SUMMER TRAINING PROJECT REPORT

ON

A STUDY OF ONLINE TRADING

AT

( 412, Agarwal Cyber Plaza, Netaji Subhash Palace Pitampura New Delhi)

Submitted in the partial fulfillment for the award of the degree of

BACHELOR OF BUSINESS ADMINISTRATION

Under the Supervision Submitted by:

& Guidance of: Vivek Kumar
BBA- Vth SEM(M)
Dr. Ajay Kumar Rathore 0111701708

TECNIA INSTITUTE OF ADVANCED

STUDIES
Approved by AICTE, Ministry of HRD, Govt. of India Affiliated To Guru Gobind Singh Indraprastha University,
Delhi
INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085
E-Mail: director.tecniaindia@gmail.com, Website: www.tecnia.in
Fax No: 27555120, Tel: 27555121-24

1
 TECNIA INSTITUTE OF ADVANCED
STUDIES
(Approved by AICTE, Ministry of HRD, Govt. of India Affiliated To Guru Gobind Singh Indraprastha University, Delhi)
INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085
E-Mail : director.tecniaindia@ gmail.com, Website: www.tecniaindia.org
Fax No: 27555120, Tel: 27555121-24

DECLARATION

I VIVEK KUMAR Enrolment NO. 0111701708 Class BBA Vth SEM.(M) of the Tecnia
Institute of Advanced Studies, Delhi hereby declare that the Summer Training Project
Report entitled A STUDY OF ONLINE TRADING is an original work and the same has
not been submitted to any other Institute for the award of any other degree.

Signature of
Student

Countersigned
Signature of faculty Guide

2
 ACKNOWLEDGEMENT

I take this opportunity to express my gratitude, high regards and sincere

thanks to these respected people who have helped me throughout this
project.

Dr. Ajay Kumar Rathore

Director
Tecnia Institute Of Advanced Studies
Plot No. 3,Madhuban Chowk,
Institutional Area, Rohini,
New Delhi - 110085

Mr. Rajesh Antil

Assistant Sales Manager
Sharekhan Pvt Ltd
412, Agarwal Cyber Plaza,
Netaji Subhash Palace
Pitampura
New Delhi – 110034

Submitted by:
Vivek Kumar
BBA Vth Sem. (M)
0111701708

3
 TABLE OF CONTENTS
PARTICULARS PAGE NO.
 Executive Summary 01

 Objectives of study 02

 Chapter-1 Introduction: 03
1.1 Overview of Online trading 03-13
1.2 Profile of the Company 14
- Overview of SHAREKHAN LTD. 14

- Vision & Mission 15

- Market share 16
- Awards & Achievements 17
- Product range 18
 Chapter-2 Situation Review 32
- SWOT analysis 32-34
 Chapter-3 Financial analysis of company 35
- Interpretation through ratios 35-43
- Limitations 44
 Chapter-4 Learning in executive training 45
- Personal experience 46
- Conclusion 47
 Bibliography 48
 Annexure . 49-52
 Questionnaire. 52-53

EXECUTIVE SUMMARY

4
This project is based on “A STUDY OF ONLINE TRADING” at Sharekhan
Limited.

Further, in this Project

Chapter-1 includes review of literature & the introduction of the company

wherein I told about the profile of Sharekhan limited.

Chapter-2 includes Situation Review wherein I have shown swot analysis of

company.

Chapter-3 shows the financial analysis of company.

Chapter-4 includes the Learning’s & Findings.

OBJECTIVES OF THE STUDY

The Objective is to review the 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.

 It is to analyze the changes in trading after the exchange shifted

from outcry to online trading system.
5
  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.

Stocks
The stock or capital stock of a business entity represents the original capital paid into or
invested in the business by its founders. It serves as a security for the creditors of a
business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct
from the property and the assets of a business which may fluctuate in quantity and value.
Buying a stock for the long term means that you want to own part of a company and you
think that in the future the company will be profitable. If you buy stock in a company and
the company performs well, the stock's price should rise. If the company fails, then the
stock should fail you, too and go down. Companies list their stocks on the various stock
exchanges located throughout the U.S. The stock exchanges actually compete with each
other for these listings, since companies that attract more trading make more money for
the stock exchange that listed it. Company stocks are assigned a "ticker", or trading
symbol by the listing exchange. You may notice some well-chosen tickers that are easy to

6
remember, like "DNA" for the company Genentech, a biotechnology firm. Or some
companies' ticker is the same as its name, Nike for example.
Stock market
A stock market or equity market is a public market (a loose network of economic
transactions, not a physical facility or discrete entity) for the trading of company stock
and derivatives at an agreed price; these are securities listed on a stock exchange as well
as those only traded privately. The size of the world stock market was estimated at about
$36.6 trillion US at the beginning of October 2008. The total world derivatives market
has been estimated at about $791 trillion face or nominal value, 11 times the size of the
entire world economy. The value of the derivatives market, because it is stated in terms
of notional values, cannot be directly compared to a stock or a fixed income security,
which traditionally refers to an actual value. Moreover, the vast majority of derivatives
'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a
comparable derivative 'bet' on the event not occurring). Many such relatively illiquid
securities are valued as marked to model, rather than an actual market price. The stocks
are listed and traded on stock exchanges which are entities of a corporation or mutual
organization specialized in the business of bringing buyers and sellers of the
organizations to a listing of stocks and securities together. The largest stock market in the
United States, by market cap is the New York Stock Exchange, NYSE, while in Canada,
it is the Toronto Stock Exchange.

Trading
Historically, stock markets were physical locations where buyers and sellers met and
negotiated. With the improvement in communications technology in the late 20th
century, the need for a physical location became less important, as traders could transact
from remote locations. Participants in the stock market range from small individual stock
investors to large hedge fund traders, who can be based anywhere. Their orders usually
end up with a professional at a stock exchange, who executes the order. Some exchanges
are physical locations where transactions are carried out on a trading floor, by a method
known as open outcry. This type of auction is used in stock exchanges and commodity
exchanges where traders may enter "verbal" bids and offers simultaneously. The other
type of stock exchange is a virtual kind, composed of a network of computers where
trades are made electronically via traders. The shares of a company may in general be
transferred from shareholders to other parties by sale or other mechanisms, unless
prohibited. Most jurisdictions have established laws and regulations governing such
transfers, particularly if the issuer is a publicly-traded entity.

The desire of stockholders to trade their shares has led to the establishment of stock
exchanges. A stock exchange is an organization that provides a marketplace for trading
shares and other derivatives and financial products. Today, investors are usually

7
represented by stock brokers who buy and sell shares of a wide range of companies on
the exchanges. A company may list its shares on an exchange by meeting and
maintaining the listing requirements of a particular stock exchange. Actual trades are
based on an auction market model where a potential buyer bids a specific price for a
stock and a potential seller asks a specific price for the stock. (Buying or selling at
market means you will accept any ask price or bid price for the stock, respectively.)
When the bid and ask prices match, a sale takes place, on a first-come-first-served basis if
there are multiple bidders or askers at a given price.The purpose of a stock exchange is to
facilitate the exchange of securities between buyers and sellers, thus providing a
marketplace (virtual or real). The exchanges provide real-time trading information on the
listed securities, facilitating price discovery.

