SUMMER INTERNSHIP PROJECT REPORT ON

“A STUDY OF ONLINE TRADING”

AT
SHAREKHAN PVT LTD

A Project report submitted in partial fulfillment of Bachelor of

Commerce (Hons.) (B.COM(H))

Submitted to: Submitted by:

Mrs.Aditi Joshi Kuldeep Verma

01324588817.

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL KALKAJI

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 STUDENT’S UNDERTAKING

I hereby certify that this is my original work and it has not been submitted
elsewhere.

KULDEEP VERMA

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 CERTIFICATE

I hereby certify that Kuldeep verma has completed the project under my
guidance on the title “A STUDY OF ONLINE TRADING”.

Name of Supervisor: Student Name:

Mrs. Aditi Joshi Kuldeep Verma

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 CONTENTS
Description Page No.

Introduction to topic

Objectives

Literature review

Company Profile

Research Methodology

Analysis & Interpretation

Findings & Inferences

Limitations

Recommendations and Conclusion

Appendices

Bibliography

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 ACKNOWLEDGEMENT

It is my proud privilege to express my profound gratitude the entire management of

JAGNNATH INTERNATIONAL MANAGEMENT SCHOOL and teachers of the institute.
I am grateful to Mrs. Aditi Joshi for their astute guidance, for her encouragement and
sincere support for this project work.

Sincere thanks to all my family members, friends for their support throughout the project
work.

Kuldeep Verma

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 Executive Summary

About the project

As per the title suggest the project has been prepared regarding the growth and
development of online trading in India. Online trading was initiated by NSE in India and
soon after the other exchanges also followed it. There was a major boom in year 2000
when lots of online trading companies came with a bang but only few were survived
because of lack of computer knowledge and low internet penetration. There are two
types of online trading companies one is the banking online trading companies and
other is non-banking online trading companies. A few examples of major banking online
trading companies are HDFC securities, ICICI direct.com, UTI securities etc. On the
other had non banking online trading companies are sharekhan.com, angelbroking, etc.
Today online trading contributes are about 8-10%. It is continuously growing and has a
huge market potential. A study was undertaken to determine the growth of various
online trading companies in India in terms of trade done by them through online and
services provided by them.

Major findings indicates that out of a survey of 300 respondents it was seen that major
investors prefer online trading because of few major factors such as time saving
convenience, protection through Freudian brokers etc. although during my research
project i’ve seen that most of the respondents feel online trading a secure way of
investing into stock market still a few of them feel it unsafe and a bit complicated but
they posses information about online trading. Today the online trading companies
having cut throat competition in our offering whose brokerage discounts lower margin
money and zero balance account. Due to the rising education awareness and use of
internet there is a huge potential for online trading in future and companies must come
up with innovative offerings to capture the untapped market.

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 CHAPTER 1:

INTRODUCTION TO THE TOPIC

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Stock exchanges to some extent play an important role as indicators, reflecting the
performance of the country’s economic state of health. Stock market is a place where
securities are bought and sold. It is exposed to a high degree of volatility, prices fluctuate
within minutes and are determined by the demand and supply of stocks at a given time.
Stock brokers are the ones who buys and sells securities on behalf of individuals and
institutions for some commission.

The Securities and Exchange Board of India (SEBI) is the authorized body, which
regulates the operations of stock exchanges, banks and other financial institutions. The
past performances in the capital markets especially the securities scam by ‘Hasrshad
Mehta’ has led to tightening of the operations by SEBI. In addition the international trading
and investment exposure has made it imperative to better operational efficiency. With the
view to improve, discipline and bring greater transparency in this sector, constant efforts
are being made and to a certain extent improvements have been made.

The Morakhiya 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 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.

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CHAPTER 2:

OBJECTIVES

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 OBJECTIVES

OBJECTIVES OF THE STUDY:

● It is to analyze the changes in trading after the exchange shifted from

outcry to online trading system.

● It is to study the functions of SHAREKHAN through various departments.

● To know the online screen based trading system adopted by SHAREKHAN

and about its communication 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 system.

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 CHAPTER 3:

LITERATURE REVIEW

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12
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 institutional 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

institutions, bank and government (SEBI) registered/controlled activities and
intermediaries. 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 market 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.

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CAPITAL MARKET
Capital market is a place where we can raise long-term
capital. Again the capital market is classified into two types
and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for
new projects as also for expansion, modernization, addition, diversify caption and
up gradation.

Function:
The main services of the primary market are origination, underwriting, and
distribution. Origination deals with the origin of the new issue. Underwriting
contract make the shares predictable and remove the element of uncertainty in
the subscription. Distribution refers to the sale of securities to the investors.

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding
securities are traded in the secondary market, which is commonly known as stock
market or 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.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange – buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
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 5. Depository
6. Depository participants.

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government
and semi-government bodies or other public bodies as also for shares and
debentures issued by the joint-stock companies. In the stock market, 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 the basic laws of supply and
demand.

