A PROJECT REPORT ON

“A STUDY OF ONLINE TRADING AND STOCK BROKING” AT SHAREKHAN PVT LTD

A Project report submitted in partial fulfillment for the Award of the
Master of Business Administration (MBA) (FINANCE)
Submitted By
CHANDRASEKHAR GOUD.G Roll No. 08J81E0010
Under the Guidance of
MR.SRINIVAS
(Assistant Professor of MBA Dept)
DEPARTMENT OF BUSINESS MANAGEMENT P.INDRA REDDY MEMORIAL ENGINEEING COLLEGE (Aff
iliated to Jawaharlal Nehru Technological University)
DECLARATION
I here by declare that this project report entitled “A STUDY OF ONLINE TRADING AND
STOCK BROKING” has been prepared by me is an original work submitted to Jawaharla
l Nehru Technological University towards partial fulfillment of the requirement
for the award of Master of Business Administration. I also here by declare that
this project report has not been submitted at any time to any other university o
r institute for the award of any Degree or Diploma.
(G.CHANDRA SEKHAR GOUD) (08J81E0010)
2
CERTIFICATE
This is to certify that the project work entitled
“A STUDY OF ONLINE TRADING AND STOCK BROKING”
Has been done by G.CHANDRA SEKHAR GOUD (08J81E0010) In the partial fulfillment o
f the requirements for the award of the degree of Master of Business Administrat
ion from P.Indra Reddy Memorial Engineering College, affiliated to Jawaharlal Ne
hru Technological University is a record of bonafide work carried out by them un
der my guidance and supervision. The result embodied in this has not been submit
ted to any other university or institute for the award of any degree.
Internal Guide: Mr. SRINIVAS
MR.D.H.B.R.PRASAD
Head of the department Master of Business Administration
3
ACKNOWLEDGEMENT
I take this opportunity to express my gratitude high regards and sincere thanks
to our respected Principal Dr. R.V. Krishnaiah for providing excellent infrastru
cture. I thank Mr. D.H.B.R.Prasad Head of the Department of MBA for his constant
help and support. I express my sincere thanks to our committed faculty Mr.SRINI
VAS for his support and guidance. I have great regard for all the well wishers w
hose help is beyond acknowledgement.
(G.CHANDRA SEKHAR GOUD) (08J81E0010)
4
Chapter 1
Objectives & Methodology
5
OBJECTIVES AND METHODOLOGY
NEED FOR THE STUDY: The present study to review the online trading procedure a c
ase study of ONLINE TRADING at SHAREKHAN as the exchange has changed it’s trading
from the outcry mode to online trading on 20th February 1997, there is need to a
ssess the performance of the capital market.
6
OBJECTIVES OF THE STUDY:

It is to analyze the changes in trading after the exchange shifted from outcry t
o online trading system.

It is to study the functions of SHAREKHAN through various departments. To know t

he online screen based trading system adopted by SHAREKHAN and about its communi
cation facilities. The appropriate configuration to set the network, which would
link the SHAREKHAN to individual / members.

To know about the latest and future development in the stock exchange trading sy
stem.
7
METHODOLOGY OF THE STUDY: The data collection methods include both primary and s
econdary collection methods. Primary method: This method includes the data colle
cted from the personal interaction with authorized members of Sharekhan Securiti
es limited.
Secondary method: The secondary data collection method includes: The lecturers d
elivered by the superintendents of respective departments. The brochures and mat
erial provided by Sharekhan Securities limited. The data collected from the maga
zines of the NSE, economic times, etc. Various books relating to the investments
, capital market and other related topics.
LIMITATIONS OF THE STUDY: Despite of the training my level best, there were stil
l some limitation which I think remains there to draw fruitful conclusion. There
were some practical problem which come across and could not be properly death w
ith The advisory services being promised by the brokers would be of little use t
o investors looking for an insight into the market. As a client one will access
the NSE through a server of the online brokerage and this may involve queuing de
lays If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be a
ble to do so. If he want advice on a particular stock in his portfolio he may no
t even be able to get that.
8
Chapter 2
Company profile
9
INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:
]
10
FINANCIAL MARKET:
Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities
for buying and selling of financial claims and services. The financial markets
match the demands of investment with the supply of capital from various sources.
According to functional basis financial markets are classified into two types.
They are: Money markets (short-term) Capital markets (long-term) According to in
stitutional basis again classified in to two types. They are Organized financial
market Non-organized financial market.
The organized market comprises of official market represented by recognized inst
itutions, bank and government (SEBI) registered/controlled activities and interm
ediaries. The unorganized market is composed of indigenous bankers, moneylenders
, individual professional and non-professionals.
MONEY MARKET:
Money market is a place where we can raise short-term capital. Again the money m
arket is classified in to Inter bank call money market Bill market and Bank loan
market Etc. E.g.; treasury bills, commercial papers, CD s etc.
11
CAPITAL MARKET: Capital market is a place where we can raise long long-term capi
tal. Again the capital market is classified in to two types and they are Primary
market and Secondary market. E.g.: Shares, Debentures, and Loans etc. PRIMARY M
ARKET: Primary market is generally referred to the market of new issues or marke
t for mobilization of resources by the companies and government undertakings, fo
r new projects as also for expansion, modernization, addition, diversification a
nd up gradation. Primary market is also referred to as New Issue Market. Primary
market n. operations include new issues of shares by new and existing companies
, further and 12
right issues to existing shareholders, public offers, and issue of debt instrume
nts such as debentures, bonds, etc. The primary market is regulated by the Secur
ities and Exchange Board of India (SEBI a government regulated authority). Funct
ion: The main services of the primary market are origination, underwriting, and
distribution. Origination deals with the origin of the new issue. Underwriting c
ontract make the shares predictable and remove the element of uncertainty in the
subscription. Distribution refers to the sale of securities to the investors. T
he following are the market intermediaries associated with the market: 1. Mercha
nt banker/book building lead manager 2. Registrar and transfer agent 3. Underwri
ter/broker to the issue 4. Adviser to the issue 5. Banker to the issue 6. Deposi
tory 7. Depository participant
Investors’ protection in the primary market: To ensure healthy growth of primary m
arket, the investing public should be protected. The term investor protection ha
s a wider meaning in the primary market. The principal ingredients of investors’ p
rotection are: Provision of all the relevant information Provision of accurate i
nformation and Transparent allotment procedures without any bias.
]
13
SECONDARY MARKET
The primary market deals with the new issues of securities. Outstanding securiti
es are traded in the secondary market, which is commonly known as stock market o
r stock exchange. “The secondary market is a market where scrip’s are traded”. It is a
market place which provides liquidity to the scrip’s issued in the primary market
. Thus, the growth of secondary market depends on the primary market. More the n
umber of companies entering the primary market, the greater are the volume of tr
ade at the secondary market. Trading activities in the secondary market are done
through the recognized stock exchanges which are 23 in number including Over Th
e Counter Exchange of India (OTCE), National Stock Exchange of India and Interco
nnected Stock Exchange of India.
Secondary market operations involve buying and selling of securities on the stoc
k exchange through its members. The companies hitting the primary market are man
datory to list their shares on one or more stock exchanges in India. Listing of
scrip’s provides liquidity and offers an opportunity to the investors to buy or se
ll the scrip’s. The following are the intermediaries in the secondary market: 1. B
roker/member of stock exchange – buyers broker and sellers broker 2. Portfolio Man
ager 3. Investment advisor 4. Share transfer agent 5. Depository 6. Depository p
articipants.
14
STOCK MARKETS IN INDIA: Stock exchanges are the perfect type of market for secur
ities whether of government and semi-govt bodies or other public bodies as also
for shares and debentures issued by the joint-stock companies. In the stock mark
et, purchases and sales of shares are affected in conditions of free competition
. Government securities are traded outside the trading ring in the form of over
the counter sales or purchase. The bargains that are struck in the trading ring
by the members of the stock exchanges are at the fairest prices determined by th
e basic laws of supply and demand. Definition of a stock exchange: “Stock exchange
means any body or individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling
or dealing in securities.” The securities include: Shares of public company. Gover
nment securities. Bonds
History of Stock Exchanges: The only stock exchanges operating in the 19th centu
ry were those of Mumbai setup in 1875 and Ahmadabad set up in 1894. These were o
rganized as voluntary nonprofit-marking associations of brokers to regulate and
protect their interests. Before the control on securities under the constitution
in 1950, it was a state subject and the Bombay securities contracts (control) a
ct of 1925 used to regulate trading in securities. Under this act, the Mumbai st
ock exchange was recognized in 1927 and Ahmadabad in 1937. During the war boom,
a number of stock exchanges were organized. Soon after it became a central subje
ct, central legislation was proposed and a committee headed by A.D.Gorwala went
into the bill for securities regulation. On the basis of the committee’s recommend
ations and public discussion, the securities contract (regulation) act became la
w in 1956.
15
Functions of Stock Exchanges: Stock exchanges provide liquidity to the listed co
mpanies. By giving quotations to the listed companies, they help trading and rai
se funds from the market. Over the hundred and twenty years during which the sto
ck exchanges have existed in this country and through their medium, the central
and state government have raised crores of rupees by floating public loans. Muni
cipal corporations, trust and local bodies have obtained from the public their f
inancial requirements, and industry, trade and commerce- the backbone of the cou
ntry’s economy-have secured capital of crores or rupees through the issue of stock
s, shares and debentures for financing their day-to-day activities, organizing n
ew ventures and completing projects of expansion, diversification and modernizat
ion. By obtaining the listing and trading facilities, public investment is incre
ased and companies were able to raise more funds. The quoted companies with wide
public interest have enjoyed some benefits and assets valuation has become easi
er for tax and other purposes.
16
Various Stock Exchanges in India:
At present there are 23 stock exchanges recognized under the securities contract
s (regulation), Act, 1956. Those are: Ahmadabad Stock Exchange Association Ltd.
Bangalore Stock Exchange Bhubaneshwar Stock Exchange Association Calcutta Stock
Exchange Cochin Stock Exchange Ltd. Coimbatore Stock Exchange Delhi Stock Exchan
ge Association
17
Guwahati Stock Exchange Ltd Hyderabad Stock Exchange Ltd. Jaipur Stock Exchange
Ltd Kanara Stock Exchange Ltd Ludhiana Stock Exchange Association Ltd Madras Sto
ck Exchange Madhya Pradesh Stock Exchange Ltd. Magadh Stock Exchange Limited Mee
rut Stock Exchange Ltd. Mumbai Stock Exchange National Stock Exchange of India O
TC Exchange of India Pune Stock Exchange Ltd. Saurashtra Kutch Stock Exchange Lt
d. Uttar Pradesh Stock Exchange Association Vadodara Stock Exchange Ltd.
18
Out of these major stock exchanges were: NSE (National Stock Exchange)
The National Stock Exchange of India Limited has genesis in the report of the Hi
gh Powered Study Group on Establishment of New Stock Exchanges, which recommende
d promotion of a National Stock Exchange by financial institutions (FI’s) to provi
de 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 Apr
il 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in
June 1994. The Capital Market (Equities) segment commenced operations in Novembe
r 1994 and operations in Derivatives segment commenced in June 2000
19
NSE s mission is setting the agenda for change in the securities markets in Indi
a. The NSE was set-up with the main objectives of:

