A PROJECT REPORT ON

A STUDY OF ONLINE TRADING AND STOCK BROKING

AT
SHAREKHAN PVT LTD

A Project report submitted in partial fulfillment for the Award of the

Master of Business Administration (MBA) (FINANCE)

Submitted By

CHANDRASEKHAR GOUD.G

Roll No. 08J81E0010

Under the Guidance of

MR.SRINIVAS

(Assistant Professor of MBA Dept)

DEPARTMENT OF BUSINESS MANAGEMENT

P.INDRA REDDY MEMORIAL ENGINEEING COLLEGE

(Affiliated to Jawaharlal Nehru Technological University)

DECLARATION

I here by declare that this project report entitled A STUDY

OF ONLINE TRADING AND STOCK BROKING has

been

prepared by me is an original work submitted to

Jawaharlal Nehru Technological University towards partial
fulfillment of the requirement for the award of

Master of Business Administration. I also here by declare

that this project report has not been submitted at any time
to any other university or institute for the award of any
Degree or Diploma.

(G.CHANDRA SEKHAR GOUD)

(08J81E0010)

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

Has been done by

G.CHANDRA SEKHAR GOUD
(08J81E0010)
In the partial fulfillment of the requirements for the award of the
degree of Master of Business Administration from P.Indra
Reddy Memorial Engineering College, affiliated to Jawaharlal
Nehru Technological University is a record of bonafide work
carried out by them under my guidance and supervision. The result
embodied in this has not been submitted to any other university or
institute for the award of any degree.
Internal Guide:
MR.D.H.B.R.PRASAD
Mr. SRINIVAS
Head of the department

Master of Business Administration

ACKNOWLEDGEMENT

I take this opportunity to express my gratitude high regards and

sincere thanks to our respected Principal Dr. R.V. Krishnaiah
for providing excellent infrastructure.
I thank Mr. D.H.B.R.Prasad Head of the Department of MBA for
his constant help and support.
I express my sincere thanks to our committed faculty
Mr.SRINIVAS for his support and guidance.

I have great regard for all the well wishers whose help is beyond
acknowledgement.

(G.CHANDRA SEKHAR GOUD) (08J81E0010)

Chapter 1

Objectiv
es
&

Methodo
logy

OBJECTIVES AND METHODOLOGY

NEED FOR THE STUDY:

The present study to review the online trading procedure a case

study of ONLINE TRADING at SHAREKHAN as the exchange has
changed its trading from the outcry mode to online trading on 20
February 1997, there is need to assess the performance of the
capital market.

th

OBJECTIVES OF THE STUDY:

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

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

To know the online screen based trading system adopted by SHAREKHAN and about
its communication facilities. The appropriate configuration to set the network, which
would link the SHAREKHAN to individual / members.

To know about the latest and future development in the stock exchange trading system.

METHODOLOGY OF THE STUDY:

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

Primary method: This method includes the data collected from the personal interaction
with authorized members of Sharekhan Securities limited.

Secondary method: The secondary data collection method includes:

The lecturers delivered by the superintendents of respective departments. The

brochures and material provided by Sharekhan Securities limited. The data collected
from the magazines of the NSE, economic times, etc.

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

LIMITATIONS OF THE STUDY:

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

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

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

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to do so. If
he want advice on a particular stock in his portfolio he may not even be able to get that.

Chapter 2

Company
profile

INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:

10

FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for
buying and selling of financial claims and services. The financial markets match the
demands of investment with the supply of capital from various sources.

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

Money markets (short-term)

Capital markets (long-term)

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

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized

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

MONEY MARKET:

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

Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

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

11

CAPITAL MARKET:

Capital market is a place where we can raise long-term capital. Again the capital market is
classified in to two types and they are

Primary market and

Secondary market.

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

PRIMARY MARKET:

Primary market is gener ally 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
exp ansion, modernization, addition, diversif cation and up gradation. Primary market is also
referred to as New Issue Market. Primary market operations include new iss ues of shares
by new and existing compan ies, further and

12

right issues to existing shareholders, public offers, and issue of debt instruments such
as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI a
government regulated authority).

Function:

The main services of the primary market are origination, underwriting, and distribution.
Origination deals with the origin of the new issue. Underwriting contract make the
shares predictable and remove the element of uncertainty in the subscription.
Distribution refers to the sale of securities to the investors.

The following are the market intermediaries associated with the market:

Merchant banker/book building lead manager

Registrar and transfer agent

Underwriter/broker to the issue

Adviser to the issue

Banker to the issue

Depository

Depository participant

Investors protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected.
The term investor protection has a wider meaning in the primary market. The principal
ingredients of investors protection are:

Provision of all the relevant information

Provision of accurate information and

Transparent allotment procedures without any bias.

13

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities are
traded in the secondary market, which is commonly known as stock market or stock
exchange. The secondary market is a market where scrips are traded. It is a market
place which provides liquidity to the scrips issued in the primary market. Thus, the
growth of secondary market depends on the primary market. More the number of
companies entering the primary market, the greater are the volume of trade at the
secondary market. Trading activities in the secondary market are done through the
recognized stock exchanges which are 23 in number including Over The Counter
Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock
Exchange of India.

Secondary market operations involve buying and selling of securities on the stock
exchange through its members. The companies hitting the primary market are
mandatory to list their shares on one or more stock exchanges in India. Listing of scrips
provides liquidity and offers an opportunity to the investors to buy or sell the scrips.

