Multi

Commodity Exchange of India (MCX) and National Commodity & Derivatives

Exchange (NCDEX), through Networth Stock.Com Ltd. With its strong support and

business units of research, distribution & advisory, NSBL aims to become a one-stop

solution to the broking and investment needs of its clients, globally.

Strong team of professional’s experienced and qualified pool of human

resources drawn from top financial service & broking houses form the backbone of

our sizeable infrastructure. Highly technology oriented, the company’s scalability of

operations and the highest level of service standards has ensured rapid growth in the

number of locations & the clients serviced in a very short span of time.

‘Networthians’, as each one of our 400 plus and ever growing team members are

addressed, is a dedicated team motivated to continuously progress by imbibing the

best of global practices, Indian sing

such practices, and to constantly evolve a comprehensive suite of products &

services trying to meet every financial / investment need of the clients.

NSE CM and Derivatives Segment SEBI Regn. 1NB230638639 & 1NF230638639

BSE CM and Derivatives Segment SEBI Regn. 1NB010638634 &

PMS SEBI Regn. 1NP000001371 CDSL DP SEBI Regn. IN-DP-CDSL

251-2004

Commodities Trading: MCX -10585 and NCDEX - 00011 (through Networth

Stock.Com Ltd.)

Hyderabad (Somajiguda)

401, Dega Towers, 4th Floor, Raj Bhavan Road, Somajiguda

Hyderabad - 500 082

Andhra Pradesh.

Phone Nos.: 040-55560708, 55562256, and 30994985

Mumbai (MF Division)

49, Au Chambers, 4th Floor, Tamarind Lane, Fort

Mumbai - 400 001

Maharashtra.

Phone Nos.: 022- 22650253

Mumbai (Registered Office)

5, Church gate House, 2nd Floor, 32/ 34 Veer Narirnan Road, Fort

Mumbai - 400 001

Maharashtra.

Phone No. 022-22850428

The Networth connectivity with 107 branches and growing

107 branches107 branches

Products and services portfolio

Retail and institutional broking

Research for institutional and retail clients

Distribution of financial products

PMS

Corporate finance

Net trading

Depository services

Commodities Broking

Infrastructure

• A corporate office and 3 divisional offices in CBD of Mumbai which houses

state-of-the-art dealing room, research wing & management and back offices.

• All of 107 branches and franchisees are fully wired and connected to hub at

Corporate office at Mumbai. Add on branches also will be wired and

connected to central hub

• Web enabled connectivity and software in place for net trading.

• 60 operative ID’s for dealing room

• In house technology back up team to ensure un-interrupted connectivity.

1993: Networth Started with 300 Sq.ft. of office space & 10 employees

2006: Spread over 42 cities (around 70,000 Sq.ft of office space) with over 107

branches & employee strength over 400

Market & research

Focusing on your needs

Every investor has different needs, different preferences, and different viewpoints.

Whether investor prefer to make own investment decisions or desire more in-depth

assistance, company committed to providing the advice and research to help you

succeed.

Networth providing following services to their customers,

Daily Morning Notes

Market Musing

Company Reports

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QUALITY POLICY

To achieve and retain leadership, Networth shall aim for complete customer

satisfaction, by combining its human and technological resources, to provide superior

quality financial services. In the process, Networth will strive to exceed Customer’s

expectations.

As per the quality policy, Networth will:

Build in house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.

Establish a partner relationship with in its investor service agents and vendors

that will help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skill so as to respond to customer’s needs.

Continue to uphold the values of honesty & integrity and strive to establish

unparalleled standards in business ethics.

Use state-of-the art information technology in developing new and innovative

financial products and services to meet the changing needs of investors and

clients.

Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice of it.

Strive to keep all stake-holders (share holders, clients, investors, employees, suppliers

and regulatory authorities) proud and satisfied.

Key Personnel:

• Mr. S P Jain – CMD Networth Stock Broking Ltd.

A qualified Chartered Accountant with over 15 years of experience in the

capital markets.

• Mr. Deepak Mehta – Head PMS

Over 12 years of experience in the capital markets and has the prior work

experience of serving on the Equity desk of Reliance.

• Mr.Viral Doshi – Equity Strategist

A qualified Chartered Accountant with experience of over a decade in

technical analysis with respect to equity markets.

• Mr. Vinesh Jain – Asst. Fund Manager

A qualified MBA graduate specializing in finance and over two years of

experience in the capital markets.

• Research and the Back office.

we have sought to provide premium financial services and information, so that the

power of investment is vested with the client. We equip those who invest with us to

make intelligent investment decisions, providing them with the flexibility to either tap

into our extensive knowledge and expertise, or make their own decisions. We made

our debut into the financial world by servicing Institutional clients, and proved its

high scalability of operations by growing exponentially over a short period of time.

Now, powered by a top-notch research team and a network of experts, we provide an

array of financial products & services spanning entire India.Our strong support,

technology-driven operations and business units of research, distribution, advisory,

wide array of products & services coalesce to provide you with a one-stop solution to

cater to all your investment needs. Our single minded objective is to help you grow

your Networth.

OUR GROUP COMPANIES

Networth Stock Broking Ltd. [NSBL]

NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the

Bombay Stock Exchange Ltd (BSE) in the Capital Market and Derivatives (Futures &

Options) segment. NSBL has also acquired membership of the currency derivatives

segment with NSE, BSE & MCX-SX. It is Depository participants with Central

Depository Services India (CDSL) and National Securities Depository (India) Limited

(NSDL). With a client base of over 1L loyal customers, NSBL is spread across the

country though its over 230+ branches. NSBL is listed on the BSE since 1994.

 

Networth Wealth Solutions Ltd. [NWSL] 

NWSL is into the business of delivery of Financial Planning & Advice. It’s vision is

to ‘Advice & Execute money related solutions to/for our customers in the most

Convenient & Consolidated manner, while making sure that their experience with us

is always pleasant & memorable resulting in positive advocacy’. The product &

Services include Financial Planning, Life Insurance, On-line Trading Account,

Mutual Funds, Debentures/Bonds, General Insurance, Loans and Depository Services.

 

NetworthStock.ComLtd.[NSCL]

NSCL is the commodities arm of NSBL. It is a member at the Multi Commodity

Exchange of India (MCX) and National Commodity & Derivatives Exchange

(NCDEX) and is backed by solid research & analytics in Commodities.

 

NetworthSoftTechLtd.[NSL]

NSL is an ISO 9001:2000 Certified Company. It is into Application Development &

maintenance. Building & Implementation of packaged software across various

functions within the Financial Services Industry is at its core. It also provides data

center services which include hosting of websites, applications & related services. It

combines a unique delivery model infused by a distinct culture of customer

satisfaction.

 

Ravisha Financial Services Pvt. Ltd. [RFSL]

RFSL is a RBI registered NBFC engaged in financing, primarily it provides loan

against securities

Principles & Values

At Net worth Stock Broking Ltd. success is built on teamwork, partnership and the

diversity of the people.

At the heart of our values lie diversity and inclusion. They are a fundamental part of

our culture, and constitute a long-term priority in our aim to become the world's best

international bank.

Values

Responsive

Trustworthy

Creative

Courageous

Approach

Participation:- Focusing on attractive, growing markets where we can leverage

our relationships and expertise

Competitive positioning:- Combining global capability, deep local knowledge

and creativity to outperform our competitors

Management Discipline:- Continuously improving the way we work,

balancing the pursuit of growth with firm control of costs and risks

Commitment to stakeholders

Customers:- Passionate about our customers' success, delighting them with the

quality of our service

Our People:- Helping our people to grow, enabling individuals to make a

difference and teams to win

Communities:- Trusted and caring, dedicated to making a difference

Investors:- A distinctive investment delivering outstanding performance and

superior returns

Regulators: - Exemplary governance and ethics wherever we are.

REVIEW OF LITERATURE

ONLINE TRADING

INTRODUCTION:

The number of online "do--it --yourself investor has grown at a remarkable

rate since the first electronic brokerage opened with virtual doors in 1994. This

brokerage has attracted over 6 million investors in less then five years. Now

accounting for over 33% of retail stock trades. While the numbering of online trading

accounts represents just 12.5% of all accounts, that proportion is expected to increase

to 33.2% by the end of 2005 as reported Fortune magazine on (October 2005) the

number of e-brokerages has also grown from 12 in 1994 to more then 200 in 2004.

With increased competition, commission per trade has fallen dramatically,

roping an average of 60 percent in 2002 and leveling off 2004. These developments

are commonly attributed to the efficiency of "friction - free" electronic market that

lower transaction information processing cost by reducing human intermediation. But

how efficient electronic markets, really? Rating of e-brokerages typically evaluates

ease of use quality of research, reliability, commission rates, customer service and

reporting. These studies however, have given insufficient attention to some less

obvious factors, including timeless of transaction execution and the ability of

investors to obtain the "best prices". These factors heavily influence investors total

transaction costs.

