MT on online trading

8/9/2019 MT on online trading

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A Thesis on

Study on the attitude of investors towards online trading.

By

CHINMAYA H P

IUD NO 0801214200

A report submitted in partial fulfillment of

The requirements of

THE MBA PROGRAM

(The Class of 2010)


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CERTIFICATE

This is to certify that the Management Thesis titled ___________________________________

______________________________________________________________________submitte

d during Semester _________________ of the MBA Program (The Class of 2010) embodies

original work done by me.

Signature of the Student

Name (in Capitals) :______________________________________________________

Enroll Number : ______________________________________________________

Campus : ______________________________________________________

Signature of the Faculty Supervisor

Name (in Capitals) :

Designation :

Campus :


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ACKNOWLEDGEMENT

First, I would like to thank The Almighty for his perpetualblessings and guidance

through out this thesis work.

I express my deep sense of gratitude to our Campus head and the faculty guide

for this thesis work MR.: Ramachandra gunari, ICFAI national college shimoga, for

providing me an opportunity and continuous encouragement for doing this thesis.

His suggestions benefited immensely. Further, he also provided me with valuable

inputs and guidance in writing this live project.

I thank Mr. Nagaraj, Comtrade accounts officer in Karvy The finapolis, for his

valuable guidance, co-operation and support, which has been a major

contributing factor in the completion of this thesis.

I also like to remember and thank all the respondents who cooperated and

answered all my questions with patience.

Last but not the least, I thank my family and well wishers for their encouragement

and support who have stood by me during this project.

CHINMAYA.H.P


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Contents TABLE OF CONTENTS page no.

i. Title page.1

ii. Certificate..2

iii. Acknowledgments..3

1. Introduction.... 6-10

1.1 Definition and Overview..7

1.2 BSE and NSE online trading system..9

2. Literature review... 11-28

2.1 literature review...............................12

2.2 Research design method25

2.3 Objective of the study.26

2.4 methodology of research....27

2.5 Data collection techniques..27

2.6 Scope of the study.28

2.7 Limitations.28

3. Industry profile...... 29-47

2.1 Industry Overview.............................30

2.2 Investment...32

2.3 Capital Market and Depository..36

2.4 Trading online and its requirements.46


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4. Data analysis and interpretation... 48-62

4.1 Data Analysis49

5. Discussions and implications. 63-67

5.1 Discussions & Implications.64

6. Conclusions and recommendations..68-71

6.1 Conclusions.69

6.2 Recommendations.70

7. References 72-73

7.1 reference sources.73

8. Annexure74-77

8.1 Questionnaire..75


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Introduction1.1 Definition and Overview

1.2 BSE and NSE online trading system

CHAPTER - I


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1.1 INTRODUCTION:

In olden days there was credence that, investments are for securing the

future and that was the only genuine objective of the people. Investments were

also happening only on government security instruments. But the trend have

changed and people like to invest on different type of government as well as semi

government and private securities not only to secure the upcoming but also to

have the benefit of present by making the large profit by their investments.

A Share market is the place where buying and selling of shares takes place.

Nowadays due to internet and advanced technology buying and selling of shares

takes place anywhere in India and also from foreign country, there is no need to

be physical present in exchanges like NSE and BSE.

When the people start accepting the changes, even the surrounding

environment also facilitates for the changes. The same when the people stated

thinking about a mixture of investments to make the profit, the existing market

also stared facilitating the investor. From these changes, the different type of

investment market came into existence.

When the market gets the importance as never seen before, many studies

will go on happening on the highlighted investment market. Similarly this study

puts the light on the different type of markets and the instruments which are

available for the investors to devote their money for their requirementsfurthermore, the study try to come across the grounds, why people like to

transact with stock brokers or with any other support instead of doing the

transactions independently.


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As mentioned, the main objective of the study is to know about the various

reasons why investors like to have support from the any means instead of doing

the same independently even though they have experience and knowledge in

investing and getting the adequate profit. Along with the main idea of the study,

there are some other objectives are also integrated with the study like, what is

trading online, the procedure included in trading online, materialized shares

trading, and what all the unidentified facts involved.

The study completely involves in detailing about the online trading system. Here

the different types of online trading system serviced by different stock exchanges

are given.

1. BSE online trading system[BOLT]

BSE On-Line Trading System, popularly known as the BOLT System

took its genesis in the year 1994, as part of the four-phase

computerization program to create an automated trading

environment. BOLT system aimed at converting the Open Outcry

System of trading to a Screen-based trading system (SBT). BSE had

the requisite knowledge base and virtue of more than 115 year track

record in the capital markets; BSE embarked on the specified project

in 1991 and seamlessly completed the fourth phase in March 1995.


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BOLT is supported on the hardware front by the Tandem Non-

Stop Himalaya System which is specifically designed to cater to the

requirements of the On Line Transaction Processing (OLTP)

environment. BOLT System works on the Tandem S88016 * 2

platform running on 32 CPUs. The existing set-up, a fault tolerant

system with scalable architecture can handle a maximum of 2.5

million trades a day against a daily average of 75000 trades a day

when BOLT was started. Further, the average time of execution is

200 orders per second with a peaking speed of 250 orders per

second. The system comprises of a Tandem Himalaya S88016

machines acting as backend to more than 17000 Trader Work

Stations (TWS) networked on Ethernet, VSAT and LAN network.

2. National exchange for automated trading[NEAT]

The NEAT is an online trading system which is similar to the BOLT

online system of BSE. But the difference is like the interface of

operating and design of the system and software. The other trading

methodology is similar in both the systems.


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The NEAT online trading system operates on the basis of four type of

market conditions like,

a. Normal market.

b. Odd lot market.

c. Auction market.

d. RTDEBT market.

The details will be discussed in analytical parts.

The study goes in detail about why investor takes the help of intermediary

to carry out with the stock market instruments when they have direct access to

the market through internet and other services and even there are few software

to transact in the market independently and also the help through online is also

available. Even investor can obtain the paid help services for the healthier

investments suggestions.

The literature review briefs the main theme of the report and tells ensures

the significance of conducting survey, and tells about the reliability and validity of

the things. Research design and analysis provides the sufficient data regarding the

findings and gives enough supports for the recorded proofs of the information.

Methodology enlightens the way of doing the work, and as a final point results,

analysis, conclusion and recommendations puts the ultimate outcome into

picture.


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Literature review

2.1 literature review

2.2 Research design method

2.3 Objective of the study

2.4 data collection techniques

2.5 Scope of the study

CHAPTER - II


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2.1 LITERATURE REVIEW:

In a broadest intelligence, investment is a sacrifice of the current money or

any other resources for the future benefits. Numerous investment opportunities

are available in the market these days. Investor can simply deposit his/her money

in the bank to be risk free or they can invest their funds on the different source of

the investments like government secured investments or on the equity market or

any other type of investments if at all ready to bear risk factors. The two factors

of investments are time and risk factors. When it comes to the government

investment instruments, time element dominates but in the same time, risk

elements dominates if the investments are like share market instruments. This

factor mostly decides the investment alternatives and it changes the investors

attitude towards the investments.