History
The two main stock markets of India are:-

• National Stock Exchange(NSE)

• Bombay stock exchange(BSE)

BSE:- At the end of the American civil war, the brokers who thrived out of this war in
1874, found a place in a street, where they would easily assemble and transact business.
This street is nowadays, popularly known as DALAL STREET. In 1887, they formally
established in Bombay, and were known as “Native Shares and Stock Brokers
Association”. In 1895, it acquired a premise in the same street and finally was
inaugurated in 1899 with the name Bombay Stock Exchange (BSE).
India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its
origin to as far as 125 years when it started
as a voluntary non-profit making
association. You hear about it any time it
reaches a new high or a new low, and you
also hear about it daily in statements like
'The BSE Sensitive Index rose 5% today'.
Obviously, stocks and stock markets are
important. Stocks of public limited
companies are bought and sold at a stock
exchange. But what really are stock
exchanges? Known also as News on the

8
stock market appears in different media every day. he stock market or bourse, a stock
exchange is an organized marketplace for securities (like stocks, bonds, options) featured
by the centralization of supply and demand for the transaction of orders by member
brokers, for institutional and individual investors. The exchange makes buying and
selling easy. The need for stock exchanges developed out of early trading activities in
agricultural and other commodities. During the middle Ages, traders found it easier to use
credit that required supporting documentation of drafts, notes and bills of exchange.
(Figure-1)
India's other major stock exchange National Stock Exchange (NSE), promoted by leading
financial institutions, was established in April 1993. Over the years, several stock
exchanges have been established in the major cities of India. There are now 23
recognised stock exchanges — Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai,
Ahmedabad, Bangalore, Bhubhaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur,
Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and
Meerut.

NSE:-
With the liberalization of Indian economy it was found necessary to lift the Indian
stock markets on par with the international standards. The NSE was incorporated in 1992
by industrial development bank of India, industrial credit and Investment Corporation of
India, industrial finance corporation of India, all insurance corporations, selected
commercial banks and others.
NSE is India’s leading stock exchange covering more than 160 cities and towns across
the country. It provides the modern fully
computerized trading system designed to
offer investors across the country a safe
and easy way to invest to liquidate
investment and securities.Investors in
many areas of country did not have the
same access and opportunity to trade so
there arise the need for setting up the
national stock exchange. The NSE
network has been designed to provide
equal access to investors from anywhere
in India and to be responsive to their
needs. (Figure-2)
On its recognition as a stock exchange under the Securities Contract Act, 1956 in April
1993, NSE started operations in the Wholesale Debt Market (WDM) segment in June
1994. Capital market (equities) segment commenced operations in November 1994, and
operations in derivative segment started in June 2000.NSE started trading in the capital
market segment on November3, 1994 and within one year became the largest exchange in
India, in terms of volumes transacted. During the year 2005-06 NSE reported, a turnover
of Rs 1,569,556 crores in the equity segment. In 12th century France the courratiers de
change were concerned with managing and regulating the debts of agricultural
communities on behalf of the banks. Because these men also traded with debts, they
could be called the first brokers. A common misbelief is that in late 13th century Bruges

9
commodity traders gathered inside the house of a man called Van der Beurze, and in 1309
they became the "Brugse Beurse", institutionalizing what had been, until then, an
informal meeting, but actually, the family Van der Beurze had a building in Antwerp
where those gatherings occurred; the Van der Beurze had Antwerp, as most of the
merchants of that period, as their primary place for trading. The idea quickly spread
around Flanders and neighboring counties and "Beurzen" 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. Bankers in Pisa, Verona, Genoa and
Florence also began trading in government securities during the 14th century. This was
only possible because these were independent city states not ruled by a duke but a council
of influential citizens. 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 share on the Amsterdam Stock
Exchange. It was the first company to issue stocks and bonds.

Relation of the stock market to the modern

financial system
The financial systems in most western countries has undergone a remarkable
transformation. One feature of this development is disintermediation. A portion of the
funds involved in saving and financing, flows directly to the financial markets instead of
being routed via the traditional bank lending and deposit operations. The general public's
heightened interest in investing in the stock market, either directly or through mutual
funds, has been an important component of this process.Statistics show that in recent
decades shares have made up an increasingly large proportion of households' financial
assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid
assets with little risk made up almost 60 percent of households' financial wealth,
compared to less than 20 percent in the 2000s. The major part of this adjustment in
financial portfolios has gone directly to shares but a good deal now takes the form of
various kinds of institutional investment for groups of individuals, e.g., pension funds,
mutual funds, hedge funds, insurance investment of premiums, etc.

The trend towards forms of saving with a higher risk has been accentuated by new rules
for most funds and insurance, permitting a higher proportion of shares to bonds. Similar
tendencies are to be found in other industrialized countries. In all developed economic
systems, such as the European Union, the United States, Japan and other developed
nations, the trend has been the same: saving has moved away from traditional
(government insured) bank deposits to more risky securities of one sort or another.Riskier
long-term saving requires that an individual possess the ability to manage the associated
increased risks. Stock prices fluctuate widely, in marked contrast to the stability of
(government insured) bank deposits or bonds. This is something that could affect not only
the individual investor or household, but also the economy on a large scale. The

10
following deals with some of the risks of the financial sector in general and the stock
market in particular. This is certainly more important now that so many newcomers have
entered the stock market, or have acquired other 'risky' investments (such as 'investment'
property, i.e., real estate and collectables).With each passing year, the noise level in the
stock market rises. Television commentators, financial writers, analysts, and market
strategists are all overtaking each other to get investors' attention. At the same time,
individual investors, immersed in chat rooms and message boards, are exchanging
questionable and often misleading tips. Yet, despite all this available information,
investors find it increasingly difficult to profit.

The behavior of the stock trading

From experience everyone know that investors may 'temporarily' move financial prices
away from their long term aggregate price 'trends'. (Positive or up trends are referred to
as bull markets; negative or down trends are referred to as bear markets.) Over-reactions
may occur—so that excessive optimism (euphoria) may drive prices unduly high or
excessive pessimism may drive prices unduly low. Economists continue to debate
whether financial markets are 'generally' efficient. According to one interpretation of the
efficient-market hypothesis (EMH), only changes in fundamental factors, such as the
outlook for margins, profits or dividends, ought to affect share prices beyond the short
term, where random 'noise' in the system may prevail. (But this largely theoretic
academic viewpoint—known as 'hard' EMH—also predicts that little or no trading should
take place, contrary to fact, since prices are already at or near equilibrium, having priced
in all public knowledge.) The 'hard' efficient-market hypothesis is sorely tested by such
events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6
percent—the largest-ever one-day fall in the United States. This event demonstrated that
share prices can fall dramatically even though, to this day, it is impossible to fix a
generally agreed upon definite cause: a thorough search failed to detect any 'reasonable'
development that might have accounted for the crash. (But note that such events are
predicted to occur strictly by chance , although very rarely.) It seems also to be the case
more generally that many price movements (beyond that which are predicted to occur
'randomly') are not occasioned by new information; a study of the fifty largest one-day
share price movements in the United States in the post-war period seems to confirm this.
However, a 'soft' EMH has emerged which does not require that prices remain at or near
equilibrium, but only that market participants not be able to systematically profit from
any momentary market 'inefficiencies'. Moreover, while EMH predicts that all price
movement (in the absence of change in fundamental information) is random (i.e., non-
trending), many studies have shown a marked tendency for the stock market to trend over
time periods of weeks or longer. Various explanations for such large and apparently non-
random price movements have been promulgated. For instance, some research has shown
that changes in estimated risk, and the use of certain strategies, such as stop-loss limits
and Value at Risk limits, theoretically could cause financial markets to overreact. But the
best explanation seems to be that the distribution of stock market prices is non-Gaussian
(in which case EMH, in any of its current forms, would not be strictly applicable). Other