A closer analysis of the online trading process reveals that, in many cases the

only that has changed as for as investment concerned is the interface, which now

involves web-based interaction. Despite proposed change in the securities trading

process and introduction of electronic trading system such as OptiMark, other process

determining market efficiency order flow, price discovery and order execution-remain

virtually unchanged.

In order to evaluate the true costs of on-line transaction we must separate the

efficiency, "perceived" by investors from the real efficiency of the transaction and

patterns of information flow beyond the interface itself. To- understanding the

difference between perceived and real efficiency we have examined how the trade

process structured (often invisible to the investor).

Perceived efficiency determine largely by information provided by e-

brokerage that customer can verify, such as commission rates, and research, and is

tempered by investors attitude about risk and the degree to which they trust online

brokerages, In contrast, real efficiency influenced by market structure and related

transactional arrangement. For example, overall cost structure for the investors can

differ depending on how intermediaries co-ordinates among themselves.

Global Scenario

Online trading has become very popular in the last couple of years because of

the conveniences of case and use. The numerous companies have gone existed for as

long as we can remember and talk about it. We are referring to the trade gin the

financial dealings, in current context trading buying and selling of financial services

including security through WWW.

Online trading has basically replaces a phone call with Internet, Instead of

interacting with the brokers over the phones the customer is clicking the mouse

through Online Trading.

Online trading in India

India ranks amongst the top 10 companies in terms of the market capitalization

of its stock market. India is gradually opening its stock market to foreign investors.

A beginning was made on 27 January 2000. When the chairman of securities and

exchange board of India (SEBI) authorized stock exchanges to provide Internet based

trading services to investors and also announced that foreign companies and

individuals could now trade on Indian aced against stocks to increase purchasing

power.

TRADING ARRANGEMENTS

The open outcry system, prevalent a few years ago on regional stock

exchanges, has been replaced by on-line screen-based electronic trading system.

NSE and OTCEI had adopted screen-based trading right from inception. With

almost all the exchanges going electronic, trading has shifted from the floor to the

brokers’ office where trades are executed through a computer terminal. All stock

exchanges together have 8000 terminals spread across the country. In a screen-

based trading system, a member can feed into the computer the number of securities

and the prices at which he would like to transact and the transaction is executed as

soon as it finds a matching order from a counter party. The electronic trading

system is superior to the open outcry system of information efficiency by a allowing

faster incorporation of price sensitive information into prevailing prices and thereby

helps in efficient price discovery. This also results in operational efficiency as there

is a reductio9n in time, cost, risk of error, and fraud and elimination of a chain of

brokers and jobbers, which result in low transaction costs.

SEBI has permitted the setting up of trading terminals abroad as well

as Internet trading. Now investors in any part of the world can route the order

through the internet for trading in Indian scrip’s. Internet trading is more cost

effective than using trading terminals.

There are two types of trading systems. They are Order driven trading

system and quote driven trading system. In the order driven system, orders from all

over the country are entered into an electronic system and matched directly and

continuously without the involvement of jobber or a market maker. In the quote

driven system, there are market makers who continuously offer two way quotes—

buy and sell quotes—and are willing to buy and sell any quantity. BSE provides

both these system while NSE provides only the order driven system.

Trading Rules and Regulations

Strict rules and regulations have been framed to prevent unfair trading

practices and insider trading. The trading rules relate to the margin system, intra-

day trading limit, and exposure limit. Broker are levied various types of margins

such as daily margins, mark to market margin, ad hoc margin, volatility margins,

and so ob to check price volatility.

SEBI has shifted the margining system f4rom net basis to gross basis

(sale and purchase) with effect from September 3, 2001, and introduced 99 per cent

value at risk (VAR) based margin for all scrip’s in the compulsory rolling system

with effect from July 2, 2001. Value at risk measures the worst expected potential

loss from an unlikely adverse event in a normal everyday market environment.

Prior to VAR, trade positions were reported at book value only and no

considerations were made for market changes. This margin is kept in a manner that

covers price movement for more than 99 per cent of the time. Usually three sigma

(standard deviation) is used for the measurement.

The intra-day trading limits, that is, limit to volume is specified and no

broker’s trading volume can exceed this limit. If a broker wishes to exceed the limit

he has to deposit additional capital with the exchange. The upper limit for the gross

exposure of a broker is fixed at 20 times his capital to ensure market safety.

Besides these, there are capital adequacy norms for members, indemnity insurance,

and on-line position monitoring by exchanges.

INVESTOR'S REASONS TO TRADE ONLINE

They have control over their accounts. Can make the own decisions for there

Actions, there are independent.

It interesting cheap and easy, fast and convenience.

A lot of information is online so they can keep up -to date.

It will give greater choice and better realization.

Increase the business afloat

It will lead brokerage commission

It will help to reduce the fraudulent rather then manually

It helps to increase the efficiency of the operation

To easy to buy or sells the share through Online Trading

Transaction makes very quickly (T+2)

Easy transferable etc.

ONLINE EQUITY TRADING

Generally, online trading refers to buying and selling securities via the Internet

or other electronic means such as wireless access, tough-tone, telephones and other

new technologies. With online trading, in most cases customers access a brokerage

firm's Web Site through their regular Internet Service provider. Online there.

Customers may consult information provided on the Web Site and log into their

accounts to place orders and monitor account activity.

Through the internet, investors can quickly find affordable market research,

stock information and economic news. They often can have their broker/dealers

execute trades almost instantaneously, while generally incurring lower commissions.

These facilities for online investing can thus provide significant benefits to many

investors.

At the same time, investors should recognize that online trading might present

special risks. For example, investors should understand that execution of their orders

might be delayed during times of high market trading volume, Investors should

appreciate the usefulness of limit orders, and they should treat bulletin boards and

chat room commentary with skepticism.

E-broking or trading of stock shares on the Internet has captured the minds of

individual investors world wide. Reports say more then seven million American

investors have gone online in the last 4-5 years, and this number is likely to double in

the next two years, in open support of this new trading system. The internet has

democratized the investing world by giving every web-enabled individual access to a

rich reservoir of data and analyses on the stock market.

In India, exchanges have been very pro-active, Rather than waiting, they have

chosen to be the harbingers of change by allowed members who fulfill the criteria to

lake advantage of the Internet by facilitating a computer-to-computer trading link.

Using the Internet, a broker can set up a NSE Trading facility in a remote town at a

far lower cost, which makes penetration of capital markets easier in rural areas.

BSE has already embarked on a campaign of investor education and

awareness about the benefits of online trading and the security features built in to the

Internet trading system to be effected via the exchange-trading plaza. There is a

tremendous potential for growth in the online trading market as more and more

brokers are going online. Both BSE and NSE are trying to provide a cost-effective

solution for their members to provide a standards-based Internet trading facility to

their clients at a fraction f the cost, of what it would cost the broker if he went alone.

The typical cost of setting up a decent sized internet trading solution is between Rs.

10 to 15crores, Which a large number of brokers are unlikely to be able to afford The

BSE therefore plans to offer an exchange-based system that leverages the economics

of scale to offer order routing via a centralized engine with the addition of content of

companies, available with the exchange. BSE has introduced an Application Service

Provider Model, which has been widely accepted.

NSE has formed a 50:50 Joint Venture with i-flex solutions to offer the

exchange trading solutions. The JV christened Dotex International in addition to

providing access to fundamental analysis, balance sheet analysis and any other

relevant company information. The BSE too is offering tools like technical analysis

and scrip related information etc on the site at a cost, which in 10 to 20% of the cost

of the broker going solo.

In India quite a number of websites today, offer online trading and e-broking

over the Internet. These are either wholly specialized services or are being offered as

an extension to an already existing offline business model. Popular websites like

ICICIDirect.com. Investsmartindia.com, Geojtsecurties.com, 5paisa.com,

Kotaksteet.com, NETWORTH.com offer basic online buying and selling off shares

through major stock exchanges like the BSE, NSE and other regional stock

exchanges, Although, in principle it is very much like the BSE, NSE and other

regional stock exchanges. Although, in principle it is very much like how it is done

traditionally and physically through a broker or broking firm, it differs from the way

that the automation is built into the system, which the individual maintaining control

of the path of the path of transaction till the stage of execution. Only demat

(dematerialized) shares can be traded on the internet.

Following are the salient features and benefits offered to individuals who

desire to trade online through various e-broking firms.

Convenience

Liquidity advantages

Tracking

Technology benefits

In order to stay ahead in the competition e-broking firms have to provide their

members with innovative schemes and clearly visible advantages in terms of hassle-

free transacting and more obviously low brokerage rates. On line trading is a battle for

the Indian investor's purse. The entry of competitive price on line broking services

has brought the excitement back in a rather lackluster market. It has exposed the

investors to the dynamics of day trading.

