A REPORT ON ONLINE TRADING AT BONANZA PORTFOLIO LIMITED Project report Submitted in the Partial fulfillment fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION By HIMANSHU SHARMA GOVT. ENGEENERING COLLEGE JHALAWAR( RAJ.) ( RAJASTHAN TECHNICAL UNIVERSITY, KOTA)
CONTENTS CHAPTER-1
PAGE NO.S Y
INTRODUCTION OF STUDY
1
CHAPTER-2
6
•
LITERATURE REVIEW
42
COMPANY PROFILE
46
CHAPTER-3 •
CHAPTER-4 •
DATA & INTERPRETATION ANALYSIS
CHAPTER-5 •
• •
60
OBSERVATIONS CONCLUSIONS SUGGESTIONS
CHAPTER-6
•
BIBLIOGRAPHY
64
CHAPTER – 1
INTRODUCTION
TO STUDY
DEMATERIALIZATION: Dematerialization is the process of converting the physical form of shares into electronic form. Prior to dematerialization the Indian stock markets have faced several problems like delay in the transfer of certificates, forgery of certificates etc. Dematerialization helps to overcome these problems as well as reduces the transaction time as compared to the physical segment. The article discusses the procedures, advantages and problems of dematerialization. The Indian Stock markets have seen a major change with the introduction of depository system and scrip less trading mechanism. There were various problems like inordinate delays in the transfer of share certificates, delay in receipt of securities and inadequate infrastructure in banking and postal segments to handle a large volume of application and storage of share certificates .To overcome these problems physical dealing in securities should be eliminated . The Indian stock market introduced the system of dematerialization recognizing the need for scrip less trading. According to the Depositories Act, 1996, an investor has the option to hold shares either in physical or electronic form .The process of converting the physical form of shares into electronic form is called dematerialization or in short demats. The converted electronic data is stored with the depository from where they can be traded. It is similar to a bank where an investor opens an account with any of the depository participants. Depository participant is a representative of the depository .The DP maintains the investors securities account balances and intimates him about the status of holdings.
ONLINE TRADING Online Trading is an easy way to buy and sell shares from the comfort of one’s place instead of trading through individual stockbroker and broking firms, the customer can transact with the help of mouse click and his visits to the neighborhood broker will become a thing of the past. Even the older generation is adapting the online trading route. Find the right depository to provide with an online trading account can be difficult, but many banks and companies offer excellent services for online trading. Our needs will determine which online broker is best for us. Online trading brings in total transparency between broker an investor in case of secondary market operation. Whether we are buying a mutual fund, investing in commodities market or any other transaction can be performed with minimal fuss. In India presently online trading can take place through order routing system, which will route client orders to exchanges trading system for execution of trade on stock exchange (NSE and BSE). One of the measure attractions of online trading is the wealth of free commentary and analysis an alysis about stock market and global economy. Any investor with an ounce of market saviness can extract all the data needed to make trading decisions and complete the trades. An important catalyst behind the emergence of thriving online brokerage system has been the buoyant stock market. One can trade online on line with e-brokerage such as ICICI Direct, HDFC Securities, India Bulls, Kotakstreet and India Info line’s 5paisa.com.
NEED OF STUDY: With the emergence of the internet in everyday business, the significance of the online stock market trading broker has gone up. •
•
•
•
•
It can be done from home at any desired fixed hours of the investor.
The processing of the order is executed exec uted at proper timings as the servers of the online trading portal are linked to the selected banks and stock exchanges though out twenty four hours.
The investments made are safe and secured and profit is earned at proper time without any dispute.
Online trading updates are also provided to the investors and also about the present grade of their orders either through the interface or e-mail.
The investors increase shares and make development to the company..
OBJECTIVES OF STUDY: • •
• •
To Study & understood the concept of Online trading. To know the time information & importance & the role played by the stock exchanges in the process of online trading. To know the reasons for the introduction of online trading and their Benefits. Bene fits. To review the changes that Online trading brought when compared with the previous systems. RESEARCH METHODOLOGY OF THE STUDY:
DATA COLLECTION METHODS The data collection methods include both the primary and secondary collection methods
Primary collection methods: method s: This method includes the data collection from the personal discussion with the authorized clerks and members of the Net worth. Secondary collection methods: The secondary collection methods includes the lectures of the superintend of the department of market operations and so on. Also the data collected from the news, magazines of the Net worth and different books issues of this study. SCOPE OF STUDY:
The study is limited to “Demat and Online Trading”. And since the year 2000, a big boom has been witnessed in the Indian stock Market when the mark market et show showed ed the the comi coming ng up of Onli Online ne Tradi Trading ng Syst System em.. Many Many Onlin Onlinee stoc stock k tradi trading ng companies came but initially due to lack of Online Trading some Companies Vanished and some survived. The Companies which are survived are getting the handsome returns also attract attracting ing the foreig foreign n Invest Investmen mentt Compani Companies. es. Now a days days this this sector sector is facing facing cut-th cut-throa roatt Competition. And also provides huge growth prospects.
LIMITATIONS OF STUDY:
A good report tells us the results of the study. But every project has its own Limitations. These Limitations can be in terms of: •
•
•
•
•
There is lack awareness among people about investing in stock market. So people who are aware of such things were found in specific areas for survey purposes. Most people are comfortable with traditional system in small towns and like to trade from their respective brokers, hence not providing their true opinions. Most of people are not using technology and Internet is growing still it is not at the required level. Some of the respondents who did not do Online trading were able to respond only to some questions. Limitations towards Demat and online trading confined to keep the study in manageable limits.
REVIEW OF LITERATURE
INTRODUCTION India Financial Market the India Financial market market comprise of talks about the primary market, FDIs, alternative investment options, banking and insurance and the pension sectors, asset management segment as well. With all these elements in the India Financial market, it happens to be one of the oldest across the globe and is definitely the fastest growing and best among all the financial markets of the emerging economies. The history of Indian capital markets spans back 200 years, around the end of the 18th century. It was at this time that India was under the rule of the East India Company. The capital market of India initially developed around Mumbai; with around 200 to 250 securities brokers participating in active trade during the second half of the 19th century.
Scope of the India Financial Market – The financial market in India at present is more advanced than many other sectors as it became organized as early as the 19th century with the securities exchanges in Mumbai, Ahmedabad and Kolkata. In the early 1960s, the number of securities exchanges in India became eight – including Mumbai, Ahmedabad and Kolkata. Apart from these three exchanges, there was the Madras, Kanpur, Delhi, Bangalore and Pune exchanges as well. Today there are 23 regional securities exchanges in India.
The financial market used to give financial services to the Industries The NSE provides exposure to investors into two types of financial Markets: 1. Capital market.
2. Money market.
Capital market: Refers to all the facilities and Institutional Institutional arrangements for borrowing and lending of term funds. It does not deal in capital goods but is concerned with the raising of money capital. It consists of term lending institutions and investing Institutions which mainly provide long term funds. Capital market has its growth includes: 1) Gilt-edged Securities Market 2) Industrial Securities Market 3) Development Banks and 4) Financial Services. Industrial Securities Market has been further divided into two markets they are: A. Primary Market. B.Secondary Market. Primary Market: Refers to the raising of new capital in the form of shares and debentures, while Secondary Market deals with securities already issued by companies. Both the markets are important, but the new issues market is much more important from the point of view of economic growth. Secondary Market: The The market market where where securi securitie ties s are traded traded after after they they are initially offered in the primary market. Most trading is done in the secondary mark market et.. To expl explai ain n furt furthe her, r, it is trad tradin ing g in prev previo ious usly ly issu issued ed finan financi cial al inst instru rume ment nts. s. An orga organi nize zed d mark market et for for used used secu securi riti ties es.. Bomb Bombay ay Stoc Stock k Exchan Exchange ge (BSE), (BSE), Nation National al Stock Stock Exchan Exchange ge NSE, NSE, bond bond market markets, s, over-t over-thehecounte counterr market markets, s, reside residenti ntial al mortga mortgage ge loans, loans, govern governme mental ntal guaran guarantee teed d loans etc Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exch Exchan ange ge.. Majo Majori rity ty of the the trad tradin ing g is done done in the the seco second ndar ary y mar market. ket. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity equity markets markets serve serve as a monitoring monitoring and control control conduit—by conduit—by facilitating facilitating value-enha value-enhancing ncing control control activitie activities, s, enabling enabling implement implementation ation of incentive incentive-base based d mana manage geme ment nt cont contra ract cts, s, and and aggr aggreg egat atin ing g info inform rmat atio ion n (via (via pric price e discovery) that guides management decisions.
18 00
Tra Tradi ding ng of sh shar ares es of east east Indi India a comp compan any y in Kolkata And Mumbai
18 50
Joint stock company came into existence
18 60
Speculation and feverish dealing in securities
18 75
Formulation of stock exchange of Mumbai
18 94
Formulation of Ahmadabad stock exchange
Money market: Money Market is a market for short-term funds, which can be used for overnights to one year duration. It also deals with the financial assets that constitute near money which means that the assets can be converted into cash quickly with minimum transaction cost and without a loss in value. It consists of commercial banks, co-operative banks and other agencies which supply only short term funds. It consists of • •
Organized Money Markets. And Un Organized money markets The Call Money Market, Treasury Bill Market, Collateral Money market, Commercial paper and Certificate of deposits.
INDIAN CAPITAL MARKET AT GLANCE
20th century 19 08
Formulation of Calcutta stock exchange
19 39
Formulation of Lahore and madras stock exchange
19 40
Formulation of U.P and Delhi stock exchange
19 56
Securities contract and regulation act enacted
19 57
Scam of Haridas Mundhra
19 88
Securities and exchange board of India set up
19 91
Scam of MS Shoes
19 92
SEBI given power Under SEBI act,1992 a ct,1992
19 93
Formation of National stock exchange
19 95
HARSHAD MEHTA Scam
19 95
SESA GOA Scam
19 97
CRB scam
19 98
BPL And Videocon Scam
200 0
Depositories came into (electronic form of shares)
existence
200 1
Ketan Parekh scam
200 2
Start of rolling settlement and banning of Badla trading
200 2
Introduction of T+3 settlement in April
200 3
Introduction of T+2 settlement in April
200 5
BSE Sensex touches all time high 6954 in January
200 6
BSE Sensex Sensex touche touches s all time time high high 12 1250 500,t 0,the he highest intraday fall of 1100
200 7
BSE reaches the level of
200 8
BSE touches all time high in January 2008
200 8
Sens Sensex ex saw saw its its high highes estt ever ever loss loss of 1,40 1,408 8 points at the end of the session.
