Summer Internship Project Report

On
(A STUDY OF INVESTOR AWARENESS ABOUT E-TRADING)
Executed At
(SHAREKHAN LTD.)
By
(ABHISHEK KUMAR AGRAHARI)
(PG-14-90001)
Under Guidance of
-PROF. DENESH SINGH
ACCMAN INSTITUTE OF MANAGEMENT
and
-MR. SACHIN KUMAR
T.M. SHAREKHAN LTD. (BARAKHAMBHA BRANCH)

Presented in Partial Fulfillment of the Requirements

For the Diploma of

Post Graduate Diploma in Management
On
(MM/YEAR)

At

ACCMAN Institute of Management

46, A/2, Knowledge Park III, Greater Noida-201308
SHAREKHAN LTD.
3-E/6, JHANDEWALAN EXTENSION, GROUND FLOOR, NEAR BANK OF INDIA,
NEW DELHI

CERTIFICATE

Certified that the summer internship project report on A STUDY OF INVESTOR

AWARENESS ABOUT E-TRADING is the bonafide work of ABHISHEK KUMAR
AGRAHARI, ROLL NO: PG-14-90001, 1st Year PGDM student of ACCMAN Institute of
Management, 46A/2, Knowledge Park III, Greater Noida - 201308, carried out under my
supervision during 04.05.2015 to 04.07.2015.

Place:

Signature of the Supervisor

Date

MR. SACHIN KUMAR

(TERRITORY MANAGER)

ACKNOWLEDGEMENTS
It gives me immense pleasure to express my indebtedness and deep senses of gratitude to my
esteemed supervisors Prof. DENESH SINGH, faculty at ACCMAN Institute of Management
and MR.SACHIN KUMAR, T.M., Back office, Sharekhan Ltd. for

their

innovative

guidance and encouraging attitude throughout the present investigation. It is only because of
their consistent involvement, easy accessibility, painstaking efforts and affectionate attitude that I
have been able to plan, execute and finally present this work.
I wish to record my sincere thanks to all members of the department of statistics and operations
research for providing incessant help and necessary facilities during the tenure of my work. I also
extend my thanks to staff for their valuable help as and when required.
On this occasion, I sincerely remember my all friends for their support and invaluable help in
many ways at the various stages of this work. I intone my thanks to all my colleagues
particularly MENKA MAAM, PROF. SOURABH BISHNOI SIR & RENU MAAM for their
co-operation and assistance during the tenure of my research work.
The eternal inspiration and unending blessings of my parents Mrs. and Mr. S. L. AGRAHARI
and my intense desire to fulfill their long cherished dreams have been the inspiring factors that
worked at the base of long venture. I am also thankful to other members of family and relatives
for their encouragement and sincere wishes that always kept me motivated and in a positive
frame of mind.
Finally the academic environment and support of my institute ACCMAN Institute of
Management is great-fully acknowledged.
Sign of Student
ABHISHEK KUMAR AGRAHARI

LIST OF NOTATIONS AND SYMBOLS USED

OTC = Other Trading Contracts
Teji-mandi = Call options and Put options
Jota phatak = Straddles
Bhav-bhav = Stake
BSE = Bombay Stock Exchange
NSE = National Stock Exchange
SEBI = Securities and Exchange Board of India
PRISM = Parallel Risk Management System
NSCCL = The National Securities Clearing Corporation Ltd.
F & O Segment in NSE = Futures and Options Segment in NSE
GDP = Gross Domestic Products
ECN = Electronic Contract Notes
FII = Foreign Institutional Investors
LIBOR = London Inter-Bank Offer Rate

EXECUTIVE SUMMARY
Conceptually the mechanism of stock market is very simple. People who are exposed to the same
risk come together and agree that if anyone of the person suffers a loss the other will share the
loss and make good to the person who lost.
We also here observe the A Study of Investor Awareness about E-Trading and its related
procedures.
The Initial part of the project focuses on the sales of types of the products of the company, and
also focuses on the acquisition of the customer. The job profile is to create customer, making
good relationship with them to have references and motivating to trade for the company benefit
and their profit.
It also enlightens the strategies to acquire the customer base. Further the project tells us about the
profile of the company (SHAREKHAN). It provides knowledge about the companys history,
mission, vision and customer base and about the company in detail and management of the
company. Also it gives special emphasis on the selling of products and management of the
company.
This is devoted to study the comparative analysis of the competitors and the SWOT analysis,
which tells about the Sharekhan edge over its competitors. This project leads us towards the job
descriptions and difficulties faced by me.

The project throws light upon my finding and

analysis about the company and the suggestions for the company for better performance.
This project will help the people in getting lot of their answers related to investment options and
the ways to analysis the market. The data in the project can also help the company in making the
strategy for potential investors.

Table of Contents
5

Student declarationi
Certificate from Guide ii
Acknowledgement.iii
Executive Summary.iv

CHAPTER- 1: INTRODUCTION

CHAPTER 2: LITERATURE REVIEW

2.1 Literature Review

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Purpose of the study.....
3.2 Research Objectives of the study..
3.3 Research Methodology of the study.
3. 3.1 Research Design ......
3.3.2 Data Collection Techniques
3.3.3.1Population..

3.3.3.2 Sample size

3.3.3.3 Sampling method...
3.3.4 Method of data collection..
3.3.4.1 Instrument for data collection
3.3.4.2 Drafting of a questionnaire
3.3.5 Limitations

CHAPTER 4: ANALYSIS& INTERPRETATION

CHAPTER- 5: FINDINGS
CHAPTER- 6: RECOMMENDATIONS AND CONCLUSION
BIBLIOGRAPHY
ANNEXURES

INTRODUCTION:ABOUT SSKI (Sharekhan) GROUP:SSKI group also comprises Institutional broking and Corporate Finance. While
the Institutional broking division caters to the largest domestic and foreign institutional investors,
the corporate finance division focuses on niche areas such as infrastructure, telecom and media.
SSKI holds a sizeable portion of the market in each of these segments.

As the forerunner of investment research in the Indian market, we provide the best
research coverage amongst broking houses in India. Our research team is rated as one of the best
in the country. Voted four times as the Top Domestic Brokerage House by Asia money
Survey, SSKI is consistently ranked amongst the top domestic brokerage houses in India.

To cut a long story short, Sharekhan is an equities focused organization tracing its
lineage to SSKI (S.S.KANTILAL&ISHWARLAL INVESTMENTS &SECURITIES PVT.LTD.),
a veteran equities solutions company with over 8 decades of experience in the Indian stock
markets.
If you experience our language, presentation style, content or for that matter the online trading
facility, you'll find a common thread; one that helps you make informed decisions and simplifies
investing in stocks. The common thread of empowerment is what Sharekhan's all about!
Share khan 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
8

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 you!
To sum up, Sharekhan brings to you a user- friendly online trading facility, coupled with a wealth
of content that will help you stalk the right shares.
Those of you who feel comfortable dealing with a human being and would rather visit a
brick-and-mortar outlet than talk to a PC, you'd be glad to know that Sharekhan offers you the
facility to visit (or talk to) any of our share shops across the country. In fact Sharekhan runs
India's largest chain of share shops with around 250 outlets in 137 cities with 1,50,000
customers!
Some of the outlets are
BRANCH

MANAGER

MUMBAI(LOWER PAREL)
BANGALORE-JAYANAGAR
BANGALORE-GANDHI NAGAR
CALICUT
CHENNAI-CHETPET
CHENNAI
COIMBATORE
ERODE
GOA-MAPUSA
HYDERABAD
JODHPUR
KOLKATA
KOCHI
NAVSARI
NEW DELHI

Mr. SANDEEP JAIN

Mr. CHANNARAJ K.J.
Mr. BASAPPA D.M.
Mr. GOPAKUMAR
Mr. RAJIV PUROHIT
Mr. V.KRISHNAMURTHY
Mr. V.MOHANKRISHNAN
Mr. T.V.N.GIRISHKUMAR
Mr. KAMATH TRIVIKRAM
Mr. D.HEM KUMAR
Mr. VINOD BHANDARI
Mr. SANJAY VORA
Mr. DINSENA KALLIDIL
Mr. NUTAN PATEL
Mr. HEMENDRA AGARWAL

DESIGNATION

NAME

CEO

MR. TARUN SHAH

CFO

MR. SHANKAR VALIYA

CTO

MR. KETAN PARIAH

MR. JAIDEEP ARORA

EXECUTIVE DIRECTOR
CUSTOMER SERVICE
REPRESENTATIVE (CSR)

MRS. GEETA RAMESH

SALES AND MARKETING

MR. AJAI BATHIJA

YOUR FRIENDLY NEIGHBOURHOOD STOCK BROKER:-

10

Sharekhan, Indias leading stockbroker is the retail arm of SSKI, an organization with
over eighty eight years of stock market experience with more than 180 share shops in over 90
cities, and a presence on internet through www.sharekhan.com , Indias premier online trading
destination, it reach out to customers like no one else.

Share khan offers your trade execution facilities on the BSE and the NSE, for cash as
well as derivatives, depository services and most importantly, investment advice tempered by 88
years of research and broking experience. To ensure that your trading experience with share khan
is fast, secure and hassle free, we offer a suite of products and services, providing you with
multi-channel access to the stock markets.

BROKINGPERSONALIZED:If you prefer the assurance and reliability of trading through a broker, you can use our network of
30 branches and 157 business partner outlets in over 80 cities to trade in equities as well as
derivatives. We will help you with the investment process, give you advice based on extensive
research and provide you with relevant and updated information to help you make informed
investment decisions.

TRADE ANYWHERE:Freedom@www.sharekhan.com
11

However, if you prefer the convenience of trading from wherever you are, you can get yourself a
Classic trading account and enjoy the freedom that comes with it. You can now place orders even
after the trading hours, and the orders are queued up to be executed as soon as the market opens.
Sharekhan.com, the winner of several prestigious awards, has been the most preferred
destination for online trading ever since its launch.

MISSION:
To educate and empower the individual investor to make better investment decisions through
quality advice and superior service.

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

STRATEGY:
The main strategies used in our training were as follow.
DATA CALLING
In data calling we were provided data of mobile numbers and our job was to generate
appointments. After that we were required to convert that appointment into closure. Apart
from given data we also brought latest business directory. We called to different business
people and tried to generate appointments.

