Introduction to the capital market The capital market is the market for securities, where companies and the

government can raise long term funds. The capital market includes the stock market and the bond market. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded. Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the economic development of the country. As a result the investors are not constrained by their individual abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the country. ince pro!ects re"uire long term finance, but on the other hand, the investor may not like to relin"uish control over their savings for a long time. A li"uid stock market ensures a "uick exit without incurring heavy losses or costs and thus it proves to be more beneficial for the investors. Thus development of efficient market system is necessary for creating conductive climate for investment and economic growth. Capital market Segment Primary And Secondary Capital market #roadly comprises of two segments. the new issue market which is commonly known as primary market and the stock market which is known as secondary market. Primary A primary offering include corporate bond, where you are buying it directly from the issuer, at par value. A secondary market is where you sell or buy existing issues that is suppose a person has brought a bond last year, now he need to get his principal , he can sell it in the secondary market. he may not get par value, If rates are up since he bought the bond, then he has to sell it at a discount to get rid of it. If rates have fallen since he bought it, he could get a premium for it.

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Secondary The secondary market is a market where securities are traded after they are initially offered in the primary market. $ost of the trading is done in the secondary market. it also means trading in previously issued financial instruments. It is an organized market for used securities. It includes #ombay tock %xchange &# %', (ational tock %xchange ( %, bond markets, over)the)counter markets, residential mortgage loans, governmental guaranteed loans etc econdary market comprises of e"uity markets and the debt markets. *or the general investor, the secondary market provides an efficient platform for trading of securities. *or the management of the company, econdary e"uity markets serve as a monitoring and controlling system by facilitating value)enhancing control activities, guides management decisions. BRIEF ABOUT T E STOC! E"C A#$ES tock %xchange is a market like any other centralized market where both buyers and sellers come and conduct their business of purchase and sale of shares + securities. In other words, it is a market place for shares and securities where trading takes place in a controlled and protected environment% &EA#I#$ OF STOC! E"C A#$E A stock exchange, share market or bourse is a corporation or mutual organization which provides ,trading, facilities for stock brokers and traders, to trade stocks and other securities. tock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include- shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. .sually there is a central location at least for recordkeeping, but trade is less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is done by members only. The initial offering of stocks and bonds to investors is done in the primary market and subse"uent trading is done in the secondary market. A stock exchange is often the most important component of a stock
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enabling

implementation of incentive)based management contracts, and aggregating information that

market. upply and demand in stock market is driven by various factors which, as in case of free markets, affect the price of stocks. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subse"uently traded on the exchange. uch trading is said to be off exchange or over)the) counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities. CO#CEPT OF S ARE TRA'I#$ The concept of share broking emerged after the establishment of the !oint stock companies. The ownership of the companies was divided into small parts and that every part was called share. o, the term / hare0 denominates some part in the ownership of the company. The shares are freely transferable sub!ect to the some certain restrictions. 1hen the need was felt to sell the shares by the owner of the shares, it was difficult to find out the buyers of the shares who want to buy the shares at the price the seller want to sell. At that time a need was felt to bring the buyers and sellers on a common platform. To solve this problem, a group of persons came into picture, who used to bring the buyers and sellers together for the trade of the shares. These persons are called the share #rokers who find the persons who wish to buy or sell their securities. The whole process of finding the buyers and sellers of the securities by the brokers is called the hare #roking. The origination of the Indian securities market may be traced back to 2345, when 66 enterprise brokers under a #anyan tree established the #ombay tock %xchange &# %'. 7ver the last 289 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern international standards both in terms of structure and in terms of operating efficiency

SETT(E&E#T C)C(E SC E'U(E

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:. (7. 2 6 8 B 5

;A< T T@6 T@6 T@8 T@5

;% C=I>TI7( 7* ACTI?IT< T=A;% Trading ;ay >A< I( #< 29.89 am. >A< A 7.T #< 6 pm. Auction of shortage in deliveries Auction pay)in by 29.89 &2 amC pay out by 6 pm.'

Function* o+ Stock E,change tock exchange is established into the main purpose of providing a market place for the members to deal in securities under well laid down regulations and to protect the interest of the investors. The main functions of stock exchange areD 2. It brings the companies and investors together so that the investors can put risk capital into companies and thus, companies can use the capital. 6. It provides an orderly regulated market for securities. 8. It provides continuous, ready and open market for selling and buying securities. B. It promotes savings and investment in the economy by attracting funds from the investors. 5. It facilitates take overEs by means of ac"uiring ma!ority of shares traded on the stock market. F. It acts as a clearing house of business information. 4. It motivates the managers of well reputed companies, to retain their shares in GAE group, to improve performance. H. It induces the managers to improve performance for converting non)specified shares into specified shares in the exchange. 3. It enables the investors to evaluate the net worth of their holdings. 29. It also allows the companies to float their shares in the market.

In*titutional o++ering

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In-e*tment Banking

I:+* Invest smart securities limited &II :' offers extensive range of Investment #anking ervices for e"uity related products and instruments. This team advises on transactions like business structuring and capital raising opportunities based on corporate needs and state of capital markets. ervices they specialize in include $anagement of

Initial >ublic 7ffering &I>7s' *ollow)on 7fferings Iualified Institutional >lacements &II>s' #uyback of %"uities 7pen 7ffers $ergers + Ac"uisitions >rivate %"uity >lacements % 7>s In*titutional E.uity

CompanyEs efficient execution, "uality research, top "uality human resources and complete compliance with stock exchange regulations, as well as business standard ethics lend towards exemplary services to investors, through I>7s, e"uities, derivatives and mutual funds. Company also focuses on identifying undiscovered value stocks to investors. Through its array of services, this division is well)suited to corporate investors, banks, financial institutions, insurance companies and *IIEs .companyEs Institutional %"uity #usiness &I%#' is well positioned to offer support for a complete range of investment banking service to corporates. II :, work closely with institutional investors, private e"uity investors and corporates, have been hosting round table conferences with leading CI7s C *und $anagers etc. Also, conduct activities like organizing of road shows, enabling the senior management to interact with *IIs, regular conference calls for institutional Investors etc. This works as a pre)re"uisite to investing in stocks. CompanyEs expertise in this area also extends to international investors from ingapore, Jong Kong, . A and the .K.

In*titutional 'e/t

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Institutional debt broking division includes, secondary market broking, primary market debt placement + distribution and provident fund advisory services. econdary debt broking is the principle service provided by this division. The clients mainly comprise of institutional debt players, such as banks, primary dealers, mutual funds, large provident funds and in some cases corporate treasuries. The division empanelled with almost all banks, primary dealers and mutual funds, on whose behalf it acts either on the buying or selling side. All types of debt papers are covered, including government securities, treasury bills, public sector bonds, corporate bonds etc. This desk also provides transacting and advisory services to various provident funds and J(I clients. The primary market services cover placement of debt paper issued by corporates, with institutional segments covering banks, mutual funds etc. These services cover various activities )

Advising the clients on the issuance including the instrument, "uantum, timing, and other instrument specific structuring such as put C call option, conversion option and rating. Assisting in the rating exercise and suggesting various means and options to improve rating if so desired, through / tructured 7bligations0 or other mechanisms. >re marketing the placement C issuance elling C placing the issuance Assisting in any related documentation for the issuance Assisting in all other steps to complete the issuance for draw down funds

The debt instrument covered by this division cover both short term as well as longer term instruments. Commercial paper and $I#7= :inked #onds are popular among the short)term instruments. The division uses a proprietary online platform called /;ebton(et0 for online book building of debt issuances. O#(I#E FU#' TRA#SFER II : have tie up with 5 banks, which are. J #C, J;*C, I;#I, CITI, ALI bank , for online money transfer