Online trading also has a role to play in economic factors such as the

mobilization of savings. Form a macroeconomic perspective in the US, about 15% of

savings were invested in equities in 1996, the concept of online trading is eminently

flexible due to scalability of infrastructure and other evolving product offerings.

Consequently the many benefits of online trading will continue to attract investors,

which in turn in economic of massive scale from the going mass of transaction. In

turn, this will enable web manages of online trading sites to constantly upgrade their

product offerings can enhance the quality of online trading experience, on a

continuous basis.

TRADING FUTURES

Future trading are on out growth of less then spectacular beginning when 100's

of years ago merchants stored grains in their mills, and then sold receipts for the

stored grains. The grains were intended for future use, on the Merchants used he

receipts to generate cash.

This eventually grew into multiple large future trading exchanges now

centered in mainly Chicago and New York. The availability of future trading quickly

expanded in to most of the industrialized world.

Today not only can you future grain, but you can also trade future in metals,

livestock, lumber soybeans coffee, oil, electricity and more.

So what is the big draw to future trading? Some argue that the prospects of

hefty returns draw many into the field. But could it be that real reason people are draw

future trading is that they can identify with tangible products that the them self can

understand? Perhaps the individual feels that they can grasp more readily the trends

that are associate with future trading commodities.

Whatever the reason, the popularity of future trading seems to be frothing,

especially as internet brings nearly instant information on future trading to the

fingertips of the average trader. This vast amount of information available for online

future trading perhaps to close the gap between the professional and the amateur.

That being said, some argue it is always preferable to find a good Online

Trading broker whop will provide you with access to licensed future trading

professional extended advice as needed. Especially for the amateur or beginner future

trader and this can certainly be safer way to approach the market.

THE DRIVERS

The global drivers for online success have been simplicity services, security

and savings. What also helped was the prolonged Bull Run fuelled by the dotcoms.

It even drove conservative investors like those in Germany to the markets. Now with

the down turn in the market sentiment for technology stocks in particular, it was only

a matter of time before the Indian bourses replicated the NASDAQ. This has been a

setback for online broking. Going by the domestic market structure the majority of

trades are speculative in nature, it is evident that most Indian market players already

enjoy relatively simple means when it comes to executing stock in the market. on an

average only around 10% of the trades done on the major Indian exchanges end in

delivery. In other words trading is the domain of speculators. this is in sharp contrast

to the western markets where typically delivery based trades account for 30 to 40% of

total trades.

Safety of Transactions on the Internet

The safety of transaction on the internet depends on the encryption system

used. The better this transactions system, the more difficult it is for any person to

hack the site.

Internationally, the best system available today, is the 128-bit encryption, a

system which even the pentagon uses, since in the online business, the orders placed

have to pass through the network of public carriers, there exists a risk of data being

intercepted or modified by a hacker or anyone with malicious intensions. According

to industry experts, in future when the quantum of funds managed by the on line

brokers reach significant levels, security related issues would take the center stage.

However, most of the domestic players use some kind of security features to enable

safe transactions on the net. Encryption, build on the secured socket layer (SSL)

protocol developed by Netscape, provides sufficient amount of security to the and

invest smart have already graduated to 128-bit encryption technology. Though the

data transmitted in the form of plain text is quite vulnerable, encrypted data has a

much better level of protection.

It is true that pricing is still the unique selling proposition at the moment, but

security could be the trump card for tomorrow. Security and trust are the two

important parameters, which will be crucial in determining a client's long-term

relation with the broker.

Points out Mr. Anup Bangchi, COO at ICICI Direct.

“Brokerages are practically a non-issue, going by the us experience.

What matters more things like trust and security especially because the service

involves dealing with people's cash as well as stocks."

The customer is also largely responsible for ensuring safety of online

transactions. He normally gets a secured user id and password, the secrecy of which

is to be maintained entirely by him.

If the transaction system requires no manual intervention, it becomes safer.

Among the Indian sites, ICICI direct.com investsmart India ltd., NETWORTH,

indiabulls.com are among the few fully integrated online trading sites. it enables the

elimination of the possibility of any manual intervention. Thus, orders can be directly

sent to the exchange, ensuring that the investor gets the best and right price.

Securities of money demat shares and transaction documents.

In online systems, the broking, banking and demat accounts are completely

integrated, therefore, the investor's money remains in his own bank account and does

not get transferred to the broker’s pool account.

Is trading through the internet a difficult and cumbersome process?

The experience of trading through the internet depends a great deal on the type

of product offered by the site. Say, for example, one may get tired of the paperwork

involved after every trade in writing cheques.

In online trading sites, the greater the back-end integration of the system, the

greater the amount of work of work the sites do for the user, therefore greater the

convenience available to him.

In case of online trading, in some integrated sites the broking account, bank

account is linked electronically.

Is any special skill in computers or finance required for online trading?

Contrary to common perceptions, trading through the internet does not require

either any expertise in working on the computer, or any special financial skills. Most

of the online trading sites are equipped with a demo (demonstration), which explains

the trading process in a lucid manner. One can also attend the demonstration sessions

held by these website in various cities. For example, NETWORTH holds seminars on

every Saturday to educate its customers.

Trading Engines

Trading engines are the heart of various sites. the software is used by many

sites and is provided only after arduous and hard work, and there are essentially a lot

of differences in the software different firms use.

Is online trading viable in India?

The high cost involved in setting up a comprehensive online brokerages

infrastructure, a dismally low investor awareness and internet penetration level in the

country haven't kept players from embracing this new medium.

The motivation is quite simple and clear, convenience and transparency would

result in more clients and better volumes. However, the prophets of doom appear to

be skeptical about the very viability of these projects in India.

According to industry experts, it would cost up to rs.5crores to set up a modest

portal with reasonably attractive content and back end support systems with increase

in competition even the most established players with relatively high brand awareness

requires to incur substantial recurring expenses for customer acquisition.

One the other hand, intense competition has initiated a price war, for instance

5 paisa.com (promoted by indiainfoline) started of 5 paisa for each trading transaction

of Rs.100 within the settlement, its sustainability in the long run was questioned at

that stage, because there would be a stiff resistance by clients to any upside price

changes at a later stage.

According to Arjun Kapoor, a farmer Delhi stock exchange, president and a

leading broker, a typical online broker would have to acquire a critical mass of about

20000 active clients to break even which could take any where about 3 to 4 years.

However, COO of ICICI web trade Anup Bagchi has a quite contrary view. He

believes that the increase client base would require additional investment in

infrastructure like hardware and software up gradation as well as substantial increase

in the recurring expenses.

The key to success is to provide an entire spectrum of products and services

for the investor. This strategy has two distinct benefits for the company. First, the

bundling of its products and services in banking and retail division would enable

ICICI to cater to a wider requirement of the online customer. Secondly, the cost of

customer acquisition would get shared across various business divisions in the

company.

Content, an important factor in determining the portal success, constitutes a

sizeable portion of the operational expenses thereby further putting pressure on the

margins. Moreover, unlike the global experience, contents like news, research reports

and other value added information cum as freebies with every subscription. most of

the online players have to make additional investments in customer support systems

like call centers and interactive voice response systems.

In the mature markets like use, the top ten online brokerage firms account for

over 90% of the total business. Another notable but concerning feature of the online

brokerage business there is the extremely low percentage of profitable ventures.

according to a recent report, about 95% of over 100 online brokerage firms are still

struggling to wipe the red of their books, for instance e-trade group, the third largest

online brokerage firm could get into the block only due to service cost cutting

initiatives. It managed to report razor-thin earnings of just 5,7 million dollars for the

third quarter ended June 2000 despite huge total revenue of 330 million dollars for the

same period.

Advantages of Online Trading

Many customers, who have chosen to trade shares online today, had at one

point of time been trading through offline brokers, after realizing the advantages of

trading shares online, they have switched over to online trading now. However, before

choosing an online trading sites all these sites should be compared in order to form a

decision.

Advantages

It eliminates the risk of bad deliveries, which in turn eliminates all costs and

wastage of time associated with follow up for rectification.

This reduction in risk associated with bad delivery has lead to reduction in

brokerage to the extent of 0.5% by quite a few brokerage firms.

Screen-based trading facilities the investor to keep a track of the transaction

from the source to the end. He can punch in the order and see the results at the

bottom of the screen. Thus, online can get instant trade confirmation.

Internet has brought the market at the desktop of an investor and he does not

have to take the pain of going to the stock exchange or to his broker's office.

He can also do away with the need of calling up his broker frequently only to

quite about the prices of various scripts. Internet trading connects the stock

exchanges directly to the investor, who should make sure that the online

trading site, he selects provides him the3 trading screen, which uses the "push

technology" to display prices. using the push technology the trading screen

displays the real time prices of 10 to 15 scripts at a every time one needs the

price.