11
research has shown that psychological factors may result in exaggerated stock price
movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological
research has demonstrated that people are predisposed to 'seeing' patterns, and often will
perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in
clouds or ink blots.) In the present context this means that a succession of good news
items about a company may lead investors to overreact positively (unjustifiably driving
the price up). A period of good returns also boosts the investor's self-confidence,
reducing his (psychological) risk threshold.

Another phenomenon—also from psychology—that works against an objective

assessment is group thinking. As social animals, it is not easy to stick to an opinion that
differs markedly from that of a majority of the group. An example with which one may
be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to
have their opinion validated by those of others in the group.In one paper the authors draw
an analogy with gambling. In normal times the market behaves like a game of roulette;
the probabilities are known and largely independent of the investment decisions of the
different players. In times of market stress, however, the game becomes more like poker
(herding behavior takes over). The players now must give heavy weight to the
psychology of other investors and how they are likely to react psychologically.The stock
market, as with any other business, is quite unforgiving of amateurs. Inexperienced
investors rarely get the assistance and support they need. In the period running up to the
1987 crash, less than 1 percent of the analyst's recommendations had been to sell (and
even during the 2000 - 2002 bear market, the average did not rise above 5%). In the run
up to 2000, the media amplified the general euphoria, with reports of rapidly rising share
prices and the notion that large sums of money could be quickly earned in the so-called
new economy stock market. (And later amplified the gloom which descended during the
2000 - 2002 bear market, so that by summer of 2002, predictions of a DOW average
below 5000 were quite common.)

Investment strategies

One of the many things people always want to know about the stock market is, "How do I
make money investing?" There are many different approaches; two basic methods are
classified as either fundamental analysis or technical analysis. Fundamental analysis
refers to analyzing companies by their financial statements found in SEC Filings,
business trends, general economic conditions, etc. Technical analysis studies price
actions in markets through the use of charts and quantitative techniques to attempt to
forecast price trends regardless of the company's financial prospects. One example of a
technical strategy is the Trend following method, used by John W. Henry and Ed
Seykota, which uses price patterns, utilizes strict money management and is also rooted
in risk control and diversification.Additionally, many choose to invest via the index
method. In this method, one holds a weighted or unweighted portfolio consisting of the
entire stock market or some segment of the stock market (such as the S&P 500 or
Wilshire 5000). The principal aim of this strategy is to maximize diversification,

12
minimize taxes from too frequent trading, and ride the general trend of the stock market
(which, in the U.S., has averaged nearly 10%/year, compounded annually, since World
War II).

Online trading
Online stock trading is becoming a very popular way in which to invest in the stock
market. Ordinary everyday citizens such as you and me can now trade stocks like the pros
without paying the ridiculous broker fees that are often associated with trading on the
stock market. This doesn't mean there are no fees involved or that you won't be
discouraged from capriciously trading stocks. What it does mean is that you will be able
to trade stocks, as you may have never been able to do before because the costs involved
in trading were so high that only the wealthiest among us could really afford to work the
market to any real advantage. Online trading has changed the average investors'
involvement in trading their own stocks. The availability of company information has
become so widespread and easily attainable that researching and finding stock to buy and
sell is as easy as logging onto your computer.You will find quite a few companies that
are going to compete for your business when it comes to empowering you to trade stocks
online. It is best to go with a business that offers education and advice in addition to the
ability to trade. There are many big names in the brokerage business that are getting in
touch with the technology of today and offering full service brokers and financial
advisors in addition to offering new online services that include Internet trading.

There are, broadly, two types of trading in the financial markets:

• Business-to-business (B2B) trading, often conducted on exchanges, where large

investment banks and brokers trade directly with one another, transacting large
amounts of securities, and
• Business-to-client (B2C) trading, where retail (e.g. individuals buying and selling
relatively small amounts of stocks and shares) and institutional clients (e.g. hedge
funds, fund managers or insurance companies, trading far larger amounts of
securities) buy and sell from brokers or "dealers", who act as middle-men between
the clients and the B2B markets

If one decides to go with some of the bigger names in the business one should
understand that he will pay a little more than he would pay going with many of
the lesser name firms and trading companies. The good news is that the bigger
names have more to loose after working for decades to establish themselves and

13
 develop a good reputation among traders. This means that they are not going to be
"fly by night" and are going to work to make sure you have the best possible
service from them for your future in the stock market trade.

Many of these firms in addition to offering the ability to buy, sell, and trade online will
also offer financial planning for retirement, future expenses, and advice on how to create
a fixed income from your investments. They will offer many tips, hints, and advice free
of charge on their website while also promoting the services they offer through discounts
in hopes of gaining your business for some of the higher ticket transactions that really
pay their bills. Online investment services offer consumers the opportunity to invest with
lower commissions and fees which means you bring more of the money home when all is
said and done and spend far less on fees and expenses associated with investing. By
saving these fees you may be doing yourself a huge service but keep in mind that the
invaluable advice of a broker can often mean the difference between mild successes and
wild successes. If you can manage the fees it is a good plan to at least consult with a
broker or financial advisor or planner once or twice a year in order to get the most out of
your investment money.
According to Chiang-Nan Chao , Robert J. Mockler , Dorothy Dologite :-The market
downturn since March 2000 has posed a serious threat to brokerage firms, particularly
those that offer online trading Findings of this study suggest that broke rage firms should
focus on improving customer services, while at the same time providing services in
addition to online trading. Online brokerage firms should move into the areas that have
been traditionally dominated by full service brokerage firms and banks.
Introduction Online trading has become a formidable force in today's investment market,
thanks to recent developments in information technology. Although setbacks in the
technology industry discouraged individual investors from actively trading, the total
number of online trading accounts continues to grow. As the NASDAQ has dropped from
its all time high of 5,000 in March 2000, and the economic situation is continuing to
deteriorate, many investors have withdrawn their funds from the stock market
Nevertheless, the interest in online trading is expected to increase (12,17).
In April 2002, America's third-largest discount brokerage house, Ameritrade, agreed to
purchase Datek Online Holdings Corporation, a privately held online trading company, in
an all-stock transaction valued at almost $1.29 billion. The move would transform
Ameritrade of Omaha, Nebraska, into the largest online brokerage firm in the U.S. in
terms of equity trades per day, surpassing industry leaders E*Trade Group, Inc. and
Charles Schwab Corporation. The proposed combination comes as the online trading
industry appears to be recovering gradually from a severe recession that has prompted
consolidation.On the academic side, many recent studies have shown that online
brokerages have moved away from offering only online trading, and are now adding
many other services (i.e., banking services) in order to survive in this volatile market This
study focuses on how online brokerage firms can better serve the market from the online

14
users' standpoint.Online trading became huge business in the late 1990s. The lure of
relatively low brokerage costs for electronic share trading, together with the capacity to
monitor real-time market developments from a computer screen, have contributed to the
fact that internet-based trading now comprises about 20% of all retail share trading.
The online trading market has become flooded with discount brokers offering low prices
and better transaction costs. Some of the most notable online discount brokers are
Ameritrade, E*Trade, Charles Schwab and TD Waterhouse. Full-service firms, including
banks, reacted to the emergence of online discount brokers by entering the online market
with their own web sites.

