Finance Project on Online trading in Equity Market

Description
Electronic trading, sometimes called etrading, is a method of trading securities (such as stocks, and bonds), foreign exchange or financial derivatives electronically. Information technology is used to bring together buyers and sellers through an electronic trading platform and network to create virtual market places such as NASDAQ, NYSE Arca and Globex which are also known as electronic communication networks (ECNs).

A PROJECTREPORT OF SUMMER INTERNSHIP TRANING ON ONLINE TRADING IN EQUITY MARKET AT

INDEX
Declaration......................................................................................................................................6 Objectives........................................................................................................................................7 Scope................................................................................................................................................7 Abstract ...........................................................................................................................................9 Hsbc Bank .....................................................................................................................................11 Corporate Profile .........................................................................................................................12 Company Profile ..........................................................................................................................16 Stock Market ................................................................................................................................27 Indian Stock Market ....................................................................................................................32 Primary & Secondary Market ....................................................................................................39 Rematerialization & Dematarialization .....................................................................................45 Trading Offline & Online ............................................................................................................48 Online Products ............................................................................................................................66 Research & Swot Analysis...........................................................................................................72 Comparative Analysis ..................................................................................................................75 Other Findings & Recommendation ..........................................................................................89 Learning From SIP ......................................................................................................................90 Conclusion ....................................................................................................................................93 Appendix .......................................................................................................................................94 Questionnaire ...............................................................................................................................95 Bibliography .................................................................................................................................98

DECLARATION

I hereby declare that the report titled ?ONLINE TRADING IN EQUITY MARKET? is a bonafide record of the summer project done by me at IL& FS INVESTSMART SECURITIES LTD, Ahmedabad during the period JUNE-JULY2009 as part of my MBA program at SARVODAY COLLEGE OF MANAGEMENT & TECHNOLOGY.

I also declare that this report has not been submitted in full or part thereof, to any university or institutions for the award of any degree or diploma.

Place: Ahmedabad Date: 15th July 2009

Nitin Khasatiya. Sarvoday colleges of

Management & Technology

Objectives
1) To understand the process of Online Trading of Shares & Stocks. 2) Study of various Ahmedabad. Brokerage Firms offerings in

3) Comparison of IL & FS Online Trading A/c‘s offering to other market players. 4) Awareness level of IL & FS Investsmart offering in Ahmedabad.
5) Recommendations to IL & FS Investmart to improve their market share in Ahmedabad.

Scope
? The project has given me practical exposure to the working culture of an organization & given a prologue of Sales & Marketing World. ? It provided me an opportunity to interact with many corporate people. ? This project also helped me in gaining knowledge various concepts related to Stock Market. ? This project has helped me to improve my interpersonal skills like communication, presentation skills, convincing power etc. ? It provided me an in-depth knowledge about Stock Market operations. I came to know about the important issues that a Financial Service providing organization deals with & the parameters the clients consider for selecting a broking firm for online trading accounts.

? This project would highlight the Competitive advantage of IL & FS Investsmart in comparison to other key players in the market. It would locate the loopholes in the products of competitors, which would be helpful for the Marketing & Sales team target their customers & convince them on our products. ? The Survey included in this project would focus on various customer relatd issued as mentioned below: o Services mostly preferred by customer o Basis on which customer select the online product o Satisfaction in their existing broking firm o Awareness about IL & FS Investmart & their product features

Abstract
My summer internship program was for 45 days and this I had gathered knowledge and experience of working in corporate. My project began on June 2009,as a trainee my project required me to skilled in simulating demand for the company‘s product (DEMATE ACCOUNT) but this not all about training. As a trainee I had to seek to influence the level, timing, and composition of demand to meet the organization‘s objectives. IL&FS INVESTSMART required me to create a Brand Recognition of

their product in the minds of the customers, and thus creating brand image in minds of customers and adding value for the organization.

In the 45 days of my summer internship, one main thing which I learned was it is really very difficult to sustain in the market where there is huge competition. I understood how important it is to keep ourselves and the products changed on a regular basis to make profit and to sustain in the market for long term.

During my summer internship program I had experienced about ACTUAL WORKING IN AN ORGANIZATION. In an organization the major influence is on human resource management. Every member of each different department had an important role to improve organization‘s efficiency. I had observed about the different role played by different department in an organization.

In IL&FS INVEST SMART I had observed the decision is taken by the top management, however different

concerned department plays a major role in the influencing the decision. I had learnt about building strong

HSBC Bank
HSBC Holdings plc is a public limited company incorporated in England and Wales in 1990, and headquartered in London since 1993. As of 2009, it is both the world's largest banking group and the world's 6th largest company according to a composite measure by Forbes magazine. The group was founded from The Hongkong and Shanghai Banking Corporation based in Hong Kong, the acronym of which led to the current name. Today, whilst no single geographical area dominates the group's earnings, Hong Kong still continues to be a significant source of its income. Recent acquisitions and expansion in China are returning HSBC to part of its roots.[4] HSBC was, up until 2008, the largest bank in Europe.

Currently, Grupo Santander has a larger market capitalization. HSBC has an enormous operational base in Asia and significant lending, investment, and insurance activities around the world. The company has a global reach and financial fundamentals matched by few other banking or financial multinationals.[5]

Corporateprofile
? In February 2008, HSBC was named the world's most valuable banking brand by The Banker magazine. Not known for marked fluctuations in securities exchanges around the world relative to its rivals. ? HSBC is more well known in banking circles for its conservative and risk-averse approach in its business operations - a company tradition going back to the 19th century. ? As of April 2, 2008, according to Forbes magazine, HSBC was the fourth largest bank in the world in terms of assets ($2,348.98 billion). ? HSBC was the second largest in terms of sales ($146.50 billion), and the largest in terms of market value ($180.81 billion).

? It was also the most profitable bank in the world with $19.13 billion in net income in 2007 (compared to Citigroup's $3.62 billion and Bank of America's $14.98 billion in the same period).

? HSBC is by far the largest bank both in the United Kingdom and in Hong Kong and prints most of Hong Kong's local currency in its own name. Since the end of 2005, HSBC has been the largest banking group in the world by Tier 1 capital. ? The HSBC Group has a significant presence in each of the world's major financial markets, with the Americas, Asia Pacific and Europe each representing around one third of the business. With 9,500 offices in 86 countries, 210,000 shareholders, 330,000 staff and 128 million customers worldwide, HSBC arguably has the most international presence among the world's multinational banking giants. ? The HSBC Group operates as a number of local banks around the world. Outlined below are countries which, in 2007, generated the top 20 profit before tax figures, with the addition of the United States as specific issues exclude that country from the top 20 for 2007.

HSBC ACQUIRES 93.86 PER CENT OF IL&FS INVESTSMART IN INDIA
*** A controlling interest in one of India's leading retail brokerages * * *** Gains foothold in a market with 20 million retail investors ***

HSBC has completed the acquisition of 93.86 per cent of IL&FS Investsmart Limited (Investsmart), a leading retail brokerage in India, for a total consideration of INR1,311.0 crore (approximately US$296.4 million). Sandy Flockhart, Group Managing Director and Chief Executive Officer of HSBC Asia-Pacific, said: "Investsmart gives HSBC access to the world's third-largest investor base, with over 20 million retail investors. In fact, the business already has 143,000 customers and operates in 128 cities. With Indian GDP expected to grow by 7.8 per cent in 2009, the opportunity here is obvious and underlines why HSBC has a stated strategic aim of focusing on high-growth economies."

Under the transaction agreement, HSBC acquired 43.85 per cent of Investsmart from E*TRADE Mauritius Limited, an indirectly

wholly-owned subsidiary of E*TRADE Financial Corporation, and 29.36 per cent from Infrastructure Leasing and Financial Services Limited (IL&FS). The decision to acquire a controlling stake in Investsmart triggered an open offer to public shareholders, through which HSBC has accepted shares equivalent to 20.65 per cent of Investsmart's capital. E*TRADE Mauritius Limited, IL&FS and those that tendered shares through the open offer received INR200 per share for their Investsmart shares. In addition, IL&FS was paid, as partof a threeyear non-compete agreement, INR82.0 crore (approximately US$17.9 million). In accordance with local regulations, HSBC paid interest of INR2.3 per share to the public shareholders who tendered their shares. This amounted to INR3.31 crore approximately US$0.72 million). Naina Lal Kidwai, Group General Manager and Chief Executive Officer, HSBC in India,added: "Investsmart is a great addition to our current operations, which already constitute the second largest foreign banking network in India.

