Himanshu1 Project Report on Bonanza

8/8/2019 Himanshu1 Project Report on Bonanza

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A REPORT ON

DEMAT AND ONLINE TRADING

AT

BONANZA PORTFOLIO LIMITED

Project report Submitted in the

Partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION

By

HIMANSHU SHARMA

GOVT. ENGEENERING COLLEGE JHALAWAR( RAJ.)

( RAJASTHAN TECHNICAL UNIVERSITY, KOTA)


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CONTENTS PAGE NO.S

CHAPTER-1 Y

INTRODUCTION OF STUDY 1

CHAPTER-2 6

y LITERATURE REVIEW 42

CHAPTER-3

y COMPANY PROFILE 46

CHAPTER-4

y DATA & INTERPRETATION ANALYSIS

CHAPTER-5 60

y OBSERVATIONS

y CONCLUSIONS

y SUGGESTIONS

CHAPTER-6

y BIBLIOGRAPHY 64


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CHAPTER 1

INTRODUCTION TO STUDY


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DEMATERIALIZATION:

Dematerialization is the process of converting the physical form of shares into electronicform. Prior to dematerialization the Indian stock markets have faced several problems likedelay in the transfer of certificates, forgery of certificates etc. Dematerialization helps toovercome these problems as well as reduces the transaction time as compared to the

physical segment. The article discusses the procedures, advantages and problems ofdematerialization.

The Indian Stock markets have seen a major change with the introduction of depositorysystem and scrip less trading mechanism. There were various problems like inordinatedelays in the transfer of share certificates, delay in receipt of securities and inadequateinfrastructure in banking and postal segments to handle a large volume of application andstorage of share certificates .To overcome these problems physical dealing in securitiesshould be eliminated . The Indian stock market introduced the system of dematerializationrecognizing 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 intoelectronic form is called dematerialization or in short demats. The converted electronic datais stored with the depository from where they can be traded. It is similar to a bank wherean investor opens an account with any of the depository participants. Depository participantis a representative of the depository .The DP maintains the investors securities accountbalances 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 ones place instead oftrading through individual stockbroker and broking firms, the customer can transact with the helpof 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 manybanks and companies offer excellent services for online trading. Our needs will determine whichonline broker is best for us. Online trading brings in total transparency between broker aninvestor in case of secondary market operation.Whether we are buying a mutual fund, investing in commodities market or any other transactioncan be performed with minimal fuss. In India presently online trading can take place throughorder routing system, which will route client orders to exchanges trading system for execution oftrade on stock exchange (NSE and BSE).One of the measure attractions of online trading is the wealth of free commentary and analysisabout 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 importantcatalyst behind the emergence of thriving online brokerage system has been the buoyant stockmarket. One can trade online with e-brokerage such as ICICI Direct, HDFC Securities, IndiaBulls, Kotakstreet and India Info lines 5paisa.com.


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NEED OF STUDY:

With the emergence of the internet in everyday business, the significance of the onlinestock market trading broker has gone up.

y It can be done from home at any desired fixed hours of the investor.

y The processing of the order is executed at proper timings as the servers of the onlinetrading portal are linked to the selected banks and stock exchanges though out twentyfour hours.

y The investments made are safe and secured and profit is earned at proper time withoutany dispute.

y Online trading updates are also provided to the investors and also about the present gradeof their orders either through the interface or e-mail.

y The investors increase shares and make development to the company..

OBJECTIVES OF STUDY:

y To Study & understood the concept of Online trading.

y To know the time information & importance & the role played by the stock exchanges inthe process of online trading.

y To know the reasons for the introduction of online trading and their Benefits.

y 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: This method includes the data collection from the personaldiscussion 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.


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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

market showed the coming up of Online Trading System. Many Online stock trading

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

attracting the foreign Investment Companies. Now a days this sector is facing cut-throat

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:

y There is lack awareness among people about investing in stock market. So people whoare aware of such things were found in specific areas for survey purposes.

y Most people are comfortable with traditional system in small towns and like to tradefrom their respective brokers, hence not providing their true opinions.

y Most of people are not using technology and Internet is growing still it is not at therequired level.

y Some of the respondents who did not do Online trading were able to respond only to

some questions.

y Limitations towards Demat and online trading confined to keep the study inmanageable limits.


