A PROJECT REPORT ON

“Sales of Demat Cum Online Trading Account, competitor analysis and Marketing Strategies of

Sharekhan.”

(FOR THE PARTIAL FULFILLMENT OF MASTERS IN BUSINESS ADMINISTRATION AND FULL TIME POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT)

At

SHAREKHAN SECURITIES PVT.LTD.

(Area Of Summer Training- Marketing/sales)

TABLE OF CONTENTS

Acknowledgement

Executive summary

CHAPTER 1. INTRODUCTION

1.1 Introduction to the Topic

1.2 Objective of the Study

1.3 Job description

CHAPTER 2. COMPANY PROFILE

2.1 About the Company

2.2 Company Profile

2.3 Share khan Business

LITERATURE REVIEW

Introduction of the product

2.4 Types of product and features

2.5 Process of DMAT A/C

2.6 Documentation

2.7 Product charges

2.8 Sharekhan services

2.9 Closure of an Account

CAPTER 3

REARSEARCH METHODOLOGY 3.1 Data collection

Secondary data

Primary data

3.2 Tools and techniques

3.3 Limitations

CHAPTER 4.

MARKETING STRATEGIES OF SHAREKHAN

4.1 Marketing Strategies

4.2 Unique objectives of the company

4.3 Comparative analysis

4.4 SWOT Analysis

CHAPTER 5.

OBSERVATIONS AND ANALYSIS

5.1 Data Analysis

5.2 Interpretation

CHAPTER 6.

FINDINGS AND RECOMMENDATION

6.1Findings

6.2 Recommendation.

CHAPTER 7.

CONCLUSION

CHAPTER 8.

RESULTS

CHAPTER 9.

BIBLIOGRAPHY

ACKNOWLEDGEMENT

A project is never the work of an individual. It is moreover a

combination of ideas, suggestions, review, contribution and work

involving many folks. It cannot be completed without guidelines.

My sincere regards to my Project guide Mr. Ramesh Tanwar for his

invaluable guidance and encouragement through out this project.

Last but not the least my sincere thanks to all the faculty members

of “AIMS” and my Sr, Sales executive and Team members for

providing their help and advice whenever it was needed.

EXECUTIVE SUMMARY

Conceptually the mechanism of stock market is very simple. People

who are exposed to the same risk come together and agree that if anyone of

the person suffers a loss the other will share the loss and make good to the

person who lost.

The initial part of the project focuses on the sales of types of the

products of the company, and also focuses on the acquisition of the

customer. The job profile is to create customer, making good relationship

with them to have their references and motivating them to trade for the

company benefit and their profit.

It also enlightens the readers about the Sharekhan strategies to

acquire the customer base. Further the project tells us about the profile of

the company (SHARE KHAN). It provides knowledge to the readers about the

company’s history, mission, customer base and about the company in detail.

and management of the company. Also it gives special emphasis on the

selling of products and management of the company. Also it gives special

emphasis on the selling of products.

The next chapter is devoted to study the comparative analysis of the

competitors and the SWOT analysis, which tells about the Sharekhan edge

over its competitors. This project leads us towards the job descriptions and

difficulties faced by me.

The next part of the project throws light upon my findings and analysis

about the company and the suggestions for the company for better

performance.

During this project I have been given the responsibility of creating customer

bringing HNI customer, handling team, generating leads.

CHAPTER 1.

INTRODUCTION

INTRODUCTION OF THE TOPIC

The topic is to study the consumer preference towards

investment in stock market.

DEMAT A/C is a pool of various scripts and securities, where as

online trading A/C is a tool of purchasing/ selling of shares or

scripts online. These scripts are then transferred to DP i.e.

Depository account after three days.

This topic includes the practical experience of selling company

product that is followed by studying the consumer preference or

interest towards share market. This is a market, which is

uncertain some time it gives huge profit and also vice versa; it

depends up on the investment customer made. This is a better

option to have better returns on the investments then investing in

banks, mutual fund or bonds et. But risk is high in this case.

This product offers customer two type of investment option

INTRADAY and DELIVERY both has there own benefits and

limitation but a better way to have more returns on investment.

Intraday means investing in share market for a day i.e.

purchasing and selling of the share in one day. Delivery is

purchasing share and selling those shares next day. The charges

that company charge in terms of brokerage is different in both the

cases.

OBJECTIVE OF THE STUDY

i) Main Objective

The main objective is selling of the DMAT Account cum Online

Trading Account.

ii) Specific Objective

1) Creating customer;

2) Marketing of the product;

3) Creating relationship with the customer to have there sources;

4) Motivating customer for trading;

JOB DISCRIPTION

The company placed me as a Summer Trainee. I have been handling the

Following responsibilities:

My job profile is to sale of product of the organization.

My job profile is to coordinate the team and also help them to sale the

product and also help them in field.

My job profile is to generate the lead by cold calling.

My job profile is to understand customers’ needs and advising them to make

a portfolio as per their investment.

My job profile is to do sales promotion through e-mails, canopies, making

cold calling, distributing pamphlets and etc.

My job profile is to convince customer for investment in Commodity.

AREA ASSIGNED

I covered areas like Delhi, Gurgaon, Ghaziabad, Faridabad and NCR.

TARGET ASSIGNED

To sell 18 accounts per month.

TARGET MARKET

Different properties dealers.

Charted accountants.

Lawyers

Travel agencies

Transport business

House wives

Businessmen

Corporate employees etc.

DAY TO DAY JOB EXPERIENCE

Reporting time: 9.30 AM

Fixing appointment with clients.

Visit clients place.

Demonstrate the product on Internet to the client.

Completing the formalities like filling the application form and documentation.

Cold calling.

CHAPTER 2.

COMPANY PROFILE

ABOUT THE COMPANY

SHAREKHAN RETAIL BROKING

• Among the top 3 branded retail service providers (Rs 650 crs avg. daily

volume- Apr Dec’04

• No. 1 player in online business

• Largest network of branded broking outlets in the country servicing 7,00,000

clients.

MANAGEMENT TEAM

The company has an eighty years experience in brokering business it was earlier known as SSKI

Group. The owner of the company is Mr. Dinesh Murikya.

Sharekhan is one of the leading retail brokerage firms in the country. It is the retail broking arm

of the Mumbai-based SSKI Group, which has over eight decades of experience in the stock

broking business. Sharekhan offers its customers a wide range of equity related services

including trade execution on BSE, NSE, Derivatives, depository services, online trading,

investment advice etc. The firm’s online trading and investment site-www.Sharekhan.com-was

launched on Feb 8, 2000. The site gives access to superior content and transaction facility to

retail customers across the country. Known for its jargon-free, investor friendly language and

high quality research, the site has a registered base of over 4 lakh customers. The number of

trading members currently stands at over 3 Lacs. While online trading currently accounts for just

over 1 per cent of the daily trading in stocks in India, Sharekhan alone accounts for 22 per cent

of the volumes traded online.

The content-rich and research oriented portal has stood out among its contemporaries because of

its steadfast dedication to offering customers best-of-breed technology and superior market

information.

The firm’s online trading and investment site-www.Sharekhan.com-was launched on Feb 8,

2000. The site gives access to superior content and transaction facility to retail customers across

the country. Known for its jargon-free, investor friendly language and high quality research, the

site has a registered base of over 4 lakh customers. The number of trading members currently

stands at over 3 Lacs. While online trading currently accounts for just over 1 per cent of the daily

trading in stocks in India, Sharekhan alone accounts for 22 per cent of the volumes traded online.

The content-rich and research oriented portal has stood out among its contemporaries because of

its steadfast dedication to offering customers best-of-breed technology and superior market

information. The objective has been to let customers make informed decisions and to simplify

the process of investing in stocks.

On April 17, 2002 Sharekhan launched SpeedTrade, a net-based executable application that

emulates the broker terminals along with host of other information relevant to the Day Traders.

This was for the first time that a net-based trading station of this caliber was offered to the

traders. In the last six months SpeedTrade has become a de facto standard for the Day Trading

community over the net.

Sharekhan’s ground network includes over 250 centres in 123 cities in India, of which 20 are

fully-owned branches.

Sharekhan has always believed in investing in technology to build its business. The company has

used some of the best-known names in the IT industry, like Sun Microsystems, Oracle,

Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India

Ltd, Spider Software Pvt Ltd. to build its trading engine and content. The Morakhia family holds

a majority stake in the company. HSBC, Intel & Carlyle are the other investors.

With a legacy of more than 80 years in the stock markets, the SSKI group ventured into

institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading

players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of

From sharekhan.com to India’s largest chain of branded retail share

Shops

250 branded

share shops

across 110 cities in

India

the market in each of these segments. SSKI’s institutional broking arm accounts for 7% of the

market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional

portfolio investment in the country. It has 60 institutional clients spread over India, Far East, UK

and US. Foreign Institutional Investors generate about 65% of the organization’s revenue, with a

daily turnover of over US$ 2 million. The Corporate Finance section has a list of very prestigious

clients and has many ‘firsts’ to its credit, in terms of the size of deal, sector tapped etc. The group

has placed over US$ 1 billion in private equity deals. Some of the clients include BPL Cellular

Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shopper’s Stop.\

Sharekhan Business

1 Brokering business

2 White feathering house production

Vision

To be the best retail brokering Brand in the retail business of stock market.

Mission

To educate and empower the individual investor to make better investment decisions

through quality advice and superior service.

Stock Exchange Mumbai

Sharekhan is the retail broking arm of SSKI, an organization with more than eight decades of

trust & credibility in the stock market.

• Amongst pioneers of investment research in the Indian market

• In 1984 ventured into Institutional Broking & Corporate Finance.

• Leading domestic player in Indian institutional business

• Over US$ 5 billion of private equity deals

SSKI Securities Pvt. Ltd.

Morakhia Family & Associates100%

Owns 56% of

SSKI INVESTOR SERVICES PVT. LTD.

Retail broking arm of the groupShareholding pattern:

55.5% Morakhia family (promoters) 18.5% HSBC Private Equity India Fund Ltd

18.5% First Carlyle Ventures, Mauritius7.5% Intel Pacific Inc.

Owns 50.5% of

SSKI CORPORATE FINANCE PVT. LTD.Investment Banking arm of the group

Shareholding pattern:50.5% SSKI Securities Pvt. Ltd.