CURRE#T SCE#ARIO

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The emergence of online exchanges has facilitated faster transactions by providing online trading portals and brokerage houses ease and flexibility. The Internet has indeed opened up new opportunities for conducting the business. The worldwide stock exchanges has made a ma!or shift from the traditional method of trading and now conduct a bulk of its business online through its brokers and partners. In the developed countries ma!orly all the exchange transactions are conducted online. The trend took off slowly in India and the (ational tock %xchange &( %' and the #ombay tock %xchange &# %' two of the largest exchanges in India have been conducting online trade successfully for some time. 0 ) O#(I#E TRA'I#$ E#TERE' (ATE I# I#'IA1 The Indian exchanges and brokering houses have been very slow in moving their transactions online and the ma!or reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed .ser Mroups &C.Ms'. This issue was resolved between the ;epartment of Telecommunications &;oT' and the *inance $inistry around 233H and after that soon came the online trading portals like I:+* investsmart, ICICI;irect.com, motilaloswal.com, sharekhan.com etc. Connectivity related issue was perhaps the most important technological factor.=#I made regulation that it is mandatory for company to store at least 4 year financial and transactional data. In the non)stop, 6B hours a day, seven days a week world of investing, we are able to 7btain investment news around the clock Check "uotes on exchanges all over the world A day or night %asily compare one investment to another via numerous ratios, charts, graphs, and tables creen for the best investments to fit our individual goals and re"uirements

Trade stocks as easily and "uickly as professional traders Calculate retirement needs based on various scenarios =egularly monitor portfolios and make necessary changes "uickly and almost effortlessly Control the routing of individual trades for the best possible price and execution %ven many years after the launch of the first online brokerage firm, there remain a large contingent of individual investors who still pick up the phone and call their stock broker

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to buy and sell investments. Jowever, every year a growing number of investors are placing their trades using online brokers. On (ine Trading &eaning o+ Online Trading 2Change i* the la3 o+ nature4% There were times when man was a wanderer or a normal. Je himself had to go place to place in search of food, water and now everything is available at his doorstep !ust at the click of the mouse. The growth of information technology has affected almost all sectors of life. Internet has enabled us to get every information at our doorstep. 1hen Internet has affected all sectors, like all other sectors Internet has set its feet in the stock markets also. Internet trading commissions are clearly posted on the websites of the various services, and are typically a fixed rate charge, depending upon the type of security being traded and the size of trade. Therefore, an Interest investor always knows what commission he is being charged on each trade. Internet investors can take as much time as they would like to take prior to placing a trade order. imilarly the online investor likely does not have to worry that his broker is making unauthorized trades. ince there is no individual broker making a commission, the only person who is authorized to trace into the account is the actual investor. *urthermore, the internet investor can never become a victim of excessive trading since the investor maintains total control over the number of transactions which take place in the account. All of these positive features of internet trading may lead the investor to believe that Internet trading is a way to take control of their finances and save more money in the process. .nfortunately, this is not always the case. The advantages of Internet stock trading have also its weaknesses and these weaknesses present significant drawbacks for the average investor. *irst and foremost, the average investor is not an expert in the financial markets. There is a danger for allowing the autonomy of online trading. An online investor sitting at home at a personal computer also foregoes proper investment advice and financial planning, perhaps among the most valuable services provided by traditional brokers. There are also additional risks relative to performing transactions over the Internet especially on a shared computer.

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Those people to whom investors have provided their account number and password can freely trade that account while the investor will have little resource against the brokerage firm for the breach of security. 0hen 3a* online trading introduced in I#'IA1 7nline trading started in India in *ebruary 6999 when a couple of brokers started offering an online trading platform for their customers. O#(I#E TRA'I#$ B) #SE 5 BSE The central computer located at the %xchange is connected to the workstations of the #rokers through satellite using ?ery mall Aperture Terminals &? ATs'. 7rders placed at the #rokersN workstations reach the central computer and are matched by the computer based on price and time priority. #oth the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as #7:T &# % 7n :ine Trading' and (%AT &(ational %xchange Automated Trading' ystem. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The scrips traded on the # % have been classified into NAN, N#2N, N#6N, NCN, N*N and NON groups. The NAN group shares represent those, which are in the carry forward system &#adla'. The N*N group represents the debt market &fixed income securities' segment. The NON group scrips are the blacklisted companies. The NCN group covers the odd lot securities in NAN, N#2N + N#6N groups and =ights renunciation. PROCESS OF O#(I#E TRA'I#$ An investor interesting in trading through Internet should firstly register himself with an Internet brokerage firm. ome formalities such as filling the account opening form of the e) broker, copies of identity proof, copy of residence proof are made to register himself with the e)trader. econdly, the investor would be re"uired to open a bank account with a scheduled bank and sufficient balance should be kept in the account. Thirdly he would be re"uired to open account with a depository participant because only dematerialized shares can be traded on Internet. o, generally following steps are followed while doing the trading through the Internet

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The client places order via the net by logging on to his Bro er!s site" The bro er accepts and e#ec$tes the order and places it %ith the e#change
The e#change accepts the order a&ter chec ing the share li'it &or the day" The bro er 'a es the pay'ent either directly via the client ban acco$nt or pays thro$gh its o%n acco$nt and recovers it later &ro' the client" The e#change receives 'oney and co'pletes the settle'ent" The client is inti'ated abo$t the settle'ent either thro$gh the de'at or via e('ail"

Step6I7Those investors interested in doing the trading over Internet system, that is, (%AT ) I L &( %', should approach the brokers and register with the tock #roker. Step687 After registration, the broker will provide to them a login name, password and a personal identification number &>I('. Step697 Actual placement of an order, using the place order window as under can then place an order&a' *irst by entering the symbol and series of stock and other parameters such as "uantity and price of the scrip on the place order window. &b' econd, fill in the symbol, series and the default "uantity. Step6:7 It is the process of review. Thus, the investor has to review the order placed by clicking the review option. Je may also re)set to clear the values. Step6;7 After the review has been satisfactoryD the order has to be sent by clicking on the send option. Step6<7 The investor will receive an ,7rder Confirmation, Nmessage along with the order number and the value of the order.

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Step6 =7 In case the order is re!ected by the #roker or the tock %xchange 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. Step6>7 It is regarding charging payment, for which there are different modes. ome brokers will take some advance payment from the investors and will fix their trading limits. 1hen the trade is executed, the broker will ask the investor for transfer of funds by the investor to his account.

T E &EC A#ICS OF O#(I#E TRA'I#$

Places an order on the net on the bro er!s %ebsite thro$gh the distinctive +"6" code

4ccepts the order7 )hec s the client!s +dentity and places the order %ith the stoc e#change

4ccepts the order a&ter chec ing the scrip li'it o& the bro er &or the day

,#ec$tes the order

The settle'ent o& the deal 8b$y9sell order: gets re&lected in his 6e'at acco$nt" The client is inti'ated abo$t the e#ec$tion o& the deal by e('ail" Pays the bro er pending physical delivery"

Pays the ,#change thro$gh his o%ns acco$nt and receives it &ro' the client acco$nt"

.eceives the 'oney and co'pletes the settle'ent

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BU)I#$ A#' SE((I#$ The first step is to open a demat account with your selected ;epository >articipants &;>'. All transactions on both the # % and ( % are done in demate securities. 1hen an individual buy shares, he is re"uired to pay money to his broker or sub)broker immediately upon getting the contract noteCconfirmation memo for the purchase of shares. The broker issue as contract note, whereas sub)broker issues a confirmation memo. imilarly, when an individual sale shares he is re"uired to give delivery of his shares by transferring them to the demate account of his brokerCsub)broker immediately upon getting the contract note or confirmation memo. 1hen he buy the shares then the share he has purchased will come first to demate account of his brokerCsub)broker. 7nce this happens, he can instruct his brokerCsub)broker to transfer those shares to his demate account for receiving shares in his demate account he will have to give his broker or sub)broker the details regarding his demate account. 1hen he sells shares he is re"uired to give delivery of share from his demate account by instructing his ;> to transfer the number of shares from his account to the demate account of his broker. In this regard, he will be re"uired to include the details of the demate account of his broker in the instruction slip that he gives to his ;>. The broker or sub)broker will help him to fill in the delivery instructions. These instructions are of a technical nature and the delivery instruction forms and procedures differ from ;> to ;> OFF (I#E T=A;I(M (evertheless, with all the convenience of online trading there are still investors who prefer the old fashion way of offline trading. 7ffline trading has lost some popularity but it is still the main form of investing. 7ffline trading offers many benefits as well. 2. The one benefit that an investor appreciates the most is that they are not alone when making investment decisions. 6. There are experienced and professional brokerage companies that handle their investments for them. 8. Investors are not faced with the challenge of making these vital investment decisionsD especially, if they do not have the experience necessary to make the appropriate investments. B. Also, there is someone there to answer any "uestions that may cause concerns. 1ith offline trading mistakes are less likely to take place. (o one wants to throw their

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money away or stand by and watch someone else throw their money away. It may be wise to hire a professional to assist in making the correct investment decision.