There are various factors to be considered while studying about the

investments and particularly about share market investments. Here the study

goes towards the searching of the factors which influences the investor to go

towards the share market investments and why investors likely to have an

additional support for their investments, but why they do not go autonomously as

an alternative.

Investors have several alternatives for their funds to be invested with. Like

that they have several people to support for the investments decisions like, stock

brokers who keep on updating the investors knowledge if they had put the

investments through the stock brokers. The main factors why the people like to


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go with the stock broker are the market unpredictability and the risk factor.

General investor always can not keep on thinking about their investment

variations so they may take the external support.

Mainly the Indian market conditions are always unsecured and it will be

varying all the time according to the main few stocks changeability in the stock

market. Doing the investments online with stock market independently is possible

with the support of the software which is provided for the transactions at the

same time few venture investors do the transactions independently but most of

the investors go with the stock brokers because of the lack of additional

knowledge and lack of confidence to go with the risk factors.

Here the main objective of the literature review is to detail the facts

regarding the study and to see an overview of the literatures which supports the

study. Basically a survey of the different investors in must for this type of study

because these studies are highly depended upon primary data. An interaction

with people makes the study better and comprehensible. Still many books and

other sources help the study to make more realistic.

For the further reference on the study, I studied the literatures of K

Sreepathi from his book, The Dynamics of Indian financial markets, Investment

analysis and portfolio management written by Prasanna Chandra, financial

management written by B V Ragunandan.


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From the study of the above literatures, book written by Prasanna Chandra,

The Dynamics of Indian financial markets contributed to a great extent. The

literature penned the main points regarding the approaches of the investments

also gave the principal reasons regarding the various investment alternatives and

the perception of the investor regarding the stock market returns. The author has

answered many questioned like, what is the relationship between risk and return.

What is the importance of diversified investments and how risks can be shared

within the diversification, how successful are the various strategies followed by

investment practitioners. As he says in the portfolio management process,

investment has five attributes like, rate of return, risk factor, marketability, tax

shelter, and convenience. Further he says, portfolio management process has

steps like,

1. Specification of investment objectives and constraints.

2. Choice of the asset mix.

3. Formulation of portfolio strategy.

4. Selection of securities.

5. Portfolio execution, revision and evaluation.

These are the main process involved in selecting the best alternative for the

investments and to select an intermediary for the investment suggestions. When

it comes to the process of port folio strategy and choice of asset mix and

securities, every investor feel to have an external help or support instead going

for independent investment decisions. So why most of the investments happens


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through stock brokers and other intermediaries. Even every investor need to

complete some formalities which can not be done independently. Like creating a

demat account is mandatory for the investment on shares. Maintaining the

accounts and time to time portfolio evaluation. Each and every person who

invests cant keep on checking the port folio because he may have other tasks too

and even selection of securities needs much knowledge than having experience

so it needs good qualified suggestions.

On the other hand, one more author BV Ragunandan who says in his book

as, usually shares are bought through a stock broker, who is a licensed member of

a recognized stock exchange. So while buying shares, one need to locate a

registered stock broker. Further he says, there are many participants in the

market like,

A. Regulators who are the key agencies that have a significant regulatory

influence over the securities market.

B. Stock exchanges, brokers who are the institution where securities are

bought and sold and brokers who are the agents of the stock exchanges

respectively.

C. Other participants are, depositors who maintains the demat accounts

which are mandatory for the transactions. Merchant bankers, primary

dealers, registrars, underwriters, bankers, these are all the people come in

stock market transactions.

When it comes to the trading with the stock market instruments that means,

investing on stocks, we have two type of trading. Those are,


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1. Open outcry system[offline trading]

2. Screen based trading[offline trading]

3. Internet trading[online trading]

As the literature of the different books and other sources reviles that,

under the open outcry system, trader need to be on the floor where trading

happens. Usually in stock exchanges where trader, means buyer have to bid their

price and seller have to offer his shares and finally closes with a mutually agreed

prices.

When it comes to screen based trading the trading, the trading happens

through computer screen and here distant participants can trade with each other

through the computer by having the internet connections. Screen based trading

system enhances the efficiency of the market. Speed of the transactions,

establishes transparency in the transactions and documentations. Till 1994,

trading on the stock market in India was based on the open outcry system and

trading was not dematerialized at that time. But after establishing national stock

exchange and SEBI, in 1994 the screen based system entered to India and in a

short span of time India could able establish the transparency like no other

countries did like that till now.

Internet trading or online trading was introduced in the year

2000.currently, ICICI Web trade, Sherekhan, kotakstreet, geogit securities,

investsmart, and others are offering the internet trading. To do internet trading,


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investor has to register himself as a client with the internet stock broker apart

from having a computer, a modem, and a telephone connection. Investor has to

keep a minimum balance with his bank account with the stock broker so that

broker can directly debit or credit.

Further, Dates of beginning of electronic trading by top leading exchange in

120 nations is provided in a Journal of Finance article published in 2005 Financial

market design and the equity premium: Electronic vs. floor trading. Leading

academic research in this field is carried out by Professor Ian Domowitz and

Professor Pankaj Jain. The same report states that, there are broadly two type of

trading in financial markets like,

Business-to-business (B2B) trading. It conducted frequently on exchanges,

where large investment banks and brokers trade directly with one another,

transacting huge amounts of securities.

Business-to-client (B2C) trading. Where retail (e.g. individuals transacting

literally small amounts of stocks and shares) and institutional clients (e.g.

hedge funds, fund managers or insurance companies, trading far larger

amounts of securities) buy and sell from brokers or "dealers", who act as

middle-men between the clients and the B2B markets.

Many of the existing analysis and findings by the reports have already givenwhat all the impacts of the electronic trading system, we shall have a look on it.

Reduced cost of transactions- from the automation, many of the works can

be done possibly in a short time so the cost can be decreased.


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Better liquidity- electronic systems make it easier to let many companies to

trade with one another, no matter where they are located. This leads to

greater liquidity for the security instruments.

Greater competition- there will be a greater competition when there are

many companies existing in the market to provide the e trading system. So

the investor can catch out better service and he is deserved for that.

Enhanced transparency level- E trading made the markets less opaque and

the market has given a greater transparency in transacting the instruments

and other securities. There will be direct access to the customer for his

transactions.

Moreover, some of the findings of several existing thesis reports said these points

about online trading system;

The central computer located at the Exchange is connected to the workstations

of the Brokers through satellite using Very Small Aperture Terminals (VSATs).

Orders placed at the Brokers' workstations reach the central computer and are

matched by the computer based on price and time priority.

The given information is like; both the exchanges have switched over from

the open outcry trading system to a fully automated computerized mode of

trading known as BOLT (BSE on Line Trading) and NEAT (National Exchange


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Automated Trading) System. It facilitates more efficient processing, automatic

order matching, faster execution of trades and transparency.

The scrips traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F'

and 'Z' groups. The 'A' group shares represent those, which are in the carry

forward system (Badla). The 'F' group represents the debt market (fixed income

securities) segment. The 'Z' group scrips are the blacklisted companies. The 'C'

group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights

renunciations. Key regulator governing Stock Exchanges, Brokers, Depositories,

Depository participants, Mutual Funds, FIIs and other participants in Indian

secondary and primary market is the Securities and Exchange Board of India (SEBI)

Ltd.

