A PROJECT REPORT ON

“A STUDY OF ONLINE TRADING AND STOCK BROKING”AT

SHAREKHAN PVT LTD

A Project report submitted in partial fulfillment for the Award of theMaster of Business Administration (MBA)

(FINANCE)Submitted By

CHANDRASEKHAR GOUD.G

Roll No. 08J81E0010

Under the Guidance of

MR.SRINIVAS

(Assistant Professor of MBA Dept)

DEPARTMENT OF BUSINESS MANAGEMENT P.INDRA REDDY MEMORIAL ENGINEEING COLLEGE

(Affiliated to Jawaharlal Nehru Technological University)

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DECLARATION

I here by declare that this project report entitled “A STUDY

OF ONLINE TRADING AND STOCK BROKING” has been prepared by me is an original work submitted to Jawaharlal Nehru Technological University towards partial fulfillment of the requirement for the award of Master of Business Administration. I also here by declare that this project report has not been submitted at any time to any other university or institute for the award of any Degree or Diploma.

(G.CHANDRA SEKHAR GOUD) (08J81E0010)

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CERTIFICATE

This is to certify that the project work entitled“A STUDY OF ONLINE TRADING AND STOCK BROKING”

Has been done byG.CHANDRA SEKHAR GOUD

(08J81E0010)

In the partial fulfillment of the requirements for the award of the degree of Master of Business Administration from P.Indra

Reddy Memorial Engineering College, affiliated to Jawaharlal Nehru Technological University is a record of bonafide work

carried out by them under my guidance and supervision. The result embodied in this has not been submitted to any other university or

institute for the award of any degree.

Internal Guide: MR.D.H.B.R.PRASAD Mr. SRINIVAS Head of the department Master of Business Administration

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ACKNOWLEDGEMENT

I take this opportunity to express my gratitude high regards and sincere thanks to our respected Principal Dr. R.V. Krishnaiahfor providing excellent infrastructure.I thank Mr. D.H.B.R.Prasad Head of the Department of MBA for his constant help and support.I express my sincere thanks to our committed faculty Mr.SRINIVAS for his support and guidance.I have great regard for all the well wishers whose help is beyond acknowledgement.

(G.CHANDRA SEKHAR GOUD) (08J81E0010)

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Chapter 1

Objectives&

Methodology

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OBJECTIVES AND METHODOLOGY

NEED FOR THE STUDY:

The present study to review the online trading

procedure a case study of ONLINE TRADING at

SHAREKHAN as the exchange has changed it’s

trading from the outcry mode to online trading on

20th February 1997, there is need to assess the

performance of the capital market.

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OBJECTIVES OF THE STUDY:

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

to online trading system.

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

To know the online screen based trading system adopted by SHAREKHAN

and about its communication facilities. The appropriate configuration to set

the network, which would link the SHAREKHAN to individual / members.

To know about the latest and future development in the stock exchange

trading system.

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METHODOLOGY OF THE STUDY:

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

Primary method: This method includes the data collected from the personal

interaction with authorized members of Sharekhan Securities limited.

Secondary method: The secondary data collection method includes:

The lecturers delivered by the superintendents of respective departments.

The brochures and material provided by Sharekhan Securities limited.

The data collected from the magazines of the NSE, economic times, etc.

Various books relating to the investments, capital market and other related topics.

LIMITATIONS OF THE STUDY:

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

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

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

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to

do so. If he want advice on a particular stock in his portfolio he may not even be

able to get that.

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Chapter 2

Company profile

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INDUSTRY PROFILE

Following diagram gives the structure of Indian financial system:

]

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FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth

functioning of the system. These markets are the centers that provide facilities for

buying and selling of financial claims and services. The financial markets match the

demands of investment with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.

They are:

Money markets (short-term)

Capital markets (long-term)

According to institutional basis again classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized

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

intermediaries. The unorganized market is composed of indigenous bankers,

moneylenders, individual professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

CAPITAL MARKET:

Capital market is a place where we can raise long

Again the capital market is classified in to two types and they are

Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up

gradation. Primary market is also referred to as New Issue Market. Primary market

operations include new issues of shares by new and existing companies, further and

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Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

E.g.: Shares, Debentures, and Loans etc.

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up

n. Primary market is also referred to as New Issue Market. Primary market

operations include new issues of shares by new and existing companies, further and

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up

n. Primary market is also referred to as New Issue Market. Primary market

operations include new issues of shares by new and existing companies, further and

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right issues to existing shareholders, public offers, and issue of debt instruments

such as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India

(SEBI a government regulated authority).

Function:

The main services of the primary market are origination, underwriting, and

distribution. Origination deals with the origin of the new issue. Underwriting contract

make the shares predictable and remove the element of uncertainty in the

subscription. Distribution refers to the sale of securities to the investors.

The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent

3. Underwriter/broker to the issue

4. Adviser to the issue

5. Banker to the issue

6. Depository

7. Depository participant

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public should be

protected. The term investor protection has a wider meaning in the primary market.

The principal ingredients of investors’ protection are:

Provision of all the relevant information

Provision of accurate information and

Transparent allotment procedures without any bias.

]

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SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities

are traded in the secondary market, which is commonly known as stock market or

stock exchange. “The secondary market is a market where scrip’s are traded”. It is a

market place which provides liquidity to the scrip’s issued in the primary market.

Thus, the growth of secondary market depends on the primary market. More the

number of companies entering the primary market, the greater are the volume of

trade at the secondary market. Trading activities in the secondary market are done

through the recognized stock exchanges which are 23 in number including Over The

Counter Exchange of India (OTCE), National Stock Exchange of India and

Interconnected Stock Exchange of India.

Secondary market operations involve buying and selling of securities on the stock

exchange through its members. The companies hitting the primary market are

mandatory to list their shares on one or more stock exchanges in India. Listing of

scrip’s provides liquidity and offers an opportunity to the investors to buy or sell the

scrip’s.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange – buyers broker and sellers broker

2. Portfolio Manager

3. Investment advisor

4. Share transfer agent

5. Depository

6. Depository participants.

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STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government

and semi-govt bodies or other public bodies as also for shares and debentures issued

by the joint-stock companies. In the stock market, purchases and sales of shares are

affected in conditions of free competition. Government securities are traded outside the

trading ring in the form of over the counter sales or purchase. The bargains that are

struck in the trading ring by the members of the stock exchanges are at the fairest

prices determined by the basic laws of supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not,

constituted for the purpose of assisting, regulating or controlling the business of buying,

selling or dealing in securities.” The securities include:

Shares of public company.

Government securities.

Bonds

History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai setup

in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non-

profit-marking associations of brokers to regulate and protect their interests. Before

the control on securities under the constitution in 1950, it was a state subject and the

Bombay securities contracts (control) act of 1925 used to regulate trading in

securities. Under this act, the Mumbai stock exchange was recognized in 1927 and

Ahmadabad in 1937. During the war boom, a number of stock exchanges were

organized. Soon after it became a central subject, central legislation was proposed

and a committee headed by A.D.Gorwala went into the bill for securities regulation.

On the basis of the committee’s recommendations and public discussion, the

securities contract (regulation) act became law in 1956.

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Functions of Stock Exchanges:

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

the listed companies, they help trading and raise funds from the market. Over the

hundred and twenty years during which the stock exchanges have existed in this

country and through their medium, the central and state government have raised

crores of rupees by floating public loans. Municipal corporations, trust and local

bodies have obtained from the public their financial requirements, and industry, trade

and commerce- the backbone of the country’s economy-have secured capital of

crores or rupees through the issue of stocks, shares and debentures for financing

their day-to-day activities, organizing new ventures and completing projects of

expansion, diversification and modernization. By obtaining the listing and trading

facilities, public investment is increased and companies were able to raise more

funds. The quoted companies with wide public interest have enjoyed some benefits

and assets valuation has become easier for tax and other purposes.

