Basics of Financial


Report By:
Rahul Singh

3.Investments and investment related basics
4.Stock Exchange
5.Financial Market and Basics
7.Do‘s and don‘ts


I express my sincerest gratitude and thanks to hon‘ble, Mr. Vijay Singh (Territory Manager,
sales), for whose kindness I had the precious opportunity of Attaining training at Sharekhan.
Under his brilliant untiring guidance I could complete the project being undertaken on the
―Basics of Financial Market‖ successfully in time. His meticulous attention and invaluable
suggestions have helped me in simplifying the problem involved in the work. I would also
like to thank the overwhelming support of all the people who gave me an opportunity
to learn and gain knowledge about the various aspects of the industry. I would like to thanks
Mr. Manoj Singh (Assistant Manager) for their constant enthusiastic encouragement and
valuable suggestions without which this project would not been successfully completed.

Rahul Singh


India being a one of the fastest growing economy has made Indian markets a hot spot for the
investors across the globe. The level of investment has been too high on past few years, the
number of investors have risen sharply. Though the fact majority of investments come from
FII‘s or FDI‘s, but the drastic change in Indian investors has made the market more
sustainable and strong. The Financial institutions have played a major role in moving the
investments and financing.
The Broad objective of the project is to have all basics knowledge of financial market. The
project guides us through and gives knowledge on various investment instruments and option
available for the investors.

I nvestments

What is Investment?

The money you earn is partly spent and the rest saved for meeting future expenses. Instead of
keeping the savings idle you may like to use savings in order to get return on it in the future.
This is called Investment.

Why should one invest?
One needs to invest to:
_ 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

One of the important reasons why one needs to invest wisely is to meet the cost of Inflation.
Inflation is the rate at which the cost of living increases. The cost of living is simply what it
costs to buy the goods and services you need to live. Inflation causes money to lose value
because it will not buy the same amount of a good or a service in the future as it does now or
did in the past. For example, if there Was a 6% inflation rate for the next 20 years, a Rs. 110
purchase? Today would cost Rs. 340 in 20 years. This is why it is important to consider
inflation as a factor in any long-term investment strategy. Remember to look at an
investment‘s ‗real‘ rate of return, which is the return after inflation. The aim of investments
should be to provide a return above the inflation rate to ensure that the investment does not
decrease in value. For example, if the annual inflation rate is 6%, then the investment will
need to earn more than 6% to ensure it increases in value. If the after-tax return on your
investment is less than the inflation rate, then your assets have actually decreased in value;
that is, they won‘t buy as much today as they did last year. India being one of the fastest
growing economy, the income levels of people have increased highly. In a country like India
where saving amount to 36% of the total GDP. To channelize the idle fund, individuals or
financial institutes have to take steps to promote investment.

When to start Investing?
The sooner one starts investing the better. By investing early you allow your investments
more time to grow, whereby the concept of compounding (as we shall see later) increases
your income, by a cumulating the principal and the interest or dividend earned on it, year
after year. The three golden rules for all investors are:
_ Invest early
_ Invest regularly
_ Invest for long term and not short term

What care should one take while investing?
Before making any investment, one must ensure to:
1. Obtain written documents explaining the investment
2. Read and understand such documents
3. Verify the legitimacy of the investment
4. Find out the costs and benefits associated with the investment
5. Assess the risk-return profile of the investment
6. Know the liquidity and safety aspects of the investment
7. Ascertain if it is appropriate for your specific goals
8. Compare these details with other investment opportunities available
9. Examine if it fits in with other investments you are considering or you have already made
10. Deal only through an authorised intermediary
11. Seek all clarifications about the intermediary and the investment
12. Explore the options available to you if something were to go wrong, and then, if satisfied,
make the investment.

These are called the Twelve Important Steps to Investing.

What is meant by Interest?
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 lender‘s 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.

What factors determine interest rates?
When we talk of interest rates, there are different types of interest rates - rates that banks
offer to their depositors, rates that they lend to their borrowers, the rate at which the
Government borrows in the Bond/Government Securities market, rates offered to investors in
small savings schemes like NSC, PPF, rates at which companies issue fixed deposits etc. 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
_ The Reserve Bank of India and the Government policies which determine some of the
variables mentioned above

What are various options available for investment?
One may invest in:
_ Physical assets like real estate, gold/jewellery, commodities etc.
_ Financial assets such as fixed deposits with banks, small saving instruments with post
offices, insurance/provident/pension fund etc. or securities market related instruments like
shares, bonds, debentures etc.

What are various Short-term financial options available for investment?
Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with
banks may be considered as short-term financial investment options:
Savings Bank Account is often the first banking product people use, which offers low
interest (4%-5% p.a.), making them only marginally better than fixed deposits.
Money Market or Liquid Funds are a specialized form of mutual funds that invest in
extremely short-term fixed income instruments and thereby provide easy liquidity. Unlike
most mutual funds, money market funds are primarily oriented towards protecting your
capital and then, aim to maximise returns. Money market funds usually yield better returns
than savings accounts, but lower than bank fixed deposits.
Fixed Deposits with Banks are also referred to as term deposits and minimum investment
period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk
appetite, and may be considered for 6-12 months investment period as normally interest on
less than 6 months bank FDs is likely to be lower than money market fund returns.

What are various Long-term financial options available for investment?
Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and
Debentures, Mutual Funds etc.
Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument,
which can be availed through any post office. It provides an interest rate of 8% per annum,
which is paid monthly. Minimum amount, which can be invested, is Rs. 1,000/- and
additional investment in multiples of 1,000/-. Maximum amount is Rs. 3, 00,000/- (if Single)
or Rs. 6, 00,000/- (if held Jointly) during a year. It has a maturity period of 6 years. A bonus
of 10% is paid at the time of maturity. Premature withdrawal is permitted if deposit is more
than one year old. A deduction of 5% is levied from the principal amount if withdrawn
prematurely; the 10% bonus is also denied.