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With all the ease of online trading, there are still investors who favor the old

fashion way of offline trading. Offline trading has lot its recognition but it is stillthe core form of investing. Offline trading offers many benefits as well.

1. The one benefit that an investor be grateful for the most is that they are not

alone when making investment decisions.

2. There are experienced and professional brokerage companies that handle their

investments for them.


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3. Investors are not faced with the challenge of making these vital investment

decisions; especially, if they do not have the experience necessary to make the

appropriate investments.

4. Also, there is someone there to answer any questions that may cause concerns.

Not to mention, with offline trading mistakes are less likely to take place. No one

wants to throw their money away or stand by and watch someone else throw

their money away. It may be wise to hire a professional to assist you in making

the correct investment decisions if you feel you lack the knowledge necessary.

DIFFERENCE BETWEEN ONLINE TRADING AND OFFLINE TRADING SYSTEM

ARE:

1. Online trading is very expensive as compare to manual trading or offline

trading.

2. Online trading consumes less time as compare to manual trading.

3. Online trading has very helpful to finding the records easily but offline trading

takes more time to finding the records.

4. In the help of online trading, there is no chance of any errors while doing the

trading. In offline trading there are some errors exist like barriers ofcommunication.

5. With the help of online trading, we know the international market rate of share

very easily.


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INTERNET BASED TRADING THROUGH ORDER ROUTING SYSTEMS:

Internet based trading on conventional exchanges, uses the Internet as a

medium for communicating client orders to the exchange, through broker web

sites. Brokers web sites may serve a variety of functions. These may include;

Allowing the clients to trade directly through investors;

promote the broker dealers services to potential investors;

Offer market information and investment tools similar to those offered

by information vendor or SRO web sites;

Offer real-time or delayed quote information, continuously update

quotes while the user visits other sites, or allow investors to create a

personal stock ticker;

Provide market summaries and commentaries, analyst reports and

trading strategies and market data on currencies, mutual funds, options,

market indices and news; and

Offer investors access to portfolio management tools and analytic

programs;

Information on commission and fees; and

Account information and research reports.

In an Order Routing system, a broker offering Internet trading facility

provides an electronic template for the customer to enter the name of the

security, whatever it is to be bought or sold, the quantity and whatever the order

is a market or limit order. Once the brokers system receives this information.


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NET WORTH REQUIREMENT

The broker must have a minimum net worth of Rs. 50 lacs if the broker is

providing the Internet based facility on his own. However, if some brokers

collectively approach a service provider for providing the interest trading facility,

net worth, criteria as stipulated by the stock exchange will apply. The net worth

will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16,

1998.

The Bombay stock exchange as well as national stock exchange has given the

highlighted points as the main features they are providing for the investors

through online trading system. These are given by the stock exchanges in its

websites;

1. Freedom of information.

2. Control and security of investors money.

3. Access to the market directly.

4. Ensures the best price for the investors.

5. Offers enhanced transparency.

6. Enables irritation free trading.

7. Allows instant trading execution.

8. Reduces settlement risk.


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9. Integrated depositary accounts with bank accounts.

Further more, the famous writer of the book Intelligent stock market

investing Mr. N J Yasaswy,and the book financial markets and services by

Mr. Y Chandra sekhar written in their book regarding the benefits of the online

trading as,

1. It is less costly.

2. Peace of mind. It means, 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 properly and access to information and investment tools

trough direct internet access.

4. It reduces the settlement risk and offers superior transparency.

The books which are mentioned above are very much useful to give

suggestions on the findings because the authors have explained the topic

thoroughly and given the good suggestions to overcome the problems regarding

the investment decisions and trading decisions.

Investors expectations are very high most of the times and very rarely they have

come down with the changing realities like softening of inflation, interest rates,

excess capacity in the industry, reduction of the import duties etc . there is a

strong need for a shift in the investors mental programming of high return on

equity investments opines the author.


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So from the above reviews of the literatures we can give further as, under the

existing legal and regulatory framework of SEBI registered brokers can offer

trading on Internet through order is routing systems. This would reduce the risk

factors which are in offline trading system and also increases the transparency.

Still there are few problems are there in trading online like problem of hacking

the data, online crimes, phishing the banking information and passwords,

problem of taking the decision independently, breakdown of the computers,

servers and internet connection etc. still we need to adapt the changes and

further technology so its better to en cash the opportunity of changes.


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2.2 RESEARCH DESIGN AND METHODOLOGY:

Problem definition:

A research problem, in general, refers to some difficulty which a researcher

experiences in the context of either a theoretical or practical situation and wants

to obtain a solution for the same.

A problem clearly stated is a problem half solved. Thus, defining a research

problem properly is a prerequisite for any study and is a step of highest

importance. It is only on careful detailing the research problem that we can work

out the research design and can smoothly carry on all the consequential steps

involved while doing the research.

The investments are subjected to risk. What ever may the type ofinvestment the investor like to make but it has its risk factors. There are several

type of investments available in the market but here the topic is only

concentrated on share market transactions hence, we are going to discuss upon

the various factor influences the investor to go for these investments and

investors are like to have a good intermediary for their transactions.


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In the light of the above background, we can illustrate the main problem

definition for the study as, what are the different type of investments are

available for the investor in the stock market, through what all the way an

investor can transact and why most of the investors desire to have assistance

from an adviser of the investments though he can transact independently through

online.

2.3 OBJECTIVES OF THE STUDY:

1. To make out what stock market investments is and what is online trading

system.

2. To know the peoples awareness regarding online stock market

transactions.

3. To study the investors opinion towards independent trading and dematerialized share trading.

4. Revealing what all the unknown things involved in the stock trading.


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2.4 METHODOLOGY OF RESEARCH:

Effective research need to take up the following steps so these are the

steps taken largely for the study.

1) Defining the problem and research objectives.

2) Developing the research plan.

3) Collecting the information.

4) Analyzing the information.

5) Presenting the findings.

2.5 DATA COLLECTION:

The required data for the study collected from the primary source of data

as well as secondary source of the data. Time required to obtain the primary data

is higher compared to that required for collecting secondary data.

Primary data collection is directly from respondents. The respondents are

the people who are already invested on shares and other type of investments and

people who are interested to invest and people who have information regarding

the independent online trading.

Primary data collection is through structured questionnaire as well as

personal meetings.

Secondary data is collected through different books, magazines, E books

and from various web sites. The details regarding the secondary data source is

given in the bibliography at the end of the report.


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2.6 SCOPE OF THE STUDY:

The scope of the study is mainly to bring out the total and true facts

regarding the share market and the trading system through online transactions.

The research was focused on various reasons for the investments and the ways of

investments the investor goes to make hence the findings are fair reflection of the

respondents.

2.7 LIMITATIONS OF THE STUDY:

Every study will have its own limitation and limitation for further study of

the topic. Like that this study also has its own limitation. The very few limitations

are given below:

1. Enough investors for the sample size. Finding out the investor who trade

online is a bit difficult task.

2. Availability of information is limited regarding online trading system.

3. Truthfulness of the information provided by the investors. Each and

every information may not be the fact.