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Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts (regulation), Act, 1956. Those are:

Ahmadabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

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Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

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Out of these major stock exchanges were:

NSE (National Stock Exchange)

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

Powered Study Group on Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by financial institutions (FI’s)

to provide access to investors from all across the country on an equal footing. Based

on the recommendations, NSE was promoted by leading Financial Institutions at the

behest of the Government of India and was incorporated in November 1992 as a

tax-paying company unlike other stock exchanges in the country. On its recognition

as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April

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

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

November 1994 and operations in Derivatives segment commenced in June 2000

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

NSE was set-up with the main objectives of:

Establishing a nation-wide trading facility for equities and debt instruments. Ensuring equal access to investors all over the country through an appropriate

communication network. Providing a fair, efficient and transparent securities market to investors using

electronic trading systems. Enabling shorter settlement cycles and book entry settlements systems, and Meeting the current international standards of securities markets.

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

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

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

industry towards new horizons and greater opportunities.

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BSE (Bombay Stock Exchange)

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

as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,

even older than the Tokyo Stock Exchange, which was established in 1878. It is a

voluntary non-profit making Association of Persons (AOP) and is currently engaged

in the process of converting itself into demutualised and corporate entity. It has

evolved over the years into its present status as the premier Stock Exchange in the

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

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

(Regulation) Act 1956.The Exchange, while providing an efficient and transparent

market for trading in securities, debt and derivatives upholds the interests of the

investors and ensures redresses of their grievances whether against the companies

or its own member-brokers. It also strives to educate and enlighten the investors by

conducting investor education programmers and making available to them

necessary informative inputs.

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A Governing Board having 20

directors is the apex body, which

decides the policies and regulates

the affairs of the Exchange. The

Governing Board consists of 9

elected directors, who are from the

broking community (one third of

them retire ever year by rotation),

three SEBI nominees, six public

representatives and an Executive

Director & Chief Executive Officer

and a Chief Operating Officer.

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

administration of the Exchange and the Chief Operating Officer and other Heads of

Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to

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

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

representatives, Executive Director & CEO and Chief Operating Officer has been

constituted. The Committee considers judicial & quasi matters in which the

Governing Board has powers as an Appellate Authority, matters regarding

annulment of transactions, admission, continuance and suspension of member-

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

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

the member-brokers to the Exchange, etc.

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REGULATORY FRAME WORK OF STOCK EXCHANGE A comprehensive legal framework was provided by the “Securities Contract

Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three tier

regulatory structure comprising

Ministry of finance

The Securities And Exchange Board of India

Governing body

Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation for the

admission of members in the stock exchanges. The qualifications for becoming a

member of a recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years.

He should be an Indian citizen.

He should be neither a bankrupt nor compound with the creditors.

He should not be convicted for fraud or dishonesty.

He should not be engaged in any other business connected with a company.

He should not be a defaulter of any other stock exchange.

The minimum required education is a pass in 12th standard examination.

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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a

resolution of government of India. It was later made statutory body by the SEBI act

1992.according to this act, the SEBI shall constitute of a chairman and four other

members appointed by the central government.

With the coming into effect of the securities and exchange board of India act, 1992

some of the powers and functions exercised by the central government, in respect of

the regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities.

Regulating the business in stock exchanges and any other securities market.

Registering and regulating the working of intermediaries associated with

securities market as well as working of mutual funds.

Promoting and regulating self-regulatory organizations.

Prohibiting insider trading in securities.

Regulating substantial acquisition of shares and take over of companies.

Performing such functions and exercising such powers under the provisions

of capital issues (control) act, 1947and the securities to it by the central

government.

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SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):

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

non-members, public representatives and government representatives to the

extent of 50% of total number of members.

Capital adequacy norms have been laid down for the members of various stock

exchanges depending upon their turnover of trade and other factors.

All recognized stock exchanges will have to inform about transactions within 24

hrs.

TYPES OF ORDERS:

Buy and sell orders placed with members of the stock exchange by the investors.

The orders are of different types.

Limit orders: Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at

Rs.50.’Here, the order has clearly indicated the price at which it has to be bought

and the investor is not willing to give more than Rs.50.

Best rate order: Here, the buyer or seller gives the freedom to the broker to execute

the order at the best possible rate quoted on the particular date for buying. It may be

lowest rate for buying and highest rate for selling.

Discretionary order: The investor gives the range of price for purchase and sale. The

broker can use his discretion to buy within the specified limit. Generally the

approximation price is fixed. The order stands as this “buy BRC 100 shares around

Rs.40”.

Stop loss order: The orders are given to limit the loss due to unfavorable price

movement in the market. A particular limit is given for waiting. If the price falls below

the limit, the broker is authorized to sell the shares to prevent further loss. E.g. Sell

BRC limited at Rs.24, stop loss at Rs.22.

Buying and selling shares: To buy and sell the shares the investor has to locate

register broker or sub broker who render prompt and efficient service to him. The

order to buy or sell specifying the number of shares of the company of investors’

choice is placed with the broker. The order may be of any type. After receiving the

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order the broker tries to execute the order in his computer terminal. Once matching

order is found, the order is executed. The broker then delivers the contract note to

the investor. It gives the details regarding the name of the company, number of

shares bought, price, brokerage, and the date of delivery of share. In this physical

trading form, once the broker gets the share certificate through the clearing houses

he delivers the share certificate along with transfer deed to the investor. The investor

has to fill the transfer deed and stamp it. The stamp duty is one of the percentage

considerations, the investor should lodge the share certificate and transfer deed to

the register or transfer agent of the company. If it is bought in the DEMAT form, the

broker has to give a matching instruction to his depository participant to transfer

shares bought to the investors account. The investor should be account holder in

any of the depository participant. In the case of sale of shares on receiving payment

from the purchasing broker, the broker effects the payment to the investor.

Share groups: The scrips traded on the BSE have been classified into

‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’ groups. The ‘A’ group represents those, which are in the

carry forward system. The ‘F’ group represents the debt market segment (fixed

income securities). The Z group scrips are of the blacklisted companies. The ‘C’

group covers the odd lot securities in ‘A’, ‘B1’&’B2’ groups.

ROLLING SETTLEMENT SYSTEM:

Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3 or

5days) after the trading day. The shares bought and sold are paid in for n days after

the trading day of the particular transaction. Share settlement is likely to be

completed much sooner after the transaction than under the fixed settlement

system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days

after the trading day. A rolling period which offers a large number of days negates

the advantages of the system. Generally longer settlement periods are shortened

gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the

criteria that they were in compulsory demat list and had daily turnover of about Rs.1

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crore or more. Then it was extended to “A” stocks in Modified Carry Forward

Scheme, Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and

lending Securities Scheme (BELSS) with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and

subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling

settlement experience it was further reduced to T+2 to reduce the risk in the market

and to protect the interest of the investors from 1st April 2003.

Activities on T+1: conformation of the institutional trades by the custodian is sent to

the stock exchange by 11.00 am. A provision of an exception window would be

available for late confirmation. The time limit and the additional changes for the

exception window are dedicated by the exchange.