Establishing a nation-wide trading facility for equities and debt instruments. E

nsuring equal access to investors all over the country through an appropriate co
mmunication network. Providing a fair, efficient and transparent securities mark
et to investors using electronic trading systems. Enabling shorter settlement cy
cles and book entry settlements systems, and Meeting the current international s
tandards of securities markets.
The standards set by NSE in terms of market practices and technology, have becom
e industry benchmarks and are being emulated by other market participants. NSE i
s more than a mere market facilitator. It s that force which is guiding the indu
stry towards new horizons and greater opportunities.
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BSE (Bombay Stock Exchange)
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 engag
ed in the process of converting itself into demutualised and corporate entity. I
t has evolved over the years into its present status as the premier Stock Exchan
ge in the country. It is the first Stock Exchange in the Country to have obtaine
d permanent recognition in 1956 from the Govt. of India under the Securities Con
tracts (Regulation) Act 1956.The Exchange, while providing an efficient and tran
sparent market for trading in securities, debt and derivatives upholds the inter
ests of the investors and ensures redresses of their grievances whether against
the companies or its own member-brokers. It also strives to educate and enlighte
n the investors by conducting investor education programmers and making availabl
e to them necessary informative inputs.
21
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 E
xecutive 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 the Chief Operating Officer and other
Heads of Department assist him. The Exchange has inserted new Rule No.126 A in
its Rules, Byelaws pertaining to constitution of the Executive Committee of the
Exchange. Accordingly, an Executive Committee, consisting of three elected direc
tors, three SEBI nominees or public representatives, Executive Director & CEO an
d Chief Operating Officer has been constituted. The Committee considers judicial
& quasi matters in which the Governing Board has powers as an Appellate Authori
ty, matters regarding annulment of transactions, admission, continuance and susp
ension of memberbrokers, declaration of a member-broker as defaulter, norms, pro
cedures and other matters relating to arbitration, fees, deposits, margins and o
ther monies payable by the member-brokers to the Exchange, etc.
22
REGULATORY FRAME WORK OF STOCK EXCHANGE A comprehensive legal framework was prov
ided by the “Securities Contract Regulation Act, 1956” and “Securities Exchange Board
of India 1952”. Three tier regulatory structure comprising Ministry of finance The
Securities And Exchange Board of India Governing body Members of the stock exch
ange: The securities contract regulation act 1956 has provided uniform regulatio
n for the admission of members in the stock exchanges. The qualifications for be
coming a member of a recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years. He should be an Indian c
itizen. He should be neither a bankrupt nor compound with the creditors. He shou
ld not be convicted for fraud or dishonesty. He should not be engaged in any oth
er business connected with a company. He should not be a defaulter of any other
stock exchange. The minimum required education is a pass in 12th standard examin
ation.
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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
The securities and exchange board of India was constituted in 1988 under a resol
ution of government of India. It was later made statutory body by the SEBI act 1
992.according to this act, the SEBI shall constitute of a chairman and four othe
r members appointed by the central government. With the coming into effect of th
e securities and exchange board of India act, 1992 some of the powers and functi
ons exercised by the central government, in respect of the regulation of stock e
xchange were transferred to the SEBI. OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities. Regulating the business in s

tock exchanges and any other securities market. Registering and regulating the w
orking of intermediaries associated with securities market as well as working of
mutual funds.

Promoting and regulating self-regulatory organizations. Prohibiting insider trad

ing in securities. Regulating substantial acquisition of shares and take over of
companies. Performing such functions and exercising such powers under the provi
sions of capital issues (control) act, 1947and the securities to it by the centr
al government.
24
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):

Board of Directors of Stock Exchange has to be reconstituted so as to include no

n-members, public representatives and government representatives to the extent o
f 50% of total number of members.

Capital adequacy norms have been laid down for the members of various stock exch
anges depending upon their turnover of trade and other factors.