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Industry Profile

2.1 Industry Overview

2.2 Investment

2.3 Capital Market and Depository

2.4 Trading online and its requirements

CHAPTER - III


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2.1 INDUSTRY OVERVIEW:

Globalization of the financial market has led to a manifold increase in

investment. New markets have been opened; new instruments have been

developed and new services have been launched.

India has a well established capital market mechanism where in effective

and efficient transfer of money capital or financial resources from the investing

class to the entrepreneur class in the private and public sector of the economy

occurs. Indian capital market has a long history of organized trading which started

with the transaction in loan stocks of the East India Company from that time it has

undergone drastic changes to meet the requirements of the globalization. The

Indian Capital Market had been dormant in the 70's and 80's has witnessed

unprecedented boom during the recent years. There has been a shift of

household savings from physical assets to financial assets, particularly the risk

bearing securities such as shares and debentures. Capital markets structure has

also undergone sea changes with number of financial services and banking

companies, private limited companies coming in to the scene which made the

competition in the market stiffer.

The Companies Act 1850, introduced the concept of limited liability to

India, served to stimulate the activity in the stock market. From then number of

acts are passed to boost the revolutionary change. The global capital market

registered spectacular growth in the decade of 1990's which had an effect on the

growth of Indian market. The world market capitalization grew at an average

annual rate of 16% during the decade, it grew from about US $ 9.3 trillion in 1990

to about US $ 36 trillion in 2000 but fell to about US $ 28 trillion by 2001. The


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turnover on all markets taken together has grown nearly 19 times from US $ 5.5

trillion in 1990 to US $ 48 trillion in 2000 before depleting to about US $ 42 trillion

in 2001. The turnover in developed markets has, however, grown more sharply

than that in emerging markets. The US alone accounted for about 70% of world

wide turnover in 2001. Despite having a large number of companies listed in its

stock exchanges, India accounted for a merger of 59% in 2001 down from 1.06%

in 2000.

The stock markets world wide has grown in size as well as depth over

last one decade. During the decade 1990-2000, the world market

capitalization/GDP ratio more than doubled from 51% to 120%. Value traded GDP

rose from 29% to 103% and turn over ratio shot up from 48% to 89%. The

combined market capitalization of a select 22 emerging economies increased

from US $ 339 billion in 1990 to US $ 2.2 trillion in 2000. The average market

capitalization increased from 3.6% to 7%, annual value of shares traded increased

from $ 180 billion to $ 2.2 trillion and GDP increased from 16.7% to 45.5%. For

India the total capitalization grew from $ 38,567 million at the end of 1990 to $

110,396 million at the end of 2001. Turn-over of stocks

Increased from $ 21,198 million in 1990 to $ 249,298 million in 2001.

Market capitalization as a percentage of GDP grew from 12.2% in 1999 to 32.4%

in 2001 while turnover ratio went up from 65.9% in 1999 to 191.4% in 2000. The

number of listed companies in India was 5,975 as at end of 2001. There are veryfew countries, which have higher turnover ratio than India. Standard and Poor

(SP) ranked India, 25th in terms of market capitalization, 15th in terms of total

value traded in stock-exchanges and 6th in terms of turn-over ratio.


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2.2 Investment:

Investment means buying securities or other monetary or paper (financial)

assets in the money markets or capital markets, or in fairly liquid real assets, such

as gold as an investment, real estate, or collectibles. Valuation is the method for

assessing whether a potential investment is worth its price. Types of financial

investments include shares or other equity investment, and bonds (including

bonds denominated in foreign currencies). These investments assets are then

expected to provide income or positive future cash flows, but may increase or

decrease in value giving the investor capital gains or losses

Characteristics of Investment:

(i) Interest (return)

When we borrow money, we are expected to pay for using it this is

known as Interest. Interest is an amount charged to the borrower for the privilege

of using the lenders money. Interest is usually calculated as a percentage of the

principal balance (the amount of money borrowed). The percentage rate may be

fixed for the life of the loan or it may be variable, depending on the terms of the

loan.


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What factors determine interest rates?

The factors which govern these interest rates are mostly economy related and

are commonly referred to as macroeconomic factors. Some of these factors are:

Demand for money

Level of Government borrowings

Supply of money

Inflation rate

(ii) Risk

Risk may relate to loss of capital, delay in repayment of capital non-

payment of interest, or variability of return. While some investment such as

government securities and bank deposits are almost without risk, others are more

risky. The risk of an investment is determined by the investments maturity

period, repayment capacity, nature of return commitment, and so on.

(iii) Safety

Every investor expects to get back the initial capacity on maturity without

loss and without delay. Investment safety is gauged through the reputation

established by the borrower of the fund. A highly reputed and successful

corporate entity assures investors of their initial capital.


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(iv) Liquidity

An investment which is easily saleable or marketable without loss of money

and without loss of time is said to be possess the characteristic of liquidity. Some

investments such as deposit in unknown corporate entities, bank deposit, post

office deposit, national saving certificate, and so on are not marketable.

An investor tends to be prefer maximization of expected return,

minimization of risk, safety of fund, and liquidity of investment

The three golden rules for all investors are:

Invest early

Invest regularly

Invest for long term and not short term

One needs to invest for

Earn return on your idle resources

Generate a specified sum of money for a specific goal in life

Make a provision for an uncertain future

To meet the cost of inflation


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Sources of study for investors:

A look out for new investment opportunities helps investors to beat the

market. There are many sources from which investors can gather the required

information. Such as;

(i) Financial institutions

Corporate house, government bodies and mutual funds are the main

source of investment information. Many of these enterprises have their ownwebsite and post investment related information on their websites.

(ii) Financial market

Stock exchange and regulated bodies also provide useful information to

investor to make there investment decisions. With respect to secondary market,

the Securities and Exchange Board of India uses various modes to promote

investors education and takes great effort to achieve an investor friendly

secondary market in India. The Reserve Bank of India also provide useful

information relating to the prevent interest rates and non-banking financial

intermediaries that mobiles money through deposit schemes.


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(iii) Financial service intermediaries

These are intermediaries who promote securities among the public. Many

of these intermediaries are the agencies of specific instruments especially tax

saving instruments. These intermediaries offer to share their commission from

there concerned organization with the individual investor thus investor get

additional advantages while investing through intermediaries.

(iv) Media

Press sources such as financial news papers, financial magazine, business

news channel, websites etc. provide information related to investment to the

public. Besides information on securities, these sources also provide analysis of

information and in certain instance suggest suitable investment decisions to be

made by investor

2.3 Capital Markets and Depository:

About Capital Market:

The function of the financial market is to facilitate the transfer of funds

from surplus sectors (lenders) to deficit sectors (borrowers). A financial market

consists of investors or buyers of securities, borrowers or sellers of securities,

intermediaries and regulatory bodies. Indian financial system consists of money

market and capital market.


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The capital market consists of primary and secondary markets. The primary

market deals with the issue of new instruments by the corporate sector such as

equity shares, preference shares and debt instruments. The secondary market or

stock exchange is a market for trading and settlement of securities that have

already been issued. The investors will holding securities or sell securities through

registered brokers/sub-brokers of the stock exchange.