The following are the intermediaries in the secondary market:

Broker/member of stock exchange buyers broker and sellers broker

Portfolio Manager

Investment advisor

Share transfer agent

Depository

Depository participants.

14

STOCK MARKETS IN INDIA:

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

Definition of a stock exchange:

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

constituted for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities. The securities include:

Shares of public company.

Government securities.

Bonds

History of Stock Exchanges:

th

The only stock exchanges operating in the 19 century were those of Mumbai setup in
1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profitmarking associations of brokers to regulate and protect their interests. Before the
control on securities under the constitution in 1950, it was a state subject and the
Bombay securities contracts (control) act of 1925 used to regulate trading in securities.
Under this act, the Mumbai stock exchange was recognized in 1927 and Ahmadabad in

1937. During the war boom, a number of stock exchanges were organized. Soon after it
became a central subject, central legislation was proposed and a committee headed by
A.D.Gorwala went into the bill for securities regulation. On the basis of the committees
recommendations and public discussion, the securities contract (regulation) act became
law in 1956.

15

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to the
listed companies, they help trading and raise funds from the market. Over the hundred
and twenty years during which the stock exchanges have existed in this country and
through their medium, the central and state government have raised crores of rupees by
floating public loans. Municipal corporations, trust and local bodies have obtained from
the public their financial requirements, and industry, trade and commerce- the backbone
of the 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.

16

Various Stock Exchanges in India:

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

Ahmadabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

17

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

18

Out of these major stock exchanges were:

NSE (National Stock Exchange)

The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (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 1994.
The Capital Market (Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000

19

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

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

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

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

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

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

20

BSE (Bombay Stock Exchange)

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as
"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even
older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary
non-profit making Association of Persons (AOP) and is currently engaged in the process
of converting itself into demutualised and corporate entity. It has evolved over the years
into its present status as the premier Stock Exchange in the country. It is the first Stock
Exchange in the Country to have obtained permanent recognition in 1956 from the
Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange,
while providing an efficient and transparent market for trading in securities, debt and
derivatives upholds the interests of the investors and ensures redresses of their
grievances whether against the companies or its own member-brokers. It also strives to
educate and enlighten the investors by conducting investor education programmers and
making available to them necessary informative inputs.

21

A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year by
rotation), three SEBI nominees, six public representatives and an Executive Director &
Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and the Chief Operating Officer and other Heads of
Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing
Board has powers as an Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-brokers, declaration of
a member-broker as defaulter, norms, procedures and other matters relating to
arbitration, fees, deposits, margins and other monies payable by the member-brokers to
the Exchange, etc.

22

REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the Securities Contract Regulation

Act, 1956 and Securities Exchange Board of India 1952. Three tier regulatory
structure comprising

Ministry of finance

The Securities And Exchange Board of India

Governing body

Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation for the
admission of members in the stock exchanges. The qualifications for becoming a
member of a recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years. He should be an Indian
citizen.

He should be neither a bankrupt nor compound with the creditors. He should not be
convicted for fraud or dishonesty.

He should not be engaged in any other business connected with a company. He should
not be a defaulter of any other stock exchange.

th

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

23

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a resolution
of government of India. It was later made statutory body by the SEBI act 1992.according
to this act, the SEBI shall constitute of a chairman and four other members appointed by
the central government.

With the coming into effect of the securities and exchange board of India act, 1992
some of the powers and functions exercised by the central government, in respect of
the regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities.

Regulating the business in stock exchanges and any other securities market.
Registering and regulating the working of intermediaries associated with

securities market as well as working of mutual funds.

Promoting and regulating self-regulatory organizations. Prohibiting insider trading in

securities.

Regulating substantial acquisition of shares and take over of companies.

Performing such functions and exercising such powers under the provisions of capital
issues (control) act, 1947and the securities to it by the central government.

24

SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):

Board of Directors of Stock Exchange has to be reconstituted so as to include nonmembers, public representatives and government representatives to the extent of 50%
of total number of members.

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

exchanges depending upon their turnover of trade and other factors.

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

TYPES OF ORDERS:

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

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

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

Discretionary order: The investor gives the range of price for purchase and sale. The
broker can use his discretion to buy within the specified limit. Generally the

approximation price is fixed. The order stands as this buy BRC 100 shares around
Rs.40.

Stop loss order: The orders are given to limit the loss due to unfavorable price
movement in the market. A particular limit is given for waiting. If the price falls below the
limit, the broker is authorized to sell the shares to prevent further loss. E.g. Sell BRC
limited at Rs.24, stop loss at Rs.22.

Buying and selling shares: To buy and sell the shares the investor has to locate register
broker or sub broker who render prompt and efficient service to him. The order to buy or
sell specifying the number of shares of the company of investors choice is placed with
the broker. The order may be of any type. After receiving the

25

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

Share groups: The scrips traded on the BSE have been classified into A,B1,B2,C,F
and Z groups. The A group represents those, which are in the carry forward system.
The F group represents the debt market segment (fixed income securities). The Z
group scrips are of the blacklisted companies. The C group covers the odd lot
securities in A, B1&B2 groups.