49.5 % Morakhia family

SSKI Group Companies

• SSKI Investor Services Ltd (Sharekhan)

• S.S. Kantilal Ishwarlal Securities

• SSKI Corporate Finance

• Idream Productions

SSKI – Corporate Structure

LITERATURE REVIEWGENERAL INTRODUCTION

DP (Depository Participants)

As an investor you open a securities account with a DP. DPs are attached to the depositories very

much the same way as commercial banks are attached to RBI. All interactions including account

opening, dematerialization, transactions, pledge etc are done through the DP.

Reasons to choose DP

You can select your DP to open a demat account just like you select a bank for opening a savings

account. Some of the important factors for selection of a DP can be:

Convenience: proximity to the office/residence, business hours.

Comfort: reputation of the DP, past association, range of services etc. Find out if the DP is in a

position to give the specific service you may need.

Cost: the service charges levied by DP and the service standard.

Dematerialization

The dematerialization system is an alternative to the physical existence of securities. In this system

securities are converted into the electronic form and deposited in a depository account in the

investors name.

In order to dematerialize certificates, an investor will have to first open an account with a DP and

then request for the dematerialization of certificates by filling up a Dematerialization Request

Form (DRF), which is available with the DP, and submitting the same along with the physical

certificates. The investor has to ensure that before the certificates are handed over to the DP for

demat, they are defaced by marking "Surrendered for Dematerialization" on the face of the

certificates.

Procedure for selling dematerialized securities

The procedure for selling dematerialized securities in stock exchanges is similar to the procedure

for selling physical securities. Instead of delivering physical securities to the broker, you instruct

your DP to debit your account with the number of securities sold by you and credit your broker's

clearing account. This delivery instruction has to be given to your DP using the delivery

instruction booklet received from the DP at the time of opening the account. The procedure for

selling securities is given here below:

Investor sells securities in any of the stock exchanges linked to NSDL through a broker.

Investor gives instruction to DP to debit his account and credit the broker's (clearing

member pool) account.

Before the pay-in day, investor's broker gives instruction to his DP for delivery to

clearing corporation.

The broker receives payment from the stock exchange (clearing corporation).

The investor receives payment from the broker for the sale in the same manner payment

is received for a sale in the physical mode.

NSDL

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

based settlement of trades caused substantial problems like bad delivery and delayed transfer of

title till recently. The enactment of Depositories Act in August 1996 paved the way for

establishment of NSDL, the first depository in India. This depository promoted by institutions of

national stature responsible for economic development of the country has since established a

national infrastructure of international standard that handles most of the trading and settlement in

dematerialized form in Indian capital market. Using innovative and flexible technology systems,

NSDL works to support the investors and brokers in the capital market of the country. NSDL

aims at ensuring the safety and soundness of Indian marketplaces by developing settlement

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

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

of the financial services industry.

In the depository system, securities are held in depository accounts, which is more or less similar

to holding funds in bank accounts. Transfer of ownership of securities is done through simple

account transfers. This method does away with all the risks and hassles normally associated with

paperwork. Consequently, the cost of transacting in a depository environment is considerably

lower as compared to transacting in certificates.

Background of Exchanges

The stock trading history in India is obscured in the mists of time. Historical

records, as and where they exist, rarely speak about business and speculative

activity except in passing. However, the origin of stock broking in the country may

go back to a time, when shares, debentures and bonds representing titles to

property were first issued on the condition of transfer from one person to another

and the earliest record of dealings in securities in India is the East India Company's

loan securities, way back in the 18th century.

The first stock exchange in India, Bombay Stock Exchange was established

in 1875 as 'The Native Share and Stockbrokers Association' and has evolved over

the years into its present status as the premier stock exchange in the country. It

may be noted that BSE is the oldest stock exchange in Asia, even older than the

Tokyo Stock Exchange, which was founded in 1878. The country's second

stock exchange was established in Ahmedabad in 1894, followed by the Calcutta

Stock Exchange (CSE). CSE can also trace its origin back to 19th century. From a

get together under a 'neem tree' way back in the 1830s, the CSE was formally

established in May 1908.

India's other major stock exchange National Stock Exchange (NSE),

promoted by leading financial institutions, was established in April 1993. Over the

years, several stock exchanges have been established in the major cities of India.

There are now 23 recognized stock exchanges — Mumbai (BSE, NSE and OTC),

Calcutta, Delhi, Chennai, Ahmedabad, Bangalore, Bhubhaneswar, Coimbatore,

Guwahati, Hyderabad, Jaipur, Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune,

Rajkot, Vadodara, Indore and Meerut. Today, most of the global stock exchanges

have become highly efficient, computerized organizations. Computerized networks

also made it possible to connect to each other and have fostered the growth of an

open, global securities market.

Though Stock Broking was practiced in Calcutta as early as 1836, the members of

the broking profession had neither any code of conduct for their guidance, nor any

permanent place for congregation. The centre of their activity was near a neem

tree, where at present, stands the offices of the Chartered Bank (now known as

Standard Chartered) on Netaji Subhas Road, Calcutta. In 1905, Chartered Bank

began to construct their own building, which led brokers to shift the arena of their

operation, to the neighbourhood of the recent Allahabad Bank.

The brokers had no shelter and business was carried on in the open place. The

inconvenience of such trading, prompted brokers to organise themselves and in

May 1908, an association was formed under the name and style of the Calcutta

Stock Exchange Association at 2, China Bazar Street.

At the time of incorporation in 1908, the Stock Exchange had 150 members. Today

the total membership has risen to more than 900, which contains several corporate

and institutional members. The number of companies listed on the Exchange is

more than 4800. The Annual turnover of the Exchange in 2004-05 was to the tune

of around Rs, 12, 00,000 crores. The Calcutta Stock Exchange has been granted

permanent recognition by the Central Government with effect from April 14, 1980

under the relevant provisions of the Securities Contracts (Regulation) Act, 1956,

with a view to render useful service to investors.

In December 1993, SEBI directed the stock exchanges to discontinue the

traditional system of carry forward of transactions (badla). Subsequently, it

proposed an alternative system in March 1994, but no agreement could be reached

on implementing this system. In February 1995, SEBI set up the G. S. Patel

Committee (GSPC) to review the system of carry forward transactions. The GSPC

submitted its report in March 1995. SEBI adopted the system recommended by the

GSPC with some modifications in its decisions of July 27, 1995 and October 5,

1995.

This Revised Carry Forward System (RCFS) was implemented in the BSE in

January 1996, but the other exchanges in which the traditional carry forward

system had been prevalent before December 1993 did not come forward to adopt

the RCFS. A year after the implementation of RCFS, the President of the BSE

wrote to SEBI in January 1997 requesting a relaxation of certain aspects of the

RCFS to make it more practical and efficient. In its meeting of March 27, 1997,

SEBI reviewed the entire sequence of developments relating to the RCFS and

specifically noted that while introducing the RCFS in July 1995, SEBI had decided

that "the implementation of the revised carry forward system would be reviewed

periodically by the Board, the first review being after three months".

BOMBAY STOCK EXCHANGE

Background: The BSE Sensitive Index (1978-79=100) has, to a considerable

extent, been serving the purpose of quantifying the price movements as also

reflecting the sensitivity of the market in an effective manner.

The number of companies listed on the Bombay Stock Exchange has registered a

phenomenal increase from 992 in the year 1980 to about 4800 companies by the

end of july 2005 and their combined market capitalization rose from Rs. 5,421

crores to around Rs. 18, 00,000crores at end of july 2005.

These factors necessitated compilation of a new broad-based index series reflecting

the present market trends in a more effective manner and providing a better

representation of the increased equity stocks, market capitalization as also the

newly emerged industry groups. Towards this end, the Exchange constructed and

launched on 27th May 1994, two index series viz. the BSE-200 and the DOLLEX.

Coverage: The equity shares of 200 selected companies from the specified and

non-specified lists of this Exchange have been considered for inclusion in the

sample for `BSE-200'. The selection of companies has primarily been done on the

basis of current market capitalization of the listed scrips on the exchange. Besides

market capitalization, the market activity of the companies as reflected by the

volumes of turnover and certain fundamental factors were considered for the final

selection of the 200 companies.

Choice of Base Year: The financial year 1989-90 has been chosen as the base year

for the price stability exhibited during that year and due to its proximity to the

current period.

NATIONAL STOCK EXCHANGE

The 13-year-old National Stock Exchange (NSE) has outshined the 130-year-old

Bombay Stock Exchange (BSE) in terms of turnover and volumes. The BSE

has lost its market share in these segments from 36 per cent to 31 per cent in the

last three years.

While, the turnover in BSE stood at around Rs 2,950 crore as on August 17, 2005,

the turnover in NSE was Rs 3,926 crore. The volumes (numbers of shares traded)

of NSE at 2.94 crore was also much higher than the volumes of BSE. The NSE has

rewritten a number of rules and upset many traditions. As the derivatives segment

has immense effect on the cash market, the movement in this segment mostly

determines the trend in the market.

Against nearly 1,400 companies listed on the NSE, the BSE has nearly 4,800 listed

companies. Despite such a huge number of listed companies, the total market

capitalisation of BSE is around Rs 20 lakh crore. On the other hand the NSE has a

total market cap of Rs 19.7 lakh crore.

The most tracked index on NSE, CNX Nifty also has more number of stocks than

the BSE Sensex. While, the Nifty represents 50 stocks, the Sensex represents only

30 stocks. The presence of more stocks on Nifty also gives a better valuation than

Sensex.

TYPES OF THE PRODUCTS

CLASSIC ACCOUNT

This account allows the client to trade through our website www.sharekhan.com and is

suitable for the retail investor who is risk-averse and hence prefers to invest in stocks or who do

not trade too frequently.

Features Classic screen serves hot

Online trading account for investing in Equity and Derivatives via www.sharekhan.com

Integration of On-line trading, Saving Bank and Demat Account.

Instant cash transfer facility against purchase & sale of shares.

Competitive transaction charges.

Instant order and trade confirmation by E-mail.

Streaming Quotes.(Cash & Derivatives)

Personalized market watch.

Single screen interface for Cash and derivatives and more.

Provision to enter price trigger and view the same online in market watch.

SPEEDTRADE

SPEEDTRADE is an internet-based software application that enables you to buy and sell in an

instant.

