Summer Project Report On

A Comparative study on Services Provided by Different Broking Firms

BY: xxxxxxxxxxxxxx

AUG, 2010

Deepshikha Institute Of Management Studies, Institutional Area, Sitapura, Jaipur

Certificate of Approval

The following Summer Project Report titled "A Comparative Study on Services Provided by Different Broking Firms" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Master of Business Administration for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.

Certificate

Jitendra Virahy as
JVIRAHYAS@GMAIL.COM

Acknowledgement

I avail this opportunity to acknowledge my deep sense of gratitude and indebtedness to Mr. Jitendra Virahyas and Mr. Nitesh Jain (Sales Manager- Religare Securities Ltd), who rendered me their invaluable help, suggestions and encouragement with monumental patience and constant guidance & other staff members of Religare for their kindness and valuable guidance and assistance, which helped me in the completion of my vocational training. I would also like to thank my project guide Prof. Jitendra Virahyas, whose valuable suggestions, throughout the training session, helped me a lot to understand the real meaning of such internship.

CONTENTS

1. Overview of the Indian Retail Brokerage Industry Industry Definition and Segmentation.10 Timeline: Evolution of the Retail Brokerage Market Pre 1990 .12 Fast forward to 1990s .13 Post 2000 14 Stock Exchanges and Stock brokers .15 Recent Developments Online trading .. 19 T+2 rolling settlement 23 Growing derivative market ...25 Fall in brokerage rates ..26 Advanced Technology ..27 Market Size: Growth of brokerage market .28 2. Porter's Five Forces Analysis Buyer Power ..30 Supplier Power ..30 Intensity of Competition ...31 Threat of New Entrants 32 Threat of Substitutes 33

3. Comparative Assessment Company Profiles ...34 Strengths and Weaknesses of Religare 50 4. METHODOLOGY & TECHNIQUES Methodology For Sampling.. ..52 Methodology For Acquiring Customers . 52 Sources of Data 53 Process of Dematerialization ...53 Working Model of Depository System...55 5. Findings and Observations ..59 6. Conclusion ...63 7. Recmmendations ..65 8. References 9. Appendices Questionnaire..67 ..66

List of Figures

Pay-In and Pay-Out of Funds and Shares Derivatives Growth in Past Years Average Daily Turnover Preference of Investments Awareness of online trading Awareness of Religare Awareness of Religares facilities Competitors Awareness Satisfaction with current broker Frequency of Trading Invested Earnings in share Trading

25 26 30 60 61 61 61 62 62 63 63

ABSTRACT
To maintain and cope up with the growing competition from the various online trading providers, Religare needs to find potential customer and also target the new investors. The project is being done to train the people about the whole procedure essential to open an online trading account couple with demat account. The project will help in exploring the area where there is the feasibility of acquiring more new investors. It would also help in knowing the various competitors of the industry and exploring the areas through which competitive advantage could be obtained. The report is divided into various sections.

1. About Stockbroker & online trading:

This part describes about stockbroker and how brokers deal with customers and stock exchanges and also define online trading with merit and demerit.

2. Company Profiles:
This part describes the company profile. This part recognizes the achievements and rewards the company has achieved, it also gives little insights into what company offers to the Corporate and the Consumers. This section also describes the kind of technology used.

3. About Online trading account

Since the project leads to opening of online trading account, this section gives the details of what all services Religare offers to the consumer. This section gives the detail of how different services provided by the others online trading account and how is Religare superior from them.

4. Procedures and requirement for opening a Trading cum demat account

This section gives the detail of the different conditions that have to be met for opening a trading cum demat account. The section contains the document, which is required to open an account.

5. Different competitors in online trading

This section gives the detail of the different competitors and different services provided by them. Then we have compared there services with our services.

6.Different formalities for opening demat account

This section throws some light over different document as well as hardware and software requirement for opening of online trading cum demat account.

7. Learning about Dematerialization

This section tells you about different concepts regarding dematerialization. How you can get your security dematerialized? Growth rate of dematerialization etc.

Overview of the Indian Retail Brokerage Industry

Industry Definition and Segmentation

The Indian Retail Brokerage Industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a commission or transaction fee basis. Hence, to understand this industry we have to study Security Market:

Security Market
Which is the most televised structure in India? A study has revealed that it is not the Rastrapati Bhawan or Parliament House; it is not the Taj Mahal; it is not even the abode of Lord Tirupati; it is the Pheroze Jeejeebhoy Towers which houses the oldest securities market participant in India, i.e. The Stock Exchange, Mumbai. This indicates our intimate relationship with the securities market. In todays rational world, it really means the immense contribution of the securities market to our life and economy. Which is the most reformed sector / segment / market in the Indian economy? Which sector / segment / market of the economy has witnessed as much as nine special legislative interventions during the last decade? Which market / segment / sector acquired the first ever autonomous regulator (which in course time became the model regulator) in India? Which sector / segment / market of the economy consumes 3/4th space of the pink newspapers everyday? Which sector / segment / market of the economy most promptly reflects the feel good factor? The answer to all these questions is the securities market. It expresses the significance of the securities market in our life. Two years down the line, there are few questions to ask-Which is the securities market first to set up demutualised stock exchanges in the World? Which is the securities market first to use satellite communication technology for securities transactions? Which is the securities market first to introduce the straight through processing in securities transactions? Which major securities market has implemented T+2 rolling settlement? Which is the largest market for stock futures? Which securities market started real time on line position monitoring of brokers? Which is the securities market where trading terminals go off automatically when the margins are exhausted? Probably answer to all of these is the Indian securities market. This has earned a place of respect amongst the comity of securities markets in the World. 10

Segmentation Of Security Market :

It has two main interdependent segments: Primary market and the Secondary market. The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. In primary market certain companies issue their shares directly to the public, collect applications and after sorting out the good issues, they put in their applications. The share brokers get their brokerage on the transactions made. The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. The secondary market comprises of brokerage that a broker earns in the buying and selling of companies that are listed in the stock exchange. These people are in charge of the conformation and carrying out of transactions. Orders are taken and deliveries are made in the latter half of the day. The erratic fluctuation of rates in the share market makes the activity in a trade market a dynamic process. It is necessary for a broker to have adequate knowledge about the economic and political factors as they affect the share market.

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Evolution of the Retail Brokerage Market

A Brief History : 1. Pre 1990

Though the historical records relating to securities market in India is meager and obscure, there is evidence to indicate that the loan securities of the East Indian Company used to be traded towards close of the 18th century. By 1830s, the trading in shares of banks started. The trader by the name of broker emerged in 1830 when 6 persons called themselves as share brokers. This number grew gradually. Till 1850, they traded in shares of banks and securities of the East India Company in Mumbai under a sprawling Banyan Tree in front of the Town Hall, which is now in the Horniman Circle Park. It is no surprise that the majestic Phiroze Jeejeebhoy Towers is located at the Horniman Circle. In 1850, the Companies Act introducing limited liability was enacted heralding the era of modern joint stock company which propelled trading volumes. The American Civil War broke out in 1861 which cut off supply of cotton from the USA to Europe. This heightened the demand for cotton from India. Cotton prices increased. Exports of cotton grew, payments were received in bullion. The great and sudden spurt in wealth produced by cotton price propelled setting up companies for every conceivable purpose. Between 1863 and 1865, the new ventures raised nearly Rs.30 crore in the form of paid up capital and nearly Rs. 38 crore of the premia. Rarely was a share which did not command a premium between 1861 and 1865. The Back Bay Reclamation share with Rs.5,000 paid up was at Rs.50,000 premium, the Port Canning share with Rs. 1,000 paid up was at Rs.11,000 premium, etc. There was a share mania and every body was after a piece of paper, variously called allotments, scrips and shares. The people woke up only when the American Civil war ended. Then all rushed to sell their securities but there were no buyers. They were left with huge mass of unsaleable paper. This occurred then. This also occurs today at regular intervals. There is, little seems to have changed since then; the bubbles and burst continue to be a perennial feature of the securities market world over. The depression was so severe that it paved way for setting up of a formal market. The number of brokers, which had increased during the civil war to about 250, declined. During the civil war, they had become so influential and powerful that even the police had only salams for them. But after the end of the civil war, they were driven from pillar to post by the police. They moved from place to place till 1874 when they found a convenient place, which is now appropriately called

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Dalal Street after their name. They organized an informal association on or about 9th July 1875 for protecting their interests. On 3rd December 1887, they established a stock exchange called Native Share and Stock Brokers Association. This laid the foundation of the oldest stock exchange in India. The word native indicated that only natives of India could be brokers of the Exchange. In 1880s a number textile mills came up in Ahmedabad. This created a need for trading of shares of these mills. In 1894, the brokers of Ahmedabad formed "The Ahmedabad Share and Stock Brokers' Association". The 1870s saw a boom in jute prices, 1880s and 1890s saw boom in tea prices, then followed coal boom. When the booms ended, there were endless differences and disputes among brokers in eastern India which was home to production of jute, tea and coal. This provoked the establishment of "The Calcutta Stock Exchange Association" on June 15, 1908. Then followed the proliferation of exchanges, many of them even do not exist today. The rest is history.