The full-service Finns want to protect their client base and gain market share in the new
online market Discount firms felt a minimal impact from full-service firms entering the
online trading marketplace. Many small discount brokerage companies are niche Finns,
against which full-service firms do not compete directly. How ever, since the bear market
started in early 2000, discount brokerage finns have been more affected by competition.
Several firms attribute accelerated changes in competitive approaches to the marketplace
to the entry of full-service Finns.

These firms explain that competition in online trading has become more similar in
product offerings and pricing. The only area left for online trading firms to gain a
competitive advantage is through the service provided to their clients. Firms now also
compete on the basis of quality service and response to clients. In a way, the entry of full-
service firms has benefited client consumers by establishing a range of product and
service options from which they can choose. As a collateral benefit for investors, the
convergence of full-service and discount firms' offerings has highlighted niche firms that
can serve a limited client base more effectively than larger competitors (5,6,8,11,16).
Some firms in the industry state that with the entry of traditional full-service brokers,
investors have become more aware of their online trading options, and online trading now
appears more legitimate to investors. When customers realized that Merrill Lynch,
Fidelity Investments, Paine Webber and other major full-service firms had online trading
web sites, it strengthened the credibility and safety of online trading, at least in investors'
minds (18,9).With the current market conditions, firms will not win by competing on
price or product because most online trading sites offer virtually the same things. Firms
have to stand out on service, and the way firms serve people has to stand out on multiple
channels. All the companies are offering multiple modalities: Schwab is now like a Smith
Barney, and Fidelity Investments competes directly with E*Trade.
Thomas Sutton, RightLine Editor-in-Chief, said that:-
Few people who set out to get rich quick trading stocks online actually become rich. The
small group of get-rich-quickers who do make lots of money fast do it purely as a result
of chance. They rarely keep their trading gains for very long. This is because trying to get
rich quick causes stock traders to take on way too much risk. This is normally done by
trading with excessive margin or by investing too much money in one position.
Unfortunately, people who are in a hurry to make a lot of money trading online tend not
to do a good job of managing risk. Managing trading risk involves focusing more on the
potential downside of a trade or investment than the potential upside. In practical terms
this means using an objective stock market trading method designed to limit drawdowns

15
in the value of your stock portfolio. If you do a good job of managing risk you will
almost certainly make money trading the stock market over the long-term. Those who
consistently ignore risk and overload the wagons in an attempt to get rich quick are
guaranteed failure. For example, most traders with a get-rich-quick mindset don't realize
that if they repeatedly bet everything on trades in which the probability of success is 90%
they will eventually lose everything. Sure, they look like a genius for a while, but the one
out of every ten trades that happens to be a 'loser' will wipe them out.

Stock market trading online is a type of speculation where education and skill can
dramatically improve your odds of winning. Risk management is a skill. Reducing your
stock market trading risk dramatically increases the odds that you will win. Stay focused
on what you need to know and what you need to do to be successful trading the stock
market online. Remember that money is just a by-product of wise trading methods and
actions. According to Mark Crisp:-It is common now for people to undertake stock
trading online. Historically there have been American stock markets from the 1700s. In
Philadelphia an exchange for trading currency was established to enable business owners
to support their business and to grow the economy. In the early 1800s, the New York
Stock Exchange replaced the Philadelphia exchange. Initially New York Stock Exchange
was a group of business people who met on a daily basis on Wall St to trade their stocks
or bonds. This initial trading was all done outside until the Exchange moved indoors in
the early 1900s. Whilst this traditional formula served its purpose admirably, trading is
no longer the bricks and mortar industry it once was. Trading no longer requires you to
be in Wall St. The way the New York Stock Exchange works could be compared to an
auction. If a company is listed on the stock exchange, they have a post in Wall St
whereby trades are listed and a specialist is employed as an "auctioneer" to oversee the
bidding on each trade. This form of trading keeps an accurate balance between supply
and demand in the stock market so the price of the shares is kept in check. These days, it
is far easier to get involved in investing in stocks. In traditional stock trading, you engage
a stock broker to take and place your order for you. You phone your broker to take the
order and then there can be a delay in the order being executed. Now you no longer need
to worry about using a stock broker to act on your behalf. If buying or selling stocks
online you can place your order with the click of a mouse. Conveniently, trading this way
is also a time saver. Setting up an account with a reputable,online brokerage company is
easy. These online companies provide access to a wide range of services that were
previously only available via a traditional bricks and mortar stock broking service.
Setting up an online account gives you access to a variety of services including: up to the
minute stock quotes, detailed historic performances of individual stocks, as well as
detailed information about company fundamentals. One of the most common reasons
investors like buying and selling stocks online compared with traditional brokerage is
price. There are much lower brokerage fees for buying and selling stocks online than
there are through buying and selling stocks at a traditional brokerage house.An important
advantage of using an online brokerage service to trade stocks online is the significant

16
price saving in brokerage fees. This is combined with the immediacy at which you can
gather information required in making your stock purchasing decisions when trading
online. Many investors also like the independence associated with trading shares online.
Many traditional brokerage houses would try to influence your decisions when trading
shares, but an online account means all the decisions you make are fully your own.
Online brokerage sites are not just about trading shares online.

Sharekhan is one of the top retail brokerage houses in India with a strong online trading
platform. The company provides equity based products (research, equities, derivatives,
depository, margin funding, etc.). It has one of the largest networks in the country with
704 share shops in 280 cities and India’s premier online trading portal
www.sharekhan.com. With their research expertise, customer commitment and superior
technology, they provide investors with end-to-end solutions in investments. They
provide trade execution services through multiple channels - an Internet platform,
telephone and retail outlets.
Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family,
continues to remain the largest shareholder. It is the retail broking arm of the Mumbai-
based SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED]
Group.
SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy
of more than 80 years in the stock markets, the SSKI group ventured into institutional
broking and corporate finance over a decade ago. Presently SSKI is one of the leading
players in institutional broking and corporate finance activities.
Sharekhan offers its customers a wide range of equity related services including trade
execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment
advice, Commodities, etc.
Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it
is having all the rights of SSKI. The company was awarded the 2005 Most Preferred
Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go
online. The Company's online trading and investment site - www.Sharekhan.com - was
also launched on Feb 8, 2000.
This 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 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.