Point* o+ di++erence /et3een online trading and o++ line trading are a* +ollo3*7 2. 7nline trading is very expensive as compare to manual trading or offline trading. 6. 7nline trading consumes less time as compare to manual trading. 8. 7nline trading is very helpful in finding the records easily but offline trading takes more time to find the records. B. In the online trading, there is no chance of any errors while doing the trading. In offline trading there are some errors exist like barriers in communication. 5. 1ith the help of online trading, we know the international market rate of share very easily. 'E&ATERIA(ISATIO# OF S ARES ;ematerialization is the process wherein shares certificates or other securities held in physical form are converted into electronic form and credited to demat account of an investor opened with a depository participant. %#I has made compulsory trading of shares of all the companies listed in stock exchanges in demat form with effect from 6nd Panuary 6996.The procedure of opening a demat account with ;> is similar to opening an account with a banks. E(ECTRO#IC SETT(E&E#T OF TRA'E A%Procedure +or purcha*ing demateriali?ed *ecuritie* 7 The procedure for purchasing dematerialized securities is also similar to the procedure for buying physical securities. 2. Investor instructs ;> 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. 6. Investor purchases securities in any of the stock exchanges linked to depository through a broker. 8. #roker receives payment from investor and arranges payment to clearing corporation. B. #roker receives credit to securities in clearing account on the payout day.

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5. #roker gives instructions to ;> to debit clearing account and credit clientEs account. Investor receives shares into his account by way of book entry. B% Procedure o+ *elling demateriali?ed *ecuritie* The procedure for selling dematerialized securities in stock exchanges is similar as selling physical securities. The only ma!or difference is that instead of delivering physical securities to the broker, the investor instructs his ;> 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 below2. Investor sells securities in any of the stock exchange linked to depository through a broker. 6. Investor instructs his ;> to debit his demat account with the number of securities sold and credit the brokerEs clearing account. 8. #efore the pay)in)day, broker of the investor transfers the securities to clearing corporation. B. 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. RE&ATERI(ISATIO# OF S ARES =ematerialization is the process of conversion of electronic holdings of securities into physical certificate form. *or rematerialisation of scripEs, the investor has to fill up a remat re"uest form &==*' and submit it to the ;>. The ;> forwards the re"uest to depository after verifying the investorEs balances. ;epository in turn initiates the registrars and transfer agent or the issuer company. =TAC Company prints the certificates and dispatches the same to the investors &arket timing*7 #ormal &arket @ E,erci*e &arket Open time hours #ormal market clo*e - 25-89 hours Set up cut o+ time +or Po*ition limit@Collateral -alue - till 25-89 hrs Trade modi+ication end time @ E,erci*e &arket - 2F-25 hours - 93-55

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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. #rokerEs web sites may serve a variety of functions. These may includeD Allowing the clients to directly trade through investorsD Advertise the broker dealersE services to potential investorsD 7ffer market information and investment tools similar to those offered by information vendor or =7 web sitesD 7ffer real)time or delayed "uote information, continuously update "uotes while the user visits other sites, or allow investors to create a personal stock tickerD >rovide market summaries and commentaries, analyst reports and trading strategies and market data on currencies, mutual funds, options, market indices and newsD and 7ffer investors access to portfolio management tools and analytic programsD Information on commission and feesD and Account information and research reports.

In an 7rder =outing 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 "uantity and whatever the order in a market or limit order. U*e o+ Internet a* Alternati-e Trading Sy*tem* APro-i*ion +or price di*co-ery and matching out*ide con-entional e,change*B In foreign !urisdiction, Alternative trading systems have been developing outside conventional securities markets, which provide investors with additional proprietary electronic trading facilities for securities that are traded principally on securities exchanges, or other organized markets. They have price discovery functions, matching systems and crossing systems. The systems that are currently in use in outside !urisdictions are closed systems and are not accessible to the general public through the Internet. The securities markets regulators in
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abroad maintain flexible and open policies designed to encourage innovation in the secondary securities markets. As a result, a number of market participants, usually broker)dealers, have developed computerized /alternative trading systems0 by which the system centralize, display, match, cross or otherwise execute trading interest. U*e o+ Internet +or making Initial Pu/lic O++ering* ecurities are issued using the Internet to communicate directly with their shareholders, potential investors and analysts by disseminating corporate information. In foreign !urisdiction, they are also using the Internet to communicate to the public for the following >ublic offeringsD >rivate offeringsD and ;isclosure and communication

Issuers are using the Internet to market themselves to potential investors. The Internet is also being used for fulfilling necessary disclosure re"uirements, for disseminating the prospects in electronics form and even for receiving share applications in public issues electronically. In India, %#I has taken initiative in permitting use of the network of stock exchange for collection of investorsE application in public offerings by the issuer companies In-e*tment Ad-i*ory Ser-ice* #rokers as well as other service providers such as investment firms, research outfits etc. are using the Internet for marketing and advertising purposes, for presenting information on portfolio analysis and market information, and for communicating with and receiving orders from potential investors. The services offered by the service providers to the investors are generally the following Advertising >roviding investment information and investment adviceD .nderwriting Communicating with the investorsD Customer ordersD and =ecord keeping

0orking $roup* *et up /y the Committee

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Considering the present state of capital markets in India and keeping in view the ongoing developments in Internet based securities business, it was felt that %#I as a regulator could strive to identify areas where use of Internet in the capital market is possible within the existing legal framework. 7ne such area identified by the Committee, which is also the central theme of this report, is the area of Internet trading on existing electronic exchange. In this area, through early introduction of Cyber :aws would be highly describe but their existence is not a necessary precondition. To look into the existing regulatory scenario and to bring out some ground rules for use of the medium of Internet, the Committee therefore constituted the following two working groups to look into the areai. ii. ecurity protocols and standardization of interfaces for Interest based securities trading. urveillance and monitoring related issues arising due to Interest based securities trading. This report of the standing committee examines the regulatory and security re"uirements Internet #ased Trading on Conventional %xchanges. eparate reports &s' will cover the other areas related to Internet applications in the securities markets. The report of the first working group on security protocols and standardization of interfaces has been submitted and incorporated in the report. 1ith nearly million on)line investors, Internet trading in the .nited tates is growing by leaps and bounds. Internet trading is being facilitated by large brokerage houses, thus changing the total concept of securities trading. A team comprising of members from stock exchanges and %#I visited the .nited tates to these development and had interactions with brokerages houses, Internet service providers and other agencies involved in facilitating Internet trading. The team also discussed the developments in the emerging regulatory and supervisory framework in .nited tates with the ecurities and %xchange Commission officials. They were also tripped of the various initiatives taken by %C in this regard. These inputs have been utilized while drafting this report.