2.Fast Forward to 1990s

In 1980s and 1990s, it was increasingly realized that an efficient and well developed securities market is essential for sustained economic growth. Without venturing into a detailed discussion, it would suffice if I just say that the securities market fosters economic growth to the extent it augments the quantities of real savings and capital formation from a given level of national income and it raises productivity of investment by improving allocation of investible funds. The extent depends on the quality of the securities market. In order to improve the quality of the market, that is, to improve market efficiency, enhance transparency, prevent unfair trade practices and bring the Indian market up to international standards, a package of reforms consisting of measures to liberalize, regulate and develop the securities market is being implemented since early 1990s.

Legal Developments :
Control of capital issues was introduced through the Defence of India Rules in 1943 under the Defence of India Act, 1939 to channel resources to support the war effort. The control was retained after the war with some modifications as a means of controlling the raising of capital by companies and to ensure that national resources were channeled to serve the goals and priorities of the government, and to protect the interests of investors. The relevant provisions in the Defence of India Rules were replaced by the Capital Issues (Continuance of Control) Act in April 1947.

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Though the stock exchanges were in operation, there was no legislation for their regulation till the Bombay Securities Contracts Control Act was enacted in 1925. This was, however, deficient in many respects. Under the constitution which came into force on January 26, 1950, stock exchanges and forward markets came under the exclusive authority of the central government. Following the recommendations of the A. D. Gorwala Committee in 1951, the Securities Contracts (Regulation) Act, 1956 was enacted to provide for direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges and to prevent undesirable transactions in securities.

3. Post 2000
Gone are the days when you left orders with your broker, received conformations on the price and quality of the shares at the end of the day and the payment made upfront or received after delays. Your securities settlement took days to reflect in your account. Internet has changed the way you do trading. The entire process is speedy with limited to zero paper work. NSE launched internet trading in early February 2000. It is the first stock exchange in the country to provide a web-based access to investors to trade directly on the exchange. The process : Log on to the brokers site of your choice where you get real time quotes, place a buy or sell order on the spot, and direct the site to debit the requisite amount. In some time you get confirmation and after the trade settlement your bank and depository account will reflect the changes which you can view anywhere, anytime. Online trading has become seamless. All that you need is a PC, a modem, subscription to an Internet Service Provider (ISP), a saving and a depository account with any bank providing online trading facility. Along with stocks one can trade in mutual funds and investment instruments. The advantage with online trading that you can operate in both BSE and NSE depending on the broking firm. NSE introduced for the first time in India a fully automated screen based trading. It uses a modern fully computerized trading system designed to offer investor across the length and breadth of country a safe and easy way to invest. The NSE trading system called National Exchange for Automated Trading (NEAT) is a fully automated screen-based trading system which adopts the principle of an order driven market.

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Stock Exchanges and Stock Brokers BOMBAY STOCK EXCHANGE

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

extent, been serving the purpose of quantifying the price movements as also reflecting the sensitivity of the market in an effective manner. The number of companies listed on the Bombay Stock Exchange has registered a phenomenal increase from 992 in the year 1980 to about 7831 companies by the end of Dec 2009 and their combined market capitalization rose from Rs. 5,421 crores to around Rs. 40,12,307 crores at end of Dec 2009. These factors necessitated compilation of a new broad-based index series reflecting the present market trends in a more effective manner and providing a better representation of the increased equity stocks, market capitalization as also the newly emerged industry groups. Towards this end, the Exchange constructed and launched on 27th May 1994, two index series viz. the BSE-200 and the DOLLEX.

Coverage: The equity shares of 200 selected companies from the specified
and non-specified lists of this Exchange have been considered for inclusion in the sample for `BSE-200'. The selection of companies has primarily been done on the basis of current market capitalization of the listed scrips on the exchange. Besides market capitalization, the market activity of the companies as reflected by the volumes of turnover and certain fundamental factors were considered for the final selection of the 200 companies.

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Choice of Base Year: The financial year 1989-90 has been chosen as the
base year for the price stability exhibited during that year and due to its proximity to the current period.

NATIONAL STOCK EXCHANGE

The 18-year-old National Stock Exchange (NSE) has outshined the 135 years old Bombay Stock Exchange (BSE) in terms of turnover and volumes. The BSE has lost its market share in these segments from 36 per cent to 31 percent in last three years. The turnover in BSE stood at around Rs 98,082 crore as on Dec 2009 while the turnover in NSE was Rs 1,44,638 crore. The volumes (numbers of shares traded) of NSE at 2.94 crore was also much higher than the volumes of BSE. The NSE has rewritten a number of rules and upset many traditions. As the derivatives segment has immense effect on the cash market, the movement in this segment mostly determines the trend in the market. Against nearly 1800 companies listed on the NSE, the BSE has nearly 7,831 listed companies. Despite such a huge number of listed companies, the total market capitalization of BSE is around Rs 40,12,307 crore while on the other hand NSE has a total market capitalization of Rs 47,01,923 crore. The most tracked index on NSE, CNX Nifty also has more number of stocks than the BSE Sensex. Nifty represents 50 stocks while the Sensex represents only 30 stocks. The presence of more stocks on Nifty gives a better valuation than Sensex.

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STOCK BROKERS

A stockbroker is a person who buys and sells stocks on behalf of another person (or company). Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or decline in price. In such cases the term broker makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves dealers, stock traders or simply traders. In the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker informs the client and charges the client a markup or markdown from the prevailing market price. In the UK: When acting as an agent, the stockbroker charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker is obliged to inform the client and no commission is charged Roles similar to that of a stock broker include investment advisor, financial advisor, and probably many others. A stockbroker may or may not be also an investment advisor. Similarly, investment advisor may or may not be a stockbroker.

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The Certified Financial Planner designation initially offered by the American College in Pennsylvania is considered by many to be the next educational step a stock broker can take in order to be consider a legitimate and ethical financial consultant. The stock market will have either one or a number of stock exchanges. In India, the most famous are the Bombay Stock Exchange and the National Stock Exchange. Then there are regional exchanges like the Ahmedabad Stock Exchange, Calcutta Stock Exchange and the Cochin Stock Exchange. The two most prominent ones are the BSE and NSE. Together, they account for most of the stock trades in the country. This means that if they catch a cold, exchanges all over the country will sneeze People like you and me just cannot go to a stock exchange and buy and sell shares. If we want to do so, we have to get in touch with someone who is a member of the stock exchange. This means we need to talk to a stockbroker. Stockbrokers buy and sell shares for themselves to make a profit. They also buy and sell shares on behalf of people like you and me and take a commission for doing so (more on this on another day). Every stockbroker has to be registered with the Securities and Exchange Board of India, which is the stock market regulator. SEBI's main function is to make sure those who invest in the stock market follow the rules and no scams take place. It is supposed to act as a watchdog on behalf of the investors. Readers from Mumbai may have seen the imposing stock exchange building called Jeejeebhoy Towers. That's the home of the BSE. But you would be disappointed if you think you can step inside the building and watch the market excitement firsthand as brokers frenziedly trade stocks. That's because all stock markets in India are now electronic. Brokers have BSE computer terminals in their offices, from which they trade. They also have BSE terminals in other cities and don't have to be physically present in Mumbai to trade on the BSE. This means that even if you stay outside Mumbai, you can contact a BSE broker and buy or sell stocks on the BSE. Years ago, the BSE was a place where brokers physically bought and sold stocks and shares through a system known as 'open outcry'. As a result, the market then resembled a fish or vegetable market. If you watch CNBC, you'll find that the New York Stock Exchange still follows that system, with traders rushing around on the trading floor, scribbling trades on little slips of paper. Actually, the improvements in the BSE came about when the government promoted the NSE. The NSE was an electronic exchange from the beginning and it started competing with the BSE, which in turn forced the BSE to tone up its act.