Internet has made it possible for broking firms to transmit key market

information to all their clients at one go. Market watch screen gives live lick

by tick update on the desktop, whereby the investor can set a number of scripts

of his choice, which will keep ticking through streaming quotes without

manual intervention.

Clients find it easier and convenient to interact with their broker in a web

enabled environment. In the past there were instances of brokers misreading

the information given to them by their elements, because of communication

lags. This had is effect ruined several investors. The internet ensures speedy

and correct flow of information between all users.

Online trading sites provide professional advices to investors. Many investors

are not knowledgeable about the stock markets and need advice about their

investment decisions. Some of them also need some hand holding especially

when the markets are falling and enmeshed in rocky times. The investor can

also send e-mail with his queries and can expect a timely response.

Many people derive a substantial portion of their income from trading in the

stock markets. For an experienced trader internet broking can prove to be a

"land of plenty". Besides information research and professional advice, online

trading will also offer technical advice that can help all who engage in trading

In the past there are instances that small investors encountered a situation

when he desperately wanted to place an order, but his broker's lines were

constantly engaged. When he finally managed to get through his broker, he

could not get the best price. Online trading can eliminate his problem. All he

has 10 do is log on to the site and place the order. Also, on the internet a

customer who is one meter away and a customer who is thousand kilometers

from his broker are equally placed. Thus, brokers who would not otherwise

entertain outstation clients. Even if one person is at Ludhiana and the client is

at Cochin, trade can be put through easily.

For example, Geojit securities, which does 10% of the business through the

net has a lot of non-resident Indians from the gulf as its clients and nearly 50%

of the internet volume comes from the nr1 clients.

Even when the market is closed, an online investor can make his trade.

Although, his trades will not be executed at that time but at least he can act

immediately. Many a times, his next morning schedule might not permit him

to go to the broker's office or even phone him for placing the order. Then,

there are always the hassles of calling up the broker a couple of times for

confirmation. Rather, he can now place his order the previous evening;

knowing that it will go through automatically first thing in the morning.

Online trading also helps in portfolio management. An investor can control the

whole process, from research to over entry, at his own convenience. He can

track the performance of the portfolio, as to how it is faring vis-à-vis the

market. If it is not performing well, he can also get advice on restructuring it.

Other services that one gets by trading shares online

Internet has brought to the retail investors what was till sometime ago the sole

prerogative of large brokerage houses and high net worth individuals. At the online

trading sites one can access a multitude of resources to arrive at his stock picks.

Reliable research with an enviable track record is available free of cost. Most of the c-

broking sites offer research reports on most of the top companies and have data like

balance sheets and profit and loss accounts.

An investor can now access these websites and do his fundamental and

technical analysis, by getting an access to real time quotes, knowing what other

leading brokers about a company and whether particular scrip is a buy or sell.

Indiainfoline.com managing director Mr. Nirmal Jain notes,

“Sites like ours also offer investors technical analysis tools which enable

even relatively detailed analysis like on intra day share price charting, using the

tools developed in association with Singapore based Asian bourses".

The investor can also access live news from international news agencies such

as Reuters, CNBC, read about what the leading CEOs think about the state or the

economy and the capital market. Thus, the internet helps the investors in shaping their

investment decisions.

Sites like NETWORTH.com and investsmartindia.com allows the facility to

receive updates on mobile phones and via e-mail, for stocks bought through their

sites. The clients can get automatic updates on any news development, price targets

met, any new updates on the stocks posted by the site or any circuit limits reached on

the stock via mobile and e-mail for free.

Indiabulls.com also offers similar facilities like short messaging services

(SMS) on mobile phones of their clients and thus keep them updated. Using the net.

Investors now have access to latest news from diverse source and online market

commentary for free. Earlier, even something like Reuters news feed was beyond the

reach of most small investors due to its prohibitively high cost. the democratization of

information has empowered investors to choose and adopt a trading and investing

style best suited to their risk returns aspirations and skill levels.

Disadvantages of Online Trading

The case and speed of online trading can give the investor a false sense of security

and encourage him to trade more frequently without paying any head to market basics

like, researching a company or knowing the risk he is going to assume.

The concept of chat rooms, which has become very popular with the investors,

may provide them with misleading information. Chat room participants are

often paid to highlight certain stock.

Online trading is not always instantaneous. In a rapidly change market, orders

may not get executed at the price shown on the computer screen. This is

because even a nanosecond delays in execution usually arise due particular

stock at that particular price. Delays in execution usually arise due to various

technological chock - points like the internet slowing down due to heavy

traffic or if the modems, computer or internet service provider (ISP) is

malfunctioning. if the investor does not factor in these technological lags

while entering into a volatile market, he may suffer heavy losses.

The investor should familiarize himself with the order entry screen and the

software provided to him. Any mistake made while inputting an order can

cause him significant financial loss. Moreover, he will be responsible for any

losses caused by lack of knowledge and / or experience. When an order is

placed and executed, he becomes liable for payment of the securities.

Active trading is dependant upon number of specialized software systems.

Disruptions or failure of any of the electronic systems utilized may leave the

investor with an open position at which time loss can occur.

Customers trading on-line may have difficulty accessing their accounts due to

high internet traffic or because of system's capacity limitations. customers

trading through brokers at full-service or discount brokerage firms or through

brokers at full-service or discount brokerage firms or through representatives

of on-line firms, when on line trading has been disabled or in not available

because of system limitations, may have difficulty reaching account

representatives on the telephone during periods of high volume.

Trouble shooting

From the investor's point of view

To prevent any technological choke point, the investor can place a limit order

and not a market order when entering a volatile market. a limit orders gets

executed only at a specific price. that is a buy limit order can only be

executed at the limit price or lower, and a sell limit order can only be executed

at the limit price or higher, by entering a limit order rather than a market order,

he will not be caught buying a stock at a price he hadn't planned for due to the

problems faced with bandwidth.

Security is a key requirement for the investor's protection. It is absolutely

essential to protect the user identification and password. He must also protect

against computer entry by someone other than himself after initializing his

system. The system should not be left unattended and must be properly shut

down when he is not actively using it. The investor is responsible for all

trades entered under his user identification and password. For his protection,

frequent changing of password is recommended.

From the broker's point of view:

In the absence of any direct interface between the organization and the

clients, online share trading firm should maintain seamless

communication with their clients. But, this is not always the case;

customer's order can be slowed down for reasons outside of a firm's

control. But explaining clearly to customers rather than merely

disclaiming liability through complex and legalistic language would go

a long way towards shoring up the customer's confidence in the firm.

DERIVATIVES

Options

An option gives its owner the right to buy or sell an underlying asset on or

before a given date at a fixed price. There can be as many different option contracts

as the number of items to buy or sell. Stock options, commodity options, foreign

exchange options, and interest rate options are traded on and off organized exchanges

across the globe.

Options belong to a broader class of assets called contingent claims. A

contingent claims is an asset whose payoff in future depends (or is contingent upon)

on the outcome of some uncertain event.

The most popular model for pricing options is the Black-Scholes model which

was published in 1973, the year in which the Chicago Board of Options Exchange

(CBOE), the first organized options exchange in the world, was also set up-it was a

rare occurrence in the field of finance when a seminal theoretical breakthrough

coincided with a major institutional development. Black-Scholes formula is widely

used by option traders

.

How Options Work

The option to buy is a call option (or just call)and the option to sell is a put

option (or just put).

The option holder is the buyer of the option and the option writer is the

seller of the option.

The date when the option expires or matures is referred to as the expiration

date or maturity date.

The act of buying or selling the underlying asset as per the option contract is

called exercising the option.

A European option can be exercised only on the expiration date whereas an

American option can be exercised on or before the expiration date.

Options traded on an exchange are called exchange-traded options and

options not traded on an exchange are called over-the-counter options.

Factors Determining Option Values

The precise location of the option value depends on five key factors;

Exercise price

Expiration date

Stock price

Interest rate

FUTURES

Forward and futures contracts are in a way like option contracts as they

specify the terms of purchase or sale of some underlying security in future. However

there is one key difference. The holder of a call (put) option enjoys the right to buy

(sell) without the obligation to do so.

In a strict sense, a forward or futures contract is not an investment because no

cash is paid to buy an asset. It is just a commitment to do a transaction in future. Yet,

we study them as part of investments as they are powerful tools to modify portfolio

characteristics and hedge other investments.

Key Differences between Forwards and Futures

A standardized forward contract is a futures contract. The key differences

between forwards and futures are as follows:

A forward contract is a tailor-made contract (the terms are negotiated between

the buyer and seller), whereas a futures contract is a standardized contract

(quantity, date, ad delivery conditions are standardized).

While there is no secondary market for forward contracts, the futures contracts

are traded on organized exchanges.

Forward contracts usually end with deliveries, whereas futures contracts are

settled with the differences.

Usually no9 collateral is required for a forward contract. In a futures contract,

however, a margin is required.

