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SUMMER TRAINING PROJECT REPORT

SMC GLOBAL SECURITIES LIMITED

SSSSSSSS

ONLINE TRADING

SESSION 2007-2010

PREFACE
Indian stock market have been role during the past five years,genrating an annual
return of 28%(on the nifty index).Still general public prefers putting it money in
bank,rather than putting it in stock. Within Indian economy doing so well, return from
stock market have been far higher than return from any other investment.Avenue
rupees 1, 00,000 invested in the nifty in April would have been worth a little over
rupees 3, 00,000 by April, 2008.But the top value creatures have been delivered far
superior returns the same lakh invested in unitech would have been worth rupees
1.52cr if it had been invested in aban aban offshare.
Most of people are reluctant to put their money in shares,because of uncertainty of the
return.At times stock market is so volatile that it becomes very difficult for investors
to decide whether to purchase some more stocks or sell them,whether to enter the
market or book profit. with so much uncertainty prevailing, the case of investing in
stock market is totally different from the case of investing in some other places.
Lack of awareness is also holding people back to a great extent,until and unless one
understands the degree of risk involved in investing in shares,the kind of return one
can get from there and history of such returns and how to go about it,one will not go
ahead.so making aware the public about things happing in stock market is something
that should be done at war level.

TABLE OF CONTENTS

CONTENTS

PAGE NO.

CHAPTER 1 : INTRODUCTION
1.1

Overview of Industry as a whole

1.2

Profile of the organization

1.3

Problems of the organization

12

1.4

Competition Information

13

1.5

S.W.O.T. Analysis of the Organization

17

CHAPTER 2 : OBJECTIVES AND METHODOLOGY


2.1 Significance of the study

20

2.2 Managerial usefulness of the study

20

2.3 Objectives of the study

21

2.4 Scope of the study

21

2.5 Methodology

23

CHAPTER 3 : CONCEPTUAL DISCUSSION

30

CHAPTER 4 : DATA ANALYSIS

52

CHAPTER 5 : FINDINGS AND RECOMMENDATIONS

63

ANNEXURE
* Questionnaire
BIBLIOGRAPHY

1.1 OVERVIEW OF INDUSTRY PROFILE


3

Mobilization of savings from surplus savers to deficit savers is most efficiently


carried out by the securities market through a range of complex products called
"securities". The definition of securities as per the SCRA, 1956 includes shares,
bonds, scrips, stocks or other marketable securities of like nature in or of any
incorporate company or body corporate, government securities, derivatives of
securities, units of collective investment scheme, interest and rights in securities,
security receipt or any other instruments so declared by the central government.
This process of mobilization of resources is carried out under the supervision and
overview of the regulators.
Market Participants in Securities Market
Market Participants
Securities Appellate Tribunal
Regulators*
Depositories
Stock Exchanges
With Equities Trading
With Debt Market Segment
With Derivative Trading
Brokers
Corporate Brokers
Sub-brokers
FIIs
Portfolio Managers
Custodians
Share Transfer Agents
Merchant Bankers
Bankers to an Issue
Debenture Trustees
Underwriters
Venture Capital Funds
Foreign Venture Capital Investors
Mutual Funds
Collective Investment Schemes
(Source: SEBI Bulletin.)

2007
1
4
2

2008
1
4
2

21
1
2
9,443
4,110
27,541
996
158
15
82
152
47
30
45
90
78
40
0

19
1
2
9,487
4,190
44,074
1319
205
15
76
155
50
28
35
106
97
40
0

MARKET SEGMENT
The securities market has two interdependent segments: the primary and the
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secondary market. The primary market is the channel for creation of new securities.
These securities are issued by public limited companies or by government agencies.
In the primary market the resources are mobilized either through the public issue or
through private placement route. It is a public issue if anybody and everybody
can subscribe for it, whereas if the issue is made available to a selected group
of persons it is termed as private placement. There are two major types of issuers
of securities, the corporate entities who issue mainly debt and equity instruments and
the government (central as well as state) who issue debt securities.

These new securities issued in the primary market are traded in the secondary market.
The secondary market enables participants who hold securities to adjust their holdings
in response to changes in their assessment of risks and returns. The secondary market
operates through two mediums, namely, the over-the-counter (OTC) market

and the exchange-traded market. OTC markets are informal markets


where trades are negotiated. Most of the trades in the government securities are in
the OTC market. All the spot trades where securities are traded for immediate deliver
y and payment take place in the OTC market. The other option is to trade using the
infrastructure provided by the stock exchanges.
There are 23 exchanges in India and all of them follow a systematic settlement period.
All the trades taking place over a trading cycle (day=T) are settled together after a
certain time (T+2 day).
The trades executed on the National Stock Exchange (NSE) are cleared and settled by
a clearing corporation. The clearing corporation acts as a counterparty and guarantees
settlement.
Nearly 100% of the trades in capital market segment are settled through demat
delivery. NSE also provides a formal trading platform for trading of a wide range of
debt securities, including government securities. A variant of the secondary market is
the forward market, where securities are traded for future delivery and payment. A
variant of the forward market is Futures and options market. Presently only two
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exchanges viz., NSE and Stock Exchange, Mumbai (BSE) provides trading in the
derivatives of securities.
Dependence on Securities Market

Corporate Sector

Government

Households

The above mentioned sectors are dependent on the Capital Market for their
financial needs. The following table shows their percentage share respectively.

Dependence on Securities Market


Share (%) of Securities Market in
External Finance of
Fiscal Deficit of
Corporate
Central Govt.
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004 -05
2005-06
2006-07

19.35
19.17
33.38
53.23
44.99
21.67
22.12
28.16
27.05
33.58
31.39
20.60
(17.98)
N . A.
24.86
22.65
38.78

17.9
20.7
9.2
48.0
35.2
54.9
30.0
36.5
60.9
67.1
61.4
69.4
77.6
64.9
26.73
34.75
52.75

Fiscal Deficit of
State Govt
13.6
17.5
16.8
17.6
14.7
18.7
17.5
16.5
14.1
13.9
13.8
15.2
19.9
32.1
18.69
8.63
23.98

Financial Savings
Number of Households
14.4
22.9
17.2
14.0
12.1
7.7
6.9
4.5
4.2
7.3
4.3
8.0
5.9
N . A.
6.6
7.5
7.8

Source: CMIE & RBI.

INTERNATIONAL SCENARIO

Following the implementation of reforms in the securities industry during the last
decade, Indian stock markets have graduated to a better position vis--vis the
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securities market in developed and emerging markets. As may be seen from Table 1-2,
India has a turnover ratio, which is comparable to the other developed market,
and also one of the highest in the emerging markets. At the end of 2003, Standard
and Poors (S&P) ranked India 17th in terms of market capitalization (19th in 2002),
16th in terms of total value traded in stock exchanges (17th in 2002) and 6th in terms
of turnover ratio (7th in 2002). India has the number one ranking in terms of
listed securities on the Exchanges followed by the USA. These data, though
quite impressive, do not reflect the full Indian market, as S&P (even other
international publications) does not cover the whole market. For example, India has
more than 9000 listed companies at the end of March 2004, while S&P
considers only 5,644 companies.

If whole market were taken into consideration, Indias position vis--vis other
countries would be much better.

International Comparison: end December 2007


Particulars

USA

UK

Japan
No. of listed Companies
5,295 2,311 China
3,116
Market Capitalisation ($ Bn.) 14,266 2,412 3,041
Market Capitalisation Ratio139.8 159.7 70.3
(%)
Turnover ($ Mn.)
15,547 2,151 2,273
Turnover Ratio (%)
122.8 100.6 88.0

Germany
684
1,079
57.5
1,147
130.0

Singapore
475
145
168.4
88
71.1

HongkongIndia
1,029 1,296 6268
715
681 999
426.4 55.2 109.5
332
477 508
56.3 83.3 162.5

Source: S&P Emerging Stock Market Factbook, 2007


A comparative study of concentration of market indices and indices stocks in different
world markets is presented in the table below. It is seen that the index stocks
share of total market capitalization in India is 75.0% whereas US index
accounted for 93.8%. The ten largest index stocks share of total market capitalization
is 36.5% in India and 16.4% in case of US.