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Recent Developments
Online Trading
Online Trading is a service offered on the internet for purchase and sale of shares. In the real world, you place orders with your stockbroker either verbally (personally or telephonically) or in a written form (fax). In Online Trading, you will access 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. . There are 2 types of online trading service: discount brokers and full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don't. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the Option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher.5Paisa.com, ICICIDirect.com, IndiaBulls.com, Religare.in,Geojitsecurities.com, HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in India. The various transactions involved in online trading can be shown from the point of view of the Client Broker Stock Exchange

The client places an order via the net by logging on to his brokers site. The broker accepts and executes the order, and places it with the exchanges. The exchange accepts the order after checking the share limit for the day. The brokers makes the payment either directly via the clients bank account or pays through his own account and recovers it later from the client. The exchange receives money and completes the settlement. The client is intimated about the settlement either through the demat account or via E-mail.

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BENEFITS OF ONLINE TRADING

This mode of trading has shifted the trading power from stockbrokers to individual investors. The advantages are that it:

1. Ensures the best price for investors

This technique offers the best price for the buying and selling transactions of the investors, by ensuring proper matching of their orders within the communication network itself. Also due to the high level of transparency with regard to display of information relating to the specific stocks and company profiles ,the investors will be able to get the best quote for the shares. This leads to a reduction in the transaction cost for the investors.

2. Offers liquidity to the investors

Online trading offers 24-hour trading facilities. or trading for longer hours when compared to the traditional stock exchanges. This provides added liquidity to the investors.

3. Offers greater transparency

Online trading gives greater transparency to the investors by providing them an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit to the depository account of the investor. All these stages are subject to inspection, thus bringing in transparency into the system.

4. Enables hassle free trading

Online trading integrates the bank, the brokerage and the demat accounts, which leads to easy and paperless trading for the client.

5. Allows quick trading

The investor will be able to execute the entire trading transaction, right from logging on to the broker's site, to the execution and settlement of his bank account, in a very short period of time.

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6. Provides a level playing field

Trading on the net, gives even the smallest retail investor access to information that earlier was available only to the big traders. This provides a level playing field for investors in the securities market.

7. Reduces the settlement risk

This method of trading reduces the settlement risk for the investor, as in this case no short sale is possible. That is .the seller will not be able to sell the securities unless he has their actual possession. In the case of a demat account (required for an online transaction), when a seller wants to sell the securities, his demat account is checked by the Depository Participant before executing the sale transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities.

HURDLES FOR ONLINE SHARE TRADING

1. Internet fraud
In India, we see this kind of frauds happening in different way due to nature of our society. Here when you talk to broker's staff while buying or selling, he will usually advise you to buy share which he has bought and plans to dump when price goes up. We have seen enough of PUMP and DUMP even without help of internet in cases of Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult following with Index of 10 shares called K-10). Today lot of investors depending on TV channel for recommendation about stocks to sell, or buy or hold. Channels like CNBS offer array of experts from economist to brokers to analyst. Most of these people have vested interest in stocks they recommend and promote. One of the most common forms of securities fraud on the Internet involves an imposter who attempts to manipulate the price of a stock by disseminating phony press releases or information, or creating phony websites. A recent example of this scheme is the hoax perpetrated against US based, PairGain Technologies.

2. Volatility of Indias Stock Markets

Recent market developments have once more focused attention on the volatility that has come to characterise Indias stock markets. Movements in the Sensex during the two years have clearly been driven by the behaviour of foreign institutional investors (FIIs), who were responsible for net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a peak level of net purchases of $3.1 billion as 21

far back as 1996 and net investments by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last two years account for the two bouts of medium-term buoyancy that the Sensex recently displayed. Given the presence of foreign institutional investors in Sensex companies and their active trading behaviour, their role in determining share price movements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, although there are more than 4700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.

3. Rampant Speculation
The Indian stock markets are perhaps the only place in the world where you can buy shares without having to put money on the table and sell shares you do not own. This extraordinary situation has facilitated rampant speculation by all sorts of operators the indigenous variety, FIIs and even our own native financial institutions (FIs) as the massive UTI scandal of recent years has demonstrated. So, when the stock markets were made to collapse by a record 800-plus points on May 17 under the pretext that the Left is opposed to divestment, the profits reaped by short sellers were astronomical and incalculable. Could this situation have been avoided? As aforesaid, the answer is yes. The electronic monitoring system in both the Bombay Stock Exchange and the bigger National Stock Exchange automatically stopped trading for half-an-hour when the two markets respectively collapsed by 10 percentage points. Thereafter when trading resumed and the markets fell further to another stipulated lower level, the electronic system automatically stopped all trading again for another two hours. A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist attacks in New York City. At the end of the day the stock exchange authorities of both the New York Stock Exchange and the heavily-weighted software exchange called NASDAQ suspended all trading for the remainder three working days during that fateful week to safeguard investor interests.

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T+2 Rolling Settlement

As per the directive by SEBI, all transactions in all groups of securities in the Equity Segment and Fixed Income securities listed on the Exchange are required to be settled on T+2 basis w.e.f. from April 1, 2003. The settlement calendar, which indicates the dates of the various settlement related activities, is drawn by the Exchange in advance and is circulated among the market participants. Under rolling settlements, the trades done on a particular day are settled after a given number of business days. A T+2 settlement cycle means that the final settlement of transactions done on T, i.e., trade day by exchange of monies and securities between the buyers and sellers respectively takes place on second business day (excluding Saturdays, Sundays, bank and Exchange trading holidays) after the trade day. The transactions in securities of companies which have made arrangements for dematerialization of their securities are settled only in demat mode on T+2 on net basis, i.e., buy and sell positions of a member-broker in the same scrip are netted and the net quantity and value is required to be settled. However, transactions in securities of companies, which are in "Z" group or have been placed under "trade to trade" by the Exchange as a surveillance measure (T and TS group) , are settled only on a gross basis and the facility of netting of buy and sell transactions in such scrips is not available. The Exchange has introduced a new segment named BSE Indonext w.e.f. January 7, 2005. S group consists of scrips from B1 & B2 group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group. The transactions in 'F' group securities representing "Fixed Income Securities" and "G" group representing Govt. Securities for retail investors are also settled at the Exchange on T+2 basis. In case of Rolling Settlements, pay-in and pay-out of both funds and securities is completed on the same day. The members are required to make payment for securities sold and/ or deliver securities purchased to their clients within one working day (excluding Saturday, Sunday, bank & Exchange trading holidays) after the pay-out of the funds and securities for the concerned settlement is completed by the Exchange. This is the timeframe permitted to the members of the Exchange to settle their funds/ securities obligations with their clients as per the Byelaws of the Exchange. The following table summarizes the steps in the trading and settlement cycle for scrips under CRS :

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DAY T

ACTIVITY Trading on BOLT and daily downloading of statements showing details of transactions and margins t t h e e n d o f e Downloading of provisional securities and a funds obligation statements by memberc brokers. h tr a d i n g d a y . 6A/7A* entry by the member-brokers/ confirmation by
the custodians.

T+1

Confirmation of Custodians u

6A/7A

data

by

the

T+2

Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 1:30 p.m. The member-brokers are

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required to submit the pay-in instru T+3 T+4

Auction on BOLT at 11.00 a.m. 12:00 noon and 1:30 p.m. respectively. Thus, the pay-in and pay-out of funds and securities takes places on the second business day (i.e., excluding Saturday, Sundays and bank & Exchange trading holidays) of the day of the execution of the trade.