Forward contracts are settled on the maturity date, whereas futures contracts

are ‘marked to market’ on a daily basis. This means that profits and losses on

futures contracts are settled daily.

Mechanics of TradingTrading in futures is more complex than trading in stocks. Inter alia, it

involves intermediation by a clearing house, marking-to-market, and margins.

Clearing House

In a traded futures contract, the clearing house of the exchange interposes

itself between the buyer (the long position) and the seller (the short position). This

means that the clearing house becomes the seller to the buyer and the buyer to the

seller. The clearing house protects its interest by imposing margin requirements on

traders and by marking-to-market.

Margins

When trader execute a futures trade, you have to provide the initial margin

which may be about 10 percent of the value of contract—it is fixed by the exchange.

The margin, consisting of cash or cash equivalents, is to ensure that traders will

honour the obligations arising out of the futures contract.

If trader incurs sustained losses from daily marking-to-market, trader margin

amount may fall below a critical level called the maintenance, or variation, margin

which may be around 5 percent—it too is fixed by the exchange.

THE ONLINE TRADING PROCESS

To avail of online trading services the following steps may be followed

Step: 1 registers on the web site

Step: 2 complete registration documentation

Step: 3 open depository account

Step: 4 open bank account.

INTRODUCTION

The term depository is defined as a central location for keeping securities on

deposit.

A depository can be defined as "as institution, which transfers the ownership

to securities in electronic mode". I.e., in DEMAT.

DEMATERIALISATION

Dematerialization trading in now compulsory for all investors. Beginning first

week of January, 1999 investor can trade in specific script only in the

dematerialization from. They can provide and receive only in the dematerialization

form and share certificates will to be changed for these scripts.

A depository is an organization where securities of a shareholder are held in

the electronic from at the request of the shareholders through depository participants

(DPs). If an investor wants services offered by a depository, he would have to open an

account with it through DP-similar to opening a bank account.

BASIC CONCEPT OF DEPOSITORY:

PRODUCTS: The depository will be designed to permit inclusion of multiple

products, eventually encompassing all securities traded in the exchanges such as

equities, preferences shares, warrants, debentures, bonds and etc.,

DEPOSITORY ELIGIBLE SECURITIES: Securities that have been

selected by the depository to be eligible for the book entry movement within

depository are named "Depository eligible."

OBJECTIVES OF DEPOSITORY SYSTEM:

Immobilization of securities. Book-entry accounts

Confidentiality.

Detailed listing of investor holdings by securities type.

Handling of corporate actions.

Delivery versus payment.

Links to other depository systems.

DEPOSITORY SYSTEM FUNCTIONS:

The depository system is a new clearing and settlement system. Under

depository system, the current practices of holding and moving scrip of quoted shares

is replaced by a safe and dependable computerized book-entry system.

FUNCATIONS OF DEPONSITORY:

CORPORATE ACTION:

The depository will track and benefits due to the clients, and will be the job of

timely collection of benefits like rights issues, bonus dividends redemption, warrants

etc.,

BOOK ENTRY SETTLEMENT / ACCOUNTING:

Depository will accomplish settlement work via computerized accounting

systems. The book keeping entry will ensure elimination of the physical packaging

movement of share certificate.

SAFE KEEPING:

Safe keeping function involves the storage of securities in a secure location.

PLEDGING:

Depository will allow securities to be used as collateral to secure

loans/options/future contracts and other form of credit.

TRANSFER AND REGISTRATION:

The use of single nominee name by the depository for all physical security

holding of its participant members accelerates transfer process. In a dematerialized

system elimination of all movement of securities is done and it reduces the transfer

process to a book entry activity.

FUNDS HANDLING:

the involves handling of funds be it collecting funds from issuing companies

such as dividend, interest or distribution of funds to participants connected with the

settlement of securities transaction.

LEGAL ISSUES

Implementation of depository system would require some legal issues to be

resolved before the could be implemented. The issues pertain to:

Settlement by book-entry.

Vesting of beneficial owner rights.

Pledges and release of pledges.

BENEFITS OF DEPOSITORY SYSTEM:

To the Nation:

Growing and more liquid capital markets provide financing and developments

stemming from efficient post-trade systems with reduced transaction costs.

Improved prospects for privatization of public sector units by creating a

conductive environment.

Restoration of faith in the capital markets and the participants with systems to

minimize settlement risk and fraud.

Considerable reduction in the delay in the registration, which can currently

impact trading.

TO THE INVESTING PUBLIC:

Reduction of risks associated with loss, mutilation, then and forgery of

physical scrip.

Elimination of financial loss owing to loss of physical scrip

Greater profits from increased trading volume mad possible by NCD systems

with reduced operational cost per transaction and reduced risk.

DEPOSITORY SYSTEM: PRESENT POSITION

Stock Holding Corporation of India Limited (SHCIL) was promoted by seven

all India institution, namely IDB, IFCI, ICICI, LIC, IRBI,GIC, and its subsidiaries for

rendering custodial service to he Indian Capital Market particularly for all India

financial Instituti9ons and Mutual Funds. SHCIL was incorporated in 1986 and want

operational in 1988.

Considering the significance of the system, SHCIL in July, 1992 circulated the

concept paper on the NATIONAL clearing AND depository system prepared in

collaboration with price water houses, Washington the internal consultants of repute

appointed under the aegis of USAID.

The proposed system envisages a three tier structure and settlement namely;

A national Trading Comparison and Reporting system (NIRS).

A National Clearing System (SCS).

A National Depository system (NDS).

Further, SHCIL conducted a seminar on nation depository system in 1992. A

technical group was formed to review and suggest a modern settlement and

depository system for securities transactions. The group suggested multiple

depositories while, the financial minister Dr. Manmohan Singh in hid budget

speech mentioned about setting up a central depository in India, Which will be

suitable for Indian conditions.

Now here we will discuss on CDSL and how to open the demat account.

CDSLA 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

SEBI guidelines, financial institutions, bank, custodians, stock brokers, 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

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

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

transactions. The depository system has effectively eliminated paper-based

certificates, which were prone to be fake, forged, counterfeit resulting in bed

deliveries. CDSL offers an efficient and instantaneous transfer or securities.

CDSL was promoted by the stock Exchange, Mumbai (BSE) jointly with

leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC

Bank, Standard Chartered Bank, and Union Bank of India and Centurion Bank.

CDSL was set up with the objective of providing convenient, dependable and

secure depository services at affordable cost to all market participants. Some of the

important milestones CDSL systems are:

CDSL received the certificate of commencement of business form SEBI in

February, 1999.

Honorable Union Finance Minister, Shri Yashwant Sinha flagged off the

operations of CDSL on July, 15 1999.

Settlement of trades in the Demat mode through BIO Shareholding Limited.

The clearing house of BSE started in July 1999.

All leading stock exchanges like the National Stock Exchanges, Calcutta

Stock Exchange, Delhi Stock Exchange, the stock exchange, Ahmadabad etc., hae

established connectivity with CDSL.

As at the end of December 2004 over 4900 issuers have admitted their

securities (equities, bonds, debentures, commercial papers) units of mutual funds,

certificate of deposits etc., into the CDSL system.

CDLS was promoted by the stock exchange, Mumbai (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.

104.50crores. The list of shareholders in as under.

DEMAT ACCOUNT WITH CDSL SYSTEM

CONVEVIENCE:

Wide DP Network: CDSL has over 200 DPs spread around 144 cities/ towns

across the country, offering convenience for an investor to select a DP based on his

location.

On-line DP Services: The branches of a DP can also be directly connected to

CDSL thereby providing on-line and efficient depository service to investors.

Wide spectrum of Securities Available for Demat: More then 4600 companies

have admitted their equity into CDSL, Further CDSL has also admitted an entire

gamut of debt instruments viz. bonds, debentures, commercial paper, government

securities, certificate of deposits etc., Thus an investor can hold almost all his

securities in one account with CDSL.

Competitive Fees Structures: CDSL has keep its tariffs very competitive to

provide affordable depository services to investor. CDSL also does not collect any

custody fees or ISIN fees from its Dps.

Internet Access: A DP. Which registers itself with CDSL for internet access, can in

turn provide demat account holders with access to their account on the internet.

On-line Information to users: DSL’s system is based on centralized database

architecture; DPs can thus provide on-line depository services with to-the-minute

status of the investor's account.

Convenient to DPs: The entire database of investors is stored centrally at CDSL, If

there is any system-related issue at DPs end, the investor is not affected, as the entire

data is available CDSL.

Contingency Arrangements: CDSL has made provisions for contingency terminals,

which enables a DP to update transactions, in case of any system related problems at

the DP's office.

Meeting User's Requirements: Continuous updating of procedures and process in

tune with evolving market practices is another hallmark of CDSL's services.

Audit and Inspection: CDSL conducts regular audit of its DPs to ensure compliance

of stringent operational and regulatory requirements.