Recommendation* o+ the Committee Application +or Permi**ion /y Broker*

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%#I registered tock #rokers interested in providing Internet based trading services will be re"uired to apply to the respective stock exchange for a formal permission. The stock exchange should grant approval or re!ect the application as the case may be, and communicate its decisions to the number within 89 calendar days of the date of completed application submitted to the exchange. The stock %xchange, before giving permission to brokers to start Internet based services shall ensure the fulfillment of the following minimum conditions. #et 3orth Re.uirement The broker must have a minimum net worth of =s. 59 lakhs if the broker is providing the Internet based facility on his own. Jowever, 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 %#I circular no *ITTCC;CCCI=)2C3H dated Pune 2F, 233H. Operational and Sy*tem Re.uirement*7 Operational Integrity: The stock %xchange must ensure that the system used by the broker has provision for security, reliability and confidentiality of data through use of encryption technology. This stock exchange must also ensure that records encryption technology. The stock %xchange must also ensure the records maintained in electronic form by the broker are not susceptible to manipulation. System Capacity The stock %xchange must ensure that the brokers maintain ade"uate backup systems and data storage capacity. The stock %xchange must also ensure that the workers have ade"uate system capacity for handling data transfer, and arrange for alternative means of communications in case of Internet link failure. Qualified Personnel: The stock %xchange must lay down the minimum "ualification for personnel to ensure that the broker has suitably "ualified and ade"uate personnel to handle communication including instructions as well as other back office work which is likely to increase because of higher volumes. Written Procedures: tock %xchange must develop uniform written procedures to handle contingency situations and for review of incoming and outgoing electronic correspondence. Signature Verification !uthentication: It is desirable that participants use authentication technologies. *or this purpose is should be mandatory for participants to use certification
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agencies as and when notified by MovernmentC %#I. They should also clearly specify when manual signatures would be re"uired. Client Bro"er Relationship #no$ %our Client: The stock %xchange must ensure that brokers have sufficient, verifiable information about clients, which would facilitate risk evaluation of clients. Bro"er& Client !greement: #rokers must enter into an agreement with clients spelling out all obligations and rights. This agreement should also inter alia, the minimum service standards to be maintained by the broker for such service specified by %#IC%xchange for the internet based trading from time to time. %xchange will prepare a model agreement for this purpose. In'estor Information: The broker web site providing the internet based trading facility should contain information meant for investor protection such as rules and regulations affecting client broker relationship arbitration rules, investor protection rules etc. The broker web site providing the Internet based trading facility should also provide and display prominently, hyper link to the web siteCpage on the web site of the relevant stock exchange &s' displaying rulesC regulationsC circulars. TickerC"uoteCorder book displayed on the web)site of the broker should display the time stamp as well as source of such information against the given information. Order Trade Confirmation: 7rderCTrade confirmation should also be sent to the investor through email at clientEs discretion at the time specified by the client in addition to the other mode of display of such confirmation of real time basis on the broker web site. The investor should be allowed to specify the time interval on the web site itself within which he would like to receive this information through email. *acility for reconfirmation of orders which are larger than that specified by the memberNs risk management system should be provided on the internet based system.

(andling Complaints )y In'estors: %xchanges should monitor complaints from investors regarding service provided by brokers to ensure a minimum level of service. %xchange should have separate cell specifically to handle Internet trading related complaints. It is desirable that exchanges should also have facility for on)line registration of complaints on their web site.

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Ris" *anagement: %xchanges must ensure that brokers have a system)based control on the trading limits of clients, and exposures taken by clients. #rokers must set predefined limits on the exposure and turnover of each client. The broker systems should be capable of assessing the risk of the client as soon as the order comes in. The client should be informed of acceptanceCre!ection of the order within a reasonable period. In case system based control re!ects an order because of client having exceeded limits etc., the broker system may have a review and release facility to allow the order to pass through. Contract +otes: Contract notes must be issued to clients as per existing regulations, within 6B hours of the trade execution. Cross Trades: As a matter of abundant precaution, the committee seeks to reiterate the existing system. #rokers using Internet based systems for routing client orders will also not be allowed to cross trades of their clients. All orders must be offered to the market for matching. It is emphasized that in addition to the re"uirements mentioned above, all existing obligations of the broker as per current regulation will continue without changes. %xchanges may also like to specify more stringent standards as they may fit for allowing Internet based trading facilities to their brokers. ,nforcement: A separate working group has been set to look into the surveillance and enforcement related issues arising due to Internet based securities trading. Jowever, general anti)fraud provisions & %#I *raudulent and .nfair Trade >ractices =egulations, 2335' would apply to all transactions involving securities or financial services, regardless of the medium.

FEATURES OF O#(I#E TRA'I#$7 The 7nline Trading is having many features which make it most suitable for the investors to go for. ome of these features are as follows*=%%;7$ 7* I(*7=$ATI7(

Page 20

The Internet can provide a new sense of control over individualsE financial future. The amount of investment information available online is truly astounding. ItNs one of the best aspects of being a wired investor. *or the first time in history, any individual with an Internet connection can Know the price of any stock at any time =eview the price history of any stock in chart format *ollow market events in)depth =eceive a wealth of free commentary and analysis about stock markets and the global economy Conduct extensive financial research on any company

C7(T=7: 7* $7(%< 7ne of the great appeals of using an online trading account is the fact that the account belongs to customers, and is under his direct control. 1hen he wants to buy or sell stock, he need not call his broker on the phoneD and hope that he is in the office to place his orderD possibly argue with the broker about the orderD and hope that the transaction is executed instantly. AC% T7 $A=K%T

At the most basic level, an online trading account gives customer more agility in buying and selling stocks. This is through sophisticated information streams, dedicated trading platforms and sophisticated tools for accessing the markets. %( .=% TJ% #% T >=IC% *7= I(?% T7= %very 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, investors will be able to get the best "uote for their orders.

7**%= M=%AT%= T=A( >A=%(C< 7nline trading offers investors greater transparency by providing them 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 their depository account. All these stages are sub!ect to inspection, thus bringing in transparency into the system.

Page 21

%(A#:% JA

:% *=%% T=A;I(M

7nline trading integrates investors bank account, trading account and demat accounts, which leads to easy and paperless trading. A::71 I( TA(T T=A;% %L%C.TI7( An individual as an Investment online customer will be able to execute the entire trading transaction, right from logging on to his site, to the execution and settlement of his bank account, in a very short period of time. >=7?I;% A :%?%: >:A<I(M *I%:; 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. =%;.C% TJ% %TT:%$%(T =I K This method of trading reduces the settlement risk for the investor, as in this case all short sell orders are s"uared off at the specified cut)off time and not allowed to be carried forward. In the case of a demat account customers demat account is checked by company before executing their sell transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities and for customer as a seller of the securities I( TA(T 7=;%= T=A;% C7(*I=$ATI7( %very trade is confirmed immediately and investor will receive an on)screen confirmation following every trade with full details for their records. This avoids costly errors that would have been discovered when it is too late.

I(T%M=AT%; ACC7.(T Investors #ank, ;epository and online account are integrated for their own convenience. BE#EFITS OF O# (I#E BRO!I#$ CB (e** Co*tly7

Page 22

The most significant advantage of the online broking is the cost reduction in the brokerage. ;ue to the power of the Internet one has the privilege of becoming the clients of really large brokerages with the benefits of en!oying the low charges hithelio before en!oyed only by the big players. As the ;> 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 is the buying power. 8B Peace o+ &ind7 7ne 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 conse"uent costs. 9B !eeping Record*7 The site one trades on keeps a record of all transactions down to unexecuted orders and cancelled orders thus keeping one abreast of all transactions 6B hours a day. (o paperwork means more time at oneEs disposal for research and analysis. :B Acce** to In+ormation and in-e*tment Tool*7 $ost online investing sites have a wealth of information for their registered members. This includes research reports, results, analysis and even gossip and the buzz in the market. ;%B Unparalleled (i.uidity7 The bank account linked with the trading account invariably has an AT$ free. $ost partner banks offer Internet banking as well. This results in oneEs money becoming available to him whenever he like from his trading account. Conversely in case he spots an opportunity in the market he can immediately allocate money from his savings account to his trading account and make profits.

<%B Unparalleled Sa+ety7 $ost sites are secure using 26H)bit algorithms )highest available commercially anywhere in the world. $oreover even if somebody broke in and tampered with oneEs account the money from the stocks he sold or the stock bought from the money in his account is in his account only.

Page 23

=%B Reduce* the *ettlement ri*k7 This method of trading reduces the settlement risk for the investor, as in this case no hort 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 &re"uired for an online transaction', when a seller wants to sell the securities, his demat account is checked by the ;epository >articipant before executing the sale transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities. >%B O++er* greater tran*parency7 7nline 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 sub!ect to inspection, thus bringing in transparency into the system. D%B Ea*e o+ trade7 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. 7ther than the above)mentioned advantages, Internet trading provides some additional advantages to the investors, brokers and also helps the nation to channelize the resources. (et trading would increase 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.