ROLLING SETTLEMENT SYSTEM:

Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3 or
5days) after the trading day. The shares bought and sold are paid in for n days after the
trading day of the particular transaction. Share settlement is likely to be completed
much sooner after the transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days after
the trading day. A rolling period which offers a large number of days negates the
advantages of the system. Generally longer settlement periods are shortened gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demat list and had daily turnover of about Rs.1

26

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
st

to protect the interest of the investors from 1 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 upto 4 p.m and
in electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same
day processing.

Activities on T+2: The depository permits the download of the paying in files of
securities and funds till 10.30 a.m on T+2 from the brokers pool accounts. The
depository processes the pay in requests and transfers the consolidated pay in files to
clearing House/clearing Corporation by 11.00am/on T+2. The exchange/clearing
house/clearing corporation executes the pay-out of securities and funds latest by 1.30
p.m on T+2 to the depositories and clearing banks. In the demat mode net basis
settlement is allowed. The buy and sale positions in the same scrip can be settled and
net quantity has to be settled.

27

ABOUT SHAREKHAN LIMITED

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

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

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable

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

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

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

28

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

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

29

PROFILE OF THE COMPANY

Name of the company:

Sharekhan ltd.
Year of Establishment:
1925
Headquarter
:
Sharekhan SSKI

A-206 Phoenix House

Phoenix Mills Compound

Lower Parel

Mumbai - Maharashtra, INDIA- 400013

Nature of Business
:
Service Provider

Services
:
Depository Services, Online Services and

Technical Research.
Number of Employees :
Over 3500
Revenue
:
Data Not Available
Website
:
www.sharekhan.com
Slogan
:
Your Guide to The Financial Jungle.

Vision

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

Mission

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

Sharekhan is infact-

Among the top 3 branded retail service providers

No. 1 player in online business

Largest network of branded broking outlets in the country serving more than 7,
00,000 clients.

30

REASON TO CHOOSE S HAREKHAN LIMITED

Experience

SSKI has more than eight decades of trust and credibility in the Indian s tock market. In
the Asia Money broker's poll held recently, SSKI won the 'India's Best Broking House for
2004' award. Ever since it launched Sharekhan as its retail bro king division in February
2000, it has been p roviding institutional-level research and broking services to
individual investors.

Technology

With its online trading accou nt one can buy and sell shares in an instant from any PC
with an internet connection. O ne can get access to its powerful online trading tools that
will help him take complete co ntrol over his investment in shares.

Accessibility

Sharekhan provides ADVICE , EDUCATION, TOOLS AND EXECUTIO N services for

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

Knowledge

In a business where the right information at the right time can trans late into direct
profits, one can get access to a wide range of information on Sharekhan limiteds
content-rich portal. One can also get a useful set of knowledge-base d tools that will
empower him to take informe d decisions.

Convenience

One can call its Dial-N-Trade number to get investment advice a nd execute his
transactions. Sharekhan ltd. have a dedicated call-centre to provide this service via a
Toll Free Number 1800-22-75 00 & 1800-22-7050 from anywhere in India.

31

Customer Service

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

Investment Advice

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

32

SHAREKHAN LIMITEDS MANAGEMENT TEAM

Dinesh Murikya
: Owner of the company

Tarun Shah
: CEO of the company

Shankar Vailaya
:
Director (Operations)
Jaideep Arora
: Director (Products & Technology)
Pathik Gandotra
:
Head of Research
Rishi Kohli
: Vice President of Equity Derivatives
Nikhil Vora
:
Vice President of Research

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED

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

Equity and derivatives trading Depository services

Online services

Commodities trading Dial-n-trade

Portfolio management Share shops

Fundamental research Technical research

33

TYPES OF ACCOUNT IN SHAREKHAN LIMITED

Sharekhan offers two types of trading account for its clints

Classic Account (which include a feature known as Fast Trade Advanced Classic
Account for the online users) and

Speed Trade Account

CLASSIC ACCOUNT

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

34

This account comes with the following features:

Online trading account for investing in Equities and Derivatives

Free trading through Phone (Dial-n-Trade)

I. Two dedicated numbers(1800-22-7500 and 39707500) for placing

the orders using cell phones or landline phones

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

III. Simple and Secure Interactive Voice Response based system for

authentication

IV.

get the trusted, professional advice of Sharekhan limiteds Tele Brokers

After hours order placement facility between 8.00 am and 9.30 am

Integration of: Online Trading +Saving Bank + Demat Account.

Instant cash transfer facility against purchase & sale of shares.

IPO investments.

Instant order and trade confirmations by e-mail.

Single screen interface for cash and derivatives.

SPEED TRADE ACCOUNT

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

This account comes with the following features:

Instant order Execution and Confirmation.

Single screen trading terminal for NSE Cash, NSE F&O & BSE.

Technical Studies.

Multiple Charting.

Real-time streaming quotes, tic-by-tic charts.

Market summary (Cost traded scrip, highest value etc.)

Hot keys similar to brokers terminal.

Alerts and reminders.

Back-up facility to place trades on Direct Phone lines.

35

Live market debts.