COMPANYPROFILE

IL&FS Investsmart Limited (IIL), formally Investsmart India Ltd. was incorporated in the year 1997 as a wholly owned subsidiary of Infrastructure Leasing and Financial Services Ltd. later name of the company was changed to the present name as IL&FS th Investsmart Ltd. from 25 March 2003. IIL is a financial services company mainly engaged in the intermediation of financial products and financial advisory services for retail institutional investors and corporate. The company is promoted by IL&FS which is one of the India‘s leading non-banking finance companies and it holds 51.33% of the equity stake. The company has amalgamated IL&FS Merchant Banking Services Ltd. (IMBSL), a wholly owned subsidiary and DebtonNet st India Ltd. with itself with effect from 1 January 2002. Consequently the name of the company was changed to IL&FS Investsmart Ltd. The company made an Initial Public Offer of 8,800,000 equity shares. The company was incorporate on 1 September 1997 and received the Certificate of Commencement of Business
st

on 7 October 1997. IL&FS has set up a financial center in Bandra Kurla Complex in Mumbai with a view to house all its subsidiaries, ventures etc. at the same place for administrative convenience and to pursue group synergy. Pursuant to this, on June 14, 2000 the register office of the Company was changed from Mahindra Towers, 4 Floor, B1 Wing, Dr. G.M. Bhosale Marg, Worli, Mumbai to The IL&FS Financial Centre, Plot C-22, G Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. IL&FS registered with SEBI as a Category merchant banker since the inception of the SEBI (Merchant Banking Regulations) 1992. Consequent to changes in SEBI regulations on segregating merchant banking from fund based activities, IL&FS set up IL&FS Merchant Banking Services Limited (IMBSL) as a wholly owned subsidiary. IMBSL was set-up to provide full-fledged merchant banking services and was registered as a Category I merchant banker with SEBI. IL&FS has a 50% stake in DebtonNet India Limited (OIL), which was set up alone with, National Stock Exchange of India Limited. DIL was set up to
th

th

? as Surface Transport and Transportation Systems, Water Supply, Hydro Power, Special Economic Zone, Port and Environment & Social Management Group.

? Corporate Financing. Advisory, Capital Markets, Project

? Made contribution to the following trusts: IL&FS Infrastructure Equity Funds, IL&FS Investment Trust – I, II, IV. The Indian Innovation Award-2005: Awarded to IL&FS by president of India. HSBC, through Group subsidiaries, is to acquire 73.21 per cent of IL&FS Investsmart Limited (?Investsmart?), a leading retail brokerage house in India.

Under the terms of the agreements, HSBC proposes to acquire a 43.85 per cent stake from E*TRADE Mauritius Limited, an indirectly wholly-owned subsidiary of E*TRADE Financial Corporation, and an additional 29.36 per cent from Infrastructure Leasing and Financial Services Limited (?IL&FS?). Both shareholders will receive a price of INR200 per share for their respective stakes, making a total consideration of INR10,225.5 million (approximately US$241.6 million). In addition, IL&FS will be paid, as part of a three–year non-compete agreement, INR820.1 million (approximately US$19.4 million).

Board of Directors Chairman - Mr. Ravi Parthasarathy Managing Director & CEO - Mr. James Leslie Whiteford Executive Director-Finance & Operation - Mr. Sachin Joshi Executive Director-Retail Business - Mr. Deepak Sharma Head-Reserch - Mr. R. Sreesankar Chief Technology Officer - Mr. Kersi Tavadia

Registered Office The IL&FS Financial Centre Plot C-22, G Block Bandra – Kurla Complex, Mumbai – 400 051 E-mail – [email protected] Web site – www.InvestSmartindia.com

Financial Results

Annual Result for the year ended 31 March, 2008 ? ? Crores Quarterly Result (Q4, 2008) compared with (Q4, 2007) ? Crores ? Crores

Table A.1 Financial Results Particulars Income Net Profit EPS Book Value Auditors S B Billimoria & Co Bankers Centurian Bank Citibank HDFC Bank Ltd. IDBI Bank UTI Bank Ltd. Corporation Bank Group Companies IL&FS Investsmart Ltd. IL&FS Investsmart Securities Ltd. IL&FS Investsmart Commodities Ltd. IL&FS Investsmart Insurance & Risk Management Services Ltd. IL&FS Academy for Insurance & Finance Ltd. IL&FS Investsmart Asia-Pacific Pvt. Ltd. IL&FS Investment Financial Services Ltd. 2005-06 212.8 69.3 10.4 66.9 2006-07 289.11 89.54 12.89 93.31 Rs. In Crores 2007-08 383.64 193.11 14.22 159.89

? ? ?

IL&FS InvestSmart Limited (IIL) is an initiative in the field of Financial Services stated by Infrastructure Leasing & Financial Services (IL&FS), an institution known for its innovative and pioneering initiatives in the areas of Infrastructure, Corporate Finance and Investment Banking. IIL was set up in October 1997 and began its retail operations in September 1998. ? objective of becoming one of the leading full service brokerage houses in the country with a strong expertise in web-based technology as well as strengths in physical distribution. Today with a presence in more than 90 cities across India through more than 200 outlets, IIL has become one of the most prominent players in the Financial Services Industry with service offerings across different categories. ? field of Financial Services started by Infrastructure Leasing & Financial Services (IL&FS), an institution known for its innovation and pioneering initiatives in the areas of Infrastructure, Corporate Finance and Investment Banking. We would like to take this opportunity to inform you that IL&FS InvestSmart Ltd is now come-up with its On-line Trading Portal.

? and Soft Bank. ? ?

with global majors – E*TRADE

-India presence; Over 211 branches/franchisees across 90 cities.

? ? ? ?

Infrastructure leasing & financial services limited (IL&FS) is one of India‘s leading financial service organizations providing

individuals and corporate with customized financial management solutions.They have institutional expertise, combined with a thorough understanding of the financial markets results in

appropriate investment solutions for customers.They have a strong team of Relationship Managers, Customer Service Executives, Advisory Managers and Research Analysts, offers efficient execution backed by in-depth research, knowledge and expertise to serve customers across the country. With a pan-India presence of over 300 offices. Vision Statement To become the preferred long term financial partner to a wide base of customers whilst optimizing stakeholders value !Mission Statement To establish a base of 1 million satisfied customers by 2010. We will create this by being a responsible and trustworthy partner !Corporate Action An Approach to business that reflects Responsibility, Transparency and Ethical behavior, Respect for Employees, Clients & Stakeholder group.

Compliance and Regulation When dealing with Investsmart, you are dealing in fully regulated and reliable environment. We are subject to stringent financial reporting and specific regulations regarding client treatment. Transparency

InvestSmart is a leading direct access broker-dealer committed to giving the trading tools and services necessary to help you ?own the trade?. Innovative Continually enhancing our features, products, partnerships and alliance, Investsmart strives to give you the best opportunities while keeping you ahead in a changing market place. All in one Whether you‘re looking for a brokerage specializing in derivatives, capital markets, mutual funds, IPO‘s, we understand you have unique requirements and we tailor our products and services to meet them. Service oriented Our goal is to provide a superior level of service to you that will support a long-term relationship and enable us to respond more efficiently and proactively to your changing needs.

Customer oriented services
Accessibility – with an Investsmart online trading account you can buy and sell shares in an instant anytime you like and from anywhere, ? Choice - you can choose the online trading account that suits your trading habits and preferences – the SmartInvest account for serious investors and SmartTrade for active day traders. Both these accounts

also come with a TeleTrade facility free* (*for the first 1 month), which is an exclusive service for trading using your telephone. ? Flexibility – Investsmart constantly strives to offer the capability to trade in a manner that meets each customer‘s needs. ? Trading Online – Access the InvestSmart secure Internet trading site 24 hours a day. InvestSmart online offers SmartInvest for the Serious Investor and SmartTrade for the Active Trader. Use the platforms to trade with unique features.

STOCK MARKET
STOCK Stock symbolizes ownership in a company. The more stock investors in a particularcompany means larger the % of the company they own. Experts identify a number of stock types that people can acquire. PENNY STOCK

Stock offered by small companies with limited growth potential. Such stockstend to be worth very little. GROWTH STOCK Stock offered by relatively new companies that are high on potential but lowon stability. BLUCHIP STOCK Stock offered by established and successful company. These stocks are relatively safe investment.