Public Provident Fund: A long term savings instrument with a maturity of 15 years and
interest payable at 8% per annum compounded annually. A PPF account can be opened
through a nationalized bank at anytime during the year and is open all through the year for
depositing money. Tax benefits can be availed for the amount invested and interest accrued is
tax-free. A withdrawal is permissible every year from the seventh financial year of the date of
opening of the account and the amount of withdrawal will be limited to 50% of the balance at
credit at the end of the 4th year immediately preceding the year in which the amount is
withdrawn or at the end of the preceding year whichever is lower the amount of loan if any.

Company Fixed Deposits: These are short-term (six months) to medium-term (three to five
years) borrowings by companies at a fixed rate of interest which is payable monthly,
quarterly, semi10 annually or annually. They can also be cumulative fixed deposits where the
entire principal along with the interest is paid at the end of the loan period. The rate of
interest varies between 6-9% per annum for company FDs. The interest received is after
deduction of taxes.

Bonds: It is a fixed income (debt) instrument issued for a period of more than one year with
the purpose of raising capital. The central or state government, corporations and similar
institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed
rate of interest on a specified date, called the Maturity Date.

Mutual Funds: These are funds operated by an investment company which raises money
from the public and invests in a group of assets (shares, debentures etc.), in accordance with a
stated set of objectives. It is a substitute for those who are unable to invest directly in equities
or debt because of resource, time or knowledge constraints. Benefits include professional
money management, buying in small amounts and diversification. Mutual fund units are
issued and redeemed by the Fund Management Company based on the fund‘s net asset value
(NAV), which is determined at the end of each trading session. NAV is calculated as the
value of all the shares held by the fund, minus expenses, divided by the number of units
issued. Mutual Funds are usually long term investment vehicle though there some categories
of mutual funds, such as money market mutual funds which are short term instruments.

Stock Exchange

What is meant by a Stock Exchange?
The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‗Stock Exchange‘ as
anybody of individuals, whether incorporated or not, constituted for the purpose of assisting,
regulating or controlling the business of buying, selling or dealing in securities. Stock
exchange could be a regional stock exchange whose area of operation/jurisdiction is specified
at the time of its recognition or national exchanges, which are permitted to have nationwide
trading since inception. NSE was incorporated as a national stock exchange.

Let us take an example for a better understanding of how market forces determine stock
prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an
upward movement in its stock price. More and more people would want to buy this stock (i.e.
high demand) and very few people will want to sell this stock at current market price (i.e. less
supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price
from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there
are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd.
in the market, its price will fall down.

Pre-Independence Scenario - Establishment of Different Stock Exchange

1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as
"Dalal Street") for the purpose of transacting business.
1875 "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was
established in Bombay

Post Independence Scenario
The depression witnessed after the Independence led to closure of a lot of exchanges in the
country. Lahore Stock Exchange was closed down after the partition of India, and later on
merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in
1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable
state till 1957 when they applied for recognition under Securities Contracts (Regulations)
Act, 1956. The Exchanges that were recognized under the Act were:
1. Bombay
2. Calcutta
3. Madras
4. Ahmadabad
5. Delhi
1880's Development of cotton mills industry and set up of many others
1894 Establishment of "The Ahmadabad Share and Stock Brokers' Association"
1880 -
Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal
1908 "The Calcutta Stock Exchange Association" was formed
1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers.
1923 When recession followed, number of brokers came down to 3 and the Exchange was closed down
1934 Establishment of the Lahore Stock Exchange
1936 Merger of the Lahore Stock Exchange with the Punjab Stock Exchange
1937 Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in
stock market activities in South India with establishment of new textile mills and plantation companies
1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established
1944 Establishment of "The Hyderabad Stock Exchange Limited"
1947 "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange
Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"
6. Hyderabad
7. Bangalore
8. Indore
Many more stock exchanges were established during 1980's, namely:
1. Cochin Stock Exchange (1980)
2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982)
3. Pune Stock Exchange Limited (1982)
4. Ludhiana Stock Exchange Association Limited (1983)
5. Guwahati Stock Exchange Limited (1984)
6. Kanara Stock Exchange Limited (at Mangalore, 1985)
7. Magadha Stock Exchange Association (at Patna, 1986)
8. Jaipur Stock Exchange Limited (1989)
9. Bhubaneswar Stock Exchange Association Limited (1989)
10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989)
11. Vadodara Stock Exchange Limited (at Baroda, 1990)
12. Coimbatore Stock Exchange
13. Meerut Stock Exchange
At present, there are twenty one recognized stock exchanges in India which does not include
the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange
of India Limited (NSEIL).

Financial market and basics

What is an ‘Equity’/Share?
Total equity capital of a company is divided into equal units of small denominations, each
called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided
into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the
company then is 11 said to have 20, 00,000 equity shares of Rs 10 each. The holders of such
shares are members of the company and have voting rights.

What is a ‘Debt Instrument’?
Debt instrument represents a contract whereby one party lends money to another on pre-
determined terms with regards to rate and periodicity of interest, repayment of principal
amount by the borrower to the lender. In the Indian securities markets, the term ‗bond‘ is
used for debt instruments issued by the Central and State governments and public sector
organizations and the term ‗debenture‘ is used for instruments issued by private corporate

What is a Derivative?
Derivative is a product whose value is derived from the value of one or more basic variables,
called underlying. The underlying asset can be equity, index, foreign exchange (forex),
commodity or any other asset. Derivative products initially emerged as hedging devices
against fluctuations in commodity prices and commodity-linked derivatives remained the sole
form of such products for almost three hundred years. The financial derivatives came into
spotlight in post-1970 period due to growing instability in the financial markets. However,
since their emergence, these products have become very popular and by 1990s, they
accounted for about two-thirds of total transactions in derivative products.