17
Share khan has one of the best states of art web portal providing fundamental and
statistical information across equity, mutual funds and IPOs. One can surf across 5,500
companies for in-depth information, details about more than 1,500 mutual fund schemes
and IPO data.
One can also access other market related details such as board meetings, result
announcements, FII transactions, buying/selling by mutual funds and much more.

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

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.

18
Sharekhan's management team is one of the strongest in the sector and has positioned
Sharekhan to take advantage of the growing consumer demand for financial services
products in India through investments in research, pan-Indian branch network and an
outstanding technology platform. Further, Sharekhan's lineage and relationship with
SSKI Group provide it a unique position to understand and leverage the growth of the
financial services sector.
SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank
with strong research-driven focus. Their team members are widely respected for their
commitment to transactions and their specialized knowledge in their areas of strength.

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.

The team has completed over US$5 billion worth of deals in the last 5 years - making it
among the most significant players raising equity in the Indian market. SSKI, a veteran
equities solutions company has over 8 decades of experience in the Indian stock markets.
If we experience their language, presentation style, content or for that matter the online
trading facility, we'll find a common thread; one that helps us make informed decisions
and simplifies investing in stocks. The common thread of empowerment is what
Sharekhan's all about!
"Sharekhan has always believed in collaborating with like-minded Corporate into
forming strategic associations for mutual benefit relationships" says Jaideep Arora,
Director - Sharekhan Limited.
Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.
Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when
he says that investing in stocks should not be confused with trading in stocks or a
portfolio-based strategy is better than betting on a single horse, it is something that is
spoken with years of focused learning and experience in the’ stock markets. And these
beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the
SSKI group, an Indian financial services power house, with strong presence in Retail
equities Institutional equities Investment banking.
In delhi it is having the branches at netaji subash place and Nehru place. We have been
given the centre at netaji subash place.

Sharekhan provides 4 in 1 account.

- Demat a/c
- Trading a/c: for cash calculation

19
 - Bank a/c: for fund transfer
- Dial and Trade: for query relating trading

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED

(Figure-3)

20
METHODOLOGY:

The data collection methods include both primary and secondary collection methods.
Primary method: This method includes the data collected from the questionnaires and
personal interaction with authorized members of Sharekhan Securities limited.
Secondary method: The secondary data collection method includes:
-The lecturers delivered by the superintendent.
-The brochures and material provided by Sharekhan Securities limited.
-The data collected from the magazines of the NSE, economic times and from internet.

Demat account:

Sharekhan is a depository participant. This means that we can keep the shares in
dematerialized form in Sharekhan. But for this one has to the demat account in
Sharekhan. Dematerialization is the process by which a client can get physical certificates
converted into electronic balances maintained in his account with the DP.

In Sharekhan, under demat account there are two types of terminals.

TYPE OF DEMAT DEPOSIT (Refundable) CHARGES (nonrefundable)

ACCOUNT TERMINAL

CLASSIC Rs.5000 Rs.750

Rs.10000 Nil

TRADETIGER Rs.5000 Rs.1000

Rs.10000/25000 Nil

Account opening:
Opening a DP account with Sharekhan-

One can open a Depository Participant (DP) account, either through a Sharekhan branch
or through a Sharekhan Franchisee center.

There is no fee for opening DP accounts with Sharekhan. However a nominal deposit
(refundable) is charged towards services which will be adjusted against all future billings.

21
All investors have to submit their proof of identity and proof of address along with the
prescribed account opening form.

BROKERAGE STRUCTURE OF SHAREKHAN

BROKERAGE:

INTRADAY DELIVERY
CASH- EQUITIES 0.05% 0.5%
FnO 0.05%
PREPAID SCHEME 0.025% 0.25%

Sharekhan has tie up with the following banks:

HDFC
Axis Bank
IDBI
Citi Bank
IndusInd Bank
Union Bank
ICICI Bank.

MINIMUM INVESTMENT IN MUTUAL FUND:

INVESTMENT MINIMUM AMOUNT

Mutual Fund (Any Company) 5000

Systematic Investment Plan (Any Company) 500

22
CUSTOMER

• Business class people (high class)

• High Net worth Individuals

• Service class people

• Government Employees

• Young Adults (19-30 yrs.)

• Adults (35-50 yrs.)

• HUF (Hindu Undivided Family)

• Women (literate and working)

Market Share
Sharekhan enjoyed about 20 per cent market share in Web business (Internet trading) in
stock markets. Three years ago, Web trading showed lot of promise but with the market
witnessing a downturn, there was not much interest among retail customers.

Profits
The share of Web trading constituted 22 per cent of the revenue. As Sharekhan's daily
trading volume was over Rs 200 crore, the share of Web trading at about Rs 40 crore a
day was substantial and a larger part of the volume was coming from day traders

23
Its core services are:

 Equities, and Derivatives trading on the National Stock Exchange of India Ltd.
(NSE), and Bombay Stock Exchange Ltd. (BSE),
 Commodities trading on National Commodity and Derivatives Exchange India
(NCDEX) and Multi Commodity Exchange of India Ltd. (MCX),
 Depository services,
 Online trading services,
 IPO Services,
 Dial-n-Trade
 Portfolio management services,
 Fundamental and Technical Research services,
 In addition to this they also provide advisory services and distributions for
mutual funds.
 Sharekhan ValueLine (a monthly publication with reviews of recommendations,
stocks to watch out for etc.)
 Daily research reports and market review (High Noon & Eagle Eye)
 Pre-market Report
 Daily trading calls based on Technical Analysis
 Cool trading products (Daring Derivatives and Market Strategy)

Sharekhan First Step

The Sharekhan FirstStep is a brand new program designed especially for those who are
new to investing in shares. All one have to do is open a Sharekhan FirstStep account and
they guide us through the investing process.

Features of Trading With Sharekhan:

1. Freedom from paperwork
2. Instant credit and money transfer
3. Trade from any net enabled PC
4. After hour orders
5. Online orders on the phone
6. Timely advice and-research reports
7. Real-time Portfolio tracking

24
8. Information and Price alerts.

WEEKLY ANALYSIS

WEEK No. 1:

Had training for three days. In this training we were told about Sharekhan Company,
history of Sharekhan, organization structure, products, Sharekhan research reports,
trading techniques, clients, Demat accounts, Derivatives, and Online trading accounts in
brief - Speed Trade and Classic account, learned how to buy and sell shares through these
online terminals, Sales technique, Sharekhan`s brokerage.
As this was my first week and had training for 3 days I got very less time to understand
the products, market and potential customers.

WEEK No. 2:

Gained detailed knowledge about classical account.

Classical account is a web-based product of sharekhan and consists of
 Online trading in Equity & Derivative

 Dial-n-Trade

 Online Trading + Bank + demat

 Cash transfer

 Order and trade confirmation through e-mails

 Single screen interface for cash and derivative

25
WEEK No. 3:

In this week we were told about the speed trade. Speed trade tiger is a software of
sharekhan which is given to its customers for trading. Speed trade enables its users-
 Online trading in Equity & Derivative

 Dial-n-Trade

 Online Trading + Bank + Demat

 Cash Transfer

 Order and trade confirmation through e-mails

 Single screen interface for cash and derivative

 Live Terminal

WEEK No. 4:

We were asked to open a demat account so that we could have practical knowledge
about what we have learned in three previous weeks and also we were given an
assignment to prepare a portfolio of our investment in five different sectors.

