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A PROJECT REPORT ON

A STUDY OF ONLINE TRADING AND STOCK BROKING


AT
SHAREKHAN PVT LTD

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


Master of Business Administration (MBA)
(FINANCE)
Submitted By

CHANDRASEKHAR GOUD.G

Roll No. 08J81E0010

Under the Guidance of

MR.SRINIVAS

(Assistant Professor of MBA Dept)

DEPARTMENT OF BUSINESS MANAGEMENT


P.INDRA REDDY MEMORIAL ENGINEEING COLLEGE
(Affiliated to Jawaharlal Nehru Technological University)
DECLARATION

I here by declare that this project report entitled A STUDY


OF ONLINE TRADING AND STOCK BROKING has been
prepared by me is an original work submitted to
Jawaharlal Nehru Technological University towards
partial fulfillment of the requirement for the award of
Master of Business Administration. I also here by declare
that this project report has not been submitted at any time
to any other university or institute for the award of any
Degree or Diploma.

(G.CHANDRA SEKHAR GOUD)

(08J81E0010)

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CERTIFICATE

This is to certify that the project work entitled


A STUDY OF ONLINE TRADING AND STOCK BROKING
Has been done by
G.CHANDRA SEKHAR GOUD
(08J81E0010)

In the partial fulfillment of the requirements for the award of the


degree of Master of Business Administration from P.Indra
Reddy Memorial Engineering College, affiliated to Jawaharlal
Nehru Technological University is a record of bonafide work
carried out by them under my guidance and supervision. The result
embodied in this has not been submitted to any other university or
institute for the award of any degree.

Internal Guide: MR.D.H.B.R.PRASAD


Mr. SRINIVAS Head of the department
Master of Business Administration

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ACKNOWLEDGEMENT

I take this opportunity to express my gratitude high regards and


sincere thanks to our respected Principal Dr. R.V. Krishnaiah
for providing excellent infrastructure.
I thank Mr. D.H.B.R.Prasad Head of the Department of MBA for
his constant help and support.
I express my sincere thanks to our committed faculty
Mr.SRINIVAS for his support and guidance.
I have great regard for all the well wishers whose help is beyond
acknowledgement.

(G.CHANDRA SEKHAR GOUD)


(08J81E0010)

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Chapter 1

Objectives
&
Methodology

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OBJECTIVES AND METHODOLOGY

NEED FOR THE STUDY:

The present study to review the online trading

procedure a case study of ONLINE TRADING at

SHAREKHAN as the exchange has changed its

trading from the outcry mode to online trading on

20th February 1997, there is need to assess the

performance of the capital market.

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OBJECTIVES OF THE STUDY:

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

to online trading system.

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

To know the online screen based trading system adopted by SHAREKHAN

and about its communication facilities. The appropriate configuration to set

the network, which would link the SHAREKHAN to individual / members.

To know about the latest and future development in the stock exchange

trading system.

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METHODOLOGY OF THE STUDY:

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

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

Secondary method: The secondary data collection method includes:


The lecturers delivered by the superintendents of respective departments.
The brochures and material provided by Sharekhan Securities limited.
The data collected from the magazines of the NSE, economic times, etc.
Various books relating to the investments, capital market and other related topics.

LIMITATIONS OF THE STUDY:

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

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

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

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

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Chapter 2

Company profile

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INDUSTRY PROFILE

Following diagram gives the structure of Indian financial system:

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FINANCIAL MARKET:

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

According to functional basis financial markets are classified into two types.
They are:
Money markets (short-term)
Capital markets (long-term)
According to institutional basis again classified in to two types. They are
Organized financial market
Non-organized financial market.

The organized market comprises of official market represented by recognized


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

MONEY MARKET:

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


Again the money market is classified in to
Inter bank call money market
Bill market and
Bank loan market Etc.
E.g.; treasury bills, commercial papers, CD's etc.

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

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for new
projects as also for expansion, modernization, addition, diversification and up
gradation.
n. Primary market is also referred to as New Issue Market. Primary market
operations include new issues of shares by new and existing companies, further and

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right issues to existing shareholders, public offers, and issue of debt instruments
such as debentures, bonds, etc.
The primary market is regulated by the Securities and Exchange Board of India
(SEBI a government regulated authority).
Function:
The main services of the primary market are origination, underwriting, and
distribution. Origination deals with the origin of the new issue. Underwriting contract
make the shares predictable and remove the element of uncertainty in the
subscription. Distribution refers to the sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant

Investors protection in the primary market:


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

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SECONDARY MARKET

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

Secondary market operations involve buying and selling of securities on the stock
exchange through its members. The companies hitting the primary market are
mandatory to list their shares on one or more stock exchanges in India. Listing of
scrips provides liquidity and offers an opportunity to the investors to buy or sell the
scrips.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.

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STOCK MARKETS IN INDIA:

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

Definition of a stock exchange:

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


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

History of Stock Exchanges:

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

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Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to


the listed companies, they help trading and raise funds from the market. Over the
hundred and twenty years during which the stock exchanges have existed in this
country and through their medium, the central and state government have raised
crores of rupees by floating public loans. Municipal corporations, trust and local
bodies have obtained from the public their financial requirements, and industry, trade
and commerce- the backbone of the countrys economy-have secured capital of
crores or rupees through the issue of stocks, shares and debentures for financing
their day-to-day activities, organizing new ventures and completing projects of
expansion, diversification and modernization. By obtaining the listing and trading
facilities, public investment is increased and companies were able to raise more
funds. The quoted companies with wide public interest have enjoyed some benefits
and assets valuation has become easier for tax and other purposes.

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Various Stock Exchanges in India:

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

Ahmadabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

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Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

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Out of these major stock exchanges were:

NSE (National Stock Exchange)

The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FIs)
to provide access to investors from all across the country on an equal footing. Based
on the recommendations, NSE was promoted by leading Financial Institutions at the
behest of the Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country. On its recognition
as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April
1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment
in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000

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

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


Ensuring equal access to investors all over the country through an appropriate
communication network.
Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
Enabling shorter settlement cycles and book entry settlements systems, and
Meeting the current international standards of securities markets.