STOCK MARKET Essentially a market is a place which introduces a buyer to a seller. In thecase of stocks the buyer and seller are dealing in small ownership portions ofcompanies or shares. A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to tradecompany stocks and other securities. Stock exchanges also provide facilitiesfor the issue and redemption of securities, as well as, other financialinstruments and capital events including the payment of income anddividends. The securities traded on a stock exchange include: shares issuedby companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listedthere. Usually there is a local & central location at least for record keeping,but trade is less and less linked to such a physical place, as modern marketsare electronic networks, which gives

those advantages of speed and cost oftransactions. Trade on an exchange is by members only & stock & shareholders. The initial offering of stocks and bonds to investors is by definitionA done in the primary market and subsequent trading is done in thesecondary market. A stock exchange is often the most importantcomponent of a stock market. Supply and demand in stock markets is drivenby various factors which, as in all free markets, affect the price of stock

There is usually no compulsion to issue stock via the stock exchange itself,nor must stock be subsequently traded on the exchange. Such trading issaid to be off exchange or over-thecounter. This is the usual way thatbonds are traded. Increasingly, stock exchanges are part of a global marketfor securities. Overtime Stock Markets have become the very symbol of commerce in themodern world. They are truly unique in their scope and in the complexity ofthe number of transactions they handle each day. The economy of the worldrelies on the stock exchanges to facilitate even trade in the stocks of companies.

HISTORY OF STOCK MARKET-GLOBAL SCENARIO

When people talk about the Stock Market, it's no always immediately clearwhat they're referring to. Is the Stock Market a place? Or is it somethingdifferent? To many people it is an abstract idea. They buy stocks in "thestock market" without ever leaving the comfort of their computer terminal.But the stock market is indeed a physical place with buildings and addresses, a place you can go and visit.

In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.

Some stories suggest that the origins of the term "bourse" come from theLatin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.

However, it is more likely that in the late 13th century commodity traders inBruges gathered inside the house of a man called Van der Burse, and in1309 they institutionalized this until now informal meeting and became the"Bruges Bourse". The idea spread quickly around Flanders and neighboring counties and "Bourses" soon opened in Ghent and Amsterdam.

In the middle of the 13th century Venetian bankers began to trade in government securities. In 1351 the Venetian Government outlawed spreading rumors intended to lower the price of government funds. Therewere people in Pisa, Verona, Genoa and Florence who also began trading ingovernment securities during the 14th century. This was only possiblebecause these were independent city states ruled by a council of influentialcitizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.

WALL STREET

Many folks think of Wall Street and the Stock Market as one in the same,and that view isn't really far from the truth. Wall Street is the place where it all started and where the world's largest financial market was born and prospered. From Wall Street a new industry sprang with its own language and terminology.

Wall Street can trace its name back to 1653. Originally it was set up fordefense and not for commerce. Settlers of Dutch descent, who were alwayson the lookout from attacks by Native Americans and the British built a 12foot stockade fence. Little did they know that this fence would go on tobecome the center of financial activity in the world. The wall lasted a good while, until 1685. At that point the wall was torn down and a new street was built. The British called it Wall Street.

Factors which affect stock market • Actions of investors • Business conditions • Government actions • Economic Indicators • International events

AE P o s t G r a d u a I s t i t u t e o f B u s i n e s s M a n a g e

INDIAN STOCK MARKET
ag INTRODUCTION Security market has essentially three categories of participants, namely the issuer of the securities, investor of the securities and the intermediaries; and two categories of product, namely the service of the intermediaries and the securities including derivatives. The security market has two interdependent and inseparable segments, the new issues (primary market) and the stock (secondary market). The primary market provides the channel for sale of new securities while the secondary market deals in securities previously issued. THE BOMBAY STOCK EXCHANGE (BSE) The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India. Bombay Stock Exchange was established in 1875. There are around 3,500 Indian companies listed with the stock exchange, and has a significant trading volume. As of October 2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE SENSEX

(SENSitive indEX), also called the BSE 30, is a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions volume. An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid1850s, each investing a (then) princely amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai. In 1875, Brokers organized an association known as the Native share Brokers Association, and the country‘s first stock exchange the Bombay Stock Exchange (BSE), set up in Mumbai with 318 members. The membership fee gradually increased from Re. 1 in 1887 to Rs. 1000 in 1896 and Rs. 48,000 in 1920. In 1986, The BSE came out with 30-share Sensitivity Index (a.k.a. the Sensex) that subsequently became the ?barometer‘ of the Indian stock market which is updated every two minutes. AESPostGraduateInstituteofBusinessMana gem In 1995, BSE has launched an electronic (e-Trading) system named BOLT, the BSE Online Trading system. In 2005, the status of the exchange changed from an Association of Persons (AOP) to a full-fledged corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and its name was changed to The Bombay Stock Exchange Limited).

How BSE works? • The scripts traded on BSE have been classified into the following;

A - Large capitalization, profitable, reliable, high-liquid companies B - Mid-capitalization, reliable, high-liquid companies B2 - Mid- capitalization, moderate liquid companies T - Trade to trade companies (compulsory delivery of trade within a day), low liquid companies S - Not reliable, low liquid companies Z -Blacklist companies • Jobbers play an important role on the BSE. A jobber or a broker who trades on his own account and hence offers a two-way quote or a bid-ask quote. The bid price reflects the price at which the jobber is willing to buy and the ask price represents the price at which the jobber is willing o sell. • Investors have to transact via jobber/ broker. The jobber / broker feed his buy/sell quotes in his terminal, which is linked to the main server at the BSE. Since both jobbers and brokers feed their orders, the NSE has adopted a ?quote-driven system and an order driven‘ system.

BSE SENSEX

The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scripts. The base year of SENSEX is 197879 and the base value is 100.

SENSEX is not only scientifically designed but also globally accepted construction and review methodology. First compiled in

1986, SENSEX is abasket of 30 constituent stocks representing a sample of large, liquid and representative companies. The set of companies which make up the indexhas been changed only a few times in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE. The index is widely reported in both domestic and international market through print as well as electronic media. The Index was initially calculated based on the ?Full Market Capitalization? methodology but was shifted to the Free float methodology with effect from September 1, 2003. The ? Free Float MarketCapitalization? methodology of index construction is regarded as an industry best practice globally. Due to its wide acceptance amongst the Indian investors, SENSEX is regarded to be the pulse of the Indian stock market.

NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE)

National Stock Exchange (NSE), established in the mid 1990s as a demutualised electronic exchange by leading Indian financial institutions, offers trading, clearing and settlement services in a range of products covering equity, debt and equity derivatives. It is India's largest exchange and ranks third globally by number of trades in the equities market. NSE provides a modern, fully automated screenbased trading system, named NEAT (National Exchange Automated Trading system) with nearly 40,000 trading terminals giving it extensive reach. Its flagship index, the NIFTY

50, is used extensively by investors in India and around the world to take exposure to the Indian equities market.

In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The National Stock Exchange of India (NSE) is the largest and most advanced exchange with 1016 companies listed and 726 trading members.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities.

The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enableup to 6 million trades to be operated daily on the NSE trading platform. AESPost r a d u a t e I n s t i t u t e o f B u s i n et Page 22 In 1998, the National Stock Exchange of India launched its website and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999).

How NSE works? • The NSE has opted for an order-driven system. When an order is placed by a trading member, an order confirmation slip is generated. • When a trade takes place, a trading confirmation slip is printed at the trading member‘s workstation. It gives details like quantity, price, code number of counterparty, and so on. • The identity of the trading member is not revealed to other when he places an order or when his pending orders are displayed. Hence, large orders can be placed on the NSE. • On the eighth day of trading, each member gets a statement showing his net position, the amount which he has to transfer to the clearing bank, and the security he has to deliver to the clearing house.

• Members are required to deliver securities and cash by the thirteenth and fourteenth day respectively. The fifteenth day is the payout day. • All trades on NSE are guaranteed by the National Securities Clearing Corporation (NSCC). This means that when A buys from B, NSCC becomes the counterparty to both the legs of the transaction. In effect, NSCC becomes the seller to a and the buyer from B. This eliminates counterparty risk.
A E S P o s t G r a d u a t e I n s t i t u t e o f B u s i n e s s M a n a g e m e n t Page

PRIMARY&SECONDARY MARKET
PRIMARY MARKET AND SECONDARY MARKET A stock market may be thought of in terms of two separate functions. The stock market consists of a two segment namely primary segment and secondary segment.