CALLED CALLING
Called calling means to go at different corporate houses and to meet different
12

People and to get their visiting card by it we get lead and our immediate task
Was to call them & to fix appointment

HIERARCHY IN SHAREKHAN:
Sales Side

Dealing Side

Trainees

Junior Dealer

Super Trainees

Dealer

Sales Executives

Relationship manager

Senior sales executives

Senior Relationship manager

Business
executive

development

Equity advisor

Assistant sales manager

Assistant Branch Manager

Deputy manager

Branch Manager

Territory manager

Cluster Head

Area sales manager/ Cluster

manager

Directors

Regional sales manager

CEO

13

 Regional Head

Vice president

Directors

CEO

OFFERING OF THE COMPANY

Sharekhan provides 2 in 1 account.
1

1. De-mat a/c

2. Trading a/c [for cash calculation]

14

[1] Dematerialization account:Dematerialization is the process of converting physical shares (share certificates) into an
electronic form. Shares once converted into dematerialized form are held in a De-mat
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 purchases the Demat account in
Sharekhan. .
Sharekhan provides no opening charge.
Sharekhan provide de-mat account free of charge for first year, Rs.400/ year from
the next year +Service Tax (year continued from the day of opening).

[2] Trading Account:

It is an electronic account which enables customers to trade in share through internet

without help to broker.

NSE/BSE/F&O/Commodity terminal live screen:Provides online fluctuations rate on computer screen

Online Daily Tips:-

Sharekhan is providing tips through mails in 4 sessions

Pre market
Noon session
Post market
Late evening
Sharekhan is providing tips through SMS.
Sharekhan is providing tips through email.

IPO/MF Online :Sharekhan provide IPO and MF facility for the customer.

FOR OPENING AN ACCOUNT:

15

2 passport size photograph

Identity proof (PAN card is compulsory)
Residence proof
Cheque ( Min Rs.10,000 margin balance)

Proofs of Identity

Customer can submit a photo copy of any one of the following

o

Voter ID

Passport

PAN Card

Driving License

Photo I card issued by Employer registered under MAPIN

Copy of Ration card

Address Proof

Customer can submit a photo copy of any one of the following

o

Voter ID Card

Driving License

Passport

Ration Card

Telephone Bill

Electricity Bill

16

Leave-License

Bank Passbook

Latest Bank Statement

PRODUCTS & SERVICES

Sharekhan ltd. Provide different Product as follows

Share online& offline

Derivatives
Mutual fund online
Commodities online
IPO online
Portfolio Management Services
Insurance
Fixed deposits
Advisory products
Currency trading

Ignite

17

SHARE ONLINE:
18

Sharekhan provide online facilities.

BENEFIT
I

Freedom from paperwork:-Integrated trading, bank and de-mat account with digital
contracts removers all paperwork.

II

Instant credit and transfer:-instant transfer of funds from bank account of the choice to
Sharekhan trading account.

III

Trade anywhere:-enjoy the ease of trading from any part of the world in a completely
secure environment.

IV

Dial n Trade:-call toll free number (1-800-22-7050) to place orders through telebrokers.

Timey advice:-make informed decisions with expert advice, investment calls and live
market commentary.

VI

Real-time portfolio tracking:-benefit from real-time information for investment and

current portfolio value.

After-hour orders:-place order after market hours, which get executed as soon as the markets
opens.

TRADE TIGER:
Trade tiger is a next-generation online trading product that brings the power of brokers terminal
to customer pc. It is session to capitalize on intra-day price movement. Trade tiger is an internet
based application available on a CD, which provides everything a trader needs on one screen.
Key Features:-

19

A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX,
Mutual Funds, IPOs

Multiple Market Watch available on Single Screen

Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with
various Studies

Graph Studies include Average, Band- Bollinger, Know Sure Thing, MACD, RSI, etc

Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines

User can save his own defined screen as well as graph template, that is, saving the
layout for future use

User-defined alert settings on an input Stock Price trigger

Tools available to gauge market such as Tick Query, Ticker, Market Summary,
Action Watch, Option Premium Calculator, Span Calculator

Shortcut key for FAST access to order placements & reports

Online fund transfer activated with 11 Banks

SHARE OFFLINE:

As the internet has taken over the physical trade, the same is the situation in trading in shares.
Even the internet has not spared trading in shares and still the conventional system of offline
trading continues in todays world.

Merits of offline trading

Low brokerage
20

 Less margin
Flexibility in credit period
Customized advice

Demerits of offline trading

Problems in getting in touch with the broker

Limited clientele
Problem of attention from the broker due to load
Reliance on the brokers information
Customer has to believe what the broker says
Broker Might not give the best price
Reconciliation of account and cash settlements
Paperwork
Geographical Restriction

DERIVATIES:
Derivatives are financial contracts whose value/price is depends on the behavior of price of
one or more basic underling assets. These contracts are legally binding agreement, made on
the trading screen of stock exchange, buy or sell an asset in future. The assets can be share,
index, interest rate, bond, rupee- dollar exchange rate, sugar, crude oil, soybean, cotton,
coffee etc.

EQUITY FUTURE AND OPTION:

21

 Future:An agreement between two parties to buy or sell an asset at a certain time in the Future at a
certain price. Stock futures on certain specified securities and internet rate futures are available
for trading at NSE (NATIONAL STOCK EXCHANGE).All the futures contracts are settled in
cash.

Options:An Options is a contract which gives the right, but not but or sell the underlying at a stated price,
which a buyer of an option pays the premium and Options are of two types calls and put.
Calls give the buyer the right but not the obligation to buy a given quantity of the underlying
asset, at a given price on or before a given future date. Calls also known as bulls.
Puts give the buyer the right, but not obligation to sell a given quantity of the underlying asset at
a given price on or before a given date. Puts also known as bears.

COMMODITIES ONLINE:
Commodities are agreements to buy and sell virtually anything except, for some reason, onions.
The primary commodities that are traded are oil, gold and agricultural products. Commodity
derivatives comprise of raw materials and products that can be traded on special commodity
exchanges across the country. Commodities expands customer investing horizon from investing
in a metal company to trading in the metal itself. Trading in commodity derivative provides
unique market opportunities for a wider section of participants like: investor, hedgers,
arbitragers, traders, manufactures planters, exporters and importers. While trading commodities
through an exchange, there are no transportation charges, no insurance costs, no storage charges
and complete security when customer trade though an exchange. Customer can trade in

22

commodities at nominal costs and carry the investment in paper from as customer want. The
fundamentals for commodities are quite simple: price is a function of demand and supply.
Sharekhan provides commodity facility. Sharekhan trades on two major commodity exchanges in
India.
1) MCX
2) NCDEX

MCX:

MCX (MULTI COMMODITY EXCHANGE OF INDIA LTD) is a state-of-the-art

electronic commodity futures exchange.MCX is an independent commodity exchange based in

India. It was established in 2003 and is based in Mumbai. The turnover of the exchange for the
period Apr-Dec 2008 was INR 32 Trillion.MCX offers futures trading in Agricultural
Commodities, Bullion, Ferrous & Non-ferrous metals, Pulses, Oils & Oilseeds, Energy,
Plantations, Spices and other soft commodities. MCX has also setup in joint venture the
NationalSpot Exchangea purely agricultural commodity exchange and National Bulk Handling
Corporation(NBHC) which provides bulk storage and handling of agricultural products.

NCDEX:

National Commodity & Derivatives Exchange Limited (NCDEX) is a

professionally managed online multi commodity exchange promoted by ICICI Bank Limited
(ICICI Bank), Life Insurance Corporation of India (LIC), National Bank for Agriculture and
Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). Punjab
National Bank (PNB), CRISIL Limited (formerly the Credit Rating Information Services of India
Limited), Indian Farmers Fertilizers Cooperative Limited (IFFCO) and Canara Bank by
subscribing to the equity shares have joined the initial promoters as shareholders of the
Exchange.
NCDEX is the only commodity exchange in the country promoted by national level institutions.
This unique parentage enables it to offer a bouquet of benefits, which are currently in short
supply in the commodity markets. The institutional promoters of NCDEX are prominent players
in their respective fields and bring with them institutional building experience, trust, nationwide
reach, technology and risk management skills. NCDEX is a public limited company incorporated
23

on April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement
of Business on May 9, 2003. It has commenced its operations on December 15, 2003. NCDEX is
a nation-level, technology driven de-mutualized on-line commodity exchange with an
independent Board of Directors and professionals not having any vested interest in commodity
markets. It is committed to provide a world-class commodity exchange platform for market
participants to trade in a wide spectrum of commodity derivatives driven by best global
practices, professionalism and transparency.
NCDEX is regulated by Forward Market Commission in respect of futures trading in
commodities. Besides, NCDEX is subjected to various laws of the land like the Companies Act,
Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations,
which impinge on its working. NCDEX is located in Mumbai and offers facilities to its members
in more than 390 centers throughout India. The reach will gradually be expanded to more
centers.
NCDEX currently facilitates trading of thirty six commodities - Cashew, Castor Seed, Chana,
Chilli, Coffee, Cotton, Cotton Seed Oilcake, Crude Palm Oil, Expeller Mustard Oil, Gold, Guar
gum, Guar Seeds, Gur, Jeera, Jute sacking bags, Mild Steel Ingot, Mulberry Green Cocoons,
Pepper, Rapeseed - Mustard Seed ,Raw Jute, RBD Palmolein, Refined Soy Oil, Rice, Rubber,
Sesame Seeds, Silk, Silver, Soy Bean, Sugar, Tur, Turmeric, Urad (Black Matpe), Wheat, Yellow
Peas, Yellow Red Maize & Yellow Soybean Meal. At subsequent phases trading in more
commodities would be facilitated.

24

MUTUAL FUNDS:
Mutual Fund is an investment company that pools money from shareholders and invests in a
variety of securities, such as stocks, bonds and money market instruments. Most openend mutual funds stand ready to buy back (redeem) its shares at their current net asset value,
which depends on the total market value of the fund's investment portfolio at the time of
redemption. Most open-end mutual funds continuously offer new shares to investors.

Security exchange board of India is the regulatory body for all mutual funds. All mutual funds
must get registered with the SEBI.

Benefits of investing in mutual funds:

Small investment
Professional fund management
Spreading risk
Transparency
Choice
regulation

IPO:-

Initial

Public

Offering,

the

first sale of stock by

a company to

the public.