What is a Mutual Fund?
A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of
India) that pools money from individuals/ corporate investors and invests the same in a
variety of different financial instruments or securities such as equity shares, Government
securities, Bonds, debentures etc. Mutual funds can thus be considered as financial
intermediaries in the investment business that collect funds from the public and invest on
behalf of the investors. Mutual funds issue units to the investors. The appreciation of the
portfolio or securities in which the mutual fund has invested the money leads to an
appreciation in the value of the units held by investors. The investment objectives outlined by
a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment
objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in
various asset classes like equity, bonds, debentures, commercial paper and government
securities. The schemes offered by mutual funds vary from fund to fund. Some are pure
equity schemes; others are a mix of equity and bonds. Investors are also given the option of
getting dividends, which are declared periodically by the mutual fund, or to participate only
in the capital appreciation of the scheme.

What is an Index?
An Index shows how the specified portfolio of share prices is moving in order to give an
indication of market trends. It is a basket of securities and the average price movement of the
basket of securities indicates the index movement, whether upwards or downwards.

What is a Depository?
A depository is like a bank wherein the deposits are securities (viz. shares, debentures, bonds,
government securities, units etc.) in electronic form.

What is Dematerialization?
Dematerialization is the process by which physical certificates of an investor are converted to
an equivalent number of securities in electronic form and credited to the investor‘s account
with his Depository Participant (DP).

What is the function of Securities Market?
Securities Markets is a place where buyers and sellers of securities can enter into transactions
to purchase and sell shares, bonds, debentures etc. Further, it performs an important role of
enabling corporate, entrepreneurs to raise resources for their companies and business ventures
through public issues. Transfer of resources from those having idle resources (investors) to
others who have a need for them (corporate) is most efficiently achieved through the
securities market. Stated formally, securities markets provide channels for reallocation of
savings to investments and entrepreneurship. Savings are linked to investments by a variety
of intermediaries, through a range of financial products, called ‗Securities‘

Which are the securities one can invest in?
_ Shares
_ Government Securities
_ Derivative products
_ Units of Mutual Funds etc., are some of the securities investors in
the securities market can invest in.

What is the role of the ‘Primary Market’?
The primary market provides the channel for sale of new securities. Primary market provides
opportunity to issuers of securities; Government as well as corporate, to raise resources to
meet their requirements of investment and/or discharge some obligation. They may issue the
securities at face value, or at a discount/premium and these securities may take a variety of
forms such as equity, debt etc. They may issue the securities in domestic market and/or
international market.

Why do companies need to issue shares to the public?
Most companies are usually started privately by their promoter(s). However, the promoters‘
capital and the borrowings from banks and financial institutions may not be sufficient for
setting up or running the business over a long term. So companies invite the public to
contribute towards the equity and issue shares to individual investors. The way to invite share
capital from the public is through a ‗Public Issue‘. Simply stated, a public issue is an offer to
the public to subscribe to the share capital of a company. Once this is done, the company
allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.

What is meant by Market Capitalisation?
The market value of a quoted company, which is calculated by multiplying its current share
price (market price) by the number of shares in issue is called as market capitalization. E.g.
Company A has 120 million shares in issue. The current market price is Rs. 100. The market
capitalisation of company A is Rs. 12000 million.

What is an Initial Public Offer (IPO)?
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It
is when an unlisted company makes either a fresh issue of securities or an offer for sale of its
existing securities or both for the first time to the public. This paves way for listing and
trading of the issuer‘s securities. The sale of securities can be either through book building or
through normal public issue.

What is a Prospectus?
A large number of new companies‘ fl oat public issues. While a large number of these
companies are genuine, quite a few may want to exploit the investors. Therefore, it is very
important that an investor before applying for any issue identifies future potential of a
company. A part of the guidelines issued by SEBI (Securities and Exchange Board of India)
is the disclosure of 23 information to the public. This disclosure includes information like the
reason for raising the money, the way money is proposed to be spent, the return expected on
the money etc. This information is in the form of ‗Prospectus‘ which also includes
information regarding the size of the issue, the current status of the company, its equity
capital, its current and past performance, the promoters, the project, cost of the project, means
of financing, product and capacity etc. It also contains lot of mandatory information
regarding underwriting and statutory compliances. This helps investors to evaluate short term
and long term prospects of the company.

What is meant by Secondary market?
Secondary market refers to a market where securities are traded after being initially offered to
the public in the primary market and/or listed on the Stock Exchange. Majority of the trading
is done in the secondary market. Secondary market comprises of equity markets and the debt

What is a Contract Note?
Contract Note is a confirmation of trades done on a particular day on behalf of the client by a
trading member. It imposes a legally enforceable relationship between the client and the
trading member with respect to purchase/sale and settlement of trades. It also helps to settle
disputes/claims between the investor and the trading member. It is a prerequisite for filing a
complaint or arbitration proceeding against the trading member in case of a dispute. A valid
contract note should be in the prescribed form, contain the details of trades, stamped with
requisite value and duly signed by the authorized signatory. Contract
notes are kept in duplicate, the trading member and the client should keep one copy each.
After verifying the details contained therein, the client keeps one copy and returns the second
copy to the trading member duly acknowledged by him.