Market Concentration in the World Index as on End 2007


Index Stocks Share of 10 largest Index (In Percent)
Share Market
Japan
Singapore

Total Mkt Cap


99.2
91.2

Share of Total Mk tCap


20.4
57.9

France
Germany
Italy
United Kingdom
United States
India

89.5
83.6
95.5
94.3
93.8
75.0

42.2
44.6
55.9
43.6
16.4
36.5

The stock markets worldwide have grown in size as well as depth over last one
decade. The turnover on all markets taken together has grown from US $ 5.5 trillion
in 1990 to $ 38 trillion in 2002 when it reached a peak. Thereafter, it has witnessed a
decline and stood at US $ 34.6 trillion in 2006. It is significant to note that US alone
accounted for about 47.4% of worldwide turnover in 2006. Despite having a large
number of companies listed on its stock exchanges, India accounted for a meager
2.96% in total world turnover in 2006. The market capitalization of all listed
companies taken together on all markets stood at US $ 34.6 trillion in 2006 ($ 23
trillion in 2005). The share of US in worldwide market capitalization decreased from
47.24% as at end-2005 to 44.66% in end-2006, while Indian listed companies
accounted for 1.87% of total market capitalization in 2006.

Market Capitalization and Turnover for Major Markets (US $


million)
Country/Region
Market Capitalization Turnover
(End of period)
Developed Markets
Australia
Japan
UK
USA
All Emerging Markets

2003
2004
25,242,989 20,957,836
374,269
380,969
2,251,814 2,126,075
2,217,324 1,864,134
13,810,42 11,052,403
9
2,556,979 2,439,080

2005
2006
2007
2008
28,290,981 39,676,01 36,098,73 26,743,15
8
1
3
585,475 240,667
294,658
369,845
3,040,66 1,826,230 1,573,279 2,272,989
5
2,412,43
1,871,894 2,721,342 2,150,753
4
14,266,2
29,040,739 25,371,27 15,547,431
66
0
3,656,722 2,404,321 2,499,768 2,896,144

China

523,952

463,080

681,204

448,928

333,369

476,813

India

110,396

131,011

279,093

249,298

197,118

284,802

Indonesia

23,006

29,991

54,659

9,667

13,042

14,774

Korea

220,046

249,639

329,616

711,192

826,620

682,706

Malaysia

120,007

123,872

168,376

20,772

27,623

50,135

Philippines

41,523

39,021

23,565

3,148

3,103

2,635

Taiwan

292,621

261,474

379,023

544,808

631,931

592,012

23,396,91
647.24

31,947,70
344.66

42,080,33 38,598,49
969.01
865.73

29,639,297

US as % of World

27,79
9,968
49.68

India as % of World

0.40

0.56

0.87

0.59

0.96

World Total

Source: S&P Emerging Stock Market Factbook, 2007

0.51

52.46

INTERNATIONAL AND

INDIAN

SCENARIO

IN

ONLINE

BROKING
In US markets, online brokerage has significantly changed the dynamics of the market
place, resulting in one of the biggest shifts in the individual investor's relationship
with their brokers. Investors access a wealth of financial information on the same time
as do market and financial professionals including breaking news, developments and
market data. Online brokerage provides investors the tools to analyse the information
such as research reports.
In the US, 82 per cent of the deals are done on line. The European on line broking
market is expected to be of $8 billions and has risen to about $50 billion today.
Net trading shall initially faced some problems relating to infrastructure and
understanding of the concept. Presently, the legal frame work is right in place and
there are organizations like SEBI, RBI etc. which provide investor guidelines to the
investors for protection of their right. Also, investor grievance handling and redressal
system is fast and efficient. Lack of investor education and resistance from stock
brokers though has always posed some problems.
With Internet trading, investment in the stock market is just a click away, in the
comfort of office or a home. It makes it easy for anyone to access net brokers and
trade in stock. Even the smallest retail investor can access information that was till
now restricted to big traders. Net trading provides investors with seamless, real time
online access to stock markets.

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1.2

PROFILE OF THE ORGANIZATION

SMC Global is one of the largest and most reputed


Investment Solutions Company that provides a wide
range of services to its substantial and diversified client base. Founded in 1990, by
Mr. Subhash Chand Aggarwal and Mr. Mahesh Chand Gupta, SMC, is a full financial
services firm catering to all classes of investors. The company is having its corporate
office in New Delhi with regional offices in Mumbai, Kolkata, Chennai, Ahemdabad,
Cochin, Hyderabad, Jaipur plus a growing network of more than 1250 offices across
over 350 cities/towns in India and overseas office in Dubai.

Enabling shorter settlement cycles and book entry settlements systems, and
meeting the current international standards of securities market.

HISTORY OF SMC
SMC acquired membership of the Delhi Stock Exchange in 1990 and later in 1995
became a trading member of NSE. In 2000 the company became a member of BSE
and a depository participant of CDSL India Ltd. In the same year, the company
acquired the Trading & Clearing Membership of NSE Derivatives and the
memberships of leading commodity exchanges i.e. NCDEX and MCX in subsequent
years. In 2006, SMC expanded globally and acquired the Trading & Clearing
Membership of Dubai Gold and Commodity Exchange (DGCX). In the same year, the
company also started its Insurance Broking division, IPO & Mutual Fund Distribution
Division and its Merchant Banking division.

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Mission

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 market.

Vision

Their vision is to be the most respected company in the financial services


space.

PRODUCT AND SERVICES OF SMC


Equity & Derivative Trading
SMC Trading Platform offers online equity & derivative trading facilities for
investors who are looking for the ease and convenience and hassle free trading
experience. We provide ODIN Application, which is a high -end, integrated trading
application for fast, efficient and reliable execution of trades. You can now trade in the
NSE and BSE simultaneously from any destination at your convenience. You can
access a multitude of resources like live quotes, charts, research, advice, and online
assistance helps you to take informed decisions. You can also trade through our
branch network by registering with us as our client. You can also trade through us on
phone by calling our designated representatives in the branches where you are
registered as a client.

Clearing Services
Being a clearing member in NSE (derivative) segment we are clearing massive
volumes of trades of our trading members in this segment.

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Commodity Trading
SMC is a member of two major national level commodity exchanges, i.e National
Commodity and Derivative Exchange and Multi Commodity Exchange and offers you
trading platform of NCDEX and MCX. You can get Real-Time streaming quotes,
place orders and watch the confirmation, all on a single screen. We use technology
using ODIN application to provide you with live Trading Terminals. In this segment,
we have spread our wings globally by acquiring Membership of Dubai Gold and
Commodities Exchange. We provide trading platform to trade in DGCX and also clear
trades of trading members being a clearing member.

Distribution of Mutual Funds & IPOs


SMC offers distribution and collection services of various schemes of all Major Fund
houses and IPOs through its mammoth network of branches across India . We are
registered with AMFI as an approved distributor of Mutual Funds. We assure you a
hassle free and pleasant transaction experience when you invest in mutual funds and
IPOs through us. We are registered with all major Fund Houses including Fidelity,
Franklyn Templeton etc. We have a distinction of being leading distributors of
IPOs.Shortly we will be providing the facility of online investment in Mutual Funds
and IPOs

Online back office support


To provide robust back office support backed by excellent accounting standards to our
branches we have ensured connectivity through FTP and Dotnet based Application. To
ensure easy accessibility to back office accounting reports to our clients

MC Depository
They are ISO 9001:2000 certified DP for shares and commodities. We are one of the
leading DP and enjoy the trust of more than 40,000 investors. We offer a quick, secure
and hassle free alternative to holding the securities and commodities in physical form.

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They are one of the few Depository Participants offering depository facilities for
commodities. We are empanelled with both NCDEX & MCX.

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SMC Research Based Advisory Services


Their massive R&D facility caters to the need of Investors, who are continuously in
need of opportunities for striking rich rewards on their investment. We have one of the
most advanced, hitech inhouse R&D wing with some of the best people, process and
technology resources providing complete research solutions on Equity, Commodities,
IPOs and Mutual Funds. We offer proactive and timely world class research based
advice and guidance to our clients so that they can take informed decisions. Click on
Research to unveil the treasure.

SMC Investor Awareness Forum


Their dedicated team of professionals is conducting investor meet/seminars across
India. We believe that a well-informed investor is an empowered investor. We also
seek your feedback on our services in these Investor meets.

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1.3 PROBLEMS OF THE ORGANIZATION


Lack of Techno Savvy people and poor Internet penetration: Since most of the people are quite experienced and also they are not techno
savy. Also Internet penetration is poor in India.

Some respondents are unwilling to talk: -- Some respondents either


do not have time or willing does not respond, as they are quite annoyed with
the phone call.