The exchanges/clearing house/ clearing corporation would process and download

the obligation files to the broker’s terminals late by 1.30 p.m on T+1. Depository

participants accept the instructions for pay in securities by investors in physical form

upto 4 p.m and in electronic form upto 6 p.m. the depositories accept from other DPs

till 8p.m for same day processing.

Activities on T+2: The depository permits the download of the paying in files of securities and funds till 10.30 a.m on T+2 from the brokers’ pool accounts. The depository processes the pay in requests and transfers the consolidated pay in files to clearing House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/clearing corporation executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the depositories and clearing banks. In the demat mode net basis settlement is allowed. The buy and sale positions in the same scrip can be settled and net quantity has to be settled.

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ABOUT SHAREKHAN LIMITED

Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group which is running successfully since 1922 in the country. It is the retail broking arm of the Mumbai-based SSKI Group, which has over eight decades of experience in the stock broking business. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, Derivatives, depository services, online trading, investment advice etc.

The firm’s online trading and investment site - www.sharekhan.com - was launched on Feb 8, 2000. The site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the site has a registered base of over one lakh customers. The content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. The objective has been to let customers make informed decisions and to simplify the process of investing in stocks.

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable application that emulates the broker terminals along with host of other information relevant to the Day Traders. This was for the first time that a net-based trading station of this caliber was offered to the traders. In the last six months Speed Trade has become a de facto standard for the Day Trading community over the net.

Share khan’s ground network includes over 1288 centers in 325 cities in India which provide a host of trading related services.

Sharekhan has always believed in investing in technology to build its business. The company has used some of the best-known names in the IT industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. to build its trading

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engine and content. The Morakhiya family holds a majority stake in the company. HSBC, Intel & Carlyle are the other investors.

With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of the market in each of these segments. SSKI’s institutional broking arm accounts for 7% of the market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional portfolio investment in the country. It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional Investors generate about 65% of the organization’s revenue, with a daily turnover of over US$ 2 million. The Corporate Finance section has a list of very prestigious clients and has many ‘firsts’ to its credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 1 billion in private equity deals. Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shopper’s Stop.

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PROFILE OF THE COMPANY

Name of the company: Sharekhan ltd.

Year of Establishment: 1925

Headquarter : Sharekhan SSKI A-206 Phoenix House Phoenix Mills Compound Lower Parel Mumbai - Maharashtra, INDIA- 400013

Nature of Business : Service Provider

Services : Depository Services, Online Services and Technical Research.

Number of Employees : Over 3500

Revenue : Data Not Available

Website : www.sharekhan.com Slogan : Your Guide to The Financial Jungle.

Vision

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

Mission

To educate and empower the individual investor to make better investment

decisions through quality advice and superior service.

Sharekhan is infact-

• Among the top 3 branded retail service providers • No. 1 player in online business• Largest network of branded broking outlets in the country serving more than

7, 00,000 clients.

•

REASON TO CHOOSE SHAREKHAN LIMITED

Experience

SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the for 2004' award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutionalindividual investors.

Technology

With its online trading account one can buy and sellwith an internet connection. One can get access to its powerful online trading tools that will help him take complete control over his investment in shares.

Accessibility

Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXEinvestors. These services are accessible through its centers across the country over the internet (through the website www.sharekhan.com) as well as over the Voice Tool.

Knowledge

In a business where the right information at the right tprofits, one can get access to a wide range of information on Sharekhan limited’scontent-rich portal. One canempower him to take informed decisions.

Convenience

One can call its Dial-N-Trade number to get intransactions. Sharekhan ltd. have a dedicated callToll Free Number 1800-22-7500

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REASON TO CHOOSE SHAREKHAN LIMITED

SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the 'India's Best Broking House

award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutional-level research and broking services to

With its online trading account one can buy and sell shares in an instant from any PC with an internet connection. One can get access to its powerful online trading tools that will help him take complete control over his investment in shares.

Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION services for investors. These services are accessible through its centers across the country over the internet (through the website www.sharekhan.com) as well as over the Voice Tool.

In a business where the right information at the right time can translate into direct profits, one can get access to a wide range of information on Sharekhan limited’s

also get a useful set of knowledge-based tools that will to take informed decisions.

Trade number to get investment advice and execute his have a dedicated call-centre to provide this service via a

7500 & 1800-22-7050 from anywhere in India.

SSKI has more than eight decades of trust and credibility in the Indian stock market. In Best Broking House

award. Ever since it launched Sharekhan as its retail broking division in level research and broking services to

shares in an instant from any PC with an internet connection. One can get access to its powerful online trading tools that

CUTION services for investors. These services are accessible through its centers across the country over the internet (through the website www.sharekhan.com) as well as over the Voice Tool.

ime can translate into direct profits, one can get access to a wide range of information on Sharekhan limited’s

ased tools that will

vestment advice and execute his centre to provide this service via a

from anywhere in India.

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Customer Service

Sharekhan limited’s customer service team will assist one for any help that one may require relating to transactions, billing, demat and other queries. Its customer service can be contacted via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice

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

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SHAREKHAN LIMITED’S MANAGEMENT TEAM

Dinesh Murikya : Owner of the company

Tarun Shah : CEO of the company

Shankar Vailaya : Director (Operations)

Jaideep Arora : Director (Products & Technology)

Pathik Gandotra : Head of Research

Rishi Kohli : Vice President of Equity Derivatives

Nikhil Vora : Vice President of Research

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED

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

Equity and derivatives trading

Depository services

Online services

Commodities trading

Dial-n-trade

Portfolio management

Share shops

Fundamental research

Technical research

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TYPES OF ACCOUNT IN SHAREKHAN LIMITED

Sharekhan offers two types of trading account for its clints

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

Account for the online users) and

Speed Trade Account

CLASSIC ACCOUNT

This is a User Friendly Product which allows the client to trade through website www.sharekhan.com and is suitable for the retail investor who is risk-averse and hence prefers to invest in stocks or who does not trade too frequently. This account allow investors to buy and sell stocks online along with the following features like multiple watch lists, Integrated Banking, Demat and digital contracts, Real-time portfolio tracking with price alerts and Instant credit & transfer.

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This account comes with the following features:

a. Online trading account for investing in Equities and Derivatives b. Free trading through Phone (Dial-n-Trade)

I. Two dedicated numbers(1800-22-7500 and 39707500) for placing the orders using cell phones or landline phones

II. Automatic funds transfer with phone banking facilities (for Citibank and HDFC bank customers)

III. Simple and Secure Interactive Voice Response based system for authentication

IV. get the trusted, professional advice of Sharekhan limited’s TeleBrokers

V. After hours order placement facility between 8.00 am and 9.30 amc. Integration of: Online Trading +Saving Bank + Demat Account.d. Instant cash transfer facility against purchase & sale of shares.e. IPO investments.f. Instant order and trade confirmations by e-mail.g. Single screen interface for cash and derivatives.

SPEED TRADE ACCOUNT

This is an internet-based software application, which enables one to buy and sell in an instant. It is ideal for active traders and jobbers who transact frequently during day’s session to capitalize on intra-day price movement.

This account comes with the following features:

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

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j. Live market debts.

CHARGE STRUCTURE

Fee structure for General Individual:

Charge Classic Account Speed Trade AccountAccount Opening Rs. 750/= Rs. 1000/=

Brokerage Intra-day – 0.10 %

Delivery - 0.50 %

Intra-day - 0.10%

Delivery - 0.50%

Depository Charges:

Account Opening Charges Rs. NIL

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

HOW TO OPEN AN ACCOUNT WITH SHAREKHAN LIMITED?