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

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BSE (Bombay Stock Exchange)

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

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

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

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

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REGULATORY FRAME WORK OF STOCK EXCHANGE
A comprehensive legal framework was provided by the Securities Contract
Regulation Act, 1956 and Securities Exchange Board of India 1952. Three tier
regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
Members of the stock exchange:
The securities contract regulation act 1956 has provided uniform regulation for the
admission of members in the stock exchanges. The qualifications for becoming a
member of a recognized stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
He should be neither a bankrupt nor compound with the creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected with a company.
He should not be a defaulter of any other stock exchange.
The minimum required education is a pass in 12th standard examination.

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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI act
1992.according to this act, the SEBI shall constitute of a chairman and four other
members appointed by the central government.
With the coming into effect of the securities and exchange board of India act, 1992
some of the powers and functions exercised by the central government, in respect of
the regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities.


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

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SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):

Board of Directors of Stock Exchange has to be reconstituted so as to include


non-members, public representatives and government representatives to the
extent of 50% of total number of members.
Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
All recognized stock exchanges will have to inform about transactions within 24
hrs.

TYPES OF ORDERS:
Buy and sell orders placed with members of the stock exchange by the investors.
The orders are of different types.
Limit orders: Orders are limited by a fixed price. E.g. buy Reliance Petroleum at
Rs.50.Here, the order has clearly indicated the price at which it has to be bought
and the investor is not willing to give more than Rs.50.
Best rate order: Here, the buyer or seller gives the freedom to the broker to execute
the order at the best possible rate quoted on the particular date for buying. It may be
lowest rate for buying and highest rate for selling.
Discretionary order: The investor gives the range of price for purchase and sale. The
broker can use his discretion to buy within the specified limit. Generally the
approximation price is fixed. The order stands as this buy BRC 100 shares around
Rs.40.
Stop loss order: The orders are given to limit the loss due to unfavorable price
movement in the market. A particular limit is given for waiting. If the price falls below
the limit, the broker is authorized to sell the shares to prevent further loss. E.g. Sell
BRC limited at Rs.24, stop loss at Rs.22.
Buying and selling shares: To buy and sell the shares the investor has to locate
register broker or sub broker who render prompt and efficient service to him. The
order to buy or sell specifying the number of shares of the company of investors
choice is placed with the broker. The order may be of any type. After receiving the

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order the broker tries to execute the order in his computer terminal. Once matching
order is found, the order is executed. The broker then delivers the contract note to
the investor. It gives the details regarding the name of the company, number of
shares bought, price, brokerage, and the date of delivery of share. In this physical
trading form, once the broker gets the share certificate through the clearing houses
he delivers the share certificate along with transfer deed to the investor. The investor
has to fill the transfer deed and stamp it. The stamp duty is one of the percentage
considerations, the investor should lodge the share certificate and transfer deed to
the register or transfer agent of the company. If it is bought in the DEMAT form, the
broker has to give a matching instruction to his depository participant to transfer
shares bought to the investors account. The investor should be account holder in
any of the depository participant. In the case of sale of shares on receiving payment
from the purchasing broker, the broker effects the payment to the investor.
Share groups: The scrips traded on the BSE have been classified into
A,B1,B2,C,F and Z groups. The A group represents those, which are in the
carry forward system. The F group represents the debt market segment (fixed
income securities). The Z group scrips are of the blacklisted companies. The C
group covers the odd lot securities in A, B1&B2 groups.

ROLLING SETTLEMENT SYSTEM:


Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3 or
5days) after the trading day. The shares bought and sold are paid in for n days after
the trading day of the particular transaction. Share settlement is likely to be
completed much sooner after the transaction than under the fixed settlement
system.
The rolling settlement system is noted by T+N i.e. the settlement period is n days
after the trading day. A rolling period which offers a large number of days negates
the advantages of the system. Generally longer settlement periods are shortened
gradually.
SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demat list and had daily turnover of about Rs.1

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crore or more. Then it was extended to A stocks in Modified Carry Forward
Scheme, Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and
lending Securities Scheme (BELSS) with effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling
settlement experience it was further reduced to T+2 to reduce the risk in the market
and to protect the interest of the investors from 1st April 2003.
Activities on T+1: conformation of the institutional trades by the custodian is sent to
the stock exchange by 11.00 am. A provision of an exception window would be
available for late confirmation. The time limit and the additional changes for the
exception window are dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would process and download
the obligation files to the brokers terminals late by 1.30 p.m on T+1. Depository
participants accept the instructions for pay in securities by investors in physical form
upto 4 p.m and in electronic form upto 6 p.m. the depositories accept from other DPs
till 8p.m for same day processing.
Activities on T+2: The depository permits the download of the paying in files of
securities and funds till 10.30 a.m on T+2 from the brokers pool accounts. The
depository processes the pay in requests and transfers the consolidated pay in files to
clearing House/clearing Corporation by 11.00am/on T+2. The exchange/clearing
house/clearing corporation executes the pay-out of securities and funds latest by 1.30
p.m on T+2 to the depositories and clearing banks. In the demat mode net basis
settlement is allowed. The buy and sale positions in the same scrip can be settled and
net quantity has to be settled.

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

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

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


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

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

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

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

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

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PROFILE OF THE COMPANY

Name of the company: Sharekhan ltd.

Year of Establishment: 1925

Headquarter : Sharekhan SSKI


A-206 Phoenix House
Phoenix Mills Compound
Lower Parel
Mumbai - Maharashtra, INDIA- 400013

Nature of Business : Service Provider

Services : Depository Services, Online Services and


Technical Research.

Number of Employees : Over 3500

Revenue : Data Not Available

Website : www.sharekhan.com

Slogan : Your Guide to The Financial Jungle.

Vision

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

Mission

To educate and empower the individual investor to make better investment


decisions through quality advice and superior service.

Sharekhan is infact-
Among the top 3 branded retail service providers
No. 1 player in online business
Largest network of branded broking outlets in the country serving more than
7, 00,000 clients.

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REASON TO CHOOSE SHAREKHAN LIMITED

Experience

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

Technology

With its online trading account one can buy and sell shares in an instant from any PC
with an internet connection. One can get access to its powerful online trading tools that
will help him take complete control over his investment in shares.