Definition of a stock exchange:

“Stock exchange means anybody or individuals whether incorporated or not,

constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities,”

History of stock exchanges

The only stock exchanges operating in the 19th century were those of Mumbai setup in
1875 and Ahmadabad set up in 1894. These were organized as voluntary non- profit-
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) act of 1925 used to regulate trading in securities. Under
this act, the Mumbai stock exchange was recognized in 1927 and Ahmedabad in 1937.
During the war boom, a number of stock exchanges were organized. Soon after it
became a central subject, central legislation was proposed and a committee headed by
A.D.Gorwala went into the bill for securities regulation.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to

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 the listed companies, they help trading and raise funds from the market. Over the
hundred and twenty years during which the stock exchanges have existed in this
country and through their medium, the central and state government have raised
crores of rupees by floating public loans. Municipal corporations, trust and local
bodies have obtained from the public their financial requirements, and industry,
trade and commerce- the backbone of the country’s economy-have secured
capital of crores or rupees through the issue of stocks, shares and debentures for
financing their day-to-day activities, organizing new ventures and completing
projects of expansion, diversification and modernization.

Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts
(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 Exchange

Guwahati Stock Exchange

Hyderabad Stock Exchange

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange

Madras Stock Exchange

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 Madhya Pradesh Stock Exchange

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Uttar Pradesh Stock Exchange

Association

Vadodara Stock Exchange Ltd.

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
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FI’s) 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.

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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 and debt instruments.

● 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.

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
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 redresses 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
programmers and making available to them necessary informative inputs.

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REGULATORY FRAME WORK OF STOCK EXCHANGE
A comprehensive legal framework was provided 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 exchange:
The securities contract regulation act 1956 has provided uniform regulation for
the admission of members in the stock exchanges. The qualifications for
becoming 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 citizen.
● He should be neither a bankrupt nor compound with the creditors.
● He should not be convicted for fraud or dishonesty.
● He should not be engaged in any other 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 examination.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI

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 act 1992.according to this act, the SEBI shall constitute of a chairman and four
other members appointed by the central government.
With the coming into effect of the securities and exchange board of India act,
1992 some of the powers and functions exercised by the central government, in
respect of the regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

● To protect the interest of investors in securities.

● Regulating the business in stock exchanges and any other securities
market.
● Registering and regulating the working of intermediaries associated with
securities market as well as working of mutual funds.
● Promoting and regulating self-regulatory organizations.
● Prohibiting insider trading in securities.
● Regulating substantial acquisition of shares and take over of companies.
● Performing such functions and exercising such powers under the
provisions of capital issues (control) act, 1947and the securities to it by the
central government.

SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):

● Board of Directors of Stock Exchange has to be reconstituted so as to include

non-members, public representatives and government representatives to the
extent of 50% of total number of members.
● Capital adequacy norms have been laid down for the members of various
stock exchanges 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 by the investors.
The orders are of different types.
Limit orders: Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at
Rs.50.’Here, the order has clearly indicated the price at which it has to be bought
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 and the investor is not willing 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 for purchase and sale.
The broker can use his discretion to buy within the specified limit. Generally the
approximation price is fixed. The order stands as this “buy 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 given 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 loss 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 service to him. The
order to buy or sell specifying the number of shares of the company of investors’
choice is placed with the broker. The order may be of any type. After receiving
the order the broker tries to execute the order in his computer terminal.

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 bought and sold are paid in for n
days after the trading day of the particular transaction. Share settlement is likely
to be completed much sooner after the transaction than under the fixed settlement
system.
The rolling settlement system is noted 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 compulsory for trading in 10 securities selected on the basis of
the criteria that they were in compulsory demat list and had daily turnover of about
Rs.1 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 Securities Scheme (BELSS) with effect from Dec 31, 2001.
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 SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling
settlement experience it was further reduced to T+2 to reduce the risk in the
market and to protect the interest 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. The time limit and the additional changes for the
exception window are dedicated by 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 investors
in physical form upto 4 p.m and in electronic form upto 6 p.m. the depositories
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 processes 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/clearing corporation executes the pay-out of securities
and funds latest by 1.30
p.m on T+2 to the depositories and clearing banks. In the demat mode net basis
settlement is allowed. The buy and sale positions in the same scrip can be settled
and net quantity has to be settled.

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 brokers shout while
buying or selling the securities. The floor of the stock exchange is divided into a
number of markets also known as ‘post pit’ or wing based on particular securities
dealt there.
In the post pit or wing, the broker using ‘open outcry’ method makes an offer or
bid price. For making the necessary bargain, he quotes his purchase or sale price,
also known as offer or bid price. The dealer, to whom the price is quoted, quotes
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 his own price when the quotation of the dealer suits the broker, he may loose the
bargain. If he is not satisfied with the quote price, he may turn to some other
dealer. On the close of the bargain, the dealer 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 upon, 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 is 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
situation.
In audibility was another disadvantage of the outcry system.
Due to the above disadvantages of the outcry system the SHAREKHAN has
shifted from outcry system to online trading from February 29th 1997.