The introduction of NSE & BSE has increased the reach of capital market

manifold which in turn increased the number of investors participating in the

capital market and thus creates the possibility of a bad delivery. The cost & time

spend by the brokers for rectification of this bad delivery tends to be higher with

the geographical spread of the clients. The increase in trade volumes leads to

exponential rise in the back office operation. The inconvenience faced by the

investors (in area that are far long & away from the main metros) in the

settlement of the trade also limits the opportunity for such investors in

participating in auction trading.

This has made the investors as well as brokers wary of Indian capital

market. The erstwhile settlement system on Indian stock exchanges was

inefficient and increased risk, due to the time that elapsed before trades was

settled. The transfer was by physical movement of papers. There had to be a

physical delivery of securities - a process fraught with delays and resultant risks.

The second aspect of the settlement related to transfer of shares in favor of

the purchaser by the company. The system of transfer of ownership was grossly

inefficient as every transfer involves physical movement of paper securities to the


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issuer for registration, with the change of ownership being evidenced by an

endorsement on the security certificate. In many cases the process of transfer

would take much longer than the two months stipulated in the Companies Act

and a significant proportion of transactions would end up as bad delivery due to

faulty compliance of paper work. Theft, forgery, mutilation of certificates and

other irregularities were rampant. In addition, the issuer had the right to refuse

the transfer of a security. All this added to costs and delays in settlement,

restricted liquidity and made investor grievance redress time consuming and, at

times, intractable.

To obviate these problems, the Depositories Act, 1996 was passed. It

provides for the establishment of depositories in securities with the objective of

ensuring free transferability of securities with speed, accuracy and security.

2 Depository:

Depository is an organization where the securities of a shareholder are held

in the electronic form at the request of the shareholder through a medium of a

Depository Participant (DP). The principal function of a Depository is to de-

materialize securities and enables their transaction in book-entry form

electronically.

Depository functions like a security bank, where the dematerialized

securities are traded and held in custody. This facilitates faster, risk-free and low

cost settlement similar to bank.


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Following tables compares the two;

BANK DEPOSITORY

Hold funds in account Hold securities in accounts

Transfer funds between accounts Transfer securities between accounts

Transfer without physically handling

money

Transfer without physically handling

securities

Safekeeping of money Safekeeping of securities

In India the Depository Act defines a Depository to mean, a company

formed and registered under the Companies Act, 1956 and which has been

granted a certificate of registration under sub-section (1A) of section 12 of the

Securities and Exchange Board of India Act, 1992

Depositories in India

There are two depositories in India, which provide dematerialization of

securities.

National Securities Depository Limited (NSDL)

Central Depository Services Limited (CDSL)


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Benefits of participation in a depository

Immediate transfer of securities

No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery,

fake securities, etc.

Reduction in paperwork involved in transfer of securities

Reduction in transaction cost

Ease of nomination facility

Depository Participant

The Depository provides its services to investors through its agents called

Depository Participants (DPs). These agents are appointed by the depository with

the approval of SEBI. According to SEBI regulations, amongst others, three

categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading

members can become DPs. The depository has not prescribed any minimum

balance. Customer can have zero balance in his account.

ISIN

ISIN (International Securities Identification Number) is a unique identification

number for a security.


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Custodian

A Custodian is basically an organization, which helps register and safeguard the

securities of its clients. Besides safeguarding securities, a custodian also keeps

track of corporate actions on behalf of its clients:

Maintaining a clients securities account

Collecting the benefits or rights accruing to the client in respect of

securities

Keeping the client informed of the actions taken or to be taken by

the issue of securities, having a bearing on the benefits or rights

accruing to the client.

Dematerialization of securities

In order to dematerialize physical securities, one has to fill a Demat Request Form

(DRF) which is available with the DP and submit the same along with physical

certificates. Separate DRF has to be filled for each ISIN number. Odd lot share

certificates can also be dematerialized. Dematerialized shares do not have any

distinctive numbers. These shares are fungible, which means that all the holdings

of a particular security will be identical and interchangeable. One can

dematerialize his debt instruments, mutual fund units, government securities in

his single demat account.


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Re-materialization

If one wishes to get back his securities in the physical form means, he has

to fill in the Remat Request Form (RRF) and request his DP for rematerialisation of

the balances in his securities account.

Legal framework:

The Depositories Act 1956 provides the regulation of depositories in

securities.

SEBI formulated the Depositories and participants Regulation Act, 1996 to

oversee the matter regarding admission and working of Depositories and its

participant. The Depositories Act passed by parliament received the Presidents

assents on August 10, 1996. The Act enables the setting up of multiple

depositories in the country. Only a company registered under the companies Act

(1956) and sponsored by the specified categories of institution can setupdepository in India. The Depository offers services relating to holding of securities

and facility processing of transaction in such securities in book entry form. The

transaction handled by depositories includes settlement of market trades,

settlement of off-market trades, securities lending and borrowing, pledge &

hypothecations.


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Function of Depository Participant:

Dematerialization:

One of the primary functions of depository is to eliminate or minimize the

movement of physical securities in the market. This is done through converting

securities held in physical form in to holdings in to back entry form.

Account Transfer:

The depository gives effects to all transfer resulting from the settlement of

trade and other transaction between various beneficial owners by recording

entries in the accounts of such beneficial owners.

Transfer & Registration:

A transfer is a legal change of ownership of a security in the records of the

insurer. Transfer of securities under demat occur merely by passing book-

entries in the records of the depositories, on the instruction of beneficial

owners.

Pledge and hypothecation:

Depositories allow the securities with them to be used as collateral to secure

loans and other credits. The securities pledged are transferred to a segregated

or collateral account through book-entries in the records of the depository.

Linkage with clearing system:

The clearing system performs the function of ascertainment in the pay in

(sell) or payout (buy) of brokers who leave traded on the stock exchange.

Actually delivery of securities from the clearing system is from the selling

brokers and delivery of securities from the clearing system to the buying broker


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is done by depository. To achieve this depositories and the clearing system are

linked electronically.

To handle the securities in electronic form as per the Depositories Act 1996

two depositories are registered with SEBI. They are

1) NSDL -- National securities depository limited.

2) CDSL -- Central depository service (India) limited.

NSDL

India had a vibrant capital market, which is more than a century old, thepaper-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. NSDL promoted by institutions of national stature responsible for economic

development of the country has since established a national infrastructure of

international standard that handles most of the trading and settlement indematerialized form.

Using an innovative and flexible technology system, 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 and minimizing risk and cost. 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.


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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.

CDSL

CDSL was set up with the objective of providing convenient, dependable

and secure depository services at affordable cost to all market participants. CDSL

received the certificate of commencement of business from SEBI in February

1999.

Depository facilitates holding of securities in the electronic form and

enables securities transactions to be processed by book-entry by a Depository

Participant (DP), who as an agent of the depository, offers depository services to

investors. According to SEBI guidelines, financial institutions, banks, custodians,

stockbrokers, etc. are eligible to act as DPs. The investor who is known as

beneficial owner (BO) has to open a demat account through any DP for

dematerialization of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL

can be obtained through the DP. The DP is required to provide the investor, at

regular intervals, a statement of account, which gives the details of the securities

holdings and transactions. The depository system has effectively eliminated

paper-based certificates, which were prone to be fake, forged, counterfeitresulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of

securities.