200 8
Sexsex Sexsex saw its its 15 month month low,from low,from its all time time high
200 9
Sexsex saw its down trend & highest ever loss because of Satyam case.
STOCK MARKETS IN INDIA: A stock market is a marketplace where organized exchange (buying and selling) of stocks or equities takes place. Indian stock markets are one of the most dynamic and efficient stock markets in Asia. In terms of the make up and overall dynamics, the Indian stock markets are at par with international standards. standards. The two national
exchanges operating in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These exchanges are well equipped with electronic trading platforms and handle large volume of transactions on a daily basis.
DEFINATION OF STOCK EXCHANGE:
Stock exchange is an organized market place where securities are traded. These securities are issued by the government, semi-government bodies, public sector undertakings and companies for borrowing funds and raising resources. Securities are defined as any monetary claims (promissory (p romissory notes or I.O.U) and also include shares, debentures, bonds and etc., if these securities are marketable as in the case of the government stock, they are transferable by endorsement and alike movable property. They are tradable on the stock exchange. So are the case shares of companies. Under the Securities Contract Regulation Act of 1956, securities’ trading is regulated by the Central Government and such trading can take place only in stock exchanges recognized by the government under this Act. As referred to earlier there are at present 23 such recognized stock exchanges in India. Of these, major stock exchanges, like Bombay Stock Exchange National Stock Exchange,Inter-Connected Stock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are permanently recognized while a few are temporarily recognized. The above act has also laid down that trading in approved contract should be done through registered members of the exchange. As per the rules made under the above act, trading in securities permitted to be traded would be in the normal trading hours (09:15 A.M to 3.30 P.M) on working days in the trading ring, as specified for trading purpose. Contracts approved to be traded are the following: A. Spot delivery deals are are for deliveries of shares shares on the same day or the next day as the payment is made. B. Hand deliveries deals for delivering delivering shares within within a period of 7 to 14 days from the date of contract. C. Delivery through clearing for delivering delivering shares with in a period of two months from the date of the contract, which is now reduce to 15 days.(Reduced to 2 days in demat trading) D. Special Delivery deals for delivering delivering of shares for specified longer periods as may be approved by the governing board of the stock exchange.
Except in those deals meant for delivery on spot basis, all the rest are to be put through by the registered brokers of a stock exchange. The securities contracts (Regulation) rules of 1957 laid down the condition for such trading, the trading hours, rules of trading, settlement of disputes, etc. as between the members and of the members with reference to their clients.
HISTORY OF STOCK EXCHANGE IN INDIA
The origin of the Stock Exchanges in India can be traced back to the later half of 19th century. After the American Civil War (1860-61) due to the share mania of the public, the number of brokers dealing in shares increased. The brokers organized an informal association in Mumbai named “The Native Stock and Share Brokers Association in 1875”.later evolved as Bombay stock exchange.
Increased activity in trade and commerce during the First World increase in the stock trading. The Growth of War and Second World War resulted in an increase Stock Exchanges suffered a set after the end of World War. World wide depression depression affected them most of the Stock Exchanges in the early stages had a speculative nature of working without without technical strength. strength. After independence, government government took keen interest to regulate the speculative nature of stock exchange working. working. In that direction, securities and Contract Regulation Act 1956 was passed, this gave powers to Central Government to regulate the stock exchanges. Further to develop secondary secondary markets in the country, stock exchanges established established at Mumbai, Chennai, Delhi, Hyderabad, Ahmedabad and Indore. The Bangalore Stock Stock Exchange was recognized in 1963. At present there there are 23 Stock Exchanges. Till recent past, floor trading took place in all Stock Exchanges. In the floor
trading system, the trade takes place through open outcry system during the official trading hours. Trading posts are assigned for different securities where by and and sell activities of securities took place. place. This system needs a face – to – face contact contact among the traders and restricts restricts the trading volume. The speed of the new information reflected on the prices was rather than the investors. The Setting up of NSE and OTCEI (Over the counter exchange of India with the
screen based trading facility resulted in more and more Sock exchanges turning towards the computer computer based trading. BSE introduced the screen screen based trading system system in 1995, which known as BOLT (Bombay (Bombay on – line Trading. System).
FUNCTIONS OF STOCK EXCHANGE Maintain Active Trading: Shares are traded on the stock exchanges, enabling the investors to buy and sell securities. The prices may vary from transaction to transaction. A continuous trading increases the liquidity liquidity or marketability of the shares traded on the stock exchanges. Fixation of Prices: Price is determined by the transactions that flow from investors demand and the supplier’s supplier’s preferences. Usually the traded prices are made known known to the public. This helps the investors to make make the better decision. decision. Ensures safe and fair dealings: The rules, regulations and bylaws of the Stock Exchanges provide a measure measure of safety to the investors. Transactions are conducted conducted under competitive conditions enabling the investors to get a fair deal. Aids in financing the Industry: A continuous market for shares provides a favourable climate for raising capital. The negotiability and transferability of the securities, investors are willing willing to subscribe to the initial initial public offering (IPO). This stimulates the capital formation. Dissemination of Information: Stock Exchanges provide information through their various publications. publications. They publish the share prices traded traded on their basis along with the volume traded. Directory of Corporate Information Information is useful for the investor’s assessment regarding the corporate. Handouts, handbooks and pamphlets provide information regarding the functioning of the Stock Exchanges. Performance Inducer: The prices of stocks reflect the performance of the traded companies. This makes the corporate more concerned with with its public image and tries to maintain good performance. Self-regulating organization: The Stock Exchanges monitor the integrity of the members, brokers, listed listed companies and clients. clients. Continuous internal audit safeguards
the investors against against unfair trade practices. It settles the disputes between member member brokers, investors and brokers.
REGULATORY FRAME WORK
This Securities Contract Regulation Act, 1956 and Securities and Exchange board of India (SEB1) Act, 1992, 1992, provides a comprehensive comprehensive legal framework. framework. A 3-tier regula regulator tory y struct structure ure compri comprisin sing g the minis ministry try of financ finance, e, SEB1 SEB1 and the Govern Governing ing Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.
Ministry of finance: The Stock Exchange division of the Ministry of Finance
has powers related to the application of the provision of the SCR Act and licensing of dealers in the other area. According to SEBI Act, The Ministry of Finance has the appellate and the supervisory power over the SEBI. It has powered to grant recognition to the Stock Exchange and regulation of their operations. Ministry of Finance has the power to approve the appointments of executives chiefs and the nominations of the public representatives in the government Boards of the Stock Exchanges. It has the responsibility of preventing undesirable speculation.
The Securities and Exchange Board of India
The Securities and Exchange Board of India even though established in the year 1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock Exchanges, other security and mutual funds. Registration and and regu regula lati tion on of mark market et inte interm rmed edia iari ries es are are also also carr carrie ied d ou outt by SEBI SEBI.. It has has responsib responsibility ility to prohibit prohibit the fraudulen fraudulentt unfair unfair trade trade practices practices and insider insider dealings. dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to promote the healthy growth of the capital market and protect the investors.The Governing Board of stockexchanges: The Govern Governing ing Board Board of the Stock Stock Exchan Exchange ge consis consists ts of electe elected d
members of directors, government nominees and public representatives. Rules, by laws and regulations of the Stock Exchange substantial powers to the executive director for mainta maintaini ining ng effici efficient ent and smooth smooth day-to day-to day functi function oning ing of Stock Stock Exchan Exchange. ge. The Governing Board has the responsibility to maintain and orderly and well-regulated market.
The Governing body of the Stock Exchange consists of 13 members of which A.
Six Six memb member erss of the the Sto Stock ck Exc Excha hang ngee are are elec electe ted d by the the mem membe bers rs of of the the Stoc Stock k
Exchange. B.
Cent Centra rall Gov Gover ernm nmen entt nom nomin inat ates es not not mor moree than than thr three ee mem membe bers rs..
C.
Thee bo Th boar ard d no nomi mina nate tess thre threee pu publ blic ic repr repres esen enta tati tive ves. s.
D.
SEBI SEBI no nomi mina nate tess pers person onaa not not exc excee eedi ding ng thre threee and and
E.
Thee Stoc Th Stock k Exch Exchan ange ge app appoi oint ntss one one Exec Execut utiv ivee Dire Direct ctor or..
One third of the elected members retire at annual general meeting (AGM). Thee reti Th retire red d memb member er can can offe offerr hims himsel elff for for elec electi tion on if he is no nott elec electe ted d for for two two cons consec ecut utiive year ears. If a membe emberr serv servees in the the go gove vern rnin ing g bo bod dy for for two yea years consecutively, he should refrain offering himself for another two years.
The members of the governing body elect the president and vice-president. It needs to approval from the Central Government or the Board. The office tenure for the president and vice-president is on year. They can offer themselves for re-election, if they have not held for two consecutive years. In that case they can offer themselves for re-election after a gap of one-year period.
VARIOUS STOCK EXCHANGES IN INDA: List of Stock Exchanges in India » Bombay Stock Exchange » National Stock Exchange » Regional Stock Exchanges » Ahmedabad » Bangalore » Bhubaneshwar » Calcutta » Cochin » Coimbatore » Delhi » Guwahati » Hyderabad » Jaipur » Ludhiana » Madhya Pradesh » Madras » Magadh » Mangalore » Meerut » OTC Exchange Of India » Pune » Saurashtra Kutch » UttarPradesh » Vadodara
AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY ARE:
1 ) NS E 2 ) BS E
NATIONAL STOCK EXCHANGE The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most advanced exchange with 1016 companies listed and 726 trading members. Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the incorporation of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After A fter a few years of operations, the NSE has become the largest stock exchange in India. Three segments of the NSE trading platform p latform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 19 94 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world. In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are ow ned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor's. In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999). The NSE is owned by the group of leading financial institutions such as Indian Bank or Life Insurance Corporation of India. However, in the totally de-mutualized Exchange, the ownership as well as the management does not have a right to trade on the Exchange. Only qualified traders can be involved in the securities trading. The NSE is one of the few exchanges in the world trading all types of securities on a single platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market.