PRIMARY MARKET Where companies can raise long-term funds for their operations by issuing shares (and other securities) to investors. The primary market deals with newly issued shares. The companies can raise the capital from issuing new shares in this market. The securities Act 1933 govern the issuance of securities. This act requires that a registration statement must be filled with the SEC (security exchange commission) by the issuer of a security. The

registration statement includes the information regarding the nature of business, key features of security, the nature of risk associated with the security, and background of management. Financial statement must be included in the registration statement and they must be certified by an independent public accountant.

Initial Public Offering - IPO Corporation's first offering of stock to the public. An initial public offering (IPO) isthe process through which a privately held company issues shares of stock to thepublic for the first time. Also known as "going public," an IPO transforms a smallbusiness from a privately owned and operated entity into one that is owned bypublic stockholders. An IPO is a significant stage in the growth of many smallbusinesses, as it provides them with access to the public capital market and alsoincreases their credibility and exposure. The primary advantage a small businessstands to gain through an initial public stock offering is access to capital. Becominga public entity involves significant changes for a small business, though, including aloss of flexibility and control for management. In many cases, however, an IPO maybe the only means left of financing growth and expansion. The decision to go public is sometimes influenced by venture capitalists or founders who wish to cash in ontheir early investment. Staging an IPO is also a very time-consuming and expensive process. A small business interested in going public must apply to the Securities and Exchange Commission (SEC) for permission to sell stock to the public. The SEC registration process is quite complex and requires the company to disclose a variety of information to potential investors. The IPO process can take as

little as six months or as long as two years, during which time management's attention is distracted away from day-to-day operations.

Overall, going public is a complex decision that requires careful consideration and planning. Experts recommend that small business owners consider all thealternatives first (such as securing venture capital, forming a limited partnership orjoint venture, or selling shares through private placement, self-underwriting, or a direct public offering), examine their current and future capital needs, and be aware of how an IPO will affect the availability of future financing.

SECONDARY MARKET

Where investors can buy and sell those shares at current prices as determined by other investors in the market. The key distinction between a primary market and secondary market is that in secondary market the issuer of the asset does not receive funds from the buyer rather the existing issues changes hands in the secondary market and funds flow from buyer of the asset to the seller. Function of secondary market 1. Secondary market provides to an issuer of securities, whether the issuer is a corporation or a governmental unit, regular information about the value of the security. The periodic trading of the asset reveals to the issuer the consensus price that, the asset commands in an open market. Thus, firm can discover what value investors attach to their stocks, and firm & non corporate issuers

canobserve the prices of their bonds and the implied interest rates investors expect & demand for them. Such information helps issuers assess how well they are using the funds acquired from earlier primary market activities, and it also indicates how receptive investors would be to new offering. 2. Secondary market offers issuer is that it provides the opportunity for the originalbuyers of asset to reverse their investment by selling it for cash. Unlessinvestors feel confident that they can shift from one financial asset to another asthey may deem necessary, they would naturally be reluctant to buy any financialasset. Such reluctance would harm potential issuers in one of two ways: either issuer would be unable to sell new securities at all or their would have to pay a high rate of return, because investors would demand greater compensation forthe expected illiquidity of the securities. 3. Investors in financial assets receive several benefits from a secondary market. Such a market obviously offers them liquidity for their assets as well as information about the assets fair or consensus values. 4. Secondary market brings together many interested parties and so can reduce the cost of searching for likely buyers and sellers of assets. 5. Moreover, by accommodating many traders. Secondary markets keep the cost of transactions low. By keeping the costs of both searching and transacting low, secondary market encourage investors to purchase financial assets. Many Secondary markets are continuous markets, which mean that prices are determined continuously throughout the trading day as buyers and sellers submit orders. For examples, Given the order flowc at 10 A.M., the market clearing price of a stock on some organized stock exchange may be Rs.70; at 11 a.m. of the same trading day, the market clearing price of the same stock, but with

different order flows, may be Rs.70.75.Thus, in a continuous market, prices may vary with the patterns of orders reaching the market and not because of any change in the basic situation of supply and demand. A contrasting market structure is the call market, in which orders are batched orgrouped together for simultaneous execution at the same price. That is, at certaintimes in the trading day (or possibly more then once in a day), a market maker holds an auction for a stock. The auction may be oral or written.

DEPOSITORY EXCHANGES AND THEIR PARTICIPANTS

DEPOSITORY EXCHANGES Depository exchanges are organizations that hold shares of investors, on request, in electronic form through a registered depository participant (DP). It can be compared with a bank as it holds securities in an account , transfers securities between accounts on the instruction of the account holder, facilitates the transfer of ownership without the account holder needing to handle securities and makes the safe keeping of shares easy. DEPOSITORY PARTICIPANT The agent through which a depository exchange interfaces with the investor is known as the Depository Participant. You can create a demat account with a DP, who will keep an account of all the shares you own. This is much like the banking system, where you just create an account and have a passbook which updates you on the money you

own and the transactions you have made. In your demat account you own shares in an electronic format and your account gets updated as you buy and sell shares. As per SEBI regulation DP could be organization involved in the business of providing financial services like banks, custodians and financial institution. You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be: Convenience: proximity to the office/residence, business hours. Comfort: Reputation of the DP, past association, range of services etc. Find out if the DP is in a position to give the specific service you may need. Cost: The service charges levied by DP and the service standard. NSDL/CDSL : The National Securities Depository Ltd (NSDL) and the Central Depository Securities Ltd (CDSL) are like the Reserve Bank of India in the sense that they are the clearing and holding house for all the demat transaction. DP’s epository Participants are like banks who are agents of NSDL or CDSL in providing depository services.

REMATERIALIZATION & DEMATARIALIZATION

REMATERIALIZATION

Rematerialization is the process by which a client can get his electronic holdingsconverted into physical certificates. The client has to submit the rematerialization 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.

DEMATERIALIZATION Dematerialization called as ?Demat‘ is the process by which an investor can get physical certificates converted into electronic form maintained in a account with the depository participant. The investors can dematerialize only those share certificates that are already registered in their name and belong to the list of securities admitted for dematerialization at the depositories. Dematerialization and trading in the demat mode is the safer and faster alternativeto 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. IL&FS Depository Services offers dematerialization services to individual andcorporate investors. In order to promote dematerialization of securities, NSE joined hands with leading financial institutions to establish the National securities Depository limited (NSDL), the first depositors in the country. CDSL (central depository‘s service limited) was set up in February, 1999 to provide depository services.

PROCEDURE FOR DEMATERIALIZATION

STEPS : 1. Clients or investor submits the DRF (Demat Request form) and physical certificates to DP. DP checks whether the securities are available for Demat. Client defaces the certificate by stamping ?surrendered for Dematerialization.‘ DP punches two holes on the name of the company and draws two parallel lines across the face of the certificate. 2. DP enters the Demat request in his system to be sent to NSDL. Do dispatch the physical certificates along with the DRF to the R & T Agent. 3. NSDL records the details of the electronic request in the system and forwards the request to the R &T Agent. 4. R&T Agent, on receiving the physical documents and the electronic request, verifies and checks them. Once the R&T

Agent is satisfied, dematerialization of the concerned securities is electronically confirmed to NSDL. 5. NSDL credits the dematerialized securities to the beneficiary account of the investor and intimates of the DP electronically. The DP issues a statement of transaction to the client.

The DP checks the DRF for validity, completeness and correctness. A E S P o s t G r a d u a t e I n s t i t u t e o f B u s inessManage
m e n t Page 31

TRADING OFFLINE & ONLINE
ONLINE TRADING INTRODUCTION On-line trading is buying and selling securities through electronic medium. Online trading is the way of buying/selling securities through internet. In off-line, we place orders on your stockbroker either verbally or in written form, while in online you will access a stockbroker‘s websites through the broker‘s internet based order routing and trading engine. These orders routed to stock exchange without manual intervention and executed thereon.