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Trading online and its requirement.

There are many stock broking companies which are providing the account

for the customers to trade online and here the investor need to be the member of

that company and its depository to have an account with the broking company.

The company itself provides the software which is to be used to trade directly

through online and the customer can not trade with the other companies

software unless and until he makes an account with them or trade with them .the

investor can take the suggestion from the broking company at any time of the

working hour.

The major thing which comes under consideration is, the investor who

trades independently is needed to maintain a bit high amount in his account.

Means nearly the double of the amount which a traders trade offline. Here

investor will be in contact to the trade directly and will be in contact with the

market.

The software on which the BSE online system works is given in the next

page as a snapshot image. This is the software which is used by the Bombay stock

exchange people who trade over there but the software which is provided by the

stock brokers to the investors are some what different from the software which is

given in the image.


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Data Analysis and Interpretation

4.1 Data Analysis

Findings & Interpretations.

CHAPTER IV


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As I have explained in the methodology section that, the study is based on

the opinions of the different authors who wrote books regarding the online

trading and also a large amount of the analysis is based on the opinion of the

investors regarding the online and offline trading. The data which is collected for

the analysis is through the questionnaires which are given to the customers who

trade offline and online.

Searching for the investors who trade online is a bit difficult in the sub

urban cities and the people stay over there, they will not be ready to takefinancial risk. In cities like shimoga, hardly we found people who trade completely

through online. Still I have taken the opinion of those investors which I met.

The analysis of the data and findings will be given in the next continuing

pages.


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Respondents on the basis of age group

age group respondents

below 20 0

20-35 10

35-50 8

50 and above 2

Findings:

From the above information which is given in the table, we can interpret as,

he people who belongs to the age group of 35 to 50 will invest more due to the

sufficiency of the earning and the people who belongs to the age group of 20 to

35 will invest comparatively less than the latter group because may be the time

and fund deficiency and other reasons. Here most of the online traders come in

the age group of 20 to 35 because of their knowledge and fast thinking and

decision making as well as interest to do the trade.


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Table showing the occupation of the investors:

Occupation Respondents Percentage

Employed 9 45

Self employed 10 50

Retired 1 5

Not employed 0 0

students 0 0

Total 20 100

Findings:

From the above information we can say that the people who are self

employed, they show much interest to invest in the equity market and it is

comparatively less in the case of employed in different organization. Reason may

be the time required to do the transaction and the availability of the fund to

invest. The data says, nearly 55% of the people who trade in stock, they are self

employed and the rest 45% of people are employed in different organizations.

The people who are in the evening of their life is less in stock trading due to the

security reason.


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Respondents based on the annual income

Annual income Respondents

annual investments[weighted

avg] Percentage

Below 150000 0 0 0

150000-300000 6 50000 30

300000-450000 10 75000 50

450000- Above 4 100000 20

Total 20 100

Findings:

From the above information we can understand that, the people in the

income group below 150000Rs per annum, they do not show much interest in

investing their money on share market. The people belongs to the group in

between 300000RS and 150000RS, they show interest towards share investments.

But the large group of investors who belong to the higher income group like the

group which has income more than 4 lacks and above they shows muchsignificance for share trading. Here we can say that, the income of the investors

ought to be taken in to consideration whether they are interested in long term or

short term and whether they are concerned in online or offline trading.


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Based on the terms of the investments

Term of investments respondents Percentage

Long term 5 25

Short term 12 60Both 3 15

Total 20 100

Findings:

From the above information we can interpret the survey as, half of the

investor would like invest for the short term gains because as per their mind set

they say they like to gain more from the short term instead putting money in the

long term investments. The rest of the people, means the rest 25% of the people

would prefer long term due to the increasing and balanced returns and 10% of

the people like to deploy their funds in both the investment types.

Also we can state that, the people who belongs to the income group of

300000 and less, they mostly go for the long term investment because the loosing

percentage is less and return will be balanced than loosing more.


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Analysis based on showing frequent investment:

Gap of investments respondents Percentage

Weekly 8 40

Monthly 5 25

Quarterly 3 15

half yearly 2 10

Yearly 2 10

Total 20 100

Findings:

The table says that, most of the investors are time oriented. It means the

short term investors who trade online as well as offline, they go for the frequent

trading like daily trading or few days in a week or once in month like but when it

comes to the long term investors, they trade once or twice for months or for

quarterly once. Even many of the long term investors go for the trading jus once

in six months and in a year also. The table says that, weekly traders are high. Long

term investors mostly go for the initial public offers and they go for the banking

shares also most of the time.


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Analysis on the basis of reason for opting online trading system:

Type of trading adopted respondents percentage

online trading system 6 30

offline trading system 14 70

Both 0 0

Total 20 100

Findings:

This is the major deciding factor for this thesis work because the whole

work is based on the choice of trading system by the investor. Here we can make

out that people like to for the offline trading more than the online trading system.

Reason may the risk factor or may be lack of information regarding the market

and may be lack of experience and decision making power.

There might be many more reasons for the right selection of the system towork on with. 70 to 75% of the people still like to go with the offline trading and

the rest of the people may opt for the online trading system. The main reason

behind the choice is the risk factor involved in the decision making and lack of

knowledge about trading online.


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Reasons for opting independent trading [online trading]:

Reason for opting online trading Respondents Percentage

A freedom of trading 6 out of 6 100

B direct access to the market 6 out of 6 100C frequent transactions 6 out of 6 100

D less brokerage charges 3 out of 6 50

E other reasons 4 out of 6 65

total 6 100

Findings:

Here the highlighted reasons for choosing the online trading are freedom of

trading so the investor can trade independently. Direct access to market so that

the investor need not to ask the broker every time for his transactions. Frequent

transactions can be made by having online trading system and also the other

reasons are brokerage charges. Brokerage charges are less but the trader mayoccur other charges like installation of computer, telephone charges and other

such costs. There were some other reasons like, no need of going to the brokers

for the documentation and no risk of transactions without permission, 100%

transparency will be there in dealings.


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Selection of offline trading facilitators:

type of offline service providers respondents percentage

A. Independent brokers 2 10

B. brokerage agencies 11 55

C. banks and IPO 5 25

D. others 2 10

Total 20 100

Findings: The selection of the service providers is depending upon the security

for the transactions and even emotions also attached with it. Partially it is based

on how the service provider treats the customer and how the customer gets the

respect for the small transactions etc.

Here in this most of the investors go for reputed brokerage agencies like

Karvy, geojit, way to wealth etc. these investors are all short term frequent

traders. When it comes to the reason like going for banking shares and initialpublic offers, the percentage is quite less and only up to 25% and 10% of the

investors go for the suggestions of independent brokers and they even trade on

the basis of others account also. And 10 of the investors go for the other sources.