What precautions must one take before investing in the stock?
Here are some useful pointers to bear in mind before you invest in the
_ Make sure your broker is registered with SEBI and the exchanges and do not deal with
unregistered intermediaries.
_ Ensure that you receive contract notes for all your transactions from your broker within one
working day of execution of the trades.
_ All investments carry risk of some kind. Investors should always know the risk that they are
taking and invest in a manner that matches their risk tolerance.
_ Do not be misled by market rumours, luring advertisement or ‗hot tips‘ of the day.
_ Take informed decisions by studying the fundamentals of the company. Find out the
business the company is into, its future prospects, quality of management, past track record
etc Sources of knowing about a company are through annual reports, economic magazines,
and databases available with vendors or your financial advisor.
_ If your financial advisor or broker advises you to invest in a company you have never heard
of, be cautious. Spend some time checking out about the company before investing.
_ Do not be attracted by announcements of fantastic results/news reports, about a company.
Do your own research before investing in any stock.
_ Do not be attracted to stocks based on what an internet website promotes, unless you have
done adequate study of the company.
_ Investing in very low priced stocks or what are known as penny stocks does not guarantee
high returns.
_ Be cautious about stocks which show a sudden spurt in price or trading activity.
_ Any advice or tip that claims that there are huge returns expected, especially for acting
quickly, may be risky and may to lead to losing some, most, or all of your money

DO’s and Don’ts
What Do’s and Don’ts should an investor bear in mind when
investing in the stock markets?
_ Ensure that the intermediary (broker/sub-broker) has a valid SEBI registration certificate.
_Enter into an agreement with your broker/sub-broker setting out terms and conditions
_ Ensure that you give all your details in the ‗Know Your Client‘ form.
_ Ensure that you read carefully and understand the contents of the ‗Risk Disclosure
Document‘ and then acknowledge it.
_ Insist on a contract note issued by your broker only, for trades done each day.
_ Ensure that you receive the contract note from your broker within 24 hours of the
_ Ensure that the contract note contains details such as the broker‘s name, trade time and
number, transaction price, brokerage, service tax, securities transaction tax etc. and is signed
by the Authorised Signatory of the broker.
_ To cross check genuineness of the transactions, log in to the NSE website
( and go to the trade verification facility extended by NSE at eq_trdverify.htm.
_ Issue account payee cheques/demand drafts in the name of your broker only, as it appears
on the contract note/SEBI registration certificate of the broker.
_ While delivering shares to your broker to meet your obligations, ensure that the delivery
instructions are made only to the designated account of your broker only.
_ Insist on periodical statement of accounts of funds and securities from your broker. Cross
check and reconcile your accounts promptly and in case of any discrepancies bring it to the
attention of your broker immediately.
_ Please ensure that you receive payments/deliveries from your broker, for the transactions
entered by you, within one working day of the payout date.
_Ensure that you do not undertake deals on behalf of others or trade on your own name and
then issue cheques from family members / friends‘ bank accounts.
_ Similarly, the Demat delivery instruction slip should be from your own Demat account, not
from any other family members‘/friends‘ accounts.
_ Do not sign blank delivery instruction slip(s) while meeting security pay in obligation.
_ No intermediary in the market can accept deposit assuring fixed returns. Hence do not give
your money as deposit against assurances of returns.
_ ‗Portfolio Management Services‘ could be offered only by intermediaries having specific
approval of SEBI for PMS. Hence, do not part your funds to unauthorized persons for
Portfolio Management.
_ Delivery Instruction Slip is a very valuable document. Do not leave signed blank delivery
instruction slip with anyone. While meeting pay in obligation make sure that correct ID of
authorised intermediary is filled in the Delivery Instruction Form.
_ Be cautious while taking funding form authorised intermediaries as these transactions are
not covered under Settlement Guarantee mechanisms of the exchange.
_ Insist on execution of all orders under unique client code allotted to you. Do not accept
trades executed under some other client code to your account.
_ When you are authorising someone through ‗Power of Attorney‘ for operation of your DP
account, make sure that:
_ your authorization is in favour of registered intermediary only. authorisation is only for
limited purpose of debits and credits arising out of valid transactions executed through that
intermediary only.
_ you verify DP statement periodically say every month/ fortnight to ensure that no
unauthorised transactions have taken place in your account.
_ authorization given by you has been properly used for the purpose for which authorization
has been given.
_ in case you find wrong entries please report in writing to the authorized intermediary.
_ Don‘t accept unsigned/duplicate contract note.
_ Don‘t accept contract note signed by any unauthorised person.
_ Don‘t delay payment/deliveries of securities to broker.
_ In the event of any discrepancies/disputes, please bring them to the notice of the broker
immediately in writing (acknowledged by the broker) and ensure their prompt rectification.
_ In case of sub-broker disputes, inform the main broker in writing about the dispute at the
earliest and in any case not later than 6 months.
_ If your broker/sub-broker does not resolve your complaints within a reasonable period (say
within 15 days); please bring it to the attention of the ‗Investor Grievances Cell‘ of the NSE.
_ While lodging a complaint with the ‗Investor Grievances Cell‘ of the NSE, it is very
important that you submit copies of all relevant documents like contract notes, proof of
payments delivery of shares etc. along with the complaint. Remember, in the absence of
sufficient documents, resolution of complaints
becomes difficult. Authorisation is only for limited purpose of debits and credits arising out
of valid transactions executed through that intermediary only.


Analysis and Indian
Stock market

Report By:
Rahul Singh


1. Acknowledgement
2. Preface
3. Abstract
4. Methodology
5. Limitations
6. Comparative Analysis
6.1. Sharekhan
6.2. 5 Paisa
6.3. Kotakstreet
6.4. Indiabulls
6.5. ICICI Direct
6.6. HDFC Securites
7. Requirements
8. Dematerialization
9. Conclusion


I express my sincerest gratitude and thanks to hon‘ble, Mr Manoj Singh (Assistant manager),
for whose kindness I had the precious opportunity of attaining training at Sharekhan. Under
his brilliant untiring guidance I could complete the project being undertaken on the
―Comparative Analysis of Sharekhan & other stock Broker companies.‖ successfully in time.
His meticulous attention and invaluable suggestions have helped me in simplifying the
problem involved in the work. I would also like to thank the overwhelming support of all the
people who gave me an opportunity to learn and gain knowledge about the various aspects of
the industry. I would like to thanks Mr Vijay Singh for his constant enthusiastic
encouragement and valuable suggestions without which this project would not been
successfully completed.