PROB(E&S OF O#(I#E BRO!I#$ There is a flip side to everything and online trading is no exception. C%B ESer-er not +oundE7

Page 24

This may appear on oneEs screens when he is desperately trying to get out of an unprofitable position. ome of the online sites are providing a telephone number for use in case their sites are overloaded or their server down. 8%B Connecti-ity o+ the Broker 3ith #SE7 ICICI ;irect had a connectivity problem with the ( % for two and half an hours during trading hours. This problem is rare but be alive to its possibility. 9%B Cy/er attack7 In the event of a malicious attack on the systems of oneEs broker he is protected only if the company is taking proper precautions against such attacks and if proper backup is regularly been taken. Je may like to choose a brokerage that has a stated security policy and contingency plan in place. :%B #on6a-aila/ility o+ a *eamle** inter+ace7 As a client one will access the ( % through a server of the online brokerage and this may involve "ueuing delays. If a number of client access the server the server takes its own time sending the orders to the ( % server. Je 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. ;%B #on6 a-aila/ility o+ per*onali?ed ad-ice7 If one likes to ask his broker about the current status of market he may not be able to do so. If he wants advice on a particular stock in his portfolio he may not even be able to get that. <%B &argin7 If Internet trading alone is not fast and furious enoughD many people are trading on margin. That is where the brokerage firm lends money by leveraging their account, allowing them to buy a large amount of securities by putting up only a small amount of money. They might have forgotten what they have read in the small print of his agreement, but the brokerage firm has the right to change the maintenance margin re"uirements without any warning or notice . In fact, the firm has the right to li"uidate their securities holdings &and it can pick and choose which ones' without any notice to one if he fails to meet the margin call. =%B (ittle u*e o+ ad-i*ory *er-ice*7

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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. $any would not like to rely on research reports, which are there for all. o, net investors will have to do their own research and take their own decision, whether wild or wise. >%B Increa*ed charge*7 ome of the brokers are of the view that they would have to provide advisory services to the customers. #ut 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.

0 ) PEOP(E ARE BE#'I#$ TO0AR'S O#(I#E TRA'I#$ everal broking houses now offer online trading facilities. An individual can trade online with e)brokerages such as ICICI ;irect, Kotakstreet, India bulls, India info lineEs 5paisa.com and J;*C securities. If he is already comfortable trading with his regular broker, here are few reasons why he must consider switching to trading online, or at least another avenue of trading. An obvious advantage of online trading is that his transaction would be virtually paperless. Jis trading account would be linked to his demat and bank account, ensuring a smooth transaction process. This is especially helpful in the extent T@6 settlement system, where he has !ust two days to settle his 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 the order is executed online. The absence of manual intervention ensures complete control of all transaction. There is also little room for error, as order is always confirmed before it is executed. 7ne can also make better decision as one has clear record of all his previous transaction. 1hen he trades offline, a demat statement is normally sent on a "uarterly basis .Keeping track of his portfolio can be a hassle in such a case. The internet can provide a new sense of control over financial future. The amount of investment information available online is truly astounding. 1hat is more, the time difference, in some cases, can work to their advantage .Antony, an (=I)based in (ew <ork, places his order in the evening after work, when it is day time India and the markets are open. 1e also have access to considerable information online. #y !ust

Page 26

logging on to ICICI direct online, for instance, we can get the latest news, market information and company research. $oreover, if our connection is maddeningly slow and we want to get order executed immediately, most e)brokerages also provide a facility to trade offline by placing our order via the phone

Rolling Settlement Cycle In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. At ( % and # %, trades in rolling settlement are settled on a T@6 basis i.e. on the 6nd working day. *or arriving at the settlement day all intervening holidays, which include bank holidays, ( %C# % holidays, aturdays and undays are excluded. Typically trades taking place on $onday are settled on 1ednesday, TuesdayNs trades settled on Thursday and so on. Concept O+ Buying (imit uppose one has sold some shares on ( % and are trying to figure out that if he can use the money to buy shares on ( % in a different settlement cycle or say on # %. To simplify things for ICICI ;irect customers, sharekhan has also introduced the concept of #uying :imit &#:'. #uying :imit simply tells the customer what is his limit for a given settlement for the desired exchange. Future Agenda.nder the existing legal and regulatory framework, %#I registered brokers can offer trading on Internet through order is routing systems. Jowever, with the rapid development of the technology, we have to evolve fisher steps in this direction it is therefore proposed that as the next step link between the depositories and banks shall be established after the necessary regulations have been passed. This would reduce the clearing and settlement time and would also minimize the risk of all the participants involved in the transactions. 1e have to look forward towards achieving an ideal scenario where all the services related to securities markets including marketing of initial public offers on internet, providing investment advisory services to the clients, broking, clearing . <%$RO0T OF O#(I#E TRA'I#$

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According to an article by Krishnamurthy # in 6995 after inception of online trading in India in the year 6999 online trading is gained momentum with trading volumes growing by 259 per cent per annum in the years 6998)6995 and it was more than approx According to brokers the better broadband connectivity across the country and wider awareness of e"uity as an asset class will raise the online trade volumes to over 59Q of total trade.In India the demography is such that 45Q of the population is under the age of 8F and more than 59Q of the 45Q is under age of 65 and this is another supporting factor The earlier 1eb)based technology used for Internet trading has been replaced by specialized software which gives real)time global data streaming rates to trader helping investors to analyze the market trends and helps in faster execution of trades. %arlier the investors made trade calls over the phone which sometimes led to the delays. India boasts of the third highest investor base in the world, unthinkable till a few years ago. The most online stock broking companies started from 6999 onwards because of development of global Internet economy and for years 6999 to 6998 the stock market was under a bear hug. The intense competition among a new wave of online brokerage companies hammered down brokerage rates from 2Q &in 6999' to 9.65 Q, or even lower to 5 paisa

RESEARC

'ESI$#

7#P%CTI?% 7* TJ% T.;< The central purpose of this study to evaluate online line trading in sharekhan ltd. It has been carried out keeping in view the following specific ob!ectives
Page 28

To analyse the need for online trading To study the current trend in online trading To know the attitude of investors towards online trading To understand the work procedure of online trading To analyse the effectives of online trading

TAT%$%(T 7* >=7#:%$ In current scenario online trading is one of the important aspects in stock market. #ut online trading re"uires ade"uate computer knowledge and technological support. As a result most of the investors do not prefer online trading and few of them are not aware of online trading. The need and scope of online trading is increasing day by day. It is therefore very essential to conduct a research on effectiveness of online trading.

RESEARC

&ET O'O(O$)

The basic task of research is to generate accurate information for use in decision making. =esearch can be defined as the systematic and ob!ective process of gathering, recording and analyzing data for aid in making business decisions.

There are /a*ically t3o techni.ue* adopted +or o/taining in+ormation7 C% 8% Primary 'ata% Secondary 'ata.

Primary 'ata Iuestionnaire was given to various respondents in order to know about their opinion regarding online trading Secondary Source*7

Page 29

ources of this data include circulars, books, website of share khan pvt ltd . It also includes references from the text books and !ournals to get a brief idea about the theoretical aspects. And the secondary data is incorporated wherever necessary to supplement the primary data. Stati*tical Tool7 imple statistical tools such as percentages, and ratios are used to analyse the data and information collected. Important diagrams are also depicted in the form of tables and charts. Source* o+ data collection are7 2' harekhan pvt.ltd

6' www.nseindia.com 8' www.bseindia.com B' www.on)linetrading.com Scope o+ *tudy7 The scope of the study includes study of factors responsible online trading in relation to share khan ltd., suggesting measures to improve customers participation in online trading and also to study its impact on stock market. (I&ITATIO#S ;espite of the trying my level best, there were still some limitation which I think remains there to draw fruitful conclusion. There were some practical problems which came across and could not be properly death with. 7nline trading is a vast area of studyD hence a detailed study was difficult. This study is confined to online trading in sharekhan ltd.,to that extent it is a micro study. ;etailed study was also not because of time constraint.

