Summer Training Project On

“Overall Study Of Online-Trading

In

Kotak Securities Ltd.”

SESSION 2009-11

Submitted under the partial fulfillment of the requirements for the Two
Year (F/T) PGDM programme 2009 - 2011

UNDER SUPERVISION OF: SUBMITTED BY:

Ms. Rajshree Singh Devashish Kanoo
Lecturer S.M.S,Varanasi PGDM/15/034

1
 SCHOOL OF MANAGEMENT SCIENCES, VARANASI

Summer Training Project On

“Overall Study of online-Trading In

Kotak Securities Ltd.”

Submitted To: Submitted By:

Ms. Rajshree Singh Devashish kanoo
Lecturer (SMS, Varanasi) PGDM/15/034

2
 DECLARATION

I hereby declare that this field survey report titled “Overall Study Of
Online-Trading In Kotak Securities Ltd.” is based on original study
conducted by me under guidance of Ms. Rajshree Singh

I declare that the information’s presented in this survey report is correct

to the best of knowledge. This summer training report has not been

published anywhere else.

Place: Varanasi

Date: July 05, 2010 DEVASHISH KANOO

3
 ACKNOWLEGEMENT

It gives me great pleasure to express my deep scene of gratitude and sincere

appreciation to Mr. Shashi Kant Roy (Branch Manager), KOTAK SECURITIES LTD.
Varanasi and Mr. Anand Tripathi (Cluster), KOTAK SECURITIES LTD. Varanasi for
providing me the opportunity to work with the renowned organization and
enabling me to gain practical knowledge in the field of Finance and Operations.

I also owed my profound gratitude to my field guide Mr. Ankur Jayswal (Assistant
Manager- Client Acquisition) and Mr. Om Singh (Assistant Manager- Client
Acquisition) for their guidance during the duration of project. I wish to express my
most sincere thanks to all the staff members of KOTAK SECURITIES LTD. Sigra
Branch Varanasi.

A special note of thanks is also reserve to, Training and Placement Cell School Of
Management Sciences, Varanasi .Moreover I express my wholehearted and sincere
thanks to Prof. P.N. Jha (Director, SMS Varanasi) for providing necessary facilities
needed to conduct this study.
I am also highly indebted to Ms Rajshree Singh (Lecturer) School Of Management
Sciences, Varanasi for his valuable guidance, constructive suggestions, inspiring
criticism, constant help and tremendous encouragement rendered during the
course of the preparations of this project.
Finally, I thank “School of Management Sciences” Varanasi for offering me this
project during my post Graduate Studies.

DEVASHISH KANOO

PREFACE

4
For management career, it is important to develop managerial skills. In order to

achieve positive and concrete results, along with theoretical concepts, the

exposure of real life situation existing in corporate world is very much needed. To

fulfill this need, this practical training is required.

I took training in KOTAK SECURITIES LTD. located in VARANASI. It was my fortune

to get training in a very healthy atmosphere. I got ample opportunity to view the

overall working of the stock exchange.

This report is the result of my 56 days of summer training in KOTAK SECURITIES

LTD., as a part of PGDM. The subject of my report is- Online trading.

5
 Contents

CHAPTER -1
1. Corporate profile 07 --35
2. Introduction
(A) Capital Market 36 --38

CHAPTER -2
3. Stock Exchanges 39 --41

CHAPTER -3
4. Share Trading 42 --43

CHAPTER -4
5. OnLine Trading 44 --45
6. Growth of On Line Trading in INDIA 46 --91

CHAPTER -5
7. Research Methodology 92

CHAPTER -6
8. Analysis and Interpretation 93 --108
9. Finding 109

CHAPTER-7
10. Conclusion 110
11. Suggestion 111 --112
12. Limitations 113

CHAPTER -8
13. Bibliography 114

14. Annexure 115 --118

6
 The Kotak Mahindra Group
Kotak Mahindra is one of India's leading
financial organizations, offering a wide
range of financial services that
encompass every sphere of life. From
commercial banking, to stock broking,
to mutual funds, to life insurance, to
investment banking, the group caters to
the diverse financial needs of individuals
and corporates. Kotak Mahindra is one
of India's leading financial
conglomerates, offering complete
financial solutions that encompass every
sphere of life. From commercial
banking, to stock broking, to mutual
funds, to life insurance, to investment
banking, the group caters to the
financial needs of individuals and
corporates.

The group has a net worth of over Rs.

7,100 crore and has a distribution
network of branches, franchisees,
representative offices and satellite
offices across cities and towns in India
and offices in New York, London, San
Francisco, Dubai, Mauritius and
Singapore. The Group services around
6.5 million customer accounts.

7
 Their Story
The Kotak Mahindra Group was born in
1985 as Kotak Capital Management
Finance Limited. This company was
promoted by Uday Kotak, Sidney A. A.
Pinto and Kotak & Company.
Industrialists Harish Mahindra and
Anand Mahindra took a stake in 1986,
and that's when the company changed
its name to Kotak Mahindra Finance
Limited.

8
The journey so far

9
In October 2005, Kotak Group acquired
the 40% stake in Kotak Prime held by
Ford Credit International (FCI) and FCI
acquired the stake in Ford Credit Kotak
Mahindra (FCKM) held by Kotak Group.

In May 2006, Kotak Group bought 25%

stake held by Goldman Sachs in Kotak
Capital and Kotak Securities

10
 Corporate Identity

The symbol of the infinite ka reflects

global Indian personality. The ka is
uniquely Indian while its curve forms
the infinity sign, which is universal. One
of the basic tenets of the economist is
that man’s needs are unlimited. The
infinite ka symbolizes that we have
infinite number of ways to meet those
needs

Key group companies

and their businesses

11
 Kotak Mahindra Bank

The Kotak Mahindra Group's flagship

company, Kotak Mahindra Finance Ltd
which was established in 1985, was
converted into a bank- Kotak Mahindra
Bank Ltd in March 2003 becoming the
first Indian company to convert into a
Bank. Its banking operations offer a
central platform for customer
relationships across the group's various
businesses. The bank has presence in
Commercial Vehicles, Retail Finance,
Corporate Banking, Treasury and
Housing Finance.

Kotak Mahindra
Capital Company-

Kotak Mahindra Capital Company

Limited (KMCC) is India's premier
Investment Bank. KMCC's core business
areas include Equity Issuances, Mergers
& Acquisitions, Structured Finance and

12
Advisory Services.

Kotak Securities-

Kotak Securities Ltd. is one of India's

largest brokerage and securities
distribution houses. Over the years,
Kotak Securities has been one of the
leading investment broking houses
catering to the needs of both
institutional and non-institutional
investor categories with presence all
over the country through franchisees
and coordinators. Kotak Securities Ltd.
offers online (through
www.kotaksecurities.com) and offline
services based on well-researched
expertise and financial products to non-
institutional investors.

Kotak Mahindra Prime-

Kotak Mahindra Prime Limited (KMP)

(formerly known as Kotak Mahindra
Primus Limited) has been formed with

13
the objective of financing the retail and
wholesale trade of passenger and multi
utility vehicles in India. KMP offers
customers retail finance for both new
as well as used cars and wholesale
finance to dealers in the automobile
trade. KMP continues to be among the
leading car finance companies in India.

Kotak Mahindra Asset

Management Company-
Kotak Mahindra Asset Management
Company Kotak Mahindra Asset
Management Company (KMAMC), a
subsidiary of Kotak Mahindra Bank, is
the asset manager for Kotak Mahindra
Mutual Fund (KMMF). KMMF manages
funds in excess of Rs 16,100 crore and
offers schemes catering to investors
with varying risk-return profiles. It was
the first fund house in the country to
launch a dedicated gilt scheme
investing only in government securities.

Kotak Mahindra Old

14
Mutual Life Insurance
Limited-
Kotak Mahindra Old Mutual Life
Insurance Limited is a joint venture
between Kotak Mahindra Bank Ltd. and
Old Mutual plc. Kotak Life Insurance
helps customers to take important
financial decisions at every stage in life
by offering them a wide range of
innovative life insurance products, to
make them financially independent.