The main objectives of NSE are as follows
1). To establish a nation wide trading facility for equities, debt and hybrid instruments 2). To ensure ensure equal equal access access invest investors ors all over the countr country y through through
appropr appropriat iatee
communication network. 3). To provide a fair, efficient and transparent securities market to investors using an electronic communication network. 4). To enable shorter settlement cycle and book entry settlement system. 5). To meet current international standards of securities market. Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank, Corpor Corporati ation on Bank, Bank, Indian Indian Bank, Bank, Orient Oriental al Bank of Commer Commerce. ce. Union Union Bank Bank of India, India, Punjab Punjab National Bank, Infrastructure Leasing and Financial Services, Stock Holding Corporation fo India and SBE capital market are the promoters of NSE.
NSE Nifty:
The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for large companies on the National Stock Exchange of India. S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later on, it came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.
NSE other indices: • • • •
S&P CNX Nifty CNX Nifty Junior CNX 100 S&P CNX 500
• • •
CNX Midcap S&P CNX Defty CNX Midcap 200
BOMBAY STOCK EXCHANGE: The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India. India. Bombay Stock Exchange was established in 1875. There are around 5,600 Indian companies listed with the stock exchange, and has a significant trading volume. As of October2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions volume. History:
An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as the Bombay Stock Exchange Exchan ge (BSE).In January 1899, the stock exchange exchan ge moved into the Brokers’ Hall after it was inaugurated by James M MacLean. After the First World War, the BSE was shifted to an old building near the Town Hall. In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts (Regulation) Act.1995, when it was replaced by an electronic (eTrading) system named BOLT,or the BSE Online Trading system. In 2005, the status of the exchange exchang e changed from an Association of Persons (AoP) to a full fledged corporation under the BSE (Corporatization and Demutualization) Scheme , 2005 (and its name was changed to The Bombay Stock Exchange Limited). BSE Sensex:
The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scrips, with the base April 1979= 100. The set of companies which make up the index has been changed only a few times in the last 20 years. These companies account accou nt for around one-fifth of the market capitalization of the BSE. SENSEX , first compiled in 1986 was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing a sample of large, well-established and financially sound companies. The base year of SENSEX is 1978-79. The index is widely reported in both domestic and international markets through print as well as electronic media. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. From September 2003, the SENSEX is calculated on a free-float market capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is a widely followed index construction methodology on which majority of global equity benchmarks are based.
The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. More recently, the bourses in India witnessed a similar frenzy in the 'TMT' sectors. The SENSEX captured all these happenings in the most judicial manner. One can identify the booms and bust of the Indian equity market through SENSEX. The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news ne ws wire agencies. SENSEX calculation: SENSEX is calculated using a "Market Capitalization-Weighted" methodology.
As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. (The market capitalization of a company is determined by multiplying the price of its stock by the n umber of shares issued by the company). An index of a set of combined variables (such as price and number of shares) is commonly referred as a 'Composite Index' by statisticians. A single indexed nu mber is used to represent the results of this calculation in order to make the value easier to work with and track over time. It is much easier to graph a chart based on indexed values than one based on actual values. . BSE - other Indices:
Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock indices as well: • • • • •
BSE 500 BSE PSU BSE MIDCAP BSE SMLCAP BSE BANK
The Securities and Exchange Board of India The Securities and Exchange Board of India even though established in the
year 1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock Exchanges, other security and mutual funds. Registration and regulation of market intermediaries are also carried out by SEBI. It has responsibility to prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to promote the healthy growth of the capital market and protect the investors. The Governing Board of stock exchanges:
The Governing Board of the Stock Exchange consists of elected members of directors, government nominees and public
representatives. Rules, by laws and regulations of the Stock Exchange substantial powers to the executive director for maintaining efficient and smooth day-to day functioning of Stock Exchange. The Governing Board has the responsibility to maintain and orderly and well-regulated market The Governing body of the Stock Exchange consists of 13 members of which Six members members of the Stock Exchange are are elected by the members of the Stock Exchange.
F.
Cent Centra rall Gov Gover ernm nmen entt nom nomin inat ates es no nott mor moree tha than n thr three ee memb member ers. s.
G.
Thee boa Th board rd no nomi mina nate tess thre threee pu publ blic ic repr repres esen enta tati tive ves. s.
H.
SEBI SEBI no nomi mina nate tess pers person onaa not not exc excee eedi ding ng thre threee and and
I.
Thee Sto Th Stock ck Ex Exch chan ange ge appo appoin ints ts on onee Exe Execu cuti tive ve Dire Direct ctor or..
One third of the elected members retire at annual general meeting (AGM). Thee reti Th retire red d memb member er can can offe offerr hims himsel elff for for elec electi tion on if he is no nott elec electe ted d for for two two cons consec ecut utiive year ears. If a membe emberr serv servees in the the go gove vern rnin ing g bo bod dy for for two yea years consecutively, he should refrain offering himself for another two years.
The members of the governing body elect the president and vice-president. It needs to approval from the Central Government or the Board. The office tenure for the president and vice-president is on year. They can offer themselves for re-election, if they have not held for two consecutive years. In that case they can offer themselves for re-election after a gap of one-year period. SEBI GUIDELINES TO SECONDARY MARKETS :
The Securities and Exchange Board of India even though established in the year 1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock Exchanges, other security and mutual funds. Registration and regulation of market
intermediaries are also carried out ou t by SEBI. It has responsibility to prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to promote the healthy growth of the capital market and protect the investors
MANUAL MODE OF TRADING: TRADING PROCEDURE BEFORE ONLINE THE TRADING RING:
Trading on stock exchanges is officially done in the ring for a few hours from 11.00 A.M to 2.30P.M. Trading before or after official hour is called KERB TRADING. In the trading ring space is provided for specified and non-specified sections. The members of their authorized assistants have to wear a badge or carry with them identify cards given by the exchange to enter the trading ring. They carry a Sauda book or confirmation memos duly authorized by exchange. The stock exchanges operations at floor level are highly technical in nature. Non-members are not permitted to enter into stock market. Hence, various stages have to be completed in executing a transaction at a stock exchange. The steps involved in the methods of trading have been given below: A.CHOICE OF BROKER:
The prospective investor who wants to buy shares or the investor who wants to sell his shares cannot enter into hall of the exchange and transact business. They have to act through only member brokers. They can also appoint their bankers for this purpose. Since, bankers can become members of stock exchange as per the present regulations. So, the first task in transacting business on stock exchanges is to choose a broker of repute or banker. Such people’s can ensure prompt and quick execution of a transaction at the possible price. At present there are 4500 authorized brokers in ISE. PLACEMENT OF ORDER:
The next step in planning of order for the purchase or sale of Securities with the broker. The order is usually 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 order, limit order, immediate or cancel order, discretionary order, limited discretionary order, open order and stop loss order. ENTRY OF ORDER INTO THE BOOKS:
After receiving the order, the member enters them in his books and the purchase and sale orders are distributed among his assistants to handle them separately in non-specified and odd-lots.
EXECUTION OF ORDER:
Big brokers transact their business through their authorized clerk. Small ones outt thei ou theirr bu busi sine ness ss pers person onal ally ly.. Orde Orders rs are are exec execut uted ed in the the trad tradin ing g ring ring of the the ISE.Thisworks from 12:00 noon to 2:00 p.m discretionary order on all working days from Monday to Friday and a special hour session on Saturday. The floor of the stock exchange is divided into number of markets (pits) according to the nature of security deal in. The authorized clerk/broker goes to the pit and jobbers offer two way quotes for the scrips they deal in. they act as market makers and provide liquidity to the market. The system has been designed to get the bet lids and offers from the jobber’s book as well as the best buy and sell orders from the book. If the quotation is not acceptable to the brokers, he may make a counter bid/offer. Ultimately the bargains may be closed at a price mutually acceptable to both the parties. In case the quotation is not acceptable to him, the broker may go to another dealer and make a bargain. All bargains on the stock exchanges are settled by word of mouth and there is no written contract signed immediately by the parties concerned. Once the transaction is finalized, the deals are recorded in a Chaupri Rough notebook or transaction note or confirmation memos. Soudha block books or confirmation memos are provided by the stock exchange. The details are recorded in these books also. The prices at which different scrips are traded on a particular day published on the next day in the newspapers. An authorized representative of the stock exchange is also present in the hall to supervise the trading.
PREPARATION OF CONTRACT NOTES
Usually, Usually, the authorize authorized d clerks clerks enter the particular particularss of the business transacted transacted during a particular day in ‘Kacha Sauda Book’ they are transferred to ‘Pucca Sauda Book’, Book’, which which are mainta maintaine ined d separa separatel tely y for the ready ready delive delivery ry contra contracts cts.. Then Then the broker/authorized clerk prepares a contract note. A contract note is a written agreement between the broker and his client for the transaction executed. It contains the details of the contract made for the purchase/sale of Securities, the brokerage chargeable, name of the company, number of shares bought/sold, net rate, etc., it is prepared in a prescribed from and a copy of it is also sent to the client.
PLACING ORDER WITH THE BROKER:
The next step is placing an order for the purchase/sale of securities with the
broker. The order is usually placed over telephone, fax. It can also take the form of telegram or letter or in person. The order placed may be any of the following varieties (largely classified on the basis of price limits that it imposes.).
AT BEST ORDER (OR) BEST RATE ORDER:
“Buy 1000 XYZ ltd.”, it does not specify any price. It means buy XYZ Ltd. Securities at the prevailing market market price. These are executed executed very fast as there there is no price limits.
LIMIT ORDER:
“Buy 100 XYZ Ltd. At Rs 100”, it is an order for the purchase of shares at a specified price by the client.(Rs 100)
LIMITED DISCRETIONARY ORDER:
“Buy 1000 XYZ Ltd., around Rs.100”. it gives discretion to the broker. The price can be a little above Rs 100. How much discretion is implied depends on how the broker and client define around.
OPEN ORDER:
It is an order to buy or sell without fixing any time or price limit on the execution of the order.
STOP LOSS ORDER:
“Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10”. It means buy 100 XYZ Ltd securities at the market rate of Rs. 12 but if on the same day the price falls to Rs. 10 immediately sell of the securities /shares. Thus an attempt is made to limit the loss of sudden unfavorable shift in the market.
NET RATE ORDER:
“Buy 1000 XYZ Ltd. @Rs.30 net “would mean that the client is willing to buy 1000 XYZ Ltd. For no more than Rs.30 per security inclusive of brokerage payable to the broker. Net rate is purchase or sale rate minus brokerage.
MARKET RATE ORDER:
Market rate is net rate plus brokerage for purchase and net minus brokerage for sale. So, “Buy 1000 XYZ Ltd. @Rs.30 market” would mean that the client is willing to pay Rs.30 plus brokerage for each security of XYZ Ltd.