There are certain inherent characteristics of this market , which make it more vulnerable to risks associated with e-commerce. The market requires knowledge, information and ability to analyze and quick decision making. This requires utmost care while trading on the net. A single click can make or destroy investor‘s wealth. Since the coming age is of online trading, more people have been investing their money in stocks than ever before because of the advantages it offers. Onlinetrading allows people to trade stocks quickly without the help of a broker, lettingthe investors have more control over their transactions. In addition to that, an ordinary person now has access to the information that could only be seen by brokers. Overall, online trading serves time, money and gives power to the investor rather than the broker. HISTORY – Global Scenario The history of E-Trading began in 1983, when a doctor in Michigan placed the first online trade using E-trading, technology. What began with a single click over 24 years ago has now taken the world by storm. One BILL PORTER, a physicist and inventor more than a dozen patents to his credit, who provided online quotes and trading services to fidelity, Charles Schwab, and Quiché Reilly, visualized the concept. This led Bill to wonder why, as an individual investor, he had to pay a broker hundreds of dollars for stock transactions with incredible foresight, he saw the solution at hand. Someday everyone would own computers and invest throughthem with unprecedented efficiency and control. Today online trading has become a way of investing in the developed world and is soon catching on in developing countries too. Since that time, online trading has increased dramatically.

According to recent estimate there are more than 10 million individuals trading online, making more than 10 lakh trades per day. Currently, there are over 250 broker dealers providing retail investors with the ability to trade online. Along with the growth in online trading, there has been a surge in investor complaints related to online trading.

The downfall of a few international websites like Value America Inc, Net Inoperative Ltd., Toysmart.com, boo.com, has not diminished the opportunities thrown open byInternet trading. There are investment banking firms which offer a suit of servicessuch as online trading, research reports, real-time market commentary, java based charts, analysis and other professional services. E-Trade, which has presence inaround 119 countries, it is one of the renowned players in the international market. e-Trade securities Inc was floated in 1992 to offer online investing services through America Online and CompuServe and launched www.etrude.com in 1996. Recently, it announced Strategic Wit sound wise the online banking subsidiary of Wit Capital Group Inc, to capitalize on the complementary care strengths of the two groups. TD water house, the second largest global brokerage house has over 2.9 million customer accounts worldwide and more than $150 billion in customers‘ assets under administration. In addition to securities trading services, it also provides banking, mutual funds, and other financial products services to its customers. HISTORY - Indian Context India ranks amongst the top 10 countries in terms of the market capitalization of its stock market.

Online trading began in India on Jan 31, 2000, the Securities Exchange Board of India (SEBI) formally notified all the stock exchanges, giving them a green signal for online trading. The various players of the securities marked which includes NSE, BSE, other regional stock exchanges and the brokers, had been waiting long for the go ahead sign. Trading via the net is expected to generate greater volumes than ever before, and this has attracted a large number of players. The chairman of theSecurities and Exchange Board of India (SEBI) also announced that foreigncompanies and individual could now trade on Indian stock Exchange. One day after, SEBI announced its regulations for net trading, Kerala based Geojit Securities took the lead and started online trading in Mumbai. The first net transaction was a trade for 100 shares 07 ?Reliance? executed by D.R. Mehta, chairman of SEBI. ICICI is the first Indian financial entity to make available Internet trading by a click of mouse. Its internet trading facility, christened as ?ICICI Direct e-invest‘, is provided by seamless unification of two pirating units. E-invest is a combo account consisting of trading bank and one and more demat accounts. It is pre condition that the account should be maintained only with ICICI‘s operating units. This enables an e-invest investor to buy & sell securities over the net transfer securitiesthrough the demat account and funds through bank account automatically. As ICICI Ltd. is a depository participant, the demat account is required to be opened with it and the bank account with ICICI Bank Ltd. Today there are many big company‘s are in the market like Angel Broking Ltd., Share Khan Ltd., India Bulls, Kotak securities, Reliance Money, Motilal Oswal, 5 paisa.com, indiainfoline.com, HDFC securities, and other players.

The Indian stock market has the potential of becoming one of the most active in the world primarily on account of its retail investor base, listed and traded companies, if an efficient and inexpensive infrastructure is make available. At this juncture, we should look at India‘s potential because this aspect of trading is in its nascent stagean estimate of which can be made by the projectingpopulation of its neitzens. We have, therefore, looked at the various projections of Indian netizens. BASIC REQUIREMENTS FOR ONLINE TRADING • Bank Account Bank should be having an alliance with the online trading service provider. Bank account will facilitate as a payment and receipts gateway. • Demat Account The depository account also should be having an alliance with the online trading service provider. This account will act as a bank for theshares we hold. • Online Service Provider Account This can be opened with any of the major service providers like depository Participants, the custodian etc. Once these three accounts are opened, the money and shares are transferred to your bank and Demat account automatically electronically and without any paper work. PROCEDURE Sitting in ones own home or office or even from your car, as long as, you can trade on the market.

The first step is to pen Saving account which link with particular bank which help inpurchasing securities , mutual funds, IPOs, Future & Option, and commodities thenafter open the Demat a/c which is the account where securities are debited and credited. One can open multiple accounts with himself or herself as the first name in the account. (One can open up to 5 demat accounts with Sharekhan.) Then it is necessary to determine the type of account that you want and how you want to pay for the trades your make. Joint accounts are allowed but for that you will need to have certain infrastructure about those people. Accounts can be Individual, Joint, Sole proprietorship, corporate partnership etc. The form filling requires simple personal details like full legal name, Citizenship Status, Residency status, employer‘s name and address, your passport/PAN number, date of birth etc. A E S P o s t G r a d u a t e I n s t i t u t e o f g e m e t Page 36 After that we will get three things such as User ID, Membership password and Trading password. These three things are unique to an individual and ensure security of transactions and for activation online trading account. After getting User ID and Password, your account has been set up, you can access the website and login using the same.

Then after you are supposed to transfer money from bank account to Trading account. In order to start trading online it‘s important that you deposit money in your bank account before placing a buy order. In order to place a sell order you must have shares in your demat account. You can sell your shares anytime as long as shares are these in your demat account. In order to place a buy order you need to fund your account. You can do this by depositing money in

your bank account orelse you can sell same-shares existing in your demat account and use the proceedsof sale to fund your purchase transaction. The amount of money required before placing a buy order would depend on the value of order and the type of e-invest account you have enrolled for whether cash or margin. The account opening charge commission rates and the minimum limit oftransaction vary from site to site. Other charges can include annual services charges, custody charges; demat account maintenance charges, etc. Also most online traders offer a host of other tools to aid the investment decision. A full research back up in terms of repairs, articles, opinions, etc. live time quotes latest news on the script, technical charts to see how the stock‘s prices has changes over time. So sitting at home one can take an investment decision at ease after having researched and read up fully about the stock. With the advent of online trading it world seem that the markets are just a click away.

WORKING OF ON-LINE TRADING The procedure for trading dematerialized securities in stock exchanges is similar to the procedure for trading physical securities. Instead of delivering physical securities to the broker, you instruct your DP to debit your account with the numberof securities sold by you and credit your broker's clearing account. This delivery instruction has to be given to your DP using the delivery instruction booklet received from the DP at the time of opening the account. The procedure for selling securities is to be like:

• Investor sells securities in any of the stock exchanges linked to NSDLthrough a broker. • Investor gives instruction to DP to debit his account and credi t the broker's (clearing member pool) account. • Before the pay-in day, investor's broker gives instruction to his DP fordelivery to clearing corporation. • The broker receives payment from the stock exchange (clearing corporation). • The investor receives payment from the broker for the sale in the samemanner payment is received for a sale in the physical mode.

ADVANTAGES

Online trading has shifted the trading power from stock brokers to individual investors. Online trading system has changed the environment for retail investor community. Online trading allows you to buy& sell shares on the exchanges through INTERNET. It is a truly powerful medium to be in direct control of your investments.

INDEPENDENT Because online trading greatly diminishes the role of brokers, investors have more freedom of making investment decisions and

entering an order. Investors have not to relay brokers. Online promotes self empowerment.

ENSURES THE BEST PRICE FOR INVESORS Online trading offers the best price for the buy and sell orders of the investorsand traders. Also due to high level of transparency with regard to display ofinformation relating to the specific stocks and company profiles, investors will be able to get the best quote for buy orders. This leads to a reduction in the transaction cost for the investors.