Companies offering an IPO are sometimes new, young companies, or sometimes companies
which have been around for many years but are finally deciding to go public. IPOs are often
25

riskybut often have the potential for significant gains. IPOs are often used as a way for a young
company to gain necessary market capital.

From an investor point of view, IPO gives a chance to buy shares of a company, directly from
the company at the price of their choice (In book build IPO's). Many a times there is a big
difference between the price at which companies decides for its shares and the price on which
investor are willing to buy share and that gives a good listing gain for shares allocated to the
investor in IPO.

From a company prospective, IPO help them to identify their real value which is decided by
millions of investor once their shares are listed in stock exchanges. IPO's also provide funds
for their future growth or for paying their previous borrowings.
Sharekhan provides to their customer the Online IPO facility. In this facility, The customer has
to feel only the bid price and the quantity for which he/she wants to buy the stock.

PMS:

PORTFOLIO MANAGEMENT SERVICES (PMS):-

Sharekhan unfolds for customer an enable of PMS to choose from that helps customer sit back,
relax and see customer money grow without worrying about the ups and downs at the stock
market. Talks to Sharekhan specialists and theyll help customer choose a PMS plan that suits
customer risk taking appetite and expectation from the market.

26

FIXED DEPOSITES:-

Fixed deposits are loan arrangements where a specific amount of funds is placed on deposit
under the name of the account holder. The money placed on deposit earns a fixed rate of interest,
according to the terms and conditions that govern the account. The actual amount of the fixed
rate can be influenced by such factors at the type of currency involved in the deposit, the
duration set in place for the deposit, and the location where the deposit is made.
The most unusual characteristic of a fixed deposit is that the funds cannot be withdrawn for a
specified period of time. In most cases, fixed deposits carry duration of five years. During that
time, the money remains in the account and cannot be withdrawn for any reason. Individuals,
corporate entities, and even non-profit organizations that wish to set aside funds and limit their
access to the funds for a period of time often find that fixed deposits are a simple way to
accomplish this goal. As an added benefit, the monies in the account will earn a fixed rate of
interest regardless of any fluctuations in interest rates that apply to other types of accounts.
However, both these benefits can also turn into disadvantages under certain circumstances.
Because the money cannot be withdrawn until the duration is complete, the funds cannot be used
even in emergency situations. Changes in the going interest rate may also rise to a point above
27

and beyond the interest rate applied to existing deposits. This means account holders are actually
earning less interest with fixed deposits than with other types of loans and accounts.
While the interest rate on fixed deposits cannot be changed, there is sometimes a way to work
around the issue of obtaining use of funds in an emergency situation. At times, the lending
institution where the fixed deposit is placed may be willing to extend a separate loan to the
account holder, using the fixed account as collateral. While not ideal, this can at least make it
possible to deal with the current financial crunch.
Fixed deposits are a credible way to make a return on investment that is somewhat higher than a
standard savings account. The use of fixed deposits can also be helpful when working with
various types of currency. By establishing what is known as a Foreign Currency Fixed Deposit or
FCFD, it is possible to choose the type of currency involved in the deposit and lock in a rate of
interest. If the choice of currency is a good one, this means the investor can enjoy a healthy fixed
deposit currency rate for the duration of the deposit and earn more than with a standard fixed
deposit strategy. However, going with an FCFD does contain a slightly higher amount of risk,
since the funds deposited must be converted to the currency of choice and then converted back
when the deposit is fulfilled. If the currency did not fare well in the interim, there is some chance
of obtaining a loss, due to the changes in the rate of exchange from the time the fixed deposit
was activated until the time the deposit is considered complete. Sharekhan has tie up with
Unitech Limited and HDFC corporations limited.

ADVISORY PRODUCT:

Sharekhan provide Advisory Products by which customer can get proper advise for investing
their money in proper way by which they can earn more profit. .

Need of Advisory Products:-

28

Wide product range to meet diverse needs of clients

Disciplined Approach
Dedicated Product manager backed by Research
Performance track record

ADVISORY PRODUCTS:-

Top picks Portfolio

123 portfolios
Smart Trade Portfolio
Derivatives Portfolio
Nifty Portfolio
Portfolio Doctor

EQUITY ONLINE

NSE:

The national stock exchange of the India was the promoted by leading financial

institutions at the behest of the government of India, and was incorporated in November 1992 as
a tax paying company. In April 1993, it was recognized as a stock exchange under the securities
contracts (Regulation) Act, 1956. NSE commenced its operation in the wholesale Debt Market
(WDM) segment in June 1994. The capital market (Equities) segment of the NSE commenced
operation in November 1994.

BSE:The Bombay stock exchange is the oldest stock exchange in Asia. It is located at Dalal
Street, Mumbai, India.
The Bombay stock exchange was established in 1985. There are around 3500 Indian companies
listed with stock exchange, and has the significant stock volume. As of 29 may 2007, the market
capitalization of the BSE is about Rs. 40.5 trillion. 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
five biggest stock exchanges in the world in terms of transactions volume.

29

About the Industry:

INTRODUCTION TO STOCK MARKET
STOCK MARKET
A stock market is a public market for the trading of companystock and derivatives at an agreed
price; these are securities listed on a stock exchange as well as those only traded privately. The
stock market is one of the most important sources for companies to raise money. This allows
businesses to be publicly traded, or raise additional capital for expansion by selling shares of
ownership of the company in a public market.
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.
Stock exchanges are the perfect type of market for securities whether of government and semigovt. bodies or other public bodies as also for shares and debentures issued by the joint-stock
companies. In the stock market, purchases and sales of shares are affected in conditions of free
competition. Government securities are traded outside the trading ring in the form of over the
counter sales or purchase. The bargains that are struck in the trading ring by the members of the
stock exchanges re at the fairest prices determined by the basic laws of supply and demand.

30

DEFINITION OF STOCK EXCHANGE:Stock exchange means anybody or individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities.

HISTORY OF STOCK EXCHANGE:The only stock exchanges operating in the 19 th century were those of Mumbai setup in 1875 and
Ahmadabad set up in 1894. These were organized as voluntary non-profit-making associations of
brokers to regulate and protect their interests. Before the control on securities under the
constitution in 1950, it was a state subject and the Bombay securities contracts (control) act of
1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was
recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of stock exchanges
were organized. Soon after it became a central subject, central legislation was proposed and a
committee headed by Mr. A.D. Gorwala went into the bill for securities regulation. On the basis
of the basis of the committees recommendations and public discussion, the securities contract
(regulation) act became law in 1956.

LITERATURE REVIEW:
In simple words, stock is a share in the ownership of a company. Holding a company's stock
means that you are one of the many owners (shareholders) of a company and you have a claim to
everything the company owns. As an owner, you are entitled to your share of the company's
earnings as well as any voting rights attached to the stock ("Stocks basics: what,").
.
Earlier days a stock was represented by a stock certificate which was a piece of paper that was
proof of your ownership. But in todays computer age, your stock is stored electronically by your
broker. This is done to make the shares easier to trade. In the past, when a person wanted to sell
his shares that person physically took the certificates down to the broker. But now stocks can be
purchased with a click of mouse.
Most stocks are traded on exchanges where both buyers and sellers meet and decide on a price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers and
sellers, and reducing the risks of investing. Some exchanges are physical locations where
31

transactions are carried out on a trading floor. The other type of exchange is virtual, composed of
a network of computers where trades are made electronically ("Stocks basics: how,).
1.4 Online and Offline Trading
Traditionally stock trading was done through stock brokers personally or through telephones. As
number of people trading in stock market increased enormously in last few years, some issues
like location constrains, busy phone lines, miss communication etc. started growing in stock
broker offices. Then Information technology helped stock brokers to solve those problems by
Online Stock Trading method ("Online stock brokers,).
Online stock trading is an internet based stock trading facility where Investor can trade shares
through a website without any manual intervention from the broker. It also provides investors
with rich, interactive information in real time including market updates, investment research and
robust analysis. Advantages and disadvantages of online trading are shown in (Table 3).
Still some people like offline stock trading where the customer calls the broker to enquire about
the stock prices. Then the broker asks some personal details to verify his identity. After that
customer can order the amount and the price at which he wants to buy a particular stock. The
broker places the order on behalf of the customer. Similarly, the customer can also sell the shares
in offline mode. And the customer can monitor all these transactions by logging into his account.
The main advantage in offline trading is time-saving.
1.5 Demat Account and Trading Account
Physical share certificates are converted into electronic format is known as Dematerialization or
Demat. Currently almost 99 percent of shares traded in Indian stock exchanges are in Demat
mode. You have to open a Demat account if you want to buy or sell stocks, just like a bank
account where actual money is replaced by shares. Demat account allows you to buy, sell and
transact shares without the endless paperwork and delays.
Similarly, a trading account works as an intermediary between the savings account and Demat
account. When you want to buy shares, first the money is transferred from your savings account
to trading account. After that required amount of shares are purchased and finally shares are
stored in electronic form in the Demat account. It works just in opposite way during the time of
selling shares.
1.6 Depository and Depository Participants
32

A depository is an entity which holds securities of investors in electronic form at the request of
the investors through a registered Depository participant. Currently there are two depositories in
India they are:
National Securities Depository Limited (NSDL)
Central Depository Services Limited (CDSL)
Depository provides a safe and convenient way to hold securities and enables instant transfer of
securities. It eliminates the risk associated with physical certificates such as bad delivery, fake
securities, Delays, thefts etc. It also provides services such as: Dematerialization,
Rematerialisation, transfer of securities and change of beneficial ownership.
Depository Participant (DP) acts as intermediaries between the depository and the investors. The
relationship between the DPs and the depository is governed by an agreement made between the
two under the Depositories Act. Hence a depository participant acts as a custodian of your
securities held in dematerialized form and carries out your instruction to transfer the same.
Currently, CDSL has 553 DPs whereas NSDL has only 293 DPs ("Depository participant,).

METHODOLOGY OF THE STYDY

The uncertainty and the rapid fluctuations in the Indian capital market made many investors
at home and foreign wary about the future of their investments. So in order to lessen this
uncertainty in the market, SEBI introduced many new trends by making changes in the way the
capital market functions by introducing online trading, rolling settlement, dematerialization of
shares, etc. This project is only an attempt to find the effect of these trends on the Indian market.
This

study

is

done

with

reference

of

S.S.KANTILAL

SECURITIES&INVESTORS Pvt. Ltd. (SSKI), so its scope is limited to SSKI.