Auction pay-in and pay-out of funds and securities by

* 6A/7A : A mechanism whereby the obligation of settling the transactions done

by a member-broker on behalf of a client is passed on to a custodian based on confirmation of latter. The custodian can confirm the trades done by the members on-line and upto 11 a.m. on the next trading day. The late confirmation of transactions by the custodian after 11:00 a.m. upto 12:15 p.m., on the next trading day is, however, permitted subject to payment of charges for late confirmation @ 0.01% of the value of trades confirmed or Rs. 10,000/-, whichever is less.

Growing Derivative Market

One look at the accompanying derivatives report card and you will probably conclude that these instruments are a roaring success in India. Six years after its debut, the derivatives market is flourishing, riding largely on the ongoing bull run. It has filled the void left by the old badla system of trading, increasing the liquidity in the underlying cash market and providing both traders and investors with new opportunities. But that is only one part of the story. Dig beneath all the optimism and you will find that the derivatives market is in desperate need for more products, more initiatives and a lot more innovation.

Are Markets Mature Enough?

Individual stock futures were launched in November 2001. Since then, not a single product has been introduced in the equity derivatives space. This has left market participants crying for more. There is a need for long-dated options which could have an expiry date 1-3 years in the future as there is a high cost involved with rolling-over one-month futures, says Sanjeev Shah, executive

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director, Benchmark AMC. There is also need for a roll-market that simplifies the rollover process, feels C.K. Narayan, vicepresident, ICICI Securities. Further, most of the trading happens in the near-month series (contracts that expire in the same month as the day of trade), stock options are very illiquid, and Indias ranking is relatively low among world exchanges in value terms, even though the volumes are high. But the high volumes neednt necessarily mean that the markets are mature. Much of the volume comes from arbitrage, where traders merely exploit risk-less spreads. Only 20 per cent of the trades take a directional view on the market estimates Narayan. Near-month contracts are more liquid than the rest, the world over. But in Indias case, the disparity is rather extreme. On a typical trading day in the middle of the month, about 98 per cent of the turnover comes from near-month contracts, while less than 0.5 per cent comes from the far-month series. Of the 124 symbols available for futures trading, far-month contracts of only about 10 per cent are traded. The concentration of volumes in the near-month series means that this is a speculators market, points out Susan Thomas, assistant professor, Indira Gandhi Institute of Development Research (IGIDR). (She had earlier worked on the project that led to the construction of NSEs Nifty index.) In 2005, noninstitutional trade accounted for over 93 per cent of total trade in the derivatives segment, much higher than their 83 per cent share in the cash market. Despite its strong growth in the last six years, NSE has lagged behind global peers in value terms. The Korea Stock Exchange the countrys financial reforms began in the early 1990s along with Indias is 32 times the size of NSE (across all segments). NSE ranks No. 1 in the world in the stock futures segment, but thats only because the top exchanges do not trade that product. In index futures, NSE ranked 15th with a turnover of $38.7 billion in September. But this is less than 1 per cent of Chicago Mercantile Exchanges (CME) turnover of $4,431 billion. The futures market accounting for 87 per cent has been the main growth driver of the Indian derivatives market. But stock options are pathetically illiquid, accounting for just 3 per cent of total turnover. On the positive side, the share of index derivatives has steadily increased to 44 per cent from about 11 per cent four years ago. Thats close to global norms of about 60 per cent, implying that some amount of hedging, not mere speculation, is being done.

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Fall In Brokerage Rates:

Depository participants (DPs) impose various charges on the institutional as well as on individual clients under various heads for providing services. The services available in dematerialized environment that are extended to the clients are as follows: Dematerialization Rematerialization Custodial services Debit or Credit facility Hypothecation Speed-e along with smart card Corporate benefits like bonus, stock split, dividend payment, etc.

This is an illustrative list of services available. The system of charging a fee for the services extended to an investor is in two-layers. The Depository charges the DPs and DPs in turn collect fee/charges from the investor. Each DP uses different norms to classify charges depending on the extent of services rendered. NSDL has a provision for collecting a one-time fee of 0.05 percent of market capitalization of the company, as custody fees for life. For these companies, no custody charge is supposed to be charged from the investors for life. However, it is not clear whether DPs are passing this benefit to investors. Since 2-3 years with changing trends of industry and increased competition, broking houses reduce brokerage rates to very much extent.

Advanced technology:
The growth in technology and communications has impacted every aspect of business in some or the other form. These effects are enduring and have changed the very way in which business is carried out. The stock market is one such institution whose very existence has been challenged by the growth in information technology. IT has turned the very idea of a stock market on its head. Technology has impacted the working of stock markets in every sense. However, a useful starting point for this study would be the study of dematerialization, or demat as it is popularly known as. This is simply because demat has changed the way stocks are held and traded and therefore has effect on every other function of the market.

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Dematerialization in simple terms means the conversion of shares from physical to electronic form. Demat, enabled by the use of technology is probably is single most important factor which has repercussions on every aspect of the stock markets. Demat in India started with the creation of NSDL (National stock depository limited) in 1996. UTI, was one of the first institutions to use demat when it decided to dematerialize 50% of its holdings in 1997. SEBI gave a boost to demat, with compulsory trading on shares in demat form in specified scrips by institutional investors from Jan 15, 1998.

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Market Size : Growth of Online Brokerage market

In five years of its existence in India, online broking has grown to account for a tenth of the total trading volumes. If the numbers are considered for only the retail segments, the growth is starker. Almost half of the Rs 5,000 crore-6,000 crore daily market volumes on the NSE are accounted for by non-retail entities such as foreign institutional investors, domestic institutions, mutual funds and arbitrage traders. Institutions aren't online customers anyway. Of the rest of the retail segment, current estimates suggest that online broking's reach is close to 30 per cent. As of September this year, there were 11.7 lakh Internet trading accounts registered with the NSE, of which roughly 9.5 lakh are unique users. It's still a small proportion of the estimated 3 crore Internet users in the country. As more surfers take to trading online, analysts expect their number to keep doubling every year until 30-40 per cent of India's overall trades are done online, as is the case in some mature Internet markets like South Korea's. The Internet's effect here has more to do with the bandwidth it has created for both brokers and clients. Banga, director of indiabulls offers an example. "Traders from Ajmer use our online platform. It would otherwise have been prohibitively loss-making to open a branch there." Thanks to the new channel, volumes are growing faster in the non-metros, where transparency is low in offline trading. "These customers were made to pay higher charges by small brokers, since they weren't aware of the market rates," says Prasanth Prabhakaran, head of Kotaksecurities.com. That is one of the reasons why more than 60 per cent of Kotak's daily online trading turnover comes from non-metros.

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NSEs growth story can be depicted by these figures :

Growth in cash market(online): Month/Yea r Mar 2007 April 2006 2005-06 2004-05 2003-04 2002-03 No Of Companie s 1084 944 929 839 787 788 No of Turnover(R Trades(lakh s cr) ) 710 167,954 567 6,088 4,510 3,780 2,398 177,372 1,569,556 1,140,071 1,099,535 617,989 Avg daily turnover(R s cr) 7,998 9,854 6,253 4,056 4,328 2,462

Average Turnover(Rs Cr)

12,000 10,000 8,000 6,000 4,000 2,000 0 2002- 2003- 2004- 2005- 6-Apr 03 04 05 06 Years/Month Mar07

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Porter's Five Forces Analysis Of Online Brokerage Industry Buyer Power

Awareness of investing knowledge

Earlier retail investors often lack the knowledge and expertise in the financial sector that called them to approach the broking houses. But nowadays TV channels like CNBC and financial magazines, newspapers are giving a brief knowledge and updates of financial sector to retail investors, also they provide investors tips to invest their money in stock market. Hence it increases the power of buyer and reduces his dependence.

Low Product and Service Differentiation Proves Beneficial :

The retail broking services provided by the various companies are homogeneous with very low product differentiation. This allows customers to enjoy a greater bargaining power.