DISADVANTAGES OF MANUAL TRADING: 1) Manual records are very difficult to be maintained safe 2) Manual records are subject to greater g reater human error 3) Business can see itself in fines and penalties if records are lost
4) Manual records are easier to be falsified, modified, altered or vanished, as compared to computerized records which become very safe when using passwords, firewalls, and back-ups. DEPOSITORY SYSTEM :
A "Depository" is a facility for holding securities, which enables securities transactions to be processed by book entry. To achieve this purpose, the depository may immobilize the securities or dematerialise them (so that they exist only as electronic records).India has chosen the dematerialisation route. In India, a depository is an organisation, which holds the beneficial owner's securities in electronic form, through through a regist registere ered d Deposit Depository ory Parti Particip cipant ant (DP). (DP). A deposi depositor tory y functi functions ons somewh somewhat at simil similar ar to a commercial bank. To avail of the services offered by a depository, the investor has to open an account with a registered DP.
BENEFITS OF DEPOSITORY SYSTEM: In the depository system, the ownership and transfer of Securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the danger related to handling of paper. NSDL provides numerous direct and indirect benefits, like:
Elimination of bad deliveries-in the depository environment, once holding of
an investor are Dematerialized, the question of bad delivery does not arise i.e. they cannot be hold “under objection”.
Elimination of all risks associated with physical certificates-dealing in physical
Securities have associates security risks of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates and advertisement, etc.., This problem does not arise in the depository environment. SERVICES AVAILABLE IN DEPOSITORY SYSTEM: NSE AND BSE.
NSDL: NATIONAL SECURITY DEPOSITORY LIMITED
Although India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialized form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimize risk and reduce costs. At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.
Promoters / Shareholders NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the largest development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and National Stock Exchange of India Limited (NSE) - the largest stock exchange in India. Some of the prominent banks in the country have taken a stake in NSDL.
Promoters • •
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Industrial Development Bank of India Limited (Now, IDBI Bank Limited) Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit Trust of India) National Stock Exchange of India Limited
Other Shareholders
• • • • • • • • • •
State Bank of India Oriental Bank of Commerce Citibank NA Standard Chartered Bank HDFC Bank Limited The Honkong and Shanghai Banking Corporation Limited Deutsche Bank Dena Bank Canara Bank Union Bank of India
CDSL: CENTRAL DEPOSITORY SERVICES LIMITED:
A Depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository Participant (DP), who as an agent of the depository, offers depository services to investors. According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. The investor who is known as beneficial owner (BO) has to open a demat account through any DP for dematerialization of his holdings and a nd transferring securities. The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. The DP is required to provide the investor, at regular intervals, a statement of account which gives the details of the securities holdings and transactions. The depository system has effectively eliminated paper-based certificates which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities.CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of India and Centurion Bank.
Promoters &shareholders
CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with Bank of India, Bank of Baroda, State Bank of India and HDFC Bank. BSE has been involved with this venture right from the inception and has contributed overwhelmingly to the fruition of the project. The initial capital of the company is Rs.104.50 crores. The list of shareholders with effect from 11th December, 2008 is as under. •
Sr. No.
Name of shareholders
Value of holding (in Rupees Lacs)
% terms to total equity
1 Bombay Stock Exchange Limited
3,825.46
36.61
2 Ba Bank of India
1,000.00
9.57
3 Ba Bank of Baroda
1,000.00
9.57
4 State Bank of India
1,000.00
9.57
5 HDFC Bank Limited
1,500.00
14.36
6 Standard Chartered Bank
750.00
7.18
7 Canara Bank
674.46
6.45
8 Union Bank of India
200.00
1.91
9 Bank of Maharashtra
200.00
1.91
10 The Jammu Jammu and Kashmi Kashmirr Bank Bank Limited
200.00
1.91
11 The Calcut Calcutta ta Stoc Stock k Exch Exchange ange Association Limited
100.00
0.96
0.08
--
10,450.00
100.00
12 Others TOTAL • • • • • • • • • • •
DEMATERIALIZATION
Dematerialization is a process by which physical shares of investors are converted to an equivalent number of Securities in electronic form and credited in the investor’s account with his Depository Participant.
Dematerialized trading is now compulsory for all investors. Beginning of firs firstt week week of Janu Januar ary y 19 1999 99,, inve invest stor or can can trad trade e in speci specifi fic c sc scri ript pts s in the the Dem Demoral oraliizatio ation n
for form.
They They can prov proviide and and
receiv ceive e
del delive ivery only nly
in a
Dematerialized form and share certificate will not be changed for these scripts. A depository depository is an organization organization where Securities Securities of shareholder shareholder are held in the electronic form at the request of the shareholder through Depository Participant (DPs). The system is comparable to that in a bank. If an investor wants services offered by a depository, he would have to open an account with it through a DPsimilar to opening an account with any other branches of the bank in order to avail of its services. s ervices. Dematerialization is a process by which physical certificates of an investor are taken back by the company/registrar and actually destroyed and an equivalent number of Securities are credited in the depository account of those investors. A Depository Participant is investor’s agent in the system. He maintains investor’s Securities account and intimates the status of holdings from time to time to the investor.
FEATURES OF DEMAT: •
•
In case you want to convert your existing shares into Demat format, you can view securities available for Demat You can view the details of your transactions including settlement date, pay in date, pay out date using the View Settlement S ettlement calendar option
OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF TRADES:
All the trades executed at the exchanges are settled by the clearing member (CM), as in the case of Securities in the physical form. To settle trades in Demat segment each CM should open one clearing account with any of the DP. The procedure for opening clearing accounts is:
Approach a DP.
Fill up an account opening form.
Sign on an agreement with the DP.
Application is forwarded to NSDL by DP.
NSDL allots a number identified as CM-BP-ID. DP opens account and an account number is providing along with CM-BP-ID to the clearing member. •
After opening an account with the DP the investor should surrender the physical certificates held in his name to a depository participant. These certificates will be sent to the respective companies where they will be cancelled after dematerialization and will credit the investors account with the DP. The securities on dematerialisation will appear as balances in the depository account. These balances can be transferred like the shares held in physical form. Dematerialised shares are in the fungible form and do not have any distinctive or certificate numbers .The securities in the demat can again be converted converted into physical form which is called as rematerialisation.
Safety to the investor * Securities Exchange Board of India (SEBI) has laid down certain rules and regulations for getting registered as a depository participant. With the recommendation of the Depository and SEBI's own independent evaluation a DP will be registered under SEBI. * The investors account will be credited/debited by the DP only on the basis of valid instruction from the client. * The system driven mandatory reconciliation is done between the DP and NSDL. * Periodic inspections of both DP and R&T agent are conducted by NSDL * The data interchange between NSDL and its business partners is protected by standard protection measures such as encryption. * No direct communication links exist between two business partners and all
communications are routed through NSDL. * A statement of account is received periodically by the investors. NSDL sends statement of account to a random sample of investors a s a counter check. * The investor has the right to approach NSDL if the grievances of the investors are not resolved by the concerned DP. Advantages of dematerialization: • •
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• •
• •
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There is no risk due to loss on account of fire, theft or mutilation. There is no chance of bad delivery at the time of selling shares as there is no signature mismatch. Transaction costs are usually lower than that in the physical segment. The bonus /rights shares allotted to the investor will be immediately credited into his account. Share transactions like sale or purchase and transfer/transmission transfer/transmission etc. can be effected in a much simpler and faster way.
A safe and convenient way to hold securities ; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.; - Reduction in paperwork involved in transfer of securities; - Reduction in transaction cost; - No odd lot problem, even one share can be sold; - Nomination facility; - Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; - Transmission of securities is done by DP eliminating correspondence with companies; - Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. - Holding investments in equity and debt instruments in a single account. Disadvantages of Demat account There is no as such disadvantage of Demat account. And even if there is any disadvantage of Demat account than by law, In India we Must have to use Demat accounts to do share transactions.
A. Procedure for purchasing dematerialized securities
The procedure for purchasing dematerialized securities is also similar to the procedure for buying physical securities.
1.
Investor Investor instruc instructs ts DP to receive credits credits into into his account account in the prescrib prescribed ed form. There may be one time standing instruction or separate instruction each time to receive credits.
2. Inve Invest stor or purc purcha hase ses s secu securi riti ties es in any any of the the stoc stock k exch exchan ange ges s link linked ed to depository through a broker. 3. Broker Broker receives receives payment payment from investor investor and and arranges arranges payment payment to clearing clearing corporation. 4. Broker receives receives credit credit to securities securities in clearing clearing account account on the payout day. 5. Broker Broker gives instruc instruction tions s to DP to debit debit clearing clearing account account and credit credit client’s client’s account. Investor receives shares into his account by way of book entry.
B. Procedure of selling dematerialized securities The procedure for selling dematerialized securities in stock exchanges is similar as selling physical securities. The only major difference is that instead of delivering physical securities to the broker, the investor instructs his DP to debit his demat account with the number of securities sold by him and credit the brokers clearing account. The procedure for selling dematerialized securities is given below:
1. Inve Invest stor or sell sells s secu securi riti ties es in any any of the the stoc stock k exch exchan ange ge link linked ed to depository through a broker. 2. Investor Investor instruc instructs ts his DP to debit debit his demat demat account account with the number number of securities sold and credit the broker’s clearing account. 3. Before Before the pay-in-day, pay-in-day, broker broker of the investor investor transfer transfers s the securities securities to clearing corporation. corporation. 4. The broker broker receive receives s payment payment from from the stock stock exchange. exchange. 5. The investor investor receives receives payment payment from from the broker broker for sale of securiti securities es in the same manner as received in case of sale of physical securities. securities.
The Evolution of Stock Brokers with Online Trading An online stock broker is an investor’s means of buying and selling shares via the Internet, just like a regular stock broker, wherein an individual or a brokerage firm acts as one’s link to the stock exchange. Are such services necessary? Is it, after all, not true that anyone can engage in online trading today, and that it is possible to invest in stocks with one’s own computer? The fact is, only a registered (SEBI) stock broker can buy and sell shares in the stock market. Such an individual is registered on one or many stock exchanges and is authorized to transact on behalf of others. Apart from that, an online stock broker is very valuable to investors who are not
technically inclined and have no or little prior knowledge of stock trading. Such investors can use their own online stock trading accounts to obtain necessary nec essary information and place online trades at any time of the day da y. Others, however, still require a human interface - a real person who will place trades on their behalf.