All recognized stock exchanges will have to inform about transactions within 24
hrs.
TYPES OF ORDERS: Buy and sell orders placed with members of the stock exchange b
y the investors. The orders are of different types. Limit orders: Orders are lim
ited by a fixed price. E.g. ‘buy Reliance Petroleum at Rs.50.’Here, the order has cl
early indicated the price at which it has to be bought and the investor is not w
illing to give more than Rs.50. Best rate order: Here, the buyer or seller gives
the freedom to the broker to execute the order at the best possible rate quoted
on the particular date for buying. It may be lowest rate for buying and highest
rate for selling. Discretionary order: The investor gives the range of price fo
r purchase and sale. The broker can use his discretion to buy within the specifi
ed limit. Generally the approximation price is fixed. The order stands as this “bu
y BRC 100 shares around Rs.40”. Stop loss order: The orders are given to limit the
loss due to unfavorable price movement in the market. A particular limit is giv
en for waiting. If the price falls below the limit, the broker is authorized to
sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop lo
ss at Rs.22. Buying and selling shares: To buy and sell the shares the investor
has to locate register broker or sub broker who render prompt and efficient serv
ice to him. The order to buy or sell specifying the number of shares of the comp
any of investors’ choice is placed with the broker. The order may be of any type.
After receiving the
25
order the broker tries to execute the order in his computer terminal. Once match
ing order is found, the order is executed. The broker then delivers the contract
note to the investor. It gives the details regarding the name of the company, n
umber of shares bought, price, brokerage, and the date of delivery of share. In
this physical trading form, once the broker gets the share certificate through t
he clearing houses he delivers the share certificate along with transfer deed to
the investor. The investor has to fill the transfer deed and stamp it. The stam
p duty is one of the percentage considerations, the investor should lodge the sh
are certificate and transfer deed to the register or transfer agent of the compa
ny. If it is bought in the DEMAT form, the broker has to give a matching instruc
tion to his depository participant to transfer shares bought to the investors ac
count. The investor should be account holder in any of the depository participan
t. In the case of sale of shares on receiving payment from the purchasing broker
, the broker effects the payment to the investor. Share groups: The scrips trade
d on the BSE have been classified into ‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’ groups. The ‘A’ group
which are in the carry forward system. The ‘F’ group represents the debt market seg
ment (fixed income securities). The Z group scrips are of the blacklisted compan
ies. The ‘C’ group covers the odd lot securities in ‘A’, ‘B1’&’B2’ groups.
ROLLING SETTLEMENT SYSTEM: Under rolling settlement system, the settlement takes
place n days (usually 1, 2, 3 or 5days) after the trading day. The shares bough
t and sold are paid in for n days after the trading day of the particular transa
ction. Share settlement is likely to be completed much sooner after the transact
ion than under the fixed settlement system. The rolling settlement system is not
ed by T+N i.e. the settlement period is n days after the trading day. A rolling
period which offers a large number of days negates the advantages of the system.
Generally longer settlement periods are shortened gradually. SEBI made RS compu
lsory for trading in 10 securities selected on the basis of the criteria that th
ey were in compulsory demat list and had daily turnover of about Rs.1 26
crore or more. Then it was extended to “A” stocks in Modified Carry Forward Scheme,
Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending Secur
ities Scheme (BELSS) with effect from Dec 31, 2001. SEBI has introduced T+5 roll
ing settlement in equity market from July 2001 and subsequently shortened the cy
cle to T+3 from April 2002. After the T+3 rolling settlement experience it was f
urther reduced to T+2 to reduce the risk in the market and to protect the intere
st of the investors from 1st April 2003. Activities on T+1: conformation of the
institutional trades by the custodian is sent to the stock exchange by 11.00 am.
A provision of an exception window would be available for late confirmation. Th
e time limit and the additional changes for the exception window are dedicated b
y the exchange. The exchanges/clearing house/ clearing corporation would process
and download the obligation files to the broker’s terminals late by 1.30 p.m on T
+1. Depository participants accept the instructions for pay in securities by inv
estors in physical form upto 4 p.m and in electronic form upto 6 p.m. the deposi
tories accept from other DPs till 8p.m for same day processing. Activities on T+
2: The depository permits the download of the paying in files of securities and
funds till 10.30 a.m on T+2 from the brokers’ pool accounts. The depository proces
ses the pay in requests and transfers the consolidated pay in files to clearing
House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/cleari
ng corporation executes the pay-out of securities and funds latest by 1.30 p.m o
n T+2 to the depositories and clearing banks. In the demat mode net basis settle
ment is allowed. The buy and sale positions in the same scrip can be settled and
net quantity has to be settled.
27
ABOUT SHAREKHAN LIMITED
Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group wh
ich is running successfully since 1922 in the country. It is the retail broking
arm of the Mumbai-based SSKI Group, which has over eight decades of experience i
n the stock broking business. Sharekhan offers its customers a wide range of equ
ity related services including trade execution on BSE, NSE, Derivatives, deposit
ory services, online trading, investment advice etc.
The firm’s online trading and investment site - www.sharekhan.com - was launched o
n Feb 8, 2000. The site gives access to superior content and transaction facilit
y to retail customers across the country. Known for its jargon-free, investor fr
iendly language and high quality research, the site has a registered base of ove
r one lakh customers. The content-rich and research oriented portal has stood ou
t among its contemporaries because of its steadfast dedication to offering custo
mers best-of-breed technology and superior market information. The objective has
been to let customers make informed decisions and to simplify the process of in
vesting in stocks. On April 17, 2002 Sharekhan launched Speed Trade, a net-based
executable application that emulates the broker terminals along with host of ot
her 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 las
t six months Speed Trade has become a de facto standard for the Day Trading comm
unity over the net. Share khan’s ground network includes over 1288 centers in 325
cities in India which provide a host of trading related services. Sharekhan has
always believed in investing in technology to build its business. The company ha
s used some of the best-known names in the IT industry, like Sun Microsystems, O
racle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial
Technologies India Ltd, Spider Software Pvt Ltd. to build its trading 28
engine and content. The Morakhiya family holds a majority stake in the company.
HSBC, Intel & Carlyle are the other investors. With a legacy of more than 80 yea
rs 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 po
rtion of the market in each of these segments. SSKI’s institutional broking arm ac
counts for 7% of the market for Foreign Institutional portfolio investment and 5
% of all Domestic Institutional portfolio investment in the country. It has 60 i
nstitutional clients spread over India, Far East, UK and US. Foreign Institution
al Investors generate about 65% of the organization’s revenue, with a daily turnov
er of over US$ 2 million. The Corporate Finance section has a list of very prest
igious clients and has many ‘firsts’ to its credit, in terms of the size of deal, se
ctor 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, Hutc
hison, Planetasia, and Shopper’s Stop.
29
•
PROFILE OF THE COMPANY
Name of the company: Year of Establishment: Headquarter : Sharekhan ltd. 1925 Sh
arekhan SSKI A-206 Phoenix House Phoenix Mills Compound Lower Parel Mumbai - Mah
arashtra, INDIA- 400013 Service Provider Depository Services, Online Services an
d Technical Research. Over 3500 Data Not Available www.sharekhan.com Your Guide
to The Financial Jungle.
Nature of Business Services
: :
Number of Employees : Revenue Website Slogan : : :
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 decisio
ns through quality advice and superior service.
Sharekhan is infact• Among the top 3 branded retail service providers • No. 1 player
in online business • Largest network of branded broking outlets in the country se
rving more than 7, 00,000 clients. 30
REASON TO CHOOSE SHAREKHAN LIMITED
Experience SSKI has more than eight decades of trust and credibility in the Indi
an stock market. In the Asia Money broker s poll held recently, SSKI won the In
dia s Best Broking House for 2004 award. Ever since it launched Sharekhan as it
s retail broking division in February 2000, it has been providing institutional
level research and broking services to institutional-level individual investors.
Technology With its online trading account one can buy and sell shares in an ins
tant from any PC with an internet connection. One can get access to its powerful
online trading tools that will help him take complete control over his investme
nt in shares. Accessibility Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXEC
UTION services for EXECUTION investors. These services are accessible through it
s centers across the country over the internet (through the website www.sharekha
n.com) as well as over the Voice Tool. Knowledge In a business where the right i
nformation at the right time can translate into direct time profits, one can get
access to a wide range of information on Sharekhan limited’s content-rich portal.
One can also get a useful set of knowledge-based tools that will ased empower h
im to take informed decisions.
Convenience One can call its Dial-N-Trade number to get investment advice and ex
ecute his Trade investment transactions. Sharekhan ltd. have a dedicated call ce
ntre to provide this service via a call-centre Toll Free Number 1800-22-7500 & 1
800-22-7050 from anywhere in India. 7500
31
Customer Service Sharekhan limited’s customer service team will assist one for any
help that one may require relating to transactions, billing, demat and other qu
eries. Its customer service can be contacted via a toll-free number, email or li
ve chat on www.sharekhan.com. Investment Advice Sharekhan has dedicated research
teams of more than 30 people for fundamental and technical researches. Its anal
ysts constantly track the pulse of the market and provide timely investment advi
ce to its clients in the form of daily research emails, online chat, printed rep
orts and SMS on their mobile phone.
32
SHAREKHAN LIMITED’S MANAGEMENT TEAM
Dinesh Murikya Tarun Shah Shankar Vailaya : : : : : : : Owner of the company CEO
of the company Director (Operations) Director (Products & Technology) Head of R
esearch Vice President of Equity Derivatives Vice President of Research
Jaideep Arora Pathik Gandotra Rishi Kohli Nikhil Vora
PRODUCTS AND SERVICES OF SHAREKHAN LIMITED
The different types of products and services offered by Sharekhan Ltd. are as fo
llows: Equity and derivatives trading Depository services Online services
ities trading Dial-n-trade Portfolio management Share shops Fundamental research
Technical research
33
TYPES OF ACCOUNT IN SHAREKHAN LIMITED
Sharekhan offers two types of trading account for its clints Classic Account (wh
ich include a feature known as Fast Trade Advanced Classic Account for the onlin
e users) and Speed Trade Account
CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investor who is risk-averse an
d hence prefers to invest in stocks or who does not trade too frequently. This a
ccount allow investors to buy and sell stocks online along with the following fe
atures like multiple watch lists, Integrated Banking, Demat and digital contract
s, Real-time portfolio tracking with price alerts and Instant credit & transfer.
34
This account comes with the following features: a. Online trading account for in
vesting in Equities and Derivatives b. Free trading through Phone (Dial-n-Trade)
I. Two dedicated numbers(1800-22-7500 and 39707500) for placing the orders usin
g cell phones or landline phones II. Automatic funds transfer with phone banking
facilities (for Citibank and HDFC bank customers) III. Simple and Secure Intera
ctive Voice Response based system for authentication IV. get the trusted, profes
sional advice of Sharekhan limited’s Tele Brokers V. After hours order placement f
acility between 8.00 am and 9.30 am c. Integration of: Online Trading +Saving Ba
nk + Demat Account. d. Instant cash transfer facility against purchase & sale of
shares. e. IPO investments. f. Instant order and trade confirmations by e-mail.
g. Single screen interface for cash and derivatives.
SPEED TRADE ACCOUNT
This is an internet-based software application, which enables one to buy and sel
l in an instant. It is ideal for active traders and jobbers who transact frequen
tly during day’s session to capitalize on intra-day price movement. This account c
omes with the following features: a. b. c. d. e. f. g. h. i. Instant order Execu
tion and Confirmation. Single screen trading terminal for NSE Cash, NSE F&O & BS
E. Technical Studies. Multiple Charting. Real-time streaming quotes, tic-by-tic
charts. Market summary (Cost traded scrip, highest value etc.) Hot keys similar
to broker’s terminal. Alerts and reminders. Back-up facility to place trades on Di
rect Phone lines.
35
j.
Live market debts.
CHARGE STRUCTURE
Fee structure for General Individual: Charge Account Opening Classic Account Rs.
750/= Intra-day – 0.10 % Brokerage Delivery - 0.50 % Depository Charges: Account
Opening Charges Annual Maintenance Charges Rs. NIL Rs. NIL first year Rs. 300/=
p.a. from second calendar year onward Delivery - 0.50% Speed Trade Account Rs. 1
000/= Intra-day - 0.10%
HOW TO OPEN AN ACCOUNT WITH SHAREKHAN LIMITED?
For online trading with Sharekhan Ltd., investor has to open an account. Followi
ng are the ways to open an account with Sharekhan Ltd.: One need to call them at
phone number provided below and asks that he want to open an account with them.
a. One can call on the Toll Free Number: 1-800-22-7500 to speak to a Customer S
ervice executive b. Or If one stays in Mumbai, he can call on 022-66621111 One c
an visit any one of Sharekhan Limited’s nearest branches. Sharekhan has a huge net
work all over India (640 centers in 280 cities). One can also log on to “http://sh
arekhan.com/Locateus.aspx” link to find out the nearest branch. One can send them
an email at info@sharekhan.com to know about their products and services.