MANUAL TRADING

Trading procedure before introduction of online trading:

Trading on stock exchanges is officially done in the trading ring. In the trading ring
the space is provided for specified and non-specified sections, the members and
their authorized assistants have to wear a badge or carry with them an identity
card 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.
The stock exchanges operations are floor level are technical in nature .Non-
members 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 transact business, have to act through member
brokers only. They can also appoint their 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

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 investors, 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 may
take any one of the forms such as At Best Orders, Limit Order, Immediate or
Cancel Order, Limited Discretionary Order, and Open Order, Stop Loss Order.
Execution of order or contract:
Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special 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 exchange 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 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 in a purchase transaction, once the
shares are delivered to the client effects payment 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 broker in the price itself. With this, the
process ends.

DEMATERLIZATION:
Dematerialization is the process by which physical certificates of an investor are
converted 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
investor has to first open an account with a DP and then request for the
Dematerialization Request Form, which is DP and submit the same along with
the share certificates. 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. Dematerialization can only be done to those certificates, which are
already registered in your name and belong to the list of securities admitted for

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 Dematerialization 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 increasing.
Briefly, the process is as follows: after completion of transfer, the investor 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 company to his
DP. The company or its R&T agent would confirm the Demat request on its 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-which 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.
Dematerialization normally takes about fifteen to thirty days. To get back dematerialized
securities in the physical form, request DP for Dematerialization of the same is made.
Dematerialization is the process of converting electronic shares in to physical
shares.
Benefits of Demat:
It reduces the risk of bad deliveries, in turn saving the cost and wastage of
time associated with follow up for rectification. This has lead to reduction in
brokerage 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
such 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.

ONLINE TRADING

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Before getting into the online trading we should know some things about the
internet, e-commerce and etc.

1) What is Internet?
Internet is a worldwide, self-governed network connecting several other smaller
networks and millions of computers and persons, to mega sources of information.
This technology shrinks vast distances, accelerating the pace of business reforms
and revolutionizing the way companies are managed. It allows direct, ubiquitous
links to anyone anywhere and anytime to build up interactive relationships.

A combination of time and space, called the Internet promises to bring

unprecedented changes in our lives and business. Internet or net is an inter-
connection of computer communication networks spanning the entire globe,
crossing all geographical boundaries.
The use 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 expected to bring changes in every functional area of business activity including
management and financial services. It offers stock trading at a lower cost.

2. E-commerce
Electronic commerce is associated with buying and selling over computer
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
change, electronic technologies. It not only reduces manual processes and paper
transactions 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
required for electronic commerce. The computers are either workstations of
individual office works or serves where large databases and information reside.
Network connects both categories of computers; the various operating systems
are the most basis program within a computer. It manages the resources of the
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computer system in a fair and efficient manner.
Now we can enter in to the concept known as online trading.
In the past, investors had no option but to contact their broker to get real time
access to market data. The net brings data to the investor on-line 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 categorized 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 offering analysis and information to investors during broking and non-
broking hours based on their profile and needs, i.e. customized services.

● Brokers (now e-brokers) will offer value management or services like initial
public offering online, on-line asset allocation, portfolio management,
financial planning, tax planning, insurance services, etc. and enables the
investors to take 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 world you place orders on your stockbroker either verbally (personally
or telephonically) or in a written form (fax).” In online trading, you will access a
stockbroker’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 without 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 SEBI committees on internet based securities

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 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 enters his requirements (security, quantity,
price buy/sell) on broker’s site.
Objectives:

Internet trading is expected to

● Increase transparency in the markets,
● Enhance market quality through improved liquidity, by increasing quote

continuity and market depth,

● Reduce settlement risks due to open trades, by elimination of mismatches,
● Provide management information system,
● Introduce flexibility in system, so as to handle growing volumes easily
and to support nationwide expansion of market activity.

Besides, through internet trading three fundamental objectives of

securities regulation can be easily achieved, these are:
● Investor protection
● Creation of a fair and efficient market, and
● Reduction of the 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. Registration for on-line trading with broker
5. A bank account
6. Depository account
7. Compliance with SEBI guidelines for net trading

The following should be produced to get a demat account and online

trading account:

As identity proof & address proof any one of the following:

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1) Voter ID card
2) Driving license
3) PAN card( in case of to trade more than 50000)
4) Ration card
5) Bank pass book
6) Telephone bill

Other requirements, which are necessary

First page of the bank pass book and last 6 months statement.
Bank manager’s signature along with bank’s seal, manager registration code
on photograph.

For stock brokers:

1. Permission from stock exchange for net trading

2. Net worth of Rs. 50 lac
3. Adequate back-up system
4. Secured and reliable software system
5. Adequate, experienced and trained staff
6. Communication of order (trade confirmation to investor by e-mail)
7. Use of authentication technologies
8. Issue of contract notes within 24 hours of the trade execution
9. Setting up a website.