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REVIEW OF LITERATURE


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INTRODUCTION

India Financial Market the India Financial 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, thenumber 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 arrangements forborrowing and lending of term funds. It does not deal in capital goods but isconcerned 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


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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 anddebentures, while Secondary Market deals with securities already issued bycompanies. Both the markets are important, but the new issues market is much moreimportant from the point of view of economic growth.

Secondary Market: The market where securities are traded after they are initially offered inthe primary market. Most trading is done in the secondary market. To explain further, it is

trading in previously issued financial instruments. An organized market for used securities.Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond markets, over-the-counter

markets, residential mortgage loans, governmental guaranteed 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 Exchange. Majority of the trading is

done in the secondary market. 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 markets serve

as a monitoring and control conduitby facilitating value-enhancing control activities, enabling

implementation of incentive-based management contracts, and aggregating information (via

price discovery) that guides management decisions.

Money market: Money Market is a market for short-term funds, which can be used forovernights to one year duration. It also deals with the financial assets that constitutenear money which means that the assets can be converted into cash quickly withminimum 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

y Organized Money Markets. And Un Organized money markets

y The Call Money Market, Treasury Bill Market, Collateral Money market,Commercial paper and Certificate of deposits.


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INDIAN CAPITAL MARKET AT GLANCE

20th

century

1908 Formulation of Calcutta stock exchange

1939 Formulation of Lahore and madras stock exchange

1940 Formulation of U.P and Delhi stock exchange

1956 Securities contract and regulation act enacted

1957 Scam of Haridas Mundhra

1988 Securities and exchange board of India set up

1991 Scam of MSShoes

1992 SEBI given power Under SEBI act,1992

1993 Formation of National stock exchange

1995 HARSHAD MEHTA Scam

1995 SESA GOA Scam

1997 CRB scam

1998 BPL And Videocon Scam

1800 Trading of shares of east India company in Kolkata And

Mumbai

1850 Joint stock company came into existence

1860 Speculation and feverish dealing in securities

1875 Formulation of stock exchange of Mumbai

1894 Formulation of Ahmadabad stock exchange


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21st century

2000 Depositories came into existence (electronic form of

shares)

2001 KetanP

arekh scam

2002 Start of rolling settlement and banning of Badla trading

2002 Introduction of T+3 settlement in April

2003 Introduction of T+2 settlement in April

2005 BSE Sensex touches all time high 6954 in January

2006 BSE Sensex touches all time high 12500,the highest

intraday fall of 1100

2007 BSE reaches the level of

2008 BSE touches all time high in January 2008

2008 Sensex saw its highest ever loss of 1,408 points at the end

of the session.

2008 Sexsex saw its 15 month low,from its all time high

2009 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. The two national exchanges operating in India are the

National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These exchanges arewell equipped with electronic trading platforms and handle large volume of transactions on a

daily basis.


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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 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 isregulated by the Central Government and such trading can take place only in stockexchanges recognized by the government under this Act. As referred to earlier thereare at present 23 such recognized stock exchanges in India. Of these, major stock

exchanges, like Bombay Stock Exchange National Stock Exchange,Inter-ConnectedStock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are

permanently recognized while a few are temporarily recognized. The above act hasalso laid down that trading in approved contract should be done through registeredmembers of the exchange. As per the rules made under the above act, trading insecurities permitted to be traded would be in the normal trading hours (09:15 A.M to3.30 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 for deliveries of shares on the same day or the next day

as the payment is made.B. Hand deliveries deals for delivering shares within a period of 7 to 14 days from

the date of contract.C. Delivery through clearing for delivering shares with in a period of two months

from the date of the contract, which is now reduce to 15 days.(Reduced to 2days in demat trading)

D. Special Delivery deals for 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 areto 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, thetrading hours, rules of trading, settlement of disputes, etc. as between the members

and of the members with reference to their clients.


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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 thepublic, the number of brokers dealing in shares increased. The brokers organized aninformal 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 WorldWar and Second World War resulted in an increase in the stock trading. The Growth ofStock Exchanges suffered a set after the end of World War. World wide depressionaffected them most of the Stock Exchanges in the early stages had a speculative natureof working without technical strength. After independence, government took keen

interest to regulate the speculative nature of stock exchange working. In thatdirection, securities and Contract Regulation Act 1956 was passed, this gave powersto Central Government to regulate the stock exchanges. Further to develop secondarymarkets in the country, stock exchanges established at Mumbai, Chennai, Delhi,Hyderabad, Ahmedabad and Indore. The Bangalore Stock Exchange was recognizedin 1963. At present there are 23 Stock Exchanges.