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Reasons for opting offline trading:

Reasons for opting offline trading. Respondents Percentage

Helps in decision making 12 out of 14 85.7142857

No much risk in handling transaction 14 out of 14 100Provision of additional limit 8 out of 14 57.1428571

Others 8 out of 14 57.1428571

Total 14 100

Findings:

Many reasons may affect the choice of offline trading system because as

per the survey we got the expected finding as people like to go with offline

trading than online trading because of the reasons which are given already in the

discussion. Here we can see the opinions of the sample group of investors which I

selected for the study. As per the answers given by the investors, all the investors

accept that, risk involved in handling transaction is less when it compared to theonline trading. 85% of the investors states that, doing trading offline helps in

decision making because there the investor will get the suggestions from the

trading people and they will suggest which shares are in good movement and

which shares can be bought and sold.


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When it comes to the reason of availability of the extra limit of the fund for

the transaction, 50% of investors accept this reason and the rest of investors says,

additional limit is available only to the investor who transact large amount intrading and who have a good image in the eyes of the stock brokers. Each and

every investor can not make out this option without having goodwill and image.

50% of investors add their own reasons for opting the offline system for trading

like, time matters because in offline trading the investor can call the broker and

say to trade on behalf of the investor and even he can give permission to the

trader up to a limit without asking for the permission.

This is because for small amount of trading the investor cant spend his

time. The other reasons are like documentation, remainder service and research

calls. Brokers will do all the required documentation for the convenience of the

customer and they will be informing the investors about the increasing and

decreasing of the share values. Even they inform the status of the trading account

and what are need to be done and other things. One more thing is the research

calls. This calls will be given from the R&D department of the company about

which is the next move can be done to trade. Brokers will suggest the investors

according to the research call. This helps the investor to feel secured because

they think that someone is taking care about their investments.

one of the other reason which the investor felt important is lacking in

computer knowledge and skills. They feels that they are not capable of doing the

computer work and they do not have enough time to learn the basi computer

skills also. Even they feels that maintaining the telephone connections and other

things are risky so it is better to go for offline trading.


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Basis of investments:

Basis of investments Respondents Percentage

A. Self analysis 1 5

B. financial advice from investors 2 10C. advice from brokers 10 50

D. friends and relatives advice 3 15

E. chartered accountants advice 2 10

F. others 2 10

G. Total 20 100

Findings:

From the above information we can understand that, half of the offline

traders would like to go for the suggestions of the brokers and a very few people

do self analysis for the investments. Fifteen to twenty percent of the people take

the suggestions from the family members and friends and rest of the people goes

for the suggestions of chartered accountants and other people like tax

consultants and others. It means that, people prefer to go for the experienced

advice than just few suggestions. Investor looks over the return and in the same

time they expect the security also for their investments.


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Analysis based on grounds to choose various investment alternatives:

Grounds to choose alternatives Respondents percentage

Risk involved 20 out of 20 100

Returns on investments 20 out of 20 100Future growth 15 out of 20 75

past performance 15 out of 20 75

Others 10 out of 20 50

Total 20 100

Findings:

The above table shows the data of the grounds on which the investor

prefer to choose one investment instrument amongst the available. All the

investors most of the time looks upon the risk involved in the instrument or we

can say a share. Return on the investment also they take in to consideration like

how much return the company is giving on its share and what is the market value

of the share etc...


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75% and above people look upon the future growth of the share in the

market as well as the growth of the company too. Even they come across the past

performance of the share resembling what was the issue value and what is themarket value the company gained in last few years etc. Many additional causes

are there to choose the better alternative like, better for long term investment, to

gain loans from banks by pledging the shares, to have a part in the ownership

value of the company and also to gaining the reputation by holding certain most

valued shares.

This is the analysis and findings part of the study where we could able to

find the answer for the defined objectives of the study and we could interpret the

investors opinions concerning to the trading system. In this part we searched out

the major facts regarding why investors prefer to go offline trading more than

going towards online trading. We found out many other reasons which affect the

investors to go towards the different trading system and also what are the

reasons behind the choice of different alternative investment instruments.

Here our study is only based upon the trading of the shares and not based

on the commodities market and multi commodities exchange market. That

market is entirely different and the investors opinion about that market also

different. Though the commodities trading also done by the same system and the

trading techniques also same. Still we can not consider both markets in to

consideration because it is beyond the scope of the project work.

In this work, I included the analysis and finding part in the same chapter so

that the reader can understand the questions and the answer from the investors

and the reader can make out the findings and what exactly the investor is telling

about his opinion. Instead of putting the findings in the different chapters andmaking the reader to come again and again to the question and findings section, I

combined both the section in to one and added graphs and charts to understand

easily.


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Discussions and implications

5.1 Discussions.

Implications.

CHAPTER V


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5.1 Discussion and implications:

Most of the topics, questions answers and opinions of the investors are

already discussed in the analysis and findings part. Here we can discuss regarding

the final results of the study and the points what I mentioned in the part of

literature review and we need to compare the results with the points which I

mentioned in the literature review and need to give justification for the study so

we need to look over the points which different authors mentioned, what

journals given and points which are given by the different books.

Most of the points which are given by the authors regarding the opinions of

the investors towards online trading are true because the study revealed those

particulars and investors behaves same most of the time as told by the authors in

their books. As Mr. Prasanna Chandra has mentioned three types of trading like

open outcry system, screen based system and internet based system. Here in the

real market, open outcry system is not in existence but only the next two are in

use. Like that many things will come to know in this study even many unknown

factors regarding the selection of trading system also will come to know.

In the beginning days of online trading there was a myth that, comparing to

offline trading system online trading is very costly and it requires greater skill so

only few people can only handle the trading through online but recent days the

phenomenon has changed and comparing to the brokerage charges and time

required for offline trading both the online and offline costs similar and regarding

the knowledge, now a days everybody use computers for one or the other

purpose so knowledge is not the problem for handling the trading through online.


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There is a saying that, it is hard to become good analyst but it is harder to

become good trader. It means what ever may be the trading system but the trade

is completely depends upon the knowledge and experience of the investor. How

much he knows about the market trends. Which is the better time to invest and

other thins. An unknown person also can invest on the stock market but very soon

he will go out of the market because the active mind is important and also

knowledge matters much for the investment value variation.

Just knowing about the computer is not at all sufficient for trading in stock

market. Beginners often assume that they can make money because they are

smart, elegant, and Computer-literate and have a record of victory in business.

You are capable of getting a speedy computer and even buy a back tested system

from a vendor, but putting money on it is like trying to sit on a three-legged stool

with two legs missing. The two other factors are psychology and money

management.

Dr. Alexander elder says in his book, Come in to my trading room as

People buy and sell on the basis of their knowledge and the latest price

represents everything known about that market. This is a valid observation, from

which the efficient market gang draws the curious conclusion that no one can

beat the market. Markets know everything, they say, and trading is like playing

chess against someone who knows more than you. Dont waste your time and

moneysimply index your portfolio and select stocks based on volatility. This

says what the observation skill needed for the investor and based on the volatility

investor must go for investing his/her money.


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Before completing this chapter we need to know that, there are certain important

barriers which make some losses for the investors without knowing. Those costs

are unstoppable and investor has to bear those losses while trading on stock

market. They are,

1. Slippage:

Slippage is the difference between the price at the time you placed

your order and the price at which that order got filled. Slippage tends to be

a much bigger expense than commissions. Slippage means nothing but,

lets take an example. Think that we are buying the shares of reliance when

the price reaches to a level of 150Rs. We places an order of buying 100

shares at 11.45am but the order executes at 11.55 am but at that time the

price falls to 148Rs. So here the investor bears a loss of 2Rs without

knowing. He should bear the loss of 2Rs. This is nothing but slippage.