Accessibility

Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXE EXECUTION


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

Knowledge

In a business where the right information at the right ttime


ime can translate into direct
profits, one can get access to a wide range of information on Sharekhan limiteds
content-rich portal. One can also get a useful set of knowledge-based
ased tools that will
empower him to take informed decisions.

Convenience

One can call its Dial-N-Trade


Trade number to get in investment
vestment advice and execute his
transactions. Sharekhan ltd. have a dedicated call
call-centre
centre to provide this service via a
Toll Free Number 1800-22-7500
7500 & 1800-22-7050 from anywhere in India.

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Customer Service

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

Investment Advice

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

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SHAREKHAN LIMITEDS MANAGEMENT TEAM

Dinesh Murikya : Owner of the company

Tarun Shah : CEO of the company

Shankar Vailaya : Director (Operations)

Jaideep Arora : Director (Products & Technology)

Pathik Gandotra : Head of Research

Rishi Kohli : Vice President of Equity Derivatives

Nikhil Vora : Vice President of Research

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED


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

Equity and derivatives trading


Depository services
Online services
Commodities trading
Dial-n-trade
Portfolio management
Share shops
Fundamental research
Technical research

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TYPES OF ACCOUNT IN SHAREKHAN LIMITED
Sharekhan offers two types of trading account for its clints

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

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

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This account comes with the following features:

a. Online trading account for investing in Equities and Derivatives


b. Free trading through Phone (Dial-n-Trade)
I. Two dedicated numbers(1800-22-7500 and 39707500) for placing
the orders using cell phones or landline phones
II. Automatic funds transfer with phone banking facilities (for Citibank
and HDFC bank customers)
III. Simple and Secure Interactive Voice Response based system for
authentication
IV. get the trusted, professional advice of Sharekhan limiteds Tele
Brokers
V. After hours order placement facility between 8.00 am and 9.30 am
c. Integration of: Online Trading +Saving Bank + Demat Account.
d. Instant cash transfer facility against purchase & sale of shares.
e. IPO investments.
f. Instant order and trade confirmations by e-mail.
g. Single screen interface for cash and derivatives.

SPEED TRADE ACCOUNT

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

This account comes with the following features:

a. Instant order Execution and Confirmation.


b. Single screen trading terminal for NSE Cash, NSE F&O & BSE.
c. Technical Studies.
d. Multiple Charting.
e. Real-time streaming quotes, tic-by-tic charts.
f. Market summary (Cost traded scrip, highest value etc.)
g. Hot keys similar to brokers terminal.
h. Alerts and reminders.
i. Back-up facility to place trades on Direct Phone lines.

35
j. Live market debts.

CHARGE STRUCTURE

Fee structure for General Individual:

Charge Classic Account Speed Trade Account


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

Intra-day 0.10 % Intra-day - 0.10%


Brokerage
Delivery - 0.50 % Delivery - 0.50%

Depository Charges:

Account Opening Charges Rs. NIL


Rs. NIL first year Rs. 300/= p.a. from
Annual Maintenance Charges
second calendar year onward

HOW TO OPEN AN ACCOUNT WITH SHAREKHAN LIMITED?


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

One need to call them at phone number provided below and asks that he want
to open an account with them.
a. One can call on the Toll Free Number: 1-800-22-7500 to speak to a
Customer Service executive
b. Or If one stays in Mumbai, he can call on 022-66621111

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

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


products and services.

36
One can also visit the site www.sharekhan.com and click on the option Open an
Account to fill a small query form which will ask the individual to give details
regarding his name, city he lives in, his email address, phone number, pin code
of the city, his nearest Sharekhan Ltd. shop and his preferences regarding the
type of account he wants.

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


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

37
Generally the process of opening an account follows the following steps:

LEAD MANAGEMENT SYSTEM (LMS) / REFERENCES

CONTACT THE PERSON OVER PHONE OR THROUGH EMAIL

FIXING AN APPOINTMENT WITH THE PERSON

GIVING
DEMONST-
RATION

YES NO

DOCUMENTATION

FILLING UP THE FORM

SUBMISSION OF THE FORM

LOGIN OF THE FORM

SENDING ACCOUNT OPENING KIT TO THE CLIENT

TRADING

38
Apart from two passport size photographs, one needs to provide with the following
documents in order to open an account with Sharekhan Limited.:

Photocopy of the clients PAN Card which should be duly attached

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

a. Passport (valid)
b. Voters ID Card
c. Ration Card
d. Driving License (valid)
e. Electricity Bill (should be latest and should be in the name of the client)
f. Telephone Bill (should be latest and should be in the name of the client)
g. Flat Maintenance Bill (should be latest and should be in the name of the
client)
h. Insurance Policy (should be latest and should be in the name of the client)
i. Lease or Rent Agreement.
j. Saving Bank Statement** (should be latest)

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

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


Statement as a proof for correspondence address.

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

39
RESEARCH SECTION IN SHAREKHAN LIMITED

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

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

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

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

40
AWARDS AND ACHIEVEMENTS

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

Sharekhan Limited won the CNBC AWARD for the year 2004.

41
Chapter 3

Project Analysis

42
PROJECT ANALYSIS

OUTCRY SYSTEM

The broker has to buy or sell securities for which he has received the orders. For
this, the broker or his authorized representatives goes to the stock exchange. This
method is called the open outcry system. Basically the brokers shout while buying or
selling the securities. The floor of the stock exchange is divided into a number of
markets also known as post pit or wing based on particular securities dealt there.
In the post pit or wing, the broker using open outcry method makes an offer or bid
price. For making the necessary bargain, he quotes his purchase or sale price, also
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may loose the bargain. If
he is not satisfied with the quote price, he may turn to some other dealer. On the
close of the bargain, the dealer as well as the broker makes a brief note of the
particulars of the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what membership number
etc., are noted.

DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.
The scope of manipulation, speculation and mal practice is more.
Signal were more important in the outcry system any member who could not
interpret the buy/sell signal correctly often landed himself in disaster situation.
In audibility was another disadvantage of the outcry system.
Due to the above disadvantages of the outcry system the SHAREKHAN has
shifted from outcry system to online trading from February 29th 1997.