. INTRODUCTION TO ONLINETRADING The Internet revolution has been changing the fundamentals of our society. It shapes the way we communicate and the way we do business. It brings us closer and closer to vital sources of information. It provides us with means to directly interact with service-oriented computer systems tailored to our specific needs; therefore, we can serve o urselves better by making our own decisions. This prevailing shift of the business paradigm is reshaping the financial industry and transforming the way people invest. In the old days, because of the limitations of communications technology, Wall Street was the center for most of the Stock Exchange Exch ange and Brokerage firms. Today, at this millennial transition, investors can use revolutionary Internet Client-Server technology to trade stocks nearly anywhere, anytime, independent of brokers' fees and service limitations. Definition: Online Trading
The act or practice of buying and selling securities over the Internet. Generally speaking, online trading occurs when an investor makes an order to a broker online; the broker then executes the order through the ordinary means. Online trading became more common in the 1990s as more brokerages offered their services online, often for a small fee rather than a commission on the trade. Online trading should be distinguished from electronic trading, which occurs on an exchange. See also: Discount brokerage. Online trading in India is the internet based investment activity that involves no direct involvement o f the broker. There are many leading online trading portals in India along with the online trading platforms of the biggest
stock houses like the National stock exchange and the Bombay stock exchange. The total portion of online share trading India has been be en found to have grown g rown from just 3 per cent of the total turnover in 2003-04 to 16 per cent in 2006-07
Facilities of the online trading in India: The investor has to register with an online trading portal and get into an agreement with the firm to trade in different securities following the terms and conditions listed down on the agreement. The order processing is done in correct timings as the servers of the online trading portal a re connected to the stock exchanges and designated banks all round the clock. They can also get updates on the trading and check the current status of their orders either through e-mail or through the interface. Brokerage also provides research content on their websites, such that the clients can take their own decisions on stocks before investing.
Products and services of the online trading in India: Varieties of financial products and services of the online trading are available in India such as: • • • • • • • • •
Life insurance Equities, Portfolio management Mutual funds Loans General insurance Share trading Commodities trading Financial planning.
National stock exchange and Bombay stock exchange: In spite of many private stock houses at present involved in online trading in India, the NSE and BSE are among the largest exchanges. They handle huge hug e daily trading volumes, supporting large amounts of data traffic, and possessing a countrywide network. The automated online systems used for trading by the national stock exchange and the Bombay stock exchange are the NIBIS or NSE's Internet Based Information System and NEAT for the national stock exchange exchang e and the BSE Online Trading system or BOLT for the Bombay stock exchange. •
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.Online trading is termed as selling products or good services through Internet. Customers willing to purchase the product should provide the credit card details and personal contact information online and once the the payment is being made the product is shipped to the address of the customer as provided earlier generally after two business days. The product is shipped to the customer from the retailer only.
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Online trading is treated as the most effective process to make money with the help of o f Internet by sitting at home only. But is not easy and simple as it requires constant con stant supervision and once people attains the appropriate skill can gain profit in huge amount. In order to make a business successful a plan need to be prepared first then multiple sources of income policy should be opened so that the plan at later time should be incorporated in to the business.
Companies provide Online Trading in India:-
Online Trading in India :: India Stock
:: BSEIndia
:: A1 Technology Online Trading
:: JV Financial Online
:: Best online trading
:: Kotak Securities Online Trading
:: Bonanza Online Trading
:: Mansukh Securities Online Trading
:: BullishIndian.com Online Trading
:: Quote.com Online Trading
:: Express Computer Online Trading
:: SHCL Online Trading
:: Geojit Securities Online
:: STC Online Trading
:: ICICI Online Trading
:: Technical Analysis Trading
:: Indiabulls Online
:: Union Bank of India Online Trading
:: India Insurance
:: Best Online Trading
FEATURES OF ONLINE TRADING: The Online Trading is having many features which make it most suitable for the investors to go for. Some of these features are as follows: Features of information. information.
The Internet can provide a new sense of control over your financial future. The amount of investment information information available online is truly astounding. It's one of the best aspects of being a wired investor. For the first time in history, any individual with an Internet connection can:
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Know the price of any stock at any time
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Review the price history of any stock in chart format
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Follow market events in-depth
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Receive a wealth of free commentary and analysis about stock markets and the global economy
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Conduct extensive financial research on any company
Control of your money: One of the great appeals of using an online trading account is the fact that the account belongs to you, and is under your direct control. When you want to buy or sell stock, you no longer need to call your broker on the phone; hope that he is in the office to place your order; possibly argue with the broker about the order; and hope that the transaction is executed instantly.
Access to Market: At the most basic level, an online trading account gives you more agility in buying and selling stocks. This is through sophisticated information streams, dedicated trading platforms and sophisticated tools for accessing the markets. Ensures the best price for Investor: Every broker house aims at providing the investor with the best price available. Also due to the high level of transparency with regard to display of information information relating to the specific stocks and company profiles, you will be able to get the best quote for your orders.
Offers grater transperanc t ransperancy: y: Online trading offers you greater transparency by providing you with an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit into your depository
account. All these stages are subject to inspection, thus bringing in transparency into the system. Enables hassle free trading: Online trading integrates your bank account, your trading account and your demat accounts, which leads to easy and paperless trading for you.
You as an Investment online customer will be able to execute the entire trading transaction, right from logging on to our site, to the execution and settlement of your bank account, in a very short period of time.
Trading on the net, gives even the smallest retail investor access to information that earlier was available only to the big traders. This provides a level playing field for all investors in the securities market.
This method of trading reduces the settlement risk for the investor, as in this case all short sell orders are squared off at the specified cut-off time and not allowed to be carried forward. In the the case case of a dema dematt acco accoun untt your your dema dematt acco accoun untt is chec checke ked d by us befo before re executing your sell transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities and for you as a seller of the securities
Ever Every y trad trade e is conf confir irme med d imme immedi diat atel ely y and and you you will ill rece receiv ive e an on-s on-scr cree een n confirmation following every trade with full details for your records. This avoids costly errors that would have been discovered when it is too late.
Your Your Bank, Bank, Deposito Depository ry and online online account account are integrat integrated ed for your convenience. convenience. Various broking houses provide access to many of the popular banks.
Broking houses work hard to keep our account and personal information secure. From updated security technology to advanced fraud prevention measures, they have the people and tools in place to provide a strong defense against electronic scams and fraud.
BENEFITS OF ONLINE BROKING
1) Less Costly: The most significant advantage of the Online broking is the cost reduction in the brokerage. Due to the power of the Internet one has the privilege of becoming the clients of really large brokerages with the benefits of enjoying the low charges hithelio before enjoyed only by the big players. As the DP account has got linked to the trading account most players do not charge a minimum transaction cost thus truly truly allow allowing ing one to buy a singl single e share share and achieve achieve meanin meaningf gful ul rupee rupee price price averaging whatever be your buying power.
2) Peace of Mind: One can never have complete peace of mind but online investing does away with the hassles of filling up instruction slips, visits to the broker for handing over these slips and consequent costs.
3) Keeping Records: The site one trades on keeps a record of all transactions down to unexecuted orders and cancelled orders thus keeping one abreast of all your transactions 24 hours a day. No paperwork means more time at one’s disposal for research and analysis.
4) Access to Information and investment Tools:
Most Most onlin online e invest investin ing g sit sites es have have a wealth wealth of infor informa matio tion n for their their regist registere ered d members. This includes research reports, results, analysis and even gossip and the buzz in the market.
5.) Unparalleled Liquidity: The. bank account linked with the trading account invariably has an A TM free. Most partner banks offer Internet banking as well. This results in one’s money becoming available to him whenever he like from his trading account. Conversely in case he spot an opportunity in the market he can immediately allocate money from his savings account to his trading account and make profits .
6.) Unparalleled Safety: Most sites sites are secure secure using using 128-bit 128-bit algorith algorithms ms -highest -highest available available commerci commercially ally anywhere in the world. Moreover even if somebody broke in and tampered with one’s account the money from the stocks he sold or the stock bought from the money in his account is in his account only.
7.) Reduces the settlement risk: This method of trading reduces the settlement risk for the investor, as in this case no Short sale is possible i.e. the seller will not be able to sell the securities unless he has their actual possession. In the case of a demat account (required for an online transa transacti ction) on),, when when a seller seller wants wants to sell sell the secur securiti ities, es, his his demat demat accou account nt is checked by the Depository Participant before executing the sale transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities.
8.) Offers greater transparency: Online trading gives greater transparency to the investors by providing them an audit trail. This involves a complete integrated electronic chain starting from order
placem placement ent,, to clear clearing ing and settle settleme ment nt and final finally ly ending ending with with a credit credit to the depository account of the investor. All these stages are subject to inspection, thus bringing in transparency into the system.
9.) Ease of trade: It is the ease of doing the trade through net, with a click of mouse, one can buy or sell any share that is dematerialized. dematerialized. Other Other than than the the above-m above-ment ention ioned ed advant advantage ages, s, Intern Internet et tradin trading g provid provides es some some additi additiona onall advant advantag ages es to the inves investor tors, s, broker brokers s and also also helps helps the nation nation to channeliz channelize e the resources. resources. Net trading would increase increase competition competition in the market market hence increase in the bargaining power of the investors. The entire communication between the investor, broker and exchange would take place within milliseconds .
PROBLEMS OF ONLINE BROKING There is a flip side to everything and online trading is no exception.
Chart
Source:- www.lse.co.in www.lse.co.in 27% Loyality is is of traditional broker 23% people says that online trading is more costly than manual trading. 21% people not prefer online trading because of lack of knowledge.
So, the main problems of online trading are as follows:
1.) "Server not found": This may appear on one’s screens when he is desperately trying to get out of an unprofitable unprofitable position. Some of the online sites are providing a telephone number for use in case their sites are overloaded or their server down.
2.) Connectivity of the Broker with NSE: Recently ICICI Direct had a connectivity problem with the NSE for two and halfhours during trading hours. This problem is rare but be alive to its possibility.
3.) Cyber attack: In the event of a malicious attack on the systems of one’s broker he is protected only if the company is taking proper precautions against such attacks and if proper backup is regularly been taken. He may like to choose a brokerage that has a stated security policy and contingency plan in place.