36
One can also visit the site www.sharekhan.com and click on the option “Open an Acc
ount” to fill a small query form which will ask the individual to give details reg
arding his name, city he lives in, his email address, phone number, pin code of
the city, his nearest Sharekhan Ltd. shop and his preferences regarding the type
of account he wants. These information are compiled in the headquarter of the c
ompany that is in Mumbai from where it is distributed through out the country’s br
anches in the form of leads on the basis of cities and nearest share shops. Afte
r that the executives of the respective branches contact the prospective clients
over phone or through email and give them information regarding the various typ
es of accounts and the documents they need to open an account and then fix appoi
ntment with the prospective clients to give them demonstration and making them u
ndergo the formalities to open the account. After that the forms that has collec
ted from the clients, is scrutinized in the branch and then it is sent to Mumbai
for further processing where after a few days the clients’ account are generated
and activated. After the accounts are activated, a Welcome Kit is dispatched fro
m Mumbai to the clients’ address mentioned in the documents provided by them. As s
oon as the clients receive the Welcome Kit, which contains the clients’ Trading ID
and Trading Password, they can start trading and investing in shares.
37
Generally the process of opening an account follows the following steps: LEAD MA
NAGEMENT SYSTEM (LMS) / REFERENCES CONTACT THE PERSON OVER PHONE OR THROUGH EMAI
L
FIXING AN APPOINTMENT WITH THE PERSON
GIVING DEMONSTRATION
YES
NO
DOCUMENTATION
FILLING UP THE FORM
SUBMISSION OF THE FORM
LOGIN OF THE FORM
SENDING ACCOUNT OPENING KIT TO THE CLIENT
TRADING
38
Apart from two passport size photographs, one needs to provide with the followin
g documents in order to open an account with Sharekhan Limited.: Photocopy of th
e clients’ PAN Card which should be duly attached Photo copy of any of the followi
ng documents duly attached which will serve as correspondence address proof: a.
b. c. d. e. f. g. Passport (valid) Voter’s ID Card Ration Card Driving License (va
lid) Electricity Bill (should be latest and should be in the name of the client)
Telephone Bill (should be latest and should be in the name of the client) Flat
Maintenance Bill (should be latest and should be in the name of the client) h. I
nsurance Policy (should be latest and should be in the name of the client) i. Le
ase or Rent Agreement. j. Saving Bank Statement** (should be latest) Two cheques
drawn in favour of Sharkhan Limited, one for the Account Opening Fees and the o
ther for the Margin Money (the minimum margin money is Rs. 5000).
** A cancelled cheque should be given by the client if he provides Saving Bank S
tatement as a proof for correspondence address. NOTE: Only Saving Bank Account c
heques are accepted for the purpose of Opening an account.
39
RESEARCH SECTION IN SHAREKHAN LIMITED
Sharekhan Limited has its own in-house Research Organisation which is known as V
alueline. It comprises a team of experts who constantly keep an eye on the share
market and do research on the various aspects of the share market. Generally th
e research is based on the Fundamentals and Technical analysis of different comp
anies and also taking into account various factors relating to the economy. Shar
ekhan Limited’s research on the volatile market has been found accurate most of th
e time. Sharekhan s trading calls in the month of November 2007 has given 89% st
rike rate. Out of 37 trading calls given by Sharekhan in the month of November 2
007, 33 hit the profit target. These exclusive trading picks come only to Sharek
han Online Trading Customer and are based on in-depth technical analysis. As a c
ustomer of Sharekhan Limited, one receives daily 5-6 Research Reports on their e
mails which they can use as tips for investing in the market. These reports are
named as Pre-Market Report, Eagle Eye, High Noon, Investors Eye, Daring Derivati
ves and Post-Market Report. Apart from these, Sharekhan Limited issues a monthly
subscription by the name of Valueline which is easily available in the market.
40
AWARDS AND ACHIEVEMENTS

SSKI has been voted as the Top Domestic Brokerage House in the research category
, twice by Euromoney Survey and four times by Asiamoney Survey. Sharekhan Limite
d won the CNBC AWARD for the year 2004.

41
Chapter 3
Project Analysis
42
PROJECT ANALYSIS
OUTCRY SYSTEM The broker has to buy or sell securities for which he has received
the orders. For this, the broker or his authorized representatives goes to the
stock exchange. This method is called the open outcry system. Basically the brok
ers shout while buying or selling the securities. The floor of the stock exchang
e is divided into a number of markets also known as ‘post pit’ or wing based on part
icular securities dealt there. In the post pit or wing, the broker using ‘open out
cry’ method makes an offer or bid price. For making the necessary bargain, he quot
es his purchase or sale price, also known as offer or bid price. The dealer, to
whom the price is quoted, quotes his own price when the quotation of the dealer
suits the broker, he may loose the bargain. If he is not satisfied with the quot
e price, he may turn to some other dealer. On the close of the bargain, the deal
er as well as the broker makes a brief note of the particulars of the deal. Such
notes are made on some pad and on it the number of shares, the price agreed upo
n, the name of the party, what membership number etc., are noted.
DISADVANTAGES OF OUTCRY SYSTEM:
It lacks transparency. The scope of manipulation, speculation and mal practice i
s more. Signal were more important in the outcry system any member who could not
interpret the buy/sell signal correctly often landed himself in disaster situat
ion.