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MANUAL TRADING

Trading procedure before introduction of online trading:


Trading on stock exchanges is officially done in the trading ring. In the trading ring
the space is provided for specified and non-specified sections, the members and
their authorized assistants have to wear a badge or carry with them an identity card
given by the exchange to enter the trading ring. They carry a sauda book or
confirmation memos, duly authorized by the exchange and carry a pen with them.
The stock exchanges operations are floor level are technical in nature .Non-
members are not permitted to enter in to stock market. Hence various stages have
to be completed in executing a transaction at a stock exchange .The steps involved
in this method of trading have given below:
Choice of broker:
sell shares and transact business, have to act through member brokers only. They
can also appoint their bankers for this purpose as per the present regulations.
Placement of order:
The next step is the The prospective investor who wants to buy shares or the
investors, who wants to placing order for the purchase or sale of securities with a
broker. The order is usually placed by telegram, telephone, letter, fax etc or in
person. To avoid delay, it is placed generally over the phone. The orders may take
any one of the forms such as At Best Orders, Limit Order, Immediate or Cancel
Order, Limited Discretionary Order, and Open Order, Stop Loss Order.
Execution of order or contract:
Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on
Saturday. The members or the authorized assistants have to wear a badge given by
the exchange to enter into the trading ring. They carry a sauda Block Book or
conformation memos, which are duly authorized by the exchange when the deal is
struck; both broker and jobber make a note in their sauda block books. From the
sauda book, the contract notes are drawn up and posted to the client. A contract

44
note is written agreement between the broker and his clients for the transaction
executed.
Drawing Up and Bills:
Both sale and purchase bills are prepared along with the contract note and it is
posted on the same day or the next day. This in a purchase transaction, once the
shares are delivered to the client effects payment for the purchases and pays the
stamp fees for transfer, a bill is made out giving the total cost of purchase, including
other expenses incurred by the broker in the price itself. With this, the process ends.

DEMATERLIZATION:
Dematerialization is the process by which physical certificates of an investor are
converted to an equipment number of securities in electronic from and credited in
the investor account with his DP. In order to dematerialize the certificates, an
investor has to first open an account with a DP and then request for the
Dematerialization Request Form, which is DP and submit the same along with the
share certificates. The investor has to ensure that he marks Submitted for
Dematerialization on the certificates before the shares are handed over to the DP
for demat. Dematerialization can only be done to those certificates, which are
already registered in your name and belong to the list of securities admitted for
Dematerialization at NSDL.
Most of the active scrips in the market including all the scrips of S&P CNX NIFTY
and BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the
option to dematerialize such shares. Investors willing to exercise this option sends a
Demat request along with the option letter sent by the company to his DP. The
company or its R&T agent would confirm the Demat request on its receipt from the
DP to reduce risk of loss in transit.
Dematerialized shares do not have any distinctive or certificate numbers. These
shares are fungible-which means that 100 shares of a security are the same as any
other 100 shares of the security. Odd lot shares certificates can also be
dematerialized.

45
Dematerialization normally takes about fifteen to thirty days. To get back
dematerialized securities in the physical form, request DP for Rematerialization of
the same is made.
Rematerialization is the process of converting electronic shares in to physical
shares.
Benefits of Demat:
It reduces the risk of bad deliveries, in turn saving the cost and wastage of time
associated with follow up for rectification. This has lead to reduction in brokerage to
the extent of 0.5% by quite a few brokerage firms.
In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid
the cost of courier / notarization.
You can receive your bonuses and rights issues into your DA as a direct credit,
this eliminating risk of loss in transit.
You can also expect a lower interest charge for loans taken against Demat
shares as compared to loans against physical shares.
There is no lost in transit, thus the overheads of getting a duplicate copy in such
circumstances is reduced.
RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical securities.

46
ONLINE TRADING

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

1) What is Internet?
Internet is a worldwide, self-governed network connecting several other smaller
networks and millions of computers and persons, to mega sources of information.
This technology shrinks vast distances, accelerating the pace of business reforms
and revolutionizing the way companies are managed. It allows direct, ubiquitous
links to anyone anywhere and anytime to build up interactive relationships.

A combination of time and space, called the Internet promises to bring


unprecedented changes in our lives and business. Internet or net is an inter-
connection of computer communication networks spanning the entire globe, crossing
all geographical boundaries. It has re-defined the methods of communication, work
study, education, business, leisure, health, trade, banking, commerce and what not it
is virtually changing every thing and we are living in dot.com age. Net being an
interactive two way medium, through various websites, enables participation by
individuals in business to business and business to consumer commerce, visit to
shopping arcades, games, etc. in cyber space even the information can be copied,
downloaded and retransmitted.
The use of Internet has grown 2000 percent in last decade and is currently growing
at 10 percent per month. In India, growth of Internet is of recent times. It is expected
to bring changes in every functional area of business activity including management
and financial services. It offers stock trading at a lower cost. Internet can change the
nature and capacity of stock broking business in India.

47
2. E-commerce
Electronic commerce is associated with buying and selling over computer
communication networks. It helps conduct traditional commerce through new way of
transferring and processing of information. Information is electronically transferred
from computer to computer in an automated way. E-commerce refers to the
paperless exchange of business information using electronic data inter change,
electronic technologies. It not only reduces manual processes and paper
transactions but also helps organization move to a fully electronic environment and
change the way they operated.

PCs and networking attempts to introduce banks of the tools and technologies
required for electronic commerce. The computers are either workstations of
individual office works or serves where large databases and information reside.
Network connects both categories of computers; the various operating systems are
the most basis program within a computer. It manages the resources of the
computer system in a fair and efficient manner.
Now we can enter in to the concept known as online trading.
In the past, investors had no option but to contact their broker to get real time access
to market data. The net brings data to the investor on-line and net broking enables
him to trade on a click of mouse. Now information has become easily accessible to
both retail as well as big investor.

EVOLUTION OF BROKING IN INDIA:


The evolution of a broking in India can be categorized in three phases -
Stockbrokers will offer on their sites features such as live portfolio manager,
live quotes, market research and news, etc. to attract more investors.
Brokers will offer online broking and relationship management by providing
and offering analysis and information to investors during broking and non-
broking hours based on their profile and needs, i.e. customized services.