26
AGE STRUCTURE OF RESPONDENTS

Ag e C h
AGE RESPONDENT
15-30 14
31-45 4
45-60 2

10%
(Figure-4)

20%
INTERPRETATION-
It can be seen that most of the people who are between 15 to 30 old are most involved in
onlne trading while there are four people who are between 31 to 45 and only two are
above 45.

27
INCOME

In c o m e C
Number of
Income/Month Member
Below 15000 12
15001 to
30000 5
30001 to
45000 1
Above 45000 2

(Figure-5)
10%
5%
INTERPRETATION-
This is clear from the chart that people having income less than 15000 are more involved
in online trading and 5 people are having income more than 15000 but less than 30000
and 3 people are having income more than 30000.

28
EDUCATION QUALIFICATION

2
(Figure-6)
Other

INTERPRETATION-
It can be seen that most of the people who are involved in online trading are graduates
and 5 respondents are post graduates and 2 people have different education qualification.

29
Post Graduation
 ACCOUNT OPENING

Number
Account of
Ref Member
Personal
acquintance
Account R
6
Referral-
Clients 8
Referral-
Non Clients 1
Call / Wall
in 2
Personal
Prospect
visit 3
(Figure-
7)

15%
INTERPRETATION-
Many of the respondents opened their accounts through agent(client) of the company & 6
people10%
opened by personal acquaintance while 6 respondents used other mode of account
opening.

5%
30
FEEL SAFE..?

Number of
Answer Member
Yes 14
No 6

14

14

12

(Figure-8)
10
INTERPRETATION-
It is shown in the figure that 70% of respondents feel safe while trading online and 30%
are having fear of fraud.

8
31
MOST TRADED STOCK

32
 Membe
stock r
Equity 7
M.Funds 8
Commoditie
s 3
F&O 1
Other 1

(Figure-9)
6
33
INTERPRETATION-
It can be seen that 40% respondents most trade in mutual fund and 7 people trade in
equity & 3 invest in commodities while 1 person trades in future and option and 1 in
other stocks.

EXPERIENCE

Online Trading Exp

experience Number of
Member
Below 5 Year 17
5 to 10 3

(Figure-10)
15%
RECEIVE UPDATED INFORMATION

34
 Update
Number
of
Answer Member
Yes 9
No 11

(Figure-11)

SUCCESSFUL BROKER

Succ
Successful Number of
broker Member
11 Strongly
agree 1
Agree 7
Moderate 10
Disagree 1
Strongly
disagree 1

(Figure-12)

35
INTERPRETATION- It can be seen that most of respondents moderately agree that their
broker is successful in online trading & 35% just agree while 1 person is strongly agree
on the statement.

SWOT ANALYSIS

Strengths

 It is a pioneer in online trading with a turn over of Rs.400 crores and more than
800 peoples working in the organization.

 SSKI the parent company of Share Khan has more than eight decades of trust and
credibility in the Indian stock market. In the Asian Money Broker’s poll SSKI
won the “India’s best broking house for 2004” award.

 Share Khan provides multi-channel access to all its customers through a strong
online presence with www.sharekhan.com, 250 share shops in 130 cities and a
call-center based Dial-n-Trade facility

 Share Khan has dedicated research teams for fundamental and technical research.
Which constantly track the pulse of the market and provide timely investment
advice free of cost to its clients which has a strike rate of 70-80%.

36
  Easier access to the customer due to largest ground network of 280 branded share
shops in 120 cities.

 Efficient research and analysis team, which is, interpreting the economy and
company’s performance accurately, is enhancing the profitability of the client.

Weakness
 Localized presence due to insufficient investments for country wide
Expansion.

 Lack of awareness among customers because of non-aggressive promotional

strategies (print media, newspapers, etc).

 Lesser emphasis on customer retention.

 Focuses more on HNIs than retail investors which results in meager market-
Share as compared to close competitors.

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

Opportunities
 With the booming capital market it can successfully launch new services and raise
its client’s base.

 It can easily tap the retail investors with small saving through promotional
Channels like print media, electronic media, etc.

 As interest on fixed deposits with post office and banks are all time low, more and
More small investors are entering into stock market.

37
  Abolition of long term capital gain tax on shares and reduction in short term
capital gain is making stock market as hot destination for investment among small
investors.

 Increasing usage of internet through broadband connectivity may boost a whole

new breed of investors for trading in securities.

Threats
 Aggressive promotional strategies by close competitors may hamper Share
Khan’s acceptance by new clients.

 Lack of sufficient branch-offices for speedy delivery of services.

 Other players are providing margin funds to investors on easy terms where as
there is no such facility in share khan.

 More and more players are venturing into this domain which can further reduce
the earnings of Share Khan.

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

38
 FINANCIAL ANALYSIS
Financial statement analysis is a judgmental process. One of the primary objectives is
identification of major changes in trends, and relationships and the investigation of the
reasons underlying those changes. The judgment process can be improved by experience
and the use of analytical tools. Probably the most widely used financial analysis
technique is ratio analysis, the analysis of relationships between two or more line items
on the financial statement. Financial ratios are usually expressed in percentage or times.
Generally, financial ratios are calculated for the purpose of evaluating aspects of a
company's operations and fall into the following categories:

• Liquidity ratios measure a firm's ability to meet its current obligations.

• Profitability ratios measure management's ability to control expenses and to earn a
return on the resources committed to the business.
• Leverage ratios measure the degree of protection of suppliers of long-term funds
and can also aid in judging a firm's ability to raise additional debt and its capacity
to pay its liabilities on time.
• Efficiency, activity or turnover ratios provide information about management's
ability to control expenses and to earn a return on the resources committed to the
business.

A ratio can be computed from any pair of numbers. Given the large quantity of variables
included in financial statements, a very long list of meaningful ratios can be derived. A
standard list of ratios or standard computation of them does not exist. The following ratio
presentation includes ratios that are most often used when evaluating the credit
worthiness of a customer. Ratio analysis becomes a very personal or company driven
procedure. Analysts are drawn to and use the ones they are comfortable with and
understand.

39
Liquidity Ratios
Working Capital
Working capital compares current assets to current liabilities, and serves as the liquid
reserve available to satisfy contingencies and uncertainties. A high working capital
balance is mandated if the entity is unable to borrow on short notice. The ratio indicates
the short-term solvency of a business and in determining if a firm can pay its current
liabilities when due.

• Formula
Current Assets - Current Liabilities

Acid Test or Quick Ratio

A measurement of the liquidity position of the business. The quick ratio compares the
cash plus cash equivalents and accounts receivable to the current liabilities. The primary
difference between the current ratio and the quick ratio is the quick ratio does not include
inventory and prepaid expenses in the calculation. Consequently, a business's quick ratio
will be lower than its current ratio. It is a stringent test of liquidity.