Company Pro+ileharekhan :td. is one of the leading retail stock broking house of based KI Mroup which is

running successfully since 2366 in the country. It is the retail broking arm of the $umbai) KI Mroup, which has over eight decades of experience in the stock broking business. harekhan offers its customers a wide range of e"uity related services including trade

Page 30

execution on # %, ( %, ;erivatives, depository services, online trading, investment advice etc. The firmEs online trading and investment site ) www.sharekhan.com A was launched on *eb H, 6999. The site gives access to superior content and transaction facility to retail customers across the country. Known for its !argon)free, investor friendly language and high "uality research, the site has a registered base of over one lakh customers. The content)rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best)of)breed technology and superior market information. The ob!ective has been to let customers make informed decisions and to simplify the process of investing in stocks. 7n April 24, 6996 harekhan launched peed Trade, a net)based executable application that emulates the broker terminals along with host of other information relevant to the ;ay Traders. This was for the first time that a net based trading station of this caliber was offered to the traders. In the last six months peed Trade has become a de facto standard for the ;ay Trading community over the net. harekhanEs ground network includes over 882 centers in 284 cities in India which provide a host of trading related services. harekhan has always believed in investing in technology to build its business. The company has used some of the best)known names in the IT industry, like un $icrosystems, 7racle, $icrosoft, Cambridge Technologies, (exgenix, ?ignette, ?erisign *inancial Technologies India :td, pider oftware >vt :td. to build its trading engine and content. The $orakhiya family holds a ma!ority stake in the company. J #C, Intel + Carlyle are the other investors. 1ith a legacy of more than H9 years in the stock markets, the institutional broking and corporate finance 2H years ago. >resently players in institutional broking and corporate finance activities. of the market in each of these segments. KI group ventured into KI is one of the leading KI holds a sizeable portion

KIEs institutional broking arm accounts for 4Q of

the market for *oreign Institutional portfolio investment and 5Q of all ;omestic Institutional portfolio investment in the country. It has F9 institutional clients spread over India, *ar %ast, .K and . . *oreign Institutional Investors generate about F5Q of the organizationEs revenue, with a daily turnover of over . R 6 million. The Corporate *inance section has a list of very prestigious clients and has many GfirstsE to its credit, in terms of the size of deal, sector tapped etc. The group has placed over . R 2 billion in private e"uity deals. ome of the clients include #>: Cellular Jolding, Mu!arat >ipavav, %ssar, Jutchison, >lanetasia, and hopperEs top.

PROFI(E OF T E CO&PA#) 7

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#ame o+ the company- harekhan ltd. <ear of %stablishment - 2365 , 2H Jead"uarter- hareKhan KI A)69F >hoenix Jouse >hoenix $ills Compound :ower >arel $umbai ) $aharashtra, I(;IA) B99928 (ature of #usiness ervice >rovider ervices - ;epository ervices, 7nline ervices and Technical =esearch. (umber of %mployees - 7ver 8599 1ebsite - www. sharekhan .com logan - <our Muide to The *inancial Pungle. AC IEFE&E#TS OF S ARE! A#7 =ated among the top 69 wired companies along with =eliance, J.Pl, Infosys, etc by G#usiness TodayE, Panuary 699B edition. Awarded GTop ;omestic #rokerage JouseE four times by %uro money and Asia money. >ioneers of online trading in India amongst the top 8 online trading websites from India. $ost preferred financial destination amongst online broking customers. 1inners of /#est *inancial 1ebsite0 award. IndiaEs most preferred brokers within 5 years. /Awaaz customers Award 69950.

*uture >lans 6,99,999 plus retail customers being serviced through centralized call 23centersC web solutions. #ranchesC emi branches servicing affluentCaggressive traders through financial advisor. high skill

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659 independent investment managersC franchisee servicing 59,999 highly valued clients.

(ew initiatives >ortfolio management ervices and commodities trading.

Fi*ion 7 To be the best retail brokering #rand in the retail business of stock market. &i**ion 7 To educate and empower the individual investor to make better investment decisions through "uality advice and superior service. harekhan is infact) S Among the top 8 branded retail service providers S (o. 2 player in online business S :argest network of branded broking outlets in the country serving more than 4,99,999 clients.. A Sharekhan outlet o++er* the +ollo3ing *er-ice*7 7nline # % and ( % executions &through #7:T + (%AT terminals' *ree access to investment advice from harekhanNs =esearch team harekhan ?alue:ine &a monthly publication with reviews of recommendations, stocks to watch out for etc' ;aily research reports and market review &Jigh (oon + %agle %ye' >re)market =eport &$orning Cuppa' ;aily trading calls based on Technical Analysis Cool trading products &;aring ;erivatives and $arket trategy' >ersonalised Advice :ive $arket Information ;epository ervices- ;emat + =emat Transactions ;erivatives Trading &*utures and 7ptions' Commodities Trading I>7s + $utual *unds ;istribution Internet)based 7nline Trading- peedTrade
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REASO# TO C OOSE S ARE! A# (I&ITE' E,perience 7 KI has more than eight decades of trust and credibility in the Indian stock market. In the Asia $oney brokerNs poll held recently, KI won theE IndiaEs #est #roking Jouse for 699B N award. %ver since it launched harekhan as its retail broking division in *ebruary 6999, it has been providing institutional level research and broking services to individual investors. Technology 7 1ith its online trading account one can buy and sell shares in an instant from any >C with an internet connection. 7ne can get access to its powerful online trading tools that will help him take complete control over his investment in shares.

Acce**i/ility 7 harekhan provides A;?IC%, %;.CATI7(, T77: A(; %L%C.TI7( services for

investors. These services are accessible through its centers across the country over the internet &through the website www.sharekhan.com' as well as over the ?oice Tool. !no3ledge7 In a business where the right information at the right time can translate into direct profits, one can get access to a wide range of information on harekhan limitedEs content)rich portal. 7ne can also get a useful set of knowledge)based tools that will empower him to take informed decisions.

Con-enience7 7ne can call its ;ial)()Trade number to get investment advice and execute his transactions. harekhan ltd. has a dedicated call)centre to provide this service via a Toll *ree (umber 2H99)66)4599 + 2H99)66)4959 from anywhere in India.

Page 34

Cu*tomer Ser-ice7 harekhan limitedEs customer service team will assist one for any help that one may re"uire relating to transactions, billing, demat and other "ueries. Its customer service can be contacted via a toll)free number, email or live chat In-e*tment Ad-ice harekhan has dedicated research teams of more than 89 people for fundamental and technical researches. Its analysts constantly track the pulse of the market and provide timely investment advice to its clients in the form of daily research emails, online chat, printed reports and $ on their mobile phone.

KI Mroup Companies) KI Investor ervices :td & hare khan' . . Kantilal Ishwarlal ecurities KI Corporate *inance I dream >roductions >alm spring estates >vt :td. *in flow Investment >vt :td. I dream >roduction .K >vt :td. hare khan Commodities >vt :td. Archfund >roperties >vt :td.

PRO'UCTS A#' SERFICES OF S ARE! A# (I&ITE' 7 The different types of products and services offered by harekhan :td. are as followsS %"uity and derivatives trading S S ;epository services 7nline services
Page 35

S S S S S

Commodities trading ;ial ) n) trade >ortfolio management hare shops *undamental research

S Technical research S0OT Analy*i* STRE#$T It is a pioneer in online trading with a turnover of =s.B99crores and more than H99 peoples working in the organization KI the parent company of hare Khan has more than eight decades of trust and KI won the credibility in the Indian stock market. In the Asian $oney #rokerEs poll /IndiaEs best broking house for 699B0 award. hare Khan provides multi)channel access to all its customers through a strong online presence with www.sharekhan.com, 659 share shops in 289 cities and a call)center based ;ial)n)Trade facility hare Khan has dedicated research teams for fundamental and technical research. 1hich constantly track the pulse of the market and provide timely investment advice free of cost to its clients which has a strike rate of 49)H9Q. 0eakne**7 :ocalized presence due to insufficient investments for country wide expansion. :ack of awareness among customers because of non)aggressive promotional strategies &print media, newspapers, etc'. :esser emphasis on customer retention. *ocuses more on J(Is than retail investors which results in meager market)share as compared to close competitors. Opportunitie*7 1ith the booming capital market it can successfully launch new services and raise its clientEs base. It can easily tap the retail investors with small saving through promotional channels like print media, electronic media, etc.

Page 36

As interest on fixed deposits with post office and banks are all time low, more and more small investors are entering into stock market. Abolition of long term capital gain tax on shares and reduction in short term capital gain is making stock market as hot destination for investment among small investors.

Threat*7 :ack of sufficient branch)offices for speedy delivery of services. 7ther players are providing margin funds to investors on easy terms where as there is no such facility in share khan. $ore and more players are venturing into this domain which can further reduce the earnings of hare Khan.