4.) Non-availability of a seamless interface: interface: As a client one will access the NSE through a server of the online brokerage and this may involve queuing delays. If a number of client access the server the server takes its its own own time time send sendin ing g the the orde orders rs to the the NSE NSE serv server er.. He must must chec check k out out the the seamlessness of this interface before selecting an online brokerage. The faster the orders are processed the more seamless is the interface.
5.) Non- availability of personalized advice:
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.
6.) Margin: If Internet trading alone is not fast and furious enough; many people are trading on margi margin. n. That That is where where the broke brokerag rage e firm firm lends lends you money money by levera leveragin ging g his account, allowing him to buy a large amount of securities by putting up only a small amount of money. He may have forgotten what he read in the small print of his agreement, but the brokerage firm has the right to change the maintenance margin requirements without any warning or notice to him. In fact, the firm has the right to liquidate his securities holdings (and it can pick and choose which ones) without any notice to one if he fail to meet the margin call. And there he was leveraged to the hilt, hoping to hit a home run when he discovered that he is required to make a large deposit that he cannot make. The next thing one know, the firm is selling off his securities at a point in time that is not the best for him. These are the perils of trading on margin.
7.) Little use of advisory services: The The adviso advisory ry servic services es being being promis promised ed by the broker brokers s would would be of little little use use to investors looking for an insight into the market. Many would not like to rely on research reports, which are there for all. So, net investors will have to do their own research and take their own decision, whether wild or wise.
8.) Increased charges: Some of the brokers are of the view that they would have to provide advisory services to the customers. But with increased volumes, they will have to follow the international practice of charging a little more than the normal charges from a customer looking for personal advice.
WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING Several broking houses now offer online trading facilities. You can trade online with e-br e-brok oker erag ages es such such as ICIC ICICII Dire Direct ct,, Kota Kotaks kstr tree eet, t, Indi India a bull bulls, s, Indi India a info info line line’s ’s 5paisa.com and HDFC securities. If you are alread already y comfor comfortab table le tradin trading g with with your your regula regularr broker broker,, here here are few reason reasons s why you may may consid consider er switc switchin hing g to tradin trading g online online,, or at least least anothe anotherr avenue of trading. an obvious advantage of online trading is that your transaction would be virtually paperless. Your trading account would be linked to your demat and bank account, ensuring a smooth transaction process. This is especially helpful in the extent T+2 settlement system, where you have just two days to settle your transaction. The normal process of issuing of delivery note, in case of a sale, or arranging for a payment in case of purchaser of shares, is all taken care of the minute your order is exec execut uted ed onli online ne.. The The abse absenc nce e of manu manual al inte interv rven enti tion on ensu ensure res s that that you you are are completely in control of all transaction. There is also little room for error, as your order is always confirmed before it is executed. You can also make better decision as you have a clear record of all your previous transaction. transaction. When you trade offline, a demat statement is normally sent to you only on a quarterly basis .keeping track of your portfolio can be a hassle in such a case. The inter net can provide a new sense of control over your financial future. The amount of investment information available online is truly astounding. Its one of the the best best aspe aspect ct of bein being g a wire wired d inve invest stor or for for the the firs firstt time time in hist histor ory, y, any any individual with an internet connection can: •
Know the price of any stock at any time
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Review the price history of any stock in chart format
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Follow market events in-depth
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Receive a wealth of free commentary and analysis about stock markets and globe economy.
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Conduct extensive financial research on any company Talk with other investors around the world
At investsmart investsmart you can get real-time real-time stock stock quotes, quotes, daily roundups roundups of the stock stock market, experts commentary, and a deep community of fellow investors.
Convenience is probably the greatest advantage online trading offers investors. if don’t have time to trade during market hours ,perhaps you are at work, you can log on the web-trading site and place your order offline, during off market hours. Your order would join the queue and be expected the next day. You would need to enjoy a good relationship with your broker, for you to be able to reach him in the late hours. For non-resident Indians (NRI), trading online is perhaps their easiest option to invest in the Indian stock markets. What is more, the time difference, in some cases, can work to their advantage .Antony, an NRI-based in New York, places his order in the evening after work, when it is day time India and the markets are open. We also have access to considerable information online. By just logging on to ICICI direct online, for instance, we can get the latest news, market information and company research. Moreover, if our connection is maddeningly slow and we want to get your order executed immediately, most e-brokerages also provide a facility to trade offline by placing our order via the phone.
PROCEDURE FOR ON-LINE TRADING:
An Investor interesting in trading through Internet shall such as filling the accoun accountt openin opening g form form of -broke -broker, r, copies copies of identi identity ty proof proof have have to, firstl firstly y
register himself with an Internet brokerage firm. Some formalities, copy of residence proof are made to register himself with the e-trader. Secondly, the investor would be required to open a bank account with a scheduled bank and sufficient balance should be kept in the account. Thirdly he would be requ requir ired ed to open open acco accoun untt with with a depo deposi sito tory ry parti partici cipan pantt beca becaus use e only only dematerialized shares can be traded on Internet.
The client places order via the net by logging on to his
The broker accepts and executes the order and places it with the exchange
The exchange accepts the order after checking the share
The broker makes the payment either directly via the client bank account or pays through its own account and recovers
The exchange receives money and completes the
The client is intimated about the settlement either through the demat or via e-mail.
So, generally following steps are followed while doing the trading through the Internet:
Step-I: Those investors interested in doing the trading over Internet system, that is,NEAT - ISX (NSE), should approach the brokers and register with the Stock Broker.
Step-2: After registration, the broker will provide to them a login name, password and a personal identification number (PIN).
Step-3: Actual placement of an order, Using the place order window as under can then place an order: (a) First by entering the symbol and series of stock and other parameters such as quantity and price of the scrip on the place order window. (b) Second, fill in the symbol, series and the default quantity.
Step-4: It is the process of review. Thus, the investor has to review the order placed by clicking the review option. He may also re-set to clear the values.
Step-5: After the review has been satisfactory; the order has to be sent by clicking on the send option.
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 certai certain n reason reasons s such such as invali invalid d price price limit limit,, an approp appropria riate te message message will will
appear at the bottom of the screen. At present, a time lag of about ten seconds is there in executing the trade.
Step-8: It is regarding charging payment, for which there are different modes. Some brokers will take some advance payment from the, investors and will fix their trading limits. When the trade is executed, the broker will ask the investor for transfer of funds by the investor to his account.
When was online trading introduced in INDIA? Online trading started in India in February 2000 when a couple of brokers started offering an online trading platform for their customers.
THE MECHANICS OF ONLINE TRADING CLIENT
Places an order on the net on the broker’s website through the distinctive I.D. code The settlement of the deal (buy/sell order) gets reflected in his Demat account.
BROKER
Accepts the order, Checks the client’s Identity and places the order with the stock exchange
STOCK EXCHANGE
Accepts the order after checking the scrip limit of the broker for the day
Executes the order
Pays the Exchange
The client is though his intimated about owns account the benefits execution of of investor The due to Online Investing: and receives it the deal by e-mail. from the client Pays the broker account.
Receives the money and completes the settlement
a) Independence and freedom due to enjoyed by an individual access to the markets: This is
conceivably the greatest advantage of online brokerages. A novice investor with an Internet connection can know there there all all time time stock quotes, historical stock price trends, have a handle on market events, access vast amounts of o f economic and market analysis, do research on firms, and interact with other investors via forums or chat rooms. This, in combination with time, can transform even the most novice investor with an active interest in investments into a knowledgeable and powerful investor. b) Elimination of the “middle man”:
Investing online gives the investor a sense of control over their wealth. Buying and selling of stock no longer requires another individual to carry it out. It saves the investor the added worries that come with busy phone lines; broker not being in, etc. when wanting to do an important trade. It can be done whenever and wherever by the Investor themselves. c) Elimination of Losses on account of Brokers: Most brokers live on commissions, hence the tactics used by them are in the favor of the broker first, the brokerage house next and finally the client. Online brokerages pay financial advisors a fixed salary, thus eliminating the chance for an investor doing unnecessary trades for the benefit of the brokerage firm and the broker. d) Inexpensive and affordable commission charges: Commissions per trade online are much lower than when compared to that charged by traditional brokerage houses like Merrill Lynch, etc. This is the fulcrum on which online o nline brokerages leverage. Cheap transaction costs along with the immense amount accessible online are the biggest reasons for the clients clients to move online. Traditional brokerage houses e) Internet as an InformationSuperhighway: Information related to stocks, company Fundamentals, etc., which were once only available to licensed brokers, are now at the finger tips of anyone and everyone. Online brokerages are inconstant endeavor to bridge the gap between the investor and the market. f) Diverse range of investment products and choices: Online brokerages are offering more
Products to the consumer, so as to give the consumer a wider choice and also to accommodate consumers that have niche tastes. Investors can invest in stocks, bonds, mutual funds, mortgages. g) Speed of trade execution: Keeping time in mind, online trading is much quicker – as far as
accessibility and availability to investment information and execution of trades areconcerned. Online have decreased the time for total completion of a trade from the regular T+3 days to to a matter of minutes. The costs borne by an Individual Investor from Online Investing a) Technical Reliability: The greatest disadvantage of online trading is the inability of a
network to be fail-safe. Computers in spite of the technological advances are by no means perfect. There are various things that could go wrong like failure to log on to the network, network blackout due to failure power, server crash resulting in site failure, traffic overload thus causing site freeze. Site freeze freeze can happen on extremely demanding days with large amounts of orders going over the networks.
b) The investor is alone: Another disadvantage may be the penalty of a bad investment.
The do it yourself attitude that empowers the investor over his own money, can give a sense of autonomy previously not experienced when dealing with traditional brokerages. But it can also spell investment failure.
The Limitations of Online Investing to an individual investor:
Besides advantages and disadvantages, there exists the possibility of limitations of what online brokerages can do for an individual investor. Though the Internet has allowed more players into the investment playing field, some investors like the institutional investors still have an advantage over the individual investors in spite of the Internet and all its advantages. It can be assertively said, “Size does matter”. Firstly, because of the sheer size of resources and contacts, institutional investors almost always get exclusive access to the hottest Initial Public Offering (IPO) deals before it goes into the markets. Individual investors usually gain access to these stocks after the initial price gain is already lost. Online brokerages do offer IPO deals dea ls –provided the trading account has h as between $100,000 to $500,000.
Client Broker Relationship Know Your Client: The stock Exchange must ensure that brokers have sufficient, verifiable information information about clients, which would facilitate risk evaluation of clients.