• Formula
Cash + Marketable Securities + Accounts Receivable
Current Liabilities

Current Ratio
Provides an indication of the liquidity of the business by comparing the amount of current
assets to current liabilities. A business's current assets generally consist of cash,
marketable securities, accounts receivable, and inventories. Current liabilities include
accounts payable, current maturities of long-term debt, accrued income taxes, and other
accrued expenses that are due within one year. In general, businesses prefer to have at
least one dollar of current assets for every dollar of current liabilities. However, the
normal current ratio fluctuates from industry to industry. A current ratio significantly
higher than the industry average could indicate the existence of redundant assets.
Conversely, a current ratio significantly lower than the industry average could indicate a
lack of liquidity.

• Formula
Current Assets
Current Liabilities

Cash Ratio
Indicates a conservative view of liquidity such as when a company has pledged its
receivables and its inventory, or the analyst suspects severe liquidity problems with
inventory and receivables.

• Formula
Cash Equivalents + Marketable Securities
Current Liabilities

Profitability Ratios

40
Net Profit Margin (Return on Sales)
A measure of net income dollars generated by each dollar of sales.

• Formula
Net Income *
Net Sales

* Refinements to the net income figure can make it more accurate than this ratio
computation. They could include removal of equity earnings from investments, "other
income" and "other expense" items as well as minority share of earnings and nonrecuring
items.

Return on Assets
Measures the company's ability to utilize its assets to create profits.

• Formula
Net Income *
(Beginning + Ending Total Assets) / 2

Operating Income Margin

A measure of the operating income generated by each dollar of sales.

• Formula
Operating Income
Net Sales

Return on Investment
Measures the income earned on the invested capital.

• Formula
Net Income *
Long-term Liabilities + Equity

Return on Equity
Measures the income earned on the shareholder's investment in the business.

• Formula
Net Income *
Equity

Gross Profit Margin

Indicates the relationship between net sales revenue and the cost of goods sold. This ratio
should be compared with industry data as it may indicate insufficient volume and
excessive purchasing or labor costs.

• Formula
Gross Profit
Net Sales

41
Financial Leverage Ratios
Total Debts to Assets
Provides information about the company's ability to absorb asset reductions arising from
losses without jeopardizing the interest of creditors.

• Formula
Total Liabilities
Total Assets

Capitalization Ratio
Indicates long-term debt usage.

• Formula
Long-Term Debt
Long-Term Debt + Owners' Equity

Debt to Equity
Indicates how well creditors are protected in case of the company's insolvency.

• Formula
Total Debt
Total Equity

Long-term Debt to Net Working Capital

Provides insight into the ability to pay long term debt from current assets after paying
current liabilities.

• Formula
Long-term Debt
Current Assets - Current Liabilities

Efficiency Ratios
Cash Turnover
Measures how effective a company is utilizing its cash.

• Formula
Net Sales
Cash

Sales to Working Capital (Net Working Capital Turnover)

Indicates the turnover in working capital per year. A low ratio indicates inefficiency,
while a high level implies that the company's working capital is working too hard.

• Formula

42
 Net Sales
Average Working Capital

Total Asset Turnover

Measures the activity of the assets and the ability of the business to generate sales
through the use of the assets.

• Formula
Net Sales
Average Total Assets

Fixed Asset Turnover

Measures the capacity utilization and the quality of fixed assets.

• Formula
Net Sales
Net Fixed Assets

Capital Gearing Ratio:

Closely related to solvency ratio is the capital gearing ratio. Capital gearing ratio is
mainly used to analyze the capital structure of a company.

• Formula
Equity Share Capital
Fixed Interest Bearing Funds

Retained Earnings to Total Assets Ratio

This ratio indicates the extent to which assets have been paid for by company
profits.A retained earnings to total assets ratio near 1:1 (100%) indicates that
growth has been financed through profits, not increased debt.A low ratio indicates
that growth may not be sustainable as it is financed from increasing debt, instead of
reinvesting profits.

• Formula
Retained earnings
Total assets

Cash Flow Indicator Ratios:

Operating Cash Flow/Sales Ratio
This ratio, which is expressed as a percentage, compares a company's operating
cash flow to its net sales or revenues, which gives investors an idea of the company's
43
ability to turn sales into cash.

• Formula:
Operating cash flow
Net sales(revenues)

Cash Turnover Ratio

The cash turnover ratio indicates the number of times that cash turns over in a year
• Formula
Sales
Cash

Cash Flow to Long Term Debt Ratio

The cash flow to long term debt ratio appraises the adequacy of available funds to
pay obligations.
• Formula
Cash flow
Long term debt

Operations Cash Flow to Current Liabilities Ratio

If the operations cash flow to current liabilities ratio keeps increasing, it may
indicate that cash inflows are increasing and need to be invested.
• Formula
Cash flow from operations
Current liabilities

Cash Flow for Investing to Cash Flows from Operating and Financing
This ratio compares the funds needed for investment to the funds obtained from
financing and operations.
• Formula
Cash flows from investing .
Cash flows from operations + cash flows from financing

44
 SOLVING & ANALYSING RATIOS:
i> Net profit margin = 152.02 x100 = 22.82%
665.99

A higher profit margin indicates a more profitable company that has better control
over its costs compared to its competitors. This is compared with the last year’s
profit margin of company.

ii> Quick ratio = 1656.05 = 1.31

1258.52

Ideal Quick ratio is 1:1. Company needs to improve this.

iii> Current ratio = 1709.81 = 1.36

1258.52

Ideal Quick ratio is 2:1. Company needs to increase its assets or

decrease its liabilities.

iv> Operating profit margin = 246.85x100 = 37.06

665.99

A healthy operating margin is required for a company to be able to pay for its
fixed costs, such as interest on debt.

v> Total debt/equity ratio = 497.750 = 0.45

1107.71

45
 The normally acceptable debt-equity ratio is 2:1. Ratio less than one means equity
provides a majority of the financing.

vi> Return on investment = 152.02x100 = 9.47

1605.46

Higher ratio is better. In this case the ratio has increased as compared to the
last year’s ratio (8.23).

vii> Gross profit margin = 271.14 x 100 = 40.72%

665.99

Higher the ratio better it is.

viii> Return on equity = 152.02 = 13.73

1107.71

ix> Capitalization ratio = 497.75 = 0.31 or 31%

1605.46
Low debt and high equity levels in the capitalization ratio
indicate investment quality.

x> Long term debt to net working capital = 497.75 = 1.11

451.29

xi> Fixed assets turnover ratio = 665.99 = 0.57

1152.42
A high ratio means a high rate of efficiency of utilization of fixed asset and low
ratio means improper use of the assets.

xii> Debtor turnover ratio = 665.99 = 1.15

577.50
Higher ratio is better. In this case company’s net sale is more than the average
debtors.

46
xiii> Capital gearing ratio = 1107.71 = 2.23
497.75

xiv> Operating cash flow ratio = 5.120 x 100 = 0.76%

665.99
The greater the amount of operating cash flow, the better.

xv> Cash flow to long term debt = 131.59 = 0.26

497.75
The higher the percentage ratio, the better the company's ability to carry its total
debt. In this case, their debt load is higher than their operating cash flows, giving it a
ratio of less than one, however the percentage (being below 40%) is considered low.