It is ideal for active traders and jobbers who transact frequently during day's session to capitalize

on intra-day price movement.

Features

Instant order Execution and Confirmation.

Single screen trading terminal.(NSE)

Real-time streaming quotes, tic-by-tic charts.

Customer can fast trade then the classic product

Market summary (Cost traded scrip, highest calue etc.)

Hot keys similar to brokers terminal.

Alerts and reminders.

Back-up facility to place trades on Direct Phone lines.

Customer can view 425 scripts at a time

Customer can view graphical presentation

PROCESS ON ACCOUNT OPENING

LEAD MANAGEMENT SYSTEM (LMS)/ REFERENCES

CONTACT

TELEPHONE AND PERSONAL VISIT

APPOINMENT

DEMONSTRATION

AGREE DISAGREE

DOCUMENTATION

FILLING THE FORM

SUBMISSION THE FORM

LOGIN OF THE FORM

SENDIND ACCOUNT OPNING KIT TO CUSTOMER

TRADING

NO

DOCUMENTS:

1) Photo ID Proof

2) Residence Proof (Permanent)

· Passport

· Pan Card

· Driving Licence

· Voter's ID

· MAPIN UIN Card

· Passport (valid)

· Voter's ID

· Driving Licence (valid)

· Bank Statement (latest)

· Telephone Bill (latest)

· Electricity Bill (lates)

· Ration Card

· Flat Maintanance Bill (latest)

· Insurance Policy (latest)

· Leave-Licence/Purchase Agreement

3) Residence Proof (Correspondence)

· Passport (valid)

· Voter's ID

· Driving Licence (valid)

· Bank Statement (latest)

· Telephone Bill (latest)

· Electricity Bill (lates)

· Ration Card

· Flat Maintanance Bill (latest)

· Insurance Policy (latest)

· Leave-Licence/Purchase Agreement

4) Two Photographs (Passport size)

ACCOUNT OPPENING CHARGES

1 For classic account Cheque of Rs. 750/= In Favour of M/s S.S.Kantilal Ishwarlal Securities

Pvt. Ltd. or Rs. 500/= or 350/= in case of corporate offer.

Or

1 For Speedtrade Account Cheque of Rs. 1000/= In Favour of M/s S.S.Kantilal Ishwarlal

Securities Pvt. Ltd.

ACCOUNT OPENING CHARGES COMPARISION

Charge Classic Account Speedtrade Account

Account

Opening

Rs. 750/= Rs. 1000/=

B! roakerage

Intraday-0.10%

Delevery-0.50% on

conversation with rahim

not general

Intrady-0.10%

Delevery-0.50%

* Refundable in case the brokrage is more than Rs. 500/= p.m.

** Taxes as per govt.

Depository Charges

Account Opening Charges Rs. NIL

Annual Maintenance Charges Rs. NIL first year

Rs. 300/= p.a. from second year onward

Brokerage: 0.10 % Plus Taxes for Each leg of Intra-day trade 0.50 % Plus Taxes for trades

resulting in delivery Minimum Brokerage Intra Day Per Share: 5 Paisa each leg (buy or

sell) for Intra-day Trades (For eg on a Rs 20 Scrip, brokerage @0.1% = 2 p, but there is a min

chargeable amt of 5 p).

SHARKHAN SERVICES

Dial-N-Trade

Along with enabling access for your trade online, the CLASSIC and SPEEDTRADE

ACCOUNT also gives you our Dial-n-trade services. With this service, all you have to do is dial

our dedicated phone lines 1-800-22-7500.

IPO ON-Line

Can apply all the forthcoming IPO online hasselfree.

Research tips

Company provide 4-6 e-mails to there customers per day

Online trade in shares

Sharekhan customers can online trade through there computers, through Internet during the

market timings

Online fund transfer

We have tie up with seven banks for online fund transferring i.e. HDFC, IDBI, CITI, UBI, OBC,

INDUSIND and UTI bank for online money transfer.

Research Based Investment Advice

Investment and Trading Services

Training and Seminars

Technology Based Investment Tools

Integrated Demat Facility

COUSTOMRE CAN TRADE IN

Equities, Derivative, Commodities

CLOSURE OF ACCOUNT

1. CLOSURE ON CLIENT’S REQUEST

A DP can close a depository account on receipt of an application in the prescribed format. The

application should be made by the account holder or by all the joint-holders. An account can be

closed only when there is no balance in the account. In case there is any balance in the account

sought to be closed, the following steps are necessary.

(a) Re-materialization of all securities standing to the credit of the account at the time of making

the application for closure; or

(b) Transferring the balance to the credit of another account opened by the same account

holder(s) either with the same participant or with a different participant. Before closing the

account the DP should ensure that all pending transactions have been settled. The request for

closure should be processed only after ensuring that there is unbalance lying in the account.

2. CONSOLIDATION OF ACCOUNT

Some clients could have opened multiple accounts to dematerialize their shares held in multiple

combination and sequence of names. However, they may not need so many accounts after they

have dematerialized their shares and may want to bring all their share holdings into one or fewer

accounts. This can be achieved by using normal off market transfer instruction.

3.CLOSURE BY DP

The DP may also initiate closure of a client's account if the client has defaulted in performing its

obligations laid out in the client-participant agreement. The participant should give sufficient

notice to the client before initiating closure of his account. The notice should clearly state the

reasons for closure of account. The process of closing account in such a case is the same that of

client-initiated closure.

CLOSURE /SHIFTING OF CLEARING ACCOUNT

A clearing member may transfer its clearing account from one DP to another DP. For this,

simultaneously applications have to be made for closure of account to the earlier DP and for

opening of new clearing member account to the new DP. On receipt of the application, the new

DP forwards the application to the depository for approval and allotment of a new CM-BP-ID.

Once the new CM-BP-ID is allotted, the new DP opens a

New clearing account and intimates the depository about the new client-ID. On receipt of

intimation from the new participant, the depository advises the old DP to close the account. The

old DP then closes the account and intimates the clearing member. All payout of securities,

subsequent to closure of old clearing account, take place in the new account.

CAPTER 3

REARSEARCH METHODOLOGY

REAEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. In it we study the various

steps that are generally adopted by a researcher in studying his research problem along with logic

behind him. Why a research study has been undertaken, how a research problem has been

defined, in what way and why the hypothesis has been formulated, what data have been collected

and what particular method has been adopted, why particular technique of analyzing data has

been used and a host of similar other questions are usually answered when we talk of research

methodology concerning a research problem or study.

RESEARCH DESIGN:

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

in a manner and aims to combine relevance to the research purpose with economy in procedure.

In fact the research design is the conceptual structure within which research I conducted.

Research design is needed because it facilitates the smooth sailing of the various research

operations thereby making research as efficient as possible yielding maximum information with

minimal expenditure of effort, time and money.

I have adopted descriptive and conclusive research design. Descriptive research is those studies,

which are concerned with describing the characteristics of a particular individual or a group.

Since the aim is to obtain the accurate information about the customer in terms of his interest

towards investment in stock sector. I have used the techniques of questioning customer in order

to know their consumer behavior, their interests, their needs and etc.

It is very important for the sales executive to study the mind of the customer so that the personal

visit would not be a waste of time, money and efforts.

DATA SOURCES:

The researcher can gather primary data, secondary data or both. Secondary data

are data that were collected for another purpose and already exist somewhere. Primary data are

data specially gathered for a specific purpose or for a specific research project. When the needed

data do not exist or are outdated, inaccurate, incomplete, or unreliable, the researcher will have

to collect primary data. Most marketing research projects involve some primary data collection.

PRIMARY DATA:

I have collected primary data through personal references;

LMS i.e. Leads management system of the company;

Customer references;

SECONDARY DATA:

The main source of information for the project was

Weakly magazine;

Telephone directory

Used leads of the company;

Leads of the other company; i.e. telephone list for tele calling;

CONTACT METHOD :

The marketing researchers have four choices to contact the respondents:

Mail,

Telephone,

Personal and

Online. I chose the above techniques to reach to the customer in a most

convenient method.

Please put a tick mark against the applicable option:

Questionnaire Response

(Tick the appropriate option)

Do you invest in share market? Yes _________ No _________

How aware are you about investing in shares? Well aware ____________

Basic awareness ___________

Not aware __________

In case you are not aware, but interested, are you willing to Yes _________ No _________

Attend the Sharekhan “First Step” program?

In case you are an investor already, what type of trading are Online ___________

You involved in? Offline ___________

Daily ___________

2 to 3 times week __________

How frequently do you trade? Once a week __________

2 to 3 times month __________

No set pattern of trading ______

Sharkhan _____________

Indibools ______________

ICICI Direct ____________

Whom are you registered with? India Infoline ___________

Kotak _____________

Subbroker of ___________

Offline (Please specify) :

Risk Factor ____________

Previous bad experience ________

In case you do not invest in shares, what is your perceived No Knowledge ____________

probles? Time Constraints __________

Other (Pls seecify):

How much can you trade in one transaction?

Any reference of other willing to invest in the share market?

For Further Assistance, Kindly provide your following details :-

Name ______________________________ Contact No . : _______________________

E-mail ID: _______________________________________________________________

Chakresh kumar singh

cM-43, Gk1, New Delhi. Mob No. : 9718202011

ansh.000@rediffmail.com

LIMITATIONS

Lack of awareness of Sharekhan and stock market:

Since the area is not known before it takes lot of time in convincing people to start investing

in shares primarily in IPO’s.

Some people are comfortable with traditional system:

As people are doing trading from there respective brokers, they are quite comfortable to trade

via physical form of paper, they want to trade off line, i.e. through telephone or etc.

Lack of Techno Savvy people and poor internet penetration:

Since most of the people are quite experienced and also they are not techno savvy. Also

Internet penetration is poor in India.

Some respondents are unwilling to talk:

Some respondents either do not have time or willing does not respond, as they are quite

annoyed with the phone call.

Inaccurate Leads:

Sometimes leads are provided which had error in it, which varies from only 5-digit phone

number to wrong phone number, some people have registered to know about their personal

quarries. They are the unsatisfied clients of the company.

Misleading concepts:

Some people think that as all the shares are in electronic form and they don’t have any

physical proof. Sometimes this leads to a great misconception of the entire process.

CHAPTER 4.

MARKETING STRATEGIES OF SHAREKHAN

Marketing strategy?