48
Brokers (now e-brokers) will offer value management or services like initial
public offering online, on-line asset allocation, portfolio management, financial
planning, tax planning, insurance services, etc. and enables the investors to
take better and well considered decisions.
The actual definition of Online Trading is as explained below:
Online trading is a service offered on the internet for purchase and sale of shares.
In the real world you place orders on your stockbroker either verbally (personally or
telephonically) or in a written form (fax). In online trading, you will access a
stockbrokers website through your internet enabled PC and place orders through
the brokers internet based trading engine. These orders are routed to the stock
exchange without manual intervention and executed thereon in a matter of a few
seconds.
The net is used as a mode of trading in internet trading. Orders are communicated to
the stock exchange through website.
In India:
Internet trading started in India on 1st April 2000 with 79 members seeking
permission for online trading. The SEBI committees on internet based securities
trading services has allowed the net to be used as an Order Routing System (ORS)
through registered stock brokers on behalf of their clients for execution of
transaction. Under the ORS the client enters his requirements (security, quantity,
price buy/sell) on brokers site.
Objectives:

Internet trading is expected to


Increase transparency in the markets,
Enhance market quality through improved liquidity, by increasing quote

continuity and market depth,


Reduce settlement risks due to open trades, by elimination of mismatches,
Provide management information system,
Introduce flexibility in system, so as to handle growing volumes easily and to
support nationwide expansion of market activity.

49
Besides, through internet trading three fundamental objectives of securities
regulation can be easily achieved, these are:
Investor protection
Creation of a fair and efficient market, and
Reduction of the systematic risks.

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

Requirements for net trading:

For investors:

1. Installation of a computer with required specification


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

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

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

1) Voter ID card
2) Driving license
3) PAN card( in case of to trade more than 50000)
4) Ration card
5) Bank pass book
6) Telephone bill

Other requirements, which are necessary

First page of the bank pass book and last 6 months statement.
Bank managers signature along with banks seal, manager registration code on
photograph.

50
For stock brokers:

1. Permission from stock exchange for net trading


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

The net is used as a medium of trading in internet trading. Orders are communicated
to the stock exchange through website. Internet trading started in India on 1st April
2000 with 79 members seeking permission for online trading. The SEBI committees
on internet based securities trading services has allowed the net to be used as an
Order Routing System (ORS) through registered stock brokers on behalf of their
clients for execution of transaction.
Under the Order Routing System the client enters his requirements (security,
quantity, price, and buy/sell) in broker's site. They are checked electronically against
the clients account and routed electronically to the appropriate exchange for
execution by the broker. The client receives a confirmation on execution of the order.
The customer's portfolio and ledger accounts get updated to reflect the transaction.
The user should have the user id and password to enter into the electronic ring. He
should also have demat account and bank account. The system permits only a
registered client to log in using user id and password. Order can be placed using
place order window of the website.

51
Procedure for net trading

Step 1: Those investors, who are interested in doing the trading over internet
system i.e. NEAT-IXS, should approach the brokers and get them self registered
with the Stock Broker.
Step 2: After registration, the broker will provide to them a Login name, Password
and personal identification number (PIN).
Step 3: Actual placement of an order. An order can then be placed by using the
place order window as under:
(a) First by entering the symbol and series of stock and other parameters like
quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step 4: It is the process of review. Thus, the investor has to review the order placed
by clicking the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be sent by clicking
on the send option.
Step 6: The investor will receive an "Order Confirmation" message along with the
order number and the value of the order.
Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the bottom
of the screen. At present, a time lag of about 10 seconds is there in executing the
trade.
Step 8: It is regarding charging payment, for which there are different mode. Some
brokers will take some advance payment from the investor and will fix their trading
limits. When the trade is executed, the broker will ask the investor for transfer of
funds to his account.
Internet trading provides total transparency between a broker and an investor in the
secondary market. In the open outcry system, only the broker knew the actually
transacted price. Screen based trading provides more transparency. With online trading

52
investors can see themselves the price at which the deal takes place.
The time gap has narrowed in every stage of operation. Confirmation and execution
of trade reaches the investor within the least possible time, mostly within 30
seconds. Instant feedback is available about the execution. Some of the websites
also offer;
News and research report
BSE and NSE movements
Stock analysis
IPO and mutual fund centers

Step by step procedure in online trading:

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


1) Log on to the stock broker's website
2) Register as client/investor
3) Fill the application form and client broker agreement form on the requisite value
stamp paper
4) Obtain user ID and pass word
5) Log on to the broker's site using secure user ID and password
6) Market watch page will show real time on-line market data
7) Trade shares directly by entering the symbol or number of the security
8) Brokers server will check your limit in the on-line account and Demat account for
the number of shares and execute the trade
9) Order is executed instantly (10-30 seconds) and confirmation can be obtained.
10) Confirmation is e-mailed to investor by broker
11) Contract note is printed and mailed in 24 hours
12) Settlement will take place automatically on the settlement day
13) Demat account and the bank account will get debited and credited by electronic
means.

53
ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:
1) Limit / stop orders: orders that can be go unfilled, but there is an extra Charge
for this leeway facility since one need to hold a price.
2) Market orders: orders can be filled at unexpected prices, but this type is much
more risky, since you have to buy stock at the given price.
3) Cash account: where funds have to be available prior to placing the order.
4) Margin account: where orders can be placed against stocks, to increase
Purchasing power.

ADVANTAGES OF ONLINE TRADING:

1) Online trading has made it possible for anyone to have easy and efficient access
to more reports and charts than it was previously possible if one went to any
brokers' office. Thus we have access to a lot more information online.
2) Online trading has let room for smaller organizations to compete with
multinational organizations since it is no longer a leg it issue. Being online does
not identify the size of any particular organization, therefore, this additional power
to the underdogs.
3) Online trading has allowed companies to locate themselves where they want as
physical location is not an issue anymore. Companies can establish themselves
according to their gains and losses, for instance where tax (sales and value
added taxes) is best suited to them.
4) Online trading gives control to individuals and they can exercise it over accounts
thus comprehend what is going on when they trade. It is like going back to school
and re-educating oneself on how to trade online.
5) Individuals benefit by saving comparatively a lot more when trading online as the
cost per trade is less.
6) Individuals can invest in a variety of products, unlike earlier when people bought
bonds, mutual funds, and stock for long-term basis and sat on them. Now they
can invest in stocks, stock and index options mutual funds, government, and
even insurance.