FLEXIBILITY Flexibility is the greatest advantage of online trading. Want to cancel ourorder or do it in seconds. If we want to modify the order, can do easily.For example, if we have placed an order to buy stock called B at Rs.1,000.We keep tracking the movement of the stock for and in a couple of minutes we find that the prices are heading to downwards. What will be our decision Modify our order immediately and put a buy at Rs.900.We can cash on the market opportunities. OFFERS LIQUIDITY TO THE INVESORS Online trading offers 24 hours trading facilities or trading for longer hours compared to the traditional stock exchanges. This provides added liquidity to the investors. OFFERS GREATER TRANSPARENCY

Online trading offers you greater transparency by providing you with an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit into your depository account. All these stages are subject to inspection, thus bringing in transparency into the system and greater transparency helps ij reducing the systematic risk for the investor.

ENABLES HASSLE FREE TRADING Online trading integrates the bank, the brokerage from and the demat accounts, which leads to easy and paperless trading for the client. PERSONAL ADVICE STILL AVAILABLE The service providers have combined off-line as well online services. They give the personal touch added to e-trading thus combining structured advice and fast trades. FREEDOM OF INFORMATION Investor can know the price of any stock at any time. He can review the price history of any stock in chart format and also follow market events in-depth. He can also conduct extensive financial research on any company. RESEARCH INFORMATION Service providers carry stock analysis for our reference. This helps inmaking the right choices. One cannot afford to hire analysts to

review the stocks and companies with given our indent and situation, the sites that provide research reports could be useful. ALLOW INSTANT TRADE EXECUTION Online customer will be able to execute the online trading transaction, right fromlogging on to our site, to the execution and settlement of your bank account, ina very short period of time. VALUE ADDED SERVICES Service providers offer a variety of trading options like Buy Today SellTomorrow (BTST) gives the advantage to take short-term positions in the market and take advantage of price fluctuations. This is very useful when we want to cash in on new specific developments. BANK STATEMENTS Bank Statements and transactions that we have made for stocks onlinecan be viewed at the click of a button on our computer. We do not haveto run behind the bank executives to get the Bank Statements. TIME SAVING Time is like money. Most of us don‘t find time in our hectic work schedules to go to stock broker and asking him to do market research.Through internet, it gives not only the advantage to save time; it alsoenables us to trade from anywhere. Imagine a person sitting in a remotevillage having to contact his broker in a city to get a trade through. In present times a person can conveniently trade from anywhere using thetool of the internet. AVAILABILITY

By business trading online they can have access to real-time market data, news and charting Traders can trades 24 hours a day and seven days a week, this is most beneficial to the trades and even the buyers.

DISADVANTAGES

LESS KNOWLEDGE Elimination of a stock broker could also be a trouble. Without proper advice of stocking trade persons, it could prove risky to enter the stock game. Expertise and experience will helps a lot. In a boom of stock market phase, money making is not a difficult task. If we see plenty of money & start feeling like a stock market genius. We get carried away and make some mistakes that could be more chances of risk.

RESTRICTED FINANCIAL GUIDANCE Individuals are restricted for first hand financial guidance. This simply means that the individual is himself/herself alone to make the decision.

OUT DATED INFORMATION Many sites let we have the ?Added Advantage‘ of research reports, maybe outdated and not updated to the changes of fast trends. But take alook at one of the four corners on the web page and see the date of theanalysis.

HIGHER BROKERAGE Sometimes on the online trading depository participants charging highbrokerage. For examples, if we buy stocks on 1st day of the month forRs.500 and sell it for Rs.700 on 5th day, we have made profit of 40% in 5 days. We have also to think about the Depository Participant charging the brokerage. If we calculate the same, our return could be below 40%. TRADING ERRORS Trading errors are also consideration for the trading online, but the mainerrors are made by humans so firms have to take precaution to prevent this type of human error, because it could cost the firm large amounts ofmoney when trading online, this is what firms do not want to deal with itbecause it time consuming and in business time is money. STABILITY The internet is unpredictable and unstable. One can never know when aweb site will fail. In a situation where, there is a problem like this,investors can usually call their brokerage firm and the problem is fixedright away. However, the problem with online trading companies is thatthey are too large and are not ?easily reaches by E-mail or phone.?

OFFLINE TRADING

INTRODUCTION The internet has not spared trading in shares and still the conventional system of offline trading continues in today‘s world. In offline trading system, two parties i.e. an individual and a broker come into contact with each other and the transactions takes place. The investor goes to the broker for the purpose of buying or selling of securities for that he has to make a payment to settle the transactions. PURCHASE For receiving demat securities you may give a one time standing instruction to yourDP. This standing instruction can be given at the time of account opening or later. The transactions relating to purchase of securities are summarized below; You purchase securities through broker. You make payment to your broker who arranges payment to clearingcorporation on the pay-in day. Your broker receives credit of securities in its clearing account (clearingmember pool accounts) on the play out day. Your broker gives instruction to its DP to debit clearing account and credit your account. You receive shares into your account. However if standing instruction are not given at the time of opening the account, you will have to give ?Receipt‘ instructions to your DP. For receiving credit, you should ensure that your broker transfers the securities from its clearing account to your depository account, before the book closure. If the securities remain in the clearing account of the

broker, the companywill give corporate benefits (dividends or bonus) to the broker. SELLING The procedure for selling dematerialized securities is very simple. After you have sold the securities, you would instruct your DP. To debit your account with the number of securities sold by you and credit your broker‘s clearing account. This delivery instruction has to be given to your DP using the delivery instruction slips given to you by your DP at the time of opening the account. Procedure for selling the securities is given below; You sell securities in any of the stock exchanges limited company NSDL through broker. You give instruction to your DP to debit your account and credit the broker‘s account. Before the pay in day, your brokerage gives instruction to its DP for delivery to clearing corporation. Your broker receives payment from the stock exchange (clearing corporation) You receive the payment from the broker for the sale of securities.

ADVANTAGES

1. Low brokerage In case of offline trading, brokerage charged by the broker is quite lowbecause of personal relation. It also provides benefit of low

cost ofinstallation as compared to online trading. He has authority tocustomize brokerage according to customers.

2. Less margin Generally online trading company charges atleast 25% margin while thebroker charges nearly 10% margin to the investor in case of trading onderivatives. Sometimes broker charges negligible amt & he allows trading upto his limit.

3. Flexibility in credit period Local brokers allow their customers to trade in shares with longer creditperiods which facilitate the payments for the investors. Whereas in online trading a customer is required to make the payment in less than two days which is not the case in offline trading. Sometimes broker also allow to delayin settlement of payment as per the relation with customers.

4. Customized advice Normally, investor would like to take the advice before taking an investment decision. Online trading is not provide such kind of personal touch. In off-line there is a person to whom you ask about your investment problem and also you can make trust on him because of personal relation.

DISADVANTAGES

? ? ? ? ? ?

Blindly trust on broker makes investment at risk. Problem of attention from broker due to load. Problem in getting in touch with the broker. Reliance on the broker‘s information. Reconciliation of accounts of cash settlement. Geographical restriction and lots of paperwork.

ONLINE PRODUCTS

Smart start is a powerful browser based trading system for those who are relatively new to online investing. Smart Start is a unique integrated account, which integrated your banking, broking and Demat account. It is a comprehensive trading service, which allows you to invest in equities and derivatives.

Trading Platform for Serious Investors… ? ?

? ? ? ? ? ? ? ? order from for Cash and F&O

Trading Platform for Active Trader….

? ? ? ? ? ? ? ? ? ? ? docking -Time Market Data

RESEARCH&SWOTANAL YSIS

Stock market research is a scientific way of gathering and analyzing information to determine market conditions and identify stocks to buy or sell at a given time. There are two types of research activities done in the stock market industry • Fundamental analysis • Technical analysis

Fundamental Analysis
It undertakes not only a quantitative analysis but also aqualitative one, i.e. corporate governance, the quality of themanagement, their past business track record, strategic/corecompetencies et al.It is done by analyzing the country's economy, the industry thecompany operates in and the company's performance to deriveits stock's current fair value as well as to forecast its futurevalue.

Technical Analysis
Technical analysis is the examination of historical pricemovements of a security, index or a sector to forecast itsfuture price movementsIt is a graphical representation of prices through bars, candlesticks etc.It incorporates the past trends into its analysis. It also studiessentiments and mass psychology.The tools of the technical analyst are indicators and systems,which are used on price charts. Moving averages, support andresistance lines,

envelopes, Bollinger bands, momentum...areall examples of indicators

SWOT ANALYSIS
STRENGTHS

• 80 years of experience in securities market • Largest chain of retail share shops in India • Volume based differentiated product. • User friendly website. • Dedicated and responsive workforce/staff.
WEAKNESSES

• Problems due to Network crash • Unawareness among investors. • Sales Promotion is not effective. • Low customer satisfaction and retention.