A strategy that focuses on developing a unique long-run competitive position in the

market by assessing consumer needs and the firm's potential for gaining a competitive

advantage.

A business’ approach to marketing its products/ services expresses in broad terms, which

forms the basis for developing a marketing plan.

Marketing starts with market research, in which needs and attitudes and competitors'

products are assessed, and continues through into advertising, promotion, distribution,

and, where applicable, customer servicing and repair, packaging, and sales and

distribution.

The broad marketing thinking that will enable an organization to develop its products and

marketing mixes in the right direction, consistent with overall corporate objectives.

MARKETING STRATEGIES OF THE COMPANY

Tele Calling: -

The company uses the tele calling/ phone calling to reach the

customer, which are interested. This is the most important technique to save time and

giving demo of the companies product through making call in order to know the customer

interest towards the product. This is the strategy with which one can motivate customer to

go for the product and etc.

LMS:

It is leads management system which means leads are generated by the

customer who want to purchase the product of the company. Company provide facility to

the customer on online to fill the registration form through which the companies

executives can provide more information to the customer.

Yellow Pages:

Yellow pages are used to gather data for making calls so that customer

who did not fine time and are unaware of the product can know about the product.

Customers are given freedom to ask question related to the products this is the technique

used to increase the awareness of the company.

Canopy’s:

This is the most important technique used by sharekhan securities to market its product in

different areas of the city, company put their canopies and customer who are willing to

know about the product come forward and provide best of their knowledge. Besides this

companies executives ask customer to fill the questionnair that tells the company about

the levels of brand awareness. It also increases the product awareness because it is

generally put at the crowdies places like near main markets, cinema s, hotels, ATM or etc

where people come in good numbers.

Direct Marketing

Sharekhan executive’s reaches to the does of the customer by fixing

appointments with the interested customer, they describe the details of the product.

Executive give demonstration of the products so that customer can understand better.

Advertising:

Advertising is the most important tool of increasing awareness of the

product and this is the most widely used technique by the company to tell about the new

features and new lunch by giving briefing of the product.

Sharekhan use banners, distribution of pamphlets, and advertisement in newspapers,

magazines.

References:

Sharekhan strategy is to satisfy the customer in terms of their need by

providing them timely services and knowledge about the trade in equities, mutual funs by

giving tips for investment advises through e-mails or toll free calls for this purpose

customers are provided relationship manager who give investment advise and also make

transaction on their behalf on demand. B satisfying customer executives ask their

references that not only increase the awareness but also increase the good will of the

company.

Competitiveness:

The company is innovative and uses the latest technology to

improve the product to fulfill the demands of the customers. Sharekhan make it easy for

the customer to make online transaction of shares. The company is competitive in terms

of the product price and facilities it offers to the customer.

Internet:

Company provides detailed information about the products on Internet so that

customer can know about the product easily and completely.

UNIQUE OBJECTIVE OF THE COMPANY

• 200000+ retail customers being serviced through centralized call centre / web solution

• 60 branches, semi branches servicing affluent/aggressive traders through highly skilled

financial advisors

• 250 independent investment managers/franchisees servicing 50000 highly valued clients

• Strong advisory role through Fundamental & technical research

• New initiatives - Portfolio Management Services & Commodities trading.

• Dealing in mutual funds.

Different competitors

5paisa.com

Company Background

Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-broking was started under the brand name of 5 paisa.com. Apart from offering online trading in stock market the company offers mutual funds online.It also acts as a distributor of various financial services i.e GOI securities, Company Fixed Deposits, Insurance.Limited ground network, present in 20 Cities.

Online Account Types•Investor Terminal : Investors / Students •Trader Terminal : Day Traders / HNI’s

PRICING FOR RETAIL CLIENTS

Investor Terminal

•Account Opening: Rs 500•Demat 1st Yr: Rs 250•Initial Margin: Rs 2500(Compulsory)•Min Margin Retainable: Rs 1000•Brokerage:

Trading 0.10% each side + STDelivery 0.50% each side + ST

PRICING FOR HNI CLIENTS

Trader Terminal

•Account Opening: Rs 500•Demat 1st Yr: Rs 250•Initial Margin: Rs 5000(Compulsory)•Min Margin Retainable: Rs 1000•Brokerage:

Trading 0.10% each side + ST Delivery 0.50% each side + ST(Negotiable to 0.05% each side & 0.25%)

•Account Access ChargesMonthly Rs 800, adjustable against BrokerageYearly Rs 8000, adjustable against brokerage

Deal Clinchers v/s 5 Paisa

•Downtime

Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency downtime between 3 – 3:30 p.m due to server load (as their T.T is feature heavy compared to Speetrade charting)

•Manual Accounting

The 5 paisa accounting system is manual, Online fund transfer through bank is not credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit released for shares sold under BTST is manual Delay in receiving pay-out of clear funds from trading to Bank Account

•Min Account Balance

Concept of Min Rs 1,000 to be maintained in form of cash / securities to keep account active. This can be withdrawn only on closure of account.

Kotakstreet

Company Background

Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs

Online Account Types

•Twin Advantage / Green Channel: 2 DP’s, Limit against shares •Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction•High Trader: 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

PRICING OF KOTAK

•Account Opening: Rs 500•Demat: Rs 22.5 p.m•Initial Margin: Rs 5000(Compulsory)•Min Margin Retainable: Rs 1000•Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers (on 0.25% & 0.40%) have been moved to the slab wise structure.

Deal Clinchers v/s Kotakstreet

•Rigid Account Opening TermsNo Flexibility of A/c opening charges (Rs 500) + Compulsory margin

Rs 5000/- Account opening free with Rs 10,000 Margin OR competitor Contract Note.

•No Customization of commercial TermsNo Flexibility in Leverage – Dependent on Type of Account ( 4 to 6

times only) No flexibility in Brokerage, driven by slab structure

•Many Other ChargesRs 22.5 p.m towards DP AMC chargesDP incoming charges extra, 0.02%

Rs 1,000 as retainable Margin to keep account activeRs 25 per call after 20 calls for the month

•Restricted Access to Terminal like productKEAT Desktop restricted distribution on payment of Rs 500, Non

refundable

INDIABULLS

Company Background

India Bulls is a retail financial services company present in 70 locations covering 62 cities. It offers a full range of financial services and products ranging from Equities to Insurance. 450 + Relationship Managers who act as personal financial advisors

Online Account Type

•Signature Account: Plain Vanilla Account with focus on Equity Analysis. The equity analysis is a paid service even for A/c holders•Power Indiabulls: Account with sophisticated trading tools, low commissions and priority access to R.M

Pricing of IB Accounts

Signature Account•Account Opening: Rs 250•Demat: Rs 200 if POA is signed, No AMC for this DP •Initial Margin: NIL•Brokerage: Negotiable

Power IndiaBulls

•Account Opening: Rs 750•Demat: Rs 200 if POA is signed, No AMC for this DP •Initial Margin: NIL•Brokerage: Negotiable

Deal Clinchers v/s IndiaBulls

•POA for Clients DMATAll shares held by client trading with IB are moved to IB Pool

Account and the same is shown as a reflection in client DP account. Charges are levied to move shares from IB pool Account to client DP account

•Paid Research ServicesAccess to a research even for an IB trading account holder is charged

a min of Rs 500 a month

•Margin funding hoaxThe interest on funding starts on leveraged delivery trades from T+1

day itself @21% p.a, on a daily basis

•The role of Relationship ManagerEach RM is looked upon as a revenue generator and he gets a % on

business generated from client. This can lead to over leveraged (Interest) & high frequency (Brokerage) trading, which may not be in the best interest of the client.

ICICIDirect

Company Background

ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an affiliate of ICICI Bank Limited and the Website is owned by ICICI BankLimited

Account Types

•ICICI Direct e-invest Account: Plain Vanilla Account with focus on 3 in 1 advantage. Differentiated in services within the account

1. Cash on spot2. MarginPlus

Premium trading interface of ICICIDirect Link is given to DBC partners and HNI’s

•Account Opening: Rs 750

•Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr. These schemes are introduced 3-4 times a year.

•Demat: NIL, 1st year charges included in Account Opening Plus a facility to open additional 4 DP’s without 1st yr AMC

•Initial Margin: Nil

•Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes. Slab wise brokerage ranges from 0.75% to 0.25% depending on volume.

Deal Clinchers v/s ICICIDirect

•Poor online InterfaceSlow website interface with no real-time quotes creates dissatisfaction

among high frequency traders

•Margin trading restrictionThe margin trading system is available up to 2:45 p.m, with

outstanding net positions under margin segment automatically squared off at any time between 2:45 – 3:30 p.m. Thus no control of square off price.

•Morning Trades IssueBeing one of the websites with largest no of after hour orders which

are pushed 1st thing in the morning, creates a choking of orders to the exchange, causes delay of confirmations for new order placed during the early morning trades.

•Restriction of BTSTThe sale of shares purchased is restricted to T+1 day and is not

permitted on T+2 Day.

•No leverage for Delivery tradesDelivery is restricted to the total money allocated into the trading

account. •No flexibility on leverage on Intra-day trades

The leverage of 4 times is available for intra- day trades.

•Restriction of Bank AccountThe choice of bank is restricted to ICICI Bank.

•Higher Brokerage rates with slabsThe delivery brokerage is pegged at 0.75% and trading at 0.10% each

side, this makes is very unviable for customers dealing in large volumes. Although progressively the delivery and trading brokerage reduce as volumes go up.

S.W.O.T. Analysis of Share Khan

Strengths

It is a pioneer in online trading with a turn over of Rs.400crores and more

than 800 peoples working in the organization.

. SSKI the parent company of ShareKhan has more than eight decades of

trust and credibility in the Indian stock market. In thr Asian Money

Broker’s poll SSKI won the “India’s best broking house for 2004” award.

ShareKhan provides multi-channel access to all its customers through a

strong online presence with www.sharekhan.com, 250 share shops in 130

cities and a call-center based Dial-n-Trade facility

ShareKhan has dedicated research teams for fundamental and technical

research. which constantly track the pulse of the market and provide

timely investment advice free of cost to its clients which has a strike rate

of 70-80%.

Weakness

Localized presence due to insufficient investments for country wide

expansion.

Lack of awareness among customers because of non-aggressive

promotional strategies (print media, newspapers, etc).