54
INVESTORS REASONS TO TRADE ONLINE:

1) They have control over their accounts, can make their own decisions and dont

have to give reasons for their actions. They are independent.

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

3) It is interesting, cheap, easy, fast, and convenient.

4) A lot of information is online so they can keep up-to-date with what is happening

in the trading world.

5) It will give investors a greater choice and better realization.

6) The immediate impact will be competition and benefits will accrue to the

investors.

7) It will lead to brokerage commissions going down and brokers striving to increase

business afloat.

8) Investors will now go to place, which have better trading conditions and also

members to offer them better facilities.

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

55
HERE ARE THE POSSIBLE DISADVANTAGES:

1) When network crashes, there will be problems and delays due to a large influx of

rapid online trading criteria.

2) Individuals are restricted to first-hand financial guidance. This simply means that

the individual is himself / herself alone to.

3) A tax (sales tax and value added tax) evaluation becomes an issue, especially

when you are trading internationally.

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

5) According to a study conducted by Mary Rowland, careful investor: is online

trading bad for your portfolio, the more one trades the less returns one gets,

meaning that an addicted trader gets, carried away online and begins to trade for

too much which causes losses for him / her.

6) Individuals think that they are trading with the market directly and know what they

are doing, but the truth is that even though technology has taken over, the basic

rules of trading are the same. It seems that the middleman has been removed,

but that is not so. When the individuals click on the mouse, his trade goes

through a broker. The commissions online pertain to the intermediary.

7) There is a need for more effective communication links over the Internet and the

ability of the server to deal with a large volume of visitors.

56
TRADING AND SETTLEMENT AT SHARE KHAN

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

The ease of operation from the view of the both members and the investors.
Increase in the confidence of the investors because of higher level of
transparency.
Facilities better monitoring of the market by the exchange.
The best price achieved in buying and selling.

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

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

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

Share Khan is provided with a computer and required software from their registered
stock exchanges. These centers are called Broker Work Stations. These
computers are connected to the server at the stock exchanges through cable.
The member or broker sitting in his office can send the quotations, orders,
negotiations, deals, in-house deals, auction orders etc., through the computer. The
Central trading system (CTS) will accept these orders and send it for match. If there
is any mistake in the order, CTS will reject the orders and send respective error
message to the member concern. All these operations are in built. The main
objective of CTS is to monitor the Stock Exchanges operations.
Order placed by the broker will be sent for a match and if the match is found
suitable, the transaction will be executed. Otherwise, the order will be deleted

57
automatically after completion of trading time. The carry forward transactions (Good
Till cancellation) are forwarded to the next day. Even if the match is not found with in
the prescribed period, the order will not cancel.

Useful links about Sharekhan:

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


2. Product Demo - Speed Trade: http://www.sharekhan.com/Demos/speedtrade/index.html
3. Product Demo - Classic: http://www.sharekhan.com/Demos/classic/index.html
4. Email: info@sharekhan.com
5. FAQs: http://sharekhan.com/KnowledgeCentre/Sharekhan_FAQ.aspx
6. Phone: 022-66621111
7. Toll Free: 1-800-22-7500

TRADING SESSION

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

BROKER WORK STATION:

At the broker workstation the BBOs, the last traded price, the days opening price,
previous days closing price, highest and lowest prices, the weighted average price
and total trade value will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These include top
gainers /losers of the day. Trader-wise, scrip wise net position, client wise net
position, top scrip by the volume/value, market summary etc.
Brokers are also provided with information relating to the companies in the matter of
Book closure, Dividend declarations, resolutions in board meeting, information about
liquidated companies, company report etc.

58
ORDERS:

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


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

Good for the day:

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

Good till cancellation:

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

59
For example, if a member a place purchase order of 500 shares of SBI @ 690 per
share and selects the order as GTC and place an order. If the match is not found on
that day it will be forwarded to the next day until trading settlement period day.

SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called settlement. Buyers
will take the delivery of shares through the depository participants like SHARE
KHAN and others.
Finally, the settlement is made by means of delivering the share certificates along
with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It
bears a stamp of the selling broker. The buyer then fills up the certificates fills up the
particulars in the transfer deed. Settlement can be done in the following way.

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

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

DETAILS OF PROCEDURES:

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

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

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

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

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


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

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

Login

Buy transcation Sell transcation


The system will check your
The system will check buying dp account quantity
limits

Orders accepted Rejected orders would be orders accepted


communicated along with reasons

your order is transmitted to exchange for execution

pending buy orders on execution pending sell orders


would be displayed of your orders would be displayed
on your screen on your screen

you may edit your you may delete you may edit your you may delete your
pending order your pending order pending order pending order

flashed on your conformationcoul contract note would


screen immediately d be send to your be sent to by mail
on execution e-mail and mobile or hand delivery

62
Chapter 4

Comparative
Analysis

63
THE MAJOR PLAYERS IN ONLINE TRADING
1) SHAREKHAN.COM
2) 5PAISA.COM
3) KOTAKSTREET.COM
4) INDIABULLS.COM
5) ICICIDIRECT.COM
6) HDFCSEC.COM

POLL RESULTS: BROKER PREFERENCE

5paise The image cannot be


display ed. Your computer
may not hav e enough
memory to open the ima
119 13.45%
Sharekhan The image cannot be display ed. Your computer may
not hav e enough memory to open the image, or the
image may hav e been corrupted. Restart your
computer, and then open the file again. If the red
194 21.92%
Motilal oswal Th
e
im
ag
38 4.29%
ICICI Direct The image cannot be display ed. Your computer may
not hav e enough memory to open the image, or the
image may hav e been corrupted. Restart your
computer, and then open the file again. If the red
192 21.69%
HDFC The
imag
e
can
46 5.20%
Indiabulls The image cannot be
display ed. Your computer
may not hav e enough
memory to open the image,
121 13.67%
Kotak The image
cannot be
display ed.
Your co
59 6.67%
Others The image cannot be
display ed. Your computer
may not hav e enough
memory to open the ima
116 13.11%

64
HDFC SECURITIES:

Company Background:

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

Online Account Type:

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


advantage.