OPPORTUNITIES

• To tap the untapped market • To capture the Market lost to its Competitors. • To focus on developing a superior and powerful portal • To spread awareness of its Brand Name • To increase its Market Share
THREATS

• Competitor develops a superior portal • Prolonged depression and high volatility in the market

• New Entrants.

ComparativeAnalysis
Comparison of Account charges
Account-opening fee Depending on the DP, there may or may not be an opening account fee. Private banks, such as ICICI Bank, HDFC Bank and UTI Bank, do not have one. However, players such as Karvy Consultants and the State Bank of India do so. But most players levy this when you re-open a demat account, though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your demat account over a long period. This fee is refundable.

Annual maintenance fee This is also known as folio maintenance charges, and is generally levied in advance. Custodian fee This fee is charged monthly and depends on the number of securities (international securities identification numbers — ISIN) held in the account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository. Transaction fee The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs. In addition to the other fees , the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both demat and remat requests. For demat, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee.

Some DPs offer a frequent trader account, where they charge frequent traders at lower rates than the standard charges. Account opening charges & Annual Maintenance Charges are major cost for an Online Trading + Demant Accounts provided by broking firms in Ahmedabad.

Institution ICICIDirect Reliance Money Sharekhan IL & FS Investsmart HDFC Securities

Account Opening Charges Rs. 750/Rs. 500/Rs. 750/Rs. 950/Rs. 750/-

Account Maintenance Charges Rs. 500/- per year. Rs. 50/- per month. Rs. 300/- per year. Rs. 300/- per year Rs. 500/- per year Rs. 400/- per year. (Rs.350/if you recieve email statements) Rs. 300/- per year

SBI India Infoline

NIL Rs. 750/-

Depository SBI HDFC

Dematerialization Rematerialization Charges Charges Rs. 35/- for each request Rs. 25/- for each request form, +Rs.2/- for each form certificate Rs. 35/- per request Rs. 10/- per certificate

Sharekhan ICICIDirect

form+ Rs. 3/- per certificate Rs. 15/- per request OR Rs. 25/- or 0.12% of Rs. 3/- per certificate, value, whichever higher whichever higher Rs.35/- per request form Rs. 20/- per request + Rs. 2/- per certificate form.

Online Broker IL & FS Investsmart Brokerage Charges SBICAP Securities brokerage charges Sharekhan brokerage charges Angel Broking brokerage charges ICICI direct brokerage charges Indiabulls brokerage charges HDFC Securities brokerage charges UTI Securities brokerage charges Religare brokerage charges Reliance Money

Brokerage for Delivery 0.50% 0.50%

Brokerage for Intraday trading 0.05% 0.10%

0.03% - 0.50% 0.03% - 0.10% 0.50% 0.75% 0.02% - 0.03% 0.15%

0.50% - 0.25% 0.05% - 0.10% 0.50% 0.80% 0.15% 0.15%

0.20% - 0.30% 0.02% - 0.03% 0.10% 0.01%

brokerage charges Indiainfoline brokerage charges

0.50%

0.10%

Effective brokerage with taxes is more: In addition to the above brokerage charges you will have to pay STT (Securities Transaction Tax) at the rate or 0.02% of the total transaction amount. You will also be charged 12.5% Service Tax on the brokerage amount (and not on the transaction amount). For example, if your brokerage is 0.50% for delivery and you do a delivery transaction of Rs.100/- then the total brokerage you pay is0.50 (brokerage) + 0.02 (stt) + 0.063 (service tax) = 0.58. Thus your effective brokerage (including all taxes) will be 0.58%. Similarl is for brokerage on intraday transactions.

Comparison of Product & Services provided in Online Trading
ICICIDIRECT (icicidirect.com) This is the part of India‘s largest private bank ICICI bank. Benefit of Trading Account with ICICIDIRECT This account allows Cash Trading, Margin Trading, Spot Trading, MarginPLUS Trading Buy Today Sell Tomorrow and Call and Trade on phone in both NSE and BSE. Investment in Mutual Funds and bonds are also provided online through your trading account with ICICIDIRECT. You can make order at any time (Beyond market hour)

Money will not be debited directly from your saving account on trading.

DisadvantageThe brokerage involved is very high ( 0.75% ) Also, the options are less flexible. If you go for intra day trading and the stock price falls, you can‘t take the delivery and have to sell at lower price. If you go for buy today sell tomorrow feature, you can‘t sell the same day and the high brokerages eat away your profit. Moreover, sometimes in intraday trades they square off your positions before 3:00 pm and sometimes they accidentally keep it open and settle it on next day. If you are going to invest for long term then choose ICICIDirect as it‘s safe and secure except for high brokerage.

ShareKhan (sharekhan.com) ShareKhan provide online trading password through classic account, fast trade and speed trade. Out of these Classic and Fast Trade is free and they provide user id and password for these without any extra cost and for Speed Trade they charge extra in the form of brokerage. sharekhan interface is quite complicated. sharekhan is good except customer care.

IndiaInfoline Best for very small investors, terminal is too fast, as well as they offer 6th time exposure of your holding, no need to cash balance in your account. There is no proper customer care service provided, the customer care no. is busy most of the time. Trading software is very easy & convenient to operate They are providing both the option. They also have a concept of offline in which you have to call your RM any time you want to trade but you can also see your position online but cannot trade online. One can take the margin position to the next day and if there is money in your account then that would be active the next day also. They are providing the links with almost all the major banks in India like HDFC, ICICI, UTI, Citibank, PNB and they provide the link both side online ie. You can transfer the money from Demat to bank and vice versa online only. Reliance Money The product provided with Reliance Money is not much appreciated by their customer & as they are having a Franchise based Model of chain they not able to provide service to their clients. The User Interface is not well, it is complex.Apart from this they have taken the secured account to the next level with the use of secure id to enter in the account. They are providing the account access with HDFC, UTI and IDBI bank.The charges are really where they will make a mark in the Indian Brokerage Market.

Religare They are providing both the option (Browser & Software based) at no extra cost. So whatever suits you can be used. It also depends on the scheme, which you are taking. The auto square off time is at 3:15 and you can buy up to 4 times the value in your account. They have a link with HDFC Bank, ICICI Bank, UTI bank and Citibank and in this you can transfer the funds both way online. So that is one good thing giving it a seemless online feel. They are not providing this service as of now but very soon they are going to start it. Angel Trading They are providing both the option (Browser & Software based) at no extra cost. So whatever suits you can be used. The auto square off time is at 3:15 and you can buy up to 4 times the value in your account. They have a link with HDFC Bank, ICICI Bank and UTI bank but the problem here is that you cannot transfer the money from demat account to your Bank account online. You have to call them and then they will transfer. It takes around 18 – 24 hrs to transfer the same. But it is possible to transfer the money from Bank to demat account online. This is one of the Online brokers which to not provide online IPO / Mutual Fund service. They will send some one at your place to collect the forms, which would then be submitted.

Comparative analysis of services
“Customer is the King of Market” Consumer is the one utilizing the services & they would be the best source to get proper feedback about the service.