'ATA A#A()SIS A#' I#TERPRETATIO#

Page 37

7pinion Jigher secondary enior secondary Mraduate >ost graduate >rofessional degree holder

(o. of =espondents 6 22 B3 2F 66

>ercentage 6 22 B3 2F 66

Chart #o%:%C

To invest in the stock market minimum 299999 or more than this should be the annual income level of the people. In India the per capita income in also increasing so we can say that there is a good opportunity for the online trading market.

Table B.6 =espondentsE opinion about years of transaction in on line 7pinion 2 year 6 year (o. of =espondents BB 6F >ercentage BB 6F

Page 38

8 year B year

23 22

23 22

Chart #o% :%8

4 5 4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0

1 year 2 year 3 year 4 year

Y EAR

According to this survey we find that BBQ people say that we are investing the money online from one year and 6FQ people say that we are investing the money online from 6 years and 23Q to 22Q people says that we are investing money online from 8 to B year. so we can say that now online trading is very popular in the modern market.

Ta/le :%9 =espondentsE opinion about operation of online trading 7pinion ?ery easy to operate (o. of =espondents F9 >ercentage F9

Page 39

?ery difficult to operate (ot secure Any other

25 29 25

25 29 25

Chart #o% :%9

60 50 40 30 20 10 0 Ex perience I find it very easy to operate I find it very difficult to operate I feel it is not secure A ny other

According to this survey we find that F9Q of people find very easy to operate and 25Q people find difficult to operate and 29Q and 25Q people find no secure and any other. so we can say that online trading is very simple to operate and easy to understand.

Ta/le :%: =espondentsE opinion about their investment 7pinion 59999 299999)259999 (o. of =espondents 85 6H >ercentage 85 6H

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259999)699999 Any other

68 2B

68 2B

Chart #o% :%:

35 30 25 20 15 10 5 0 Money 50000 100000to150000 150000to200000 Any Other

According to this survey we find that 85Q of people invest normally 59999, 6HQ of people invest 299999 to259999 and 68Q and 2BQ of people invest money between 259999 to 699999 and any other respectively. o we can say that the people do not invest more money in the share market because there is a great risk involved while trading.

Ta/le :%; =espondentsE opinion about period of transaction. 7pinion (o. of =espondents >ercentage
Page 41

;aily 1eekly $onthly $ore than 2 month

29 B9 86 2H

29 B9 86 2H

Chart no%:%;

40 35 30 25 20 15 10 5 0 i! e daily "ee#ly ! onthly ! ore than 1 ! onth

According to this survey we find that 29Q of people do trade ;aily and B9Q people do trade weekly and 86Q and 2HQ people do trade monthly and more than month. o we can say that people generally invest in stock market on weekly basis.

Ta/le :%< =espondentsE opinion about their mode of trading

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7pinion 7n line trading 7ffline trading #oth

(o. of =espondents 69 86 BH

>ercentage 69 86 BH

Chart #o% :%<

50 40 30 20 10 0 Relationship On line trading Offline trading Both

According to this survey we find that 69Q people prefer online trading

and

86Q people prefer offline trading rest of BHQ people prefer both. o we can say that most of the people are aware about the online trading and because of this reason the mostly people are optimizing offline trading.

Ta/le :%= =espondentsE opinion about their knowledge about online trading

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7pinion <es (o

(o. of =espondents 89 49

>ercentage 89 49

Chart #o% :%=

70 60 50 40 30 20 10 0 Settleled Yes o

According to this survey we find that 89Q people opine that on line trading is settled in Indian psyche and remaining 49Q people opine that on line trading is not settled in Indian psyche . o we can find that on line trading is not settled in the Indian psyche because some people are not experience towards online trading.

=% Ta/le :%> =espondentsE opinion about short comings of online trading 7pinion :ack of awareness (o. of =espondents 25 >ercentage 25

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hortage of expertise hortage of infrastructure Any other

B3 2B 69

B3 2B 69

Chart #o% :%>

;G :G 9G 8G CG G Shortcoming* (ack o+ a3arene** Shortage o+ e,perti*e Shortage O+ In+ra *tructure any other

According to this survey we find that 25Q of people feel that there is lack of awareness B3Q feel that there is hortage of expertise and 2BQ people feel that there is hortage 7f Infra structure and 66Q opine that there might be any other reason. o we can say that the main reason for short coming in Indian market is shortage of experience about the Indian derivatives market or share market.

Ta/le :%D =espondentsE opinion about media they would prefer to know about investment 7pinion T.? (ewspaper $agazines Pournals (o. of =espondents 55 65 29 29 >ercentage 55 65 29 29
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Chart #o% :%D

<G ;G :G 9G 8G CG G &edia T%F #e3*paper &aga?ine* Hournal*

According to this survey we find that 55Q people >refer T.? and 65Q people prefer newspaper and 29Q people prefer magazines and 29Q people prefer !ournals to know of stock market. o we can infer that people very easily grab the knowledge through T.?.

Ta/le :%CG =espondentsE opinion about their income level 7pinion #elow 299999 299999)699999 (o. of =espondents 6 5H >ercentage 6 5H

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699999)899999 899999)B99999 Above B99999

62 26 4

62 26 4

Chart #o% :%CG

5HQrespondent are having the income level of 299999)699999 ,62Q is having 699999)899999 , 26Q is having income between 899999)B99999 , 4Q of the total respondent are having income more than B99999 per annum and only 6Q are having less than 299999 per annum.To invest in the stock market minimum 299999 or more than this should be the annual income level of the people.

Ta/le :%CC =espondentsE opinion about portfolio in stock market 7pinion :ess than 5Q 5)29 29)25 25)69 $ore than 69Q (o. of =espondents 68 B2 62 28 6 >ercentage 68 B2 62 28 6

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Chart #o% :%CC

According to the data 68Q of the total respondent invest less than 5Q of their income, B2Q respondents are saying that they invest 5Q)29Q of their monthly income 1hereas the 62Q investor do the investment 29Q)25Q of their total monthly income,28Q invest between 25Q)69Q of the total income and only 6Q does more than 69Q of their income invest in the market 1e can easily understand that 45Q of the total population is having a good amount of investment, so the investment is their in the market, good number of people are ready to invest a good amount in the market 32Q of respondent is in the income level of 299999 A 899999 &according to the last "uestion analysis'. o we can say that stock brokerage houses will have to do a good business with the help of 7nline trading system with few value addition services Ta/le :%C8 =espondentsE opinion about kind of investment 7pinion %"uity $utual fund Insurance Term deposit others (o. of =espondents F5 2B 26 3 9 >ercentage F5 2B 26 3 9

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Chart #o% :%C8

Jighest number of respondent is having their investment in the e"uity that is F5Q whereas the investment available for the mutual fund, term deposit and insurance is 2BQ ,26Q and 3Q. o the investor for e"uity is high which is again showing the number of opportunity for online trading

Ta/le :%C9 =espondentsE opinion about ob!ective of investment 7pinion Capital appreciation ources of income =etirement planning 1ealth prevention (o. of =espondents 28 44 B 2 >ercentage 28 44 B 2

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%ducation fundsC others

25

25

Chart #o% :%C9

28Q of the respondent invest the money for the reason capital appreciation but most of the investor is having same motive that is source of income and retirement plan, wealth preservation and education funding for children or other are only 29Q *rom the analysis we can have idea that the main ob!ective of the investor to earn the money through trading in stock market44Q of the respondent achieve their ob!ective with the help of investment in the e"uity market, because most of the investment take place in the form of e"uity . o we can say that there is a huge potential in the market for the trading in the stock market

Ta/le :%C: =espondentsE opinion about owning computers 7pinion <es (o (o. of =espondents 4H 66 >ercentage 4H 66

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Chart #o% :%C:

4HQ of the total respondent who are dealing with the stock market is having computer in their house and only 66Q is not having computer in their house. The people who is having computer that is 4HQ can also go for online trading which can be a large number of people who will go for online trading. There is no need to do a additional investment for computer to go for online trading

Ta/le :%C; =espondentsE opinion about convenience of operating in computer 7pinion trongly agree Agree (o. of =espondents 6F 52 >ercentage 6F 52

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CanEt say ;isagree trongly disagree

8 28 4

8 28 4

Chart #o% :%C;