Rahul Singh


To maintain and cope up with the growing competition from the various online trading
providers, Sharekhan needs to find potential clients, also the new investors and satisfy their
needs. The Broad objective of the project is to equip the trainees with all the quality which is
essential to face any circumstances which can arise while providing service to the clients.
This project will accomplish to understand how the people interact with technology savvy
products and if they are ready for doing all the trading through net. The project also helps in
understanding the trend of the scripts of the particular sector (banking sector) in different
market condition. All these steps help me to understand how to cope up with different types
of people and their diversified need and satisfaction level.

To maintain and cope up with the growing competition from the various online trading
providers, Sharekhan needs to find potential customer and also target the new investors. The
project is being done to train the people about the whole procedure essential to open an online
trading account couple with demat account. The project will help in exploring the area where
there is the feasibility of acquiring more new investors. It would also help in knowing the
various competitors of the industry and exploring the areas through which competitive
advantage could be obtained.

The report is divided into various sections

About Online trading account - Since the project leads to opening of online trading
account, this section gives the details of what all services Sharekhan offers to the consumer.
This section gives the detail of how different services provided by the others online trading
account and how is Sharekhan superior from them.

Different competitors on online trading - This section gives the detail of the different
competitors and different services provided by them. Then we have compared there services
with our services.

Learning about Dematerialization - This section tells you about different concepts
regarding dematerialization. How you can get your security dematerialized?


Methodology of the project starts with:

· In the first phase we are trained and they teach us different things about market.
· After that they conduct a mock viva, in this they ask about the real life problem faced by the
· They provide leads and after that we make calls.
· Then after that we have to provide details of product and convince them
· Then we have to visit them and get the formed filled from them.
· Maintaining dairy of clients and contacting them at regular basis.

The next part knows the pattern of the banking sectors scripts. How they move with the
correspondence to the market movement and also the economy.

· Get the knowledge of technical as well as fundamental methods.
· Observe the patterns of the scripts.

The various Limitations are: -

· Lack of awareness of Stock market: - Since the area is not known before it takes lot of
time in convincing people to start investing in shares primarily in IPO‘s.
· Mostly people comfortable with traditional brokers: - As people are doing trading from
their respective brokers, they are quite comfortable to trade via phone.
· Lack of Techno Savvy people and poor internet penetration:- Since most of the people
are quite experienced and also they are not techno savvy. Also internet penetration is poor in
· Some respondents are unwilling to talk: - Some respondents either do not have time or
willing does not respond as they are quite annoyed with the phone call.
· Inaccurate Leads: - Sometimes leads are provided which had error in it which varies from
only 5 digit phone numbers to wrong phone number.
· Misleading concepts: - Some people think that Shares are too risky and just another name
of gamble but they don‘t know it‘s not at all that risky for long investors.

Comparative Analysis

Different competitors

The major players in online trading


Company Background
• Share khan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56% in
sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific
• Into broking since 80 years
• Focused on providing equity solutions to every segment
• Largest ground network of 210 Branded Share shops in 90 Cities
Online Account Types
•Classic Account / Applet: Investor in equities
•Speed Trade: Trader in equities & derivatives
Pricing for Retail Customers
Speed Trade
•Account Opening: Rs 1000 (Refundable against brokerage in Month + 1)
•Demat 1st Year: Including in Account Opening
•Initial Margin: NIL
•Min Margin Retainable: NIL
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
•Account Access Charges
Monthly Rs 500, adjustable quarterly against brokerage of Rs 9000/- for qtr
No access charges for gold customers (Above 1 lac brokerage P.A.)
Classic A/C
Account opening: 750 (lifetime)
Demat 1st year: free a/c opening
Initial margin: NIL
Minimum margin: NIL
Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes
(Negotiable based on volume).

Company Background
Indiainfoline was founded in 1995 and was positioned as a research firm In 2000 e-broking
was started under the brand name of 5 Apart from offering online trading in stock
market the company offers mutual funds online. It also acts as a distributor of various
financial services i.e. Government of India securities, Company Fixed Deposits, Insurance.
Limited ground network, present in 20 Cities Online Account Types
•Investor Terminal : Investors / Students
•Trader Terminal : Day Traders / HNI‘s
Investor Terminal
•Account Opening: Rs 500
•Demat 1st Year: Rs 250
•Initial Margin: Rs 2500(Compulsory)
•Min Margin Retainable: Rs 1000
Trading 0.10% each side + ST
Delivery 0.50% each side + ST
Trader Terminal
•Account Opening: Rs 500
•Demat 1st Year: Rs 250
•Initial Margin: Rs 5000(Compulsory)
•Min Margin Retainable: Rs 1000
Trading 0.10% each side + ST
Delivery 0.50% each side + ST
(Negotiable to 0.05% each side & 0.25%)
•Account Access Charges
Monthly Rs 800, adjustable against Brokerage
Yearly Rs 8000, adjustable against brokerage