The net is used as a medium of trading in internet trading. Orders are

communicated to the stock exchange through website. Internet trading started in
India on 1st April 2000 with 79 members seeking permission for online trading.
The SEBI 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 System 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 broker. 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 should have the user id and password to enter into the
29
 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 order window of the website.

Procedure for net trading

Step 1: Those investors, who are interested in doing the trading over internet
system i.e. NEAT-IXS, should approach the brokers and get them self registered
with the Stock Broker.
Step 2: After registration, the broker will provide to them a Login name, Password
and personal identification number (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 series of stock and other parameters
like quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step 4: It is the process of review. Thus, the investor has to review the order
placed by clicking the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be sent by clicking
on the send option.
Step 6: The investor will receive an "Order Confirmation" message along with the
order number and the value of the order.
Step 7: In case the order is rejected by the Broker or the Stock Exchange for
certain reasons such as invalid price limit, an appropriate message will appear at
the bottom of the screen. At present, a time lag of about 10 seconds is there in
executing the trade.
Step 8: It is regarding charging payment, for which there are different 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 investor for
transfer of funds to his account.
Internet trading provides total transparency 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
30
trading investors can see themselves the price at which the deal takes place.

The time gap 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 offer;
News and research report
BSE and NSE movements
Stock analysis
IPO and mutual fund 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 website
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 word
5) Log on to the broker's site using secure user ID and password
6) Market watch page will show real time on-line market data
7) Trade shares directly by entering the symbol or number of the security
8) Brokers server will check your limit 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 settlement day
13) Demat account and the bank account will get debited and credited by
electronic means.

ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:

1) Limit / stop orders: orders that can be go unfilled, but there is an extra Charge
for this leeway facility since one need to hold a price.
31
 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) Cash account: where funds have to be available prior to placing the order.
4) Margin account: where orders can be placed against stocks, to increase
Purchasing power.

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 brokers' office. Thus we have access to a lot more information online.
2) Online trading has let room for smaller organizations to compete with
multinational organizations since it is no longer a leg it issue. Being online
does not identify 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 physical location is not an issue anymore. Companies can establish
themselves according to their gains and losses, for instance where tax (sales
and value added taxes) is best suited to them.
4) Online trading gives control to individuals and they can exercise it over
accounts thus comprehend what is going on when they trade. It is like going
back to school 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
bought 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.

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.

32
 2) They have a reason to participate in the market and learn about it.

3) It is interesting, cheap, easy, fast, and convenient.

4) A lot of information is online so they can keep up-to-date with what is

happening in the trading world.

5) It will give investors a greater choice and better realization.

6) The immediate impact will be competition and benefits will accrue to the

investors.

7) It will lead to brokerage commissions going down and brokers striving to

increase business afloat.

8) Investors will now go to place, which have better trading conditions and also

members to offer them better facilities.

9) They have access to numerous tools to invest, and can create their own
portfolio.

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

that the individual is himself / herself alone to.

3) A tax (sales tax and value added tax) evaluation becomes an issue, especially

when you are trading internationally.

4) One has no idea with whom he is dealing with on the other end.

5) According to a study 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 addicted trader gets, carried away online and begins to trade

33
 for too much which causes losses for him / her.

6) Individuals think that they are trading with the market directly and know what

they 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

removed, but that is not so. When the individuals click on the mouse, his trade

goes through 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.

34
 CHAPTER 4:

COMPANY PROFILE

35
 ABOUT SHAREKHAN LIMITED

Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group which
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 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 one lakh customers. 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 Speed Trade, 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 Speed Trade has
become a de facto standard for the Day Trading community 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 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 Morakhiya 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 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
36
 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.

• PROFILE OF THE COMPANY

Name of the company: Sharekhan

ltd. Year of Establishment: 1925

Headquarter : Sharekhan

SSKI

A-206 Phoenix House

Phoenix Mills
Compound Lower
Parel
Mumbai - Maharashtra, INDIA- 400013

Nature of Business : Service Provider

Services : Depository Services, Online Services and

Technical Research.

Number of Employees : Over 3500

Revenue : Data Not

Available

Website : www.sharekhan.com

Slogan : Your Guide to The Financial Jungle.

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.
37
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 serving more
than 7, 00,000 clients.

REASON TO CHOOSE SHAREKHAN LIMITED

Experience

SSKI has more than eight decades of trust and credibility in the Indian stock
market. In the Asia Money broker's poll held recently, SSKI won the 'India's Best
Broking House
for 2004' award. Ever since it launched Sharekhan as its retail broking
division in
February 2000, it has been providing institutional-level research and broking services
to individual investors.

Technology

With its online trading account one can buy and sell shares in an instant 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 investment in shares.

Convenience

One can call its Dial-N-Trade number to get investment advice and execute his
transactions. Sharekhan ltd. have a dedicated call-centre to provide this service via
a Toll Free Number 1800-22-7500 & 1800-22-7050 from anywhere in India.