CHARGE STRUCTURE

Fee structure for General Individual:

Charge
Classic Account
Speed Trade Account

Account Opening
Rs. 750/=
Rs. 1000/=

Intra-day 0.10 %
Intra-day - 0.10%
Brokerage

Delivery - 0.50 %
Delivery - 0.50%
Depository Charges:

Account Opening Charges

Rs. NIL

Annual Maintenance Charges

Rs. NIL first year Rs. 300/= p.a. from

second calendar year onward

HOW TO OPEN AN ACCOUNT WITH SHAREKHAN

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

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

One can call on the Toll Free Number: 1-800-22-7500 to speak to a Customer Service
executive
Or If one stays in Mumbai, he can call on 022-66621111

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

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

36

One can also visit the site www.sharekhan.com and click on the option Open an
Account to fill a small query form which will ask the individual to give details
regarding his name, city he lives in, his email address, phone number, pin code
of the city, his nearest Sharekhan Ltd. shop and his preferences regarding the
type of account he wants.

These information are compiled in the headquarter of the company that is in

Mumbai from where it is distributed through out the countrys branches in the
form of leads on the basis of cities and nearest share shops. After that the
executives of the respective branches contact the prospective clients over phone
or through email and give them information regarding the various types of
accounts and the documents they need to open an account and then fix
appointment with the prospective clients to give them demonstration and making
them undergo the formalities to open the account. After that the forms that has
collected from the clients, is scrutinized in the branch and then it is sent to
Mumbai for further processing where after a few days the clients account are
generated and activated. After the accounts are activated, a Welcome Kit is
dispatched from Mumbai to the clients address mentioned in the documents
provided by them. As soon as the clients receive the Welcome Kit, which
contains the clients Trading ID and Trading Password, they can start trading and
investing in shares.

37

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

LEAD MANAGEMENT SYSTEM (LMS) / REFERENCES

CONTACT THE PERSON OVER PHONE OR THROUGH EMAIL

FIXING AN APPOINTMENT WITH THE PERSON

GIVING
DEMONST-

RATION

YES

NO

DOCUMENTATION

FILLING UP THE FORM

SUBMISSION OF THE FORM

LOGIN OF THE FORM

SENDING ACCOUNT OPENING KIT TO THE CLIENT

TRADING

38

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

Photocopy of the clients PAN Card which should be duly attached

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

Passport (valid)

Voters ID Card

Ration Card

Driving License (valid)

Electricity Bill (should be latest and should be in the name of the client)

Telephone Bill (should be latest and should be in the name of the client)

Flat Maintenance Bill (should be latest and should be in the name of the client)

Insurance Policy (should be latest and should be in the name of the client)

Lease or Rent Agreement.

Saving Bank Statement** (should be latest)

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

** A cancelled cheque should be given by the client if he provides Saving Bank

Statement as a proof for correspondence address.

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

39

RESEARCH SECTION IN SHAREKHAN LIMITED

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

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

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

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

40

AWARDS AND ACHIEVEMENTS

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

Sharekhan Limited won the CNBC AWARD for the year 2004.

41

Chapter 3

Project
Analysis

42

PROJECT ANALYSIS

OUTCRY SYSTEM

The broker has to buy or sell securities for which he has received the orders. For
this, the broker or his authorized representatives goes to the stock exchange. This
method is called the open outcry system. Basically the brokers shout while buying or
selling the securities. The floor of the stock exchange is divided into a number of
markets also known as post pit or wing based on particular securities dealt there.

In the post pit or wing, the broker using open outcry method makes an offer or bid
price. For making the necessary bargain, he quotes his purchase or sale price, also
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may loose the bargain. If
he is not satisfied with the quote price, he may turn to some other dealer. On the
close of the bargain, the dealer as well as the broker makes a brief note of the
particulars of the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what membership number
etc., are noted.

DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.

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

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

In audibility was another disadvantage of the outcry system.

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

from outcry system to online trading from February 29 1997.

43

MANUAL TRADING

Trading procedure before introduction of online trading:

Trading on stock exchanges is officially done in the trading ring. In the trading ring the
space is provided for specified and non-specified sections, the members and their
authorized assistants have to wear a badge or carry with them an identity card given by
the exchange to enter the trading ring. They carry a sauda book or confirmation memos,
duly authorized by the exchange and carry a pen with them. The stock exchanges
operations are floor level are technical in nature .Non-members are not permitted to
enter in to stock market. Hence various stages have to be completed in executing a
transaction at a stock exchange .The steps involved in this method of trading have
given below:
Choice of broker:

sell shares and transact business, have to act through member brokers only. They can
also appoint their bankers for this purpose as per the present regulations. Placement of
order:

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

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30 P.M
on all working days Monday to Friday, and a special one-hour session on Saturday. The
members or the authorized assistants have to wear a badge given by the exchange to
enter into the trading ring. They carry a sauda Block Book or conformation memos,
which are duly authorized by the exchange when the deal is struck; both broker and
jobber make a note in their sauda block books. From the sauda book, the contract notes
are drawn up and posted to the client. A contract

44

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

Drawing Up and Bills:

Both sale and purchase bills are prepared along with the contract note and it is posted
on the same day or the next day. This in a purchase transaction, once the shares are
delivered to the client effects payment for the purchases and pays the stamp fees for
transfer, a bill is made out giving the total cost of purchase, including other expenses
incurred by the broker in the price itself. With this, the process ends.

DEMATERLIZATION:

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

converted to an equipment number of securities in electronic from and credited in the
investor account with his DP. In order to dematerialize the certificates, an investor has to
first open an account with a DP and then request for the Dematerialization Request
Form, which is DP and submit the same along with the share certificates. The investor
has to ensure that he marks Submitted for Dematerialization on the certificates before
the shares are handed over to the DP for demat. Dematerialization can only be done to
those certificates, which are already registered in your name and belong to the list of
securities admitted for Dematerialization at NSDL.