Kotak Securities Ltd. is India's leading

stock broking house with a market
share of close to 9 % as on 31st March
2007. Kotak Securities Ltd. has been the
largest in IPO distribution. Kotak
Securities Ltd is also a depository
participant with National Securities
Depository Limited (NSDL) and Central
Depository Services Limited (CDSL),
providing dual benefit services wherein
the investors can use the brokerage
services of the company for executing
the transactions and the depository

15
services for settling them. kotak
Securities Ltd.

Organization Structure
Mr. Uday Kotak

MD,Kotak Group

Mr. Prashant Prabhakaran

Vice-president Kotak Securities

Mr. Sanjay Singh

State Head

Kotak Securities Ltd. Lucknow.

Mr. Anand Tripathi

Cluster Head,

Kotak Securities Ltd. Varanasi

16
 Mr. Sashi Kant Roy

Br. Manager

Kotak Securities Ltd. Varanasi

 To become the Global Indian

Financial Services Brand.

 To be the most preferred

Employer in Financial Services.

 To be the most trusted Financial

Services Company.

 Value Creation rather than size

alone will be our business driver.

17
 LOCATION

 Registered Office

Kotak Securities Ltd

Bakhtawar, 1st Floor, 229,

Nariman Point, Mumbai - 400021.

 Corporate Office

Kotak Securities Ltd

2nd floor, Amandeep Building

18
 14, Kasturba Gandhi marg

New Delhi - 110001.

 Branch Office-

Kotak Securities Ltd.

1st Floor, Arihant Complex

Sigra, Varanasi – 221001

Kotak Securities Ltd.

Kotak Securities Ltd. is India's
leading stock broking house with a
market share of close to 14 % as on 31st
March 2010. Kotak Securities Ltd. has
been the largest in IPO distribution.

19
Kotak Securities Ltd is also a depository
participant with National Securities
Depository Limited (NSDL) and Central
Depository Services Limited (CDSL),
providing dual benefit services wherein
the investors can use the brokerage
services of the company for executing
the transactions and the depository
services for settling them. Kotak
Securities Ltd. Is further divided as-

Kotak Securities Ltd.

Kotak FPG(Financial
Off-line Planning
Division Group) \ PMS

Kotak Securities has 813

outlets servicing more than 3, 15,000
customers and coverage of 277 Cities.

20
Kotaksecurities.com, the online division
of Kotak Securities Limited offers
Internet Broking services and also
online IPO and Mutual Fund
Investments. It has 147 Branches all
over India.
Kotak Securities Limited
manages assets around 2300 crores of
Assets Under Management (AUM) .The
portfolio Management Services provide
top class service , catering to the high
end of the market. Portfolio
Management from Kotak Securities
comes as an answer to those who
would like to grow exponentially on the
crest of the stock market, with the
backing of an expert.

KEAT Software

(Kotak Securities E-
Trading access Terminal)

It is the software which enables

you which enable you to have a touch

21
with the direct to the market. It shows
the live ticker rates, which will help the
investor to track market movement.
Orders can be placed along with that
the order status can be checked .It
easily provide several other information
which can serve you the best.

Kotak Securities Research Centre

It is the special research cell where
some of India's finest financial analysts
bring you intensive research reports on
how the stock market is faring, when is
the right time to invest, when to
execute your order and more.
Depending on what kind of
investor you are, we bring you
fundamental or basic research and
technical research. As an investor with
Kotak Securities, you get access to

22
these research reports exclusively.

Backed by expertanalyst recommendations.

Kotak Group Products &

Services:
 Bank
 Life Insurance
 Mutual Fund
 Car Finance
 Securities
 Institutional Equities
 Investment Banking
 Kotak Mahindra International
 Kotak Private Equity
 Kotak Realty Fund

23
 Our Accolades include:

 UTI MF – CNBC TV18 Financial Advisor Awards - Best Performing

Equity Broker (National) for the year 2009
 Best Brokerage Firm in India by Asia0money in 2009, 2008, 2007
& 2006
 Finance Asia Award (2009)-Best Brokerage Firm In India
 Best Performing Equity Broker in India – CNBC Financial Advisor
Awards 2008
 Avaya Customer Responsiveness Awards (2007 & 2006) in
Financial Services Sector
 The Leading Equity House in India in Thomson Extel Surveys
Awards for the year 2007
 Euromoney Award (2007 & 2006) - Best Provider of Portfolio
Management: Equities
 Euromoney Award (2005)-Best Equities House In India
 Finance Asia Award (2005)-Best Broker In India
 Finance Asia Award (2004)- India's best Equity House
 Prime Ranking Award (2003-04)- Largest Distributor of IPO's
 
We have been the first in providing many products and services which
have now become industry standards. Some of them are:

 Facility of Margin Finance to the customers for online stock trading

 Investing in IPOs and Mutual Funds on the phone
 SMS alerts before execution of depository transactions
 Mobile application to track portfolio of your investments in stock
market

24
  AutoInvest - A systematic investing plan in Equities and Mutual funds
Provision of margin against securities automatically against shares in
your Demat account
 
We have a full-fledged research division involved in Macro Economic
studies, Sectoral research and Company Specific Equity Research which
publishes in-depth stock market analysis. This combined with a strong and
well networked sales force which helps deliver current and up to date
market information and news.

We are also a depository participant with National Securities

Depository Limited (NSDL) and Central Depository Services Limited (CDSL),
providing dual benefit services wherein the investors can avail our stock
broking services for executing the transactions and the depository services
for settling them. We process more than 400000 trades a day which is much
higher even than some of the renowned international brokers.

Our network spans over 400 cities with 1113 outlets. Kotak Securities
Limited has Rs. 2300 crore of Assets Under Management (AUM) as of 31
March, 2010. The portfolio Management Service provides top class service,
catering to the high end of the market. Portfolio Management from Kotak
Securities comes as an answer to those who would like to grow
exponentially on the crest of the stock market, with the backing
expert.

Why Kotak
Securities?

Welcome to Kotak
Securities. We see investing from
your perspective, and make

25
recommendations based on your
needs. One of our important goals
is to simplify investing for you,
along with this we also provide long
term values to our customers.
We have a million
reasons for you to choose us. Listed
below are a few:

Stability: We are a 100%

subsidiary of Kotak Mahindra Bank
and one of the oldest and largest
stock broking firms in the Industry.
We have been the first and only
NBFC to receive the license to be
converted into a bank.
Innovators in the
Industry: We have been the
first in providing many products
and services which have now
become industry standards.

 UTI MF – CNBC TV18 Financial

Advisor Awards - Best
Performing Equity Broker
(National) for the year 2009
 First to provide Margin
Financing to the customers
 First to enable investing in
IPOs and Mutual Funds on the
phone
 Providing SMS alerts before
execution of depository
transactions
 Launching of Mobile

26
 application to track portfolio
 AutoInvest - A systematic
investing plan in Equities and
Mutual fund
 Provision of margin against
securities automatically
against shares in your Demat
account

Reliability:
Our accolades are a testimony
to our services and high standards.
We have been awarded as:

 Best Brokerage Firm in India

by Asiamoney in 2009, 2008, 2007 &
2006
 Best Brokerage Firm in India
for 2009 by FinanceAsia
 Best Performing Equity
Broker in India – CNBC Financial
Advisor
Awards 2008
 Avaya Customer
Responsiveness Awards
(2007) in Financial Services
Sector

 The Leading Equity House in

India' in Thomson Extel Surveys
Awards
for the year 2007
 Euromoney Award (2006 &
2007) - Best Provider of Portfolio
Management : Equities

27
Value: Whether you are a
customer with a small or large
wallet size, you can expect us to
bring value to you in every form.

 Quality Research
 Quick trade execution
 Low brokerages
 Accounts that suit your
investment profile
 Risk Profiler
 Superior Customer Service

Service: We believe in high

standards of service and that's
precisely what we offer. It's an
honour to be awarded the most
customer responsive company
award in the Financial Institution
sector by AVAYA Global Connect
Award both in 2006 and 2007

Robust Technology:
We have developed our own
proprietary trading platform which
is robust and among the best in the
industry. We have more than 150
technology professionals constantly
working on upgrading and speeding
up all our systems.