Till recent past, floor trading took place in all Stock Exchanges. In the floortrading system, the trade takes place through open outcry system during the officialtrading hours. Trading posts are assigned for different securities where by and sell

activities of securities took place. This system needs a face to face contact amongthe traders and 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 thescreen based trading facility resulted in more and more Sock exchanges turningtowards the computer based trading. BSE introduced the screen based trading systemin 1995, which known as BOLT (Bombay on line Trading. System).


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FUNCTIONS OF STOCK EXCHANGE

Maintain Active Trading: Sharesare traded on the stock exchanges, enabling theinvestors to buy and sell securities. The prices may vary from transaction totransaction. A continuous trading increases the liquidity or marketability of the shares

traded on the stock exchanges.

Fixation of Prices: Price is determined by the transactions that flow from investorsdemand and the suppliers preferences. Usually the traded prices are made known tothe public. This helps the investors to make the better decision.

Ensures safe and fair dealings: The rules, regulations and bylaws of the StockExchanges provide a measure of safety to the investors. Transactions are conducted

under competitive conditions enabling the investors to get a fair deal.

Aids in financing the Industry: A continuous market for shares provides afavourable climate for raising capital. The negotiability and transferability of thesecurities, investors are willing to subscribe to the initial public offering (IPO). This

stimulates the capital formation.

Dissemination of Information: Stock Exchanges provide information throughtheir various publications. They publish the share prices traded on their basis alongwith the volume traded. Directory of Corporate Information is useful for theinvestors 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 tradedcompanies. This makes the corporate more concerned with its public image and tries

to maintain good performance.

Self-regulating organization: The Stock Exchanges monitor the integrity of themembers, brokers, listed companies and clients. Continuous internal audit safeguardsthe investors against unfair trade practices. It settles the disputes between member

brokers, investors and brokers.


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REGULATORY FRAME WORK

This Securities Contract Regulation Act, 1956 and Securities and Exchange board of

India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier

regulatory structure comprising the ministry of finance, SEB1 and the Governing

Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.

Ministry of finance: The Stock Exchangedivision 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 regulation of market intermediaries are also carried out by SEBI. It has

responsibility to prohibit the fraudulent unfair trade practices and insider dealings.


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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 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

A.Six members of the Stock Exchange are elected by the members of the Stock

Exchange.

B.Central Government nominates not more than three members.

C.The board nominates three public representatives.

D.SEBI nominates persona not exceeding three and

E. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM).

The retired member can offer himself for election if he is not elected for two

consecutive years. If a member serves in the governing body for two 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.


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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) NSE2) BSE

NATIONAL STOCK EXCHANGE

The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and mostadvanced exchange with 1016 companies listed and 726 trading members. Capital marketreforms in India and the launch of the Securities and Exchange Board of India (SEBI)


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accelerated the incorporation of the second Indian stock exchange called the National StockExchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stockexchange in India.

Three segments of the NSE trading platform were established one after another. The Wholesale

Debt Market (WDM) commenced operations in June 1994

and the Capital Market (CM) segmentwas opened at the end of 1994. Finally, the Futures and Options segment began operating in2000. 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 JuniorIndices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50stocks from 25 different economy sectors. The Indices are owned and managed by India IndexServices 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 leadershipin the Indian financial market by gaining many awards such as 'Best IT Usage Award' byComputer 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 LifeInsurance Corporation of India. However, in the totally de-mutualized Exchange, the ownershipas well as the management does not have a right to trade on the Exchange. Only qualified traderscan 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 equal access investors all over the country through appropriate

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,

Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India, Punjab


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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 largecompanies on the National Stock Exchange of India. S&P CNX Nifty is a well diversified 50stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such asbenchmarking 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 ajoint 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 theidentities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands forNSE 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:

y

S&P CNX Niftyy CNX Nifty Juniory CNX 100y S&P CNX 500y CNX Midcapy S&P CNX Deftyy 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 locatedat Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600 Indian companieslisted with the stock exchange, and has a significant trading volume. As of October2006, themarket capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSESENSEX (Sensitive index), also called the BSE 30, is a widely used market index in India and


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Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactionsvolume.