Lack of Career Opportunities


Limitations of online trading
Competition
Technical Problem

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1.4. COMPETITION INFORMATION


ICICIDIRECT.COM

Products and Services


A product for every need: ICICIdirect.com is the most comprehensive website,
which allows you to invest in Shares, Mutual funds, Derivatives (Futures and
Options) and other financial products. Simply put we offer you a product for
every investment need of yours.
ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an Affiliate
of ICICI Bank Limited and the Website is owned by ICICI Bank
Limited
Product & Services:
Trading in shares: ICICIdirect.com offers you various options while trading in
shares.
Cash Trading: This is a delivery based trading system, which is generally done with
the intention of taking delivery of shares or monies.
Margin Trading: You can also do an intra-settlement trading up to 3 to 4 times your
available funds, wherein you take long buy/ short sell positions in stocks with the
intention of squaring off the position within the same day settlement cycle. (ONLY
for intraday)

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INDIA BULLS

India bulls Group is one of the top business houses in the country with business
interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex and
Power sectors. India bulls Group companies are listed in Indian and overseas markets
and have a market capitalization of over USD 7 billion. The Net worth of the Group
exceeds USD 2.5 billion. India bulls Group companies enjoy highest ratings from
CRISIL, a subsidiary of Standard and Poors. India bulls has been conferred the status
of a Business Super brand by The Brand Council, Super brands India.
India bulls Financial Services is an integrated financial services powerhouse
providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,
Asset Management and Advisory services. India bulls Financial Services Ltd is
amongst 68 companies constituting MSCI - Morgan Stanley India Index. India bulls
Financial is also part of CLSAs model portfolio of 30 Best Companies in Asia. India
bulls Financial Services signed a joint venture agreement with Sogecap, the insurance
arm of Societ Generale (SocGen) for its upcoming life insurance venture. India bulls
Financial Services in partnership with MMTC Limited, the largest commodity trading
company in India, is setting up Indias 4th Multi-Commodities Exchange.

ABHIPRA

Beginning as a Broking House, we grew into Business House. We broadened our


horizons and stepped into the field of Depository, Stock Broking, Full-Fledged Money
Changing Services, Category I Registrar & Transfer Agent, Commodity Trading,
Online Trading (Equity, F&O & Commodity), e-Return Intermediary. Abhipra today
commands the status of being one of the leading Depository Participants of
Northern India in Private Sector. Moreover, Abhipra has Trading Terminal Outlets
for NSE & BSE spread to almost every nook & corner of Northern India.
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Abhipra Capital Limited is also empanelled as a Depository Participant with one of


the premier Commodity bourse, National Commodities and Derivatives Exchange
Limited (NCDEX). So a client now can open Commodity Demat Account with us
At Abhipra, we offer our clients far more than merely a comprehensive range of
financial services. We offer them ideas, innovations, and solutions with extra-ordinary
results. We feel that quality is an essential ingredient in building successful
businesses. Not only do products and services need to be of high quality, but potential
customers also need to have assurance that the products will be of high quality. This is
evidenced from the fact that Abhipra is a ISO 9001 (Quality Assurance Systems)
Registered Company.

KOTAK SECURITIES:-

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking
and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's
leading financial institutions, offering complete financial solutions that encompass
every sphere of life. From commercial banking, to stock broking, to mutual funds, to
life insurance, to investment banking, the group caters to the financial needs of
individuals and corporate.
Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both
The Bombay Stock Exchange and the National Stock Exchange of India Limited.
The company has four main areas of business:

Institutional Equities,

Retail (equities and other financial products),

Portfolio Management and

Depository Services.

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MOTILAL OSWAL:-

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with
just two people running the show. It has established itself as the Best Local Brokerage
House in India (Asia Money Brokers Poll 2005). Their Institutional Equity Division
combines the efforts of the Research and Sales & Trading departments to best serve
clients' needs. Consistent delivery of high quality advice on individual stocks, sector
trends and investment strategy has established them as a reliable research unit
amongst leading Indian as well as international investors.

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1.5 S. W. O. T ANALYSIS OF THE ORGANIZATION


Strengths

The `do-it-yourself' framework of online share trading offers retail investors the
three benefits of transparency, access and efficiency. Paperwork diminishes
significantly, and no more painful trips to your broker to check if everything's in
order. Online trading has made it possible to universalize access to retail investors.
This was earlier very difficult, as the cost of servicing often-outweighed
transaction volumes. Online brokerage ranges between 0.05-0.20 per cent of the
value of transactions for non-delivery-based trades, and between 0.25-0.95 per
cent for delivery-based trades. Once major investments in online infrastructure are
over and done with - and with the economies of scale coming into play - it is
expected that brokerage rates would head further downwards.

Access to online trading and latest financial happenings, apart from quotes and
unbiased investment analyses, all consolidate into a value-added product mix in
tandem with evolving markets that are freer and fairer. The Net result: An
inquisitive, informed and demanding investor. Today's investor is more involved
in managing his or her assets and analyzing a vast array of investment options.
Technology and today's enabled investor have, in turn, driven competition,
resulting in reduced costs of trading, transparency in dealings, and pricing info
that is accurate and real-time. More and more investors now want to know how
their trades are executed, and whether they have received the best possible price.
Critical components of execution quality include the prices at which orders were
executed as well as the speed of execution. The quality of execution, in turn,
hinges on efficient order routing. We owe this to our investor fraternity.

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Weakness

Every thing in the world has a flip side to it - Transaction velocity is crucial. And
more often than not, connections are lousy. There's also a degree of investor
skepticism about online payment and settlement mechanisms in spite of all the
encryption and fire walling brought into play. Time and technology will soon
assuage these concerns, which hark back to the `physical' days.

The three main technology obstacles which have prevented Internet broking from
taking off are:

Lack of Internet penetration

Bandwidth infrastructure

Poor quality of ISP infrastructure.

Opportunities

You have some money to dabble with. Trading shares on BSE/NSE has
always been your dream. When will you ever find the time? And besides, the
hassle of finding a broker is not easy. This is your main opportunity.

Realizing there is untapped market of investors who want to be able to


execute their own trades when it suits them, brokers have taken their trading
rooms to the Internet. Known as online brokers, they allow you to buy and sell
shares via Internet.

There are 2 types of online trading service: discount brokers and full service
online broker. Discount online brokers allow you to trade via Internet at
reduced rates. Some provide quality research, other dont. Full service online
brokerage is linked to existing brokerages. These brokers allow their clients to
place online orders with the option of talking/ chatting to brokers if advice is
needed. Brokerage rates here are higher. 5Paisa.com, ICICIDirect.com,
IndiaBulls.com,

Sharekhan.com,

Geojit

securities.com,

HDFCsec.com,

Tatatdw.com, Kotakstreet.com are some of the online broking sites in India.


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And daily trading turnover is estimated in the vicinity of 0.75 per cent of the
combined BSE and NSE daily turnover of about RS 11,000 crore!!! The point
is, there's tremendous scope for growth. Especially when you consider the US,
where trading over the Net accounts for about 55 per cent of the total
volumes. And, I believe, in some Asian markets the figures as high as 70 per
cent.

Threats

On to some threat perception - Domestic funds, foreign institutional investors and


operators comprise the three main market constituents. And all three include term
investors as well as opportunists in their pecking order. Some, for instance, hitch
their fate with what the FIIs are up to. All this spells spurting volumes. But
nobody gives a damn about the resultant volatility.

And some, not all, offer free investment advice over the Net to lure rookie
investors with misleading information. Prices of scripts can also be influenced to
the advantage of vested interests, courtesy the Net. Unlike in the US, stockbrokers
out here willingly (or under the force of circumstance) assume the role of
`advisors', sans the neutral, non-vested stance.

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OBJECTIVES AND METHODOLOGY


2.1

SIGNIFICANCE
This project will accomplish to understand the problem faced by the new client

with respect to online share trading and find

ways to solve their queries at

microscopic level. The study also aims to highlight the possible hurdles that a
prospective client faces who are interested to investing insecurities but is unaware of
the system of online share trading. It also aims at finding out the brand image of the
organization amongst the general investors and give information to the management
about the new developments in the market adopted by the competitors and the areas
where the company needs to improve. The project is to study the effectiveness of the
stock exchange as this is one of the best way of investment.

2.2.

MANAGERIAL USEFULNESS OF THE STUDY


A thorough research and a detailed study of market are very important for the

management to take the right strategy suiting the market condition. The study gives
information regarding the market competition, innovative products offered by
competitors, present demand of the product in the marketed.
1.

The study will help the management to understand the customer mind set and
also estimating the present future market demand of the product.

2.

It will help to estimate the level of awareness established in the market and in
deciding the extent of promotion required.

3.

Help in finding the areas in which SMC will concentrate to increase its market
share.

4.

It will help in finding out the customer expectation about the product and also
help to know the customer physiology.

5.