Lesser emphasis on customer retention.

Focuses more on HNIs than retail investors which results in meager

market-share as compared to close competitors.

Opportunities

With the booming capital market it can successfully launch new services and

raise its client’s base.

It can easily tap the retail investors with small saving through promotional

channels like print media, electronic media, etc.

As interest on fixed deposits with post office and banks are all time low,

more and more small investors are entering into stock market.

Abolition of long term capital gain tax on shares and reduction in short term

capital gain is making stock market as hot destination for investment among

small investors.

Increasing usage of internet through broadband connectivity may boost a

whole new breed of investors for trading in securities.

Threats

Aggressive promotional strategies by close competitors may hamper Share

Khan’s acceptance by new clients.

Lack of sufficient branch-offices for speedy delivery of services.

Other players are providing margin funds to investors on easy

terms where as there is no such facility in share khan.

More and more players are venturing into this domain which can

further reduce the earnings of Share Khan.

CHAPTER -4

DATA ANALYSIS

Market Research Analysis

Interpretation: This shows that although the mutual funds

market is on the rise yet, the most favored investment continues

to be in the Share Market. So, with a more transparent system,

investment in the Stock Market can definitely be increased.

Interpretation: With the increase in cyber education, the

awareness towards online share trading has increased by leaps

Awareness of online share trad-ing

Yes -- 91%

No-- 9%

Preference of Investment

Only Shares-- 75 %

Mutual Funds-- 16%

Bonds--7%

Derivatives--2%

and bounds. This awareness is expected to increase further with

the increase in Internet education.

Interpretation: This pie chart shows that Sharekhan has a

reasonable amount of Brand awareness in terms of a premier

Retail stock broking company. The company to increase its

market share over its competitors should further leverage this

brand image.

.

Awareness of Sharekhan as a Brand

Yes-- 63%

No-- 37%

Interpretation: Although there is sufficiently high brand equity

among the target audience yet, it is to be noted that the

customers are not aware of the facilities provided by the

company meaning thereby, that, the company should concentrate

more towards promotional tools and increase its focus on

product awareness rather than brand awareness.

Interpretation: This shows that even with sufficiently high

Brand Equity, Sharekhan ranks only 3rd amongst the Demat

account providers. This is probably because of two main reasons:

Awareness of Sharekhan facil-ities

Yes--14%

No-- 86%

DEMAT account market

Sharekhan- 12%

ICICI Direct- 31%

Kotak Mahindra- 7%

India Bulls- 24%

Others-26%

1. Lack of promotion and unfocussed approach towards

Product awareness

2. Non – transparent marketing policies of the company

Hence, the company should crystallize its products and should

indulge in aggressive marketing and promotion.

Interpretation: This

pie chart

accentuates the fact that Strategic marketing, today, has gone

beyond only meeting Sales targets and generating profit

volumes. It shows that all the competitors are striving hard not

only to woo the customers but also to make them Brand loyal by

generating customer satisfaction.

Satisfaction level among Customers with current bro-

ker

Yes - 92% No- 8%

Interpretation: In spite of the huge returns that the share

market promises, we see that there is still a dearth

of active traders and investors. This is because of the non –

transparent structure of the Indian share market and the

skepticism of the target audience that is generated by the

volatility of the stock market. It requires efficient bureaucratic

intervention on the part of the Government.

Interpretation:

This shows that people invest only upto 10% of their earnings in

the stock market, again reiterating the volatile and non-

transparent structure of the Indian stock market. Hence,

Frequency of Trading

Daily- 9%

Weekly- 27%

Monthly-53%

Yearly-11%

Percentage of earnings invested in

Share trading

Upto 10%--71%

Upto 25%--19%

Upto 50%-- 7%

Above 50%--3%

effective and efficient steps should be undertaken to woo the

customers to invest more in the lucrative stock market.

Conclusion

In spite of these optimistic numbers, online trading in India is at a very nascent

stage (about 5-8 percent of total traded volumes) compared to countries like South

Korea (60 percent), US (40 percent) and UK (20 percent). Online trading in the

year 2000-2001 accounted for only Rs 50,170 crore out of total traded volume of

Rs 25,08,445 crore.

There are currently close to 50 online brokerages in India with ICICIDirect,

KotakStreet, Sharekhan, Motilal Oswal, IndiaBulls and 5Paisa being some major

players. However, due to limited volumes, no online brokerage is currently making

money and a shakeout is imminent in the near future. The going is expected to get

tougher with the advent of capital account convertibility. On an average, Rs 40

crore per day (Rs 1,000 crore per month) is likely to be the threshold breakeven for

online brokerages. There is scope for multiple players as the entire segment is in a

growth stage.

While there are many factors that need to be understood to justify this assertion,

one simple fact is worthy of note. The average age of the Indian Internet user as

cited by a recent IDC survey is 27 years. The average age of the head (and

financial decision taker) of the Indian equity-investor household, as revealed by the

SEBI-NCAER study of Indian investors in 2000 is 45 years. The older,

experienced equity investor is not online today and the fact that older, mature

investors are not ‘tech-positive’ and hence unlikely to move to online trading is a

major barrier to the growth of e-broking in India.

Here, the numbers of banks with a strong online presence are very few - again,

dominated by new private banks and foreign banks. Both have lesser reach owing

to a smaller network in the country. The relative inability of large public-sector

banks to offer-facilities for Internet banking is a barrier in this regard. Besides,

Internet penetration in India is still very low and concerns about security also tend

to predominate. In markets like the US, online brokerages are advertised very

heavily. Online trading in India has so far not seen similar levels of aggressive

advertising, with the exception of ICICI Direct and India bulls. Besides, only

scripts that have been compulsorily dematerialized can be traded on the net here.

Brand building, assurances of security, developing multiple delivery channels with

anytime telephonic grievance redressed options is some directions, which may be

of use for the immediate future. Online trading firms can also market themselves

aggressively to students who are entering the professional arena, ensuring that their

entry into equity happens online. One of the major issues governing trading is the

prevailing uncertainty in the market.

Hence, not withstanding the current sentiment in the market, potential for online

trading is still immense in India. With a more transparent system, increased

awareness, and a sustained bullish market we would surely be heading to become

the largest online stock trading country by the turn of the next decade.

Chapter-5

RECOMMENDATIONS

RECOMMENDATIONS

We suggest following measures, which Share Khan could take so as to take on

heavy competition from India bulls and 5 Paisa

1. To identify regions where promotions are required. Share Khan lacks visibility

in northern region where as it is a well known name in western region. Even

then, its promotional campaign focuses on western region where as northern

region is still waiting for promotional campaigns.

2. Try to reduce cost, so that benefits can be passed on to customers. Senior

managers at Share Khan keep on telling that it is difficult to reduce cost,

because of services we provide. But the fact is, India being a price sensitive

market, people at times go for monetary benefits rather than for long term non-

monetary benefits.

3. If charges can’t be reduced because of costs involved, make the services

customized, so that services are provided to only those customers who are

willing to pay the price for services they are getting and let the other customers

enjoy costs benefits without getting services.

4. Concept of margin funding should be introduced, as more and more people are

asking for it.

5. Share Khan should contact with their clients regularly for knowing the problems faced by them. This will help Share Khan in providing best services to customers. This will result in additional customer base by getting further references from satisfied clients.

6. To launch slab wise brokerage structure as Share Khan has fixed brokerage structure which can not be negotiated. But other players in the market offer launch slab wise brokerage structure which motivate customers to increase their volumes. That’s why heavy investors do not open their account with Share Khan

BIBLIOGRAPHY

Books and Newspapers:

The Economic Times, Business Standard, Business line

Securities Market (Basic) Module :--NCFM

Economic Times.

Training Kit Provided by the Sharekhan.

Indian financial system by M.Y KHAN

NSDL Depository operations module :--NCFM

URLs:

www.indiainfoline.com

www.economics times.com

http://www.investopedia.com/articles/

www. nse-india.com

www.bseindia.com

www.moneycontrol.com

www.sharekhan .com

Indian Stock Market

Overview

The Bombay stock exchanges (BES) and the National Stock Exchange of India Ltd (NSE) are

the two primary exchange in India. In addition, there are 22Regional Stock Exchanges However,

the BSE and NSE have established themselves as the two leading exchanges and account for

about 80% of the equity volume traded in India.

The average daily turnover at the exchanges has increased from Rs. 851 crore in 1997-98 to Rs.

1,284 crore in 1998-99 and further to Re. 2273 crore in 1999-2000 (April- August 1999). NSE

has around 1500 shares listed with a total market capitalization of around Rs. 921500 crore (Rs.

9215 Bln). The BSE has over 6000 stocks listed and has a market capitalization of around Rs.

968000 crore (9680 Bln). Most key stocks are traded on both the exchanges and hence the

investor could buy them on either exchange. Both exchanges have a different settlement cycle,

which allows investors to shift their positions on the bourse. The primary index of BSE is BSE

Sensex comprising 30 stocks. NSE has the S&P NSE 50 index (Nifty) which consists of fifty

stocks.

The BSE Sensex is the older and more widely followed index. Both these

indices are calculated on the basis of market capitalization and contain the

heavily traded shares from key sectors. The markets are closed on Saturdays and

Sundays. Both the exchanges have switched over from the open outcry trading

system to a fully automated computerized mode of trading known as BOLT

(BSE On Line Trading) and NEAT (National Exchange Automated Trading)

System. It facilitates more efficient processing, automatic order matching, faster

execution of trades and transparency.

The Scripts traded on the BSE have been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’ and ‘Z’ groups.

The ‘A’ group shares represent those, which are in the carry forward system (Badla). The ‘F’

group represents the debt market (fixed income securities) segment. The ‘Z’ group scripts are the

blacklisted companies. The ‘C’ group covers the odd lot secutities in ‘A’, ‘B1’& ‘B2’ groups and

Rights renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories,

Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and

primary market is the Securities and Exchange Board of India (SEBI) Ltd.

About NSE

The Organization

The National Stock Exchange of India Limited has genesis in the report of the High Powered

Study Group on Establishment of New Stock Exchanges, which recommended promotion of a

National Stock Exchange by financial institutions (FIs) to provide access to investors from all

across the country on an equal footing. Based on the recommendations, NSE was promoted by

leading Financial Institutions at the behest of the Government of India and was incorporated in

November 1992 as a tax-paying company unlike other stock exchanges in the country. \

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in

April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June

1994. The Capital Market (Equities) segment commenced operations in November 1994 and

operations in Derivatives segment commenced in June 2000.