In audibility was another disadvantage of the outcry system. Due to the above di
sadvantages of the outcry system the SHAREKHAN has shifted from outcry system to
online trading from February 29th 1997.
43
MANUAL TRADING Trading procedure before introduction of online trading: Trading
on stock exchanges is officially done in the trading ring. In the trading ring t
he space is provided for specified and non-specified sections, the members and t
heir authorized assistants have to wear a badge or carry with them an identity c
ard given by the exchange to enter the trading ring. They carry a sauda book or
confirmation memos, duly authorized by the exchange and carry a pen with them. T
he stock exchanges operations are floor level are technical in nature .Nonmember
s are not permitted to enter in to stock market. Hence various stages have to be
completed in executing a transaction at a stock exchange .The steps involved in
this method of trading have given below: Choice of broker: sell shares and tran
sact business, have to act through member brokers only. They can also appoint th
eir bankers for this purpose as per the present regulations. Placement of order:
The next step is the The prospective investor who wants to buy shares or the in
vestors, who wants to placing order for the purchase or sale of securities with
a broker. The order is usually placed by telegram, telephone, letter, fax etc or
in person. To avoid delay, it is placed generally over the phone. The orders ma
y take any one of the forms such as At Best Orders, Limit Order, Immediate or Ca
ncel Order, Limited Discretionary Order, and Open Order, Stop Loss Order. Execut
ion of order or contract: Orders are executed in the trading ring of the BSE. Th
is works from 11:30 to 2.30 P.M on all working days Monday to Friday, and a spec
ial one-hour session on Saturday. The members or the authorized assistants have
to wear a badge given by the exchange to enter into the trading ring. They carry
a sauda Block Book or conformation memos, which are duly authorized by the exch
ange when the deal is struck; both broker and jobber make a note in their sauda
block books. From the sauda book, the contract notes are drawn up and posted to
the client. A contract
44
note is written agreement between the broker and his clients for the transaction
executed. Drawing Up and Bills: Both sale and purchase bills are prepared along
with the contract note and it is posted on the same day or the next day. This i
n a purchase transaction, once the shares are delivered to the client effects pa
yment for the purchases and pays the stamp fees for transfer, a bill is made out
giving the total cost of purchase, including other expenses incurred by the bro
ker in the price itself. With this, the process ends. DEMATERLIZATION: Demateria
lization is the process by which physical certificates of an investor are conver
ted to an equipment number of securities in electronic from and credited in the
investor account with his DP. In order to dematerialize the certificates, an inv
estor has to first open an account with a DP and then request for the Dematerial
ization Request Form, which is DP and submit the same along with the share certi
ficates. The investor has to ensure that he marks “Submitted for Dematerialization”
on the certificates before the shares are handed over to the DP for demat. Demat
erialization can only be done to those certificates, which are already registere
d in your name and belong to the list of securities admitted for Dematerializati
on at NSDL. Most of the active scrip’s in the market including all the scrip’s of S&
P CNX NIFTY and BSE SENSEX have already joined NSDL. This list is steadily incre
asing. Briefly, the process is as follows: after completion of transfer, the inv
estor gets the option to dematerialize such shares. Investor’s willing to exercise
this option sends a Demat request along with the option letter sent by the comp
any to his DP. The company or its R&T agent would confirm the Demat request on i
ts receipt from the DP to reduce risk of loss in transit. Dematerialized shares
do not have any distinctive or certificate numbers. These shares are fungible-wh
ich means that 100 shares of a security are the same as any other 100 shares of
the security. Odd lot shares certificates can also be dematerialized.
45
Dematerialization normally takes about fifteen to thirty days. To get back demat
erialized securities in the physical form, request DP for Rematerialization of t
he same is made. Rematerialization is the process of converting electronic share
s in to physical shares. Benefits of Demat:

It reduces the risk of bad deliveries, in turn saving the cost and wastage of ti
me
associated with follow up for rectification. This has lead to reduction in broke
rage to the extent of 0.5% by quite a few brokerage firms.

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid
the cost of courier / notarization.

You can receive your bonuses and rights issues into your DA as a direct credit,
this eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat
shares as compared to loans against physical shares.

There is no lost in transit, thus the overheads of getting a duplicate copy in s

uch
circumstances is reduced.

RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical securities.
46
ONLINE TRADING
Before getting in to the online trading we should know some things about the int
ernet, e-commerce and etc. 1) What is Internet? Internet is a worldwide, self-go
verned network connecting several other smaller networks and millions of compute
rs and persons, to mega sources of information. This technology shrinks vast dis
tances, accelerating the pace of business reforms and revolutionizing the way co
mpanies are managed. It allows direct, ubiquitous links to anyone anywhere and a
nytime to build up interactive relationships. A combination of time and space, c
alled the Internet promises to bring unprecedented changes in our lives and busi
ness. Internet or net is an interconnection of computer communication networks s
panning the entire globe, crossing all geographical boundaries. It has re-define
d the methods of communication, work study, education, business, leisure, health
, trade, banking, commerce and what not it is virtually changing every thing and
we are living in dot.com age. Net being an interactive two way medium, through
various websites, enables participation by individuals in business to business a
nd business to consumer commerce, visit to shopping arcades, games, etc. in cybe
r space even the information can be copied, downloaded and retransmitted. The us
e of Internet has grown 2000 percent in last decade and is currently growing at
10 percent per month. In India, growth of Internet is of recent times. It is exp
ected to bring changes in every functional area of business activity including m
anagement and financial services. It offers stock trading at a lower cost. Inter
net can change the nature and capacity of stock broking business in India.
47
2. E-commerce Electronic commerce is associated with buying and selling over com
puter communication networks. It helps conduct traditional commerce through new
way of transferring and processing of information. Information is electronically
transferred from computer to computer in an automated way. E-commerce refers to
the paperless exchange of business information using electronic data inter chan
ge, electronic technologies. It not only reduces manual processes and paper tran
sactions but also helps organization move to a fully electronic environment and
change the way they operated.
PC’s and networking attempts to introduce banks of the tools and technologies requ
ired for electronic commerce. The computers are either workstations of individua
l office works or serves where large databases and information reside. Network c
onnects both categories of computers; the various operating systems are the most
basis program within a computer. It manages the resources of the computer syste
m in a fair and efficient manner. Now we can enter in to the concept known as on
line trading. In the past, investors had no option but to contact their broker t
o get real time access to market data. The net brings data to the investor on-li
ne and net broking enables him to trade on a click of mouse. Now information has
become easily accessible to both retail as well as big investor.
EVOLUTION OF BROKING IN INDIA: The evolution of a broking in India can be catego
rized in three phases
Stockbrokers will offer on their sites features such as live portfolio manager,
live quotes, market research and news, etc. to attract more investors.

Brokers will offer online broking and relationship management by providing and o
ffering analysis and information to investors during broking and nonbroking hour
s based on their profile and needs, i.e. customized services.
48
Brokers (now e-brokers) will offer value management or services like initial pub
lic offering online, on-line asset allocation, portfolio management, financial p
lanning, tax planning, insurance services, etc. and enables the investors to tak
e better and well considered decisions.
The actual definition of “Online Trading” is as explained below: “Online trading is a
service offered on the internet for purchase and sale of shares. In the real wor
ld you place orders on your stockbroker either verbally (personally or telephoni
cally) or in a written form (fax).” In online trading, you will access a stockbrok
er’s website through your internet enabled PC and place orders through the broker’s
internet based trading engine. These orders are routed to the stock exchange wit
hout manual intervention and executed thereon in a matter of a few seconds. The
net is used as a mode of trading in internet trading. Orders are communicated to
the stock exchange through website. In India: Internet trading started in India
on 1st April 2000 with 79 members seeking permission for online trading. The SE
BI committees on internet based securities trading services has allowed the net
to be used as an Order Routing System (ORS) through registered stock brokers on
behalf of their clients for execution of transaction. Under the ORS the client e
nters his requirements (security, quantity, price buy/sell) on broker’s site. Obje
ctives: Internet trading is expected to Increase transparency in the markets, En
hance market quality through improved liquidity, by increasing quote continuity
and market depth,

Reduce settlement risks due to open trades, by elimination of mismatches, Provid

e management information system, Introduce flexibility in system, so as to handl
e growing volumes easily and to support nationwide expansion of market activity.
49
Besides, through internet trading three fundamental objectives of securities reg
ulation can be easily achieved, these are:

Investor protection Creation of a fair and efficient market, and Reduction of th

e systematic risks.
Some of the brokers offering net trading include ICICI direct, kotakstreet, etc.
Requirements for net trading: For investors: 1. Installation of a computer with
required specification 2. Installation of a modem 3. Telephone connection 4. Reg
istration for on-line trading with broker 5. A bank account 6. Depository accoun
t 7. Compliance with SEBI guidelines for net trading The following should be pro
duced to get a demat account and online trading account: As identity proof & add
ress proof any one of the following: 1) 2) 3) 4) 5) 6) Voter ID card Driving lic
ense PAN card( in case of to trade more than 50000) Ration card Bank pass book T
elephone bill
Other requirements, which are necessary