SIGNIFICANCE OF THE SUDY

33

ISHWARLAL

The present study A study of investor awareness about E-trading a case study of SSKI Ltd.
As the exchange has changed its trading style from outcry to on-line (screen based) on 20
February 1997.

OBJECTIVES OF THE STUDY

1)

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

2)

To analyze and conclude what is customers awareness towards online trading, its
usefulness and its ease in availability.

3)

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

4)

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.

5)

To know about the latest and future development in the stock exchange trading
system, clearly defining each term of the stock exchange procedure.

6)

Tostudy the effect of the changing trends in the capital market on the investor, the
broker and on the country largely, particularly in Hyderabad.

34

7)

To study the functions of SSKI through various departments and committees.

8)

To study the effect of the changing technology on the Capital Market.

NEED FOR THE STUDY

Stock exchanges are an integral part of the capital market. It is the perfect type of market for
securities whether of govt. or semi govt. bodies or other bodies as for share and debentures
issued by the joint stock enterprises.
Stock exchanges provide liquidity to the listed companies; they give quotations to the listed
companies and help in trading and raising funds from the market.
An exchange provides ready market for the sale and purchase of securities.
Stock market in India is more than century old and has been functioning effectively through the
medium of recognized stock exchanges. The stock market, which is integral part of the capital,
has a major impact on the functioning of the corporate sector in particular. Since the capital
market is playing, major role in the Indian economy from the past several years there is an
essential need to study the overall functioning of stock exchange.
This method includes the data collected from the personal interaction with authorized members
of Share Khan Securities limited.

SCOPE OF THE STUDY:

35

The scope of the study analyses us to know how the A study of investor awareness about ETrading activities are carried out in SHAREKHAN.

DATA COLLECTION METHODS: The data collection methods include both the primary and
secondary collection methods.

Primary method: This method includes the data collected from the personal interaction with
customers from different classes, government employees, corporate, executives at MNCs etc. A
total of 300 people were contacted through various mediums like phone, e-mail, personal
interviews, chats etc. 100 customers agreed to share their perception towards this industry.

Secondary method: The secondary data collection method includes:

The lecturers delivered by the superintendents of respective departments.

The brochures and material provided by ShareKhan limited.

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

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

LIMITATIONS OF THE STUDY:

The study is confined to the past 2-3 years and present system of the trading procedure in the
SSKI and the study is confined to cover all the related issues in brief. Online-trading procedure
only exhaustive analysis, problems of listing, management of trade, SEBI guidelines relating
there to be not covered due to limited time and to keep the study in manageable limits.

36

Following diagram gives the structure of Indian financial system:

37

FINANCIAL MARKETS:
Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for buying and
38

selling of financial claims and services. The financial markets match the demands of investment
with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.
They are:
Money markets (short-term)
Capital markets (long-term)

According to institutional basis again classified in to two types.

They are:
Organized financial market
Non-organized financial market.

The organized market comprises of official market represented by recognized institutions,

bank and government (SEBI) registered/controlled activities and intermediaries. The
unorganized market is composed of indigenous bankers, moneylenders, individual professional
and non-professionals.

MONEY MARKET:
Money market is a place where we can raise short-term capital.
Again the money market is classified in to
Inter bank call money market
Bill market and
Bank loan market Etc.
39

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

CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to 2 types and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.

My emphasis is more on capital market.

PRIMARY MARKET
Primary market is generally referred to the market of new issues or market for mobilization of
resources by the companies and government undertakings, for new projects as also for
expansion, modernization, addition, and diversification and up gradation. Primary market is also
referred to as New Issue Market. Primary market operations include new issues of shares by new
and existing companies, further and right issues to existing shareholders, public offers, and issue
of debt instruments such as debentures, bonds, etc.
The primary market is regulated by the Securities and Exchange Board of India (SEBI a
government regulated authority).

FUNCTIONS:-

40

The main services of the primary market are origination, underwriting, and distribution.
Origination deals with the origin of the new issue. Underwriting contract make the shares
predictable and remove the element of uncertainty in the subscription. Distribution refers to the
sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant

INVESTORS PROTECTION IN PRIMARY MARKETS:To ensure healthy growth of primary market, the investing public should be protected. The term
investor protection as a wider meaning in the primary market. The principal ingredients of
investors protection are
Provision of all the relevant information
Provision of accurate information and
Transparent allotment procedures without any bias.

SECONDARY MARKET:41

The primary market deals with the new issues of securities. Outstanding securities are traded in
the secondary market, which is commonly known as stock market or stock exchange. The
secondary market is a market where scrips are traded. It is a market place which provides
liquidity to the scrip issued in the primary market. Thus, the growth of secondary market depend
on the primary market. More the number of companies entering the primary market, the greater
is the volume of trade at the secondary market. Trading activities in the secondary market are
done through the recognized stock exchanges which are 23 in number including Over The
Counter Exchange of India, National Stock Exchange of India and Interconnected Stock
Exchange of India.
Secondary market operations involve buying and selling of securities on the stock exchange
through its members. The companies hitting the primary market are mandatorily
Required to list their shares on one or more stock exchanges in India including stock
exchanges. Listing of scrips provides liquidity and offers an opportunity to the investors to buy
or sell the scrips.
The following intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.

STOCK MARKETS IN INDIA

42

Stock exchanges are the perfect type of market for securities whether of government and semigovt. bodies or other public bodies as also for shares and debentures issued by the joint-stock
companies. In the stock market, purchases and sales of shares are affected in conditions of free
competition. Government securities are traded outside the trading ring in the form of over the
counter sales or purchase. The bargains that are struck in the trading ring by the members of the
stock exchanges re at the fairest prices determined by the basic laws of supply and demand.

DEFINITION OF STOCK EXCHANGE:Stock exchange means anybody or individuals whether incorporated or not, constituted
for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities.
The securities include:
1. Shares, scrip, stocks, bonds. Debentures stock or other marketable securities of a like
nature in or of any incorporated company or other body corporate;
2. Government securities; and
3. Rights or interest in securities.

HISTORY OF STOCK EXCHANGE:The only stock exchanges operating in the 19 th century were those of Mumbai setup in 1875 and
Ahmadabad set up in 1894. These were organized as voluntary non-profit-marking associations
43

of brokers to regulate and protect their interests. Before the control on securities under the
constitution in 1950, it was a state subject and the Bombay securities contracts (control) act of
1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was
recognized in 1927 and ahemedabad in 1937. During the war boom, a number of stock
exchanges were organized. Soon after it became a central subject, central legislation was
proposed and a committee headed by A.D.Gorwala went into the bill for securities regulation. On
the basis of the basis of the committees recommendations and public discussion, the securities
contract (regulation) act became law in 1956.

FUNCTIONS OF STOCK EXCHANGE:Stock exchanges provide liquidity to the listed companies. By giving quotations to the
listed companies, they help trading and raise funds from the market, savings of investors flow
into public loans and to joint-stock enterprises because of this ready marketability and
unequalled facility for transfer of ownership of stocks, shares and securities provided by the
recognized stock exchanges as a result, over the hundred and twenty years during which the
stock exchanges have existed in this country and through their medium, the central and state
government have raised crores of rupees by floating public loans; municipal corporations,
improvement trust, local bodies and state finance corporations have obtained from the public
their financial requirements, and industry, trade an commerce- the backbone of the countrys
economy-have secured capital of
Crores or rupees through the issue of stocks, shares and debentures for financing their day-to-day
activities, organizing new ventures and completing projects of expansion, diversification and
modernization. By obtaining the listing and trading facilities, public investment is increased and
companies were able to raise more funds. The quoted companies with wide public interest have
enjoyed some benefits and assets valuation has become easier for tax and other purposes.

VARIOUS STOCK EXCHANGES IN INDIA:-

44

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

Region

Exchange

Northern

Ludhiana Stock Exchange

Region

Delhi Stock Exchange

Southern
Region

City
Ludhiana
Delhi

Jaipur Stock Exchange

Jaipur

U.P. Stock Exchange

Kanpur

Hyderabad Stock Exchange

Bangalore Stock Exchange

Hyderabad
Bangalore

Mangalore Stock Exchange

Madras Stock Exchange

Mangalore

Chennai

Coimbatore Stock Exchange Coimbatore

Cochin Stock Exchange

Cochin

Eastern

Calcutta Stock Exchange

Calcutta

Region

Gauhati Stock Exchange

Gauhati

Magadha Stock Exchange

Patna

Bhubaneswar Stock Exchange

Bhubaneswar

45

Western

Bombay Stock Exchange

Mumbai

Region

National Stock Exchange

Mumbai

OTCEI Stock Exchange

Mumbai

M.P. Stock Exchange

Indore

Pune Stock Exchange

Pune

Vadodara Stock Exchange

Vadodara

Saurashtra Stock Exchange

Rajkot

OUT OF THESE MAJOR STOCK EXCHANGES ARE:NSE

The Organization

The National Stock Exchange (NSE) of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access to
investors from all across the country on an equal footing. Based on the recommendations, NSE
was promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the
country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in
April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June
46

1994. The Capital Market (Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.

NSE's mission is setting the agenda for change in the securities markets in India. The NSE was
set-up with the main objectives of:

Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate
communication network,

Providing a fair, efficient and transparent securities market to investors using electronic
trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become industry
benchmarks and is being emulated by other market participants. NSE is more than a mere market
facilitator. It's that force which is guiding the industry towards new horizons and greater
opportunities.
BSE

INTRODUCTION:
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as
"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older
than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit
47

making Association of Persons (AOP) and is currently engaged in the process of converting itself
into demutualised and corporate entity. It has evolved over the years into its present status as the
premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have
obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts
(Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures redresses of
their grievances whether against the companies or its own member-brokers. It also strives to
educate and enlighten the investors by conducting investor education programmers and making
available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of nine elected directors,
who are from the broking community (one third of them retire ever year by rotation), three SEBI
nominees, six public representatives and an Executive Director & Chief Executive Officer (CEO)
& a Chief Operating Officer (COO).
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and the Chief Operating Officer and other Heads of Departments
assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to constitution of
the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of
three elected directors, three SEBI nominees or public representatives, Executive Director &
CEO and Chief Operating Officer has been constituted. The Committee considers judicial &
quasi matters in which the Governing Board has powers as an Appellate Authority, matters
regarding annulment of transactions, admission, continuance and suspension of member-brokers,
declaration of a member-broker as defaulter, norms, procedures and other matters relating to
arbitration, fees, deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.