Most of the active scrips in the market including all the scrips of S&P CNX NIFTY and
BSE SENSEX have already joined NSDL. This list is steadily increasing. Briefly, the
process is as follows: after completion of transfer, the investor gets the option to
dematerialize such shares. 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.

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.

45

Dematerialization normally takes about fifteen to thirty days. To get back dematerialized
securities in the physical form, request DP for Rematerialization of the same is made.

Rematerialization is the process of converting electronic shares in to physical shares.

Benefits of Demat:

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

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid the cost
of courier / notarization.

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

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

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

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

46

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 services. It offers stock trading at a lower cost. Internet can change the nature
and capacity of stock broking business in India.

47

2. E-commerce

Electronic commerce is associated with buying and selling over computer

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

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.

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

EVOLUTION OF BROKING IN INDIA:

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

Stockbrokers will offer on their sites features such as live portfolio manager, live
quotes, market research and news, etc. to attract more investors.

Brokers will offer online broking and relationship management by providing and
offering analysis and information to investors during broking and non-broking hours
based on their profile and needs, i.e. customized services.

48

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 internet enabled PC and place orders through
the brokers internet based trading engine. These orders are routed to the stock
exchange without manual intervention and executed thereon in a matter of a few
seconds.

The net is used as a mode of trading in internet trading. Orders are communicated to
the stock exchange through website.

In India:

st

Internet trading started in India on 1 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.

49

Besides, through internet trading three fundamental objectives of securities regulation

can be easily achieved, these are:

Investor protection

Creation of a fair and efficient market, and Reduction of the systematic risks.

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

Requirements for net trading:

For investors:

Installation of a computer with required specification

Installation of a modem
Telephone connection
Registration for on-line trading with broker
A bank account
Depository account
Compliance with SEBI guidelines for net trading

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

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

Voter ID card
Driving license
PAN card( in case of to trade more than 50000)
Ration card
Bank pass book
Telephone bill

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.

50

For stock brokers:

Permission from stock exchange for net trading

Net worth of Rs. 50 lac

Adequate back-up system

Secured and reliable software system

Adequate, experienced and trained staff

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

Use of authentication technologies

Issue of contract notes within 24 hours of the trade execution

Setting up a website.

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

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

51

Procedure for net trading

Step 1: Those investors, who are interested in doing the trading over internet system
i.e. NEAT-IXS, should approach the brokers and get them self registered with the Stock
Broker.

Step 2: After registration, the broker will provide to them a Login name, Password and
personal identification number (PIN).

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

First by entering the symbol and series of stock and other parameters like quantity and
price of the scrip on the place order window.

Second, fill in the symbol, series and the default quantity.

Step 4: It is the process of review. Thus, the investor has to review the order placed by
clicking the review option. He may also re-set to clear the values.

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

Step 6: The investor will receive an "Order Confirmation" message along with the order
number and the value of the order.

Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the bottom of
the screen. At present, a time lag of about 10 seconds is there in executing the trade.

Step 8: It is regarding charging payment, for which there are different mode. Some
brokers will take some advance payment from the investor and will fix their trading
limits. When the trade is executed, the broker will ask the investor for transfer of funds
to his account.

Internet trading provides total transparency between a broker and an investor in the
secondary market. In the open outcry system, only the broker knew the actually
transacted price. Screen based trading provides more transparency. With online trading

52

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

The time gap has narrowed in every stage of operation. Confirmation and execution of
trade reaches the investor within the least possible time, mostly within 30 seconds.
Instant feedback is available about the execution. Some of the websites also offer;

News and research report BSE and NSE movements Stock analysis

IPO and mutual fund centers

Step by step procedure in online trading:

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

Log on to the stock broker's website

Register as client/investor

3)
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 by entering the symbol or number of the security

Brokers server will check your limit in the on-line account and 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.

53

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.

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.

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

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, government, and even insurance.

54

INVESTORS REASONS TO TRADE ONLINE:

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 is 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 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.

55

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.

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

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.

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

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.

56

TRADING AND SETTLEMENT AT SHARE KHAN

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

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

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

Facilities better monitoring of the market by the exchange. The best price achieved in
buying and selling.

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

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

ShareKhan deals in buying and selling equity shares and debentures on the National
Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-The-Counter
Exchange of India (OTCEI).

Share Khan is provided with a computer and required software from their registered
stock exchanges. These centers are called Broker Work Stations. These computers
are connected to the server at the stock exchanges through cable.

The member or broker sitting in his office can send the quotations, orders, negotiations,
deals, in-house deals, auction orders etc., through the computer. The Central trading
system (CTS) will accept these orders and send it for match. If there is any mistake in
the order, CTS will reject the orders and send respective error message to the member
concern. All these operations are in built. The main objective of CTS is to monitor the
Stock Exchanges operations.

Order placed by the broker will be sent for a match and if the match is found suitable,
the transaction will be executed. Otherwise, the order will be deleted

57

automatically after completion of trading time. The carry forward transactions (Good Till
cancellation) are forwarded to the next day. Even if the match is not found with in the
prescribed period, the order will not cancel.