NSE Group

NSCCL

IISL NSE.IT

NSDL DotEx Intl. Ltd.

NSE Milestones

November 1992 Incorporation

April 1993 Recognition as a stock exchange

May 1993 Formulation of business plan

June 1994 Wholesale Debt Market segment goes live

November 1994 Capital Market (Equities) segment goes live

March 1995 Establishment of Investor Grievance Cell

April 1995 Establishment of NSCCL, the first Clearing Corporation

June 1995 Introduction of centralised insurance cover for all trading members

July 1995 Establishment of Investor Protection Fund

October 1995 Became largest stock exchange in the country

April 1996 Commencement of clearing and settlement by NSCCL

April 1996 Launch of S&P CNX Nifty

June 1996 Establishment of Settlement Guarantee Fund

November 1996Setting up of National Securities Depository Limited, first depository in

India, co-promoted by NSE

November 1996 Best IT Usage award by Computer Society of India

December 1996 Commencement of trading/settlement in dematerialised securities

December 1996 Dataquest award for Top IT User

December 1996 Launch of CNX Nifty Junior

February 1997 Regional clearing facility goes live

November 1997 Best IT Usage award by Computer Society of India

May 1998Promotion of joint venture, India Index Services & Products Limited

(IISL)

May 1998 Launch of NSE's Web-site: www.nse.co.in

July 1998 Launch of NSE's Certification Programme in Financial Market

August 1998 CYBER CORPORATE OF THE YEAR 1998 award

February 1999 Launch of Automated Lending and Borrowing Mechanism

April 1999 CHIP Web Award by CHIP magazine

October 1999 Setting up of NSE.IT

January 2000 Launch of NSE Research Initiative

February 2000 Commencement of Internet Trading

June 2000 Commencement of Derivatives Trading (Index Futures)

September 2000 Launch of 'Zero Coupon Yield Curve'

November 2000Launch ofBroker Plaza by Dotex International, a joint venture between

NSE.IT Ltd. and i-flex Solutions Ltd.

December 2000 Commencement of WAP trading

June 2001 Commencement of trading in Index Options

July 2001 Commencement of trading in Options on Individual Securities

November 2001 Commencement of trading in Futures on Individual Securities

December 2001 Launch of NSE VaR for Government Securities

January 2002 Launch of Exchange Traded Funds (ETFs)

May 2002NSE wins the Wharton-Infosys Business Transformation Award in the

Organization-wide Transformation category

October 2002 Launch of NSE Government Securities Index

January 2003 Commencement of trading in Retail Debt Market

June 2003 Launch of Interest Rate Futures

August 2003 Launch of Futures & options in CNXIT Index

June 2004 Launch of STP Interoperability

August 2004 Launch of NSE’s electronic interface for listed companies

NSE Mission

NSE's mission is setting the agenda for change in the securities markets in India.

The NSE was set-up with the main objectives of:

establishing a nation-wide trading facility for equities, debt instruments and

hybrids,

ensuring equal access to investors all over the country through an

appropriate communication network,

providing a fair, efficient and transparent securities market to investors using

electronic trading systems,

enabling shorter settlement cycles and book entry settlements systems, and

meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology have

become industry benchmarks and are being emulated by other market participants.

NSE is more than a mere market facilitator. It's that force which is guiding the

industry towards new horizons and greater opportunities.

NSE Logo

The logo of the NSE symbolises a single nationwide securities trading facility ensuring equal and

fair access to investors, trading members and issuers all over the country. The initials of the

Exchange viz., N, S and E have been etched on the logo and are distinctly visible. The logo

symbolises use of state of the art information technology and satellite connectivity to bring about

the change within the securities industry. The logo symbolises vibrancy and unleashing of

creative energy to constantly bring about change through innovation.

Promoters

NSE has been promoted by leading financial institutions, banks, insurance companies and other

financial intermediaries:

Industrial Development Bank of India Limited

Industrial Finance Corporation of India Limited

Life Insurance Corporation of India

State Bank of India

ICICI Bank Limited

IL & FS Trust Company Limited

Stock Holding Corporation of India Limited

SBI Capital Markets Limited

The Administrator of the Specified Undertaking of Unit Trust of India

Bank of Baroda

Canara Bank

General Insurance Corporation of India

National Insurance Company Limited

The New India Assurance Company Limited

The Oriental Insurance Company Limited

United India Insurance Company Limited

Punjab National Bank

Oriental Bank of Commerce

Corporation Bank

Indian Bank

Union Bank of India

Corporate Structure

NSE is one of the first de-mutualised stock exchanges in the country, where the ownership and

management of the Exchange is completely divorced from the right to trade on it. Though the

impetus for its establishment came from policy makers in the country, it has been set up as a

public limited company, owned by the leading institutional investors in the country.

From day one, NSE has adopted the form of a demutualised exchange - the ownership,

management and trading is in the hands of three different sets of people. NSE is owned by a set

of leading financial institutions, banks, insurance companies and other financial intermediaries

and is managed by professionals, who do not directly or indirectly trade on the Exchange. This

has completely eliminated any conflict of interest and helped NSE in aggressively pursuing

policies and practices within a public interest framework.

The NSE model however, does not preclude, but in fact accommodates involvement, support and

contribution of trading members in a variety of ways. Its Board comprises of senior executives

from promoter institutions, eminent professionals in the fields of law, economics, accountancy,

finance, taxation, etc, public representatives, nominees of SEBI and one full time executive of

the Exchange.

While the Board deals with broad policy issues, decisions relating to market operations are

delegated by the Board to various committees constituted by it. Such committees includes

representatives from trading members, professionals, the public and the management.The day-to-

day management of the Exchange is delegated to the Managing Director who is supported by a

team of professional staff.

ABOUT BSE

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The

Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the

Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making

Association of Persons (AOP) and is currently engaged in the process of converting itself into

demutualised and corporate entity. It has evolved over the years into its present status as the

premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have

obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts

(Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market for trading in securities, debt

and derivatives upholds the interests of the investors and ensures redressal of their grievances

whether against the companies or its own member-brokers. It also strives to educate and

enlighten the investors by conducting investor education programmes and making available to

them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and

regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who

are from the broking community (one third of them retire ever year by rotation), three SEBI

nominees, six public representatives and an Executive Director & Chief Executive Officer and a

Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-day

administration of the Exchange and he is assisted by the Chief Operating Officer and other

Heads of Departments.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining

to constitution of the Executive Committee of the Exchange. Accordingly, an Executive

Committee, consisting of three elected directors, three SEBI nominees or public representatives,

Executive Director & CEO and Chief Operating Officer has been constituted. The Committee

considers judicial & quasi matters in which the Governing Board has powers as an Appellate

Authority, matters regarding annulment of transactions, admission, continuance and suspension

of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other

matters relating to arbitration, fees, deposits, margins and other monies payable by the member-

brokers to the Exchange, etc.

Turnover on the Exchange

The average daily turnover of the Exchange during the financial year 2003-2004 and

2004-05 (April-March), was Rs. 1978.81 crores and Rs. 2050.26 crores respectively.

The average number of daily trades recorded during the above period was 7.98 lakhs and

9.38 lakhs respectively.

The ban on all deferral products like Borrowing & Lending of Securities Scheme (BLESS) and

Automated Lending & Borrowing Mechanism (ALBM) in the Indian capital markets by SEBI

w.e.f. July 2, 2001, abolition of account period settlements, introduction of Compulsory Rolling

Settlements in all scrips traded on the Exchanges w.e.f. December 31, 2001, etc. have adversely

impacted the liquidity in the market and consequently there is a considerable decline in the

average daily turnover at the Exchange as reflected in above statistics.

Safety of the market

One of the objectives of the Exchange is to promote and inculcate honorable and just practices of

trade in securities transactions and to discourage malpractices.

The surveillance function at the Exchange has assumed greater importance in the last few years.

The Securities and Exchange Board of India (SEBI) had directed the Stock Exchanges in August

1995 to set up a separate Surveillance Department with staff exclusively assigned to surveillance

functions. The Exchange has accordingly set up a separate Surveillance Department to keep a

close watch on price movement of scripts, detect market manipulations like price rigging, etc.,

monitor abnormal prices and volumes which are not consistent with normal trading pattern and

monitor the member-brokers' position to ensure that defaults do not occur. This Department,

which is headed by a General Manager, reports directly to the Executive Director.

The Surveillance Department monitors exposure of the members on a daily basis. It also

scrutinizes the prices and volumes of the scripts on a daily basis.

As per the guidelines issued by SEBI, the Exchanges are required to apply a daily Circuit Filter

of 20% on all the scripts except on the scripts on which derivative products are available or are

included in the indices on which derivative products are available. On these scripts Exchange has

imposed dummy circuit filters to avoid punching error by members, if any. The imposition of

circuit filters on scripts ensures that the price of the scrip cannot move upward or downward

beyond the limit set for a day.

The large variation in the prices as well as the volumes of the scripts are scrutinized and

appropriate actions are taken. The scripts which reach new high or new low and companies

which have high turnover, are watched. Also the prices and volumes in the newly listed scripts

are monitored. In case certain abnormalities are noticed, then circuit filters are reduced to make it

difficult for the price manipulators to increase or push down the prices of a scrip within a short

period of time. The Exchange imposes special margin in the scripts where it is suspected that

there is an attempt to ramp up the prices by creating artificial volumes. The Exchange also

transfers the scrip’s for trading and settlement on a trade-to-trade basis which would result into

giving/taking delivery of shares on a gross level and no intra-day/settlement netting off/squaring

off facility would be permitted. In cases where the abnormal movements continue despite the

aforesaid measures, trading in the scrip is suspended.

Detailed investigations are conducted in cases where price manipulation is suspected and

disciplinary action is taken against the members concerned.

The Exchange has developed an On-line Real Time (OLRT) Surveillance System, which has

been commissioned from July 15, 1999. Under this system, alerts are generated by the system

on-line, in real time, based on certain preset parameters like the price and volume variation in

scrips, members taking unduly large positions not commensurate with their financial position or

having concentrated position(s) in one or a few scrips, etc.