Supplier Power
Increased Dependence on IPOs
There is a growing dependence of corporate on broking houses with the rising number of IPO's coming to the market. We see traction when initial public offers (IPOs) are announced. People find the online platform a very convenient way to enter the market. In 2004-05, Rs 25,526 crore was raised in the markets, almost 450 per cent more than the amount raised in 2002-03. For instance, in the month that the Maruti IPO was announced, 300,000 demat accounts were opened. In an average month, the figure is about 100,000. Since 2002, the number of demat accounts has doubled to 7.1 million, many of them belonging to new investors applying for IPOs.

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Threat of Competitors
Move towards consolidation
The bigger trend in the industry is consolidation, just like it happened in the US and South Korea, where 90 per cent of online trades are with the top 10 players. Says Banga: "As the industry grows, people prefer going to solid brands that have strong balance sheets. The big guys can invest in infrastructure, technology and risk management systems." As a result, several sub-brokers have been pushed by client demand to take up franchises of the bigger brokers. The consolidation in the broking industry should see more and more businesses shifting from small, hole-in-the-wall brokerages to big players. Lot of brokerage companies is moving towards consolidation with the smaller ones becoming either franchisees for the larger brokers or closing operations.

Increased Focus of Banks in Retail Broking

Many leading banks are coming into retail broking field like ICICI , HDFC , UTI etc. Actually as online trading has come into feature; it would be easy for banks to give online trading platform with depositary services. Although they are into only online trading, they are not dealing with proper services of RM (Risk manager0.

Entry Of foreign Players

Even the foreign players are seeing opportunities in the Indian markets. Various foreign banks like ABN Amro and others are planning to enter the Indian retail brokerage industry. US-based E*Trade took a 34 per cent stake in IL&FS Investsmart (along with Softbank) in March 2004

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Online Trading Competes with Traditional Brokerage

There is an increasing demand for online trading due to consumer's growing preference for internet as compared to approaching the brokers. In India, the economics don't allow it to be a cost game. Says Bagchi: "Brokerage costs are already so low (0.1-0.5 per cent for delivery) that the online medium doesn't really offer any significant price advantages." Traditional brokers are now scrambling to scale up their online operations. Meanwhile, ICICI Direct & Indiabulls have raced ahead of the others. The other online players that make up the top six - Sharekhan (owned by SSKI), Religar(earlier fortis securities), Kotak Securities, HDFC Securities and 5paisa (owned by Indiainfoline) - all have hybrid models. Collectively, these players have 75-80 per cent of the market. The remaining 130 players, who were given licenses to open online trading platforms by the NSE, can be divided into three categories - those that are active businesses but have less than 5 per cent of the online market (Motilal Oswal among them); those that invested in the technology but weren't able to get their projects off the ground (the Lalbhai Group's Anagram Securities), and those that simply bid for the licence but didn't pursue business. Most players fall in the last category.

Threat of New Entrants

Entry of Foreign Players As it is already discussed above, many foreign players like ABN Amro and USbased E*Trade are taking place in Indian retail brokerage industry. New forms of trading New forms of trading including T+2 settlement system, dematerialization etc are strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry

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Threat of Substitutes

Alternative Investment Options

Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. The most important alternative investment form is Mutual Fund investment in which gain is as higher as in share investment but risk is too low.

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Comparative Assessment Company Profiles

Introduction
Religare is driven by ethical and dynamic process for wealth creation. Based on this, the company started its endeavor in the financial market. Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Broking Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, it provides various financial services, which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot more to come your way. Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 3000 highly skilled professionals who subscribe to Religare philosophy and are spread across its countrywide branches. Today, it has a growing network of more than 300 branches and more than 580 business partners spread across more than 400 cities/towns in India and a fully operational international office at London. Unlike a traditional broking firm, Religare group works on the philosophy of partnering for wealth creation. We not only execute trades for our clients but also provide them critical and timely investment advice. The growing list of financial institutions with which Religare is empanelled as an approved broker is a reflection of the high-level service standard maintained by the company.

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GROUP COMPANIES
Religare Enterprises Limited group comprises of Religare Securities Limited, Religare Commodities Limited, Religare Finvest Limited and Religare Insurance Broking Limited which deal in equity, commodity and financial services business.

1.

Religare Securities Limited

RSL is one of the leading broking houses of India and are dealing into Equity Broking, Depository Services, Portfolio Management Services, Internet Trading, Institutional Equity Brokerage & Research, Investment Banking, Merchant Banking and Corporate Finance. To facilitate free and fare trading process Religare is a member of major financial institutions like, National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and a SEBI approved Portfolio Manager. RSL serves a platform to all segments of investors to avail the opportunities offered by investing in Indian equities either on their own or through managed funds in Portfolio Management

2. Religare Commodities Limited

Religare is a member of NCDEX and MCX and provides platform for trading in commodities, which is an online facility also. RCL provides platform to both agro and non-agro commodity traders to derive the actual price of the commodity and also to trade and hedge actively in the growing commodity trading market in India. With this realization, Religare Commodities is coming up with its branches at mandi locations. It is a flagship effort from our team which would be helpful in facilitating trade and speculating price of commodities in future.

3. Religare Finvest
Religare Finvest Limited (RFL), a Non Banking Finance Company (NBFC) is aggressively making a name in the financial services arena in India. In a fast paced, constantly changing dynamic business environment, RFL has delivered the most competitive products and services. RFL is primarily engaged in the business of providing finance against securities in the secondary market. It also provides finance for application in Initial Public Offers to non-retail clients in the primary market . RFL is also planning to initiate personal loan portfolio as fund based activity and mutual fund distribution as fee based activities.

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Along with this, the company also undertakes non-fund based advisory operations in the field of Corporate Financing in the nature of Credit Syndication which includes inter alias, bills discounting, inter corporate deposit, working capital loan syndication, placement of private equity and other structured products.

4. Religare Insurance Broking Ltd.

Religare has been taking care of financial services for long but there was a missing link. Financial planning is incomplete without protective measure i.e. structured products to take care of event of things that may go wrong Religare Insurance Broking Limited. As composite insurance broker, deals in both insurance and reinsurance, providing our clients risk transfer solutions on life and non-life sides. This service will take benefit of Religares vast business empire spread throughout the country -- providing our valued clients insurance services across India. We aim to have a wide reach with our services literally! Thats why we are catering the insurance requirements of both retail and corporate segments with products of all the insurance companies on life and non-life Still, there is more in store. We also cater individuals with a complete suite of insurance solutions, both life and general to mitigate risks to life and assets through our existing network side. For corporate clients, we will be offering value based customized solutions to cover all risks, which their business is exposed to. Our clients will be supported by an operations team equipped with the best of technology support Religare Insurance Broking aims to provide neutral, transparent and professional risk transfer advice to become the first choice of India

Vision
Providing integrated financial care driven by the relationship of trust and confidence.

Mission
To be India's first Multinational providing complete financial services solution across the globe.

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Why customer trade with Religare?

1. Personal Assistance Dedicated dealers for facilitating trading and post trade needs. Dedicated Relationship Managers for assisting multiple investment needs.

2. Research & Advisory Regular news and updates on market Research service over SMS to keep you abreast Daily and weekly technical reports A complete information report on results and performance individual companies. Complete reports on various economic sectors and their performance along with analysis of few major companies in that sector Trading calls in Futures & Options Daily capsule of Market indices and index movement, national and international corporate news, and their performance along with forth coming IPO tracker.

3. Add-Ons Access to all your accounts through your Customer Relationship Number (CRN) Access your ledger balances and account information over internet, branch and call center

PRODUCT & SERVICES

Equity & Derivatives Commodity Depository Portfolio Management Services International Equity & Commodity NRI Services Investment Banking Corporate Advisory Group

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EQUITY & DERIVATIES

Religare provides two type of Product in Equity & Derivative market:

R-ACE (Religare Advanced Client Engine) is a group of highly sophisticated trading platforms meant for tech-savvy individuals. Various platforms of R-ACE have been designed to suit the varying needs of different investors. It is fully automated platform, wherein the client may do all his investments through Internet.