Centralised Risk

28
Management
System: Unlike many other
players we have a centralised risk
management system. This allows us
to offer the same levels of service to
customers across all locations.

Exceptional
Research: Unlike most other
competitors we have our own in
house research team. Our in house
research team is among the best in
the industry and they have years of
experience in the financial markets.
They scan through the plethora of
stocks and find the scrips that have
a high potential of providing you
good returns.
Our investors get research
Technical, Fundamental,
Derivatives, Macro-economic and
mutual fund research.

29
30
KEAT
If you are a first time-investor, use this free online tool to monitor what is
happening in the market and also view your gains and losses in real-time.

KEAT Pro
KEAT Pro, a free, easy-to-use integrated web based trading platform allows online
trading customers to trade in Equity, Derivatives and Currency Derivatives. KEAT
Pro is a high speed trading platform allows you to monitor the market real time.
You can check live market rates of scrips/contracts in NSE , BSE & NSE Currency,
create multiple watchlists and simultaneously place orders, view order reports,
view positions etc.

KEAT Premium
KEAT Premium is an exclusive online tool that makes extensive use of detailed
technical charts to help you monitor what is happening in the market. It also
enables you to view your gains and losses in real-time.

KEAT Premium
As a Power Trader, we understand that you demand powerful, flexible tools, and a
higher level of service. That's why we have created KEAT Premium an exclusive
online tool that lets you monitor what is happening in the market and view your
gains and losses in real-time. KEAT Premiums is available only to online trading
customers.

31
Features of KEAT Premium
 Real time streaming data
watch the market in real time with free streaming quotes
 Customizable
KEAT lets you create your own personalized view of the market so you can
watch the data you want -including intraday charts, EOD charts(right from NSE
inception),scrip alerts and much more.
 Trade on the cash as well as the derivative market

 Pay nominal charges of just Rs.500 per month

Benefits of KEAT Premium

 View specific charts, 52 Indicators for Technical Analysis, Derivative Chains,

Multiple Watchlists
 View unlimited scrips and Intraday and historical charts for a scrip
 Set scrip alerts
 Use charting tools
 View the graphs type you want to
 See derivative chains
 See online order and trade confirmations
 View dynamic net positions
 Dynamic profit and loss
 Select indices/sectors or business groups

All this and more so you can manage your portfolio dynamically, take advantage
of potential opportunities as soon as they present themselves, and get in step
with market trends.

32
KEAT
The stock market constantly changes. That's why we bring you KEAT-Kotak
Securities E-trading Acess Terminal, a free, easy-to-use online tool for online trading
customers, KEAT lets you monitor what is happening in the market and view your
gains and losses in real-time.

Features of KEAT
 Real time streaming data
watch the market in real time with free streaming quotes
 Customisable - KEAT lets you create your own personalised view of
the market so you can watch the data you want, including intraday charts,
End Of the Day charts (right from NSE inception), scrip alerts and much more
 Trade on the cash as well as the derivatives market
 Pay nominal charges of just Rs.500 per month

Benefits from KEAT

 View specific charts, 52 Indicators for Technical Analysis, Derivative

Chains, Multiple Watchlists
 View unlimited scrips and Intraday and historical charts for a scrip
 Set scrip alerts
 Use charting tools
 View the graphs type you want to
 See derivative chains
 See online order and trade confirmations
 View dynamic net positions
 Dynamic profit and loss
 Select indices/sectors or business groups
All these and more, so you can manage your portfolio dynamically, take
advantage of potential opportunities as soon as they present themselves, and

33
 get in step with market trends.

Access KEAT

As a Kotak Securities client, you can get access to KEAT easily. You can download
the applet version every day or you may download and install the KEAT exe on
your machine once and for all. Just connect to the net and start the exe to witness
powerful trading.

Access of KEAT is available only to the customers of Kotak Securities

KEAT Pro
KEAT Pro, a free, easy-to-use integrated web based trading platform allows online
trading customers to trade in Equity, Derivatives and Currency Derivatives. KEAT
Pro is a high speed trading platform allows you to monitor the market real time.
You can check live market rates of scrips/contracts in NSE , BSE & NSE Currency,
create multiple watchlists and simultaneously place orders, view order reports,
view positions etc.

It's an online trading platform in which you can view positions, select indices,
sectors, view order confirmations and much more.

Features of KEAT Premium

 Real time streaming data - Watch the market at real time with free
streaming quotes from NSE, BSE & NSE Currency. Available information
also has details of Market Lot, Top Gainers/Losers, Indices Update, Top
Active Scrips, Option Calculator.

 Live Account Information - Track your account information live, view

placed orders, trade confirmation, Limits, Positions, Changing profit and

34
 loss etc.

 Customizable - KEAT Pro lets you create your own personalized view of
the market so you can watch the data you want. You can create multiple
watch lists that can have upto 50 scrips in each of them, these watch list
can be set in tabs.

Benefits from KEAT

Premium

 Set multiple watch lists

 Create tab-wise access to watch list
 View placed order and trade confirmation online
 Select indices/sectors or business groups
 Trade long contracts
 Facility to sell from existing stock
 Limits, Positions tabs available in the Risk Report
 View changing profit and loss
 View last 3 days placed orders
 Attractive Graphical User Interface (GUI)
 Customize User Interface
 View live Market Depth
All these and much more, so you can manage your portfolio actively, take
advantage of potential opportunities and move ahead with market trends.

Access to KEAT Premium

As a Kotak Securities online trading customer, you can easily get free access to
KEAT Pro. Only you need to do is download the Desktop application and install it on
your machine. Just be connected to the internet and start the application to
witness Pro speed trading.

Access to KEAT Pro is available only to the customers of Kotak Securities

35
36
Competitive Brokerages

"One loses money in the market, not because of the brokerage paid, but due to bad
investments and bad advice"

Though rated as the best broker in India, we still offer the most competitive
brokerage rates in the Industry. Our products provide an ideal mix of brokerage
rates and services.

We provide rates as low as 0.18% for delivery and 0.03% for Intraday trades.

BROKERAGE STRUCTURE FOR INTERNET BASED TRADING

Delivery
 
< 1lakh 0.59% Gateway A/C
1 - 5 lakh 0.55%  
5 - 10 lakh 0.45%  
10 - 20 lakh 0.36%  
20 - 60 lakh 0.27%  
60 lakh - 2 crore 0.23%  
> 2 crore 0.18% Privilege A/C
 
Intraday brokerages
 
< 25 lakhs 0.06% both sides Gateway A/C

25 lakhs - 2 crores 0.05% both sides  

2 crores - 5 crores 0.04% both sides  

> 5 crores 0.03% both sides Privilege A/C

Options

37
Futures
  Intraday brokerages Settlement  
Minimum Minimum
Monthly
< 2 crores Intraday0.07% Settlement
both sides Brokerage Brokerage
0.09% both sides PerGateway A/C
Premium  
Brokerage% Brokerage% Per Lot Lot
2Volume
- 5.5 crores 0.045% both sides (Intraday)
0.073% both sides
(Settlement)  
5.5 - 10
Upto 4Lacscrores 2.5 0.036% both2.5 sides 0.046% both sides
100 100  
Gateway
10 - 25 crores 0.027% both sides 0.046% both sides Privilege A/C
4Lacs-11Lacs
> 25 crores 2.25 0.023% both
2.5 sides 100 100
0.032% both sides   

11Lacs-20Lacs 1.8 2.3 100 100  

20Lacs-
1.35 2.3 80 100 Privilege
50Lacs
< 50Lacs 1.15 1.6 70 100  

Here Premium Volume is considered as (Premium x Lot Size x No. of Lots). As

per this new structure you will be charged either a fixed minimum brokerage
per lot or the new brokerage rate based on the monthly premium value slabs
you achieve, whichever is higher. Kindly note that this new brokerage structure
for option contracts will be applicable with effect from 23rd February 2007.