48

REGULATORY FRAME WORK OF STOCK EXCHANGE:

The Securities Contract Regulation Act, 1956 and Securities Exchange Board of India 1952
provided a comprehensive legal framework. Three tier regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body

MEMBERS OF STOCK EXCHANGE:The securities contract regulation act 1956 has provided uniform regulation for the admission of
members in the stock exchanges. The qualifications for becoming a member of a recognized
stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
He should be neither a bankrupt nor compound with the creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected with a company.
He should not be a defaulter of any other stock exchange.
The minimum required educational is a pass in 12th standard examination.

SECURITIES AND EXCHANGE BOARD OF INDIA {SEBI}

49

The securities and exchange board of India was constituted in 1998 under a resolution of
government of India. It was later made statutory body by the SEBI act 1992.according to this
act, the SEBI shall constitute of a chairman and five other members appointed by the central
government.
With thee coming into effect of the securities and exchange board of India act, 1992 some of the
powers and functions exercised by the central government, in respect of the regulation of stock
exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

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

SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK

EXCHANGES):
1. Board of Directors of Stock Exchange has to be reconstituted so as include nonmembers, public representatives and government representatives to the extent of 50%
of total number of members.
2. Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
3. All recognized stock exchanges will have to inform about transactions within 24 hrs.
50

Types of order:
Buy and sell orders placed with members of the stock exchange by the investors. The orders are
of different types.

Limit orders: Orders are limited by a fixed price buy Reliance Petroleum at Rs.50.Here, the
orders has clearly indicated the price at which it has to be bought and the investor is not willing
to give more than Rs.50.

Best rate order: Here, the buyer or seller gives the freedom to the broker to execute the order at
the best possible rate quoted on the particular date for buying. It may be lowest rate for buying
and highest rate for selling.

Discretionary order: The investor gives the range of price for purchase and sale. The broker can
use his discretion to buy within the specified limit. Generally the approximation price is fixed.
The order stands as this buy BRC 100 shares around Rs.40.

Stop loss order: The orders are given to limit the loss due to unfavorable price movement in the
market. A particular limit is given for waiting. If the price falls below the limit, the broker is
authorized to sell the shares to prevent further loss. E.g., Sell ANDHRABANK at Rs.105 stops
loss at Rs.100.
Buying and selling shares: The to buy and sell the share the investor has to locate register
broker or sub broker who render prompt and efficient to service to him. The order to buy or sell
specified number of shares of the company of investors choice are placed with the broker. The
order may be of any of the above any mentioned type. After receiving the order the broker tries

51

to execute the order in his computer terminal. Once matching order is found, the order is
executed. The broker the delivers the contract note

To the investor. It gives the details regarding the name of the company, number of shares bought,
price, brokerage, and the date of delivery of share. In this physical trading form, once the broker
gets the share certificate through the clearing houses he delivers the share certificate along with
transfer deed to the investor. The investor has to fill the transfer deed and stamp it. The stamp
duty is one of the percentage considerations, the investor should lodge the share certificate and
transfer deed to the register or transfer agent of the company. If it is bought in the DEMAT form,
the broker has to give a matching instruction to his depository participant to transfer shares
bought to the investors account. The investor should be account holder in any of the depository
participant. In the case of sale of shares on receiving payment from the purchasing broker, the
broker effects the payment to the investor.

Share groups: The listed shares are divided into 3 categories:

Group A shares, B1 shares, B shares. The last 2 groups are referred to cleared securities or non
specified shares. The shares that come under the specified group can avail the carry forward
transaction. In A group, shares are selected on the basis of equity, market capitalization and
public holding. Further it should have good track record and dividend paying company. It should
have good growth potential too. The trading volumes and the investors base are high in A
group shares. Any company when it satisfies these criteria would be shifted from B group to A
group.
In the B1 group actively traded share are included. Carry forward transactions are not allowed in
this group. Settlement takes place through the clearinghouse along with the A group shares. The
settlement cycle and the procedure are identical to A group security. The rest of the company
shares listed from the B group.
Rolling settlement system:

52

Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3 or 5days) after
the trading day. The shares bought and sold are paid in for n days after the trading day of the
particular transaction. Share settlement is likely to be completed much sooner after the
transaction than under the fixed settlement system.
The rolling settlement system is noted by T+N i.e. the settlement period is n days after the
trading day. A rolling period which offers a large number of days negates the advantages of the
system. Generally longer settlement periods are shortened gradually.
SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria
that they were in compulsory demat list and had daily turnover of about Re.1 crore or more. Then
it was extended to A stocks in Modified Carry Forward Scheme, Automated Lending and
Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS) with
effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July 2001 and subsequently
shortened the cycle to T+3 from April 2002. After the T+3 rolling settlement experience it was
further reduced to T+2 to reduce the risk in the market and to protect the interest of the investors
from 1st April 2003.

Activities on T+1: conformation of the institutional trades by the custodian is sent to the stock
exchange by 11.00 am. A provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the exception window are dedicated
by the exchange.
The exchanges/clearing house/ clearing corporation would process and download the obligation
files to the brokers terminals late by 1.30 p.m. on T+1. Depository participants accept the
instructions for pay in securities by investors in physical form up to 4 p.m. and in electronic form
up to 6 p.m. the depositories accept from other DPs till 8p.m for same day processing.
T+2 activities: The depository permits the download of the paying in files of securities and
funds until 10.30 am on T+2 from the brokers pool accounts. The depository processes the pay
in requests and transfers the consolidated pay in files to clearing House/clearing Corporation by
53

11.00am/on T+2. The exchange/clearing house/clearing corporation executes the pay-out of

securities and funds latest by 1.30 p.m on T+2 to the depositories and clearing banks. In the
demat mode net basis settlement is allowed. The buy and sale positions in the same scrip can be
settled and net quantity has to be settled.

KEY FEATURES OF ONLINE TRADING WITH SHAREKHAN:

Freedom from paperwork.

Instant credit and money transfer.

Trade from any net enabled PC.

Online orders on the phone.

Timely advice and research reports.

Real-time Portfolio tracking.

After-hour orders.

TRADING PROCEDURE

OUTCRY SYSTEM
TRADING IN THE STOCK EXCHANGE:
-THE CONVENTION DAY
The broker has to buy or sell securities for which he has received the orders. For
this, the broker or his authorized representatives goes to the stock exchange. This method is
called the open outcry system. Basically the brokers shout while buying or selling the securities.
The floor of the stock exchange is divided into a number of markets also known as post pit or
wing based on particular securities dealt there.
In the post pit or wing, the broker using open outcry method makes an offer or bid price. For
making the necessary bargain, he quotes his purchase or sale price, also known as offer or bid
54

price. The dealer, to whom the price is quoted, quotes his own price when the quotation of the
dealer suits the broker, he may lose the bargain. If he is not satisfied with the quote price, he may
turn to some other dealer. On the close of the bargain, the dealer as well as the broker makes a
brief not of the particulars of the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what membership number etc., are noted.

DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.

The scope of manipulation, speculation and mal practice more.

The time gap between many of the trading operations used to be met quickly and easily.

Signal were more important in the outcry system any member who could not interpret the
buy/sell signal correctly often landed himself in disastrous situation.

In audibility was another disadvantage of the outcry system.

Due to the above disadvantages of the outcry system, the SHAREKHAN has shifted from outcry
system to online trading from February 29 1997.

MANUAL TRADING

TRADING PROCEDURE BEFORE INTRODUCTION OF ONLINE

TRADING:Trading on stock exchanges is officially done in the trading ring. In the trading ring the space is
provided for specified and non-specified sections, the members and their authorized assistants
have to wear a badge or carry with them on identity card given by the exchange to enter the
trading ring. They carry a sauda book or confirmation memos, duly authorized by the exchange
55

and carry a pen with them. The stock exchanges operations are floor level are technical in
nature .Non-members are not permitted to enter in to stock market. Hence various stages have to
be completed in executing a transaction at a stock exchange .The steps involved in this method
of trading have given below:

CHOICE OF BROKER:The prospective investor who wants to buy shares or the investors, who wants to sell shares and
transact business, have to act through member brokers only. They can also appoint their bankers
for this purpose as per the present regulations.

PLACEMENT OF ORDER:The next step is the placing order for the purchase or sale of securities with a broker. The order is
usually placed by telegram, telephone, letter, fax etc or in person. To avoid delay, it is placed
generally over the phone. The orders may take any one of the forms such as At Best Orders,
Limit Order, Immediate or Cancel Order, Limited Discretionary Order, and Open Order, Stop
Loss Order.

EXECUTION OF ORDER OR CONTRACT:Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30 P.M on all
working days Monday to Friday, and a special one-hour session on Saturday. The members or the
authorized assistants have to wear a badge given by the exchange to enter into the trading ring.
They carry a suada Block Book or conformation memos, which are duly authorized by the
exchange when the deal is struck; both broker and jobber make a note in their suada block books.
From the suada book, the contract notes are drawn up and posted to the client. A contract note is
written agreement between the broker and his clients for the transaction executed.
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DRAWING UP AND BILLS:Both sale and purchase bills are prepared along with the contract note and it is posted on the
same day or the next day. This in a purchase transaction, once the shares are delivered to the
client effects payment for the purchases and pays the stamp fees for transfer, a bill is made out
giving the total cost of purchase, including other expenses incurred by the broker in the price
itself. With this, the process ends.

DEMATERLIZATION:

Dematerialization is the process by which physical certificates of an investor are converted to an

equipment number of securities in electronic from and credited in the investor account with his
DP. In order to dematerialization his certifies an investor has to first open an account with a DP
and then request for the Dematerialization Request Form, which is DP and submit the same
along with the share certificates. The investor has to ensure that he marks Submitted for
Dematerialization on the certificates before the shares are handed over to the DP for demat.
Dematerialization can only be done to those certificates, which are already registered in your
name and belong to the list of securities admitted for Dematerialization at NSDL.
Most of the active scrips in the market including all the scrips of S&P CNXNIFTY and BSE
SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the option to
dematerialize such shares. Investors willing to exercise this option sends a Demat request along
with the option letter sent by the company to his DP. The company or its R&T agent would
confirm the Demat request on its receipt from the DP to reduce risk of loss in transit.