This system includes databases such as company profile, members' profile and historical

database of turnover and price movement in scrips, members' turnover, their pay-in obligations,

etc. The system generates alerts on the basis of pre-set parameters during the trading hours and

corrective action based on further investigations is taken in such cases.

Brokerage and other transaction costs

Brokerage is negotiable. The Exchange has not prescribed any minimum brokerage. The

maximum brokerage is subject to a ceiling of 2.5 percent of the contract value. However, the

average brokerage charged by the members to the clients is much lower.Typically there are

different scales of brokerages for delivery transaction, trading transaction, etc.

The Stamp Duty on transfer of securities in physical form is to be paid by the seller but in

practice it is paid by the buyer while registering the shares in his name. In case of transfer of

shares, the rate is 50 paise for every Rs.100/- or part thereof on the basis of the amount of

consideration and that for transfer of debentures the rate of stamp duty varies from State to State,

where the registered office of a Company issuing the debentures is located.

Inspection of the broker’s books

In terms of the instructions issued by the Ministry of Finance, Government of India, Stock

Exchanges are required to inspect the books of accounts of at least 10% of their active members

in a financial year. The Inspection Department of the Exchange has been entrusted with this

responsibility. Notably, every year, the number of inspections carried out by the Exchange, far

exceeds the level prescribed in this regard by the Ministry of Finance.

The Exchange has also constituted a panel of Chartered Accountants to conduct inspection of the

book and accounts of the members. The purpose of involving independent Chartered

Accountants in this work is to inspect the books of accounts of every members at least once in

every three years.

The Exchange has also prepared a detailed "Guidance Manual for inspection of member-brokers"

to assist the Chartered Accountants in the inspection of the books of accounts of members.

The purpose of the inspection is to verify whether the member has maintained the required books

of accounts as per the Securities Contracts (Regulation) Rules, 1957, whether the member has

issued contract notes in the proper format prescribed by the Exchange, whether brokerage has

been indicated separately therein, whether the member has adhered to the Rules, Regulations and

By-laws of the Exchange and guidelines issued by the Exchange and SEBI from time to time,

etc.

The findings of the inspection are conveyed to the members and follow-up action is taken based

on the responses/clarifications provided by the members. If the violations are of serious nature,

the matter is referred to the Disciplinary Action Committee of the Exchange.

The members are required to get their annual accounts audited from a Chartered Accountant and

submit an Audit Certificate as well as the Profit & Loss Account and Balance Sheet to the

Exchange. The members are also required to submit net worth certificates as at the end of March

and September every year. Filing of these documents by the members is also monitored by the

Inspection Department.

SHAREKHAN

SHAREKHAN SECURITIES one of India’s leading brokerage houses, is the retail broking arm of SSKI Securities Pvt Ltd. It is into broking for the past 80 years. Its focus is to provide equity solutions to every segment. Sharekhan has a largest ground network of 240 branded shareshops in 110 cities.Apart from Sharekhan, the SSKI group also comprises of institutional broking and corporate finance. The institutional broking division caters to domestic and foreign institutional investors, while the corporate finance division focuses on niche areas such as infrastructure, telecom and media.

SERVICES

Equity & Derivatives Trading Depository Services Online Services Commodities Trading Dial-N-trade Portfolio Management Share Shops Fundamental Research Technical Research

S e r v i c e s

Branches all over India

Online trading

redefined

SpeedTrade is a next-generation online trading product that brings the power of your broker’s

terminal to your PC. It provides on a single screen streaming quotes, online tic-by-tic charts,

instant order placement and trade confirmations for equity/ cash market. It is ideal for active

traders and jobbers who transact frequently during day trading session to capitalize on intra-day

price movements.

Unlike browser based trading applications that require moving from page to page to execute a

single transaction, SPEEDTRADE is a net-based executable application that provides everything

a trader needs on one screen, thereby, reducing the maximum time required to execute a trade by

a huge margin. SPEEDTRADE offers a tick-by-tick update on stock price movements with

market depth and intra-day chart and lets the client do his own stock/ technical analysis.

SpeedTradePlus extends the power of online trading from cash markets to futures & Options. On

a single screen, you can trade cash as well as future & option contracts. Other features include

advanced intra-day charting (Bar & Japanese Candlestick Charts), easy order placement and

instant trade confirmations in seconds, price alerts, research calls, and derivative tool-kit to help

you trade like the experts.

Power-packed features

1. Real time streaming quotes, tic-by-tic chart

2. Market summary (most traded, highest value etc.)

3. Ability to customize the terminal screen

4. Hot keys similar to BOLT & NEAT

5. Instant Order execution & confirmation

6. Reports for personal account details

7. Pre-defined detailed sector-wise script list

8. Simple order entry process

9. Alerts and remainders

10. Ability to place limit order and subsequently modify / cancel instantly

ordinary guy's ordinary dreams?

Hurdles for online share trading

1. Internet fraud

In India, we see this kind of frauds happening in different way due to nature of our society. Here

when you talk to broker's staff while buying or selling, he will usually advise you to buy share

which he has bought and plans to dump when price goes up.

We have seen enough of PUMP and DUMP even without help of internet in cases of Harshad

Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult following with Index of

10 shares called K-10).

Today lot of investor’s depending on TV channel for recommendation about stocks to sell, or

buy or hold. Channels like CNBS offer array of experts from economist to brokers to analyst.

Most of these people have vested interest in stocks they recommend and promote.

One of the most common forms of securities fraud on the Internet involves an imposter who

attempts to manipulate the price of a stock by disseminating phony press releases or information,

or creating phony websites. A recent example of this scheme is the hoax perpetrated against US

based, PairGain Technologies.

2. Volatility of India’s Stock Markets

Recent market developments have once more focused attention on the volatility that has come to

characterise India’s stock markets.

Movements in the Sensex during the two years have clearly been driven by the behaviour

of foreign institutional investors (FIIs), who were responsible for net equity purchases of as

much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a

peak level of net purchases of $3.1 billion as far back as 1996 and net investments by FIIs

of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last

two years account for the two bouts of medium-term buoyancy that the Sensex recently

displayed.

Given the presence of foreign institutional investors in Sensex companies and their active

trading behaviour, their role in determining share price movements must be considerable.

Indian stock markets are known to be narrow and shallow in the sense that there are few

companies whose shares are actively traded. Thus, although there are more than 4700

companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies,

trading in whose shares is seen as indicative of market activity. This shallowness would also

mean that the effects of FII activity would be exaggerated by the influence their behaviour

has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making

their investment decisions.

3. Rampant Speculation

The Indian stock markets are perhaps the only place in the world where you can buy shares

without having to put money on the table and sell shares you do not own. This extraordinary

situation has facilitated rampant speculation by all sorts of operators – the indigenous variety,

FIIs and even our own native financial institutions (FIs) as the massive UTI scandal of recent

years has demonstrated. So, when the stock markets were made to collapse by a record 800-plus

points on May 17 under the pretext that the Left is opposed to divestment, the profits reaped by

short sellers were astronomical and incalculable.

 

Could this situation have been avoided? As aforesaid, the answer is yes. The electronic

monitoring system in both the Bombay Stock Exchange and the bigger National Stock Exchange

automatically stopped trading for half-an-hour when the two markets respectively collapsed by

10 percentage points. Thereafter when trading resumed and the markets fell further to another

stipulated lower level, the electronic system automatically stopped all trading again for another

two hours.

 

A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist attacks

in New York City. At the end of the day the stock exchange authorities of both the New York

Stock Exchange and the heavily-weighted software exchange called NASDAQ suspended all

trading for the remainder three working days during that fateful week to safeguard investor

interests. So, advanced capitalism does know how to intervene "politically" in the markets when

fundamental interests are in danger of violation by short sellers.

Effect of technology

The growth in technology and communications has impacted every aspect of business in some

or the other form. These effects are enduring and have changed the very way in which business is

carried out.

The stock market, is one such institution whose very existence has been challenged by the

growth in information technology. IT has turned the very idea of a stock market on its head.

Technology has impacted the working of stock markets in every sense. However, a useful

starting point for this study would be the study of dematerialization, or demat as it is popularly

known as. This is simply because demat has changed the way stocks are held and traded and

therefore has effect on every other function of the market.

Dematerialization in simple terms means the conversion of shares from physical to electronic

form.

Demat, enabled by the use of technology is probably is single most important factor which has

repercussions on every aspect of the stock markets.

Demat in India started with the creation of NSDL (National stock depository limited) in 1996.

UTI, was one of the first institutions to use demat when it decided to dematerialize 50% of its

holdings in 1997. SEBI gave a boost to demat, with compulsory trading on shares in demat form

in specified scrips by institutional investors from Jan 15, 1998.

Table 1-No. of scrips under compulsory demat and value of demat shares

Timeline No. of scrips YearValue of demat

shares

March 1999 31 2000 1,14,255 Cr

March 2000 462 2001 4,00,000 Cr

October 2000 1413 2002 4,35,000 Cr

Consequently, an increasing percentage of the share trading is done in demat form.

The exhibit below shows the percentage of demat shares in the total value of shares traded at

NSE over a period of 6 years.

Table 2 -- % of trade in demat form

Timeline Percentage of trade in demat form

April 1998 2.5%

December 1999 79.3%

Since 2003 99%

Dematerialization has benefited the market and the market players in more than one way.

Demat is instrumental in –

Abolition of market lots

Introduction of rolling settlements

Enhancing liquidity

Bringing stamp duty to zero

Reducing chances of bad delivery

Increased lending by banks and other FIs

SEBI extended demat to IPOs during capital reforms in capital markets in 2002. The premise

being elimination of problems due to loss of allotment letters, share certificates etc., encouraging

shareholders to opt for demat credit of allotments, trading compulsorily in demat form with an

option of holding shares in physical form for retail investors.

BSE, the first exchange to be set up in India, started as a floor-based exchange. However, NSE,

setup as an alternative to BSE, was an electronic (computerized) exchange. With advancements

in technology, both these exchanges moved to SBTS (Screen Based Trading System) in 1997.

While NSE introduced NEAT (NSE’s Online Trading System) in May 1997, BSE introduced

BOLT (BSE’s Online Trading System) in September 1997 in Mumbai.

The outcome has phenomenal with respect to the number of trades taking place on these two

exchanges. 