38
S-STRENGTH

Innovators in the Industry:

39
 First to provide Margin Financing to the customers.
 First to enable investment in IPO’s and Mutual Funds on the phone.
 Providing SMS alerts before execution of depository transactions.
 Launching of Mobile application to track portfolio.
 Auto Invest - A systematic investing plan in Equities and Mutual
fund.
 Provision of margin against securities automatically, against shares
in your Demat account.

Reliability: Their accolades are a testimony to their services and high

standards. They have been awarded as:
 Best Performing Equity Broker in India – CNBC Financial Advisor
Awards 2008
 Avaya Customer Responsiveness Awards (2007) in Financial
Services Sector
 Best Brokerage Firm in India" by Asiamoney in 2007
 The Leading Equity House in India' in Thomson Extel Surveys Awards
for the year 2007
 Euromoney Award (2006 & 2007) - Best Provider of Portfolio Management:
Equities

Large Presence:
Present in 321 cities with 877 offices all over the country. Their employee
strength extends beyond 5100.

Exceptional Research:
Unlike most other competitors they have their own in house research team.

KEAT Software

40
 It is the software which enables you which enable you to have a touch with
the direct to the market. It shows the live ticker rates, which will help the investor
to track market movement. Orders can be placed along with that the order status
can be checked .It easily provide several other information which can serve you the
best.

Superior Customer Service

W-WEAKNESS-
 High account opening charges
 Low Market Penetration.

O - OPPORTUNITY
 Opportunity to Tap the Trading in growing Capital Market Segment.
 To be best in Providing Diversified Financial Services.

T-THREATS
 From it’s leading competitors.
 New growing Brokerage houses create a threat to Maintain it’s
position

41
42
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. Financial regulators ensure that investors are
protected against fraud. 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,
liquidity of capital market is an important factor affecting growth.

Since projects require long term finance, but on the other hand, the
investor may not like to relinquish control over their savings for a long time. A liquid
stock market ensures a quick exit without incurring heavy losses or costs. Thus
development of efficient market system is necessary for creating conductive
climate for investment and economic growth.

Capital market Segment – Primary And Secondary

Broadly , the 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.

43
Primary
A primary offering, such as with a corporate bond, means you are buying it
directly from the issuer, at par value, usually. A secondary market is where you sell
or buy existing issues. I.E. If you bought a bond last year, now need to get your
principal, you can sell it in the secondary market. You may not get par value. If rates
are up since you bought the bond, then you will likely have to sell it at a discount to
be able to get rid of it. If rates have fallen since you bought it, you could get a
premium for it.

Secondary
The market where securities are traded after they azre initially offered in the
primary market. Most trading is done in the secondary market. To explain further, it
is trading in previously issued financial instruments. An organized market for used
securities. Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond
markets, over-the-counter markets, residential mortgage loans, governmental
guaranteed loans etc

Secondary Market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the Stock
Exchange. Majority of the trading is done in the secondary market. Secondary
market comprises of equity markets and the debt markets. For the general
investor, the secondary market provides an efficient platform for trading of his
securities. For the management of the company, Secondary equity markets serve
as a monitoring and control conduit—by facilitating value-enhancing control
activities, enabling implementation of incentive-based management contracts,
and aggregating information (via price discovery) that guides management
decisions.

BRIEF ABOUT THE STOCK EXCHANGES

Stock Exchange 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.

44
MEANING OF STOCK EXCHANGE
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. Stock 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. Usually there is a central location at least for
recordkeeping, but trade is less and 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 by members only. The initial offering of
stocks and bonds to investors is by definition done in the primary market and
subsequent trading is done in the secondary market. A stock exchange is often the
most important component of a stock market. Supply and demand in stock markets
is driven by various factors which, as in all free markets, affect the price of stocks
(see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself,
nor must stock be subsequently traded on the exchange. Such 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.

CONCEPT OF SHARE TRADING

The concept of share broking emerged after the establishment of the joint
stock companies. The ownership of the companies was divided into small parts and
that every part was called share. So, the term “Share” denominates some part in
the ownership of the company. The shares are freely transferable subject to the
some certain restrictions. When the need was felt to sell the shares by the owner of

45
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, which used to bring the buyers and sellers together for
the trade of the shares. These persons are called the share Brokers 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 Share Broking. The
origination of the Indian securities market may be traced back to 1975, when 22
enterprise brokers under a Banyan tree established the Bombay Stock Exchange
(BSE). Over the last 130 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.

SETTLEMENT CYCLE SCHEDULE

SR. NO. DAY DESCRIPTION OF ACTIVITY TRADE

1 T Trading Day
2 T+2 PAY IN BY 10.30 am.
3 T+2 PAY – OUT BY 2 pm.
4 T+3 Auction of shortage in deliveries
5 T+5 Auction pay-in by 10.30 (1 am/ pay
Out by 2 pm.)

46
 Functions of Stock Exchange

Stock 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 are;

1. It brings the companies and investors together so that the investors can put
risk capital into companies and thus, companies can use the capital.
2. It provides an orderly regulated market for securities.
3. It provides continuous, ready and open market for selling and buying
securities.
4. It promotes savings and investment in the economy by attracting funds from
the investors.
5. It facilitates take overs by means of acquiring majority of shares traded on
the stock market.
6. It acts as a clearing house of business information.
7. It motivates the managers of well reputed companies, to retain their shares
in ‘A’ group, to improve performance.
8. It induces the managers to improve performance for converting non-
specified shares into specified shares in the exchange.
9. It enables the investors to evaluate the net worth of their holdings.
10. It also allows the companies to float their shares in the market.

47
ONLINE TRADING INFRASTRUCTURE
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 major 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 majorly all the exchange transactions are

conducted online. The trend took off slowly in India and the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE) two of the largest
exchanges in India have been conducting online trade successfully for some time.

WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very slow in moving
their transactions online and the major reason has been the lot government
regulations. The initial delay was due to laying down the specifications for creating
Closed User Groups (CUGs). This issue was resolved between the Department of
Telecommunications (DoT) and the Finance Ministry around 1998 and after that
soon came the online trading portals like IL&FS investsmart, ICICIDirect.com,
motilaloswal.com, sharekhan.com etc. Connectivity related issue was perhaps the
most important technological factor.RBI made regulation that it is mandatory for
company to store at least 7 year financial and transactional data.

48
 In the non-stop, 24 hours a day, seven days a week world of investing, we are
able to

 Obtain investment news around the clock

 Check quotes on exchanges all over the world – day or night
 Easily compare one investment to another via numerous ratios, charts,
graphs, and tables
 Screen for the best investments to fit our individual goals and requirements
 Trade stocks as easily and quickly as professional traders
 Calculate retirement needs based on various scenarios
 Regularly monitor portfolios and make necessary changes quickly and
almost effortlessly
 Control the routing of individual trades for the best possible price and
execution
Even 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 to buy and sell investments. However, every year a growing
number of investors are placing their trades using online brokers.

49
OBJECTIVES OF THE STUDY
1. To understand the appropriate organizational structure of the KOTAK
SECURITIES LIMITED.

2. Growth of Online Trading .

3. To analyse the online trading and its process.

4. To study the different products of KOTAK SECURITIES LTD.

5. To determine the various pricing strategy involve in Online-Trading.

6. To give an in-depth knowledge about Securities, Derivatives: Future,

Options, Capital market: Primary Market, Secondary Market, NSE and
BSE.

7. To study the software KEAT used by the company for trading.

Meaning of Online Trading

“Change is the law of nature”. There were times when man was a wanderer
or a normal. He himself had to go place to place in search of food, water and now
everything is available at your doorstep just 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. When Internet has affected all
sectors he could “stock markets” the most important player of the economy, has

50
remained far behind? 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. In theory, 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. Similarly the online investor likely does not have to worry that his
broker is making unauthorized trades. Since there is no individual broker making a
commission, the only person who is authorized to trace in a the account is the
actual investor. Furthermore, the internet investor can never become a victim of
excessive trading (where for the broker) 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 unwary
investor to believe that Internet trading is a way to take control of their finances
and save more money in the process. Unfortunately, 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.