Broker- Client Agreement: Brokers must enter into an agreement with clients spelling out all obligations and rights. This agreement should also inter alia, the minimum service standards to be maint maintain ained ed by the broker broker for such such servic service e specif specified ied by SEBI/E SEBI/Exch xchang ange e for the the internet based trading from time to time. Exchange will prepare a model agreement for this purpose. The broker agreement with clients should not have any clause that is less stringent/contrary to the conditions stipulated is the model agreement.
Investor Information:
The broker web site providing the internet based trading facility should contain information meant for investor protection such as rules and regulations affecting client broker relationship arbitration rules, investor protection rules etc. The broker web site providing the Internet based trading facility should also provide and display prominently, hyper link to the web site/page on the web site of the relevant stock exchan exchange ge (s) (s) dis displ playi aying ng rules/ rules/ regula regulatio tions/ ns/ circul circular ars. s. Ticker Ticker/qu /quote ote/or /order der book book displayed on the web-site of the broker should display the time stamp as well as source of such information against the given information.
Order/Trade Confirmation: Order/Trade confirmation should also be sent to the investor through email at client’s discretion at the time specified by the client in addition to the other made of display of such confirmation of real time basis on the broker web site. The investor should be allowed to specify the time interval on the web site itself within which he would like to receive this information through email. Facility Facility for reconfir reconfirmati mation on of orders orders which are larger than that specified specified by the member member's 's risk risk manag manageme ement nt system system should should be provid provided ed on the the intern internet et based based system.
Handling Complaints by Investors: Exchanges should monitor complaints from investors regarding service provided by brokers to ensure a minimum level of service. Exchange should have separate cell speci specific ficall ally y to handle handle Intern Internet et tradin trading g relate related d compla complaint ints. s. It is desira desirable ble that that exchanges should also have facility for on-line registration of complaints on their web site.
Risk Management: Exchanges must ensure that brokers have a system-based control on the trading limits of clients, and exposures taken by clients. Brokers must set predefined limits on the exposure and turnover of each client. The broker systems should be capable of assessing the risk of the client as soon as the order comes in. The client should be informed of acceptance/rejection of the order within a reasonable period. In case system based control rejects an order because of client having exceeded limits etc.,
the broker system may have a review and release facility to allow the order to pass through.
Contract Notes: Contract notes must be issued to clients as per existing regulations, within 24 hours of the trade execution .
Cross Trades: As a matter of abundant precaution, the committee seeks to reiterate that as III the case of existing system, brokers using Internet based systems for routing client orders will also not be allowed to cross trades of their clients with each other. All orders must be offered to the market for matching. It is emphasized that in addition to the requirements mentioned above, all existing obligations of the broker as per current regulation will continue without changes. Exchanges may also like to specify more stringent standards as they may deem fit for allowing Internet based trading facilities to their brokers.
Enforcement: A sepa separa rate te work workin ing g grou group p has has been been set set to look look into into the the surveillance surveillance and enforcement related issues arising due to Internet based securities trading. However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices Regulations, 1995) would apply to all transactions involving securities or financial services, regardless of the medium.
STOCK MARKET TRADING ON INTERNET The major events that will take place in the Indian Capital Market are introduction introduction of index-b index-bas ased ed future futures s tradin trading g on intern internet. et. Tradi Trading ng on intern internet et means means that that the investor’s will actually buy and sell the stocks on-line through the net. A committee was setup by SEBI to develop regulatory parameters for use internet trading. SEBI approved the report on the committee. SEBI decided that internet trading could take place in India within the existing legal framework through use of order routing system system,, which which will will route route order order from from client client to broker brokers, s, for trade trade execut execution ion on regi regist ster ered ed stoc stock k exch exchan ange ges. s. The The broa broad d also also took took note note of the the reco recomm mmen ende ded d minimu minimum m techni technical cal standa standard rds s for ensur ensuring ing safet safety y and securi security ty of trans transact action ion
betw betwee een n clie client nts s and and brok broker ers, s, whic which h will will be forc forced ed by the the resp respec ecti tive ve stoc stock k exchanges.
Easier transaction processing processing Profit in time: Investor can make profits by selling shares when the going is good. They do not have to instruct their brokers on the cut off price to sell shares. Ease Ease and and tran transp spar aren ency: cy: Sinc Since e the the brok brokin ing, g, bank bank and and dema dematt acco accoun untt are are all all electron electronical ically ly connected connected,, all transact transaction ion get updated, updated, demat demat account account shows shows the latest stockholding statement while the bank account shows the balance amount after buying or selling of shares. Preca Precauti ution: on: Check Check for hidden hidden costs costs of broke broker’s r’s age. age. Bewar Beware e of net seams seamstre tress ss.. Never double click the mouse during execution of trade avoids cyber cafes and change password regularly. Less fees: shares traded online require no human intervention to match buys and sells. sells. This This means means that that commi commiss ssion ion costs costs are cut drama dramatic ticall ally y for the frequ frequent ent investor.
Market timings:
Trading on the derivatives segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the derivatives segment are: Normal Market / Exercise Market Open time
: 09:55 hours
Normal market close
:
15:30 hours Set up cut of time for Position limit/Collateral value
: till
15:30 hrs
Trade modification end time / Exercise Market
:
16:15 hours
Inte Intern rnet et Bas Based Trad Tradin ing g thro throug ugh h Orde Order r Ro Rout utin ing g Systems Internet based trading on conventional exchanges, uses the Internet as a medium for communicating client orders to the exchange, through broker web sites. Broker’s web sites may serve a variety of functions. These may include;
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Allowing the clients to directly trade through investors;
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Advertise the broker dealers’ services to potential investors;
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Offer market information and investment tools similar to those offered by information information vendor or SRO web sites;
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Offer real-time or delayed quote information, continuously update quotes while the user visits other sites, or allow investors to create a personal stock ticker;
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Provide market summaries and commentaries, analyst reports and trading strategies and market data on currencies, mutual funds, options, market indices and news; and
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Offe Offerr inve invest stor ors s acce access ss to port portfo foli lio o mana manage geme ment nt tool tools s and and anal analyt ytic ic programs;
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Information Information on commission commission and fees; and
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Account information and research reports.
In an Orde Orderr Rout Routin ing g syst system em,, a brok broker er offe offeri ring ng Inte Intern rnet et trad tradin ing g faci facili lity ty provides an electronic template for the customer to enter the name of the security, whatever it is to be bought or sold, the quantity and whatever the order is a market or limit order. Once the broker’s system receives this information. information.
COMPANY PROFILE COMPANY PROFILE
Bonanza a leading Financial Services & Brokerage House working diligently since 1994 19 94 can can be desc descri ribe bed d in a sing single le word word as a "Fin "Finan anci cial al Powe Powerh rhou ouse se". ". With With acknowledged industry industry leadership in execution and clearing services on
Exchange Traded Derivatives and cash market products. Bonanza has spread its trustw trustwort orthy hy tentac tentacles les all over over the count country ry with with more more than than 1025 1025 outlet outlets s sprea spread d across 340 cities.
It provides an extensive smorgasbord of services in equity, commodities, currency derivatives, wealth management, distribution distribution of third party products etc. Keeping in par par with with the the mode modern rn tech tech-s -sav avvy vy worl world d , Bona Bonanz nza a make makes s an inte integr grat ated ed and and innovative use of technology; it also enables its clients to trade online as well as offline and the strategic tie-ups with the latest technology partners has earned Bonanza this prestigious place in one of the top brokerage houses in the country. Client -focused philosophy backed by memberships of all principal Indian Stock and Commo Commodit dity y Excha Exchange nges s makes makes Bonanz Bonanza a stand stand apart apart from from its compe competit titor ors s and a preferred service provider in the industry for value-based services.
To add to our ever-growing achievements, a study by Dun and Bradstreet has rated Bonanza as the SIXTH largest broking house in terms of equity terminal listings in the country. If this is not enough, Bonanza Portfolio Ltd was recently nominated amongst the Top 3 Retail Financial Advisors of the country in an event conducted by CNBC-TV18 and OptiMix Financial Advisor Awards 2008. Also Bonanza has been awarded by BSE the "Major Volume driver for the year 20042005, 2006-2007 and 2008-2009".
ACHIEVEMENTS 1. Top Equity Equity Brokin Broking g House House in terms terms of branch branch expansion expansion for 2008*. 2008*.
2. 3rd in in terms terms of Number of Trading Trading Accounts Accounts for 2008*.
3. 6th in terms terms of trading trading terminal terminalss in for two two consecutive consecutive years years 2007- 2008*.
4. 9th in in terms terms of Sub Sub Brok Brokers ers for 200 2007* 7*
5. Awarded Awarded by BSE 'Major 'Major Volume Driver Driver 04-05, 04-05, 06-07, 06-07, 07-08’. 07-08’.
6. Nominated Nominated among among the Top 3 for the the "Best Financial Financial Advisor Advisor Awards '08" '08" in the category category of National Distributors - Retail instituted by CNBC-TV18 and OptiMix.
* As per the survey by DUN & BRADSTREET.
CORPORATE TIE UPS
The The compan company y has Corpor Corporate ate Tie ups with with Birla Birla Sunlif Sunlife e ,Bajaj ,Bajaj All Allian ianz, z, ICICI ICICI Prudential, SBI , Aviva , Kotak Mahindra and Reliance for Life Insurance and General Insurance. In General Insurance, Bonanza provides Insurance for Motor, Health, Travel, Housekeeper, Shopkeeper, Marine, Personal and Group Insurance.
SERVICE PROVIDED BY BONANZA
1. Mutu Mutual al Fund Funds s
2. Ins Insura urance nce •
Life Insurance
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General Insurance
3. PMS
4. Shar Share e Bro Broki king ng
5. IPO
6. Curren Currency cy Deriva Derivativ tives es
7. Shar Share e Bro Broki king ng
8. Comm Commod odit ity y Brok Brokin ing g
.
COMPETITORS
RESEARCH METHODOLOGY The basic task of research is to generate accurate inform informati ation on for use in decisi decision on making making.. Resear Research ch can be define defined d as the systematic and objective process of gathering, recording and analyzing data for aid in making business decisions. There are basically two techniques adopted for obtaining information:
Primary Data. Secondary Data.