Helps in knowing the class in which max new SMC must concentrate.
This study helps in finding the area in which SMC is strong and the area in which

it lags behind others. Which class of customer mostly approaches SMC policies?

24

2, 3. OBJECTIVES
Before starting any project, we should keep in mind the clear objectives of the project
because in the absence of the objectives one cannot reach the conclusion or end result
of the project.
So, the objective of my project is to:

To analyze the market share & services of existing players to


judge the future prospects of online trading for SMC
INVESTMENT SOLUTIONS.
Stock market of India is now been one of the fascinating market worldwide. Indian is
among the top ten destination of the world to which global player want to invest.
Research comprises defining and redefining problems, formulating hypothesis or
suggested solutions; collecting, organizing and evaluating data; making deductions
and reaching conclusions; and at last carefully testing the conclusions to determine
whether they fit the formulating hypothesis.
In short, the search for knowledge through Objective and Systematic method of
finding solutions to a problem is Research.

2.4 SCOPE OF THE STUDY

Since better broadband connectivity across the country and wider awareness of equity
as an asset class will push the online trade volumes to over 50% of total Trade
therefore it is relevant to the future prospects emerging in the stock market.
In order to compete with the online trading market leader like ICICI the company has
to work a lot on Online Trading in order to get the competency with other players.

25

Since the online trading is accepted by major players in the Indian Stock Market, the
importance of Online Trading has increased over the past decade therefore it is very
important to consider the Online Trading as a future of the Indian Stock Market.
This project would also tell us about the working of the Indian Stock Market and the
forces acting in the Online Trading.
SMC a software used by SMC Investment Solutions & SERVICES is an edge for
gaining competitive advantage; therefore it is relevant to know the working of this
software which would be enlightened in our company.

Online Trading Account and Demat Account


After the introduction of the online trading systems it is very easy to do online trading
with just a PC and an internet connection. All you need to do is just open a Demat
account and a trading account with a depository participant or DP. DP is connecting
Depository to investors. Depository is the people who stores shares in electronics
form. In India there are two depositories, NSDL and CDSL.
Most of the banks and brokerage houses provide trading account and Demat account.
To open a Demat account you need many things like PAN card, address proof, bank
account etc. To know more about Demat account Opening a Demat Account

PROBLEM FORMULATION
The research focuses on the future prospects of online trading along with SMC
investment solutions. The research will basically present the current scenario of online
trading in India, the market players involved and the trading strategies followed in the
market.
The research will cover the Indian trading market and try to understand its various
dimensions, so as to know how is the environment in Indian trading market? We will
also analyze the competitive strategies of SMC investment solutions

26

Therefore this research will help in understanding Indian trading market and also try
to find future prospects of online trading with SMC Investment Solutions.

2.5 METHODOLOGY

Marketing Research
Is the systematic design collection, and analysis and reporting of Data
and findings relevant to specific marketing situation facing the company.
Research Design
Types of Research: - Descriptive research

Descriptive research includes Surveys and fact-finding enquiries of


different kinds. The major
purpose of descriptive research is description of the state of affairs, as it
exists as the present. The main characteristic of this method is that the
researcher has no control over the variables; he can only report what has
happened or what is happening.

27

Marketing Research Process

1.Define the Problem and


Research Objectives

2. Develop the Research


Plan

3. Collect the Information

4. Analyze the
Information

5. Present the Findings

28

1. Define the Research Problem and Objective


Objective
TO ANALYSE THE MARKET SHARE & SERVICES OF
EXISTING PLAYERS
TO JUDGE THE FUTURE PROSPECTS OF ONLINE TRADING
FOR SMC INVESTMENT SOLUTIONS.
The respondents are stratified into offline share trading respondents and
online share trading respondents.
Hence the sub objective are:
To understand satisfaction, perception & awareness of offline
trading customers.
To understand satisfaction, perception & awareness of online
trading customers.
2. Develop the Research Plan
The second stage of Research calls for developing the most efficient plan
for gathering information.
Designing a research plan calls for decision on the data sources, research
approaches, research instruments, sampling plan & contact methods.
Data Sources
There are two types of data.
29

Primary data:

The data that is collected first hand by someone

specifically for the purpose of facilitating the study is known as primary


data. So in this research the data is collected from respondents through
questionnaire.
Secondary data: For the company information I had used secondary data
like brochures, websites of the company etc.
Survey Approach
Survey Research: - survey research is used to learn about need,
perception and awareness level of the customers for online share trading.
The method used by me is Survey Method as the research done is
Descriptive Research.
Research Instruments
Selected instrument for Data Collection for survey is Questionnaire.
Questionnaires: - A questionnaire consists of set of questions presented
to respondent for their answers. It can be Closed Ended or Open
Ended.

Open Ended: - Allows respondents to answer in their own words & are
difficult to Interpret and Tabulate.
Close Ended: - Pre-specify all the possible answers & are easy to
Interpret and Tabulate.
30

Types Of Question Included:


Dichotomous Questions
Which has only two answers Yes or No?
Multiple Choice Questions
Where the respondent is offered more than two choices.
Rating Scale
A scale that rates some attributes from excellent to very poor
and very inefficient to Very efficient.
Sampling Plan
After deciding on the research approach and instrument, the marketing
researcher must
Design a Sampling Plan. This includes:
Sampling Unit: - Who is to be surveyed? The marketing researcher must
define the target population that will be sampled.
The sample Unit taken by me;
General individual customer those who trade in share market.
Sample Size/ Population Size: - How many people should be surveyed?
I have cover entire Delhi city for the survey. My sample size is 200.
Sampling Procedure: - How should the respondent be chosen?
31

In the Project, sampling done is on basis of area sampling for the Delhi
city.
In which convenient sampling was done.
Contact Methods
Once the sampling plan had been determine, the marketing researcher
must device how the subject should be contacted: Mail, Telephone,
Personal or On-line Interviews.
In my project I went for personal Interviewing, as its necessary to go
meet the individual respondents at their place so I can collect the right
information.
3. Collect The Information
The Data collection phase of marketing research is generally the most
expensive and the most prone to error.
I had visited all the respondents individually in the Delhi city and
collected information via questionnaire.
I used to talk with them and in that talk I asked them the relevant question
of the questionnaire so I could get correct information from them for the
objective purpose. For some questions I have to explain them about
company, like different plans of the company etc.
Generally most of the respondents had filled questionnaire themselves but
some avoid filling up so at that time myself filled according to their
answer.

32

The sample of questionnaires 1 used is in Annexure.

4. Analysis of the Information or Data Collected


After the data have been collected, the researcher turns to the task of
analysis then. The analysis of data requires a number of closely related
operations such as establishment of categories, then application of these
categories to raw data though coding, tabulation and statistical inferences.
The unwieldy data should necessarily be condensed into a manageable
groups and tables for further analysis.
The researcher can analyze the collected data with the help of various
statistical measures.
After collecting the data I used hand tabulation method for analysis.
5. Interpretation of survey:
Based on collected information the analysis is done.

33

CONCEPTUAL DISCUSSION
INVESTOR PERCEPTION
SEBI in association with National Council of Applied Economic Research (NCAER)
conducted a Survey of Indian Investors in 1998-99 and then followed it up in 200001. The survey of 2000-01 was based on a sample of 288,081 geographically
dispersed rural and urban areas. The findings of this survey were released in
September 2003. The survey estimated that a total of 13.1 million or 7.4 per cent of
all Indian households totaling 21 million individuals directly invested in equity
shares or debentures or both during 2000-01. The other findings are as listed below:
1.

The number of debenture owning households and individual debenture holders


far exceeds household and individual equity investors. Of the total 13.1 million
investor households, 9.6 million households owned bonds or debentures,
whereas only 6.5 million investor households owned equity shares.

2.

The percentage of households investing in equity or debentures is more in urban


areas than in rural areas. This divergence is more in case of equities compared
to debentures. Of the 51 million urban households, 7.8 million households
representing more than 12 million urban individual investors owned equity
shares or debentures or both. Whereas, of the 125 million rural households, only
5.3 million households representing more than 8 million individual investors
shows a definite migration of investors from equity market to bond market
during the period between the two surveys.

3.

The survey results also clearly reveal that number of non-investor


households have increased from about 156 million in 1998-99 to nearly 164
million in 2001-02 constituting nearly 92.6 per cent of all households.

4.

It was also observed that the investor population and town size are directly
proportional. The largest city with more than 50 lakh population accounted for
about 17 per cent of investor households and the next higher segment, more
than 31 per cent investor households were in towns with population between
10 and 50 lakh.