First and foremost, the average investor is not an expert in the financial
markets. There is a danger for allowing the autonomy of online trading to hull you
into the belief that you are an expert investor. An online investor sitting at home at
a personal computer also foregoes proper investment advice and financial

51
planning, perhaps among the most valuable services provided by traditional
brokers.

There are, of course, additional risks relative to performing transactions over

the Internet especially on a shared computer. Those people whom investors have
provided their account number and password can freely trade that account while
the investor will have little, if any, resource against the brokerage firm for the
breach of security.

When was online trading introduced in INDIA?

Online trading started in India in February 2000 when a couple of brokers

started offering an online trading platform for their customers.

ONLINE TRADING BY NSE & BSE

The central computer located at the Exchange is connected to the
workstations of the Brokers through satellite using Very Small Aperture Terminals
(VSATs). Orders placed at the Brokers' workstations reach the central computer
and are matched by the computer based on price and time priority.

Both the exchanges have switched over from the open outcry trading system
to a fully automated computerized mode of trading known as BOLT (BSE On Line
Trading) and NEAT (National Exchange Automated Trading) System. It facilitates
more efficient processing, automatic order matching, faster execution of trades
and transparency. The scrips traded on the BSE have been classified into 'A', 'B1',
'B2', 'C', 'F' and 'Z' groups. The 'A' group shares represent those, which are in the
carry forward system (Badla). The 'F' group represents the debt market (fixed

52
income securities) segment. The 'Z' group scrips are the blacklisted companies. The
'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights renunciati

PROCESS OF ONLINE TRADING

An investor interesting in trading through Internet shall have to, firstly
register himself with an Internet brokerage firm. Some 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. Secondly, the investor would
be required to open a bank account with a scheduled bank and sufficient balance
should be kept in the account. Thirdly he would be required to open account with a
depository participant because only dematerialized shares can be traded on
Internet.

53
 The client places order via the net by logging on to his

Broker’s site.

The broker accepts and executes the order and places it with
the exchange

The exchange accepts the order after checking the share limit for the day.

The broker makes the payment either directly via the client bank account
or pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through

the demat or via e-mail.

So, generally following steps are followed while doing the trading through the
Internet:

Step-I:

Those investors interested in doing the trading over Internet system, that is,NEAT -
ISX (NSE), should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a
personal identification number (PIN).

54
Step-3:

Actual placement of an order, Using the place order window as under can then
place an order:

(a) First by entering the symbol and series of stock and other parameters such as
quantity and price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

Step-4:

It is the process of review. Thus, the investor has to review the order placed by
clicking the review option. He may also re-set to clear the values.

Step-5:
After the review has been satisfactory; the order has to be sent by clicking on
the send option.

Step-6:

The investor will receive an "Order Confirmation" 'message along with the order
number and the value of the order.

Step- 7:

In case the order is rejected by the Broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the

55
bottom of the screen. At present, a time lag of about ten seconds is there in
executing the trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some
brokers will take some advance payment from the, investors and will fix their
trading limits. When the trade is executed, the broker will ask the investor for
transfer of funds by the investor to his account.

56
 THE MECHANICS OF ONLINE TRADING

CLIENT BROKER STOCK EXCHANGE

Accepts
n the net on the thewebsite
broker’s order, Checks the
through client’s
the Identity
distinctive I.D.and placesthe
Accepts
code theorder
orderafter
withchecking
the stockthe
exchange
scrip limit of the broker for the day

Executes the order

uy/sell order) gets reflected in his Demat account.

the execution of the deal by e-mail. Pays the broker pending physical delivery.

Pays the
Exchange
though his owns account and receives it from the client account.

Receives the money and completes the settlement

57
DEFINITIONS AND EXPLANATIONS
1. Shares:-

In everyday language, when we talk of shares we normally refer to equity

shares or ordinary shares of a company. The terms shares and stock essentially
means the same things, the letter being a more common American usage.

An equity share is evidence of ownership in a company. The physical evidence

of this ownership of this document is called the Share Certificate. Now days, shares
are usually kept in electronic, or dematerialized, form with a depository participant
(Banks, brokers, financial institutions) of the National Securities Depository Limited
(NSDL). However, if one wants one can still hold the share in the physical form
which has your name endorsed on it, and is proved that you are a part owner of the
company. Your ownership rights are proportionate to the number of share you
own.

Companies issue shares of a certain fixed denomination, called face value or par
value of that share, which is clearly indicated on a share certificate in the physical
form.

58
2. Investment: -
Investment essentially refers to what you do with your savings in order to
preserve them and make them grow or yield an income. If you keep your savings in
the form of cash, they are certainly going to diminish in value because the
purchasing power of money is constantly going down as a result of inflation. (The
value of money is judged by the quantity of goods and services you can buy with it).
Therefore, if you want to maintain or increase the value of your savings, you have
to keep them in forms other than cash. This is what investment is all about,
deployment of your saving with the intentions of preserving or increasing their
value. This deployment can be done by using your savings to buy land, residential
properties, commercial properties, gold, jewelry, works of art, fixed deposits in
banks and companies, shares, bonds, infact, anything whose value is likely to either
remain constant or appreciate with time. Investment also refer to using one's
savings with the intention of earning an income.

3. Demate A/c:-
On doing an online business ever customer has to open and demate account
in any bank whichever he likes. Demate account is the account in which the trading
done by the customer is mentioned. If the customer sales or purchases any share
the details of this sale and purchasing are in demate account. This account contents
the name of the shares and also the number of shares held or sold and also the rate
of the share with this demate account. It is also compulsory for every customer to
open a saving account in the bank because the amount which is to be received
when the customers sales the shares are transferred from the demate account to

59
the saving account.It is the responsibility of the customers that the share which he
purchased or sales are properly transferred in demate account from the stock
exchange whichever he deals. The amount of dividend whichever to be received on
the shares when held for one or more year are also transferred in this demate
account. It is compulsory for every customer to have a PAN no. For opening an
demate account. If PAN no. Is not there is no chance for the customer to do any
trading on line. There is no limit of amount to deal in this account.

4. Circuit Limit:-
While issuing the shares to the public the company has to fix a particular limit
of the rate of the per share this limit is called as circuit limit. This circuit limit is
generally fixed on the percentage basis. This circuit limit is applied to both the
ends of the share. That is to the upper limit also and also to the lower limit actually
circuit limit is of two types

1) Upper limit

2) Lower limit

It is compulsory for every company to fix the circuit limit. This limit is beneficial to
both. The customer and also to the company generally every company fix below
10%of the rate of per share.

5. Upper Limit: -
While issuing the shares to the public the company has to fix the upper limit
this limit is also calculated in percentage the limit is also beyond which the rate of
the shares cannot exceed nor that the customer doing the trading can sell above

60
the level.

For ex. Customer wants to sell a share which is of Rs10 and its upper limit is
fixed at 10% so in this case the person will have to sell it at Rs11 or the rate which
ever he wants but the person cannot sell it beyond this Rs 11 because by addition of
upper limit to the rate of share the maximum amount of the shares is Rs 11 only and
not above.

6.Lower Limit: -
At the time of issuing share the company has to fix the lower limit also. This
lower limit is calculated on the basis of the rate of the shares. This limit bears the
same percentage, which is mentioned for the upper limit of the share. Like upper
limit in this limit also the share minimum rate of the share is fixed the customer
who wants to see; the holding shares has to first consider the upper& lower limit of
the share he cannot sell the share below the lower limit and not above the upper
limit like the upper limit Percentage generally in this limit also the percentage is
below 10% of the face value of the shares the percentage is below 10% of the face
value of the shares the percentage of the upper &lower limit is equal to every type
of share

For ex. Suppose the person wants to sell the shares and the rate of the share is
Rs. 10/- and the lower limit percentage is 10% of the rate. So in this case the person
cannot sell the share at below Rs. 9/-. He will have to sell at above Rs. 9/- or up to the
upper limit of the share.