Primary Data is gathered specifically for the project at hand through personal interviews with the accounts officers. Secondary data is previously collected and assembled for some project other than the one at hand. It is gathered and recorded by someone else prior to current needs of the researcher. It is less expensive than the primary data. SECONDARY DATA
Secondary data was collected from Ludhiana Stock Exchange
Scope of study: The study is limited to Ludhiana Stock Exchange , Firoz Gandhi Market Ludhiana
Data Collection: Data is collected from secondary sources.
Sources of data collection are: 1) Ludhiana Stock Exchange 2) www.nseindia.com 3) www.bseindia.com
4) www.on-linetrading.com
For the successful research the manipulation of certain things, concepts, and symbols for the purpose of generalization is inevitable. Research Research is simply the pursuit of truth with the help of the study.
Analysis and Interpretation
1. For how long you have been trading trading with on line-trading? line-trading? (a)1 year
(b) 2 year
(c) 3 year
(d) 4 year
Sample size 100
According to this survey we find that 44% people says that we are investing the money online from one year and 26% people says that we are investing the money online from 2 years and 19% to 11% people says that we are investing money online from 3 to 4 year. so we can say that now online trading is very popular in the modern market.
2. How will you describe your experience with on-line trading till date? (a) very easy to operate (b) very difficult to operate (c) not secure (d) Any other Sample size 100
According to this survey we find that 60% of people find very easy to operate and 15% people find diffcuilt two operate and 10% and 15% people find no secure and any other. so we can say that online trading is very simple to operate and easy to understand.
3. what amount of money you invest normally normally ? (a) 50000
(b) 100000 to 150000
(c) 150000 to 2000000
(d) Any other amount
Sample size 100
35 30 25
50000
20
100000to150000
15
150000to200000
10
AnyOther
5 0 Money
Accord Acco rdin ing g to this this su surv rvey ey we find find that that 35 35% % of peop people le inve invest st mone money y norm normal ally ly 50 5000 000 0 and and 28 28% % of peop people le inve invest st mone money y 1000 10 0000t 00to15 o15000 0000 0 and 23 23% % and 14 14% % of people people invest invest money money between 150000to200000 and any other. So we can say that the people are not invest more money in the share market because there is a great risk involved while doing the trading.
4
.
How often do you trade? (a)Daily
(b) Weekly
(c) Monthly
(d) More than one month
Sample Size 100
According to this survey we find that 10% of people do trade Daily and 40% people do trade weekly and 32% and 18% people do trade mont month h and and more more than than mont month. h. So we can can say say that that peop people le are are generally invest in stock market weekly basis.
5. which trading you you prefer? prefer? (a) On line trading
(b) Manual trading
(c) Both
Sample Size 100
Accord According ing to this this survey survey we find find that 20% people people prefer prefer online online trading and 32% people prefer offline trading rest of 48% people pref prefer ers s both both.. So we can can say say that that most mostly ly peop people le are are awar awaren enes ess s about the on line trading and because of this reason the mostly people are optimizing offline trading.
6. Whether online trading settled in Indian investor psyche (a) Yes
(b) N o
Sample Size 100
According to this survey we find that 30% people says yes and 70% people says no. so we can find that on line trading is not settled in the Indian psyche because some people are not experience towards online trading.
7. What shortcomings shortcomings do you feel feel in Indian On-Line trading ? (a) Lack of awareness the investors about on-line trading (b) Shortage of domestic technical expertise (c) Shortage Of Infra structure (c) any other
Sample Size 100
According According to this survey survey we find that 15% of people people says lack of awareness 49% says Shortage of expertise and 14% people says Shortage Of Infra structure and 22% says any other. So we can say that mostly people are shortage of experience about the Indian derivatives market or share market.
8. Which media media would would you prefer the most for for investment? investment?
(a) T.V
(b) Newspaper
(c) Magazines
(D) Journals
According to this survey we find that 55% people Prefer T.V and 25% people prefer newspaper and 10% people prefer magazines and 10% people prefer journals. So we can suggest that mostly people are very easily grapped the knowledge through T.V.
FINDINGS
1. For how long you have been trading with with on line-trading? According to this survey we find that 44% people says that we are investing investing the money online from from one year. 11% people people says that we are investing money online from 4 year. so we can say that now online trading is very popular in the modern market.
2. How will you describe your experience with on-line trading till date? According According to this survey survey we find that 60% of people find very easy to operate. and15% people find no secure. so we can say that online trading is very simple to operate and easy to understand
3. what amount of money you invest normally normally ? Accord Acco rdin ing g to this this su surv rvey ey we find find that that 35 35% % of peop people le inve invest st money normally 50000. 14% of people invest money between 150000to200000. So we can say that the people are not invest more money in the share market because there is a great risk involved while doing the trading.
4.
How often do you trade?
According to this survey we find that 10% of people do trade Daily. 18% people do trade more than month. So we can say that people are generally invest in stock market weekly basis.
5. which trading you you prefer? prefer? Accord According ing to this this survey survey we find find that 20% people people prefer prefer online online trading and 32% people prefer offline trading. So we can say that mostly people are awareness about the on line trading and because of this reason the mostly people are optimizing offline trading.
6. Whether online trading settled in Indian investor psyche
According to this survey we find that 30% people says yes and 70% people says no. so we can find that on line trading is not settled in the Indian psyche because some people are not experience towards online trading.
7. What shortcomings shortcomings do you feel feel in Indian derivatives market? According to this survey we find that 37% of people says lack of awareness 49% says Shortage of expertise and 14% people says any any othe other. r. So we can can say say that that most mostly ly peop people le are are sh shor orta tage ge of experience about the Indian derivatives market or share market.
8. Which media would you prefer prefer the most most for investment? According to this survey we find that 41% people Prefer T.V and 39% people people prefer prefer newspaper newspaper and 20% people prefer magazines. magazines. So we can suggest that mostly people are very easily grapped the knowledge through T.V.
9.How did you come to know about Bonanza Portfolio Ltd.?
. 10. The USP of Bonanza Portfolio Ltd.
11.Biggest Competitor of Bonanza Portfolio Ltd.
12.The most preferred product at Bonanza
13.The areas of improvement for Bonanza Portfolio Ltd.
14. How often do you attend the training Session organized in the company?
15.The Reasons for not attending the Training Sessions
CONCLUSION
Online trading is the new concept in the stock market. In India, online trading is still at its infancy stage. Online trading has made it easy to trade in the stock market as now people people can trade trade while while sit sittin ting g at their their home. home. Now stock stock marke markett is easily easily accessible by the people. There are some problems while doing the trade through the internet. Major problem faced by online trader is that the investors are loyal to their traditional brokers, they rely upon the suggestions given by their brokers. Anothe Anotherr major major proble problem m is that that the people people don't don't have have full full knowle knowledge dge regar regardin ding g online trading. They find it difficult to trade themselves, as a wrong entry made by them, can bring them huge losses.
Nevertheless to say that online trading has the bright future as the percentage of the trade done through online trading is increasing day by day.
LIMITATIONS
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" 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.
Suggestions
The introduction of the Internet has surprisingly changed our way of life as a society. It has defined the way we do business and the way we correspond. The Internet has opened many opportunities for online trading. The financial industry revolves around the Internet. Every thing is just a few clicks away. This makes online trading most convenient. But there are still investors who prefer the old fashion way of offline trading and they mainly prefer offline trading for security reasons. Internet has introduced a way for consumers to manage their money online. Not to mention, Internet has transformed the way investment companies operate their business and has made it easy for private investors to gain straight access to a range of different markets and online tools that were at one point only reserved by the use of investment professionals. Consumer investing and online trading has dramatically changed over the last decade. Onli Online ne tradi trading ng dynam dynamic ical ally ly cont contin inue ues s to be rede redefi fine ned. d. Serv Servic ices es have have expa expand nded ed to incl includ ude e inte integr grat ated ed mana manage geme ment nt of addi additi tion onal al fina financ ncia iall accounts. Not to mention, it has subsequently expanded in conjunction with ground-breaking improvements to the traditional trading interface, such as telephone interface systems. Of cour course se,, onli online ne tradi trading ng has has many many pros pros.. Ther There e are are seve severa rall wond wonder erfu full reasons to invest online and consider online trading.
1. Money Money saving saving opport opportuni unitie ties s The amount amount of money money you save save depend depends s primarily on the online brokerage firm that you choose. No two firms are the same. There may be different regulations, similar to bank regulations. There are minim minimum um deposi deposits ts requir required ed that that must must be mainta maintaine ined. d. As mentio mentioned ned above, this will depend on the online brokerage firm. 2. Instant online access You can gain instant access to your account, the value of your portfolio updates upda tes immediately before your eyes. 3. Enter online trades at anytime You can enter online trades at anytime and from anywhere. This is very convenient if you live in a different time zone than the country you are trading in. Not to mention, it is especially fit for investors with busy schedules. 4. With online trading you are in charge You are in control of your investments. No sales pitches and no hassle. You decide where to invest your money.
BIBLIOGRAPHY BOOKS C. R. Kothri, Research Methodology, Vishwa Prakshan •
MAGAZINES •
Business World
•
LSE’s Magazine
INTERNET SITES •
www.nseindia.com
•
www.bseindia.com
•
www.on-linetrading.com
•
www.sebi.gov.in
•
www.lse.co.in
Questionnaire Dear respondent,
I am student of MBA. I am working on the project of “On-Line trading”. You are requested to fill the questionnaire to enable, to undertake the study on the said Project. Name………………………. Occupation……………… Address …………………… Phone no………………….
1. For how long you have been trading trading with on line-trading? line-trading? (a)1 year
(b) 2 year
(c) 3 year
(d) 4 year
2 .How .H ow will will you you desc descri ribe be your your expe experi rien ence ce with with on-li on-line ne tradi trading ng till till date? (a) very easy to operate (b) very difficult to operate (c) not secure (d) Any other
3.
4.
what amount of money you are invested normally ? (a) 50000
(b) 100000 to 150000
(c) 150000 to 2000000
(d) Any other amount
How often do you trade? (a)Daily
(b) Weekly
(c) Monthly
(d) More than one month
5. In which trading you will prefer? prefer? (a) Online trading
(b) offline trading
(c) Both
6. According to you online trading setteled setteled in Indian investor psyche (a) Yes
(b ) N o
7. What shortcomings shortcomings do you feel feel in Indian On-line Trading ? (a) Lack of awareness the investors about on-line trading (b) Shortage of domestic technical expertise (c) Shortage Of Infra structure
(d) If any other
8. Which media would you prefer prefer the most most for investor? (a) T.V
(b) Newspaper
(c) Magazines
(d) Journals