For online trading with Sharekhan Ltd., investor has to open an account. Following are the ways to open an account with Sharekhan Ltd.:

One need to call them at phone number provided below and asks that he want to open an account with them.

a. One can call on the Toll Free Number: 1-800-22-7500 to speak to a Customer Service executive

b. Or If one stays in Mumbai, he can call on 022-66621111

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

One can send them an email at info@sharekhan.com to know about their products and services.

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One can also visit the site www.sharekhan.com and click on the option “Open an Account” to fill a small query form which will ask the individual to give details regarding his name, city he lives in, his email address, phone number, pin code of the city, his nearest Sharekhan Ltd. shop and his preferences regarding the type of account he wants. These information are compiled in the headquarter of the company that is in Mumbai from where it is distributed through out the country’s branches in the form of leads on the basis of cities and nearest share shops. After that the executives of the respective branches contact the prospective clients over phone or through email and give them information regarding the various types of accounts and the documents they need to open an account and then fix appointment with the prospective clients to give them demonstration and making them undergo the formalities to open the account. After that the forms that has collected from the clients, is scrutinized in the branch and then it is sent to Mumbai for further processing where after a few days the clients’ account are generated and activated. After the accounts are activated, a Welcome Kit is dispatched from Mumbai to the clients’ address mentioned in the documents provided by them. As soon as the clients receive the Welcome Kit, which contains the clients’ Trading ID and Trading Password, they can start trading and investing in shares.

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

LEAD MANAGEMENT SYSTEM (LMS) / REFERENCES

CONTACT THE PERSON OVER PHONE OR THROUGH EMAIL

FIXING AN APPOINTMENT WITH THE PERSON

GIVINGDEMONST- RATION

NO YES

DOCUMENTATION

FILLING UP THE FORM

SUBMISSION OF THE FORM

LOGIN OF THE FORM

SENDING ACCOUNT OPENING KIT TO THE CLIENT

TRADING

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

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

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

a. Passport (valid)b. Voter’s ID Cardc. Ration Cardd. Driving License (valid)e. Electricity Bill (should be latest and should be in the name of the client)f. Telephone Bill (should be latest and should be in the name of the client)g. Flat Maintenance Bill (should be latest and should be in the name of the

client)h. Insurance Policy (should be latest and should be in the name of the client)i. Lease or Rent Agreement.j. Saving Bank Statement** (should be latest)

Two cheques drawn in favour of Sharkhan Limited, one for the Account Opening Fees and the other for the Margin Money (the minimum margin money is Rs. 5000).

** A cancelled cheque should be given by the client if he provides Saving Bank Statement as a proof for correspondence address.

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

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RESEARCH SECTION IN SHAREKHAN LIMITED

Sharekhan Limited has its own in-house Research Organisation which is known as Valueline. It comprises a team of experts who constantly keep an eye on the share market and do research on the various aspects of the share market. Generally the research is based on the Fundamentals and Technical analysis of different companies and also taking into account various factors relating to the economy.

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

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

As a customer of Sharekhan Limited, one receives daily 5-6 Research Reports on their emails which they can use as tips for investing in the market. These reports are named as Pre-Market Report, Eagle Eye, High Noon, Investors Eye, Daring Derivatives and Post-Market Report. Apart from these, Sharekhan Limited issues a monthly subscription by the name of Valueline which is easily available in the market.

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AWARDS AND ACHIEVEMENTS

SSKI has been voted as the Top Domestic Brokerage House in the research category, twice by Euromoney Survey and four times by Asiamoney Survey.

Sharekhan Limited won the CNBC AWARD for the year 2004.

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Chapter 3

Project Analysis

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PROJECT ANALYSIS

OUTCRY SYSTEM

The broker has to buy or sell securities for which he has received the orders. For

this, the broker or his authorized representatives goes to the stock exchange. This

method is called the open outcry system. Basically the brokers shout while buying or

selling the securities. The floor of the stock exchange is divided into a number of

markets also known as ‘post pit’ or wing based on particular securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or bid

price. For making the necessary bargain, he quotes his purchase or sale price, also

known as offer or bid price. The dealer, to whom the price is quoted, quotes his own

price when the quotation of the dealer suits the broker, he may loose the bargain. If

he is not satisfied with the quote price, he may turn to some other dealer. On the

close of the bargain, the dealer as well as the broker makes a brief note of the

particulars of the deal. Such notes are made on some pad and on it the number of

shares, the price agreed upon, the name of the party, what membership number

etc., are noted.

DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.

The scope of manipulation, speculation and mal practice is more.

Signal were more important in the outcry system any member who could not

interpret the buy/sell signal correctly often landed himself in disaster situation.

In audibility was another disadvantage of the outcry system.

Due to the above disadvantages of the outcry system the SHAREKHAN has

shifted from outcry system to online trading from February 29th 1997.

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MANUAL TRADING

Trading procedure before introduction of online trading:Trading on stock exchanges is officially done in the trading ring. In the trading ring

the space is provided for specified and non-specified sections, the members and

their authorized assistants have to wear a badge or carry with them an identity card

given by the exchange to enter the trading ring. They carry a sauda book or

confirmation memos, duly authorized by the exchange and carry a pen with them.

The stock exchanges operations are floor level are technical in nature .Non-

members are not permitted to enter in to stock market. Hence various stages have

to be completed in executing a transaction at a stock exchange .The steps involved

in this method of trading have given below:

Choice of broker:sell shares and transact business, have to act through member brokers only. They

can also appoint their bankers for this purpose as per the present regulations.

Placement of order:

The next step is the The prospective investor who wants to buy shares or the

investors, who wants to placing order for the purchase or sale of securities with a

broker. The order is usually placed by telegram, telephone, letter, fax etc or in

person. To avoid delay, it is placed generally over the phone. The orders may take

any one of the forms such as At Best Orders, Limit Order, Immediate or Cancel

Order, Limited Discretionary Order, and Open Order, Stop Loss Order.

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30

P.M on all working days Monday to Friday, and a special one-hour session on

Saturday. The members or the authorized assistants have to wear a badge given by

the exchange to enter into the trading ring. They carry a sauda Block Book or

conformation memos, which are duly authorized by the exchange when the deal is

struck; both broker and jobber make a note in their sauda block books. From the

sauda book, the contract notes are drawn up and posted to the client. A contract

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note is written agreement between the broker and his clients for the transaction

executed.

Drawing Up and Bills:Both sale and purchase bills are prepared along with the contract note and it is

posted on the same day or the next day. This in a purchase transaction, once the

shares are delivered to the client effects payment for the purchases and pays the

stamp fees for transfer, a bill is made out giving the total cost of purchase, including

other expenses incurred by the broker in the price itself. With this, the process ends.

DEMATERLIZATION:Dematerialization is the process by which physical certificates of an investor are

converted to an equipment number of securities in electronic from and credited in

the investor account with his DP. In order to dematerialize the certificates, an

investor has to first open an account with a DP and then request for the

Dematerialization Request Form, which is DP and submit the same along with the

share certificates. The investor has to ensure that he marks “Submitted for

Dematerialization” on the certificates before the shares are handed over to the DP

for demat. Dematerialization can only be done to those certificates, which are

already registered in your name and belong to the list of securities admitted for

Dematerialization at NSDL.

Most of the active scrip’s in the market including all the scrip’s of S&P CNX NIFTY

and BSE SENSEX have already joined NSDL. This list is steadily increasing.

Briefly, the process is as follows: after completion of transfer, the investor gets the

option to dematerialize such shares. Investor’s willing to exercise this option sends a

Demat request along with the option letter sent by the company to his DP. The

company or its R&T agent would confirm the Demat request on its receipt from the

DP to reduce risk of loss in transit.