34

Primary Market
An aggregate of Rs. 2,676,600 million were raised by the government and corporate
sector during 2005-06 as against Rs. 2,572,201 million during the preceding year.
Government raised about two third of the total resources, with central government
alone raising nearly Rs. 1,476,360 million.

Corporate Securities
The average annual capital mobilization from the primary market has grown manifold
since the last two-three decades. It received a further boost during the first half
of 1990s with the capital raised by non-government public companies rising sharply
from Rs. 43,120 million in 1990-91 to Rs. 264,170 million in 1994-95. Thereafter,
there has been a decline due to conditions prevailing in the secondary market.
However, the year 2005-06 took a turnaround in its performance as compared to the
previous year by mobilizing Rs. 32,100 million. The capital raised, which used to be
less than 1% of gross domestic saving (GDS) in the 1970s increased to about 13% in
1992-93 but thereafter witnessed declines. Though there has been a considerable
increase in the amount mobilized in 2005-06, when seen as a percentage of GDS, it is
1.20% (Table 1-8). Data in Table 1-9 shows that there is a high preference for
raising resources in the primary market through private placement route. Private
placements accounted for 89% of total resources mobilized through domestic issues
by corporate sector during 2005-06.
Indian market is getting integrated with the global market, though in a limited way
through Euro Issues. Since they were permitted access in 1992, Indian companies
have raised about Rs. 30,980 million through American Depository Receipts
(ADRs)/Global Depository Receipts (GDRs).
FIIs have invested heavily in Indian market in 2005-06. They had net cumulative
investments of US$ 38.75 billion as at end of March 2006. There were 745 FIIs
registered with SEBI as of end March 2006.
It appears that more and more people prefer mutual funds (MFs) as their investment
vehicle. This change in investor behavior is induced by the evolution of a regulatory
framework for MFs, tax concessions offered by Government and preference of
35

investors for passive investing. Starting with an asset base of Rs. 250 million in
1964, the total assets under management at the end of March 2006 have risen to Rs.
1,396,160 million. During the last one decade, the resources mobilized by the MFs are
increased from Rs. 112,440 million in 1993-94 to Rs. 476,840 million in 2005-06.

Secondary Market
Corporate Securities
There are 23 exchanges in the country, which offer screen based trading system. The
trading system is connected using the VSAT technology from over 357 cities. There
were 9,368 trading members registered with SEBI as at end March 2006 (Table 1-10).
The market capitalization has grown over the period indicating more companies using
the trading platform of the stock exchange. The all India market capitalization is
estimated at Rs. 13,187,953 million at the end of March 2006. The market
capitalization ratio defined as the value of listed stocks divided by GDP is used
as a measure of stock market size. It is of economic significance since market is
positively correlated with the ability to mobilize capital and diversify risk. It increased
sharply to 52.3% in 2005-06 against 28.5% in the previous year. The trading volumes
on exchanges have been witnessing phenomenal growth over the past decade. The
trading volume which peaked at Rs. 28,809,900 million in 2000-01, fell substantially
to Rs. 9,689,093 million in 2004-05. However, the year 2005-06 saw a turnaround in
the total trading volumes on the exchanges. It registered a volume of Rs. 16,204,977
million. The turnover ratio, which reflects the volume of trading in relation to the size
of the market, has been increasing by leaps and bounds after the advent of screen
based trading system by the NSE. The turnover ratio for the year 2005-06 accounted
at 122.9%.
The relative importance of various stock exchanges in the market has undergone
dramatic change during this decade. The increase in turnover took place mostly at the
big exchanges. The NSE yet again registered as the market leader with more 85% of
total turnover (volumes on all segments) in 2005-06. Top 5 stock exchanges
accounted for 99.88% of turnover, while the rest 18 exchange for less than 0.12%
during 2005-06 (Table 1-11). About ten exchanges reported nil trading volume during
36

the year.
S&P CNX Nifty is the most widely used indicator of the market, .The index
movement have been responding to changes in the governments economic policies
, the increase in FIIs inflows , etc. However, the year 2005-06 witnessed a
favorable movement in the Nifty, wherein it registered its all time high in
January. The movement of the S&P CNX Nifty, the most widely used indicator
of the market, is presented in Chart 1-1. The index movement have been responding
to changes in the governments economic policies , the increase in FIIs inflows ,
etc. However, the year 2005-06 witnessed a favorable movement in the Nifty,
wherein it registered a high in January 2006 of 2014.65. The point-to-point
return of Nifty was 80.14% for 2005-06.

Resources mobilized through public Issues


(Amount in Rs. Million)
Year

Resources raised by
non-government

% of GDS

companies
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-04
2003-05
2004-06

% of
disbursement

Mobilisation
By MF

by Fis
43,120
61,930
198,030
193,300
264,170
160,750
104,100
31,380
50,130
51,530
49,490
56,924
18,777
32,100

3.32
4.38
12.76
9.98
10.48
5.34
3.28
0.84
1.27
1.11
1.01
1.17
0.74
1.20

33.66
38.08
85.54
74.85
78.69
41.59
24.40
5.85
8.59
7.51
6.89
10.18
18.37
15.08

750,800
112,530
130,210
112,430
112,750
583,30
203,70
40,640
36,110
199,532
111,350
71,370
45,830
476,840

Government Securities
The primary issues of the Central Government have increased manifold during the
decade of 1990s from Rs. 89,890 million in 1990-91 to Rs. 1,476,360 million in 200506 (Table 1-9). The issues by state governments have also increased over this
period from Rs. 25,690 million to Rs. 505,210 million. The Central Government
37

mobilized Rs. 1,215,000 million through issue of dated securities and Rs. 261,360
million through issue of T-bills. After meeting repayment liabilities of Rs. 326,930
million for dated securities, and redemption of T-bills of Rs. 261,260 million, net
market borrowing of Central Government amounted to Rs. 888,160 million for the
year 2005-06. The State Governments collectively raised Rs. 505,210 million during
2005-06 as against Rs. 308,530 million in the preceding year. The net borrowings of
State Governments in 2005-06 amounted to Rs. 463,760 million. The trading in
government securities exceeded the combined trading in equity segments of all the
exchanges in the country during 2005-06. The aggregate trading in central and state
government dated securities, including treasury bills, increased by manifold over a
period of time. During 2005-06 it reached a level of Rs. 26,792,090 million. The share
of WDM segment of NSE in total turnover for government securities decreased
marginally from 52% in 2004-05 to 47.6% in 2005-06. However, the share of WDM
segment of NSE in the total of Non-repo government

securities

increased

marginally from 74.01% in 2004-05 to 74.89% in 2005-06.


Along with growth of the market, the investor base has also widened. In addition to
banks and insurance companies, corporate and individual investors are also investing
in government securities. Due to the soft interest rate policy pursued by the RBI, the
coupon rates offered on government borrowings have fallen sharply. The weighted
average costs of its borrowing have declined to 5.71% in 2005-06. The maturity
structure of government debt is also changing. About 77% of primary issues were
raised through securities with maturities above 5 years and up to 10 years. As a result
the weighted average maturity of dated securities increased to 14.94 years in 2005-06.

Derivative Market
The number of instruments available in derivatives has been expanded. To begin with,
SEBI only approved trading in index futures contracts based on S&P CNX Nifty
Index and BSE-30 (Sensex) Index. This was followed by approval for trading in
options based on these two indices and options on individual securities and also
futures on interest rates derivative instruments (91-day Notional T-Bills and 10-year
Notional 6% coupon bearing as well as zero coupon bonds). Now, there are futures
38

and options based on benchmark index S&P CNX Nifty and CNX IT Index as well as
options and futures on single stocks.
The total exchange traded derivatives witnessed a value of Rs. 21,422,690 million
during 2005-06 as against Rs. 4,423,333 million during the preceding year. While
NSE accounted for about 99.5% of total turnover, BSE accounted for less than 1% in
2005-06. NSE has created a niche for itself in terms of derivatives trading in the
global market.

Risk Management System


The risk management system ensures the minimization of inherent known risks with
appropriate tools and timely speedy flow of information. An effective risk
management system further ensures certain alerts by which unknown risks can be
predicted & informed in due course of time.
In stock market operation, the risk is too high to imagine and one can find instant
impact of every bit of information in terms of monetary gain or loss. So one has to be
very careful & particular to the alerts provided time to time by RMS for containing
the risks.
Further, RMS cant ensure a complete elimination of risks. It can reduce the risk &
level of reduction of risk depends upon our own efforts. So it is advised that one
should follow set norms & put proper attentions on various alerts send by the RMS
during the day /at the end of day for controlling the risks.
To start with day to day processes which are implemented on daily basis to eliminate
Risk as much as one can with the stipulated tools and techniques. One should apply
these tools and techniques according to the requirement of their Management and the
Market conditions.