Deal Clinchers v/s 5 Paisa

•Company Background: Not having a very positive image, relatively new in the broking
arena, limited network
•Downtime: Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency
downtime between 3 – 3:30 P.M. due to server load (as their T.T is feature heavy compared
to Speed trade charting)
•Manual Accounting: The 5 paisa accounting system is manual, Online fund transfer
through bank is not credited instantly. Limit is provided EOD for shares sold from DP, or call
Similarly limit released for shares sold under BTST is manual Delay in receiving pay-out of
clear funds from trading to Bank Account.
•Min Account Balance: Concept of Min Rs 1,000 to be maintained in form of cash /
securities to keep account active. This can be withdrawn only on closure of account.
Company Background
Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture
between Kotak Mahindra Bank and Goldman Sachs.
Online Account Types
•Twin Advantage / Green Channel: 2 DP‘s, Limit against shares
•Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction
•High Trader: 6 Times Exposure Cash & Derivatives, Auto sq off 2:55
•Cash Expressway: Spot payment, additional 0.5% charges
For Kotak FastLane / Keat Lite / Keat Desktop are trading interfaces. Keat Desktop with
advanced tools comes at a charge of Rs 500 p.m, Non refundable
•Account Opening: Rs 500
•Demat: Rs 22.5 p.m
•Initial Margin: Rs 5000(Compulsory)
•Min Margin Retainable: Rs 1000
•Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers (on
0.25% & 0.40%) have been moved to the slab wise structure wef 1/4/2004.
Deal Clinchers v/s Kotakstreet
•Rigid Account Opening Terms- No Flexibility of A/c opening charges (Rs 500) +
Compulsory margin Rs 5000/- Account opening free with Rs 10,000 Margin OR competitor
Contract Note.
•No Customization of commercial Terms- No Flexibility in Leverage – Dependent on Type
of Account (4 to 6 times only) No flexibility in Brokerage, driven by slab structure
•Many Other Charges Rs 22.5 p.m towards DP AMC charges DP incoming charges extra,
0.02% Rs 1,000 as retainable Margin to keep account active Rs 25 per call after 20 calls for
the month
•Restricted Access to Terminal Like product KEAT Desktop restricted distribution on
payment of Rs 500, Non refundable.

Company Background
IndiaBulls is a retail financial services company present in 70 locations covering 62 cities. It
offers a full range of financial services and products ranging from Equities to Insurance. 450
+ Relationship Managers who act as personal financial advisors
Online Account Type
•Signature Account: Plain Vanilla Account with focus on Equity Analysis. The equity
analysis is a paid service even for A/c holders
•Power Indiabulls: Account with sophisticated trading tools, low commissions and priority
access to R.M
Pricing of IB Accounts
Signature Account
•Account Opening: Rs 250
•Demat: Rs 200 if POA is signed, No AMC for this DP
•Initial Margin: NIL
•Brokerage: Negotiable
Power IndiaBulls
•Account Opening: Rs 750
•Demat: Rs 200 if POA is signed, No AMC for this DP
•Initial Margin: NIL
•Brokerage: Negotiable
Deal Clinchers v/s IndiaBulls
•POA for Clients DMAT
•Paid Research Services Access to a research even for an IB trading account holder is
charged a min of Rs 500 a month.
•Margin funding hoax The interest on funding starts on leveraged delivery trades from T+1
day itself @21% p.a, on a daily basis.
•The role of Relationship Manager Each RM is looked upon as a revenue generator and he
gets a % on business generated from client. This can lead to over leveraged (Interest) & high
frequency (Brokerage) trading, which may not be in the best interest of the client.

Company Background
ICICI Web Trade Limited (IWTL) maintains IWTL is an affiliate of ICICI
Bank Limited and the Website is owned by ICICI Bank Limited
Account Types
•ICICI Direct e-invest Account : Plain Vanilla Account with focus on 3 in 1 advantage.
Differentiated in services within the account
1. Cash on spot
2. MarginPlus
Premium trading interface of ICICIDirect Link is given to DBC partners and HNI‘s
•Account Opening: Rs 750
•Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr. These
schemes are introduced 3-4 times a year.
•Demat: NIL, 1st year charges included in Account Opening Plus a facility to open additional
4 DP‘s without 1st yr AMC
•Initial Margin: Nil
•Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes.
Deal Clinchers v/s ICICIDirect
•Poor online Interface Slow website interface with no real-time quotes creates dissatisfaction
among high frequency traders.
•Margin trading restriction- the margin trading system is available up to 2:45 p.m, with
outstanding net positions under margin segment automatically squared off at any time
between 2:45 – 3:30 p.m, thus no control of square off price.
•Morning Trades Issue- being one of the websites with largest no of after hour orders which
are pushed 1st thing in the morning, creates a choking of orders to the exchange, causes delay
of confirmations for new order placed during the early morning trades
•Restriction of BTST- the sale of shares purchased is restricted to T+1 day and is not
permitted on T+2 Day.
•No leverage for Delivery trades- delivery is restricted to the total money allocated into the
trading account.
•No flexibility on leverage on Intra-day trades- the leverage of 4 times is available for intra-
day trades.
•Restriction of Bank Account- the choice of bank is restricted to ICICI Bank.
•Higher Brokerage rates with slabs- the delivery brokerage is pegged at 0.75% and trading at
0.10% each side, this makes is very unviable for customers dealing in large volumes.
Although progressively the delivery and trading brokerage reduce as volumes go up.