Dematerialized shares do not have any distinctive or certificate numbers. These

shares are fungible-which means that 100 shares of a security are the same as any

other 100 shares of the security. Odd lot shares certificates can also be

dematerialized.

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Dematerialization normally takes about fifteen to thirty days. To get back

dematerialized securities in the physical form, request DP for Rematerialization of

the same is made.

Rematerialization is the process of converting electronic shares in to physical

shares.

Benefits of Demat:

It reduces the risk of bad deliveries, in turn saving the cost and wastage of time

associated with follow up for rectification. This has lead to reduction in brokerage to

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

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid

the cost of courier / notarization.

You can receive your bonuses and rights issues into your DA as a direct credit,

this eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat

shares as compared to loans against physical shares.

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

circumstances is reduced.

RBI has also reduced the minimum margin to 25% for loans against

dematerialized securities as against 50% for loans against physical securities.

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ONLINE TRADING

Before getting in to the online trading we should know some things about the

internet, e-commerce and etc.

1) What is Internet?

Internet is a worldwide, self-governed network connecting several other smaller

networks and millions of computers and persons, to mega sources of information.

This technology shrinks vast distances, accelerating the pace of business reforms

and revolutionizing the way companies are managed. It allows direct, ubiquitous

links to anyone anywhere and anytime to build up interactive relationships.

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

unprecedented changes in our lives and business. Internet or net is an inter-

connection of computer communication networks spanning the entire globe, crossing

all geographical boundaries. It has re-defined the methods of communication, work

study, education, business, leisure, health, trade, banking, commerce and what not it

is virtually changing every thing and we are living in dot.com age. Net being an

interactive two way medium, through various websites, enables participation by

individuals in business to business and business to consumer commerce, visit to

shopping arcades, games, etc. in cyber space even the information can be copied,

downloaded and retransmitted.

The use of Internet has grown 2000 percent in last decade and is currently growing

at 10 percent per month. In India, growth of Internet is of recent times. It is expected

to bring changes in every functional area of business activity including management

and financial services. It offers stock trading at a lower cost. Internet can change the

nature and capacity of stock broking business in India.

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2. E-commerce

Electronic commerce is associated with buying and selling over computer

communication networks. It helps conduct traditional commerce through new way of

transferring and processing of information. Information is electronically transferred

from computer to computer in an automated way. E-commerce refers to the

paperless exchange of business information using electronic data inter change,

electronic technologies. It not only reduces manual processes and paper

transactions but also helps organization move to a fully electronic environment and

change the way they operated.

PC’s and networking attempts to introduce banks of the tools and technologies

required for electronic commerce. The computers are either workstations of

individual office works or serves where large databases and information reside.

Network connects both categories of computers; the various operating systems are

the most basis program within a computer. It manages the resources of the

computer system in a fair and efficient manner.

Now we can enter in to the concept known as online trading.

In the past, investors had no option but to contact their broker to get real time access

to market data. The net brings data to the investor on-line and net broking enables

him to trade on a click of mouse. Now information has become easily accessible to

both retail as well as big investor.

EVOLUTION OF BROKING IN INDIA:

The evolution of a broking in India can be categorized in three phases -

Stockbrokers will offer on their sites features such as live portfolio manager,

live quotes, market research and news, etc. to attract more investors.

Brokers will offer online broking and relationship management by providing

and offering analysis and information to investors during broking and non-

broking hours based on their profile and needs, i.e. customized services.

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Brokers (now e-brokers) will offer value management or services like initial

public offering online, on-line asset allocation, portfolio management, financial

planning, tax planning, insurance services, etc. and enables the investors to

take better and well considered decisions.

The actual definition of “Online Trading” is as explained below:

“Online trading is a service offered on the internet for purchase and sale of shares.

In the real world you place orders on your stockbroker either verbally (personally or

telephonically) or in a written form (fax).” In online trading, you will access a

stockbroker’s website through your internet enabled PC and place orders through

the broker’s internet based trading engine. These orders are routed to the stock

exchange without manual intervention and executed thereon in a matter of a few

seconds.

The net is used as a mode of trading in internet trading. Orders are communicated to

the stock exchange through website.

In India:

Internet trading started in India on 1st April 2000 with 79 members seeking

permission for online trading. The SEBI committees on internet based securities

trading services has allowed the net to be used as an Order Routing System (ORS)

through registered stock brokers on behalf of their clients for execution of

transaction. Under the ORS the client enters his requirements (security, quantity,

price buy/sell) on broker’s site.

Objectives:

Internet trading is expected to Increase transparency in the markets, Enhance market quality through improved liquidity, by increasing quote

continuity and market depth,

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

Provide management information system,

Introduce flexibility in system, so as to handle growing volumes easily and to

support nationwide expansion of market activity.

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Besides, through internet trading three fundamental objectives of securities

regulation can be easily achieved, these are:

Investor protection

Creation of a fair and efficient market, and

Reduction of the systematic risks.

Some of the brokers offering net trading include ICICI direct, kotakstreet, etc.

Requirements for net trading:

For investors:

1. Installation of a computer with required specification2. Installation of a modem3. Telephone connection4. Registration for on-line trading with broker5. A bank account6. Depository account 7. Compliance with SEBI guidelines for net trading

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

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

1) Voter ID card2) Driving license3) PAN card( in case of to trade more than 50000)4) Ration card5) Bank pass book6) Telephone bill

Other requirements, which are necessary

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

photograph.

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For stock brokers:

1. Permission from stock exchange for net trading

2. Net worth of Rs. 50 lac

3. Adequate back-up system

4. Secured and reliable software system

5. Adequate, experienced and trained staff

6. Communication of order (trade confirmation to investor by e-mail)

7. Use of authentication technologies

8. Issue of contract notes within 24 hours of the trade execution

9. Setting up a website.

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

to the stock exchange through website. Internet trading started in India on 1st April

2000 with 79 members seeking permission for online trading. The SEBI committees

on internet based securities trading services has allowed the net to be used as an

Order Routing System (ORS) through registered stock brokers on behalf of their

clients for execution of transaction.

Under the Order Routing System the client enters his requirements (security,

quantity, price, and buy/sell) in broker's site. They are checked electronically against

the clients account and routed electronically to the appropriate exchange for

execution by the broker. The client receives a confirmation on execution of the order.

The customer's portfolio and ledger accounts get updated to reflect the transaction.

The user should have the user id and password to enter into the electronic ring. He

should also have demat account and bank account. The system permits only a

registered client to log in using user id and password. Order can be placed using

place order window of the website.

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Procedure for net trading

Step 1: Those investors, who are interested in doing the trading over internet

system i.e. NEAT-IXS, should approach the brokers and get them self registered

with the Stock Broker.

Step 2: After registration, the broker will provide to them a Login name, Password

and personal identification number (PIN).

Step 3: Actual placement of an order. An order can then be placed by using the

place order window as under:

(a) First by entering the symbol and series of stock and other parameters like

quantity and price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

Step 4: It is the process of review. Thus, the investor has to review the order placed

by clicking the review option. He may also re-set to clear the values.

Step 5: After the review has been satisfactory, the order has to be sent by clicking

on the send option.

Step 6: The investor will receive an "Order Confirmation" message along with the

order number and the value of the order.

Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain

reasons such as invalid price limit, an appropriate message will appear at the bottom

of the screen. At present, a time lag of about 10 seconds is there in executing the

trade.