Pricing of HDFC Account


Account Opening: Rs 750
Demat: NIL, 1st year charges included in Account Opening
Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)
Brokerage:
Trading 0.15%* each side + ST
Delivery 0.50%** each side + ST

*Rs 25 Min Brokerage per transaction


**Rs 8 Min Brokerage per transaction

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ICICI Direct:

Account Opening: Rs 750


Schemes: For short periods Rs 750 is refundable against brokerage generated
in a qtr. These schemes are introduced 3-4 times a year.

Demat: NIL, 1st year charges included in Account Opening Plus a facility to open
additional 4 DPs without 1st yr AMC. Only Rs 100 as linking charges per DP

Initial Margin : Nil

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

Delivery Vol per QTR Brokerage Square Vol P.M. Brokerage


< 10 lakhs 0.75% < 50 lakhs .10% Both Sides
10 25 lakhs 0.70% 50 lakhs 2 Cr .08% Both Sides
25 50 lakhs 0.55% 2Cr-5Cr .05% Both Sides
50 lakhs - 1 Cr 0.45% 5Cr- 10 Cr .04% Both Sides
1 Cr 2 Cr 0.35% 10Cr -20 Cr .035% Both Sides
2 Cr 5 Cr 0.30% > 20 Cr .03% Both Sides
> 5 Cr 0.25% ---- --------

66
INDIABULLS:

Company Background:
India Bulls is a retail financial services company present in 70 locations covering 62
cities. It offers a full range of financial services and products ranging from Equities
to Insurance. 450 + Relationship Managers who act as personal financial advisors.

Online Account Type:


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

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

Pricing of IB Accounts:
Signature Account Power India Bulls
* Account Opening: Rs 250 * Account Opening: Rs 750
* Demat: Rs 200 if POA is signed, *Demat: Rs.200 if POA is signed,
No AMC for this DP No AMC for this DP
* Initial Margin: NIL * Initial Margin: NIL
* Brokerage: Negotiable * Brokerage: Negotiable

PAID Research:
SCHEME FACILITY
WebBased-1-Month-500: View & Print on Website
WebBased-1-Month-6000: View & Print on Website
PrintReport-1-Month-750: View & Print on Website

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

Kotakstreet:

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

Online Account Type

Twin Advantage / Green Channel : 2 DPs, Limit against shares

Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction

High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

Cash Expressway : Spot payment, additional 0.5% charges

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

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

PRICING OF KOTAK

Account Opening : Rs 500

Demat: Rs 22.5 p.m

Initial Margin : Rs 5000(Compulsory)

Min Margin Retainable : Rs 1000

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

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

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Slab structure of Kotak
Delivery Vol p m Brokerage * Square Vol P.M. Brokerage **
< 1 lakhs 0.65% < 10 lakhs 0.10% Both Sides
1 lakhs 5 lakhs 0.60% 10 lakhs 25 lakhs 0.08% Both Sides
5 lakhs 10 lakhs 0.50% 25 lakhs - 2 Cr 0.05% Both Sides
10 lakhs - 20 lakhs 0.40% 2 Cr - 5 Cr 0.04% Both Sides
20 lakhs 60 lakhs 0.30% > 5 Cr 0.035% Both Sides
60 lakhs - 2 Cr 0.25% ---do--- 0.03% Both Sides
>2 0.20% ---- --------

* Brokerage is inclusive of All Taxes * Brokerage is inclusive of All Taxes


* DP Charges Extra
* Min Brokerage of Rs 0.05 per share * Min Brokerage of Rs 0.01 per share
Derivatives Vol off p m Brokerage
< 2 Cr 0.07% Both Sides
2 Cr - 5.5 Cr 0.05% Both Sides
5.5 Cr 10 Cr 0.04% Both Sides
> 10 Cr 0.03% Both Sides
* Brokerage is inclusive of All Taxes.

69
5paisa

Company Background
Indiainfoline was founded in 1995 and was positioned as a research firm
In 2000 e-broking was started under the brand name of 5paisa.com.
Apart from offering online trading in stock market the company offers
mutual funds online.
It also acts as a distributor of various financial services i.e. GOI securities,
Company Fixed Deposits, Insurance.
Limited ground network, present in 20 cities

Online Account Types


Investor Terminal : Investors / Students
Trader Terminal : Day Traders / HNIs
PRICING FOR RETAIL CLIENTS
Investor Terminal

Account Opening : Rs 500


Demat 1st Yr : Rs 250
Initial Margin : Rs 2500 (Compulsory)
Min Margin Retainable : Rs 1000
Brokerage :
Trading 0.10% each side + ST
Delivery 0.50% each side + ST

PRICING FOR HNI CLIENTS


Trader Terminal
Account Opening : Rs 500
Demat 1st Yr : Rs 250
Initial Margin : Rs 5000(Compulsory)
Min Margin Retainable : Rs 1000
Brokerage :
Trading 0.10% each side + ST
Delivery 0.50% each side + ST
(Negotiable to 0.05% each side & 0.25%)
Account Access Charges
Monthly Rs 800, adjustable against Brokerage
Yearly Rs 8000, adjustable against brokerage

70
Sharekhan

Company Background

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56%
in Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific
Into broking since 80 years
Focused on providing equity solutions to every segment
Largest ground network of 210 Branded Share shops in 90 cities

Online Account Types


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

PRICING FOR HNI CLIENTS


Speed Trade

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


Demat 1st Yr : Incl in Account Opening
Initial Margin : Nil
Min Margin Retainable : NIL
Brokerage :
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
Account Access Charges
Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr.
No access charges for gold customers (Above 1 lac brokerage p.a)

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Pricing for Retail Customers
Classic / Applet
Account Opening : Rs 750
Demat 1st Yr : NIL
Initial Margin : NIL
Min Margin Retainable : NIL
Brokerage:
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes

Sharekhan online Trading Interfaces


The customer can choose the online trading interface that meets his requirement
based on his trading habits and preferences
CLASSIC / APPLET
The website is meant for customers who Invests in Equities