Dormant Account Monitoring: CDSL has in place a mechanism for monitoring

dormant accounts.

Helpdesk: DPs and investors obtain clarifications and guidance from CDSL's prompt

and courteous help line facility.

Computer Systems: CDSL has installed state- of -the -art computer system and data

storage devise. All data is stored at CDSL and is auto mirrored separately and also

transmitted to a Disaster Recovery site. Data is also backed up on digital linear taps,

which are stored in fireproof cabinets at the main and disaster recovery sites.

Unique BO account number: Each BO in CDSL Is Allocated A Unique account

number, which ensures that at the time of transfer or securities if the transferor's

account number is wrongly entered, the transaction will not go through the CDSL

system, unless corrected.

Data security: CDSL ensures the security and integrity of all data by encrypting all

communications between CDSL and its users.

Claims on DP: if any DP of CDSL goes into liquidation, the creditors of the DP will

have no access to the holdings or the BO.

Insurance cover: CDSL has obtained adequate insurance cover in the unlikely event

of any loss to a BO due to the negligence of CDSL or its DP.

Benefits of Holding Securities in the Dematerialized form:

Elimination of all risks associated with physical certificates: There is no risk of

loss, mutilation or theft of certificates of securities.

Effects immediate transfer and registration of securities: After the payout, once

securities are credited to the investors BO account maintained with a DP, the investor

becomes the legal owner of the securities a there is no further need to seek registration

from the company or its registrar.

Faster settlement cycles: All stock exchanges currently follow T+3 rolling

settlement cycle i.e. settlement of trades is done on the 31d working day from the

trade day. This has become possible because of demat which enables faster turnover

of securities and enhances liquidity. Waive of stamp duty: No stamp duty is payable

by investors for transfer or any kind of securities received in demat form.

Acilitate recording of change of address, transmission etc., - For all investments

held in the a/c, instead or advising each company separately about the change in

address, bank account particulars, nomination, deletion of name in case of joint

holder, on e single advice to the DP takes care of all such changes.

Ease of portfolio monitoring: The statement of account periodically sent by the DPs

provides the investor the consolidated position of all his investments in the demat

account. This makes it convenient for an investor to compare and monitor his

portfolio.

DE - MATERIALIZATION PROCESS AND PROCEDURE:

Opening a depository account

Investors, both individuals and non-individuals, have a choice to open a demat

account with any CDSL, DP. Individual investors could be Indian residents or NRIs.

Non-individual BOs include corporate, FIs, FIILs, Mutual Finds, Trusts etc. Under

two-way fungibility of ADR/GDR, non-residents can also open a demat account with

a CDSL DP.

A BO should consider fee structure, location convenience and the track record

of the DP before selecting a DP for-opening his BO account.

More then one demat account ca be opened in identical names with the same

or different DPs with the same depository and / or with both the depositories.

A demat account ca be maintained even with 'nil' balance as there is no

requirement of holding any minimum - security balance in a demat account.

Acilitate recording of changes of address, transmission etc.,- For all investments held

in the a/c, instead of advising each company separately about the change in address,

bank account particulars, nomination, deletion of name in cse of joint holder, one

single advice to the DP takes care of all such changes.

Documents required to the submitted at the time of opening a CDSL Demat

account:

Individual investor

An application in the prescribed form duty completed. certified copy of an

election-id card/passport/ration card/PAN Card or in the absence of these documents,

an introduction by an existing account holder of the DP giving the introducer's name,

address, and contact number.

A certified copy of birth certificate and guardian's name, in case of a minor. A

passport size photograph of each of the applicants with his/their signature's put across

the photographs.

In case of any attestation by a Magistrate/ Notary public/special Executive

magistrate, the name, address and telephone number of the Magistrate desired.

Agreement in the prescribed form duty executed.

Corporate investor:

An application in the prescribed form duty completed. A certified copy of the

Memorandum and Articles of Association of the company.

A certified true copy of the board resolution authorizing opening of demat

account and listing out the names of the officials authorized by the board to act as

authorized signatory (ies) Names of the authorized signatories, their designation with

specimen signatures.

A copy of power of attorney duly executed.

In case of attestations by any Magistrate / Notary, Public / Special Executive

Magistrate, their name, address and telephone number.

Agreement in the prescribed form duly executed.

On opening of the demat account, a DP would provide to the BO a/c

holder the following:

A copy of the signed agreement.

Issues "BIO - ID" (IE., beneficial owner identification number or demat

account number). This BO-ID should be quoted in all future correspondence with the

DP, Issuer Companies and / or their registrar & transfer agents or CDSL.

Pre-printed instruction slips for effecting various types of transactions viz.

form for dematting physical holdings, transaction slips, etc. CDSL has one single

debit instruction slip both for 'on-market' and off-market" transactions.

NSDL

Although India had a vibrant capital markets which is more then 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 nation stature responsible for economic

development of the country has since established a nat9ion infrastructure of

International standard that handles most of the trading and sell lenient in

dematerialized form in Indian capital market.

Using innovative and flexible technology systems, NSDL works to sup-port

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

the safely and soundness of Indian Marketplaces by developing settlement solutions

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

hut 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 paper work. Consequently, the cost of

transacting in a depository environment is considerably lower as compared to

transacting in certificates.

Under the provisions of the Depositories Act, NSDL. Provides various

services to investors and other participants in the capital market like, clearing

members, stock exchanges, banks and issuers of securities. these include basic

facilities like account maintenance, Dematenance, dematerialization re-

materialization, settlement of trades through market transfers, off market transfers &

interdeponsitory transfers, distribution of non-cash corporate actions and nomination

transmission. The depository system which facilitates scrip less trading, offers various

direct and indirect benefits to the market participants.

Depository is a facility for holding securities electronically in which securities

transactions are processed by book entry, In addition to the core services of electronic

custody and trade settlement services, NSDL provides special services like pledge,

hypothecation of securities and automatic delivery of securities to clearing

corporations. Distribution of cash and non-cash corporate benefits (Bonus, Rights,

IPOs etc) stock lending and Internet-based services such as SPEED -e and IDEAS.

NSDI has also set-up a facility that enables brokers to deliver contract notes to

custodians and/or fund managers electronically. This facility called STEADY

(securities Trading - Information Easy Access and Delivery) was launched by NSDI

on November 30, 2002. STEADY is a means of transmitting g digitally signed trade

information with encryption across market participants electronically, through

internet.

NSDI, carries out its activities through service providers like Depository

Participants(DPs). Issuing companies and their Registrars and Share Transfer Agents,

Clearing Corporations clearing Houses of Stock Exchanges. These entities are called

business partners in NSDL terminology. These entities need to get integrated into

NSDL depository system to be able to provide various services to the investors and

Clearing Members.

The investor can obtain depository services through a depository participant of

NSDL. Just as one opens a bank account in order to avail of the services of a bank, an

investor opens a denial account with a depository participant in order to avail of

depository facilities.

A clearing member can open a special account in the depository system for the

purpose of settling trades done on stock exchanges. The clearing account enables the

clearing account enables the clearing members to receive securities from its clients for

delivery to the clearing House / Clearing Corporation as pay-in and to distribute the

payout to its clients received from the Clearing House/Clearing Corporation.

Issuer can make dematerialization services available to their shareholder by

signing of agreement to that effect with NSDL after the agreement is entered into, an

electronic link is established between NSDL, issuer or its & tangents.

The clearing corporations / house of stock exchanges also have to be

electronically link to the depository in order to electronically receive securities

delivered by clearing members towards pay in and to give out securities to clearing

members towards pay-out.

Special services

Depository is a facility for holding securities electronically in which securities

transactions are processed by book entry. In addition to the core services of electronic

custody and trade settlement services, NSDL provide special services like pledge,

hypothecation of securities, automatic delivery of securities to clearing corporations,

distribution of cash corporate benefits (bonus, Rights, IPOs etc.) stock lending and

Internet-based services such as SPEED-e and IDEAS.

NSDI has also set-up a facility that enables brokers to deliver contract notes to

custodians and/or fund managers electronically. This facility called STEADY

(securities Trading - Information Easy Access and Delivery) was launched by NSDI

on November 30, 2002. STEADY is a means of transmitting g digitally signed trade

information with encryption across market participants electronically, through

internet.

Conversion of physical shares into demat account:

In order to dematerialize physical securities one has to fill in a DRF (Demat

Request from) Which is available with the DP and submit the same along with

physical certificates one wishes to dematerialize. Separate DRF has to be filled for

each ISIN no.

The complete process of dematerialization is outlined below:

Surrender certificates for dematerialization to your depository

participant.

Depository participant intimates Depository of the request through the

system.

Depository participant submits the certificates to the registrar.

Registrar confirms the dematerialization request from depository.

After dematerializing certificates, Registrar updates accounts and

informs depository of the completion of dematerializations.