Step 8: It is regarding charging payment, for which there are different mode. Some

brokers will take some advance payment from the investor and will fix their trading

limits. When the trade is executed, the broker will ask the investor for transfer of

funds to his account.

Internet trading provides total transparency between a broker and an investor in the

secondary market. In the open outcry system, only the broker knew the actually

transacted price. Screen based trading provides more transparency. With online trading

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investors can see themselves the price at which the deal takes place.

The time gap has narrowed in every stage of operation. Confirmation and execution

of trade reaches the investor within the least possible time, mostly within 30

seconds. Instant feedback is available about the execution. Some of the websites

also offer;

News and research report

BSE and NSE movements

Stock analysis

IPO and mutual fund centers

Step by step procedure in online trading:

Following steps explain the step by step approach to on-line trading:

1) Log on to the stock broker's website

2) Register as client/investor

3) Fill the application form and client broker agreement form on the requisite value

stamp paper

4) Obtain user ID and pass word

5) Log on to the broker's site using secure user ID and password

6) Market watch page will show real time on-line market data

7) Trade shares directly by entering the symbol or number of the security

8) Brokers server will check your limit in the on-line account and Demat account for

the number of shares and execute the trade

9) Order is executed instantly (10-30 seconds) and confirmation can be obtained.

10) Confirmation is e-mailed to investor by broker

11) Contract note is printed and mailed in 24 hours

12) Settlement will take place automatically on the settlement day

13) Demat account and the bank account will get debited and credited by electronic

means.

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ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:

1) Limit / stop orders: orders that can be go unfilled, but there is an extra Charge

for this leeway facility since one need to hold a price.

2) Market orders: orders can be filled at unexpected prices, but this type is much

more risky, since you have to buy stock at the given price.

3) Cash account: where funds have to be available prior to placing the order.

4) Margin account: where orders can be placed against stocks, to increase

Purchasing power.

ADVANTAGES OF ONLINE TRADING:

1) Online trading has made it possible for anyone to have easy and efficient access

to more reports and charts than it was previously possible if one went to any

brokers' office. Thus we have access to a lot more information online.

2) Online trading has let room for smaller organizations to compete with

multinational organizations since it is no longer a leg it issue. Being online does

not identify the size of any particular organization, therefore, this additional power

to the underdogs.

3) Online trading has allowed companies to locate themselves where they want as

physical location is not an issue anymore. Companies can establish themselves

according to their gains and losses, for instance where tax (sales and value

added taxes) is best suited to them.

4) Online trading gives control to individuals and they can exercise it over accounts

thus comprehend what is going on when they trade. It is like going back to school

and re-educating oneself on how to trade online.

5) Individuals’ benefit by saving comparatively a lot more when trading online as the

cost per trade is less.

6) Individuals can invest in a variety of products, unlike earlier when people bought

bonds, mutual funds, and stock for long-term basis and sat on them. Now they

can invest in stocks, stock and index options mutual funds, government, and

even insurance.

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INVESTORS REASONS TO TRADE ONLINE:

1) They have control over their accounts, can make their own decisions and don’t

have to give reasons for their actions. They are independent.

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

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

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

in the trading world.

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

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

investors.

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

business afloat.

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

members to offer them better facilities.

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

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HERE ARE THE POSSIBLE DISADVANTAGES:

1) When network crashes, there will be problems and delays due to a large influx of

rapid online trading criteria.

2) Individuals are restricted to first-hand financial guidance. This simply means that

the individual is himself / herself alone to.

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

when you are trading internationally.

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

5) According to a study conducted by Mary Rowland, careful investor: is online

trading bad for your portfolio, the more one trades the less returns one gets,

meaning that an addicted trader gets, carried away online and begins to trade for

too much which causes losses for him / her.

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

are doing, but the truth is that even though technology has taken over, the basic

rules of trading are the same. It seems that the middleman has been removed,

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

through a broker. The commissions online pertain to the intermediary.

7) There is a need for more effective communication links over the Internet and the

ability of the server to deal with a large volume of visitors.

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TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading system imparted

a greater level of transparency and investors preferred exchanges that offered

Online trading because of the following factors:

The ease of operation from the view of the both members and the investors.

Increase in the confidence of the investors because of higher level of

transparency.

Facilities better monitoring of the market by the exchange.

The best price achieved in buying and selling.

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

trading.

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

ShareKhan deals in buying and selling equity shares and debentures on the National

Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-The-

Counter Exchange of India (OTCEI).

Share Khan is provided with a computer and required software from their registered

stock exchanges. These centers are called “Broker Work Stations”. These

computers are connected to the server at the stock exchanges through cable.

The member or broker sitting in his office can send the quotations, orders,

negotiations, deals, in-house deals, auction orders etc., through the computer. The

Central trading system (CTS) will accept these orders and send it for match. If there

is any mistake in the order, CTS will reject the orders and send respective error

message to the member concern. All these operations are in built. The main

objective of CTS is to monitor the Stock Exchanges operations.

Order placed by the broker will be sent for a match and if the match is found

suitable, the transaction will be executed. Otherwise, the order will be deleted

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automatically after completion of trading time. The carry forward transactions (Good

Till cancellation) are forwarded to the next day. Even if the match is not found with in

the prescribed period, the order will not cancel.

Useful links about Sharekhan:

1. Sharekhan Website: http://www.ShareKhan.com2. Product Demo - Speed Trade: http://www.sharekhan.com/Demos/speedtrade/index.html3. Product Demo - Classic: http://www.sharekhan.com/Demos/classic/index.html4. Email: info@sharekhan.com5. FAQs: http://sharekhan.com/KnowledgeCentre/Sharekhan_FAQ.aspx6. Phone: 022-666211117. Toll Free: 1-800-22-7500

TRADING SESSION

Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of the trading period.

Monday to Friday is the trading period in all the stock exchanges. SEBI has

stipulated that all the stock exchanges in India must have same trading period.

BROKER WORK STATION: At the broker workstation the BBO’s, the last traded price, the day‘s opening price,

previous day’s closing price, highest and lowest prices, the weighted average price

and total trade value will be available continuously, as the BBO for each scrip.

Other information will be available on query from the BWS. These include top

gainers /losers of the day. Trader-wise, scrip wise net position, client wise net

position, top scrip by the volume/value, market summary etc.

Brokers are also provided with information relating to the companies in the matter of

Book closure, Dividend declarations, resolutions in board meeting, information about

liquidated companies, company report etc.

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ORDERS:

Orders can be done one at a time or in a batch mode.

The submitted order will be accepted at the CTS, after validation if it finds any invalid

reason the order is return back to the BWS, with the appropriate error message. If

Accepted at the CTS it will be added to the local pending order book.

The order will then be taken up for matching, if it is a buy order the system tries to

find a sell order, which fits the requirement of the buy order, when such match is

found a trade gets executed. Each trade involves two brokers and respective traders

who sent the order. Both these traders are informed of the trade being executed at

their respective BWS.

At the BWS the trade is added to the local trade book.

Orders sent by the brokers are two types:

1) Good for the day (GFD)2) Good till cancellation(GTC)

Good for the day:

This is also called as “market order”. For an order if the member selects the deal as

good for the day, the order is treated as market order. If a “best bid” founds match

with “best order” then the transaction gets executed. If the match is not found then

after trade time the order gets cancelled that day. Next day he has to place a new

order.

For example if a member wants to purchase 1000 shares of satyam info @ 400 each

through Good for Day order. If the correct match is not found, order gets cancelled

automatically and new quotation has to be placed the next day.