History:

An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hallof Bombay from the mid-1850s, 1875, was formally organized as the Bombay Stock Exchange(BSE).In January 1899, the stock exchange moved into the Brokers Hall after it was inauguratedby James M MacLean. After the First World War, the BSE was shifted to an old building nearthe Town Hall. In 1956, the Government of India recognized the Bombay Stock Exchange as thefirst stock exchange in the country under the Securities Contracts (Regulation) Act.1995, when itwas replaced by an electronic (eTrading) system named BOLT,or the BSE Online Tradingsystem. In 2005, the status of the exchange changed from an Association of Persons (AoP) to afull 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 30scrips, with the base April 1979= 100. The set of companies which make up the index has beenchanged only a few times in the last 20 years. These companies account for around one-fifth ofthe 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 andfinancially sound companies. The base year of SENSEX is 1978-79. The index is widelyreported in both domestic and international markets through print as well as electronic media.

SENSEXis not only scientifically designed but also based on globally accepted construction andreview methodology. From September 2003, the SENSEX is calculated on a free-float market

capitalization methodology. The "free-float MarketCapitalization-Weighted"methodology is awidely followed index construction methodology on which majority of global equity benchmarksare based.

The growth of equity markets in India has been phenomenal in the decade gone by. Right fromearly nineties the stock market witnessed heightened activity in terms of various bull and bearruns. More recently, the bourses in India witnessed a similar frenzy in the 'TMT' sectors. TheSENSEX captured all these happenings in the most judicial manner. One can identify the boomsand bust of the Indian equity market through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market hours anddisplayed through the BOLT system, BSE website and news wire agencies.

SENSEX calculation:SENSEX is calculated using a "Market Capitalization-Weighted" methodology.


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As per this methodology, the level of index at any point of time reflects the total market value of30 component stocks relative to a base period. (The market capitalization of a company isdetermined by multiplying the price of its stock by the number of shares issued by the company).An index of a set of combined variables (such as price and number of shares) is commonlyreferred as a 'Composite Index' by statisticians. A single indexed number is used to represent the

results of this calculation in order to make the value easier to work with and track over time. It ismuch 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 stockindices as well:

y BSE 500

y BSE PSU

y BSE MIDCAP

y BSE SMLCAP

y 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 ofSEBI. SEBI has the powers to regulate the business ofStock 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 ofStock 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 of the Stock Exchange are elected by the members of the Stock Exchange.


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F. Central Government nominates not more than three members.

G.The board nominates three public representatives.

H.SEBI nominates persona not exceeding three and

I. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM).

The retired member can offer himself for election if he is not elected for two

consecutive years. If a member serves in the governing body for two 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 ofSEBI. SEBI has the

powers to regulate the business ofStock 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 marketand protect the investors


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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 peoples 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


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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

out their business personally. Orders are executed in the trading ring of 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 jobbers 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


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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, the authorized clerks enter the particulars of the business transacted

during a particular day in Kacha Sauda Book they are transferred to Pucca Sauda

Book, which are maintained separately for the ready delivery contracts. 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 price. These are executed very fast as there is no price limits.


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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.


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DISADVANTAGES OF MANUAL TRADING:

1) Manual records are very difficult to be maintained safe2) Manual records are subject to greater human error3) Business can see itself in fines and penalties if records are lost4) Manual records are easier to be falsified, modified, altered or vanished, as comparedto 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 a registered Depository Participant (DP). A depository functions somewhat similar 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 ofSecurities 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.


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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 largestdevelopment bank of India, Unit Trust of India (UTI) - the largest mutual fund in India andNational Stock Exchange of India Limited (NSE) - the largest stock exchange in India. Some ofthe prominent banks in the country have taken a stake in NSDL.

Promoters

y Industrial Development Bank of India Limited (Now, IDBI Bank Limited)y Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit Trust of

India)y National Stock Exchange of India Limited

Other Shareholders


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y State Bank of Indiay Oriental Bank of Commercey Citibank NAy Standard Chartered Banky HDFC Bank Limitedy

The Honkong and Shanghai Banking Corporation Limitedy Deutsche Banky Dena Banky Canara Banky Union Bank of India

CDSL: CENTRAL DEPOSITORY SERVICES LIMITED:

A Depository facilitates holding of securities in the electronic form and enables securitiestransactions to be processed by book entry by a Depository Participant (DP), who as an agent ofthe 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 isknown as beneficial owner (BO) has to open a demat account through any DP fordematerialization of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be obtainedthrough the DP. The DP is required to provide the investor, at regular intervals, a statement ofaccount which gives the details of the securities holdings and transactions. The depositorysystem 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 ofsecurities.CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leadingbanks 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 ofIndia, Bank of Baroda, State Bank of India and HDFC Bank. BSE has been involved with thisventure right from the inception and has contributed overwhelmingly to the fruition of theproject. The initial capital of the company is Rs.104.50 crores. The list of shareholders witheffect from 11th December, 2008 is as under.