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 queries. Its customer service
can be contacted via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice

Sharekhan has dedicated research teams of more than 30 people for fundamental
and technical researches. Its analysts constantly track the pulse of the market and
provide timely investment advice to its clients in the form of daily research emails,
online chat, printed reports and SMS on their mobile phone.

38
 SHAREKHAN LIMITED’S MANAGEMENT TEAM

Dinesh Murikya : Owner of the company

Tarun Shah : CEO of the company

Shankar Vailaya : Director (Operations)

Jaideep Arora : Director (Products & Technology)

Pathik Gandotra : Head of Research

PRODUCTS AND SERVICES

The different types of products and services offered by Sharekhan Ltd. are as
follows:

● Equity and derivatives trading

● Depository services
● Online services
● Commodities trading
● Dial-n-trade
● Portfolio management
● Share shops
● Fundamental research
● Technical research

Sharekhan offers two types of trading account for its clients

Classic Account (which include a feature known as Fast Trade Advanced

Classic Account for the online 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
and hence prefers to invest in stocks or who does not trade too frequently.
This account allow investors to buy and sell stocks online along with the
39
 following features like multiple watch lists, Integrated Banking, Demat and
digital contracts, Real-time portfolio tracking with price alerts and Instant credit
& transfer.

This account comes with the following features:

a. Online trading account for investing 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 using cell phones or landline phones
II. Automatic funds transfer with phone banking facilities (for
Citibank and HDFC bank customers)
III. Simple and Secure Interactive Voice Response based system
for authentication
IV. get the trusted, professional advice of Sharekhan limited’s Tele
Brokers
V. After hours order placement facility between 8.00 am and 9.30
am
c. Integration of: Online Trading +Saving Bank + 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 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.

This account comes with the following features:

a. Instant order Execution and Confirmation.

b. Single screen trading terminal for NSE Cash, NSE F&O & BSE.
c. Technical Studies.
d. Multiple Charting.
e. Real-time streaming quotes, tic-by-tic charts.
f. Market summary (Cost traded scrip, highest value etc.)
g. Hot keys similar to broker’s terminal.
h. Alerts and reminders.
i. Back-up facility to place trades on Direct Phone lines.

40
CHARGE STRUCTURE

Fee structure for General Individual:

Charge Classic Account Speed Trade Account

Account Opening Rs. 750/= Rs. 1000/=

Intra-day – 0.10 % Intra-day - 0.10%

Brokerage
Delivery - 0.50 % Delivery - 0.50%

Depository Charges:

Account Opening Charges Rs. NIL

Rs. NIL first year Rs. 300/= p.a. from
Annual Maintenance Charges
second calendar year onward

HOW TO OPEN AN ACCOUNT WITH SHAREKHAN LIMITED?

For online trading with Sharekhan Ltd., investor has to open an account. Following
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 Service executive
b. Or If one stays in Mumbai, he can call on 022-66621111

One can visit any one of Sharekhan Limited’s nearest branches. Sharekhan
has a huge network all over India (640 centers in 280 cities). One can also
log on to “http://sharekhan.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.

One can also visit the site www.sharekhan.com and click on the option “Open
an Account” to fill a small query form which will ask the individual to give details
regarding 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.

41
Generally the process of opening an account follows the following steps:

LEAD MANAGEMENT SYSTEM (LMS) / REFERENCES

CONTACT THE PERSON OVER PHONE OR THROUGH EMAIL

FIXING AN APPOINTMENT WITH THE PERSON

GIVIN
G
DEMON
ST-
RATION

YES NO

DOCUMENTATION

FILLING UP THE FORM

SUBMISSION OF THE FORM

LOGIN OF THE FORM

SENDING ACCOUNT OPENING KIT TO THE CLIENT

TRADING

42
Apart from two passport size photographs, one needs to provide with the following
documents in order to open an account with Sharekhan Limited.:

Photocopy of the clients’ PAN Card which should be duly attached

Photo copy of any of the following documents duly attached which will serve
as correspondence address proof:

a. Passport (valid)
b. Voter’s ID Card
c. Ration Card
d. Driving License (valid)
e. Electricity Bill (should be latest and should be in the name of the client)
f. Telephone Bill (should be latest and should be in the name of the
client)
g. Flat Maintenance Bill (should be latest and should be in the name of
the client)
h. Insurance Policy (should be latest and should be in the name of the
client)
i. Lease 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 other 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

Statement as a proof for correspondence address.

NOTE: Only Saving Bank Account cheques are accepted for the
purpose of Opening an account.

RESEARCH SECTION IN SHAREKHAN LIMITED

Sharekhan Limited has its own in-house Research Organisation which is known as
Valueline. 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 the
research is based on the Fundamentals and Technical analysis of different
companies and also taking into account various factors relating to the economy.

Sharekhan Limited’s research on the volatile market has been found accurate most
of the time. Sharekhan's trading calls in the month of November 2007 has given 89%
strike rate.