Depository updates its accounts and informs the depository participant

Depository participant updates the account and infor4ms the investor.

If you wish to gel back your back your securities in the physical form one has

to till in the RRH (Demat Request Form) and request your DP for re-materialization

of the balances in your securities account.

The process of re-materialization is outlined below:

Make a request for re - materialization.

Depository participant intimates depository of the request through the

system.

Depository confirms re-materialization request to the registrar.

Registrar updates accounts and prints certificates.

Depository updates accounts and downloads details to depository

participant.

Registrar dispatches certificates to investor.

DELIVERY INSTRUCTION SLIP (DIS)

De-materialized shares do not have any distinctive numbers. These shares are-

fungible, which means that all the holdings of a particular security will be identical

and interchangeable.

To give the delivery instruction to DP you have to fill one form called

Delivery Instruction Slip (DIS) . DIS may be compared to chequebook of a bank

account. The following precautions are to be taken in respect of DIS.

Ensure and insist with DP to issue DIS book: do not use loose slips

Ensure that DIS numbers are pre-printed and DP takes

acknowledgement for the DIS booklet issued to investor.

Ensure that your account number (Client id) is pre-stamped.

If the account is a joint account, all the joint holders have to submit the

instruction slips. Instruction cannot be executed if all joint holders

have not signed.

Avoid using loose slips

Do not leave signed blank DIS with anyone through broker/sub-broker.

Keep the DIS book under look and key when not in use.

If only one entry is made in(he DIS book, strike out remained space to

prevent misuse by any one,

Investor should personally fill in target account id and all details in the

DIS.

ANALYSIS

ICICI BANK OVERVIEW :

ICICI Bank is India's second-largest bank with total assets of Rs. 3,446.58

billion (US$ 79 billion) at March 31, 2007 and profit after tax of Rs. 31.10 billion for

fiscal 2007. ICICI Bank is the most valuable bank in India in terms of market

capitalization and is ranked third amongst all the companies listed on the Indian stock

exchanges in terms of free float market capitalisation*. The Bank has a network of

about 950 branches and 3,300 ATMs in India and presence in 17 countries. ICICI

Bank offers a wide range of banking products and financial services to corporate and

retail customers through a variety of delivery channels and through its specialised

subsidiaries and affiliates in the areas of investment banking, life and non-life

insurance, venture capital and asset management. The Bank currently has subsidiaries

in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong

Kong, Sri Lanka and Dubai International Finance Centre and representative offices in

the United States, United Arab Emirates, China, South Africa, Bangladesh, Thailand,

Malaysia and Indonesia. Our UK subsidiary has established a branch in Belgium.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and

the National Stock Exchange of India Limited and its American Depositary Receipts

(ADRs) are listed on the New York Stock Exchange (NYSE).

HISTORY :

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in

ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal

1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000,

ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in

fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal

2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank,

the Government of India and representatives of Indian industry. The principal

objective was to create a development financial institution for providing medium-term

and long-term project financing to Indian businesses. In the 1990s, ICICI transformed

its business from a development financial institution offering only project finance to a

diversified financial services group offering a wide variety of products and services,

both directly and through a number of subsidiaries and affiliates like ICICI Bank. In

1999, ICICI become the first Indian company and the first bank or financial institution

from non-Japan Asia to be listed on the NYSE.

BOARD MEMBERS :

Mr. N. Vaghul, Chairman Mr. Sridar Iyengar Mr. Lakshmi N. Mittal Mr. Narendra Murkumbi Mr. Anupam Puri Mr. Arun Ramanathan Mr. M.K. Sharma Mr. P.M. Sinha Prof. Marti G. Subrahmanyam Mr. T.S. Vijayan Mr. V. Prem Watsa Mr. K.V. Kamath, Managing Director & CEO Ms. Chanda Kochhar, Joint Managing Director &

Chief Financial Officer

Ms. Madhabi Puri-Buch, Executive Director

Mr. Sonjoy Chatterjee, Executive Director Mr. V. Vaidyanathan, Executive Director

INVESTOR RELATIONS :

ICICI Bank disseminates information on its operations and initiatives on a

regular basis. The ICICI Bank website serves as a key investor awareness facility,

allowing stakeholders to access information on ICICI Bank at their convenience.

ICICI Bank's dedicated investor relations personnel play a proactive role in

disseminating information to both analysts and investors and respond to specific

queries.

ANALYSIS

The objective of this analysis is to the profit/loss position futures and options. This analysis is based on date taken of Reliance Communication and ICICI bank scrip. This analysis considered the January contract of Reliance Communication and ICICI Bank. The lot size of Reliance Communication is 350 and ICICI bank is 175, the time period in which this analysis done is from the period is 27th December, 2011 to 31st January, 2012.

In the data can be divided into 5 weeks.

PRICES OF ICICI BANK IN FUTURE MARKET.

FIRST WEEK.:

DATE OPEN HIGH LOW CLOSE27-12-2011 1165 1210.05 1163 1205.528-12-2011 1202 1235 1200 122731-12-2011 1240 1288 1237 128201-01-2012 1302.5 1352.05 1301 134702-01-2012 1339.05 1322.5 1248 1248

1050

1100

1150

1200

1250

1300

1350

1400

OPEN HIGH LOW CLOSE

Interpretation of first week graph:

Open = 1165High = 1352.05Low = 1163Close = 1248

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1352.05+1163/2= 1257.52

SECOND WEEK:

DATE OPEN HIGH LOW CLOSE03-01-2012 1238.5 1285 1233 1238.504-01-2012 1240 1302.2 1238 1287.5507-01-2012 1322.05 1394.25 1322.05 1394.2508-01-2012 1392.5 1410 1384.05 138409-01-2012 1388.5 1398 1360 1362.7

1100

1150

1200

1250

1300

1350

1400

1450

OPEN HIGH LOW CLOSE

Interpretation of Second week graph:

Open = 1238.5High = 1410Low = 1233Close = 1362.7

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1410 + 1233 / 2= 1321.50

THIRD WEEK:

DATE OPEN HIGH LOW CLOSE10-01-2012 1370.65 1420 1370 140711-01-2012 1412 1452 1396 143514-01-2012 1448 1455 1429 143915-01-2012 1442 1474 1435 174116-01-2012 1468 1469 1459 1460

13001320134013601380140014201440146014801500

OPEN HIGH LOW CLOSE

Interpretation of Third week graph:

Open = 1370.65High = 1474Low = 1396Close = 1460

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1474 + 1396 / 2= 1435

FOURTH WEEK:

DATE OPEN HIGH LOW CLOSE17-01-2012 1432 1446 1430 142718-01-2012 1422.5 1429 1389 1392.221-01-2012 1368 1369 1341 1340.722-01-2012 1335.01 1362 1322.05 136023-01-2012 1347 1406 1347 1387

12601280130013201340136013801400142014401460

OPEN HIGH LOW CLOSE

Interpretation of Fourth week graph:

Open = 1432High = 1446Low = 1322.05Close = 1387

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1446 + 1322.05/ 2= 1384.02

FIFTH WEEK:

DATE OPEN HIGH LOW CLOSE24-01-2012 1380 1405 1372.5 138825-01-2012 1385 1420 1382.1 140528-01-2012 1388 1392 1246 125029-01-2012 1239.85 1286 1201.10 1277.3030-01-2012 1299 1299.90 1191.10 1223.8531-01-2012 1244 1224 1167 1187.40

0200400600800

1000120014001600

OPEN HIGH LOW CLOSE

Interpretation of Fifth week graph:

Open = 1380High = 1420Low = 1167Close = 1187.40

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1420 + 1167/ 2= 1293.5

RELIANCE COMMUNICATION

OVERVIEW:

The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would have access to affordable means of information and communication. Dhirubhai, who single-handedly built India’s largest private sector company virtually from scratch, had stated as early as 1999: “Make the tools of

information and communication available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility.” It was with this belief in mind that Reliance Communications (formerly Reliance Info comm) started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was commissioned on 28 December 2002, the auspicious occasion of Dhirubhai’s 70th birthday, though sadly after his unexpected demise on 6 July 2002. Reliance Communications has a reliable, high-capacity, integrated (both wireless and wire line) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire info comm (information and communication) value chain, including infrastructure and services — for enterprises as well as individuals, applications, and consulting. Today, Reliance Communications is revolutionizing the way India communicates and networks, truly bringing about a new way of life.

BOARD OF DIRECTORS:

Shri Anil D. Ambani - Chairman

Prof. J Ramachandran

Shri S.P. Talwar

Shri Deepak Shourie

Shri A.K.Purwar

BUSINESS:

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock Exchange, it is India’s leading integrated telecommunication company with over 40 million customers. Our business encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value-added services and

applications. Our constant endeavour is to achieve customer delight by enhancing the productivity of the enterprises and individuals we serve. Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002, coinciding with the joyous occasion of the late Dhirubhai Ambani’s 70th birthday, was among the initial initiatives of Reliance Communications. It marked the auspicious beginning of Dhirubhai’s dream of ushering in a digital revolution in India. Today, we can proudly claim that we were instrumental in harnessing the true power of information and communication, by bestowing it in the hands of the common man at affordable rates.