R-ACE clients also have the option to trade on following types of product. A. R-ACE B. R-ACE Lite C. R-ACE pro

R-ACE
Account Activation Charges Rs.299/Minimum margin of Rs.5000/- required No software installation required, easily accessible on browser NSE cash segment, NSE F&O and BSE on single platform Trade online and over phone Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Earn interest on cash margin deposited with us 247 Customer support center

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R-ACE lite
Account Activation Charges Rs.499/Minimum margin of Rs.5000/- required No software installation reqqired, easily accessible on browser NSE cash segment, NSE F&O and BSE on single platform Real- time streaming quotes Alerts Hot key functions Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Earn interest on cash margin deposited with us 247 Customer support center

R-ACE pro
Account Activation charges Rs. 999/Minimum margin of Rs.10000/- required Traders terminal on your desktop NSE cash segment,NSE F&O and BSE on single platform Real- time streaming quotes Advanced alerts Technical charting (intra- day and EOD) Multiple watch lists Advanced hot- key function Derivative chains Futures & Option calculator Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Trade online and over phone Earn interest on cash margin deposited with us 247 Customer support center

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RELIGAREs ALLY also known as R-ALLY is a perfect partner for savvy investors. It has been designed to provide world-class experience and expertise to investors. Clients opting for this service would be provided services managed by a team of dedicated relationship managers and experienced trade dealers. They would not only assist the client in information dissemination but would also take care of all post trade requirements

R-ALLY clients also have the option to trade on following types of product. A. R-ALLY B. R-ALLY Lite C. R-ALLY pro

R-ALLY
R-ALLY clients have no option to trade on their own through our online platforms. No subscription fees No Enrolment Deposit Brokerage : Jobbing : 0.10% each side + All Taxes Delivery : 0.50% each side + All Taxes (Negotiable based on volume)

R-ALLY lite
Account Activation charges Rs. 500/Browser based platform, easily accessible over internet explorer from anywhere Minimum margin to be maintained Rs.10000

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No software installation required NSE cash segment, NSE F&O and BSE on single platform Real- time streaming quotes Multiple watch lists Hot key function Online transfer of funds through multiple banks Trade Online and Over phone at Branch Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes (Negotiable based on volume)

R-ALLY pro
Application based platform Account Activation charges Rs. 1800 (refundable subscription fees ) Traders terminal on your desktop NSE cash segment, NSE F&O and BSE on single platform Real time streaming quotes Multiple watch lists Alerts and triggers Advanced Hot key functions Online transfer of funds through multiple banks Trade Online and Over phone at Branch Make and save your own workspace View charts Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes (Negotiable based on volume)

FUTURE PLANS (NEED TO HAVE PERSPECTIVE WITH TIMELINESS)

STRATEGIC

7 00,000 + retail customers being serviced through centralized call centre / web solution. 400branches/semi-branches servicing affluent/aggressive traders through highly skilled financial advisors. 1800 independent investment managers/franchisees servicing 50000 highly valued clients. 42

 Strong advisory role through Fundamental & technical research. New initiatives - Portfolio Management Services & Commodities trading.

Depository Services
Religare is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Religare performs clearing services for all securities transactions through its accounts. We offer depository services to create a seamless transaction platform execute trades through Religare Securities and settle these transactions through the Religare Depository Services. Religare Depository Services is part of our value added services for our clients that create multiple interfaces with the client and provide for a solution that takes care of all your needs. Dematerialization and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository. Religare Depository Services offers dematerialization services to individual and corporate investors. We have a team of professionals and the latest technological expertise dedicated exclusively to our demat department, apart from a national network of franchisee, making our services quick, convenient and efficient.

Problems of Religare
Religare has failed to evolve into a widespread Internet broking firm because of its un-focused promotional strategies (advertisements in electronic media, newspapers, etc) across the length and breadth of India. Although it is a wellknown broking house in some states like Maharashtra, Gujarat, etc.It still lacks considerable awareness in the northern parts of India where its competitors have been building their reputation very rapidly. The other problem faced by Religare is that they give more attention to HNIs (high networth individuals) as compared to retail investors or individuals; this is why volumes of trading at Religare are less as compared to its competitors.

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OTHER MARKET PLAYERS (COMPETITORS)

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

Online Account Types

Investor Terminal: Investors / Students Trader Terminal: Day Traders / HNIs

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

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PRICING FOR HNI CLIENTS

Trader Terminal Account Opening: Rs 500 Demat 1st Yr: Rs 250 Initial Margin: Rs 5000(Compulsory) Min Margin Retainable: Rs 1000 Brokerage: Trading 0.10% each side + ST Delivery 0.50% each side + ST (Negotiable to 0.05% each side & 0.25%) Account Access Charges Monthly Rs 800, adjustable against Brokerage Yearly Rs 8000, adjustable against brokerage

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

Manual Accounting
The 5 paisa accounting system is manual, Online fund transfer through bank is not credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit released for shares sold under BTST is manual Delay in receiving pay-out of clear funds from trading to Bank Account. Min Account Balance Concept of Min Rs1,000 is to be maintained in form of cash / securities to keep account active. This can be withdrawn only on closure of account.

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

Online Account Types

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

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

Problems of Kotakstreet
Rigid Account Opening Terms No Flexibility of A/c opening charges (Rs 500) + Compulsory margin Rs 5000/- Account opening free with Rs 10,000 Margin OR Competitor Contract Note. No Flexibility in Leverage Dependent on Type of Account ( 4 to 6 times only) No flexibility in Brokerage, driven by slab structure. No Customization of commercial Terms. Restricted Access to Terminal like product KEAT Desktop restricted distribution on payment of Rs 500, Non refundable Rs 22.5 p.m towards DP AMC charges DP incoming charges extra, 0.02%

Many Other Charges:

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

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

Online Account Type

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

Pricing of IB Accounts
Signature Account Account Opening: Rs 250 Demat: Rs 200 if POA is signed, No AMC for this DP Initial Margin: NIL Brokerage: Negotiable Power IndiaBulls Account Opening: Rs 750 Demat: Rs 200 if POA is signed, No AMC for this DP Initial Margin: NIL Brokerage: Negotiable

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Problems Of IndiaBulls
POA for Clients DMAT
Charges are levied to move shares from IB pool Account to client DP account All shares held by client trading with IB are moved to IB Pool Account and the same is shown as a reflection in client DP account.

Paid Research Services

Access to a research even for an IB trading account holder is charged a min of Rs 500 a month.

Margin funding hoax

The interest on funding starts on leveraged delivery trades from T+1 day itself @21% p.a, on a daily basis.

The role of Relationship Manager

Each RM is looked upon as a revenue generator and he gets a % on business generated from client. This can lead to over leveraged (Interest) & high frequency (Brokerage) trading, which may not be in the best interest of the client.

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

Account Types
ICICI Direct e-invest Account: Premium trading interface of ICICIDirect Link is given to DBC partners and HNIs Plain Vanilla Account with focus on 3 in 1 advantage. Differentiated in services within the account. 1. Cash on spot 2. MarginPlus

Account Opening: Rs. 950 Schemes: For short periods Rs 950 is refundable against brokerage generated in a qtr. These schemes are introduced 3-4 times a year. Demat: NIL, 1st year charges included in Account Opening Plus a facility to open additional 4 DPs without 1st yr AMC. Initial Margin: Nil Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes. Slab wise brokerage ranges from 0.75% to 0.25% depending on volume.

Problems Of ICICIDirect
Poor online Interface Slow website interface with no real-time quotes creates dissatisfaction among high frequency traders Margin trading restriction

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The margin trading system is available up to 2:45 p.m, with outstanding net positions under margin segment automatically squared off at any time between 2:45 3:30 p.m. Thus no control of square off price. Morning Trades Issue Being one of the websites with largest no of after hour orders which are pushed 1st thing in the morning, creates a choking of orders to the exchange, causes delay of confirmations for new order placed during the early morning trades. Restriction of BTST The sale of shares purchased is restricted to T+1 day and is not permitted on T+2 Day. No leverage for Delivery trades Delivery is restricted to the total money allocated into the trading account. No flexibility on leverage on Intra-day trades The leverage of 4 times is available for intra- day trades. Restriction of Bank Account The choice of bank is restricted to ICICI Bank. Higher Brokerage rates with slabs The delivery brokerage is pegged at 0.75% and trading at 0.10% each side, this makes is very unviable for customers dealing in large volumes. Although progressively the delivery and trading brokerage reduce as volumes go up.