57

Dematerialized shares do not have any distinctive or certificate numbers. These shares are
fungible-which means that 100 shares of a security are the same as any other 100 shares of the
security. Odd lot shares certificates can also be dematerialized.
Dematerialization normally takes about fifteen to thirty days. To get back dematerialized
securities in the physical form, request DP for Rematerialization of the same is made.
Rematerialization is the process of converting electronic shares in to physical shares.

BENEFITS OF DEMAT:Transacting the depository has several advantages like

It reduces the risk of bad deliveries, in turn saving the cost and wastage of time associated with
follow up for rectification. This has lead to reduction in brokerage to the extent of 0.5% by quite
a few brokerage firms.

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid the cost of
courier / notarization. The need for further follow-up with your broker for the
Shares returned for company objection.

You can receive your bonuses and rights issues into your DA as a direct credit, this eliminating
risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat shares as compared t
internet for loans against physical shares.

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

RBI has increased the limit of loans against dematerialized securities as collateral to Rs.1 per
borrower in case of loans against physical securities.

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RBI has also reduced the minimum margin to 25% for loans against dematerialized securities as
against 50% for loans against physical securities.

ONLINE TRADING

Before getting in to the online trading we should know some things about the internet, ecommerce and etc.

1. What is Internet?

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

and millions of computers and persons, to mega sources of information. This technology
shrinks vast distances, accelerating the pace of business reforms and revolutionizing the way
companies are managed. It allows direct, ubiquitous links to anyone anywhere and anytime
to build up interactive relationships.
A combination of time and space, called the Internet promises to bring unprecedented changes in
our lives and business. Internet or net is an inter-connection of computer communication
networks spanning the entire globe, crossing all geographical boundaries. It
has re-defined the methods of communication, work study, education, business, leisure,
health, trade, banking, commerce and what not it is virtually changing every thing and we are
living in dot.com age. Net being an interactive two way medium, through various websites,
enables participation by individuals in business to business and business to consumer
commerce, visit to shopping arcades, games, etc. in cyber space even the information can be
copied, downloaded and retransmitted.
The use of Internet has grown 2000 percent in last decade and is currently growing at 10
percent per month. In India, growth of Internet is of recent times. It is expected to bring
changes in every functional area of business activity including management and financial
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services. In offers stock trading at a lower cost. Internet can change the nature and capacity
of stock broking business in India.

2. E-commerce

Electronic commerce is associated with buying and selling over computer communication
networks. It helps conduct traditional commerce through new way of transferring and
processing of information. Information is electronically transferred from computer to
computer in an automated way. E-commerce refers to the paperless exchange of business
information using electronic data inter change, electronic technologies. It not only automates
manual processes and paper transactions but also helps organization move to a fully
electronic environment and change the way they operated.

E-TRADING INTERFACE

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INVESTOR
SATELLITE LINK

STOCK BR

DEPOSITORY

DEPOSITORY PARTICIPANT

PCs and networking attempts to introduce banks of the tools and technologies required for
electronic commerce. The computers are either workstations of individual office works or
serves where large databases and information reside. Network connects both categories of
computers; the various operating systems are the most basis program within a computer. It
manages the resources of the computer system in a fair and efficient manner.
Now we can enter in to the concept known as online trading.

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STOCK

In the past, investors had no option but to contact their broker to get real time access to
market data. The net brings data to the investor on line and net broking enables him to trade
on a click of mouse. Now information has become easily accessible to both retail as well as
big investor. Once investors learn to research on line, they will demand more market
information.

EVOLUTION OF BROKING IN INDIA:-

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

1. Stockbrokers will offer on their sites features such as live portfolio manager, live quotes,
market research and news, etc. to attract more investors.
2. Brokers will offer on line broking and relationship management by providing and
offering analysis and information to investors during broking and non-broking hours
based on their profile and needs, i.e. customized services.
3. Brokers (now e-brokers) will offer value management or services like initial public
offering online, on-line asset allocation, portfolio management, financial planning, tax
planning, insurance services, etc. and enables the investors to take better and well
considered decisions.

The actual definition of Online Trading is as explained below:

Online trading is a service offered on the internet for purchase and sale of shares. In the real
world you place orders on your stockbroker either verbally (personally or telephonically) or in a
written form (fax). In online trading, you will access a stockbrokers website through your
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internet enabled PC and place orders through the brokers internet based trading engine. These
orders are routed to the stock exchange without manual intervention an executed thereon in a
matter of a few seconds.
The net is used as a modem of trading in internet trading. Orders are communicated to the stock
exchange through website.

In India:
Internet trading started in India on 1st April 2000 with 79 members seeking permission for
online trading. The SEBI committees on internet based securities trading services has allowed
the net to be used as an Order Routing System (ORS) through registered stock brokers on behalf
of their clients for execution of transaction. Under the ORS the client enters his requirements
(security, quantity, price buy/sell) on brokers site.
OBJECTIVES:Internet trading is expected to

Increase transparency in the markets,

Enhance market quality through improved liquidity, by increasing quote continuity and
market depth,

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

Provide management information system,

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

nationwide expansion of market activity.

Besides, through internet trading three fundamental objectives of securities regulation can be
easily achieved, these are:

Investor protection

Creation of a fair and efficient market, and

63

Reduction of the systematic risks.

Some of the brokers offering net trading include ICICI web trade, investment India, Geojit
securities, etc.
REQUIREMENTS FOR NET TRADING:

For investors:

1. Installation of a computer with required specification

2. Installation of a mode
3. Telephone connection
4. Registration for on-line trading with broker
5. A bank account
6. Depository account
7. Compliance with SEBI guidelines for net trading

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

As identity, proof &address proof produce the following things:

Voter ID card

Driving license

PAN card

Ration card

Bank pass book

Telephone bill
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Other requirements, which are necessary

First page of the bank pass book and last 6 months statement.

Bank managers signature along with banks seal, manager registration code on
photograph.

For stock brokers:

1. Permission from stock exchange for net trading

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

The net is used as a medium of trading in internet trading. Orders are communicated
to the stock exchange through website. Internet trading started in India on 1st April 2000 with 79
members seeking permission for online trading. The SEBI committees on internet based
securities trading services has allowed the net to be used as an Order Routing System (ORS)
through registered stock brokers on behalf of their clients for execution of transaction.

65

Under the Order Routing System the client enters his requirements (security, quantity, price, and
buy/sell) in broker's site. They are checked electronically against the clients account and routed
electronically to the appropriate exchange for execution by the broker. The client receives a
confirmation on execution of the order. The customer's portfolio and ledger accounts get updated
to reflect the transaction. The user should have the user id and password to enter into the
electronic ring. He should also have demat
Account and bank account. The system permits only a registered client to log in using user id and
Password . Order can be placed using place order window of the website.

PROCEDUR FOR NET TRADING:Step 1: Those investors, who are interested in doing the trading over internet system i.e. NEATIXS, should approach the brokers and get them self-registered with the Stock Broker.
Step 2: After registration, the broker will provide to them a Login name, Password and personal
identification number (PIN).
Step 3: Actual placement of an order. An order can then be placed by using the place order
window as under:
(a) First by entering the symbol and series of stock and other parameters like quantity and price
of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.

Step 4: It is the process of review. Thus, the investor has to review the order placed by clicking
the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be sent by clicking on the send
option.
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Step 6: the investor will receive an "Order Confirmation" message along with the order number
and the value of the order.
Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain reasons such
as invalid price limit, an appropriate message will appear at the bottom of the screen. At present,
a time lag of about 10 seconds is there in executing the trade.
Step 8: It is regarding charging payment, for which there are different mode. Some brokers will
take some advance payment room the investor and will fix their trading limits. When the trade is
Executed, the broker will ask the investor for transfer of funds by the investor to his account.
Internet trading provides total transparency between a broker and an investor in the secondary
market. In the open outcry system, only the broker knew the actually transacted price. Screen
based trading provides more transparency. With online trading investors can see them sleeves the
price at which the deal take place.
The time gap has narrowed in every stage of operation. Confirmation and execution of trade
reaches the investor within the least possible time, mostly within 30 seconds. Instant feedback is
available about the execution. Some of the websites also offer;

New and research report

BSE and NSE movements

Stock analysis

Freebies

IPO and mutual fund centers and

Movements of interaction stock exchanges.

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STEP BY STEP PROCEDURE IN ONLINE TRADING:Following steps explain the step by step approach to on-line trading:

Log on to the stock broker's website

Register as client/investor

Fill the application form and client broker agreement form on the requisite value stamp
paper

Obtain user ID and pass word

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

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

Trade shares directly yourself by entering the symbol or number of the security

Brokers server will check your limit in the on-line accountant demat account for the
number of shares and execute the trade

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

Confirmation is e-mailed to investor by broker

Contract note is printed and mailed in 24 hours

Settlement will take place automatically on the settlement day

Demat account and the bank account will get debited and credited by electronic means.

ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:

Limit / stop orders: orders that can be go unfilled, but there is an extra Charge for this
leeway facility since one need to hold a price.
Market orders: orders can be filled at unexpected prices, but this type is much more
risky, since you have to buy stock at the given price.
Cash account: where funds have to be available prior to placing the order.
Margin account: where orders can be placed against stocks, to increase Purchasing
power.

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ADVANTAGES OF ONLINE TRADING:

Online trading has made it possible for anyone to have easy and efficient access to more
reports and charts than it was previously possible if one went to any brokers' office. Thus,
we have access to a lot more information online to self teaches our brokerslves.

Online trading has let room for smaller organizations to compete with multinational
organizations since is no longer a legit issue. Being online does not identify the size of
any particular organization, therefore, this additional power to the underdogs.

Online trading has allowed companies to locate themselves where they want, as physical
location is not an issue anymore. Companies can establish themselves according to their
gains and losses, for instance where tax (sales and value added taxes) is best suited to
them.

Online trading gives control to individuals and they can exercise it over accounts thus
comprehend what is going on when they trade. It is like going back to school and reeducating oneself on how to trade online.

Individuals benefit by saving comparatively a lot more when trading online as the cost
per trade is less.