7. Sensex:-

61
 When the shares are issued to the public the stock exchange gives a
particular group to the company. For ex. The Reliance Group is given the group “A”
like this there are several companies which fall in “A” Group. The weightage mean
is calculated according to its equity when all the companies of Group “A” has
calculated this weightage mean they are added all together when this addition is
done the result which comes down is known as “Sensex”.The trading of shares of
“A” group is totally depended on this sensex value. The price of the share rises this
sensex value also rises and when the price of this share comes down the sensex
value also comes down With the sensex

8. Scripts:-
The company, which has more than one working area, it has to issue the
share separately than that company is the company which has the script of its
name.

For Ex. The Reliance this company has its several working area Namely
Reliance, Capital Reliance, Infocom Reliance Energy, Reliance Industry. So reliance
company issues separate share for separate working area but the bold name which
is given to the working area is “Reliance”. So in this case Reliance has its own
scripts. Other example Ambuja, Birla, Etc.

9. Groups:-

62
 When the shares are issued by the company they are given the particular
group by the Stock exchange according to its demand in the market. There are
mainly 7 groups .

BUYING AND SELLING

The first step is to open a demat account with your selected Depository
Participants (DP). All transactions on both the BSE and NSE are done in demate
securities.

When you buy shares, you are required to pay money to your broker or sub-
broker immediately upon getting the contract note/confirmation memo for the
purchase of shares. The broker issue as contract note, whereas sub-broker issues a
confirmation memo. Similarly, when you sale shares you are required to give
delivery of your shares by transferring them to the demate account of your
broker/sub-broker immediately upon getting the contract note or confirmation
memo. When you buy the shares then the share you have purchased will come first
to demate account of your broker/sub-broker. Once this happens, you can instruct
your broker/sub-broker to transfer those shares to your demate account for
receiving shares in your demate account you will have to give your broker or sub-
broker the details regarding your demate account.

When you sale shares you are required to give delivery of share from your
demate account by instructing your DP to transfer the number of shares that you
have sold from your account to the demate account of your broker. In this regard,
you will be required to include the details of the demate account of your broker in
the instruction slip that you give to your DP. Your broker or sub-broker will help you

63
to fill in the delivery instructions. These instructions are of a technical nature and
the delivery instruction forms and procedures differ from DP to DP.

DIFFERENCE BETWEEN ON LINE AND

OFF LINE TRADING

Nevertheless, with all the convenience of online trading there are still
investors who prefer the old fashion way of offline trading. Offline trading has lost
some popularity but it is still the main form of investing. Offline trading offers many
benefits as well.

1. The one benefit that an investor appreciates the most is that they are not
alone when making investment decisions.

2. There are experienced and professional brokerage companies that

handle their investments for them.

3. Investors are not faced with the challenge of making these vital
investment decisions; especially, if they do not have the experience
necessary to make the appropriate investments.

4. Also, there is someone there to answer any questions that may cause
concerns. Not to mention, with offline trading mistakes are less likely to
take place. No one wants to throw their money away or stand by and
watch someone else throw their money away. It may be wise to hire a
professional to assist you in making the correct investment decisions if
you feel you lack the knowledge necessary.

64
Points of difference between online trading and
off line trading are as follows:
1. Online trading is very expensive as compare to manual trading or offline
trading.

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

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

4. In the help of online trading, there is no chance of any errors while doing
the trading. in offline trading there are some errors exist like barriers of
communication .

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

65
DEMATERIALISATION OF SHARES
Dematerialization 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. SEBI has made
compulsory trading of shares of all the companies listed in stock exchanges in
demat form with effect from 2nd January 2002.The procedure of opening a demat
account with DP is similar to opening an account with a bank.s

ELECTRONIC SETTLEMENT OF TRADE

A. Procedure for purchasing dematerializedsecurities
The procedure for purchasing dematerialized securities is also similar to the
procedure for buying physical securities.
1. Investor instructs DP to receive credits into his account in the prescribed
form. There may be one time standing instruction or separate instruction
each time to receive credits.
2. Investor purchases securities in any of the stock exchanges linked to
depository through a broker.
3. Broker receives payment from investor and arranges payment to clearing
corporation.
4. Broker receives credit to securities in clearing account on the payout day.
5. Broker gives instructions to DP to debit clearing account and credit client’s
account. Investor receives shares into his account by way of book entry.

B. Procedure of selling dematerialized securities

66
 The procedure for selling dematerialized securities in stock exchanges is
similar as selling physical securities. The only major difference is that instead of
delivering physical securities to the broker, the investor instructs his DP to debit his
demat account with the number of securities sold by him and credit the brokers
clearing account. The procedure for selling dematerialized securities is given below:

1. Investor sells securities in any of the stock exchange linked to depository

through a broker.
2. Investor instructs his DP to debit his demat account with the number of
securities sold and credit the broker’s clearing account.
3. Before the pay-in-day, broker of the investor transfers the securities to
clearing corporation.
4. The broker receives payment from the stock exchange.
5. The investor receives payment from the broker for sale of securities in the
same manner as received in case of sale of physical securities.

67
 REMATERILISATION OF SHARES
Rematerialization is the process of conversion of electronic holdings of
securities into physical certificate form. For rematerilisation of scrip’s, the investor
has to fill up a remat request form (RRF) and submit it to the DP. The DP forwards
the request to depository after verifying the investor’s balances. Depository in turn
initiates the registrars and transfer agent or the issuer company. RTA/ Company
prints the certificates and dispatches the same to the investor.

Market timings:
Normal Market / Exercise Market Open time : 09:00 hours
Normal market close : 15:30 hours
Set up cut of time for Position limit/Collateral value : till 15:30 hrs
Trade modification end time / Exercise Market : 16:15 hours

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. Broker’s web sites may serve a variety of functions. These may include;

 Allowing the clients to directly trade through investors;

 Advertise the broker dealers’ services to potential investors;

68
 Offer market information and investment tools similar to those offered by
information vendor or SRO web sites;
 Offer real-time or delayed quote information, continuously update quotes
while the user visits other sites, or allow investors to create a personal stock
ticker;
 Provide market summaries and commentaries, analyst reports and trading
strategies and market data on currencies, mutual funds, options, market
indices and news; and
 Offer investors access to portfolio management tools and analytic programs;
 Information on commission and fees; and
 Account information and research reports.
In an Order Routing system, a broker offering Internet trading facility
provides an electronic template for the customer to enter the name of the security,
whatever it is to be bought or sold, the quantity and whatever the order is a market
or limit order. Once the broker’s system receives this information.

69
Use of Internet as Alternative Trading Systems (Provision for
price discovery and matching outside conventional exchanges)
In foreign jurisdiction, 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 jurisdictions are closed systems and are not accessible to the
general public through the Internet. The securities markets regulators abroad the
maintained 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 systems” by
which the system centralize, display, match, cross or otherwise execute trading
interest.

Use of Internet for making Initial Public Offerings

Issues of securities of using the Internet to communicate directly with their

shareholders, potential investors and analysts by disseminating corporate
information. In foreign jurisdiction, they are also using the Internet to communicate
to the public for the following:

 Public offerings;
 Private offerings; and
 Disclosure and communication
Issuers are using the Internet to market themselves to potential investors. The
Internet is also being used for fulfilling necessary disclosure requirements, for

70
disseminating the prospects in electronics form and even for receiving share
applications in public issues electronically. In India, SEBI has taken initiative in
permitting use of the network of stock exchange for collection of investor
applications in public offerings by the issuer companies

Investment Advisory Services

Brokers as well as other service provides 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
 Providing investment information and investment advice;
 Underwriting
 Communicating with the investors;
 Customer orders; and
 Record keeping

71
 Working Groups set up by the Committee
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
SEBI as a regulator could strive to identify areas where use of Internet in the capital
market is possible within the existing legal framework. One such area identified by
the Committee, which is also the central within the existing legal framework. One
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 Laws 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 area of:

i. Security protocols and standardization of interfaces for Interest based

securities trading, chaired by Prof. Deepak B. Phatak, IIT, Pawai, Mumbai
ii. Surveillance and monitoring related issues arising due to Interest based
securities trading, chaired by Shri. L.K. Singhvi, Sr. ED, SEBI
The committee also requested Ms D N Raval, Executive Director, SEBI to
examine the legality of introduction of Internet trading and issue of Alternative
trading systems. This report of the standing committee examines the regulatory
and security requirements Internet Based Trading on Conventional Exchanges.
Separate reports (s) will cover the other areas related to Internet applications in
the securities markets.