First page of the bank pass book and last 6 months statement. Bank manager’s signa
ture along with bank’s seal, manager registration code on photograph.
50
For stock brokers: 1. Permission from stock exchange for net trading 2. Net wort
h of Rs. 50 lac 3. Adequate back-up system 4. Secured and reliable software syst
em 5. Adequate, experienced and trained staff 6. Communication of order (trade c
onfirmation to investor by e-mail) 7. Use of authentication technologies 8. Issu
e of contract notes within 24 hours of the trade execution 9. Setting up a websi
te. The net is used as a medium of trading in internet trading. Orders are commu
nicated to the stock exchange through website. Internet trading started in India
on 1st April 2000 with 79 members seeking permission for online trading. The SE
BI committees on internet based securities trading services has allowed the net
to be used as an Order Routing System (ORS) through registered stock brokers on
behalf of their clients for execution of transaction. Under the Order Routing Sy
stem the client enters his requirements (security, quantity, price, and buy/sell
) in broker s site. They are checked electronically against the clients account
and routed electronically to the appropriate exchange for execution by the broke
r. The client receives a confirmation on execution of the order. The customer s
portfolio and ledger accounts get updated to reflect the transaction. The user s
hould have the user id and password to enter into the electronic ring. He should
also have demat account and bank account. The system permits only a registered
client to log in using user id and password. Order can be placed using place ord
er window of the website.
51
Procedure for net trading Step 1: Those investors, who are interested in doing t
he trading over internet system i.e. NEAT-IXS, should approach the brokers and g
et them self registered with the Stock Broker. Step 2: After registration, the b
roker will provide to them a Login name, Password and personal identification nu
mber (PIN). Step 3: Actual placement of an order. An order can then be placed by
using the place order window as under: (a) First by entering the symbol and ser
ies of stock and other parameters like quantity and price of the scrip on the pl
ace order window. (b) Second, fill in the symbol, series and the default quantit
y. Step 4: It is the process of review. Thus, the investor has to review the ord
er placed by clicking the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be sent by cli
cking on the send option. Step 6: The investor will receive an "Order Confirmati
on" message along with the order number and the value of the order. Step 7: In c
ase the order is rejected by the Broker or the Stock Exchange for certain reason
s such as invalid price limit, an appropriate message will appear at the bottom
of the screen. At present, a time lag of about 10 seconds is there in executing
the trade. Step 8: It is regarding charging payment, for which there are differe
nt mode. Some brokers will take some advance payment from the investor and will
fix their trading limits. When the trade is executed, the broker will ask the in
vestor for transfer of funds to his account. Internet trading provides total tra
nsparency between a broker and an investor in the secondary market. In the open
outcry system, only the broker knew the actually transacted price. Screen based
trading provides more transparency. With online trading
52
investors can see themselves the price at which the deal takes place. The time g
ap has narrowed in every stage of operation. Confirmation and execution of trade
reaches the investor within the least possible time, mostly within 30 seconds.
Instant feedback is available about the execution. Some of the websites also off
er; News and research report BSE and NSE movements Stock analysis IPO and mutual fun
d centers Step by step procedure in online trading: Following steps explain the
step by step approach to on-line trading: 1) Log on to the stock broker s websit
e 2) Register as client/investor 3) Fill the application form and client broker
agreement form on the requisite value stamp paper 4) Obtain user ID and pass wor
d 5) Log on to the broker s site using secure user ID and password 6) Market wat
ch page will show real time on-line market data 7) Trade shares directly by ente
ring the symbol or number of the security 8) Brokers server will check your limi
t in the on-line account and Demat account for the number of shares and execute
the trade 9) Order is executed instantly (10-30 seconds) and confirmation can be
obtained.
10) Confirmation is e-mailed to investor by broker 11) Contract note is printed
and mailed in 24 hours 12) Settlement will take place automatically on the settl
ement day 13) Demat account and the bank account will get debited and credited b
y electronic means.
53
ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:
1)
Limit / stop orders: orders that can be go unfilled, but there is an extra Charg
e for this leeway facility since one need to hold a price.
2)
Market orders: orders can be filled at unexpected prices, but this type is much
more risky, since you have to buy stock at the given price.
3) 4)
Cash account: where funds have to be available prior to placing the order. Margi
n account: where orders can be placed against stocks, to increase Purchasing pow
er.
ADVANTAGES OF ONLINE TRADING:
1)
Online trading has made it possible for anyone to have easy and efficient access
to more reports and charts than it was previously possible if one went to any b
rokers office. Thus we have access to a lot more information online.
2)
Online trading has let room for smaller organizations to compete with multinatio
nal organizations since it is no longer a leg it issue. Being online does not id
entify the size of any particular organization, therefore, this additional power
to the underdogs.
3)
Online trading has allowed companies to locate themselves where they want as phy
sical location is not an issue anymore. Companies can establish themselves accor
ding to their gains and losses, for instance where tax (sales and value added ta
xes) is best suited to them.
4)
Online trading gives control to individuals and they can exercise it over accoun
ts thus comprehend what is going on when they trade. It is like going back to sc
hool and re-educating oneself on how to trade online.
5)
Individuals’ benefit by saving comparatively a lot more when trading online as the
cost per trade is less.
6)
Individuals can invest in a variety of products, unlike earlier when people boug
ht bonds, mutual funds, and stock for long-term basis and sat on them. Now they
can invest in stocks, stock and index options mutual funds, government, and even
insurance. 54
INVESTORS REASONS TO TRADE ONLINE:
1)
They have control over their accounts, can make their own decisions and don’t have
to give reasons for their actions. They are independent.
2) 3) 4)
They have a reason to participate in the market and learn about it. It is intere
sting, cheap, easy, fast, and convenient. A lot of information is online so they
can keep up-to-date with what is happening in the trading world.
5) 6)
It will give investors a greater choice and better realization. The immediate im
pact will be competition and benefits will accrue to the investors.
7)
It will lead to brokerage commissions going down and brokers striving to increas
e business afloat.
8)
Investors will now go to place, which have better trading conditions and also me
mbers to offer them better facilities.
9)
They have access to numerous tools to invest, and can create their own portfolio
.
55
HERE ARE THE POSSIBLE DISADVANTAGES:
1)
When network crashes, there will be problems and delays due to a large influx of
rapid online trading criteria.
2)
Individuals are restricted to first-hand financial guidance. This simply means t
hat the individual is himself / herself alone to.
3)
A tax (sales tax and value added tax) evaluation becomes an issue, especially wh
en you are trading internationally.
4) 5)
One has no idea with whom he is dealing with on the other end. According to a st
udy conducted by Mary Rowland, careful investor: is online trading bad for your
portfolio, the more one trades the less returns one gets, meaning that an addict
ed trader gets, carried away online and begins to trade for too much which cause
s losses for him / her.
6)
Individuals think that they are trading with the market directly and know what t
hey are doing, but the truth is that even though technology has taken over, the
basic rules of trading are the same. It seems that the middleman has been remove
d, but that is not so. When the individuals click on the mouse, his trade goes t
hrough a broker. The commissions online pertain to the intermediary.
7)
There is a need for more effective communication links over the Internet and the
ability of the server to deal with a large volume of visitors.
56
TRADING AND SETTLEMENT AT SHARE KHAN The NSE first introduced online trading in
India. The Online trading system imparted a greater level of transparency and in
vestors preferred exchanges that offered Online trading because of the following
factors:

The ease of operation from the view of the both members and the investors. Incre
ase in the confidence of the investors because of higher level of transparency.