Useful links about Sharekhan:

Sharekhan Website: http://www.ShareKhan.com

Product Demo - Speed Trade: http://www.sharekhan.com/Demos/speedtrade/index.html
Product Demo - Classic: http://www.sharekhan.com/Demos/classic/index.html
Email: info@sharekhan.com
FAQs: http://sharekhan.com/KnowledgeCentre/Sharekhan_FAQ.aspx
Phone: 022-66621111

Toll Free: 1-800-22-7500

TRADING SESSION

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

BROKER WORK STATION:

At the broker workstation the BBOs, the last traded price, the days opening price,
previous days closing price, highest and lowest prices, the weighted average price and
total trade value will be available continuously, as the BBO for each scrip.

Other information will be available on query from the BWS. These include top gainers
/losers of the day. Trader-wise, scrip wise net position, client wise net position, top scrip
by the volume/value, market summary etc.

Brokers are also provided with information relating to the companies in the matter of
Book closure, Dividend declarations, resolutions in board meeting, information about
liquidated companies, company report etc.

58

ORDERS:

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

The submitted order will be accepted at the CTS, after validation if it finds any invalid
reason the order is return back to the BWS, with the appropriate error message. If
Accepted at the CTS it will be added to the local pending order book.

The order will then be taken up for matching, if it is a buy order the system tries to
find a sell order, which fits the requirement of the buy order, when such match is
found a trade gets executed. Each trade involves two brokers and respective traders
who sent the order. Both these traders are informed of the trade being executed at
their respective BWS.

At the BWS the trade is added to the local trade book. Orders sent by the brokers
are two types:

Good for the day (GFD)

Good till cancellation(GTC)

Good for the day:

This is also called as market order. For an order if the member selects the deal as
good for the day, the order is treated as market order. If a best bid founds match
with best order then the transaction gets executed. If the match is not found then
after trade time the order gets cancelled that day. Next day he has to place a new
order.

For example if a member wants to purchase 1000 shares of satyam info @ 400 each
through Good for Day order. If the correct match is not found, order gets cancelled
automatically and new quotation has to be placed the next day.

Good till cancellation:

This order is forwarded to the last trading day of that settlement period. This is also
called as carry forward order like GFD; broker has to select the option of GTC for the
order. If the order finds match with in the trading settlement period, the order is
executed. If no match is found, the order is cancelled on the last day of settlement
period. This order is not carried forward to the next settlement period.

59

For example, if a member a place purchase order of 500 shares of SBI @ 690 per
share and selects the order as GTC and place an order. If the match is not found on
that day it will be forwarded to the next day until trading settlement period day.

SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called settlement. Buyers will
take the delivery of shares through the depository participants like SHARE KHAN and
others.

Finally, the settlement is made by means of delivering the share certificates along with
the transfer deeds. The transferor (or the seller) duly signed transfer deed. It bears a
stamp of the selling broker. The buyer then fills up the certificates fills up the particulars
in the transfer deed. Settlement can be done in the following way.

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

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

DETAILS OF PROCEDURES:

Delivery in : The members who are in pay-out position delivers share certificates in to
clearing house within the settlement period along with the delivery Chelan filled in with
the details of share certificates which has folio numbers or distinctive numbers etc.

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

60

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

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

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

good and bad deliveries pertaining to the settlement will be settled by the settlement
committee of the exchange.

61

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

Login

Buy transcation

Sell transcation

The system will check your dp account

quantity

The system will check

buying limits

orders
accepted
Orders
accepted

Rejected orders would be

communicated along with
reasons

your order is transmitted to exchange for execution

pending buy orders

on execution
pending sell orders
would be displayed
of your orders
would be displayed
on your screen

on your screen

you may
edit your
you may delete
you may edit your

you may delete your

pending order
your pending order
pending order

pending order

flashed on your
screen immediately
on execution

conformationcoul d
be send to your email and mobile

contract note would

be sent to by mail or
hand delivery

62

Chapter 4

Compara
tive

Analysis

63

THE MAJOR PLAYERS IN ONLINE TRADING

SHAREKHAN.COM

5PAISA.COM

KOTAKSTREET.COM

INDIABULLS.COM

ICICIDIRECT.COM

HDFCSEC.COM

POLL RESULTS: BROKER PREFERENCE

I
H
5paise

I
K

Sharekh
an

Motilal
oswal
T
h

T
h

64

HDFC SECURITIES:

Company Background:

HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital
Partners and their associates. Pioneers in setting up Dial-a-share service with
the largest team of Tele-brokers.

Online Account Type:

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

Pricing of HDFC Account

Account Opening: Rs 750

st

Demat: NIL, 1 year charges included in Account Opening

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

Trading 0.15%* each side + ST

Delivery 0.50%** each side + ST

*Rs 25 Min Brokerage per transaction **Rs 8 Min Brokerage per transaction

65

ICICI Direct:

Account Opening: Rs 750

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

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

st

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

additional 4 DPs without 1 yr AMC. Only Rs 100 as linking charges per DP

Initial Margin : Nil

Brokerage: ICICIs brokerage rates are inclusive of Stamp duty (0.002%) for trading
and 0.010% for delivery while service tax (10.2%) on BROKERAGE land turnover
tax is EXTRA.

Delivery Vol per QTR Brokerage Square Vol P.M.