72
 The report of the first working group on security protocols and
standardization of interfaces has since been submitted and incorporated in the
report. The committee would like to place on record its sincere thanks to Dr. D.B.
Phatak, Ms. D.N. Raval and their team members. The global financial market is
undergoing a transformation due to rapid technological developments. It thus
becomes imperative that for developing in effective regulatory framework
developments in other parts of the world should be studies and analyzed.

With nearly who million on-line investors, Internet trading in the United
States 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 SEBI visited the United states 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 United States with the Securities and Exchange Commission officials.
They were also tripped of the various initiatives taken by SEC in this regard. These
inputs have been utilized while drafting this report.

Recommendations of the Committee

Application for Permission by Brokers

SEBI registered Stock Brokers interested in providing Internet based trading

services will be required to apply to the respective stock exchange for a formal
permission. The stock exchange should grant approval or reject the application as

73
the case may be, and communicate its decisions to the number within 30 calendar
days of the date of completed application submitted to the exchange. The stock

Exchange, before giving permission to brokers to start Internet based

services shall ensure the fulfillment of the following minimum conditions.

Net worth Requirement

The broker must have a minimum net worth of Rs. 50 lacs if the broker is
providing the Internet based facility on his own. However, if some brokers
collectively approach a service provider for providing the interest trading facility,
net worth, criteria as stipulated by the stock exchange will apply. The net worth

will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16, 1998.

Operational and System Requirements:

Operational Integrity:

The stock Exchange 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 Exchange must also ensure the records
maintained in electronic from by the broker are not susceptible to manipulation.

System Capacity:

74
 The stock Exchange must ensure that the brokers maintain adequate backup
systems and data storage capacity. The stock Exchange must also ensure that the
workers have adequate system capacity for handling data transfer, and arranged
for alternative means of communications in case of Internet link failure.

Qualified Personnel:

The stock Exchange must lay down the minimum qualification fro personnel
to ensure that the broker has suitably qualified and adequate personnel to handle
communication including instructions as well as other back office work which is
likely to increase because of higher volumes.

75
Written Procedures:

Stock Exchange must develop uniform written procedures to handle

contingency tuitions and for review of incoming and outgoing electronic
correspondence.

Signature Verification/ Authentication:

It is desirable that participants use authentication technologies. For this

purpose is should be mandatory for participants to use certification agencies as and
when notified by Government/SEBI. They should also clearly specify when manual
signatures would be required.

Client Broker Relationship

Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable
information about clients, which would facilitate risk evaluation of clients.

Broker- Client Agreement:

Brokers 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 SEBI/Exchange for the
internet based trading from time to time. Exchange will prepare a model
agreement for this purpose. The broker agreement with clients should not have

Investor Information:

76
 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 site/page on the web site of
the relevant stock exchange (s) displaying rules/ regulations/ circulars.
Ticker/quote/order 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:

Order/Trade confirmation should also be sent to the investor through email

at client’s discretion at the time specified by the client in addition to the other made
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. Facility for
reconfirmation of orders which are larger than that specified by the member's risk
management system should be provided on the internet based system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service

provided by brokers to ensure a minimum level of service. Exchange 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.

Risk Management:

77
 Exchanges must ensure that brokers have a system-based control on the
trading limits of clients, and exposures taken by clients. Brokers must set pre-
defined 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 acceptance/rejection of the order within a
reasonable period. In case system based control rejects 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 Notes:

Contract notes must be issued to clients as per existing regulations, within 24

hours of the trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as

III the case of existing system, brokers using Internet based systems for routing
client orders will also not be allowed to cross trades of their clients with each other.
All orders must be offered to the market for matching.

It is emphasized that in addition to the requirements mentioned above, all

existing obligations of the broker as per current regulation will continue without
changes. Exchanges may also like to specify more stringent standards as they may
deem fit for allowing Internet based trading facilities to their brokers.

Enforcement:

78
 A separate working group has been set to look into the surveillance and
enforcement related issues arising due to Internet based securities trading.
However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices
Regulations, 1995) would apply to all transactions involving securities or financial
services, regardless of the medium.

FEATURES OF ONLINE TRADING:

The Online Trading is having many features which make it most suitable for
the investors to go for. Some of these features are as follows:

The Internet can provide a new sense of control over your financial future.
The amount of investment information available online is truly astounding. It's one
of the best aspects of being a wired investor. For the first time in history, any
individual with an Internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock
markets and the global economy
 Conduct extensive financial research on any company

79
 One of the great appeals of using an online trading account is the fact that
the account belongs to you, and is under your direct control. When you want to buy
or sell stock, you no longer need to call your broker on the phone; hope that he is in
the office to place your order; possibly argue with the broker about the order; and
hope that the transaction is executed instantly.

At the most basic level, an online trading account gives you more agility in
buying and selling stocks. This is through sophisticated information streams,
dedicated trading platforms and sophisticated tools for accessing the markets.

Every broker house aims at providing the investor with the best price
available. Also due to the high level of transparency with regard to display of
information relating to the specific stocks and company profiles, you will be able to
get the best quote for your orders.

Online trading offers you greater transparency by providing you with an audit
trail. This involves a complete integrated electronic chain starting from order
placement, to clearing and settlement and finally ending with a credit into your
depository account. All these stages are subject to inspection, thus bringing in
transparency into the system.

Online trading integrates your bank account, your trading account and your
demat accounts, which leads to easy and paperless trading for you.

80
 You as an Investment online customer will be able to execute the entire
trading transaction, right from logging on to our site, to the execution and
settlement of your bank account, in a very short period of time.

Trading on the net, gives even the smallest retail investor access to
information that earlier was available only to the big traders. This provides a level
playing field for all investors in the securities market.

This method of trading reduces the settlement risk for the investor, as in this
case all short sell orders are squared off at the specified cut-off time and not
allowed to be carried forward.

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

executing your sell transaction. This reduces the settlement risk for the buyer, who
is assured of the delivery of the securities and for you as a seller of the securities

Every trade is confirmed immediately and you will receive an on-screen

confirmation following every trade with full details for your records. This avoids
costly errors that would have been discovered when it is too late.

81
 Your Bank, Depository and online account are integrated for your
convenience. Various broking houses provide access to many of the popular banks.

BENEFITS OF ON LINE BROKING

1) Less Costly:

The most significant advantage of the Online broking is the cost reduction in
the brokerage. Due to the power of the Internet one has the privilege of becoming
the clients of really large brokerages with the benefits of enjoying the low charges
hithelio before enjoyed only by the big players. As the DP account has got linked to
the trading account most players do not charge a minimum transaction cost thus
truly allowing one to buy a single share and achieve meaningful rupee price
averaging whatever be your buying power.

2) Peace of Mind:

One can never have complete peace of mind but online investing does away
with the hassles of filling up instruction slips, visits to the broker for handing over
these slips and consequent costs.

3) Keeping Records:

The site one trades on keeps a record of all transactions down to unexecuted
orders and cancelled orders thus keeping one abreast of all your transactions 24
hours a day. No paperwork means more time at one’s disposal for research and
analysis.

82
4) Access to Information and investment Tools:

Most online investing sites have a wealth of information for their registered
members. This includes research reports, results, analysis and even gossip and the
buzz in the market.

5.) Unparalleled Liquidity:

The. bank account linked with the trading account invariably has an A TM
free. Most partner banks offer Internet banking as well. This results in one’s money
becoming available to him whenever he like from his trading account. Conversely in
case he spot an opportunity in the market he can immediately allocate money from
his savings account to his trading account and make profits.