Facilities better monitoring of the market by the exchange. The best price achie
ved in buying and selling.
All these resulted in ever-increasing volumes on the exchanges offering the onli
ne trading. TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING ShareKhan deals in bu
ying and selling equity shares and debentures on the National Stock Exchange (NS
E), the Bombay Stock Exchange (BSE) and the Over-TheCounter Exchange of India (O
TCEI).
Share Khan is provided with a computer and required software from their register
ed stock exchanges. These centers are called “Broker Work Stations”. These computers
are connected to the server at the stock exchanges through cable. The member or
broker sitting in his office can send the quotations, orders, negotiations, dea
ls, in-house deals, auction orders etc., through the computer. The Central tradi
ng system (CTS) will accept these orders and send it for match. If there is any
mistake in the order, CTS will reject the orders and send respective error messa
ge to the member concern. All these operations are in built. The main objective
of CTS is to monitor the Stock Exchanges operations. Order placed by the broker
will be sent for a match and if the match is found suitable, the transaction wil
l be executed. Otherwise, the order will be deleted 57
automatically after completion of trading time. The carry forward transactions (
Good Till cancellation) are forwarded to the next day. Even if the match is not
found with in the prescribed period, the order will not cancel.
Useful links about Sharekhan: 1. 2. 3. 4. 5. 6. 7. Sharekhan Website: http://www
.ShareKhan.com Product Demo - Speed Trade: http://www.sharekhan.com/Demos/speedt
rade/index.html Product Demo - Classic: http://www.sharekhan.com/Demos/classic/i
ndex.html Email: info@sharekhan.com FAQs: http://sharekhan.com/KnowledgeCentre/S
harekhan_FAQ.aspx Phone: 022-66621111 Toll Free: 1-800-22-7500
TRADING SESSION Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of
the trading period. Monday to Friday is the trading period in all the stock exc
hanges. SEBI has stipulated that all the stock exchanges in India must have same
trading period. BROKER WORK STATION: At the broker workstation the BBO’s, the las
t traded price, the day‘s opening price, previous day’s closing price, highest and l
owest prices, the weighted average price and total trade value will be available
continuously, as the BBO for each scrip. Other information will be available on
query from the BWS. These include top gainers /losers of the day. Trader-wise,
scrip wise net position, client wise net position, top scrip by the volume/value
, market summary etc. Brokers are also provided with information relating to the
companies in the matter of Book closure, Dividend declarations, resolutions in
board meeting, information about liquidated companies, company report etc.
58
ORDERS: Orders can be done one at a time or in a batch mode. The submitted order
will be accepted at the CTS, after validation if it finds any invalid reason th
e order is return back to the BWS, with the appropriate error message. If Accept
ed at the CTS it will be added to the local pending order book. The order will t
hen be taken up for matching, if it is a buy order the system tries to find a se
ll order, which fits the requirement of the buy order, when such match is found
a trade gets executed. Each trade involves two brokers and respective traders wh
o sent the order. Both these traders are informed of the trade being executed at
their respective BWS. At the BWS the trade is added to the local trade book. Or
ders sent by the brokers are two types: 1) Good for the day (GFD) 2) Good till c
ancellation(GTC) Good for the day: This is also called as “market order”. For an ord
er if the member selects the deal as good for the day, the order is treated as m
arket order. If a “best bid” founds match with “best order” then the transaction gets ex
ecuted. If the match is not found then after trade time the order gets cancelled
that day. Next day he has to place a new order. For example if a member wants t
o purchase 1000 shares of satyam info @ 400 each through Good for Day order. If
the correct match is not found, order gets cancelled automatically and new quota
tion has to be placed the next day. Good till cancellation: This order is forwar
ded to the last trading day of that settlement period. This is also called as ca
rry forward order like GFD; broker has to select the option of GTC for the order
. If the order finds match with in the trading settlement period, the order is e
xecuted. If no match is found, the order is cancelled on the last day of settlem
ent period. This order is not carried forward to the next settlement period.
59
For example, if a member a place purchase order of 500 shares of SBI @ 690 per s
hare and selects the order as GTC and place an order. If the match is not found
on that day it will be forwarded to the next day until trading settlement period
day. SETTLEMENT OF TRANSACTIONS: Clearing of transaction in the form of shares
and cash is called settlement. Buyers will take the delivery of shares through t
he depository participants like SHARE KHAN and others. Finally, the settlement i
s made by means of delivering the share certificates along with the transfer dee
ds. The transferor (or the seller) duly signed transfer deed. It bears a stamp o
f the selling broker. The buyer then fills up the certificates fills up the part
iculars in the transfer deed. Settlement can be done in the following way. Spot
settlement: under this method, the delivery of securities and payment for them a
re affected on the day of the contract itself.
Rolling settlement: Under this rolling settlement the trading is on “T+2”,basis i.e.
if Monday is trading day then Wednesday is the paying day . In case on non-deli
very, the securities will go for auction.
DETAILS OF PROCEDURES: Delivery in : The members who are in pay-out position del
ivers share certificates in to clearing house within the settlement period along
with the delivery Chelan filled in with the details of share certificates which
has folio numbers or distinctive numbers etc. Delivery out: The buyer of shares
who made pay in position will take delivery of shares from the clearing house.
60
Pay-in: The member who is in paying position shall pay for value of shares with
in the trading settlement period (T+2). Payout: The cheques paid in the clearing
house will be paid to members who are in paying position. All disputes arising b
etween members regarding non-deliveries, non-payments, good and bad deliveries p
ertaining to the settlement will be settled by the settlement committee of the e
xchange.
61
The given flow chart clearly explains the process of online trading:
Login
Buy transcation
The system will check buying limits
Sell transcation
The system will check your dp account quantity
Orders accepted
Rejected orders would be communicated along with reasons
orders accepted
your order is transmitted to exchange for execution
pending buy orders would be displayed on your screen
on execution of your orders
pending sell orders would be displayed on your screen
you may edit your pending order
you may delete your pending order
you may edit your pending order
you may delete your pending order
flashed on your screen immediately on execution
conformationcoul d be send to your e-mail and mobile
contract note would be sent to by mail or hand delivery
62
Chapter 4
Comparative Analysis
63
THE MAJOR PLAYERS IN ONLINE TRADING 1) SHAREKHAN.COM 2) 5PAISA.COM 3) KOTAKSTREE
T.COM 4) INDIABULLS.COM 5) ICICIDIRECT.COM 6) HDFCSEC.COM
POLL RESULTS: BROKER PREFERENCE
5paise Sharekhan Motilal oswal ICICI Direct HDFC Indiabulls Kotak Others
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64
HDFC SECURITIES:
Company Background: HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and C
hase Capital Partners and their associates. Pioneers in setting up Dial-a-share
service with the largest team of Tele-brokers.
Online Account Type: HDFC Online Trading A/c: Plain Vanilla Account with focus o
n 3 in 1
advantage. Pricing of HDFC Account Account Opening: Rs 750 Demat: NIL, 1st year
charges included in Account Opening Initial Margin : Rs 5000/- for non HDFC Bank
Customers (AQB) Brokerage: Trading 0.15%* each side + ST Delivery 0.50%** each
side + ST *Rs 25 Min Brokerage per transaction **Rs 8 Min Brokerage per transact
ion
65
ICICI Direct:

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 ch
arges included in Account Opening Plus a facility to open
additional 4 DP’s without 1st yr AMC. Only Rs 100 as linking charges per DP Initia
l Margin : Nil Brokerage: ICICI’s brokerage rates are inclusive of Stamp duty (0.0
02%) for
trading and 0.010% for delivery while service tax (10.2%) on BROKERAGE land turn
over tax is EXTRA.

Delivery Vol per QTR Brokerage Square Vol P.M. < 10 lakhs 10 – 25 lakhs 25 – 50 lakh
s 50 lakhs - 1 Cr 1 Cr – 2 Cr 2 Cr – 5 Cr > 5 Cr 0.75% 0.70% 0.55% 0.45% 0.35% 0.30%
0.25% < 50 lakhs 50 lakhs – 2 Cr 2Cr-5Cr 5Cr- 10 Cr 10Cr -20 Cr > 20 Cr ----
Brokerage .10% Both Sides .08% Both Sides .05% Both Sides .04% Both Sides .035%
Both Sides .03% Both Sides --------
66
INDIABULLS:
Company Background: India Bulls is a retail financial services company present i
n 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 Equi
ty Analysis. The
equity analysis is a paid service even for A/c holders. Power India bulls: Accou
nt 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: Nego
tiable PAID Research: SCHEME WebBased-1-Month-500: WebBased-1-Month-6000: PrintR
eport-1-Month-750: 67 FACILITY View & Print on Website View & Print on Website V
iew & Print on Website Power India Bulls * Account Opening: Rs 750 *Demat: Rs.20
0 if POA is signed, No AMC for this DP * Initial Margin: NIL * Brokerage: Negoti
able
+ 10 Reports Delivered PrintReport-1-Month-9000: View & Print on Website + 10 Re
ports Delivered
Kotakstreet:
Company Background: Kotakstreet is the retail arm of Kotak Securities. Kotak Sec
urities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs
. Online Account Type Twin Advantage / Green Channel : 2 DP’s, Limit against share
s 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 Cash Expressway : Spot payme
nt, additional 0.5% charges
For Kotak FastLane / Keat Lite / Keat Desktop are trading interfaces. Keat Deskt
op with advanced tools comes at a charge of Rs 500 p.m, Non refundable. PRICING
OF KOTAK Account Opening : Rs 500 Demat: Rs 22.5 p.m Initial Margin : Rs 5000(Co
mpulsory) 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 structu
re w.e.f 1/4/2004 68
Slab structure of Kotak Delivery Vol p m < 1 lakhs 1 lakhs – 5 lakhs 5 lakhs – 10 la
khs 10 lakhs - 20 lakhs 20 lakhs – 60 lakhs 60 lakhs - 2 Cr >2 Brokerage * Square
Vol P.M. 0.65% 0.60% 0.50% 0.40% 0.30% 0.25% 0.20% < 10 lakhs 25 lakhs - 2 Cr 2
Cr 5 Cr > 5 Cr ---do-----Brokerage ** 0.10% Both Sides 0.05% Both Sides 0.04% Bo
th Sides 0.035% Both Sides 0.03% Both Sides --------
10 lakhs – 25 lakhs 0.08% Both Sides
* Brokerage is inclusive of All Taxes * DP Charges Extra * Min Brokerage of Rs 0
.05 per share Derivatives Vol off p m < 2 Cr 2 Cr - 5.5 Cr 5.5 Cr – 10 Cr > 10 Cr
* Brokerage is inclusive of All Taxes * Min Brokerage of Rs 0.01 per share
Brokerage 0.07% Both Sides 0.05% Both Sides 0.04% Both Sides 0.03% Both Sides
* Brokerage is inclusive of All Taxes.
69
5paisa
Company Background Indiainfoline was founded in 1995 and was positioned as a res
earch firm In 2000 e-broking was started under the brand name of 5paisa.com. Apa
rt 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 sec
urities, Company Fixed Deposits, Insurance. Limited ground network, present in 2
0 cities Online Account Types Investor Terminal : Investors / Students Trader Te
rminal : 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 + ST Delivery 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 Brok
erage : Trading 0.10% each side + ST Delivery 0.50% each side + ST (Negotiable t
o 0.05% each side & 0.25%) Account Access Charges Monthly Rs 800, adjustable aga
inst Brokerage Yearly Rs 8000, adjustable against brokerage 70
Sharekhan
Company Background