Brokerage
< 10 lakhs
0.75%
< 50 lakhs
.10% Both Sides
10
25 lakhs
0.70%
50 lakhs 2 Cr
.08% Both Sides
25
50 lakhs
0.55%
2Cr-5Cr
.05% Both Sides
50 lakhs - 1 Cr
0.45%
5Cr- 10 Cr
.04% Both Sides
1 Cr 2 Cr
0.35%
10Cr -20 Cr
.035% Both Sides

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

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

66

INDIABULLS:

Company Background:

India Bulls is a retail financial services company present in 70 locations covering 62

cities. It offers a full range of financial services and products ranging from Equities to
Insurance. 450 + Relationship Managers who act as personal financial advisors.

Online Account Type:

Signature Account: Plain Vanilla Account with focus on Equity Analysis. The equity
analysis is a paid service even for A/c holders.

Power India bulls: Account with sophisticated trading tools, low commissions and
priority access to R.M.

Pricing of IB Accounts:

Signature Account Power India Bulls

* Account Opening: Rs 250

* Account Opening: Rs 750

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

No AMC for this DP No AMC for this DP

* Initial Margin: NIL * Initial Margin: NIL

* Brokerage: Negotiable

* Brokerage: Negotiable

PAID Research:

SCHEME

FACILITY

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

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

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

67

+ 10 Reports Delivered PrintReport-1-Month-9000: View & Print on Website

+ 10 Reports Delivered

Kotakstreet:

Company Background:

Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is a joint
venture between Kotak Mahindra Bank and Goldman Sachs.

Online Account Type

Twin Advantage / Green Channel : 2 DPs, Limit against shares Free Way: Flat Rs
999 Cover Charge p.m, 0.03% per transaction

High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55 Cash
Expressway : Spot payment, additional 0.5% charges

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

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

PRICING OF KOTAK

Account Opening : Rs 500 Demat: Rs 22.5 p.m

Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000

Brokerage Slab wise: Higher the volume, lower the brokerage.

Even older customers (on 0.25% & 0.40%) have been moved to the slab wise
structure w.e.f 1/4/2004

68

Slab structure of Kotak

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

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

1 lakhs 5 lakhs
0.60%
10 lakhs 25 lakhs
0.08% Both Sides
5 lakhs 10 lakhs
0.50%
25 lakhs - 2 Cr
0.05% Both Sides
10 lakhs - 20 lakhs
0.40%
2 Cr

- 5 Cr
0.04% Both Sides
20 lakhs 60 lakhs
0.30%

> 5 Cr
0.035% Both Sides
60 lakhs - 2 Cr
0.25%
---do--0.03% Both Sides
>2
0.20%

----

--------

* Brokerage is inclusive of All Taxes

* Brokerage is inclusive of All Taxes
* DP Charges Extra

* Min Brokerage of Rs 0.05 per share

* Min Brokerage of Rs 0.01 per share

Derivatives Vol off p m

Brokerage

< 2 Cr

0.07% Both Sides

2 Cr - 5.5 Cr

0.05% Both Sides

5.5 Cr 10 Cr

0.04% Both Sides

> 10 Cr

0.03% Both Sides

* Brokerage is inclusive of All Taxes.

69

5paisa

Company Background

Indiainfoline was founded in 1995 and was positioned as a research firm

In 2000 e-broking was started under the brand name of 5paisa.com. Apart
from offering online trading in stock market the company offers mutual
funds online.

It also acts as a distributor of various financial services i.e. GOI securities,

Company Fixed Deposits, Insurance.
Limited ground network, present in 20 cities

Online Account Types

Investor Terminal : Investors / Students Trader Terminal : Day Traders /

HNIs

PRICING FOR RETAIL CLIENTS

Investor Terminal

st

Account Opening : Rs 500 Demat 1 Yr : Rs 250

Initial Margin : Rs 2500 (Compulsory) Min Margin Retainable : Rs 1000

Brokerage :

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

PRICING FOR HNI CLIENTS

Trader Terminal

st

Account Opening : Rs 500 Demat 1 Yr : Rs 250

Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000

Brokerage :

Trading 0.10% each side + ST Delivery 0.50% each side + ST

(Negotiable to 0.05% each side & 0.25%)

Account Access Charges

Monthly Rs 800, adjustable against Brokerage

Yearly Rs 8000, adjustable against brokerage

70

Sharekhan

Company Background

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56% in
Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific

Into broking since 80 years

Focused on providing equity solutions to every segment

Largest ground network of 210 Branded Share shops in 90 cities

Online Account Types

Classis Account / Applet : Investor in equities Speed Trade : Trader in equities &
derivatives

PRICING FOR HNI CLIENTS

Speed Trade

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

st

Demat 1 Yr : Incl in Account Opening Initial Margin : Nil

Min Margin Retainable : NIL Brokerage :

Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
Account Access Charges

Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr. No access
charges for gold customers (Above 1 lac brokerage p.a)

71

Pricing for Retail Customers

Classic / Applet

Account Opening : Rs 750

st

Demat 1 Yr : NIL Initial Margin : NIL

Min Margin Retainable : NIL Brokerage:

Trading 0.10% each side + All Taxes

Delivery 0.50% each side + All Taxes

Sharekhan online Trading Interfaces

The customer can choose the online trading interface that meets his requirement
based on his trading habits and preferences

CLASSIC / APPLET

The website is meant for customers who Invests in Equities

SPEEDTRADE

The speed trade is meant for customers who trade in Equities

DIAL-N-TRADE Toll Free

The DNT is a value added services meant for all customers who Want to transact
but are not online.