Rationale behind Study


As result of reforms in financial and real sector new investment alternatives have
emerged. There was a time when few individuals possessed majority of the wealth in
39

the society.

With the efforts of government our economy witnessed significant

growth, which led to uniform distribution of income in society. As a result income of


masses started rising and they started looking for suitable investment avenues, to
achieve their financial goals. From savings accounts, fixed deposits, post office
savings schemes, several other investment alternatives have emerged such as capital
markets, mutual funds, commodities market, insurance derivatives etc. There has been
a major shift towards risky investments in order to earn higher returns. There were
also scams like US-64, Harshad Mehtas scam, which forced investors to make
changes in their portfolio. But after government efforts investors confidence is
restored in equity markets, which led to growth in financial services sector. After this
period in today's market scenario we find Indian economy still struggling while the
world is facing massive recession. Indian economy is in such position because it is
still in its developing stage and so there is so much more to explore and develop.
Recently market has faced downtrend but still holding on and offering new
investment avenues to investors and still offers lucrative benefits to investors.
SMC GLOBAL AND SECURITY plays a very important role along with other
players in the market in current scenario by offering its financial services. Investors
today are going in for saving their money instead of investing it in the market due to
current market situation. Government of India is making constant efforts to support
the economy by decreasing interest rate on loans of all types. This showed a positive
growth in the market by investors turning back to the market. Also constant efforts
have made auto industry to lower down the rates of automotives and private banks
also lowered their interest rates on loans to help Indian investors to come forward and
step in the market.
Thus, this study helps in understanding current market volatility and solutions to deal
with it, so as to find future prospects for \SMC GLOBAL AND SECURITY and
answer questions like, how to deal with recession evils? How to protect investors
interest? How to sustain market position and market share?
To understand it and deal with it one always has to go to the basics that is the
investors and the reason investor invests is his motive.

40

Motives for investment may vary from person to person, but there are some common
desires. Everybody expects some return out of investment. Investors are also
concerned about the safety of investment. And, in case of an emergency, people want
their money back, quickly. Hence, there are three criterias to evaluate every
investment avenue:
1.
2.
3.

Safety
Liquidity
Returns

Products & Services


SMC customers have the advantage of trading in all the market segments together in
the same window, as they understand the need of transactions to be executed with
high speed and reduced time. At the same time they have the advantage of having all
kind of Insurance & Investment Advisory Services for Life Insurance, General
Insurance, Mutual Funds, and IPOs also.
SMC is a customer focused financial services organization providing a range of
investment solutions to their customers. They work with clients to meet their overall
investment objectives and achieve their financial goals. Their clients have the
opportunity to get personalized services depending on their investment profiles. Their
personalized approach enables clients to achieve their Total Investment Objectives.
Their key product offerings are as follows:
o Equity Trading
o Commodity Trading
o Depositary Services
o Portfolio Tracker
o Life Insurance
o General Insurance
o Mutual Fund

COMPANY FINANCIALS
Revenue
Month
Sep 07
Oct 07
Nov 07
Dec 07
Jan08
Feb08
Mar08

(in Lakhs)
29.05
60.27
79.61
107.94
104.37
140.43
128.89

41

The above shown graph depicts the revenue generated by SMC in 6 months starting
from September, 2007 to March2008. This graph shows an upward sloping trend
line. If we look at the numbers, we see a 343% growth in the revenues from 29.05
lakhs in Sept07 to 128.89 lakhs in March08.
Though, there have been a few slips in January and March but over all its presents
financials of a growth company.

ONLINE Vs OFFLINE TRADING


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 (MIS).

Introduce flexibility in system, 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, reduction of the systematic risks.

42

The investors would be able to track the fluctuations in a particular stock and the
market as a whole, while deciding to execute the order and also while the order is
being executed. The confirmation of the order would also be real time. The order
routing system on which net trading will be done is compatible with screen-based
trading terminals used today.
Internet trading brings in total transparency between a broker and an investor in case
of secondary market operations. When the open outcry system was prevalent, only the
broker knew the actually transacted price. This practice diminished significantly when
it was taken over by screen-based trading. With on-line trading, investors can now see
for themselves the price at which the deal takes place.
It will also reduce transaction costs, increase liquidity in the market and ensure total
transparency. It allows quick and easy access to valuable research and information to
an investor and enables him execute transactions faster and more efficiently on a real
time basis. The volume of trade has also increased and has provided depth to the
market. Thus, in a nut shell, we can summarize the difference between online and
offline trading as follows:
ONLINE
1. In

online

trading

OFFLINE
mechanism

the

In offline the investor has no control.

customer has full control on his Demat


and trading a/c.
2. Investor in online trading can easily
transfer it funds.

The investor needs to deposit and withdraw


fund each time of trading.

3. Broking houses providing online trading

No live terminal is provided.

also provides live terminals to their


clients.
4. The broker provides investor at online

Offline investors are deprived of advices.

trading with advisory facility.


5. Online investor can directly invest into

Offline trader needs to open separate

IPOs and Mutual funds also.

account.

6. Investor can place order even after the

Investor cannot place After Market Order


43

market closes.

(AMO).

7. The client can globally access the

Trader cannot trade away for the place

account and can trade anywhere in the

where he/she has opened its account.

world

DI slips are required for trading.

where

Internet

facility

is

available.
8. No documents are required for trading.

The Demat account cannot be linked with

9. Any Demat/DP account can be attached

any trading account.

with any companys trading account.


10. Online trading is time effective

It is time consuming process.

11. No pool account is maintained at online

In offline pool account are maintained.

process

SEBI Guidelines for online Trading


According to SEBI guidelines on Internet trading, brokers providing e-trading must
have a minimum net worth of Rs. 50 lakhs, besides obtaining specific permission of
the stock exchange concerned. Stock exchanges should ensure that the systems used
by the broker provide for security, reliability and confidentiality of data through use of
the encryption technology. For signatures, participants should use authentication
technologies and certification agencies as and when notified later.
Stock exchanges should also ensure that brokers maintain adequate back-up systems
and data storage capacity. Brokers should have adequate system capacity for handling
data transfer and arrange for alternate means of communication in case of Internet
failure. The following security features are mandatory for all Internet-related trading
systems:
User ID.
First level password.
Automatic expiry of password at the end of reasonable duration.
All transaction logs with proper audit facilities to be maintained in the system.
Secured socket level security server for access through Internet.
44

Suitable firewalls between trading set up directly connected to an exchange


trading system and the internet trading set up.

Internet Trading
At the end of March 2007, 78 trading members on the CM segment provided internet
based trading facility to investors. The members of the exchange in turn had
registered 849,696 clients for web based access as on March 31, 2007. In the CM
segment about 499 lakh trades for Rs. 81,034 crores, constituting 7.11% of total
trading volume, were routed and executed through internet. The following table gives
the growth of internet trading.

Year

Enabled
Members*

Registered
Clients*

2001-02

2002-03

61

123578

2003-04

82

231899

2004-05

80

346420

2005-06

70

463560

2006-07

78

849696

Year

Trading Volume
(Rs. Crore)

% of total
trading
volume

2000-01

2001-02

7287.81

0.54

2002-03

8138.81

1.59

2003-04

15360.76

2.48

2004-05

37945.08

3.45

2005-06

81033.81

7.11

45

(Source:

- www.nseindia.com)

By the end of Dec. 2006 the number of clients doing the online trading has increased
to 13lacs.

Liquidity
The liquidity in the CM segment, as measured by the turnover ratio, has witnessed a
steady increase and reached nearly 10.13% during March 2007. More than 98.02% of
securities available for trading are being traded every month and 95.6% of the
securities were traded for at least 100 days during 2005-06, as indicated below:

Distribution of Turnover
The concentration of trading among top N securities/brokers. It is observed that the
top 5 and 100 securities account for about 25.88% and 84.26% of total turnover in
the CM segment in 2005-06. The details of 50 most active securities during 2005-06,
which accounted for 78.40% of turnover Broker-wise distribution of turnover
increasing diffusion of trades among a large number of trading members over the
years. During 2005-06, top 5 brokers accounted for only 13.52% of turnover, while
top 100 brokers accounted for 65.09% of total turnover. The following shows the
turnover of the trade done through internet.
Trade Date

Settlement No.