4FQ &6F@52' of the total respondent believe that operate a computer is easy for them whereas 69Q&28@4' of the respondent is having problem to operate a computer out of that 69Q , 45 believe that they canEt go for computer. o ,if 4HQ of the people who are dealing with the stock market is having computer at their house and around 4FQ of the same population donEt have any problem to operate a computer. o around F9 Q is their who is having computer and they donEt have problem to operate a computer. C:% Ta/le :%C< =espondentsE opinion about security of online trading 7pinion trongly agree Agree CanEt say ;isagree (o. of =espondents 84 8B 22 2B >ercentage 84 8B 22 2B
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trongly disagree

Chart #o% :%C<

42Q of the respondent is having a positive thinking that online trading is a secure way of trading whereas 23Q of the respondent believes that online trading is not a secure way of trading% atisfaction about the process, by which they will be going to do a trading that is online trading, should be there in the mind of the customer. If they believe that their is no risk over the money which they are going to invest in the market with the help of online trading, there will be a perception to go for online trading at least one time

Ta/le :%C= =espondentsE opinion about convenience of online trading 7pinion trongly agree Agree (o. of =espondents 24 8B >ercentage 24 8B
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CanEt say ;isagree trongly disagree

H 69 62

H 69 62

Chart #o% :%C=

52Q of the total respondent believe that online trading is a easy task 1hereas B2Q of the respondent believes that to deal with online Trading is not a easy task and H5 was confused to anything about that the trading via internet is a easy task or not. There is a difference between the people who believe and who donEt believe is not very big that is only 29Q , the reason of this problem can be if a person is doing its investment on its own he or she think of the problem of being mistaken in the transaction. o there is a need of proper training to do trading online

Ta/le :%C> =espondentsE opinion about as to whether online trading contributed in attracting new customers. 7pinion (o. of =espondents >ercentage
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trongly agree Agree CanEt say ;isagree trongly disagree

8F B2 4 26 B

8F B2 4 26 B

Chart (o. B.2H

*rom the above table B.2H we can infer that 8FQ and B2Q of the respondents are of the opinion that new customers are easily attracted through on line trading,26Q and BQ of the respondents feel that new customers are easily attracted through on line trading, remaining 4 Q are not having any idea as to whether online trading attracts new customers. Thus we can summarize that online trading attracts new customers.

FI#'I#$S 2. 7nline trading is becoming very popular in the modern market 6. >eople are finding very simple to operate and easy to understand through on line trading
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8. >eople are not interested to invest more money in the share market because there is a great risk involved while doing the trading. B. >eople generally invest in stock market on weekly basis. 5. >eople are aware about the on line trading and because of this reason the mostly people are optimizing offline trade F. 7n line trading is not settled in the Indian psyche because some people are not experience towards online trading. 4. >eople are shortage of experience about the Indian derivatives market or share market. H. >eople easily grab the knowledge about stock market through Television 3. >eople would like to invest 5) 29Q of their income in stock market 29. >eople would like to invest more on e"uity when compared to mutual funds, insurance etc. 22. 7nline trading is able to attract more no. of customers

Sugge*tion*

The introduction of the Internet has surprisingly changed our way of life as a society. It has defined the way we do business and the way we correspond. The Internet has opened many opportunities for online trading. The financial industry revolves around the Internet. %very thing is !ust a few clicks away. This makes online trading most convenient. #ut there are still

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investors who prefer the old fashion way of offline trading and they mainly prefer offline trading for security reasons. Internet has introduced a way for consumers to manage their money online. (ot to mention, Internet has transformed the way investment companies operate their business and has made it easy for private investors to gain straight access to a range of different markets and online tools that were at one point only reserved by the use of investment professionals. Consumer investing and online trading has dramatically changed over the last decade. 7nline trading dynamically continues to be redefined. ervices have expanded to include integrated management of additional financial accounts. (ot to mention, it has subse"uently expanded in con!unction with ground)breaking improvements to the traditional trading interface, such as telephone interface systems. 7f course, online trading has many pros. There are several wonderful reasons to invest online and consider online trading. $oney saving opportunities The amount of money you save depends primarily on the online brokerage firm that you choose. (o two firms are the same. There may be different regulations, similar to bank regulations. There are minimum deposits re"uired that must be maintained. As mentioned above, this will depend on the online brokerage firm. 6. Instant online access <ou can gain instant access to your account, the value of your portfolio updates immediately before your eyes. 8. %nter online trades at anytime <ou can enter online trades at anytime and from anywhere. This is very convenient if you live in a different time zone than the country you are trading in. (ot to mention, it is especially fit for investors with busy schedules. B. 1ith online trading you are in charge <ou are in control of your investments. (o sales pitches and no hassle. <ou decide where to invest your money.

CO#C(USIO# 7nline trading is the new concept in the stock market. In India, online trading is still at its infancy stage. 7nline trading has made it easy to trade in the stock market as now people can trade while sitting at their home. (ow stock market is easily accessible by the people. There are some problems while doing the trade through the internet. $a!or problem faced by online
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trader is that the investors are loyal to their traditional brokers, they rely upon the suggestions given by their brokers. Another ma!or problem is that the people donNt have full knowledge regarding online trading. They find it difficult to trade themselves, as a wrong entry made by them, can bring them huge losses. (evertheless to say that online trading has the bright future as the percentage of the trade done through online trading is increasing day by day.

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BIB(IO$RAP ) BOO!S C% R% !othriI Re*earch &ethodologyI Fi*h3a Prak*han

&A$AJI#ES Bu*ine** 0orld (SEK* &aga?ine

I#TER#ET SITES 333%n*eindia%com 333%/*eindia%com 333%on6linetrading%com 333%*e/i%go-%in 333%l*e%co%in 333%*harekhan%com

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Lue*tionnaire

'ear re*pondentI

I am student of $#A. I am working on the pro!ect of /7n):ine trading0. <ou are re"uested to fill the "uestionnaire to enable, to undertake the study on the said >ro!ect. (ameTTTTTTTTT. 7ccupationTTTTTT Address TTTTTTTT >hone noTTTTTTT.

2. *or how long you have been trading with on line)tradingU &a'2 year &c' 8 year &b' 6 year &d' B year

6 .Jow will you describe your experience with on)line trading till dateU &a' very easy to operate &b' very difficult to operate &c' not secure &d' Any other

8.

1hat amount of money you are invested normallyU &a' 59999 &c' 259999 to 6999999 &b' 299999 to 259999 &d' Any other amount

B.

Jow often do you tradeU &a';aily &c' $onthly &b' 1eekly &d' $ore than one month

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5. In which trading you will preferU &a' 7nline trading &c' #oth &b' offline trading

F. According to you online trading settled in Indian investor psyche &a' <es &b' (o

4. 1hat shortcomings do you feel in Indian 7n)line Trading U &a' :ack of awareness the investors about on)line trading &b' hortage of domestic technical expertise &c' hortage 7f Infra structure &d' If any other

H. 1hich media would you prefer the most for investorU &a' T.? &c' $agazines &b' (ewspaper &d' Pournals

3. 1hat is your annual incomeU &a' #elow 299999 &c' 6,99,999 A 8,99,999 &b' &d' 2,99,999 A 6,99,999 8,99,999 A B,99,999

29. 1hat percentage of your monthly household income could be available for m investmentU &a' :ess than 5Q &c' 29Q to 25Q &b' 5Q to 29Q &d' 25Q to 69Q
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22. 1here do you often invest your moneyU &a' &c' &e' %"uity Insurance 7thers &b' &d' $utual fund Term deposits

26. 1hat is the primary ob!ective of your investmentU &a' Capital appreciation &c' =etirement planning &e' %ducation funding Cothers &b' ource of income

&d' 1ealth preservation

28. ;o you owe a ComputerU &a' <es

&b' (o 2B. online trading is a secure way of trading &a' &c' trongly agree CanEt say &b' &d' Agree ;isagree

25. online trading is easy and fast way of tradingU &a' &c' trongly agree CanEt say &b' &d' Agree ;isagree

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2F. Introduction of online trading helped to attract the new Investors thus increasing the trading volumes at tock $arketU

&a' &c'

trongly agree CanEt say

&b' &d'

Agree ;isagree

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