HDFC Securities
Company Background
HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital Partners and
their associates pioneers in setting up Dial-a-share services with the largest team of Tele-
Online Account Type
HDFC Online Trading A/c : Plain Vanilla Account with focus on 3 in 1 advantage
Pricing of HDFC Account
•Account Opening: Rs 750
•Demat: NIL, 1st year charges included in Account Opening
•Initial Margin: Rs 5000/- for non HDFC Bank customers (AQB)
Trading 0.15%* each side + ST
Delivery 0.50%** each side + ST
* Rs 25 Min Brokerage per transaction
** Rs 8 Min Brokerage per transaction
Deal Clinchers v/s HDFC Securities
•Poor online Interface- apart from having no product to cater to Day-Traders, the website is plagued with downtime. The same is currently being revamped.
•Lack of focus on Broking- the core business of HDFC is Housing Finance and that of
HDFC Bank is Banking. Broking as a business is a small part of the portfolio of financial
services and hence the commitment to resources is limited.
•No Leverage - no leverage is available to clients even for Intra-Day trades, effectively all
clients are on cash and carry system.
•No flexibility in commercial terms- the delivery brokerage is pegged at 0.5% and trading at
0.15% each side, this makes it unviable for customers dealing in large volumes.
Requirement for opening online account
Sharekhan Depository Services
Dematerialization and trading in the Demat mode is the safer and faster alternative to the
physical existence of securities. Demat as a parallel solution offers freedom from delays,
thefts, forgeries, settlement risks and paper work. This system works through depository
participants (DPs) who offer Demat services and the securities are held in the electronic form
for the investor directly by the Depository. Sharekhan Depository Services offers
dematerialization services to individual and corporate investors. We have a team of
professionals and the latest technological expertise dedicated exclusively to our Demat
department, apart from a national network of franchisee, making our services quick,
convenient and efficient. At Sharekhan, our commitment is to provide a complete Demat
solution which is simple, safe and secure.
Opening a DP account with Sharekhan
· You can open a Depository Participant (DP) account, either through a Sharekhan branch or
through a Sharekhan Franchisee center.
· There is no fee for opening DP accounts with Sharekhan. However a nominal deposit
(refundable) is charged towards services which will be adjusted against all future billings.
Documents required to opening of Demat account:-
Requirement for opening Demat a\c:
All investors have to submit their proof of identity and proof of address along with the
prescribed account opening form.
1. Proof of identity: You can submit a copy of Passport, Voters ID card, Driving license or
PAN card with photograph.
2. Proof of address: You can submit a copy of Passport, Voters ID card, Driving license,
PAN card with photograph, Ration card or Bank passbook as proof of address. You must
remember to take original documents to the DP for verification.
3. Passport-size photograph: The above are mandatory requirements as per Securities and
Exchange Board of India.
Dematerialization with Sharekhan
Dematerialization is the process by which a client can get physical certificates converted into
electronic balances maintained in his account with the DP.
· Holdings in only those securities that are admitted for dematerialization by National
Securities Depository Ltd (NSDL) can be dematerialized.
· Structure of holding in the securities should match with the account structure of the
depository account. Now shares in different order of names can also be dematted.
If the shares are in the name of X and Y, the same cannot be dematerialized into the account
of either X or Y alone. However if the shares are in the name of X first and Y second, and the
account is in the name of Y first and X second, then these shares can be dematerialized in this
account. Only those holdings that are registered in the name of the account holder can be
dematerialized. Physical shares which have not been transferred and are still there with a
transfer deed cannot be dematted. Only a few companies have been given the permission to
offer Transfer-cum-Demat.

Rematerialization is the process by which a client can get his electronic holdings converted
into physical certificates. The client has to submit the Rematerialization request to the DP
with whom he has an account along with a Remat request form. The physical shares will be
posted by the company directly to the clients.
For all sales made by clients, the shares will have to be given to the broker, so that the Pay In
can be made by the broker to the stock exchange concerned. For that it's essential that the
shares be transferred to the account of the broker well before the deadline date. You must
confirm with your broker the settlement date and settlement number and then submit your
instructions to your DP. Also it's important to give the instructions to your DP as early as
Pledge enables you to obtain loans against your dematerialized shares. So you get liquidity
without having to sell your shares. A highly simplified procedure may be availed of for
pledging of securities in the electronic mode. The pledged securities continue to be reflected
in the DP account of the clients but the concerned securities are "blocked" and cannot be used
for any transactions. As and when the pledge is to be removed, based on confirmations
received from both the pledgor and the pledgee, the blocked securities will be released to
"Free Balance" of the account holder. A very big advantage of using pledges in the electronic
mode is that the securities continue to be in your account and therefore all benefits—viz
Dividend, Bonus and Rights--accrue to the holder, ie you and not the bank (pledgee).
Corporate Benefits
Corporate benefits are benefits given by a company to its investors. These may be either
monetary benefits like dividend, interest etc or non-monetary benefits like bonus, rights etc.
NSDL facilitates distribution of corporate benefits. It's important to mention your correct
MICR No and attach copy of the cheque leaf with your account opening form. NSDL is
planning to distribute all cash corporate benefits to bank accounts directly.

Learning about dematerialization
How to convert your security to Demat form:-
Process of conversion of securities into the Demat form Securities specified as being eligible
for dematerialization by the depository in its bye laws and as under the SEBI (Depositories
and Participants) Regulations, 1996 (the Regulations) can be converted or issued in a
dematerialized form. The process of conversion of securities into a dematerialized form or the
issuance of the same in a dematerialized form can be explained thus:
1. Firstly, the issuer company, whose securities are eligible for dematerialization, has to enter
into an agreement with a depository for dematerialization of securities already issued, or
proposed to be issued to the public or existing shareholders .
2. The investor is given an option to hold the securities in a dematerialized form and it is his
prerogative to exercise the option to hold the securities in that manner.
3. The depository enters into an agreement with the participants who are the agents of the
depository and co-functionaries in the process of dematerialization of securities.
4. Any person can then enter into an agreement, through the participant, with the depository
for availing the services provided by the depository.
5. upon the entering into such agreement with the depository, the person has to surrender the
certificate pertaining to the securities sought to be Dematerialized to the issuer. This
surrender is affected in the following manner
(i) The person (beneficial owner) who has entered into an agreement with the participant for
dematerialization of the securities has to inform the participant about the details of the
certificate of such securities.
(ii) The beneficial owner has to then surrender the said certificate to the participant.
(iii) The participant informs the depository about the particulars of the securities to be
dematerialized and the agreement entered into between him and the beneficial owner.
(iv) The participant then transfers the certificate pertaining to the said securities to the issuer
along with the details and particulars of the securities.
(v) These certificates are mutilated upon receipt by the issuer and substituted in the records
against the name of the depository, who is the registered owner of the said securities. A
certificate to this effect is sent to the depository and all stock exchanges where the security is
(vi) Subsequent to this, the depository enters the name of the person who has surrendered the
certificate of security as the beneficial owner of the dematerialized securities.
(vii) The depository also enters the name of the participant through whom the process has
been carried out and sends an intimation of the same to the said participant.
6. Once the aforesaid process of dematerialization is carried out, the depository has the
responsibility to maintain all the records pertaining to the securities that have been