Good till cancellation:

This order is forwarded to the last trading day of that settlement period. This is also

called as carry forward order like GFD; broker has to select the option of GTC for the

order. If the order finds match with in the trading settlement period, the order is

executed. If no match is found, the order is cancelled on the last day of settlement

period. This order is not carried forward to the next settlement period.

60

For example, if a member a place purchase order of 500 shares of SBI @ 690 per

share and selects the order as GTC and place an order. If the match is not found on

that day it will be forwarded to the next day until trading settlement period day.

SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called settlement. Buyers

will take the delivery of shares through the depository participants like SHARE

KHAN and others.

Finally, the settlement is made by means of delivering the share certificates along

with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It

bears a stamp of the selling broker. The buyer then fills up the certificates fills up the

particulars in the transfer deed. Settlement can be done in the following way.

Spot settlement: under this method, the delivery of securities and payment for

them are affected on the day of the contract itself.

Rolling settlement: Under this rolling settlement the trading is on “T+2”,basis i.e. if

Monday is trading day then Wednesday is the paying day . In case on non-delivery,

the securities will go for auction.

DETAILS OF PROCEDURES:

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

to clearing house within the settlement period along with the delivery Chelan filled in

with the details of share certificates which has folio numbers or distinctive numbers

etc.

Delivery out: The buyer of shares who made pay in position will take delivery of

shares from the clearing house.

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Pay-in: The member who is in paying position shall pay for value of shares with in

the trading settlement period (T+2).

Payout: The cheques paid in the clearinghouse will be paid to members who are in

paying position.

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

good and bad deliveries pertaining to the settlement will be settled by the settlement

committee of the exchange.

62

The given flow chart clearly explains the process of online trading:

Login

Buy transcation Sell transcation

The system will check buyinglimits

The system will check yourdp account quantity

Orders accepted Rejected orders would becommunicated along with reasons

orders accepted

contract note wouldbe sent to by mailor hand delivery

flashed on yourscreen immediately

on execution

conformationcould be send to youre-mail and mobile

you may edit yourpending order

you may delete yourpending order

your order is transmitted to exchange for execution

pending sell orderswould be displayed

on your screen

pending buy orderswould be displayed

on your screen

on executionof your orders

you may edit yourpending order

you may deleteyour pending order

63

Chapter 4

ComparativeAnalysis

64

THE MAJOR PLAYERS IN ONLINE TRADING

1) SHAREKHAN.COM

2) 5PAISA.COM

3) KOTAKSTREET.COM

4) INDIABULLS.COM

5) ICICIDIRECT.COM

6) HDFCSEC.COM

POLL RESULTS: BROKER PREFERENCE

5paise 119 13.45%

Sharekhan 194 21.92%

Motilal oswal 38 4.29%

ICICI Direct 192 21.69%

HDFC 46 5.20%

Indiabulls 121 13.67%

Kotak 59 6.67%

Others 116 13.11%

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65

HDFC SECURITIES:

Company Background:

HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital

Partners and their associates. Pioneers in setting up Dial-a-share service with the

largest team of Tele-brokers.

Online Account Type:

HDFC Online Trading A/c: Plain Vanilla Account with focus on 3 in 1

advantage.

Pricing of HDFC Account

Account Opening: Rs 750

Demat: NIL, 1st year charges included in Account Opening

Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)

Brokerage:

Trading 0.15%* each side + ST

Delivery 0.50%** each side + ST

*Rs 25 Min Brokerage per transaction

**Rs 8 Min Brokerage per transaction

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ICICI Direct:

Account Opening: Rs 750

Schemes: For short periods Rs 750 is refundable against brokerage generated

in a qtr. These schemes are introduced 3-4 times a year.

Demat: NIL, 1st year charges included in Account Opening Plus a facility to open

additional 4 DP’s without 1st yr AMC. Only Rs 100 as linking charges per DP

Initial Margin : Nil

Brokerage: ICICI’s brokerage rates are inclusive of Stamp duty (0.002%) for

trading and 0.010% for delivery while service tax (10.2%) on BROKERAGE land

turnover tax is EXTRA.

Delivery Vol per QTR Brokerage Square Vol P.M. Brokerage

< 10 lakhs 0.75% < 50 lakhs .10% Both Sides

10 – 25 lakhs 0.70% 50 lakhs – 2 Cr .08% Both Sides

25 – 50 lakhs 0.55% 2Cr-5Cr .05% Both Sides

50 lakhs - 1 Cr 0.45% 5Cr- 10 Cr .04% Both Sides

1 Cr – 2 Cr 0.35% 10Cr -20 Cr .035% Both Sides

2 Cr – 5 Cr 0.30% > 20 Cr .03% Both Sides

> 5 Cr 0.25% ---- --------

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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 India bulls: Account with sophisticated trading tools, low commissions

and priority access to R.M.

Pricing of IB Accounts:

Signature Account Power India Bulls

* Account Opening: Rs 250 * Account Opening: Rs 750

* Demat: Rs 200 if POA is signed, *Demat: Rs.200 if POA is signed,

No AMC for this DP No AMC for this DP

* Initial Margin: NIL * Initial Margin: NIL

* Brokerage: Negotiable * Brokerage: Negotiable

PAID Research:

SCHEME FACILITY

WebBased-1-Month-500: View & Print on Website

WebBased-1-Month-6000: View & Print on Website

PrintReport-1-Month-750: View & Print on Website

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+ 10 Reports Delivered

PrintReport-1-Month-9000: View & Print on Website

+ 10 Reports Delivered

Kotakstreet:

Company Background:

Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is a joint

venture between Kotak Mahindra Bank and Goldman Sachs.

Online Account Type

Twin Advantage / Green Channel : 2 DP’s, Limit against shares

Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction

High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

Cash Expressway : Spot payment, additional 0.5% charges

For Kotak FastLane / Keat Lite / Keat Desktop are trading interfaces.

Keat Desktop with advanced tools comes at a charge of Rs 500 p.m, Non

refundable.

PRICING OF KOTAK

Account Opening : Rs 500

Demat: Rs 22.5 p.m

Initial Margin : Rs 5000(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 w.e.f 1/4/2004

69

Slab structure of Kotak

Delivery Vol p m Brokerage * Square Vol P.M. Brokerage **

< 1 lakhs 0.65% < 10 lakhs 0.10% Both Sides

1 lakhs – 5 lakhs 0.60% 10 lakhs – 25 lakhs 0.08% Both Sides

5 lakhs – 10 lakhs 0.50% 25 lakhs - 2 Cr 0.05% Both Sides

10 lakhs - 20 lakhs 0.40% 2 Cr - 5 Cr 0.04% Both Sides

20 lakhs – 60 lakhs 0.30% > 5 Cr 0.035% Both Sides

60 lakhs - 2 Cr 0.25% ---do--- 0.03% Both Sides

> 2 0.20% ---- --------

* Brokerage is inclusive of All Taxes * Brokerage is inclusive of All Taxes

* DP Charges Extra

* Min Brokerage of Rs 0.05 per share * Min Brokerage of Rs 0.01 per share

Derivatives Vol off p m Brokerage

< 2 Cr 0.07% Both Sides

2 Cr - 5.5 Cr 0.05% Both Sides

5.5 Cr – 10 Cr 0.04% Both Sides

> 10 Cr 0.03% Both Sides

* Brokerage is inclusive of All Taxes.

70

5paisa

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 5paisa.com.

Apart from offering online trading in stock market the company offers

mutual funds online.