43
Out of 37 trading calls given by Sharekhan in the month of November 2007, 33 hit
the profit target. These exclusive trading picks come only to Sharekhan Online
Trading Customer and are based on in-depth technical analysis.

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 Limited won the CNBC AWARD for the year 2004.

44
 INDUSTRY PROFILE

Following diagram gives the structure of Indian financial system:

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 investors preferred exchanges that
45
 offered Online trading because of the following factors:

The ease of operation from the view of the both members and the investors.
Increase in the confidence of the investors because of higher level of
transparency.
Facilities better monitoring of the market by the exchange.
The best price achieved in buying and selling.

All these resulted in ever-increasing volumes on the exchanges offering the

online trading.

TRADING PROCEDURE AT SHAREKHAN STOCK BROKING

ShareKhan deals in buying and selling equity shares and debentures on the
National Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the
Over-The- Counter Exchange of India (OTCEI).

Share Khan is provided with a computer and required software from their
registered 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, deals, in-house deals, auction orders etc., through the computer.
The Central trading 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 message 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 will be executed. Otherwise, the order will be deleted
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 within the
prescribed period, the order will not cancel.

Useful links about Sharekhan:

46
1. Sharekhan Website: http://www.ShareKhan.com
2. Product Demo - Speed Trade:
http://www.sharekhan.com/Demos/speedtrade/index.html
3. Product Demo - Classic:
http://www.sharekhan.com/Demos/classic/index.html
4. Email: info@sharekhan.com
5. FAQs: http://sharekhan.com/KnowledgeCentre/Sharekhan_FAQ.aspx
6. Phone: 022-66621111
7. 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 exchanges. 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 last traded price, the day‘s opening
price, previous day’s closing price, highest and lowest 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.

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 the order is return back to the BWS, with the appropriate error
message. If Accepted at the CTS it will be added to the local pending order book.
The order will then be taken up for matching, if it is a buy order the system tries
to find a sell order, which fits the requirement of the buy order, when such match
47
 is found a trade gets executed. Each trade involves two brokers and respective
traders who 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. Orders sent by the brokers are two types:
1) Good for the day (GFD)
2) Good till cancellation(GTC)

Good for the day:

This is also called as “market order”. For an order if the member selects the deal
as good for the day, the order is treated as market order. If a “best bid” founds
match with “best order” then the transaction gets executed. 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 to 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 quotation has to be placed the next day.

Good till cancellation:

This order is forwarded to the last trading day of that settlement period. This is
also called as carry 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 executed.
For example, if a member a place purchase order of 500 shares of SBI @ 690 per share
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 the depository participants like SHARE
KHAN and others.
Finally, the settlement is made by means of delivering the share certificates along

48
 with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It
bears a stamp of the selling broker. The buyer then fills up the certificates fills up
the particulars 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 are 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-
delivery, the securities will go for auction.

DETAILS OF PROCEDURES:

Delivery in : The members who are in pay-out position delivers 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.

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 clearinghouse will be paid to members who are
in paying position.

All disputes arising between members regarding non-deliveries, non-payments,

good and bad deliveries pertaining to the settlement will be settled by the
settlement committee of the exchange.

49
 CHAPTER 5:

RESEARCH METHODOLOGY

50
The research design refers to the overall strategy that you choose to integrate the
different components of the study in a coherent and logical way, thereby, ensuring you
will effectively address the research problem; it constitutes the blueprint for the
collection, measurement, and analysis of data.

Data collection

Data collection is the process of gathering and measuring information on targeted

variables in an established systematic fashion, which then enables one to answer
relevant questions and evaluate outcomes. Data collection is a component of research
in all fields of study including physical and social sciences, humanities, and business.
While methods vary by discipline, the emphasis on ensuring accurate and honest
collection remains the same.

Primary data

Primary data is information that you collect specifically for the purpose of your research
project. An advantage of primary data is that it is specifically tailored to your research
needs. A disadvantage is that it is expensive to obtain.

Primary sources:

The data required for study are collected from:

● Questionnaire

A set of printed or written questions with a choice of answers, devised for the purposes
of a survey or statistical study.

● Visual and Audio Materials

Visual materials such as maps, photographs, prints, graphic arts, and original art forms
can provide insights into how people viewed and/or were viewed the world in which they
existed.

51
Advantages of primary data collection

● Is gathered first hand, following careful operationalization of variables and using

carefully chosen procedures.
● Might be considered to be more trustworthy, in that they have greater validity
than secondary data.

Secondary source

In contrast, a secondary source of information is one that was created later by

someone who did not experience first-hand or participate in the events or conditions
you're researching. For the purposes of a historical research project, secondary
sources are generally scholarly books and articles.

The data collected from secondary data are:

● Internet , websites
● Case studies
● Books
● Journal
● Magazines

Advantages of secondary data

The first advantage of using secondary data (SD) has always been the saving of time.

Accessibility. In the past, SD was often confined to libraries or particular institutions.