xvi> Cash turnover ratio = 665.99 = 1.18

561.84

xvii> Operations cash flow to current liabilities = 5.1200 x 100 = 0.49%

1026.21
Any result less than 1 indicates that the company is not able to liquidate its current
liabilities from operating cash flow; the company will probably have to sell assets,
borrow money or issue stock in order to meet its short term debt obligations.

xviii> Retained earnings to total assets = 177.54 = 0.11

1605.46
Retained earnings to total assets ratio near 1:1 (100%) indicates that growth has
been financed through profits, not increased debt. This low ratio indicates that
growth is not sustainable as it is financed from increasing debt, instead of
reinvesting profits.

xix> Equity multiplier = 1605.46 = 1.44

1107.71
The equity multiplier ratio discloses the amount of investment leverage. A higher
equity multiplier indicates higher financial leverage, which means the company is
relying more on debt to finance its assets.

47
xx> Cash flow for investing to cash flow from operating and financing
=- 265.620
5.12+392.08

= -265.62
397.20

= -0.66

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 problems 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

• The company does not provide its financial report to anyone. So the balance
sheet, cash-flow-statement & profit and loss account shown in this project are not
audited and are of some other’s company.

48
 LEARNINGS & FINDINGS

LEARNINGS: During my summer training, I have learned:

• Importance of information technology in the field of stock broking is immense.

• Stock broking companies run with the help of IT. The terminal through which the
brokers buy and sell shares is software that completely depends on the internet.
For Sharekhan, this terminal has been designed by the software company
“Spider”. Buying and selling through internet is fast. As soon as the prices of the
shares goes up or comes down then they can be sold or purchased instantly within
seconds. Customer Relationship is very necessary for the company to retain the
customers.
• In Sharekhan Ltd. I have learned a lot relating to the finance, learned the meaning
of the words that are mostly used in the share market.

49
 • Learned about various products of the Sharekhan Limited, Learned various
aspects regarding Share Market.
• Learned how to use online trading terminal.
• Learned the various policies of the company.
• Learned about various products used in the share market especially Demat
accounts and Derivatives.
• Got the practical knowledge of the market.

FINDINGS AND OBSERVATIONS:-

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

• There are more speculators than investors.
• Information plays a vital role in the secondary market.
• Previously rolling settlement is T+5 days, now it changed to T+2 days and
further it will be changing to T+1 day.
• 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.
• 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.

50
CONCLUSION AND RECOMMENDATIONS

• 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.
• 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.
• 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.
• The broker’s has a greater scope than compared to the earlier times because of
invention of online trading.
• 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.
• I recommend the exchange authorities to take steps to educate Investors about

51
 their rights and duties. I suggest to the exchange authorities to increase the
investors’ confidences.
• I recommend the exchange authorities to be vigilant to curb wide fluctuations of
prices.
• The speculative pressures are responsible for the wide changes in the price, not
attracting the genuine investors to the greater extent towards the market.
• 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.

BIBLIOGRAPHY

 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

Newspapers:-
 The Times of India
 The Economic Times

52
BOOKS:-
 Beri G.C, Marketing Research
 Gupta C.B, Marketing Management.

ANNEXURE
Balance sheet

Mar ' Mar '

10 09
Equity share capital 57.04 56.68
Share application money 0.40 11.37
Preference share capital - -
1,050.6
Reserves & surplus 980.13
7
Secured loans 1.17 1.70
Unsecured loans 496.58 0.10
1,605.8 1,049.9
Total
6 9
Gross block 108.83 143.68
Less : revaluation reserve - -
Less : accumulated depreciation 60.63 44.94
Net block 48.20 98.73
Capital work-in-progress 1.75 4.51
1,104.2
Investments 869.31
2
1,709.8
Current assets, loans & advances 778.75
1
1,258.1
Less : current liabilities & provisions 701.31
2
Total net current assets 451.69 77.43
Miscellaneous expenses not written - -
1,605.8 1,049.9
Total
6 9
Book value of unquoted investments 1,101.4 869.28

53
 Mar ' Mar '
10 09
9
Market value of quoted investments 3.27 0.03
Contingent liabilities 24.17 20.85
2852.1 2834.0
Number of equity sharesoutstanding (Lacs)
5 0

Cash flow statement

Mar ' Mar '
10 09
Profit before tax 233.31 151.48
Net cashflow-operating activity 5.12 513.70
-
Net cash used in investing activity -18.71
265.62
Netcash used in fin. activity 392.08 -
279.11
Mar ' Mar '
Net inc/dec in cash and equivlnt 131.59 215.88
10 09
Cash and equivalnt begin of year 430.25 214.37
Income
Cash and equivalnt end of year 561.84 430.25
Operating income 665.99 542.27
Expenses
Material consumed - -
Manufacturing expenses 14.52 93.32 Profit loss account
Personnel expenses 162.62 136.91
Selling expenses 137.18 67.38
Adminstrative expenses 104.83 85.81
Expenses capitalised - -
Cost of sales 419.14 383.42
Operating profit 246.85 158.85
Other recurring income 24.30 29.37
Adjusted PBDIT 271.14 188.22
Financial expenses 13.88 11.15 QUESTIONNAIRE
Depreciation 31.86 25.56 A STUDY ON ONLINE TRADING
Other write offs - -
ON SHAREKHAN LTD
Adjusted PBT 225.40 151.51
Tax charges 77.34 47.88 The purpose of this questionnaire is to
Adjusted PAT 148.07 103.63 know the behavior of investors about
online trading and this is only for
Non recurring items 7.90 -0.03 academic purpose.
Other non cash adjustments -3.96 2.23
Reported net profit 152.02 105.83
Earnigs before appropriation 277.22 228.74
Equity dividend 85.20 54
79.45
Preference dividend - -
Dividend tax 14.48 13.50
Retained earnings 177.54 135.79
1. Name………………………

2. Age
□ 15 to 30 □ 31 to 45
□ 46 to 60 □ above 60

3. Income per month

□ Below 15000 □ 15001 to 30000
□ 30001 to 45000 □ above 45000

4. Education qualification
□ Graduation □ post graduation
□ Others

5. Do you know about online trading?

□ Yes □ No

6. How was account opened?

□ Personal acquaintance □ Referral-Clients
□ Referral-Non Clients □ Call/Walk in
□ Personal Prospect Visit

7. Net worth involved in online trading ………………...

8. Do you feel safe while trading online?

□ Yes □ No

9. In which stock you most trade online

55
 □ Equity □ Mutual Funds
□ Commodities □ F&O Equitie
□ Other

10. No. of years of online trading experience in stocks at this firm

□ below 5 yrs □ 5 to 10

11. Do you receive updated online information regarding the stock market from your
dealer/broker?
□Yes □No

12. Do you believe that your trader/broker is very successful in online trading?
□ Strongly Agree □Agree □Moderate
□Disagree □Strongly Disagree

56