Table 2 - NSE / BSE vis-à-vis other stock exchanges

NSE BSE

YearTransactions per

year ( millions)

Ranking

( largest exchanges

over the world )

Transactions per

year (millions)

Ranking

( largest exchanges

over the world )

2003 336 3 180 5

2002 233 3 148 7

2001 172 3 133 6

Further, trading in stocks has reached retail investors’ home via the Internet. In 1999-2000, SEBI

proposed Internet based trading under ORS (Order Routing System)

Trading via Internet was an instant hit, with 18 members being granted licenses in 2000-2001

and trades touching 767 Cr. during the first six months itself.

Although security concerns still exist regarding the safety of data transfer over the Internet,

companies like VERISIGN and RSA, who specialize in security algorithms and data encryption

ensure high degree of authenticity and trust in trades.

Information Flow

Any trading system disseminates data to market constituents, in other words, information is

freely available. This has two disadvantages -

It makes easier for off-exchange transactions to occur because of availability of

information.

It makes off-exchange transactions attractive due to absence of trading costs.

On the other hand rapid flow of information has also meant increased volatility in the markets. In

financial terms, volatility is:

The degree to which the price of a security, commodity, or market rises or falls within a short-

term period. An obvious reason for market volatility is technology.  This includes more timely

information dissemination, improved technology to make trades and more kinds of financial

instruments.  The faster information is disseminated, the quicker markets can react to both

negative and positive news.  Improved trading technology makes it easier to take advantage of

arbitrage opportunities, and the resulting price alignment arbitrage causes.  Finally, more kinds

of financial instruments allow investors more opportunity to move their money to more kinds of

investment positions when conditions change.

Adverse impacts of IT on stock markets

Some other interesting observations about impact of technology on stock markets –

1. The vintage capital model teaches us that technological change destroys old capital. We

have gone further and argued that major technological change—like the IT revolution—

destroys old firms. It does so by making machines, workers, and managers obsolete.

Product-market entry of new firms and new capital takes time, and their stock-market

entry takes even longer. In the meantime, the stock market declines. We have argued that

aggregate valuation can fall below the present value of dividends because capital may

"disappear" right after a major technological shift, as new capital forms in small, private

companies. Later, these companies are IPO’d, and only then does their value become a

part of stock-market capitalization.

2. Indeed, the innovation may, at first, reduce the market’s value because some firms,

usually large or old, will cling to old technologies that have lost their momentum. (a) the

market declined in the late 1960’s because it felt that the old technologies either had lost

their momentum or would give way to IT, and that (b) IT innovators boosted the stock

market’s value only in the 1980’s.

To sum up, we can say that computerization and automation are not to be avoided. Technology

has been able to make the stock markets accessible to every individual. It has also led to positive

developments in terms of reduced costs and fewer errors. But, as some experiences have

indicated, IT cannot be applied as a panacea for all problems. Regulation and knowledge

dissemination are still important. The use of technology should be preceded by a detailed study

and assessment of all other alternatives. The key to successful use to technology is the

appreciation of its constraints.

Market Research and Analysis

Preference of Investment

Only Shares-- 75 %

Mutual Funds-- 16%

Bonds--7%

Derivatives--2%

Interpretation: This shows that although the mutual funds market is on the rise yet, the most

favored investment continues to be in the Share Market. So, with a more transparent system,

investment in the Stock Market can definitely be increased.

Interpretation: With the increase in cyber education, the awareness towards online share trading

has increased by leaps and bounds. This awareness is expected to increase further with the

increase in Internet education.

Interpretation: This pie-chart shows that Sharekhan has a reasonable amount of Brand

awareness in terms of a premier Retail stock broking company. This brand image should be

further leveraged by the company to increase its market share over its competitors.

Awareness of online share trading

Yes -- 91%

No-- 9%

Awareness of Sharekhan as a Brand

Yes-- 63%

No-- 37%

Interpretation: Although there is sufficiently high brand equity among the target audience yet, it

is to be noted that the customers are not aware of the facilities provided by the company meaning

thereby, that, the company should concentrate more towards promotional tools and increase its

focus on product awareness rather than brand awareness.

Interpretation: This shows that even with sufficiently high Brand Equity, Sharekhan ranks only

3rd amongst the Demat account providers. This is probably because of two main reasons:

3. Lack of promotion and unfocussed approach towards Product awareness

Awareness of Sharekhan facilities

Yes--14%

No-- 86%

DEMAT account market

Sharekhan- 12%

ICICI Direct- 31%

Kotak Mahindra- 7%

India Bulls- 24%

Others-26%

4. Non – transparent marketing policies of the company

Hence, the company should crystallize its products and should indulge in aggressive marketing

and promotion.

Interpretation: This pie-chart accentuates the fact that Strategic marketing, today, has gone

beyond only meeting Sales targets and generating profit volumes. It shows that all the

competitors are striving hard not only to woo the customers but also to make them Brand loyal

by generating customer satisfaction.

Interpretation: Inspite of the huge returns that the share market promises, we see that there is

still a dearth of active traders and investors. This is because of the non – transparent structure of

the Indian share market and the skepticism of the target audience that is generated by the

volatility of the stock market. It requires efficient bureaucratic intervention on the part of the

Government.

Satisfaction level among Customers with current broker

Yes - 92% No- 8%

Frequency of Trading

Daily- 9%

Weekly- 27%

Monthly-53%

Yearly-11%

Interpretation: This shows that people invest only upto 10% of their earnings in the stock

market, again reiterating the volatile and non-transparent structure of the Indian stock market.

Hence, effective and efficient steps should be undertaken to encourage the customers to invest

more in the lucrative stock market.

Interpretation: The survey indicated that people ranked Sharekhan at the 3rd position as an

online stock broking company. Even after relatively low brokerages and better services being

provided in comparison to its competitors, Sharekhan is not at the top spot because of ineffective

marketing and promotional strategies. Hence, the company should indulge into aggressive

Percentage of earnings invested in Share trading

Upto 10%--71%

Upto 25%--19%

Upto 50%-- 7%

Above 50%--3%

Rating of Share trading companies

ICICI Direct-37%

India Bulls- 25%

Sharekhan-16%

Kotak Mahindra-6%

Others-16%

marketing and promotional methods and should approach this problem in a more structured

format.

In spite of these optimistic numbers, online trading in India is at a very nascent stage (about 2

percent of total traded volumes) compared to countries like South Korea (60 percent), US (40

percent) and UK (20 percent). Online trading in the year 2000-2001 accounted for only Rs

50,170 crore out of total traded volume of Rs 25,08,445 crore.

There are currently close to 50 online brokerages in India with ICICI Direct, Home Trade,

KotakStreet, Sharekhan, Motilal Oswal, IndiaBulls and 5Paisa being some major players.

However, due to limited volumes, no online brokerage is currently making money and a

shakeout is imminent in the near future. The going is expected to get tougher with the advent of

capital account convertibility. Players such as PWC have already entered the Indian market,

while others such as Schwab are expected shortly. On an average, Rs 40 crore per day (Rs 1,000

crore per month) is likely to be the threshold breakeven for online brokerages. There is scope for

multiple players as the entire segment is in a growth stage.

While there are many factors that need to be understood to justify this assertion, one simple fact

is worthy of note. The average age of the Indian Internet user as cited by a recent IDC survey is

27 years. The average age of the head (and financial decision taker) of the Indian equity-investor

household, as revealed by the SEBI-NCAER study of Indian investors in 2000 is 45 years. The

older, experienced equity investor is not online today and the fact that older, mature investors are

not ‘tech-positive’ and hence unlikely to move to online trading is a major barrier to the growth

of e-broking in India.

Here, the numbers of banks with a strong online presence are very few - again, dominated by

new private banks and foreign banks. Both have lesser reach owing to a smaller network in the

country. The relative inability of large public-sector banks to offer-facilities for Internet banking

is a barrier in this regard. Besides, Internet penetration in India is still very low and concerns

about security also tend to predominate. In markets like the US, online brokerages are advertised

very heavily. Online trading in India has so far not seen similar levels of aggressive advertising,

with the exception of ICICI Direct and Home Trade. Besides, only scripts that have been

compulsorily dematerialised can be traded on the Net here. These number nearly 600 (about

1,500 and 6,000 scripts are traded on the national stock Exchange (NSE) and the Bombay Stock

Exchange (BSE), respectively).

Brand building, assurances of security, developing multiple delivery channels with anytime

telephonic grievance redressal options is some directions which may be of use for the immediate

future. Online trading firms can also market themselves aggressively to students who are

entering the professional arena, ensuring that their entry into equity happens online. One of the

major issues governing trading is the prevailing uncertainty in the market.

Hence, notwithstanding the current sentiment in the market, potential for online trading is still

immense in India. With a more transparent system, increased awareness, and a sustained bullish

market we would surely be heading to become the largest online stock trading country by the

turn of the next decade.

Limitations

Services of competitors:

We cannot give proper comment on competitor’s services till we use it. But I try to collect as

accurate information as possible. As we all know services are intangible and we cannot predict

its quality, it is a thing to feel not to see.

No proper assurance of right information:

The main data sources are websites, telephonic information and offices visit.

The data on websites might be possible, not get updated.

The marketing person might be possible, is not through with all concepts to whom I

contacted.

Sometimes, they try to hide information.

Lack of awareness of Stock market: -- Since the area is not known before it

takes lot of time in convincing people to start investing in shares primarily in IPO’s.

Mostly people comfortable with traditional brokers: -- As people are

doing trading from there respective brokers, they are quite comfortable to trade via phone.

Lack of Techno Savvy people and poor Internet penetration: -

- Since most of the people are quite experienced and also they are not techno savy. Also

Internet penetration is poor in India.

Some respondents are unwilling to talk: -- Some respondents either do not

have time or willing does not respond, as they are quite annoyed with the phone call.

Inaccurate Leads: -- Sometimes leads are provided which had error in it which varies

from only 5 digit phone number to wrong phone number

Misleading concepts: -- Some people think that Shares are too risky

and just another name of gamble but they don’t know its not at all that risky

for long investors.

Bibliography

Books and Newspapers:

The Economic Times, Business Standard, Business line etc.

Intelligent Stock Market Investing by N. J. Yasaswy.

The Indian Securities Market by Tadashi Endo.

The Big Picture : Reflections on Our Economic Times by T.T.

Ram Mohan