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56% in
Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific

Into broking since 80 years Focused on providing equity solutions to every segme
nt Largest ground network of 210 Branded Share shops in 90 cities
Online Account Types Classis Account / Applet : Investor in equities Speed Trade
: Trader in equities & derivatives
PRICING FOR HNI CLIENTS Speed Trade
Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1) Demat 1st
Yr : Incl in Account Opening Initial Margin : Nil Min Margin Retainable : NIL B
rokerage : Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Ta
xes (Negotiable based on volume)

Account Access Charges

Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr. No acce
ss charges for gold customers (Above 1 lac brokerage p.a)
71
Pricing for Retail Customers Classic / Applet Account Opening : Rs 750 Demat 1st
Yr : NIL Initial Margin : NIL Min Margin Retainable : NIL Brokerage: Trading 0.
10% each side + All Taxes Delivery 0.50% each side + All Taxes
Sharekhan online Trading Interfaces The customer can choose the online trading i
nterface that meets his requirement based on his trading habits and preferences
CLASSIC / APPLET The website is meant for customers who Invests in Equities
SPEEDTRADE The speed trade is meant for customers who trade in Equities DIAL-N-T
RADE – Toll Free The DNT is a value added services meant for all customers who Wan
t to transact but are not online. DNT – TOLL FREE FERTURES

Dedicated Toll – Free number for Order placements Automatic fund transfer with pho
ne banking* Simple and secure IVR based system for authentication No wait time,
on entry of Phone Id & TPIN, the call is transferred Trusted, professional advic
e of Tel-brokers who offer undiluted Sharekhan Research Inputs

After-hours order placement facility ** Transfer of money using phone banking is

available with Citibank only 72
** Between 9 a.m to 9.55 am and 3.30p.m to 6 p.m
CLASSIC/WEBSITE FEATURES

Facility to integrate choice of 4 Banks/DP/Trading Account Instant credit for sh

ares sold from DP Automatic pick-up of shares from linked DP for pay – in Automati
c deposit of shares into linked DP after pay-out 4 Times leverage on Margin Trad
es Margin Trading available for entire marker session Slab wise brokerage struct
ure for delivery and margin trades, shortly Free calls for order placement on To
ll-Free Trusted, Professional advice of Tele-brokers Facility to enter After Mar
ket Orders online & via Phone
CLASSIC/WEBSITE FEATURES

Daily Research newsletter (Investor Eye) Via e-mail Access to new IPO without an
y paperwork Advanced portfolio monitoring Tools Integrated DP account with tradi
ng account Option of linking additional 4 DP accounts to trading account Choice
of linking 4 banks to trading a/c for online payments Cash and Derivatives tradi
ng in a single account E-mail confirmations for all transactions Choice of elect
ronic/Physical contracts
SPEEDTRADE EXE FEATURES ALL THE FEATURES OF CLASSIC *Real – time streaming quotes
using 2 Marker Watches *Trade Execution in 2-3 seconds * Instant Order/trade con
firmations in the same window *Hot keys similar to a Broker’s Terminal 73
*MULTIPLE Tic-by-Tic Intra-day charts with multiple indicators * Availability of
2 ISP & 6 Servers ensuring maximum uptime * Customized alerts based on multiple
parameters * Cancel All/Square Off All Facility * Window for Top Gainers, Top L
osers, and Most Active updated Live
SWOT ANALYSIS
Strengths
1. 2. 3. 4. 5.
Strong credibility among investors because of its heritage. Excellent reputation
among the business society. Capability of providing superior customer service.
Quality research team. Easier access to the customer due to largest ground netwo
rk of 280 branded share shops in 120 cities.
6. 7. 8. 9.
Abundant information about economy and companies. Ability to attract and retain
superior and quality personnel. Highly sophisticated infrastructure. Efficient r
esearch and analysis team, which by interpreting the economy and company’s perform
ance accurately is enhancing the profitability of the clientele.
Weaknesses
1.
Limited customer appeal as the company product line does not include mutual fund
s which is increasingly becoming a preferred customer investment option.
2.
Inadequate product awareness among the retail investors.
74
3.
Limited customer appeal as the company does not have access to the BSE online sp
ace.
4. 5.
Brand awareness is low in the financial market. Promotional activities conducted
by the company are not at par with the other firms.
Opportunities
1.
Hyderabad covers only 2% of investors which gives huge potential for the market
penetration.
2. 3.
Bullish phase of the market attracts investing public. Access to the BSE online
space for the retail investors creates opportunity to increase clientele base.
4.
Awareness campaigns about online trading create new market.
Threats
1.
Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the ma
rket.
2.
Threat of entry is high in this industry as the manpower required is less and ca
pital requirement is medium.
75
Chapter 5
Finding & Observations
76
FINDINGS AND OBSERVATIONS:
1. 2. 3. 4.
Fluctuations are more in secondary market than any other market. There are more
speculators than investors. Information plays a vital role in the secondary mark
et. Previously rolling settlement is T+5 days, now it changed to T+2 days and fu
rther it will be changing to T+1 day.
5.
It was also observed that many broking houses offering internet trading allow cl
ients to use their conventional system as well just ensure that they do not loos
e them and this instead of offering e-broking services they becomes providers. s
ervice
6.
The number of players is increasing at a steady rate and today there are over a
dozen of brokerage houses who have opted to offer net trading to their customers
and prominent among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct
and geojit.
7.
The Bombay stock exchange sensex zoomed past the 7700 barrier for the first time
in history to achieve new all time high of 7800 intra day trade and ended at a
historic close of 7732 points.
77
Conclusion & Recommendations
78
CONCLUSION AND RECOMMENDATIONS 1. Things have changed for the better with the SH
AREKHAN going on-line coupled with endeavor to stream line the whole trading sys
tem, things have changed dramatically over the last 3 to 4 years. New and advanc
ed technologies have breached geographical and cultural barriers, and have broug
ht the countrywide market to doorstep. 2. In the present scenario to compete wit
h the Broker’s would require sound infrastructure and trading as per international
standards. 3. The introduction of on-line trading would influence the investors
resulting in an increase in the business of the exchange. It has helped the bro
kers handling a vast amount of transactions and this can be an efficient trading
, delivering, settlement system with adequate protection to investors. The tradi
ng of SHAREKHAN of the first day was Rs. 1.8 crores. 4. Due to invention of onli
ne trading there has been greater benefit to the investors as they could sell /
buy shares as and when required and that to with online trading. 5. The broker’s h
as a greater scope than compared to the earlier times because of invention of on
line trading. 6. The concept of business has changed today, this is a service or
iented industry hence the survival would require them to provide the best possib
le service to the clients. 7. I recommend the exchange authorities to take steps
to educate Investors about their rights and duties. I suggest to the exchange a
uthorities to increase the investors’ confidences. 8. I recommend the exchange aut
horities to be vigilant to curb wide fluctuations of prices. 9. The speculative
pressures are responsible for the wide changes in the price, not attracting the
genuine investors to the greater extent towards the market.
79
10. Genuine investors are not at all interested in the speculative gain as their
investment is based on the future profits, therefore the authorities of the exc
hange should be more vigilant to curb the speculation. 11. Necessary steps shoul
d be taken by the exchange to deal with the situations arising due to break down
in online trading.
80
BIBLIOGRAPHY
Books: 1. Investment management -V.K.Bhalla Investment management -Preethi Singh
2.
3. Security Analysis And Portfolio Management -V.A.Avadhani 4. Marketing of Fina
ncial Services -V.A.Avadhani Indian Financial System -M.Y.Khan
5.
Newspapers: The Times of India The Economic Times
81
 www.sharekhan.com www.economictimes.com www.moneycontrol.com www.bseindia.com ww
w.nseindia.com www.sebi.gov.in www.investors.com www.investopedia.com
ANY FEEDBACK PLZ MAIL US:
chandu9041@gmail.com
82