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SWOT Analysis Of Religare

Strengths
1. It is a pioneer in online trading with a turn over of Rs.400 crores and more than 4300 peoples working in the organization. 2. Religare is A Ranbaxy promoter Group Company. 3. Religare provides multi-channel access to all its customers through a strong online presence with www.religare.in, 580 share shops in 300 cities and a call-center based Dial-n-Trade facility 4. Religare has dedicated research teams for fundamental and technical research, Which constantly track the pulse of the market and provide timely investment advice free of cost to its clients which has a strike rate of 70-80%.

Weakness
1. Localized presence due to insufficient investments for countrywide expansion. 2. Lack of awareness among customers because of non-aggressive promotional strategies (print media, newspapers, etc). 3. Lesser emphasis on customer retention. 4. Focuses more on HNIs than retail investors which results in meager market-share as compared to close competitors.

Opportunities
1. With the booming capital market it can successfully launch new services and raise its clients base. 2. It can easily tap the retail investors with small saving through promotional channels like print media, electronic media, etc. 3. As interest on fixed deposits with post office and banks are all time low, more and more small investors are entering into stock market. 52

4. Abolition of long-term capital gain tax on shares and reduction in short term capital gain is making stock market as hot destination for investment among small investors. 5. Increasing usage of Internet through broadband connectivity may boost a whole new breed of investors for trading in securities.

Threats
1. Aggressive promotional strategies by close competitors may hamper Religares acceptance by new clients. 2. Lack of sufficient branch-offices for speedy delivery of services. 3. More and more players are venturing into this domain, which can further reduce the earnings of Religare.

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METHODOLOGY
Methodology For Sampling
The team divided the entire city into zones and drew out samples out of each zone. The size of samples drawn from each zone depended on the prospective ness of the particular area. For e.g., if a particular research area consisted of Offices then the sample size would obviously be higher than an area like Shopping mall or PVR. This is because Office employees constitute the service sectors who are the active investors of today. Also, the office areas consist of people from the business class who have always been in the hunt for quick money, not to forget that smart and timely investment in the share market can yield to enormous returns. After dividing the city into zones, the Target audience was probed using Interviews and questionnaires. These were later analyzed to draw out conclusive results.

4.2] Methodology for Customer Acquisition

The leads for customer acquisition primarily came from the questionnaires filled up by prospective customers. Apart from these customers were also pitched through personal references and contacts. Moreover the organization takes every possible effort in order to spread mass awareness. As a result of this publicity campaign, influenced prospective customers approach the organization. There are various ways to make people aware about the organization as such Marketing Research, Canopy, Personal References, Pop-up windows having collaboration with various portals e.g. Rediffmail.com etc. Person with adequate interest leaves his contact information. Later on these leads are contacted personally for further development. The organization has efficient sales stuff that excels in this job. Part time trainees are also appointed for the same. This work force been perfectly supervised by the Managers. Thus all these factors sum up into a result oriented work force. These leads were the contacted through telecalling and after developing a relationship, they were pitched in at the addresses provided by them. After giving them a presentation about the product and its advantages over its competitors, they were promised of a Demo by company sales force in case a sale had resulted. Also references were collected from such people and the same methodology was repeated. For each and every customer personal quarries have been entertained after the sale is done.

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Data Source
Data used for the research work was primary and secondary in nature. Secondary data is the data that was collected from another purpose and already exists somewhere. Primary data is gathered for a specific purpose and is collected by the researcher from mapping or cold calls methods. The data used in this project is primary data collected from the various categories of investors from different areas. Secondary data was collected using various journals and publications like: NSEs module on Capital Market, October 03 Business Today, Feb05 edition Report on internet based securities trading and services by a committee chaired by Shri O P Gahrotra, Sr. Exec Director, SEBI. Share investors list of broking houses

Sample Size:
Sample size for the questionnaire prepared for Investors was 50.

Process of conversion of securities into the demat form

Securities specified as being eligible for dematerialization by the depository in its bye laws and as under the SEBI (Depositories and Participants) Regulations, 1996 (the Regulations) can be converted or issued in a dematerialized form. The process of conversion of securities into a dematerialized form or the issuance of the same in a dematerialized form can be explained thus: Firstly, the issuer company, whose securities are eligible for dematerialization, has to enter into an agreement with a depository for dematerialization of securities already issued, or proposed to be issued to the public or existing shareholders. The investor is given an option to hold the securities in a dematerialized form and it is his prerogative to exercise the option to hold the securities in that manner. 55

 The depository enters into an agreement with the participants who are the agents of the depository and co-functionaries in the process of dematerialization of securities. Any person can then enter into an agreement, through the participant, with the depository for availing the services provided by the depository. Upon the entering into such agreement with the depository, the person has to surrender the certificate pertaining to the securities sought to be dematerialized to the issuer. This surrender is affected in the following manner: The person (beneficial owner) who has entered into an agreement with the participant for dematerialization of the securities has to inform the participant about the details of the certificate of such securities. The beneficial owner has to then surrender the said certificate to the participant. The participant informs the depository about the particulars of the securities to be dematerialized and the agreement entered into between him and the beneficial owner. The participant then transfers the certificate pertaining to the said securities to the issuer along with the details and particulars of the securities. These certificates are mutilated upon receipt by the issuer and substituted in the records against the name of the depository, who is the registered owner of the said securities. A certificate to this effect is sent to the depository and all stock exchanges where the security is listed. Subsequent to this, the depository enters the name of the person who has surrendered the certificate of security as the beneficial owner of the dematerialized securities. The depository also enters the name of the participant through whom the process has been carried out and sends an intimation of the same to the said participant.

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Depository System (working model)

NSDL carries out its activities through various functionaries called business partners who include Depository Participants (DPs), Issuing companies and their Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. NSDL is electronically linked to each of these business partners via a satellite link through Very Small Aperture Terminals (VSATs) or through Leased landlines. The entire integrated system (including the electronic links and the software at NSDL and each business partner's end) is called the "NEST" [National Electronic Settlement & Transfer] system.

Benefits of Depository System

In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangers related to handling of paper. NSDL provides numerous direct and indirect benefits, like: Elimination of bad deliveries: In the depository environment, once holdings of an investor are dematerialized, the question of bad delivery does not arise i.e. they cannot be held "under objection". In the physical environment, buyer was required to take the risk of transfer and face uncertainty of the quality of assets purchased. In a depository environment good money certainly begets good quality of assets. Elimination of all risks associated with physical certificates: Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates and advertisements, etc. This problem does not arise in the depository environment. Immediate transfer and registration of securities: In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months and is rarely completed within the statutory framework of two months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is to hold

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the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the securities are not good for delivery and the investor would also stand to loose his corporate entitlements. No stamp duty: For transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds. Faster settlement cycle: The exclusive demat segments follow rolling settlement cycle of T+2 i.e. the settlement of trades will be on the 2nd working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor. Faster disbursement of non cash corporate benefits like rights, bonus, etc. NSDL provides direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit. Reduction in brokerage by many brokers for trading in dematerialized Securities: Brokers provide this benefit to investors as dealing in dematerialized securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker. Reduction in handling of huge volumes of paper Periodic status reports to investors on their holdings and transactions, leading to better controls Elimination of problems related to change of address of investor, transmission, etc In case of change of address or transmission of demat shares, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their DP with all relevant documents and the required changes are effected in the database of all the companies, where the investor is a registered holder of securities. Elimination of problems related to selling securities on behalf of a minor: A natural guardian is not required to take court approval for selling demat securities on behalf of a minor. Ease in portfolio monitoring: Since statement of account gives a consolidated position of investments in all instruments.

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Disadvantages of Dematerialization
The disadvantages of dematerialization of securities can be summarized as follows: Trading in securities may become uncontrolled in case of dematerialized securities. It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors. The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market. Multiple regulatory frameworks have to be confirmed to, including the Depositories Act, Regulations and the various Bye Laws of various depositories. Additionally, agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity in terms of transactions in dematerialized securities. However, the advantages of dematerialization outweigh its disadvantages and the changes ushered in by SEBI and the Central Government in terms of compulsory dematerialization of securities is important for developing the securities market to a degree of advancement. Freely traded securities are an essential component of such an advanced market and dematerialization addresses such issues and is a step towards the advancement of the market.