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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 Bank of India 1,000.00 9.57

3 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 and Kashmir BankLimited

200.00 1.91

11 The Calcutta Stock ExchangeAssociation Limited

100.00 0.96

12 Others 0.08 --

TOTAL 10,450.00 100.00


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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 investors account with his

Depository Participant.

Dematerialized trading is now compulsory for all investors. Beginning of first week of

January 1999, investor can trade in specific scripts in the Demoralization form. They can provide and

receive delivery only in a Dematerialized form and share certificate will not be changed for these

scripts.

A depository is an organization where Securities of 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 DP- similar to opening an account with any other branches of the bank in order to avail of

its services.

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 ofSecurities are credited in the

depository account of those investors. A Depository Participant is investors agent in the system. He

maintains investors Securities account and intimates the status of holdings from time to time to the

investor.

FEATURES OF DEMAT:

y In case you want to convert your existing shares into Demat format, you can view

securities available for Dematy You can view the details of your transactions including settlement date, pay in date, pay

out date using the View Settlement calendar option


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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.

y After opening an account with the DP the investor should surrender the physicalcertificates held in his name to a depository participant. These certificates will besent to the respective companies where they will be cancelled after dematerialization

and will credit the investors account with the DP. The securities on dematerialisationwill appear as balances in the depository account. These balances can be transferredlike the shares held in physical form. Dematerialised shares are in the fungible formand do not have any distinctive or certificate numbers .The securities in the dematcan again be 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 forgetting registered as a depository participant. With the recommendation of the Depositoryand 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 validinstruction 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 standardprotection measures such as encryption.

* No direct communication links exist between two business partners and all


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communications are routed through NSDL.

* A statement of account is received periodically by the investors. NSDL sends statement ofaccount 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:

y There is no risk due to loss on account of fire, theft or mutilation.y There is no chance of bad delivery at the time of selling shares as there is no

signature mismatch.y Transaction costs are usually lower than that in the physical segment.y The bonus /rights shares allotted to the investor will be immediately credited into

his account.y Share transactions like sale or purchase and transfer/transmission etc. can be

effected in a much simpler and faster way.

y

A safe and convenient way to hold securitiesy ; Immediate transfer of securities;

y No stamp duty on transfer of securities;

y Elimination of risks associated with physical certificates such as bad delivery, fakesecurities, delays, thefts etc.;

y - Reduction in paperwork involved in transfer of securities;

y - Reduction in transaction cost;- No odd lot problem, even one share can be sold;

y - Nomination facility;

y - Change in address recorded with DP gets registered with all companies in which

investor holds securities electronically eliminating the need to correspond with each ofthem separately;

y - Transmission of securities is done by DP eliminating correspondence with companies;

y - Automatic credit into demat account of shares, arising out ofbonus/split/consolidation/merger etc.

y - Holding investments in equity and debt instruments in a single account.

y Disadvantages of Demat account -

y There is no as such disadvantage of Demat account. And even if there is anydisadvantage of Demat account than by law, In India we Must have to use Demataccounts 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.


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1. Investor instructs DP to receive credits into his account in the prescribed form. There may be

one time standing instruction or separate instruction each time to receive credits.

2. Investor purchases securities in any of the stock exchanges linked to depository through a

broker.

3. Broker receives payment from investor and arranges payment to clearing corporation.

4. Broker receives credit to securities in clearing account on the payout day.

5. Broker gives instructions to DP to debit clearing account and credit clients 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. Investor sells securities in any of the stock exchange linked to depository through a

broker.

2. Investor instructs his DP to debit his demat account with the number of securities sold

and credit the brokers clearing account.

3. Before the pay-in-day, broker of the investor transfers the securities to clearing

corporation.

4. The broker receives payment from the stock exchange.

5. The investor receives payment from the broker for sale of securities in the same manner

as received in case of sale of physical securities.