Individuals can invest in a variety of products, unlike earlier when people bought bonds,
mutual funds, and stock for long-term basis and sat on them. Now they can invest in
stocks, stock and index options mutual funds, individual, government, and even
insurance.

Online trading has made it possible for one fid investment options that were not available
on a regular basis like offbeat net stocks eccentric unique things and trading in global
market.

INVESTORS REASONS TO TRADE ONLINE:

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They have control over their accounts can make their own decisions and dont have to
give reasons for their actions. They are independent.

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

It interesting, cheap, easy, fast, and convenient.

A lot of information is online so they can keep up-to-date with what is happening in
the trading world.

It is the interest of the small investors because rates will be available immediately
across the country execution will be immediately across the country and execution
will be immediate.

It will give investors a greater choice and better realization.

The immediate impact will be competition and benefits will accrue to the investors.

It will lead to brokerage commissions going down and brokers striving to increase
business afloat.

Investors will now go to place, which have better trading conditions and also
members to offer them better facilities.

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

HERE ARE THE POSSIBLE DISADVANTAGES:

When network crashes, there will be problems and delays due to a large influx of rapid
online trading criteria.

Individuals are restricted to first-hand financial guidance. This simply means that the
individual is himself / herself alone to.

A tax (sales tax and value added tax) evaluation becomes an issue, especially when you
are trading internationally.

Chances are that one has no idea who one is dealing with on the other end, so it is
advisable to gather all the possible information about the party one is dealing with. In
short, do the home work and be prepared.

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Online trading has left individuals open to too much information. This is harmful since it
leaves brokerages wide open to sensitive data.

According to a study conducted by Mary Rowland, careful investor: is online trading bad
for your portfolio, the more one trades the less returns one gets, meaning that an addicted
trader gets, carried away online and begins to trade for too much which causes losses for
him / her.

The study also shows that smart investment is better than fast investment. Simply put
speed should be considered to be a major factor would lead any online trader to think
they know the market.

Individuals think that they are trading with the market directly and know what they are
doing, but the truth is that even through technology has taken over the basic rules of
trading are the same. It seems that the middleman has been removed, but that is not so.
When the individuals click on the mouse, his trade goes through a broker. The
commissions online pertain to the intermediary.

There is a need for more effective communication links over the Internet and the ability
of the server to deal with a large volume of visitors.

TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading system imparted a greater
level of transparency and investors preferred exchanges that offered Online trading because of
the following factors:

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

Increase in the confidence of the investors because at higher level of transparency.

Facilities better monitoring of the market by the exchange.

The best price achieved in buying and selling.

All these resulted in ever-increasing volumes on the exchanges offering the online trading.
71

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

Share Khan deals in buying and selling equity shares and debentures on the National
Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-The-Counter
Exchange of India (OTCEI).
Share Khan is provided with a computer and required software from their registered stock
exchanges. These centers are called Broker Work Stations. These computers are connected to
the server at the stock exchanges through cable.
The member or broker sitting in his office can send the quotations, orders, negotiations, deals, inhouse deals, auction orders etc., through the computer.
The central trading system (CTS) will accept these orders and send it for match.
If there is any mistake in the order, CTS will reject the orders and send respective error
message to the member concern. All these operations are in built. The main objective of CTS is
to monitor the Stock Exchanges operations.
Order placed by the broker will be sent for a match and if the match is found suitable, the
transaction will be executed. Otherwise, the order will be deleted automatically after completion
of trading time the carry forward transactions (Good Till cancellation) are forward to the next
day. Even if the match is not found within the prescribed period, the order will not cancel.

TRADING SESSION

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Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of the trading period. Monday to
Friday is the trading period in all the stock exchanges. SEBI has stipulated that all the stock
exchanges in India must have same trading period.

BROKER WORK STATION:

At the broker workstation the best BBOs the last traded price, the day s opening price, previous
days closing price, highest and lowest prices, the weighted average price, the total trade value
and total trade value will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These include top gainers /losers of
the day. Trader-wise, scrip wise net position, client wise net position, top scrip by the
volume/value, market summary etc.
The BWS as a powerful profiling future which enables each trader to customize his/her screens
layouts as is convenient, profiles may be set at the BWS by the individual users, for the scrips
that he/she is interested in watching columns of information available, etc.
Brokers are also provided with information relating to the companies in the matter of Book
closure, Dividend declarations, resolutions in board meeting, information about liquidated
companies, company report etc.
Broker can visualize his personal details relating to trade done he can have scrip wise details,
sub-broker wise details, and client-wise details and can also take the point of daily volume
reports and adjustment reports.
ORDERS:

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

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The submitted order will be accepted at the CTS after validation if found any invalid reason the
order is return back to the BWS, with the appropriate error message. If
Accepted at the CTS it will be added to the local pending order book.
The order will then be taken up for matching if it is a buy order the system tries to find a sell
order, which fits the requirement of the buy order when such match is found a trade, gets
executed. Each trade involves two brokers and respective traders who sent the order. Both these
traders are informed of the trade being executed at their respective BWS.
At the BWS the trade is added to the local trade book, land the pending quantity decreased by the
trade quantity in the local pending order book.
Orders sent by the brokers are two types:

Good For the Day (GFD)

Good Till Cancellation(GTC)

Good for the Day:

This also called as market order. For an order if the member selects the deal as good for day,
the order is treated as market order. If a best bid founds match with best order then the
transaction executes. If the match is not found then after trade time the order is cancelled that
day. Next day he has to place a new order.
For example if a member wants to purchase 1000 shares of satyam info @ 400, each through
Good for Day order. If the correct match is not found, order is cancelled automatically and new
quotation has to be placed the next day.

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Good till Cancellation:

This order is forwarded to the last trading day of that settlement period. This is also called as
carry forward order like GFT; broker has to select the option of GTC for the order. If the order
finds match with in the trading settlement period, the order is executed. If no match is found, the
order is cancelled on the last day of settlement period. This order is not carried forward to the
next settlement period.
For example, if a member places a purchase order of 500 shares of SBI @ 690 per share, selects
the order as GTC, and places an order. If the match is not found on that day it will be forwarded
to the next day until trading settlement period day.

SETTLEMENT OF TRANSACTIONS:
Clearing of transaction in the form of shares and cash is called settlement, which was held in
clearing house of stock exchange (for example, SHAREKHAN is a clearance house is member
in NSDL (National Securities Depository Limited). Buyers will take the delivery of shares
through the Depository Participants (DPS) like SHARE KHAN and others. Finally, the
settlement is made by means of delivering the share certificates along with the transfer deeds.
The transferor (or the seller) duly signed transfer deed. It bears a stamp of the selling broker. The
buyer then fills up the certificates fills up the particulars in the transfer deed. Settlement can be
done in the following way.

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 Spot settlement: under this method, the delivery of securities and payment for them are affected
on the day of the contract itself.

Rolling settlement: Under this rolling settlement the trading is on T+2,basis i.e. if Monday is
trading day then Wednesday is the paying day . In case on non-delivery, the securities will go for
auction.

DETAILS OF PROCEDURES:

Delivery in : The members who is in PAY-OUT position delivers share certificates in to

clearing house with in the settlement period along with the delivery Chelan filled in with
the details of share certificates which has folio numbers or distinctive numbers etc.

Delivery out: The buyer of shares who made pay in position will take delivery of shares
from the clearinghouse.

Pay-in: The member who is in paying position shall pay for value of shares with in the
trading settlement period (T+2).

Payout: The cheques paid in the clearinghouse will be paid members who are in paying
position.

All disputes arising between members regarding non-deliveries, non-payments, good and
bad deliveries pertaining to the settlement will be here by Share Khan and settled by the
settlement committee of the exchange.

BROKERAGE STRUCTURE AT SHAREKHAN

Trading - 0.10 %( on each side)

Delivery - 0.50%
Exposure - 4 times of deposit
Sharekhan provides offline trading too. For this sharekhan is providing a toll-free number
i.e. 41628061/62/63.

The given flow chart clearly explains the process of online trading:
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THE WINDOW WHICH DISPLYAS IS BUYING SHARES ONLINE THROUGH

SHAREKHAN.COM
77

THE WINDOW WHICH DISPLYAS IS SELLING SHARES ONLINE THROUGH

SHAREKHAN.COM
78

79

SURVEILLANCE:
Surveillance can be done during the continuous trading session for monitoring the
broker scrip and the market, this is referred to as online may be used for analysis. Analysis and
monitoring reports that can generate. For the continuous trading session the surveillance
workstation user can set up a member of alerts any scrip broker or index the workstation profile
will be automatically reported to the user.
The market event list will be available to the BWS user. During the continuous
trading session details of the scrip broker or index that pass the alert or violate their circuit
breakers are displayed on message window. There are three messages windows i.e., one for each
scrip and index, different colors indicate the importance and BWS user is modified when BWS
user is denied access to the system a number of are available for the SWS user.

PROBLEM AREAS:
When internet trading was first launched in Feb. 2000, the stock markets were experiencing an
unprecedented boom and it held out a lot of promise. However, two years down the line we find
the system as failed to deliver up to its potential. The main reasons for declining volume of
trading are:

Bearish market:
The poor performance in the on line market segment can be attributed to lack of Bull Run in the
stock market. This is the reason for which the overall trading as come down. Almost ever since
internet trading has started the markets have remained bearish. This relationship between the
mood of the market and the internet in trading indeed gets reflected in the volumes.

Poor penetration of the internet:

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Besides the bearishness in the equity market, another reason for low acceptance of net trading
could be poor penetration of the internet. In India it is a fact that internet has not been able to
spread its tentacles in rural areas and small towns.

The very basis of net trading is based on two factors:

1. An equity market in good shape.
2. Deep penetration of the internet.

Poor internet connectivity:

In the Indian context, the quality of internet connections also comes into play for determining the
reasons for the lack in response. Here, we have connectivity problems and there are instances of
clients panicking, as they could not execute their trades. Many times at particularly at places
other than Mumbai, sudden stoppage of electricity results in disconnection.

Long supply chain:

In case of conventional or offline, trading the chain is small as the clients directly interact with
the brokers. However, in case of internet trading the chain is quite long as it involves a client, an
internet service provider, server, stock exchange, depositor and a broker and a problem can rise
up at any stage of the chain, breaking down the entire system.
A Costly Affair:
Other than the technological hassles, there is an element of cost as well. For active traders, doing
online trading he has to remain connected all the time and the cost of connecting through dial up
can work out to Rs 3500 per month which is over and above the brokerage and other service
charges. This is the reason offering online trading facility

81

Allows the clients to use the conventional system as well in order to retain them. A part from a
dealing room, most broking houses have a separate room for the clients. Where the stock
exchanges terminals are kept for their use.