SPEEDTRADE
The speed trade is meant for customers who trade in Equities
DIAL-N-TRADE Toll Free
The DNT is a value added services meant for all customers who
Want to transact but are not online.
DNT TOLL FREE FERTURES
Dedicated Toll Free number for Order placements
Automatic fund transfer with phone banking*
Simple and secure IVR based system for authentication
No wait time, on entry of Phone Id & TPIN, the call is transferred
Trusted, professional advice of Tel-brokers who offer undiluted Sharekhan
Research Inputs
After-hours order placement facility **
Transfer of money using phone banking is available with Citibank only

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

CLASSIC/WEBSITE FEATURES
Facility to integrate choice of 4 Banks/DP/Trading Account
Instant credit for shares sold from DP
Automatic pick-up of shares from linked DP for pay in
Automatic deposit of shares into linked DP after pay-out
4 Times leverage on Margin Trades
Margin Trading available for entire marker session
Slab wise brokerage structure for delivery and margin trades, shortly
Free calls for order placement on Toll-Free
Trusted, Professional advice of Tele-brokers
Facility to enter After Market Orders online & via Phone

CLASSIC/WEBSITE FEATURES
Daily Research newsletter (Investor Eye) Via e-mail
Access to new IPO without any paperwork
Advanced portfolio monitoring Tools
Integrated DP account with trading account
Option of linking additional 4 DP accounts to trading account
Choice of linking 4 banks to trading a/c for online payments
Cash and Derivatives trading in a single account
E-mail confirmations for all transactions
Choice of electronic/Physical contracts

SPEEDTRADE EXE FEATURES

ALL THE FEATURES OF CLASSIC


*Real time streaming quotes using 2 Marker Watches
*Trade Execution in 2-3 seconds
* Instant Order/trade confirmations in the same window
*Hot keys similar to a Brokers Terminal

73
*MULTIPLE Tic-by-Tic Intra-day charts with multiple indicators
* Availability of 2 ISP & 6 Servers ensuring maximum uptime
* Customized alerts based on multiple parameters
* Cancel All/Square Off All Facility
* Window for Top Gainers, Top Losers, and Most Active updated Live

SWOT ANALYSIS
Strengths

1. Strong credibility among investors because of its heritage.

2. Excellent reputation among the business society.

3. Capability of providing superior customer service.

4. Quality research team.

5. Easier access to the customer due to largest ground network of 280 branded

share shops in 120 cities.

6. Abundant information about economy and companies.

7. Ability to attract and retain superior and quality personnel.

8. Highly sophisticated infrastructure.

9. Efficient research and analysis team, which by interpreting the economy and

companys performance accurately is enhancing the profitability of the clientele.

Weaknesses

1. Limited customer appeal as the company product line does not include mutual

funds which is increasingly becoming a preferred customer investment option.

2. Inadequate product awareness among the retail investors.

74
3. Limited customer appeal as the company does not have access to the BSE

online space.

4. Brand awareness is low in the financial market.

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

firms.

Opportunities

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

penetration.

2. Bullish phase of the market attracts investing public.

3. Access to the BSE online space for the retail investors creates opportunity to

increase clientele base.

4. Awareness campaigns about online trading create new market.

Threats

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

market.

2. Threat of entry is high in this industry as the manpower required is less and

capital requirement is medium.

75
Chapter 5

Finding
&
Observations

76
FINDINGS AND OBSERVATIONS:
1. Fluctuations are more in secondary market than any other market.
2. There are more speculators than investors.
3. Information plays a vital role in the secondary market.
4. Previously rolling settlement is T+5 days, now it changed to T+2 days and further
it will be changing to T+1 day.
5. It was also observed that many broking houses offering internet trading allow
clients to use their conventional system as well just ensure that they do not loose
them and this instead of offering e-broking services they becomes service
providers.
6. The number of players is increasing at a steady rate and today there are over a
dozen of brokerage houses who have opted to offer net trading to their
customers and prominent among them are SHARE KHAN, India bulls,
kotakstreet, ICICI direct and geojit.
7. The Bombay stock exchange sensex zoomed past the 7700 barrier for the first
time in history to achieve new all time high of 7800 intra day trade and ended at a
historic close of 7732 points.

77
Conclusion
&
Recommendations

78
CONCLUSION AND RECOMMENDATIONS
1. Things have changed for the better with the SHAREKHAN going on-line coupled
with endeavor to stream line the whole trading system, things have changed
dramatically over the last 3 to 4 years. New and advanced technologies have
breached geographical and cultural barriers, and have brought the countrywide
market to doorstep.

2. In the present scenario to compete with the Brokers would require sound
infrastructure and trading as per international standards.
3. The introduction of on-line trading would influence the investors resulting in an
increase in the business of the exchange. It has helped the brokers handling a
vast amount of transactions and this can be an efficient trading, delivering,
settlement system with adequate protection to investors. The trading of
SHAREKHAN of the first day was Rs. 1.8 crores.
4. Due to invention of online trading there has been greater benefit to the investors
as they could sell / buy shares as and when required and that to with online
trading.
5. The brokers has a greater scope than compared to the earlier times because of
invention of online trading.
6. The concept of business has changed today, this is a service oriented industry
hence the survival would require them to provide the best possible service to the
clients.
7. I recommend the exchange authorities to take steps to educate Investors about
their rights and duties. I suggest to the exchange authorities to increase the
investors confidences.
8. I recommend the exchange authorities to be vigilant to curb wide fluctuations of
prices.
9. The speculative pressures are responsible for the wide changes in the price, not
attracting the genuine investors to the greater extent towards the market.

79
10. Genuine investors are not at all interested in the speculative gain as their
investment is based on the future profits, therefore the authorities of the
exchange should be more vigilant to curb the speculation.
11. Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.

80
BIBLIOGRAPHY

Books:

1. Investment management
-V.K.Bhalla

2. Investment management
-Preethi Singh

3. Security Analysis And Portfolio Management


-V.A.Avadhani

4. Marketing of Financial Services


-V.A.Avadhani

5. Indian Financial System


-M.Y.Khan

Newspapers:-

The Times of India

The Economic Times

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www.sharekhan.com

www.economictimes.com

www.moneycontrol.com

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

www.investors.com

www.investopedia.com

ANY FEEDBACK PLZ MAIL US:

chandu9041@gmail.com

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