We endeavour to further extend our efforts beyond the traditional value chain by developing and deploying complete telecom solutions for the entire spectrum of Society.

VISION:

“We will leverage our strengths to execute complex global-scale projects to facilitate leading-edge information and communication services affordable to all individual consumers and businesses in India.

We will offer unparalleled value to create customer delight and enhance business productivity.

We will also generate value for our capabilities beyond Indian borders and enable millions of India's knowledge workers to deliver their services globally.”

ANALYSIS

PRICES OF RELIANCE COMMUNICATION IN FUTURE MARKET.

FIRST WEEK:

DATE OPEN HIGH LOW CLOSE

27-12-2011 792 796.1 775.3 778.528-12-2011 782.1 799 791.1 79531-12-2011 782.1 784 771 775.601-01-2012 770 790.2 781.25 78302-01-2012 778.06 781.45 753 760

730

740

750

760

770

780

790

800

810

OPEN HIGH LOW CLOSE

Interpretation of first week graph:

Open = 792High = 799Low = 753Close = 760

Calculation of Break Even Point(BEP):

BEP = High Value + Low Value/2

= 799 + 753 / 2= 776

SECOND WEEK:

DATE OPEN HIGH LOW CLOSE03-01-2012 765 772.6 740.7 749.504-01-2012 742 776.4 742 768.4507-01-2012 795 810 790 81008-01-2012 818 823 809 81209-01-2012 820 849 826 835

680

700

720

740

760

780

800

820

840

860

OPEN HIGH LOW CLOSE

Interpretation of second week graph:

Open = 765High = 849Low = 740.7Close = 835

Calculation of Break Even Point(BEP):

BEP = High Value + Low Value/2

= 849 + 740.7 / 2= 794.85

THIRD WEEK:

DATE OPEN HIGH LOW CLOSE10-01-2012 842 836 828 83111-01-2012 824 824 817 82214-01-2012 801 804 791.6 79215-01-2012 793 799 787 78816-01-2012 821 826 811 817

750760770780790800810820830840850

OPEN HIGH LOW CLOSE

Interpretation of third week graph:

Open = 842High = 836Low = 787Close = 817

Calculation of Break Even Point(BEP):

BEP = High Value + Low Value/2

= 836 + 787 / 2= 811.5

FOURTH WEEK:

DATE OPEN HIGH LOW CLOSE17-01-2012 799 809 802 80518-01-2012 792 799.6 782 78821-01-2012 772 769 738 74422-01-2012 741 738 722 729

23-01-2012 729 739 726 732

660

680

700

720

740

760

780

800

820

OPEN HIGH LOW CLOSE

Interpretation of fourth week graph:

Open = 799High = 809Low = 722Close = 732

Calculation of Break Even Point(BEP):

BEP = High Value + Low Value/2

= 809 + 722 / 2= 765.5

FIFTH WEEK:

DATE OPEN HIGH LOW CLOSE24-01-2012 730 739 731 73525-01-2012 740 749 721 72628-01-2012 732 738 643 64529-01-2012 650 659 612.9 645.4030-01-2012 650 659.70 636.50 642.831-01-2012 644.80 645 607.10 611.90

0100200300400500600700800

OPEN HIGH LOW CLOSE

Interpretation of fifth week graph:

Open = 730High = 749Low = 607.10Close = 611.90

Calculation of Break Even Point(BEP):

BEP = High Value + Low Value/2

= 749 + 607.10 / 2

= 678.05NAM OF THE COMPANY : ICICI BANK

LOT SIZE: 175

DATE OPEN HIGH LOW CLOSE27-12-2011 1165 1210.05 1163 12.05.528-12-2011 1202 1235 1200 122731-12-2011 1240 1288 1237 1282

01-01-2012 1302.5 1352.05 1301 134702-01-2012 1339.05 1322.5 1248 124803-01-2012 1238.5 1285 1233 1238.504-01-2012 1240 1302.2 1238 1287.5507-01-2012 1322.05 1394.25 1322.05 1394.2508-01-2012 1392.5 1410 1384.05 138409-01-2012 1388.5 1398 1360 1362.710-01-2012 1370.65 1420 1370 140711-01-2012 1412 1452 1396 143514-01-2012 1448 1455 1429 143915-01-2012 1442 1474 1435 174116-01-2012 1468 1469 1459 146017-01-2012 1432 1446 1430 142718-01-2012 1422.5 1429 1389 1392.221-01-2012 1368 1369 1341 134.722-01-2012 1335.01 1362 1322.05 136023-01-2012 1347 1406 1347 138724-01-2012 1380 1405 1372.5 138825-01-2012 1385 1420 1382.1 140528-01-2012 1388 1392 1246 125029-01-2012 1239.85 1286 1201.10 1277.3030-01-2012 1299 1299.90 1191.10 1223.8531-01-2012 1244 1224 1167 1187.40

0

200

400

600

800

1000

1200

1400

1600

OPEN HIGH LOW CLOSE

BEP

Interpretation of January month future Market of ICICI Bank:

OPEN = 1165HIGH = 1474LOW = 1163CLOSE = 1187.40

Calculation of Break Even Point (B.E.P):-

B.E.P. = HIGH VALUE + LOW VALUE/ 2

= 1474 + 1163 / 2= 1318.5

NAME OF THE COMPANY : RELIANCE COMMUNICATIONS

LOT SIZE:350

DATE OPEN HIGH LOW CLOSE27-12-2011 792 796.1 775.3 778.528-12-2011 782.1 799 791.1 79531-12-2011 782.1 784 771 775.601-01-2012 770 790.2 781.25 78302-01-2012 778.06 781.45 753 76003-01-2012 765 772.6 740.7 749.504-01-2012 742 776.4 742 768.4507-01-2012 795 810 790 81008-01-2012 818 823 809 81209-01-2012 820 849 826 83510-01-2012 842 836 828 83111-01-2012 824 824 817 82214-01-2012 801 804 791.6 79215-01-2012 793 799 787 78816-01-2012 821 826 811 81717-01-2012 799 809 802 805

18-01-2012 792 799.6 782 78821-01-2012 772 769 738 74422-01-2012 741 738 722 72923-01-2012 729 739 726 73224-01-2012 730 739 731 73525-01-2012 740 749 721 72628-01-2012 732 738 643 64529-01-2012 650 659 612.9 645.4030-01-2012 650 659.70 636.50 642.831-01-2012 644.80 645 607.10 611.90

0

100

200

300

400

500

600

700

800

900

OPEN HIGH LOW CLOSE

Interpretation of January month future Market of Reliance Communication :-

OPEN = 792HIGH = 849

BEP

LOW = 607CLOSE = 611.90

Calculation of Break Even Point (B.E.P):-

B.E.P. = HIGH VALUE + LOW VALUE/ 2

= 849 + 607 / 2= 728

FINDINGS AND SUGGESTIONS:

1. The investor is able to know the risk and returns of the share by using

Online trading.

2. It is useful to each and every investor who wants long and short-term

Investments.

3. Estimating future EPS good result in future.

4. Investor must have a basic idea about the computer operations.

5. It is very must have a basic idea about the computer operations.

6. The result of analysis is proving correctly in the matter of price movements.

' 7. Avoid buying shares of a company with an equity capital of less then

Rs. 1crore.

8. Avoid buying shares of a company with number of shareholders.

9. Investors must show interest in steady and fast growing shares only.

10. If the investor is confident of EPS moving up and expect the P/E to

Increase as well stick to the shares and be patients.

CONCLUSION

The benefits of depository system are significant. Introduction of depositories

will improve the market efficiency, through adopting criteria for describing scrip

depositors eligible. If the company is not able to meet the criteria , the company gels

to be shifted to paper based market. This leads to falloff image of the company.

Hence, the company will try their best to reach the eligible criteria to move into

system.

Secondly, the paper management will substantially reduce. This helps in

savings in time for allotment/transfer of scripts. This improves internal systems

effectively.

Thirdly, the intensity of trading in the script is likely to increase substantially.

The experiences of the developed countries, these who are introduced the depository

system, shows that there will be around 5 to 6 times increase in the turnover. This

happens due to investors indulging more and more in buying and selling even for

marginal trading profits.

Fourthly, the cost of bad deliveries, forged share certificates and unproductive

back office activity will vanish for corporate.

Last but not least, the depository system will bring in a sea change in

corporate democracy, particularly in corporate management price discovery in market

place and proxy exercise etc.

BIBLIOGRAPHY

Newspaper: Economic Times of India

Web-site: www.nseindia.orgwww.iseindia.comwww.nsccl.com

Report: ACM Report