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The Evolution of Stock Brokers with Online Trading

An online stock broker is an investors means of buying and selling shares via the Internet, justlike a regular stock broker, wherein an individual or a brokerage firm acts as ones link to thestock 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 ones own computer?

The fact is, only a registered (SEBI)stock broker can buy and sell shares in the stock market. Such anindividual is registered on one or many stock exchanges and is authorized to transact on behalf of others.

Apart from that, an online stock broker isvery valuable to investors who are not technicallyinclined and have no or little prior knowledge of stock trading. Such investors can use their ownonline stock trading accounts to obtain necessary information and place online trades at any timeof the day. Others, however, still require a human interface - a real person who will place tradeson their behalf.

. INTRODUCTION TO ONLINETRADING

The Internet revolution has been changing the fundamentals of our society. It shapes the way wecommunicate and the way we do business. It brings us closer and closer to vital sources ofinformation. It provides us with means to directly interact with service-oriented computersystems tailored to our specific needs; therefore, we can serve ourselves better by making ourown decisions. This prevailing shift of the business paradigm is reshaping the financial industryand transforming the way people invest.

In the old days, because of the limitations of communications technology, Wall Street was thecenter for most of the Stock Exchange 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 of 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 found to have grown from just 3 per cent of the total turnover in 2003-04 to 16 per cent

in 2006-07


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Facilities of the online trading in India:

The investor has to register with an online trading portal and get into an agreement with the firmto 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 areconnected to the stock exchanges and designated banks all round the clock. They can also getupdates on the trading and check the current status of their orders either through e-mail orthrough the interface. Brokerage also provides research content on their websites, such that theclients 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:

y Life insurance

y Equities,y Portfolio management

y Mutual funds

y Loans

y General insurance

y Share trading

y Commodities trading

y 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 largestexchanges. They handle huge daily trading volumes, supporting large amounts of data traffic,and possessing a countrywide network. The automated online systems used for trading by thenational stock exchange and the Bombay stock exchange are the NIBIS or NSE's Internet BasedInformation System and NEAT for the national stock exchange and the BSE Online Tradingsystem or BOLT for the Bombay stock exchange.

y .Online trading is termed as selling products or good services through Internet.

y Customers willing to purchase the product should provide the credit card details andpersonal contact information online and once the payment is being made the product isshipped to the address of the customer as provided earlier generally after two business

days.

y The product is shipped to the customer from the retailer only.y Online trading is treated as the most effective process to make money with the help of

Internet by sitting at home only.y But is not easy and simple as it requires constant supervision and once people attains the

appropriate skill can gain profit in huge amount.


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y In order to make a business successful a plan need to be prepared first then multiplesources of income policy should be opened so that the plan at later time should beincorporated in to the business.

Companies provide Online Trading in India:-

Online Trading in India

:: India Stock

:: A1 Technology Online Trading

:: Best online trading

:: Bonanza Online Trading

:: BullishIndian.com Online Trading

:: Express Computer Online Trading

:: Geojit Securities Online

:: ICICI Online Trading

:: Indiabulls Online

:: India Insurance

:: BSEIndia

:: JV Financial Online

:: Kotak Securities Online Trading

:: Mansukh Securities Online Trading

:: Quote.com Online Trading

:: SHCLOnline Trading

:: STC Online Trading

:: Technical Analysis Trading

:: Union Bank of India Online Trading

:: 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.

The Internet can provide a new sense of control over your financial future. The amount of investment

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:

y Know the price of any stock at any time

y Review the price history of any stock in chart format

y Follow market events in-depth


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y Receive a wealth of free commentary and analysis about stock markets and the

global economy

y 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 relating to the specific stocks

and company profiles, you will be able to get the best quote for your orders.

Offers grater transperancy:

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.


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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 case of a demat account your demat account is checked by us before 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

Every trade is confirmed immediately and you will receive an on-screen 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 Bank, Depository and online account are integrated for your 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.


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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

allowing one to buy a single share and achieve meaningful rupee price averaging whatever be yourbuying 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 ones disposal for research and analysis.

4) Access to Information and investment Tools:

Most online investing sites have a wealth of information for their registered members. This includes

research reports, results, analysis and even gossip and the buzz in the market.

5.) Unparalleled Liquidity:


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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 ones 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 are secure using 128-bit algorithms -highest available commercially anywhere in the world.