No. of Trades

Turnover (Rs.cr)

5-May-2007

2007082

649071

1182.21

4-May-2007

2007081

655428

1234.84

3-May-2007

2007080

680710

1260.11

2-May-2007

2007079

669625

1216.86

29-Apr-2007

2007300

308508

735.79

28-Apr-2007

2007078

652819

1326.26

27-Apr-2007

2007077

677594

1597.00

26-Apr-2007

2007076

565581

1353.48

25-Apr-2007

2007075

613816

1263.89

24-Apr-2007

2007074

614635

1356.16

21-Apr-2007

N2007073

681553

1375.54

20-Apr-2007

N2007072

585334

1143.46

19-Apr-2007

N2007071

607168

1200.28

18-Apr-2007

N2007070

568237

1052.51

17-Apr-2007

N2007069

501438

922.51

13-Apr-2007

N2007068

686576

1315.20

12-Apr-2007

N2007067

681800

1284.18

10-Apr-2007

N2007066

570339

1143.94

7-Apr-2007

N2007065

758906

1655.68

46

5-Apr-2007

N2007064

633591

1306.19

4-Apr-2007

N2007063

635877

1238.40

3-Apr-2007

N2007062

591383

1180.07

MARKET CAPITALIZATION
The total market capitalization of securities available for trading on the CM segment
increased from Rs. 363,350 crore as at end March 1995 to Rs. 1,585,585 crore as at
end March 2007. Top 50 companies account for 69.21% of total market capitalization
as at end March 2007.

SECTORAL DISTRIBUTION
The share of top '50' companies, classified according to different sectors, in terms of
trading volume and market capitalization. A drastic change in the importance of
different sectors is observed since NSE commenced trading. The share of
manufacturing companies in trading volume of top '50' companies, which was more
than 23% in 1998-99, had witnessed a decline in the years 2001-02 and 2002-03, but a
turnaround was noticed in the year 2003-04 (it accounted for 37.66%) which was also
maintained till 2006-07 with the share of manufacturing companies rising to 41.81%.
As compared to this, the share of information technology (IT) companies in trading
volume, which had been quite high in the year 2000-01, witnessed a considerable
decline and stood at only 19.56% in 2005-06. A mixed trend has been noticed in these
sectors in terms of market capitalization. Sectors like manufacturing, which used to
dominate in terms of market capitalization in the year 1999-00 witnessed a dip in
2002-03, however this sector has witnessed a rebound and accounted for 31.13% and
23.35% in 2005-06 and 2006-07 respectively. The IT sector has also shown a
turnaround this year with 22.54% in the top 50-market capitalization in 2006-07.

ONLINE TRADING WITH SMC

47

SMC launched online trading in June, 2006 in addition to the traditional offline
mode of trading on NEATXSV4. Since then SMC has managed to a fair
share of client base which is very much visible from the company
financials.
SMC is doing a good job in the offline industry as it has established a good
brand name for itself in a short span of time.
But looking at the competition, the company decided to launch its online
trading portal in June, 2006.
Besides, being up in the line of competition, Online trading also helps the
company to cut recurring costs as it happens in offline trading.
Though, setting up online trading infrastructure requires one time set up cost
like the cost of software, bandwidth charges, skilled manpower etc. which is
quite high. But the benefits are recurring as the online trading is about volumes.
Larger the client base, higher the revenues.
This is screenshot of SMC, which is the online trading software of SMC.

Features of SMC
A browser based trading software that enables clients to access their accounts from
anywhere using internet by a unique ID and password. This facility is available to all
the online clients the moment they get registered with SMC INVESTMENT

SOLUTIONS & SERVICES


The product has a lot of features which provides various benefits to clients:
1) The screen gives live streaming quotes from respective exchanges. The client has
an option of having live Multiple Windows for different exchanges and his personal
window where he can add the scrips of his choice and save it.
2) It provides a Common window for display of market watch and order execution
where the client can click + (plus) for Buy and (minus ) for Sell or Click on the

48

scrip and Press F1 to Buy and F2 to sell which provides an easy trading facility to the
client. It also provides an Offline order placement facility.
3) Before Buying or Selling, the client can watch the Market Depth, which tells about
Best Buy/Sell rates and Quantities etc of that security & also enables the clients to use
the Stop-loss Feature to minimize their losses.
4) A very useful feature of the product is FIRE THE TRIGGER,
TRIGGER, which lets the
client set an Alert for itself to indicate a certain price of the scrip. The user can set a
different color or an audio alarm.
5) It enables clients to transfer funds online from their bank account
to SMC trading account. SMC has banking integration with PNB, HDFC,AXIS
Bank.
6) It also enables the clients to view the transactions (Buy or Sell) done during the
day. Beside the rate, quantity, type of account etc, the client can also view the order
number, time of transaction & can also get the details of entire fortnight.
7) The client can see the Bids/Offers that are not yet executed by the Exchange and
has the options to Modify and Cancel the Order.
8) Greater exposure for trading on the available margin & DP MARGIN STOCK with
very competitive commission.
9) It also provides Real time updating of exposure and portfolio while trading &
Online Integration of trading a/c with two common depositories to help move clients
shares to and fro with ease.

They also have the authority to square of the positions of the clients who dont pay
their margin money.
IT shares the responsibility of supporting the entire system so that it runs smoothly.

How to do trading with our SMC Swift Model:Step 1


Install the Software provided by us and register urself on the software
49

Step 2: Check the Current Status of the account

Step 3: Check the limit assigned

50

Step 4 Account Valuation

Step 5 To Buy

To Sell

51

ORDER BOOK

TRADE BOOK

52

Default Limit and Exposure to the Clients:1. For Liquidated Value greater than or equal to 2 LAC, default limits
will be opened in Intraday ten times and Delivery Three times (Only
on a Cat) on Cash market and one time on FNO market of Net Margin.
2. For Liquidated Value less than 2 LAC, default limits will be opened in
Intraday five times and Delivery Three times (Only on a Cat) on Cash
market and one time on FNO market of Net Margin .
Square Up:
It is a margin status when percentage of coverage is less then 25% when
comparing funding stock (A cat stock) with gross margin. It is a last alert
that the position of client may be squared up at any time if the Percentage
of coverage goes below 25%. It is a last alert that something must be
done either by reducing the position or enhancing the margin .It is a point
where the position of the client is squared up.
NORMAL SQUARE OFF (LESS THEN 25%)
This activity has been done on daily basis with the help of software
driven Batch file (provided by the IT department). Codes which have
53

been not uploaded in the Batch file due to any exceptions are any
commitment from Branch end are done manually if commitment fails.
Sauda of a client BELOW 25% will be compulsory squared off next
morning, in case no proper reply received from the concerned
RM/Branch.
Proper Reply here shall mean:
- Amount is being transferred to top up the margins only through a
transfer Cheque or Demand draft subject to the condition that the
transfer Cheque or Demand draft is reflected in the bank as having
been deposited before 2:00 P.M.
- The reply should Specify what positions shall be squared off before
that 10.30 a.m. , in case the same is not done to the extent of bringing
the clients margin above the required 50% margin levels , the RMS
shall block the client and square off the balance position so as to bring
the client above the required margin levels.
Margin Call square off process:1. Preparation of square off cases report.
2. Preparation of Batch File for Automated Square off.
3. Reconciliation of Batch File after and before it has been executed.
4. Consolidation of square off replies of margins from Branch end
and make it considered.
5. Preparation of Exceptions client List.
6. Making note of commitments from Branch and Regional Heads
against square off codes and make follow up accordingly.
7. Preparation clients Cheque deposit details.

54

Before: - We have to make sure that the batch file has been created
according to square off policy of RMS. All exceptions and necessary
details has been taken into consideration or not.
After: - After execution of the batch file we have to check that every
order of the file is properly executed or not and if there is any rejection
then immediate action to be taken (Rejection to be squared manually)
SQUARE OFF 5TH DAY LEDGER DEBIT CLIENTS (NON LAS):This activity is done on the Manual basis only. The process of square off
5th day ledger debit is same as Normal Square off; only difference is that
it is done manually. To square off we have to prepare NON LAS
LEDGER DEBIT REPORT.

55

DATA ANALYSIS
Q 1. Do you know about investment options available?

KNOWLEDGE
Yes
No
TOTAL

%AGE
80%
20%
100

Interpretation
Only 80% people knows the exact meaning of investment. Because of remaining 20%
take his/her residential property as an investment. According to law purpose this is not
an investment because of it is not create any profit for the owner.

56

Q 2. Most important things you take into your mind while making investments?
FACTOR

%AGE

Risk
Returns

8%
17%

Both
TOTAL

75%
100

Interpretation
75% people are considered the both factors risk as well as returns but, only 25%
considered the risk or returns factor.