METHODOLOGY OF THE STUDY:

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

Primary method: This method includes the data collected from the personal
interaction with authorized members of Sharekhan Securities limited.

Secondary method: The secondary data collection method includes:

52
 The lecturers delivered by the superintendents of respective
departments. The brochures and material provided by Sharekhan
Securities limited.
The data collected from the magazines of the NSE, economic times, etc.
Various books relating to the investments, capital market and other related topics.

SAMPLING PROCESS

It is very true that to do the research with the whole universe. As we know that it is feasible
to go to population survey because of the n number of customers and their scattered
location. So for this purpose sample size has to be determined well in advance and
selection of sample also must be scientific so that it represents the whole universe.

So far as our research is concerned, we have taken sample size of 300 respondents. We
have selected Income Earners with saving to invest in Rajkot city.

Sample Universe Delhi

Sampling Technique Stratified and Random
Sample Size 300 Respondents
Sampling Unit: Professional =
Random
Business Man =
Random
Government Employees =
Random
Employees working in private firms =
Random

53
 CHAPTER 6:

ANALYSIS AND INTERPRETATION

54
 ANALYSIS & INTERPRETATION
1. Gender Ratio:

Male Female
196 104

2. Age:
The
image
cannot
be
displa
yed.

Below 30 30-50 More than 50

Your
compu
ter
may
not
hav e
enoug
h
memo
ry to
open
the
image,

212 35 53
…

55
3. Education Qualification:

Post Graduate Under Graduate

Graduate
112 172 16

4. Occupation:

56
 Govt. Non-Govt. Business Professional
Employees Employees Man
120 62 70 48

5. Investment Pattern:

Securities No. Percentage(%)

Bank F.D. 114 38
Post office 63 21
Insurance 28 9
Mutual Fund 30 10
Gold 22 7
Equity 19 6
Derivatives 10 3
Commodities 14 5

57
It can be seen from the graph that the respondents have given first preference for
investment to Bank F.D. and Gold, Equity, Derivatives and Commodity having almost
equal share.

Preference for investment Derivatives & Commodity:

Instruments No. Percentage(%)

Bullion 79 26
Spices 33 3
Fiber 19 11
Oil 50 17
Metal 43 14
F&O 76 25

58
When asked to the respondents that out of the given options which one would they prefer?
So they prefer Bullion first. So the preference for commodity (Bullion) is more than the
Derivatives.

Factors that are to be consider by Individual at the time of investment

Obstacles No. Rank

Risk Reduction 129 1
Leverage Benefit 112 2
Arbitrage Benefit 12 5
Speculative Motive 15 4
Liquidity preference 32 3

59
So, Each and every investor are not risk taker though they want more return from the
investment.

Medium prefer by individual at the time of investment

Factor No. Rank

Broker 117 1
Magazine 55 3
Internet 102 2
Other 26 4

Exchange preferred by individual Derivatives

60
BSE 155
NSE 145

Commodity
MCX 189
NCDEX 111

Constraints that are holding back to individual for investment

61
 No. Percentage
(%)
Lack of knowledge 64 21
Lack of Guidance 58 19
Lack of Fund Availability 70 23
Lack of Risk taking 108 36
Ability

Individual take decision through

No. Rank
Independently 97 1
Broker/Agent 73 2
News Channels 19 6
News Papers 20 5
Internet 68 3
Tax consultant 23 4

62
Medium reliable for individual for trading

Stock Broking Companies 168

Franchisees 43
Online 89

Most preferred Broking Companies of the Rajkot City

India Bulls 3
ShareKhan 2
Marwadi 5
Motilal oswal 8
HDFC 7
Securities
ICICI Direct 1
Kotek street 6
Skse 4
63
THE MAJOR PLAYERS IN ONLINE TRADING
1) SHAREKHAN.COM
2) 5PAISA.COM
3) KOTAKSTREET.COM
4) INDIABULLS.COM
5) ICICIDIRECT.COM
6) HDFCSEC.COM

The
ima
ge
can
not
be
disp
laye
d.
You
r
com
put
er
ma
y
not
hav
e
eno
ugh
T
me
h
mor
e
iy to
ope
m
n
a
the
g
ima
…

T
h
e
i
m
a
g
e
c
a
n
…

64
SWOT ANALYSIS

Strengths

1. Strong credibility among investors because of its heritage.

2. Excellent reputation among the business society.

3. Capability of providing superior customer service.

4. Quality research team.

5. Easier access to the customer due to largest ground network of 280 branded

share shops in 120 cities.

6. Abundant information about economy and companies.

7. Ability to attract and retain superior and quality personnel.

8. Highly sophisticated infrastructure.

9. Efficient research and analysis team, which by interpreting the economy and

company’s performance accurately is enhancing the profitability of the

clientele.

Weaknesses

1. Limited customer appeal as the company product line does not include

mutual funds which is increasingly becoming a preferred customer

investment option.

2. Inadequate product awareness among the retail investors.

3. Limited customer appeal as the company does not have access to the BSE

online space.