Moreover even if somebody broke in and tampered with ones 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 transaction), when a seller wants to sell the securities,

his demat account 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 placement, to clearing and settlement and

finally ending with a 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.

Other than the above-mentioned advantages, Internet trading provides some additional advantages to

the investors, brokers and also helps the nation to channelize the resources. Net trading would increase


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competition in the market hence increase in the bargaining power of the investors. The entire

communication between the investor, broker and exchange would take place within milliseconds.


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PROBLEMS OF ONLINE BROKING

There is a flip side to everything and online trading is no exception.

Chart

Source:- www.lse.co.in

27% Loyality 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 ones screens when he is desperately trying to get out of an 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:

21%

23%

27%

11%

14%

4%

More Costly

Lack Of Knowledge

Loyaltyto Traditional Broker

Lack of Trust

Slow Speed

Other


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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 ones 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:

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 own time sending the orders

to the NSE server. He must check out 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 margin. That is

where the brokerage firm lends you money by leveraging 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:


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The advisory services being promised by the brokers would be of little 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-brokerages such

as ICICI Direct, Kotakstreet, India bulls, India info lines 5paisa.com and HDFC securities.

If you are already comfortable trading with your regular broker, here are few reasons why you may

consider switching to trading online, or at least another 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 executed online. The absence of manual

intervention ensures that you 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. 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 best aspect of

being a wired investor for the first time in history, any individual with an internet connection can:

y Know the price of any stock at any time


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y Review the price history of any stock in chart format

y Follow market events in-depth

y Receive a wealth of free commentary and analysis about stock markets and globe economy.

y Conduct extensive financial research on any company

y Talk with other investors around the world

At investsmart you can get real-time stock quotes, daily roundups of the stock market, experts

commentary, and a deep community of fellow investors.

Convenience is probably the greatest advantage online trading offers investors. if dont 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 inthe

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.


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PROCEDURE FOR ON-LINE TRADING:

An Investor interesting in trading through Internet shall such as filling the account opening

form of -broker, copies of identity proof have to, firstly register himself with an Internet

brokerage firm. Some formalities, copy of residence proof are made to register himself withthe 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

required to open account with a depository participant because 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 limit for the day.

The broker makes the payment either directly via the client bank account

or pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through

the demat or via e-mail.


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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.


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CLIENT BROKER STOCK EXCHANGE

Places an order on the

net on the brokers

website through the

distinctive I.D. code

Accepts the order,

Checks the clients

Identity and places

the order with the

stock exchange

Accepts the order after

checking the scrip limit

of the broker for the

day

The settlement of the

deal (buy/sell order)

gets reflected in his

Demat account.

The client is intimated

about the execution of

the deal by e-mail.

Pays the broker

Pays the

Exchange

though his owns

account and

receives it from

the client account.

Receives the

money and

completes the

settlement

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 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


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The benefits ofinvestor due to Online Investing:

a) Independence and freedom due to enjoyed by an individualaccess to the markets: This isconceivably the greatest advantage of online brokerages. A novice investor with an Internetconnection can know there all time stock quotes, historical stock price trends, have a handle

on market events, access vast amounts of economic and market analysis, do research on firms,and interact with other investors via forums or chat rooms. This, in combination with time, cantransform even the most novice investor with an active interest in investments into aknowledgeable and powerful investor.

b) Elimination of the middle man:Investing online gives the investor a sense of control over their wealth. Buying and selling ofstock no longer requires another individual to carry it out. It saves the investor the added worriesthat 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 ofLosses on accountof 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 theclient. Online brokerages pay financial advisors a fixed salary, thus eliminating the chance for aninvestor doing unnecessary trades for the benefit of the brokerage firm and the broker.d) Inexpensive and affordable commission charges: Commissions per trade online are muchlower than when compared to that charged by traditional brokerage houses like Merrill Lynch,etc. This is the fulcrum on which online brokerages leverage. Cheap transaction costs along withthe immense amount accessible online are the biggest reasons for the clients to move online.Traditional brokerage housese) Internet as an InformationSuperhighway: Information related to stocks, companyFundamentals, etc., which were once only available to licensed brokers, are now at the finger tipsof 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 moreProducts to the consumer, so as to give the consumer a wider choice and also to accommodateconsumers 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 asaccessibility 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 amatter 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 anetwork to be fail-safe. Computers in spite of the technological

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