It also acts as a distributor of various financial services i.e. GOI securities,Company Fixed Deposits, Insurance.Limited ground network, present in 20 cities

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

PRICING FOR RETAIL CLIENTSInvestor Terminal

Account Opening : Rs 500 Demat 1st Yr : Rs 250 Initial Margin : Rs 2500 (Compulsory) Min Margin Retainable : Rs 1000 Brokerage : Trading 0.10% each side + ST Delivery 0.50% each side + ST

PRICING FOR HNI CLIENTSTrader 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

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Sharekhan

Company Background

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56%

in Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific

Into broking since 80 years

Focused on providing equity solutions to every segment

Largest ground network of 210 Branded Share shops in 90 cities

Online Account Types

Classis Account / Applet : Investor in equities

Speed Trade : Trader in equities & derivatives

PRICING FOR HNI CLIENTS

Speed Trade

Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1)

Demat 1st Yr : Incl in Account Opening

Initial Margin : Nil

Min Margin Retainable : NIL

Brokerage :

Trading 0.10% each side + All Taxes

Delivery 0.50% each side + All Taxes

(Negotiable based on volume)

Account Access Charges

Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr.

No access charges for gold customers (Above 1 lac brokerage p.a)

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Pricing for Retail Customers

Classic / Applet

Account Opening : Rs 750

Demat 1st Yr : NIL

Initial Margin : NIL

Min Margin Retainable : NIL

Brokerage:

Trading 0.10% each side + All Taxes

Delivery 0.50% each side + All Taxes

Sharekhan online Trading Interfaces

The customer can choose the online trading interface that meets his requirement

based on his trading habits and preferences

CLASSIC / APPLET

The website is meant for customers who Invests in Equities

SPEEDTRADE

The speed trade is meant for customers who trade in Equities

DIAL-N-TRADE – Toll Free

The DNT is a value added services meant for all customers who

Want to transact but are not online.

DNT – TOLL FREE FERTURES

Dedicated Toll – Free number for Order placements

Automatic fund transfer with phone banking*

Simple and secure IVR based system for authentication

No wait time, on entry of Phone Id & TPIN, the call is transferred

Trusted, professional advice of Tel-brokers who offer undiluted Sharekhan

Research Inputs

After-hours order placement facility **

Transfer of money using phone banking is available with Citibank only

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** Between 9 a.m to 9.55 am and 3.30p.m to 6 p.m

CLASSIC/WEBSITE FEATURES

Facility to integrate choice of 4 Banks/DP/Trading Account

Instant credit for shares sold from DP

Automatic pick-up of shares from linked DP for pay – in

Automatic deposit of shares into linked DP after pay-out

4 Times leverage on Margin Trades

Margin Trading available for entire marker session

Slab wise brokerage structure for delivery and margin trades, shortly

Free calls for order placement on Toll-Free

Trusted, Professional advice of Tele-brokers

Facility to enter After Market Orders online & via Phone

CLASSIC/WEBSITE FEATURES

Daily Research newsletter (Investor Eye) Via e-mail

Access to new IPO without any paperwork

Advanced portfolio monitoring Tools

Integrated DP account with trading account

Option of linking additional 4 DP accounts to trading account

Choice of linking 4 banks to trading a/c for online payments

Cash and Derivatives trading in a single account

E-mail confirmations for all transactions

Choice of electronic/Physical contracts

SPEEDTRADE EXE FEATURES

ALL THE FEATURES OF CLASSIC

*Real – time streaming quotes using 2 Marker Watches

*Trade Execution in 2-3 seconds

* Instant Order/trade confirmations in the same window

*Hot keys similar to a Broker’s Terminal

74

*MULTIPLE Tic-by-Tic Intra-day charts with multiple indicators

* Availability of 2 ISP & 6 Servers ensuring maximum uptime

* Customized alerts based on multiple parameters

* Cancel All/Square Off All Facility

* Window for Top Gainers, Top Losers, and Most Active updated Live

SWOT ANALYSIS

Strengths

1. Strong credibility among investors because of its heritage.

2. Excellent reputation among the business society.

3. Capability of providing superior customer service.

4. Quality research team.

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

share shops in 120 cities.

6. Abundant information about economy and companies.

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

8. Highly sophisticated infrastructure.

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

company’s performance accurately is enhancing the profitability of the clientele.

Weaknesses

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

funds which is increasingly becoming a preferred customer investment option.

2. Inadequate product awareness among the retail investors.

75

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

online space.

4. Brand awareness is low in the financial market.

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

firms.

Opportunities

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

penetration.

2. Bullish phase of the market attracts investing public.

3. Access to the BSE online space for the retail investors creates opportunity to

increase clientele base.

4. Awareness campaigns about online trading create new market.

Threats

1. Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the

market.

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

capital requirement is medium.

76

Chapter 5

Finding&

Observations

77

FINDINGS AND OBSERVATIONS:

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

2. There are more speculators than investors.

3. Information plays a vital role in the secondary market.

4. Previously rolling settlement is T+5 days, now it changed to T+2 days and further

it will be changing to T+1 day.

5. It was also observed that many broking houses offering internet trading allow

clients to use their conventional system as well just ensure that they do not loose

them and this instead of offering e-broking services they becomes service

providers.

6. The number of players is increasing at a steady rate and today there are over a

dozen of brokerage houses who have opted to offer net trading to their

customers and prominent among them are SHARE KHAN, India bulls,

kotakstreet, ICICI direct and geojit.

7. The Bombay stock exchange sensex zoomed past the 7700 barrier for the first

time in history to achieve new all time high of 7800 intra day trade and ended at a

historic close of 7732 points.

78

Conclusion&

Recommendations

79

CONCLUSION AND RECOMMENDATIONS

1. Things have changed for the better with the SHAREKHAN going on-line coupled

with endeavor to stream line the whole trading system, things have changed

dramatically over the last 3 to 4 years. New and advanced technologies have

breached geographical and cultural barriers, and have brought the countrywide

market to doorstep.

2. In the present scenario to compete with the Broker’s would require sound

infrastructure and trading as per international standards.

3. The introduction of on-line trading would influence the investors resulting in an

increase in the business of the exchange. It has helped the brokers handling a

vast amount of transactions and this can be an efficient trading, delivering,

settlement system with adequate protection to investors. The trading of

SHAREKHAN of the first day was Rs. 1.8 crores.

4. Due to invention of online trading there has been greater benefit to the investors

as they could sell / buy shares as and when required and that to with online

trading.

5. The broker’s has a greater scope than compared to the earlier times because of

invention of online trading.

6. The concept of business has changed today, this is a service oriented industry

hence the survival would require them to provide the best possible service to the

clients.

7. I recommend the exchange authorities to take steps to educate Investors about

their rights and duties. I suggest to the exchange authorities to increase the

investors’ confidences.

8. I recommend the exchange authorities to be vigilant to curb wide fluctuations of

prices.

9. The speculative pressures are responsible for the wide changes in the price, not

attracting the genuine investors to the greater extent towards the market.

80

10.Genuine investors are not at all interested in the speculative gain as their

investment is based on the future profits, therefore the authorities of the

exchange should be more vigilant to curb the speculation.

11.Necessary steps should be taken by the exchange to deal with the situations

arising due to break down in online trading.

81

BIBLIOGRAPHY

Books:

1. Investment management-V.K.Bhalla

2. Investment management -Preethi Singh

3. Security Analysis And Portfolio Management -V.A.Avadhani

4. Marketing of Financial Services -V.A.Avadhani

5. Indian Financial System -M.Y.Khan

Newspapers:-

The Times of India

The Economic Times

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www.sharekhan.com

www.economictimes.com

www.moneycontrol.com

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

www.investors.com

www.investopedia.com

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chandu9041@gmail.com