Low Investor Confidence:

Investor confidence in the country has been badly hurt due to the escalating IndoPak tensions.
This sentiment has got reflected in the stock markets, which have gone down. The global
recession has also dampened the mood of the stock market. Although, the US economy is
showing signs of recovery, but any tangible outcome is yet to be felt.

DATA COLLECTION:-

PRIMARY DATA as the decision of the investor keeps on changing from time to time.
Collection of primary data is reliable as it avoids self report bias and cannot record what cannot
be said.
Due to time and financial constraint Marketing Research is done through Sampling. Sample
offers various benefits as:
1) It saves time.
2) It helps in cutting expense.

SECONDARY SOURCES The data had been collected through Books, Journals and Websites.

3.3.3 SAMPLE DESIGN

3.3.3.1 POPULATION:100 people
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3.3.3.2 SAMPLE SIZE: The sample size is 60 persons.

3.3.3.3 Sampling Method:Judgment sampling and Convenience Sampling Technique

Judgment sampling is mainly done on the basis of the knowledge of the respondent about stock
market and Convenience Sampling is the technique in which the researcher just simply picks up
the respondents on the basis of their availability.

3.3.4 Methods of Data Collection:-

3.3.4.1 Instrument for data collection:

The study to be conducted is about the Derivative Market in Shakarpur, NirmaanVihar and
Laxmi Nagar and members of Share Khan so the method of data collection used is SURVEY
METHOD with the help of Questionnaire.
3.3.4.2 Drafting of a questionnaire:
To frame questionnaire or schedule, we have at first to decide regarding various questions to be
incorporated. This decision of the selection of questions depends upon the purpose of enquiry. In
this regard, precaution should be adopted to avoid irrelevant or unnecessary questions.

3.3.5 LIMITATIONS
1) For performing these king of research large data base is required. The data collected for this
study is not sufficient to analyze the investment pattern of retail investors in India.
2) There may be many variables which influences the result but this analysis reveals only few
variables.
3) There can be some deviations in the data as the human psychology changes from time to time.
4) The feedback we got may not be correct as the respondent might have filled in the information
with no interest or in hurry.
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5) Scientific research on the part of research is also required.

6) Accuracy level may be effected when data is subjected to weighing.
7) Time was the biggest constraint as these studies cannot be completed with accuracy in two
month.
8) Understanding the psychology of human is not the cup of every one tea so, might be some
interpretations go wrong.
9) Some respondents might have taken the question in different sense which can change the data
collected.
10) Cost was also the constraint as collection of Primary data required huge amount of spending.

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ANALYSIS& INTERPRETATION
There are certain questions which have been asked to the people for the completion of this
project and find the result matching to the Objective.

1. PEOPLE WHO INVEST AND DONT INVEST

No
17%
Yes
No
Yes
83%

Interpretation: This shows that though the slowdown has affected many people financially and
mentally but then also there is large portion of population who invest their money in one or the
other financial instrument in hope of getting some handsome return. The people who dont invest
can be the client of the company as these people are the fresh market for the company and the
challenge for the marketers to find out the reasons behind their decision and pull them towards
the growing investment sector.

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2. REASON FOR NOT INVESTING

Interpretation: This chart answers the why part of not investing the money. The company
should concentrate on these reasons and try to solve the issues like imparting knowledge about
the various investment options and the share market. Those having financial constraint can also
be converted to the clients as the company should provide them the options which are in the
client reach of investment. The people with time constraint and financially sound can be given an
option of Portfolio Management Services.

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3. TRADER OR INVESTOR

Interpretation:This chart shows that 70% of the people believe in short term trading i.e.
investing their money for less than 1 year. These short term investors believe in getting their
return quick as they dont want to park their money for longer time. The company can attract
them towards the share market as this market give high return in short span combining with risk
factor. The company should identify the risk taker and then play the role of increasing their client
base by absorbing the clients in their company. For long term investors aspiring high return on
their investment Portfolio Management Services can be a good options and attracting them
towards the investment in blue chip companies in share market for more than a year.
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4. PREFERENCE OF INVESTMENT

Interpretation: In this chart we can see that the preference for Share Market is more but the
preference for Insurance is not less. Insurance sector is an upcoming sector. The company should
see this as an opportunity and should take a step towards diversification to Insurance sector.
Mutual Fund is also a limited risky platform to invest in with good return and the company
should step forward to tell more about this instrument.

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5. WHAT MOVES THE SHARE MARKET

Interpretation: This helps in understanding the psychology of the investor and helps the
company in making the research reports for the clients (this is a kind of additional service to
retain the customer towards share market). The Company can provide the technical and
fundamental analysis so that those reports help them in their analysis of share market and they
can make their own company portfolio for investment purpose according to the market
forecasting and their own analysis.

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6. PERCENTAGE OF THE EARNING INVESTED BY THE PEOPLE

Interpretation:This statistical data is very important for the company as this is an estimation of
how much business the company can get in their court. The company could categories the
investors according to their capacity to invest and pitch them the right product to invest in. The
investors who are ready to invest more than 30% of their earning should be treated under special
category as they can be High Net worth Individual for the company.

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7. APPETITE FOR RISK

Interpretation: This data shows the capacity of the investors to take risk. Those who are ready
to take high risk seek high return on their investment from the market. These data will help the
company to target the customer with right kind of product offering to them and categorize the
client under different heads. This data will also cross check certain other data in the research
whether client is true to the questionnaire or not.

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8. RECESSION: THE BEST TIME TO PURCHASE SHARE

Interpretation: This chart shows that in recession phase also around 40% people do not lose
hope to earn or invest. The company should take an initiative to hold the faith of these people in
recession. The rest not having faith in the recession time should be provided with financial
consultancy to do the right investment in the critical phase of economy.

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9. BEST FINANCIAL INSTRUMENT TO INVEST DURING

BOOM PHASE

Interpretation: This chart shows the proportion of people investing in different financial
instruments during boom phase. This helps the company in knowing the psychology of the
investors as how they switch on their investing decision from boom phase to normal or stagnant
phase to recession phase. It is expected during boom phase that there are more chance of high
return from share market and sectors which invest their major portion of money in share market
so 57% of people are tilted towards share market.

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10.BEST

FINANCIAL

INSTRUMENT

TO

INVEST

DURING

RECESSION PHASE

Interpretation: This chart shows the contrasting data from the earlier one. This is how the
economic situation changes the decision of the investor. As we can see that during boom period,
share market was the most liked one but in recession the people see the security and most of their
investment goes to government securities and bonds as they are safer than any other instrument.
In recession time people usually lose faith in the economic growth and their vision to get good
return is very short and change their decision or some of them either dont invest and keep their
money with them which give them zero in return. The people should be aware of the difference
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between recession and depression and this can be done by any company consultant to their
clients.

Findings from the Survey

After the analysis followings are the main points which come out by the survey:

Still there are people who do not want to go for the derivatives market because they think

it is risky and hard to understand and also due to financial constraints.

Mostly Professional and post graduates are the participant of the derivatives market.
Derivatives need continuously involvement of the investors.
Respondents still prefer to go for the equity market. For investment purpose people go for

the equity market.

Majority of investors invest for short term period.
Normally near about 20% part of the income people invest in various sectors.
Still people think that market is more risk prone and opt for government securities during

recession period and during boom phase they go for share market.
Main reasons for not using derivatives reveals from the survey are that people have less

knowledge and they are unable to understand the derivative market concept.
Main purpose to invest in derivatives market is to hedge them from the future risk.
Main factor which people consider before investing money in market is condition in the
market. Other reasons are also there like profit of the company, growth of the company,
previous return on the stock, capital return etc.

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OBSERVATIONS AND FINDINGS

Fluctuations 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.

According to Mr. Manish Sukhla of Motilal Oswal Securities, many clients who
registered themselves for online trading ended up using the offline system.

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, Motilal Oswal securities and geojit.

The Bombay stock exchange Sensex zoomed past the 6900 barrier for the first time in
history to achieve new all-time high of 6864.62 intraday trade and ended at a historic close of
6849.48 points.

SEBI reconstruct the retail investors limit i.e., Rs.50000 to Rs.100000.

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Conclusion

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. BROKERS have
suddenly been thrown to intense competition from their counter parts across the country.

The Regional Stock Exchanges have their own advantages like being nearer to the retail
investors and to let the Brokers perish would be detrimental to stock market system there
is no brokerage firms with in India with national reach.

In the present scenario and to compete the BROKERS would require sound
infrastructure and trading as per international standards. The concepts of business have
changed and today this has become service to client or to provide the best possible
service to client or to engage into new business from the regional center to the metro
centers and to impart liquidity introduction of on-line trading is necessary.

The introduction of on-line trading would influence in 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 Fs.
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, it will inspire
confidence in investors resulting in increase business of the exchange.

The BROKERS 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 oriental industry hence the
survival would require them to provide the best possible service to the client.

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The longer trading time had helped the investors as well as the broker to take much
interest in the trading of the securities as they had extra time to take in the security
market.

The existing system can be further improved by introduction of stop loss facility that will
help to reduce investors losses.

Also there is need for an exchange to setup standing committee into breakdown of online
trading.

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SUGGESTIONS:

I suggest the exchange authorities to take steps to educate Investors about their rights
and duties. I suggest to the exchange authorities to increase the investors confidences.

I suggest 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 in imposing to curb the speculative of securities.

Necessary steps should be taken by the exchange to deal with the situations arising due
to break down in online trading.

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BIBILOGRAPHY

BOOKS:

Investment management

V.K.Bhalla

Investment management

Preethi Singh

Security Analysis And Portfolio Management

V.A.Avadhani

Marketing of Financial Services

V.A.Avadhani

Indian Financial System

M.Y.Khan

Secondary market & its functions

I.M. Pandey

WEBSITES:

1.
2.
3.
4.
5.
6.
7.

www.Share Khan.com
www.bseindia.com
www.sebi.com
www.moneycontrol.com
www.economictimes.com
www.nseindia.com
www.reuters.com

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