Benefits of Depository System:-
In the depository system, the ownership and transfer of securities takes place by means of
electronic book entries. At the outset, this system rids the capital market of the dangers
related to handling of paper. NSDL provides numerous direct and indirect benefits, like:
· Elimination of bad deliveries- In the depository environment, once holdings of an investor
are dematerialized, the question of bad delivery does not arise i.e. they cannot be held "under
objection". In the physical environment, buyer was required to take the risk of transfer and
face uncertainty of the quality of assets purchased. In a depository environment good money
certainly begets good quality of assets.
· Elimination of all risks associated with physical certificates- Dealing in physical securities
have associated security risks of theft of stocks, mutilation of certificates, loss of certificates
during movements through and from the registrars, thus exposing the investor to the cost of
obtaining duplicate certificates and advertisements, etc. This problem does not arise in the
depository environment.
· No stamp duty - for transfer of any kind of securities in the depository. This waiver extends
to equity shares, debt instruments and units of mutual funds.
· Immediate transfer and registration of securities- In the depository environment, once the
securities are credited to the investors account on pay out, he becomes the legal owner of the
securities. There is no further need to send it to the company's registrar for registration.
Having purchased securities in the physical environment, the investor has to send it to the
company's registrar so that the change of ownership can be registered. This process usually
takes around three to four months and is rarely completed within the statutory framework of
two months thus exposing the investor to opportunity cost of delay in transfer and to risk of
loss in transit. To overcome this, the normally accepted practice is to hold the securities in
street names i.e. not to register the change of ownership. However, if the investors miss a
book closure the securities are not good for delivery and the investor would also stand to
loose his corporate entitlements.

· Faster settlement cycle- The exclusive demat segments follow rolling settlement cycle of
T+2 i.e. the settlement of trades will be on the 2nd working day from the trade day. This will
enable faster turnover of stock and more liquidity with the investor.
· Faster disbursement of non cash corporate benefits like rights, bonus, etc- NSDL provides
for direct credit of non cash corporate entitlements to an investors account, thereby ensuring
faster disbursement and avoiding risk of loss of certificates in transit.
· Reduction in brokerage by many brokers for trading in dematerialized securities- Brokers
provide this benefit to investors as dealing in dematerialized securities reduces their back
office cost of handling paper and also eliminates the risk of being the introducing broker.
· Reduction in handling of huge volumes of paper
· Periodic status reports to investors on their holdings and transactions, leading to better
· Elimination of problems related to change of address of investor, transmission, etc- In case
of change of address or transmission of Demat shares, investors are saved from undergoing
the entire change procedure with each company or registrar. Investors have to only inform
their DP with all relevant documents and the required changes are effected in the database of
all the companies, where the investor is a registered holder of securities.
· Elimination of problems related to selling securities on behalf of a minor: A natural
guardian is not required to take court approval for selling Demat securities on behalf of a
· Ease in portfolio monitoring: Since statement of account gives a consolidated position of
investments in all instruments.

Disadvantages of Dematerialization
The disadvantages of dematerialization of securities can be summarized as follows:
A. Trading in securities may become uncontrolled in case of dematerialized securities.
B. It is incumbent upon the capital market regulator to keep a close watch on the trading in
dematerialized securities and see to it that trading does not act as a detriment to investors.
The role of key market players in case of dematerialized securities, such as stock-brokers,
needs to be supervised as they have the capability of manipulating the market.
C. Multiple regulatory frameworks have to be confirmed to, including the Depositories Act,
Regulations and the various Bye Laws of various depositories. Additionally, agreements are
entered at various levels in the process of dematerialization. These may cause anxiety to the
investor desirous of simplicity in terms of transactions in dematerialized securities. However,
the advantages of dematerialization outweigh its disadvantages and the changes ushered in by
SEBI and the Central Government in terms of compulsory dematerialization of securities are
important for developing the securities market to a degree of advancement. Freely traded
securities are an essential component of such an advanced market and Dematerialization
addresses such issues and is a step towards the advancement of the market.

Depository System (working model)
NSDL carries out its activities through various functionaries called business partners who
include Depository Participants (DPs), Issuing companies and their Registrars and Share
Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. NSDL is
electronically linked to each of these business partners via a satellite link through Very Small
Aperture Terminals (VSATs) or through Leased land lines. The entire integrated system
(including the electronic links and the software at NSDL and each business partner's end) is
called the "NEST" [National Electronic Settlement & Transfer] system.

Indian economy has been globalized and the capital market has been linked to the
international financial market. Foreign individuals and institutional investors have
encouraged participating into it. So, there is a need for raising the Indian Capital market in to
the international standards in terms of efficiency and transparency. One such measure is the
passing out of the Depository Act during the year 1996. Dematerialization of securities and
under this system is one of the major steps aimed at improving and modernizing the capital
market and enhancing the levels of investor‘s protection measures which aims at eliminating
the bad deliveries and forgery of shares and expediting the transfer of shares. The draw back
of the old system and the pool proof measures sought to improve efficiency in transfer and
transparency standards prompted to evaluate the functioning of the dematerialization process
and to focus on the 8developments of the depository system in the Indian capital market.
The study showed that there is a growth in the shares included in the Dematerialization
process both in terms of volume of shares and value of shares.

· Securities Market (Basic) Module:--NCFM
· Economic Times.
· Training Kit Provided by the Sharekhan.
· Economic times


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