DNT TOLL FREE FERTURES

Dedicated Toll Free number for Order placements Automatic fund transfer with
phone banking*

Simple and secure IVR based system for authentication

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

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

Inputs

After-hours order placement facility **

Transfer of money using phone banking is available with Citibank only

72

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

CLASSIC/WEBSITE FEATURES

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

for shares sold from DP

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

deposit of shares into linked DP after pay-out 4 Times leverage on
Margin Trades

Margin Trading available for entire marker session

Slab wise brokerage structure for delivery and margin trades, shortly
Free calls for order placement on Toll-Free

Trusted, Professional advice of Tele-brokers

Facility to enter After Market Orders online & via Phone

CLASSIC/WEBSITE FEATURES

Daily Research newsletter (Investor Eye) Via e-mail Access to new IPO
without any paperwork

Advanced portfolio monitoring Tools

Integrated DP account with trading account

Option of linking additional 4 DP accounts to trading account Choice of

linking 4 banks to trading a/c for online payments Cash and Derivatives
trading in a single account

E-mail confirmations for all transactions Choice of electronic/Physical

contracts

SPEEDTRADE EXE FEATURES

ALL THE FEATURES OF CLASSIC

*Real time streaming quotes using 2 Marker Watches *Trade

Execution in 2-3 seconds

* Instant Order/trade confirmations in the same window *Hot keys

similar to a Brokers Terminal

73

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

Availability of 2 ISP & 6 Servers ensuring maximum uptime

Customized alerts based on multiple parameters

Cancel All/Square Off All Facility

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

SWOT ANALYSIS
Strengths

Strong credibility among investors because of its heritage.

Excellent reputation among the business society.

Capability of providing superior customer service.

Quality research team.

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

Abundant information about economy and companies.

Ability to attract and retain superior and quality personnel.

Highly sophisticated infrastructure.

Efficient research and analysis team, which by interpreting the economy and companys
performance accurately is enhancing the profitability of the clientele.

Weaknesses

Limited customer appeal as the company product line does not include mutual funds
which is increasingly becoming a preferred customer investment option.

Inadequate product awareness among the retail investors.

74

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

Brand awareness is low in the financial market.

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

Opportunities

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

Bullish phase of the market attracts investing public.

Access to the BSE online space for the retail investors creates opportunity to increase
clientele base.

Awareness campaigns about online trading create new market.

Threats

Availability of Unit Linked Insurance Policies (ULIPs) and mutual funds in the market.

Threat of entry is high in this industry as the manpower required is less and capital
requirement is medium.

75

Chapter 5

Finding
&

Observa
tions

76

FINDINGS AND OBSERVATIONS:

Fluctuations are more in secondary market than any other market.

There are more speculators than investors.

Information plays a vital role in the secondary market.

Previously rolling settlement is T+5 days, now it changed to T+2 days and further it will
be changing to T+1 day.

It was also observed that many broking houses offering internet trading allow clients to
use their conventional system as well just ensure that they do not loose them and this
instead of offering e-broking services they becomes service providers.

The number of players is increasing at a steady rate and today there are over a dozen
of brokerage houses who have opted to offer net trading to their customers and
prominent among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct and
geojit.

The Bombay stock exchange sensex zoomed past the 7700 barrier for the first time in
history to achieve new all time high of 7800 intra day trade and ended at a historic close
of 7732 points.

77

Conclusion
&

Recommen
dations

78

CONCLUSION AND RECOMMENDATIONS

Things have changed for the better with the SHAREKHAN going on-line coupled with
endeavor to stream line the whole trading system, things have changed dramatically
over the last 3 to 4 years. New and advanced technologies have breached geographical
and cultural barriers, and have brought the countrywide market to doorstep.

In the present scenario to compete with the Brokers would require sound infrastructure
and trading as per international standards.

The introduction of on-line trading would influence the investors resulting in an increase
in the business of the exchange. It has helped the brokers handling a vast amount of
transactions and this can be an efficient trading, delivering, settlement system with
adequate protection to investors. The trading of SHAREKHAN of the first day was Rs.
1.8 crores.

Due to invention of online trading there has been greater benefit to the investors as they
could sell / buy shares as and when required and that to with online trading.

The 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 oriented industry hence
the survival would require them to provide the best possible service to the clients.

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

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

The speculative pressures are responsible for the wide changes in the price, not
attracting the genuine investors to the greater extent towards the market.

79

Genuine investors are not at all interested in the speculative gain as their investment
is based on the future profits, therefore the authorities of the exchange should be
more vigilant to curb the speculation.

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

80

BIBLIOGRAPHY

Books:

1.

Investment management

-V.K.Bhalla

2.

Investment management

-Preethi Singh

3. Security Analysis And Portfolio Management

-V.A.Avadhani

4.

Marketing of Financial Services

-V.A.Avadhani

5.

Indian Financial System

-M.Y.Khan

Newspapers:-

The Times of India

The Economic Times

81

www.sharekhan.com

www.economictimes.com

www.moneycontrol.com

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

www.investors.com

www.investopedia.com

ANY FEEDBACK PLZ MAIL US:

chandu9041@gmail.com

82