2. Commissions:

Commissions may appear to be a minuscule expense. Most traders

Neglect them, but if you add them up, youre likely to find that your broker

ends up with much of your profit. Usually brokers charges 0.05%

commission on the traded amount every time whether it may be buying

transaction or may be selling but they charge this fixed amount and they

may charge for the stamp duties of the transactions from investor itself.

Brokers provide discount for the regular investors and for large trading also

but the discounts will be jus 0.02% maximum.


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3. Expenses:

Some expenses are unavoidable. Especially in the beginning investor

will have to buy a few books, download or subscribe trading software, sign

up with a data service, opening several accounts and documentation

process and so on. It is important to keep your expenses as low as possible.

Brokers and brokerage agencies sometime facilitates traders trading-

related expenses, such as computers, subscriptions, and advisory services,

and software in a discounted costs without taking full money. That helps

the investor to lessen their expenses. These are the few barriers in trade

profits which can be avoided and which will incur every time.


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Conclusion and recommendations

6.1 Conclusions.

6.2 Recommendations

CHAPTER VI


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CONCLUSIONS:

We have examined all the reasons which affect the selection of the trading

system and we have discussed about the Indian stock market, which all comes

under the stock market, who all trades inside the stock market, what all the things

will be traded under the stock market and many other facts regarding the stock

market and the stock market transactions.

In the meanwhile we discussed about the stock traders, who all can trade

the equities, what all the minimum requirements for the equity trading, Bodies

and boards who controls the share market and the stock exchanges etc many

more thing we discussed in detail in this study so this is the time to give a better

conclusion regarding the study what I performed.

As in the discussion space we have seen that who ever trades in the market

or which ever may be the system of trading, knowledge is essential for trading

and possession of the skill is an important task. Attentive mind will succeed in the

stock market trading. Still most of the time the trading system puts its effect on

trading. Main thing is decision making about the shares because people unaware

regarding the stock market variation most of the time so they need a better

advisers to understand the situation so preferably they go for the brokers. So we

say here that the offline screen based trading is much popular than online

independent trading.


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Both the system has its own advantages but as per the survey, as per the

analysis, as per the investors opinions we can say that people attitude and

perception supports the offline trading much more than online trading. From the

study we came to know that most of the investors are unaware about the online

trading and they are not confident that they can also do trading independently.

They lack in decision making.

One more thing we can state here that, online trading has a bright future in

the upcoming days because of the technological development and people can get

the market information easily from media and also investors becoming more andmore time conscious so they like to do other works also along the trading in

market so online trading is getting importance more and more in India. Foreign

markets are already covered with online trading. In USA people do not go for the

suggestions from the brokerage agencies and they trade independently. The same

trend is coming to India also.

Recommendations & suggestions:

As already we have discussed the advantages of the online trading and even we

have discussed about the future development of the online trading system and

the opportunities which are awaiting form the side of online trading so here I

would like to suggest few points how the online trading can be well developed

and what are the corrections to be done to erase the myths which are stuck in the

mind of the investor. They are,


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1. Investor awareness should be done to teach the investor regarding

the usage of the internet trading so the investor can trade

independently.

2. Investor orientation programs can be done by the institutional

trader so that they can make the common man to learn how to

invest.

3. The brokerage agencies should provide enough trading limit to the

online traders also. Than only the investors show interest on

investments through online.

4. Brokerage agencies should provide the updated information to the

online investors also and they should provide the information which

they get from the research calls of their R&D department.

5. Totally when the investor gets all the information which he gets

from offline, than only he will show interest upon the online trading

so that should be done to assure that he is going to get all the

information.

6. Service provider of IT should secure the investor against the system

breakdown. He must give all the securities.

7. Finally, investors goes to the option where the cost is less so when

the total cost goes down for trading online than offline,

automatically investor shows a greater interest and sure they will try

to learn the new system which are helpful for them.


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References

7.1 reference sources.

PART VII


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6.1. REFERENCE SOURCES.

i. N J Yasaswy., Intelligent stock market investing.

ii. Y Chandra sekar. Financial markets and services.

iii.B V Raghunandan. financial management

iv. Prasanna Chandra, The Dynamics of Indian financial markets

v. Professor Ian Domowitz and Professor Pankaj Jain., Financial market

design and the equity premium: Electronic vs. floor trading. Journal.

2005.

vi.Training material of BOLT, Bombay stock exchange Ltd BSE Training

institute [BTI].

vii.National stock exchange. Understanding the NEAT system, Chapter 1.

Issued by National stock exchange.

viii. Stock market. Article published by Wikipedia the German

encyclopedia.

Link, file:///D:/SHARE%20MARKET/Stock%20market%20-

%20Wikipedia,%20the%20free%20encyclopedia.htm .

ix. Come in to my trading room.Alexander elder.
http://d/SHARE%20MARKET/Stock%20market%20-%20Wikipedia,%20the%20free%20encyclopedia.htmhttp://d/SHARE%20MARKET/Stock%20market%20-%20Wikipedia,%20the%20free%20encyclopedia.htmhttp://d/SHARE%20MARKET/Stock%20market%20-%20Wikipedia,%20the%20free%20encyclopedia.htmhttp://d/SHARE%20MARKET/Stock%20market%20-%20Wikipedia,%20the%20free%20encyclopedia.htmhttp://d/SHARE%20MARKET/Stock%20market%20-%20Wikipedia,%20the%20free%20encyclopedia.htm


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Annexure.

8.1 Questionnaire.

PART VIII


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Questionnaire

Dear Respondent,

As I am a Management Student, undertaking my management thesis with

the topic "study on investors attitude towards online trading " I request you to

spare some time of yours to fill this questionnaire to provide me the information

regarding the reasons of using online trading or offline trading [trading through

brokers and stock brokerage agencies].Your response will be kept strictly

confidential.

Name of investor: ________________________________

1. Age group:

Below 20

20 to 35

35 to 50

50 and above

3. Occupation:

Employed:

Private Sector Public Sector

Self-Employed:

Business Profession

Retired Not Employed


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4. Annual income:

Below 150000 150000 to 300000

300000 to 450000 450000 and above

5. Are you a short term investor or long term investor?

Short term investment

Long term investment

Both

6. What is your investment per annum?

Below 20000 20000 to 40000

40000 to 80000 80000 and above

7. How frequently do you invest:

Weekly Monthly

Quarterly Half yearly yearly

8. Do you personally follow the stock market?

Yes No

9. If yes, then how frequently do you watch market?

Daily Twice a week Weekly Fortnightly

10.Do you trade independently?

Yes No


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11.If yes, why do you like to trade independently?

Freedom of trading direct access to the market

Frequent transactions free of brokerage charges others

12.If you are not trading independently, in which way do you like to trade?

Through independent brokers through broking agencies

Through banks others

Others please specify: __________________

Documents

MT on online trading