57

Q 3. Awareness related to security markets


KNOWLEDGE
Complete
Partial
Nil
TOTAL

PERCENTAGE
8%
75%
17%
100

Interpretation
On that basis, we conclude that 17% people know nothing about the securities
investments and 75% people have partial knowledge about it, so, some promotional
activities are required for increasing the awareness about security market.

58

Q 4. What is the basic purpose of your investment?


INVESTMENT PURPOSE
Liquidity

PERCENTAGE
30%

Returns

25%

Capital appreciation

10%

Tax benefits

20%

Risk covering
Others
TOTAL

5%
10%
100

Interpretation
75% people are interested in liquidity, returns and tax benefits. And remaining 25%
are interested in capital appreciations, risk covering, and others.

59

Q 5: Since how long have you been investing in capital market?


Time

Period Frequency

Less than 3 yrs


3-5 yrs
More than 5 yrs
Total

80
73
47
200

%age
39
37
24
100

Interpretation
Looking at the figures, we can observe that 39 % of people have been investing for
less than 3 years and so on. We know that the capital markets have picked up in past
4-5 years. Also, there are more stringent norms by SEBI and exchanges. That is the
reason why people have started to pose more trust in capital markets now.

60

Q 6 : Do you trade Online?

Yes
No
Total

Frequency
141
59
200

Percentage
70.5
29.5
100

Interpretation
Out of the people surveyed, 70 % people trade online. This shows a good prospect for
online trading in future.

61

Q. 7. COMPLICATED PROCESS

Yes
No
No reply
Total

Frequency
60
46
94
200

Percentage
30
23
47
100

Interpretation
This table shows the consolidated table of number of people voting for different
factors as to why dont they prefer to trade online.

62

Q. 8 . Why not online?


Factors
Yes
LACK OF MARKET
KNOWLEDGE
NO COMPUTER
INVESTMENT RISK
POOR SERVICES
COMPLICATED PROCESS

No. of People
No
36
20
100
75
60

21
110
75
72
46

Interpretation
We asked the people as to why they dont trade online. Out of the reasons, given, we
observe that maximum people avoid doing online trading as they perceive it to be
more risky. Also, some of them have experienced poor services from their online
brokers. Hence, they avoid doing online trading.
At the same time the companies need to trap those 30% people who are still not aware
of the benefits of online trading and try to shift them towards online trading. The
companies should also try to find and analyze the reasons as to why these customers
are not trading online in spite of so many benefits the online trading offers.

63

IF YES
Name of the company you trade with.
Kotak Securities
ICICI direct
IndiaBulls
Sharekhan
SMC Investments Solutions
Others
TOTAL

Frequency
42
35
60
30
15
18
200

Percentage
21
17.5
30
15
7.5
9
100

Interpretation
India Bulls enjoy maximum market share of 30% followed by Kotak and ICICI direct.
SMC has only 7.5% share at present but is growing

64

Q 9: Which factor is most important while choosing a broking house?

Interpretation
Out the factors that attract ant investor to online trading are the low transaction cost
followed by fast processing so that their margin is not lost due to time lag. Also,
another factor that is of importance are the regular updates that the organization
provides to its clients.

65

Q 10 : Where ELSE do you invest your surplus fund?


Areas
Direct Equity
Mutual fund
Insurance
Real Estate
Banks

Frequency
75
65
150
35
150

Interpretation
We also found that besides stock Market, people prefer to invest in Mutual funds.
Thus, it can also serve as a good opportunity to earn revenue for the company.

66

FINDINGS AND RECOMMENDATIONS


As we worked with this project, we came across some good and some not
so good features of this product.
We take this opportunity to suggest some measures in order to make improvements to
the product.
1. SMC needs to be more flexible with account types and brokerage structure so
that it can cater to all types of client segments and hence, increase its client
base.
2. SMC need to focus on HNI and corporate accounts more as they bring in bulk
business.
3. It should also try to collaborate with more banks so that the investor doesnt
have to go through the turmoil of opening new accounts.
4. Their were some features in SMCPlus that needed to be changed and so were
suggested by us.
There was no feature of Payment Gateway for fund transfer to and from
the client in case of Pay-in and Payout.
The Margin report and Intra-day report though, contains all the necessary
details, are a little complicated from the clients end.
In case the client does some transactions for Intra-day purpose but he
gets his orders in different lots. Now, if he wants to change his order type
from Intra-day to Delivery, then he has to go to trade log and change
the order type for each of the order lots.
This can be done away with by going to Net Position feature and changing it in
one go.
SMCSwift gives the client a facility to put an alarm if a certain rate of a
particular stock is achieved.

67

We suggest that a new feature should be introduced wherein an SMS facility


should be provided to the clients who are on the go most of the time. This feature
will be unique as no other software does it and can become the USP of this
product. This will also benefit the company n terms of revenue.
5. As a whole, if we look in general, we find a lot of frauds happening in this
field. Thus, there should be proper compliance measures taken up by the
company for investor protection like sending reports on the total trades done
on their accounts.
6. Also, looking at the competitive scenario, it is suggested that the company
should aggressively focus more on Sales and promotional activities by
efficiently utilizing the manpower resource it has.
7. The company can also introduce dial and trade facility in case online system
defunct.

68

CONCLUSION
Facts and figure speak in itself that as from the past years analysis of capital market
we could see the bullish trend of the Indian stock market. There has been a
tremendous pressure on the Indian industries to perform well as the expectations of
the investors are rising with bullish market sentiments. The Online trading has grown
tremendously since 2000-01 to 2007 form 7287.18 cr. to 81033.1 cr. respectively. The
client base has also improved form 1,23,578 to 8,49,696. This has raised to 12.70 lacs
till Dec. 2007.
Compared to the Western countries, online trading is still in its infancy in India. With
trading turnover at around Rs. 10 crores per day from online trading compared to a
combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and
NSE together, online trading has a long way to go. With some ten dotcom players,
such as icicidirect.com, investsmart, 5paisa.com, indiabulls, and a host of brokers,
such as kotaksecurities, sharekhan, motilaloswal, Geojit Securities and duttstock,
entering the online ring promises exciting times ahead.
However, the existing online trading system suffers from a major lacunae.
icicidirect.com currently offers online trading services only to investors who have a
bank or a demat account with ICICI. Or, investors can open an online trading account
with SMC only if they open a demat account with it and have a bank account either
with ICICI, HDFC Bank. If investors do not have these accounts, they have to go
through the entire rigmarole of opening up the bank and demat account again for easy
operation. Apart from the hassles involved, there may also be certain extra charges
involved in this exercise that may have to be built into the overall cost of online
trading.

69

ANNEXURES

70

QUESTIONNAIRE
Q 1. Do you know about investment options available?
KNOWLEDGE
Yes
No

Q 2. Most important things you take into your mind while making investments?
FACTOR
Risk
Returns
Both
Q 3. Awareness related to security markets
KNOWLEDGE
Complete
Partial
Nil
TOTAL
Q 4. What is the basic purpose of your investment?
INVESTMENT PURPOSE
Liquidity
Returns
Capital appreciation
Tax benefits
Risk covering
Others

71

Q 5: Since how long have you been investing in capital market?


Time
Less than 3 yrs
3-5 yrs
More than 5 yrs
Total

Q 6 : Do you trade Online?


Yes
No
Q. 7. COMPLICATED PROCESS
Yes
No
No reply

Q. 8 . Why not online?


Factors
LACK OF MARKET
KNOWLEDGE
NO COMPUTER
INVESTMENT RISK
POOR SERVICES
COMPLICATED PROCESS

IF YES
Name of the company you trade with.
Kotak Securities
ICICI direct
IndiaBulls
Sharekhan
SMC Investments Solutions
Others

72

Q 9: Which factor is most important while choosing a broking house?


Low transaction
Regular information
Fast quarry
Fast transaction
Brand image
Q 10 : Where ELSE do you invest your surplus fund?
Areas
Direct Equity
Mutual fund
Insurance
Real Estate
Banks

73

BIBLIOGRAPHY
BOOKS

Gupta, C.B., Human resource management

Kothari, C.R., Research Methodology

Gupta .S.L ,Research Mythology

Sources of Secondary Data:


1. Magazines and Journals:

S & P Emerging Stock Market Factbook

SEBI Bulletin

The Economic Times

The Mint

The Hindustan Times

The Times of India

The Wallstreet Journal

Indian Economy Magazine

Financial Management (Prasanna Chandra 12th Edition)

Marketing Research (TN Chabbra 4th Edition)

2. Websites

www.cmie.com

www.rbi.org.in

www.SMCindia.in

www.nse-india.com

www.wikipedia.com

www.ask.com

www.google.co.in

www.sebi.gov.in

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