Dematerialization with Religare

Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in his account with the DP.

Features:
Holdings in only those securities that are admitted for dematerialization by National Securities Depository Ltd (NSDL) can be dematerialized. Structure of holding in the securities should match with the account structure of the depository account. Now shares in different order of names can also be demat-ted.

Example:
If the shares are in the name of X and Y, the same cannot be dematerialized into the account of either X or Y alone. However if the shares are in the name of X

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first and Y second, and the account is in the name of Y first and X second, then these shares can be dematerialized in this account. Only those holdings that are registered in the name of the account holder can be dematerialized. Physical shares which have not been transferred and are still there with a transfer deed cannot be dematted. Only a few companies have been given the permission to offer Transfer-cum-Demat. The list of these companies can be viewed here.

Rematerialization:
Rematerialization is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account along with a Remat request form. The physical shares will be posted by the company directly to the clients.

Trades
For all sales made by clients, the shares will have to be given to the broker, so that the Pay In can be made by the broker to the stock exchange concerned. For that it's essential that the shares be transferred to the account of the broker well before the deadline date. You must confirm with your broker the settlement date and settlement number and then submit your instructions to your DP. Also it's important to give the instructions to your DP as early as possible.

Pledge
Pledge enables you to obtain loans against your dematerialised shares. So you get liquidity without having to sell your shares. A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue to be reflected in the DP account of the clients (pledgor) but the concerned securities are "blocked" and cannot be used for any transactions. As and when the pledge is to be removed, based on confirmations received from both the pledgor and the pledgee, the blocked securities will be released to "Free Balance" of the account holder.

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KEY FINDINGS AND OBSERVATIONS

Nature of Investment Prefered

12% 16% 44% Long Term Short Term Short Term & High Return 28% Long Term High Return

Interpretation: This shows that most of the investors prefer long term
investment (Delivery basis). Sort term high return investment indicates those investors who believes that high risk provides high return.
Perception of Investors about Investment In Stock Market

34% 60% 6%

Risky Safe Volatile

Interpretation This shows that 60 % investors assume investment volatile, 30 % assume risky, and 6 % assume safe in stock market. It means that mostly, investors see investment in stock market volatile.

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Awareness of Broaking Firms

52% 78% Religare India Infoline Any Other's

58%

Interpretation: This pie chart shows that Religare has a reasonable amount of
Brand awareness in terms of a premier Retail stock broking company. The company to increase its market share over its competitors should further leverage this brand image.

Awareness of Demat & Trading A/c

32% Yes No 68%

Interpretation: Coz Indian stock market is still in progress stage so there are some people they do not have knowledge about share market and how to play in this market.

CONCLUSION
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In spite of these optimistic numbers, online trading in India is at a very nascent stage (about 5-8 percent of total traded volumes) compared to countries like South Korea (60 percent), US (40 percent) and UK (20 percent). Online trading in the year 2000-2001 accounted for only Rs 50,170 crore out of total traded volume of Rs 25,08,445 crore. There are currently close to 70 online brokerages in India with ICICIDirect, KotakStreet, Religare, MotilalOswal, IndiaBulls and 5Paisa being some major players. However, due to limited volumes, no online brokerage is currently making money and a shakeout is imminent in the near future. The going is expected to get tougher with the advent of capital account convertibility. On an average, Rs 40 crore per day (Rs 1,000 crore per month) is likely to be the threshold breakeven for online brokerages. There is scope for multiple players as the entire segment is in a growth stage. While there are many factors that need to be understood to justify this assertion, one simple fact is worthy of note. The average age of the Indian Internet user as cited by a recent IDC survey is 27 years. The average age of the head (and financial decision taker) of the Indian equity-investor household, as revealed by the SEBI-NCAER study of Indian investors in 2000 is 45 years. The older, experienced equity investor is not online today and the fact that older, mature investors are not tech-positive and hence unlikely to move to online trading is a major barrier to the growth of e-broking in India. Here, the numbers of banks with a strong online presence are very few - again, dominated by new private banks and foreign banks. Both have lesser reach owing to a smaller network in the country. The relative inability of large publicsector banks to offer-facilities for Internet banking is a barrier in this regard. Besides, Internet penetration in India is still very low and concerns about security also tend to predominate. In markets like the US, online brokerages are advertised very heavily. Online trading in India has so far not seen similar levels of aggressive advertising, with the exception of ICICI Direct and India bulls. Besides, only scripts that have been compulsorily dematerialized can be traded on the net here.

Brand building, assurances of security, developing multiple delivery channels with anytime telephonic grievance redressed options is some directions, which

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may be of use for the immediate future. Online trading firms can also market themselves aggressively to students who are entering the professional arena, ensuring that their entry into equity happens online. One of the major issues governing trading is the prevailing uncertainty in the market. Hence, not withstanding the current sentiment in the market, potential for online trading is still immense in India. With a more transparent system, increased awareness, and a sustained bullish market we would surely be heading to become the largest online stock trading country by the turn of the next decade.

RECOMMENDATIONS

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We suggest following measures, which Religare could take so as to take on heavy competition from Indiabulls and 5 Paisa.com : 1. To identify regions where promotions are required. Religare lacks visibility in northern region where as it is a well known name in western region. Even then, its promotional campaign focuses on western region where as northern region is still waiting for promotional campaigns. 2. Try to reduce cost, so that benefits can be passed on to customers. Senior managers at Religare keep on telling that it is difficult to reduce cost, because of services we provide. But the fact is, India being a price sensitive market; people at times go for monetary benefits rather than for long-term non- monetary benefits. 3. If charges cant be reduced because of costs involved, make the services customized, so that services are provided to only those customers who are willing to pay the price for services they are getting and let the other customers enjoy costs benefits without getting services. 4. Concept of margin funding should be introduced, as more and more people are asking for it. 5. Religare should contact with their clients regularly for knowing the problems faced by them. This will help Religare in providing best services to customers. This will result in additional customer base by getting further references from satisfied clients. 6. To launch slab wise brokerage structure as Religare has fixed brokerage structure, which cannot be negotiated. But other players in the market offer launch slab wise brokerage structure, which motivate customers to increase their volumes.

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References
Books and Newspapers:
1 The Economic Times, Business Standard, Business line 2 3 4 5 Securities Market (Basic) Module :--NCFM Training Kit Provided by the Religare. Indian financial system by M.Y KHAN NSDL Depository operations module :--NCFM

URLs: 1 www. religare .in 2 www.indiainfoline.com 3 jvirahyas@gmail.com 4 www.economics times.com 5 http://www.investopedia.com/articles/ 6 www. nseindia.com 7 www.bseindia.com 8 www.moneycontrol.com

Jitendra Virahy as
JVIRAHYAS@GMAIL.COM
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Appendices
QUESTIONNAIRE
(THIS QUESTIONNAIRE IS FOR ACADMIC PURPOSE ONLY) NAME AGE DESINATION CONTACT NO..

Q1. Are you saving oriented? a. Yes a. Long term a. Risky a.. New issue b. No b. Short term b. Safe c. High returns c. Volatile d. Any other Q2. In share which type of investment you prefer? Q3. What is your perception regarding dealing in share market? Q4. What mode do you prefer to enter the share market? b. Trading (broker) Q5. How often Do you sell or purchase securities? a. Once in month b. Once in 6 months c. Any others Q6. Are you aware of Demat and Trading a/c? a.Yes a.Yes b. No b. No b. INDIAINFOLINE c. Any other Q7. Do you have any Demat and Trading a/c? Q8. Do you know which bank/ institution provide Demat a/c? a. RELIGARE Q9. What reasons make you to choose? a. Close to house b. Services rendered c. Staff courtesy a.Yes b. No d. Any other Q10. Are you satisfied by the services rendered by the bank or institution ?

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Jitendra Virahy as
JVIRAHYAS@GMAIL.COM

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