4. Brand awareness is low in the financial market.

5. Promotional activities conducted by the company are not at par with the

other firms.

65
Opportunities

1. Hyderabad covers only 2% of investors which gives huge potential for the

market penetration.

2. Bullish phase of the market attracts investing public.

3. 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 market.

2. Threat of entry is high in this industry as the manpower required is less and

capital requirement is medium.

66
 CHAPTER 7:

FINDINGS & INFERENCES

67
FINDINGS AND INFERENCES:

1. Fluctuations are more in secondary market than any other market.

2. There are more speculators than investors.
3. Information plays a vital role in the secondary market.
4. Previously rolling settlement is T+5 days, now it changed to T+2 days and
further it will be changing to T+1 day.
5. It was also observed that many broking houses offering internet trading allow
clients to use their conventional system as well just ensure that they do not
loose them and this instead of offering e-broking services they becomes
service providers.
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.

68
 CHAPTER 8:

LIMITATIONS

69
 LIMITATIONS OF THE STUDY:

Despite of the training my level best, there were still some limitation which I
think remains there to draw fruitful conclusion. There were some practical
problem which come across and could not be properly death with

The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market.

As a client one will access the NSE through a server of the online
brokerage and this may involve queuing delays

Individuals may have personal bias towards particular investment option so they may not
give correct information and due to which the conclusion may be derived.

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to do so.
If he want advice on a particular stock in his portfolio he may not even be able to get
that.

70
 CHAPTER 9:

CONCLUSION AND RECOMMENDATION

71
CONCLUSION AND RECOMMENDATIONS
1. Things have changed for the better with the SHAREKHAN going on-line
coupled with endeavor to stream line the whole trading system, things have
changed dramatically over the last 3 to 4 years. New and advanced
technologies have breached geographical and cultural barriers, and have
brought the countrywide market to doorstep.

2. In the present scenario to compete with 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 brokers
handling a vast amount of transactions and this can be an efficient trading,
delivering, settlement system with adequate protection to investors. The
trading of SHAREKHAN of the first day was Rs. 1.8 crores.
4. Due to invention of online 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 has a greater scope than compared to the earlier times because
of invention of online trading.
6. The concept of business has changed today, this is a service oriented industry
hence the survival would require them to provide the best possible 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 authorities to increase
the investors’ confidences.
8. I recommend the exchange authorities 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.

72
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
exchange should be more vigilant to curb the speculation.
11. Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.

73
APPENDICES

74
 QUESTIONNAIRE

1. Name:____________________________________________

2. Gender: Male Female

3. Age: 21-35 36-50 Above 50

4. Education: ___________________________________

5. Occupation: Professional Businessman

Govt. Employee Employess working

Q.1 Do you invest Your surplus money in saving instrument?

Yes: No:

Q.2 If YES, Where do You invest Your savings?

Bank F.D.: Gold:

Post schemes: Equity:

Insurance: Derivatives:

Mutual Fund Commodities

Q.3 If You invest in Derivatives OR Commodity, Which would be your first

preference from the list given below?

Bullion: Oil & Oil Seed:

Spices: Metal:

Fiber: F&O:

75
Q.4 Which factor plays crucial role when you make a decision to invest in
Derivatives & Commodity?

Risk Reduction: Leverage Benefit:

Arbitrage Benefit: Speculative Motive:

Liquidity preference:

Q.5 which mediums do you use to invest in Derivatives & Commodity?

Broker: Internet:

Magazine: News channels

Q.6 which stock exchange would you prefer to carry out your transaction?

BSE: NSE:

MCX: NCDEX:

Q.7 Do You consider investment in Derivatives & Commodities are safer then
Other investment avenues?

YES: No:

Q.8 If No, than What are constraints that are holding you back?

Lack of Knowledge:

Lack of Guidance from Broker:

Lack of Funds Availability:

Lack of Risk taking ability:

Q.9 How do You take decisions If You want to trade in Derivatives & Commodity?

Independently: Broker/Agent:

News Channels: News Papers:

Internet: Tax Consultant:

Q.10 How much time will you be able to devote for learning Derivatives OR
Commodity?

76
 ½ Hour: 1 Hour :

2 Hour :

Q.11 According to You, Which medium is the most reliable for trading in
Derivatives & Commodity ?

Stock Broking Company:

Franchises:

Online:

Q.12 Name any 2 Stock Broking companies that deal in Derivatives & Commodity

1.____________ 2.____________

77
BIBLIOGRAPHY

78
 BIBLIOGRAPHY

Books:

1. Investment management
-V.K.Bhalla

2. Investment management
-Preethi Singh

3. Security Analysis And Portfolio Management

-V.A.Avadhani

Newspapers:

The Times of India

The Economic Times

Websites:
❖ www.economictimes.com

❖ www. moneycontrol.com

❖ www.bseindia.com

❖ www.nseindia.com

❖ www.investopedia.com

❖ www.sharekhan.com

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