Hence a Questionnaire was designed to know 1) Customers Satisfaction from service provided by existing broking house. 2) Perception of various Online Broking Houses. 3) Factor‘s influencing selection of Online Broking House. 4) Awareness level of IL & FS Investsmart‘s Product. General Demographic Information of Respondent’s Level of Educational Qualification Valid Cumulative Percent Percent 2.7 2.7 4.8 7.4 12.8 20.2 54.3 74.5 24.5 1.1 100.0 98.9 100.0

Valid

Illiterate SSC HSC Graduate Post Graduate Proffesional Course Total

Frequency Percent 5 2.7 9 4.8 24 12.8 102 54.3 46 2 188 24.5 1.1 100.0

Type of Occupation Valid Cumulative Percent Percent 46.3 46.3 40.4 86.7 10.6 97.3 .5 97.9 2.1 100.0 100.0

Frequency Percent Valid Business 87 46.3 Service 76 40.4 Proffessional 20 10.6 Housewife 1 .5 Student 4 2.1 Total 188 100.0

Income Group Valid Percent 31.4 38.3 23.9 6.4 100.0 Cumulative Percent 31.4 69.7 93.6 100.0

Frequency Valid Less than 2 Lacs 2 Lacs to 5 Lacs 5 Lacs to 8 Lacs Above 8 Lacs Total 59 72 45 12 188

Percent 31.4 38.3 23.9 6.4 100.0

Type of Trading Account

Frequenc y Valid Online Offline Both Total 104 71 13 188

Percent 55.3 37.8 6.9 100.0

Valid Percent 55.3 37.8 6.9 100.0

Cumulative Percent 55.3 93.1 100.0

Type of Trading Account
Online Offline Both

Online Share Broking Firms
ICICIDir. HDFC IL&FS ShKhan RelMoney IndInfoline Others 21 10 19 30 23 42 12

Online Share Broking Firm 12 ICICIDir.,
21, 13% Series1, IndInfoline, 42, 27% Series1, HDFC, 10, 6% Series1 , IL&FS, 19, Series1, 12% ShKhan, 30, 19%

Others,

Series1,

Series1, RelMoney, 23, 15%

Offline Share Broking Firms
Angel Karvy Anagram Religare Anand_Rathi Marwadi Others 24 18 12 17 10 14 16

Offline Share Broking Firm
Series1, Others, 16, 14% Series1, Angel, 24, 22% Series1, Karvy, 18, 16% Series1, Anagram, 12, 11%

Series1, Marwadi, 14, 13% Series1, Anand_Rathi , 10, 9% Series1, Religare, 17, 15%

Daily Time Spent on Stock Market
Cumulative Percent 9.6 83.0 96.3

Frequency Valid Less than 1 Hr. 1 - 2 Hrs. 2 - 5 Hrs. 18 138 25

Percent 9.6 73.4 13.3

Valid Percent 9.6 73.4 13.3

5 - 8 Hrs. Total

7 188

3.7 100.0

3.7 100.0

100.0

Daily Time Spent on Stock Market

125

100

Frequency

75

50

25

0 Less than 1 Hr. 1 - 2 Hrs. 2 - 5 Hrs. 5 - 8 Hrs.

Daily Time Spent on Stock Market

Have you heard about Il & FS Investsmart
Frequency Valid No Yes Total 132 56 188 Percent 70.2 29.8 100.0 Valid Percent 70.2 29.8 100.0 Cumulative Percent 70.2 100.0

Awareness of IL & FS Product Features

Series1, Awareness of IL & FS Product Weekly mail of Model Features Portfolio, 21, 12% Series1, Live Series1, Streamning Personalized Quotes, 52, R.M. to 30% manage Series1, PMS Portfolio, 42, / RMS (CNBC 24% Award for 2 Consecutive Series1, Call Years), 37, & Trade 21% Facility, 22, 13%

Inference Investors aware of IL & FS product are least aware of its key features as Call & Trade Facility & Weekly mail of Model portfolio Recommendation These two features of product are very likely to attract new customer, as they are the competitive advantage not provided by the competitors, hence company should undertake strong promotional activities to highlight this key features.

Other Findings &Recommendation
During Sales-calls I had observed that some of the prospective clients were not ready to give advance brokerage, but were having good monthly Turnover, as some of the Online Trading Broking Houses offered low brokerage without any advance brokerage. 1) I would recommend the company to come-up with a new scheme, which could meet the requirement of such segment of clients wherein they could ask for committed turnover rather than advance brokerage.

Even there was lack of promotional & advertisement activity, whereas the other market players like Sharekhan, ICICI Direct, Reliance Money etc. are very keen at Media Advertisement, Roadside Hoardings etc. 2) IL & FS Investsmart should undertake such kind or promotional campaigns to increase the awareness of the company among the invest, as it was even seen in the survey that people were less aware about IL & FS. Tie-up with more no. of banks, as some of the customer were not having A/c‘s with the banks who are in online Tie-up with IL & FS product. 3) IL & FS Investsmart should arrange to have Tie-up with some of the other banks for online Fund transfer or should have Tie-Up to offer Free Saving Accounts in such bank to their customer.

Learning FromSIP
? This Summer Internship Program has given us a wide insight into practical dimension of corporate world & working culture of an organization. ? It provided me an opportunity to interact with many corporate people. ? This project has helped me to improve my interpersonal skills like communication, presentation skills, convincing power etc. ? As a Trainee I was given an Marketing Assignment to promote Online Trading A/c‘s of IL & FS Investsmart.

? Training about product & Market was given as follows. ? Basic knowledge about Shares & description of organizations involved. ? Complete process of Share Trading & various terminologies related to it. ? Features about our Online share Trading A/c ? Brief about other Competitors & their offerings in market. ? Competitive advantage of our product over other key rivals products. ? Even I personally had visited some competitor‘s office & meet people using their product to understand the competition better.

Marketing Strategy

Marketing Methodology

As a part of our Marketing Assignment, we were supposed to promote their Online Trading A/c & for this we were given training about their Product offering & also the competitor in the market. At initial stage we were given Data by our Team Leaders for Data Calling& later under took Cold Calling, Cross Selling & Canopy Activit

CONCLUSION
Each and every beginning has an end in the same ways, each and every introduction has conclusion. We are thankful and express our gratitude who have directly or indirectly co-operated us in preparation of our project report and suggested some New ideas.
We did our summer industrial project in the IL&FS Investsmart Ltd.as partial fulfilment of our course curriculum.We have worked on Online

Trading in Equity Market with IL&FS Investsmart. During our course of training, we interacted with many people of Ahmedabad city and outside. We also learned the basic fundamentals of online trading; demat accounts and transactions in stock market. This traning has been the first time practical exposure to us to the corporate world and that‘s why this training has been the immense professional value to us.

Appendix

Reference http://www.moneycontrol.com http://www.investsmartonline.com http://www.nseindia.com http://www.bseindia.com http://www.investopedia.com http://www.onlinetrading.com http://www.demataccount.com http:/www.wikipedia.com Investor‘s Guide Magazine NCFM Dealer Module Book

QUESTIONNAIRE
Q1. How do you operate your Share Trading A/c ? Online Offline

Q2. What type of Investor do you think you are? Long Term Investor Trader Small Investor Q3. Where do you operate your Trading A/c? Online Trading ICICI Direct HDFC SharekhanIndia Infoline Reliance Money Others Offline Trading Angel Broking Karvy AnagramSecurities ReligareAnandRathi Marwadis Others Q4. How much time do you spend on Share Market daily ? Less than 1 hr. 1 – 2hrs 2-5 hrs. 5 – 8 hrs. IL&FS Investmart

Q5. Please rank the below as per your preference of importance, while selecting an online Trading A/c ? Brokerage Charges ______ Operational Services & Local office Support ______ Suggestions / Advices / Tips for scripts ______ Safety & Security of Investment ______ Exposure & Credit/Due Payment Cycle ______ Q6. Do you have any problem with your existing Share Broking Firm?

______________________________________________________ ______________________ ______________________________________________________ _____________________. Q7. Do you use Computer at your Home/Office/Business ? Yes No Q8. Do you have a Internet Connection? If yes go to next quest. Yes No Q9. Where do you access the internet? Home Stock broker office Browsing centre Office / Business Premises Q10. Have you heard of IL& FS Investsmart Online Trading A/c‘s ? (If yes go to Ques. No. 11) Yes No

Q11. Are you aware of different facilities provided by IL & FS Investsmart Trading A/c. Live Streaming Quotes PMS/RMS (Awarded Best Financial Advisor in last 2 years consequentively) Call & Trade Facility (Toll Free No. for BSNL/MTNL/Mobiles) Personalized Relationship Manager to manage your Portfolio of Investment Weekly mail of Model Portfolio Q12. What is your level of Education?

Illiterate SSC HSC Graduate

Post Graduate Professional Course Others

Q13. What is your occupation? ( Please specify your Profile) Business Professional Services Housewife Student

Q14. Which income group do you belong to? Less than 2 Lacs 2 Lacs to 5 Lacs 5 Lacs to 8 Lacs Above 8 Lacs

BIBLIOGRAPHY

Financial Management by Prasanna Chandra, NCFM Capital market moduls
Magazines: ?IL&FS Smart Update?

Websites:
http://www.investsmartindia.com http://www.nseindia.com http://www.bseindia.com http://www.hdfcsec.com http://www.indiabulls.com http://www.google.com

THANKYOU



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