6.) Unparalleled Safety:

Most sites are secure using 128-bit algorithms -highest available commercially
anywhere in the world. Moreover even if somebody broke in and tampered with
one’s account the money from the stocks he sold or the stock bought from the
money in his account is in his account only.

7.) Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as in this
case no Short sale is possible i.e. the seller will not be able to sell the securities
unless he has their actual possession. In the case of a demat account (required for
an online transaction), when a seller wants to sell the securities, his demat account
is checked by the Depository Participant before executing the sale transaction. This

83
reduces the settlement risk for the buyer, who is assured of the delivery of the
securities.

8.) Offers greater transparency:

Online trading gives greater transparency to the investors by providing them

an audit trail. This involves a complete integrated electronic chain starting from
order placement, to clearing and settlement and finally ending with a credit to the
depository account of the investor. All these stages are subject to inspection, thus
bringing in transparency into the system.

9.) Ease of trade:

It is the ease of doing the trade through net, with a click of mouse, one can
buy or sell any share that is dematerialized.

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

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

PROBLEMS OF ONLINE BROKING

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

84
 Chart Title

4%

21%
14%

More Costly Lack O f Knowledge

Loyalty to Traditional Broker Lack of Trust

11%

Slow Speed O ther

23%

27%

Chart

Source:- www.lse.co.in
27% Loyality is of traditional broker
23% people says that online trading is more costly than manual trading.
21% people not prefer online trading because of lack of knowledge.
So, the main problems of online trading are as follows:

1.) "Server not found":

This may appear on one’s screens when he is desperately trying to get out of
an unprofitable position. Some of the online sites are providing a telephone
number for use in case their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

Recently ICICI Direct had a connectivity problem with the NSE for two and
halfhours during trading hours. This problem is rare but be alive to its possibility.

85
3.) Cyber attack:

In the event of a malicious attack on the systems of one’s broker he is

protected only if the company is taking proper precautions against such attacks
and if proper backup is regularly been taken. He may like to choose a brokerage
that has a stated security policy and contingency plan in place.

4.) Non-availability of a seamless interface:

As a client one will access the NSE through a server of the online brokerage
and this may involve queuing delays. If a number of client access the server the
server takes its own time sending the orders to the NSE server. He must check out
the seamlessness of this interface before selecting an online brokerage. The faster
the orders are processed the more seamless is the interface.

5.) Non- availability of personalized advice:

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

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are
trading on margin. That is where the brokerage firm lends you money by leveraging
his account, allowing him to buy a large amount of securities by putting up only a
small amount of money. He may have forgotten what he read in the small print of
his agreement, but the brokerage firm has the right to change the maintenance

86
margin requirements without any warning or notice to him. In fact, the firm has the
right to liquidate his securities holdings (and it can pick and choose which ones)
without any notice to one if he fail to meet the margin call. And there he was
leveraged to the hilt, hoping to hit a home run when he discovered that he is
required to make a large deposit that he cannot make. The next thing one know,
the firm is selling off his securities at a point in time that is not the best for him.
These are the perils of trading on margin.

7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market. Many would not like to rely on
research reports, which are there for all. So, net investors will have to do their own
research and take their own decision, whether wild or wise.

8.) Increased charges:

Some of the brokers are of the view that they would have to provide advisory
services to the customers. But with increased volumes, they will have to follow the
international practice of charging a little more than the normal charges from a
customer looking for personal advice.

WHY PEOPLE ARE BENDING TOWARDS ONLINE

TRADING

87
 Several broking houses now offer online trading facilities. You can trade
online with e-brokerages such as ICICI Direct, Kotakstreet, India bulls, India info
line’s 5paisa.com and HDFC securities.

If you are already comfortable trading with your regular broker, here are few
reasons why you may consider switching to trading online, or at least another
avenue of trading. an obvious advantage of online trading is that your transaction
would be virtually paperless. Your trading account would be linked to your demat
and bank account, ensuring a smooth transaction process. This is especially helpful
in the extent T+2 settlement system, where you have just two days to settle your
transaction.

The normal process of issuing of delivery note, in case of a sale, or arranging

for a payment in case of purchaser of shares, is all taken care of the minute your
order is executed online. The absence of manual intervention ensures that you are
completely in control of all transaction.

There is also little room for error, as your order is always confirmed before it
is executed. You can also make better decision as you have a clear record of all your
previous transaction. When you trade offline, a demat statement is normally sent to
you only on a quarterly basis .keeping track of your portfolio can be a hassle in such
a case. The inter net can provide a new sense of control over your financial future.
The amount of investment information available online is truly astounding. Its one
of the best aspect of being a wired investor for the first time in history, any
individual with an internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format

88
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and
globe economy.
 Conduct extensive financial research on any company
 Talk with other investors around the world
At invest smart you can get real-time stock quotes, daily roundups of the
stock market, experts commentary, and a deep community of fellow investors.

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

don’t have time to trade during market hours ,perhaps you are at work, you can log
on the web-trading site and place your order offline, during off market hours. Your
order would join the queue and be expected the next day. You would need to enjoy
a good relationship with your broker, for you to be able to reach him in the late
hours. For non-resident Indians (NRI), trading online is perhaps their easiest option
to invest in the Indian stock markets.

What is more, the time difference, in some cases, can work to their
advantage .Antony, an NRI-based in New York, places his order in the evening after
work, when it is day time India and the markets are open. We also have access to
considerable information online. By just logging on to ICICI direct online, for
instance, we can get the latest news, market information and company research.

Moreover, if our connection is maddeningly slow and we want to get your

order executed immediately, most e-brokerages also provide a facility to trade
offline by placing our order via the phone

Rolling Settlement Cycle

89
 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 NSE and BSE, trades in rolling settlement are settled on a T+2 basis i.e. on the
2nd working day. For arriving at the settlement day all intervening holidays, which
include bank holidays, NSE/BSE holidays, Saturdays and Sundays are excluded.
Typically trades taking place on Monday are settled on Wednesday, Tuesday's
trades settled on Thursday and so on.

Concept Of Buying Limit

Suppose you have sold some shares on NSE and are trying to figure out that
if you can use the money to buy shares on NSE in a different settlement cycle or say
on BSE. To simplify things for ICICI Direct customers, we have introduced the
concept of Buying Limit (BL). Buying Limit simply tells the customer what is his limit
for a given settlement for the desired exchange. Assume that you have enrolled for
a ICICI Direct account, which requires 100% of the money required to fund the
purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C and you set
aside Rs 50,000 for which you would like to make some purchase. Your Buying
Limit is Rs 50,000. Assume that you sell shares worth Rs 1,00,000 on the NSE on
Monday. The BL therefore for the NSE at that point of time goes upto Rs 1,50,000.
This means you can buy shares upto Rs 1,50,000 on NSE or BSE. If you buy shares
worth Rs 75,000 on Tuesday on NSE your BL will naturally reduce to Rs75,000.
Hence your BL is simply the amount set aside by you from your bank account and
the amount realized from the sale of any shares you have made less any purchases
you have made. Your BL of Rs 50,000, which is the amount set aside by you from
your Bank account for purchase is available for BSE and NSE. As you have made the

90
sale of shares on NSE for Rs.100000, the BL for NSE & BSE rises to 1,50,000. The
amount from sale of shares in NSE will also be available for purchase on BSE. ICICI
Direct

Future Agenda

Under the existing legal and regulatory framework, SEBI registered brokers
can offer trading on Internet through order is routing systems. However, 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. We 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 .

7. GROWTH OF ONLINE TRADING

According to an article by Krishnamurthy B in 2005 after inception of online
trading in India in the year 2000 online trading is gained momentum with trading
volumes growing by 150 per cent per annum in the years 2003-2005 and it was more
than approx. 200% in the year 2008 The volume of all trades executed through the
Internet on the National Stock Exchange had grown from less than Rs 100 crore (Rs
1 billion) in June 2003 to over Rs 700 crore (Rs 7 billion) in July 2005 which was a

91
handsome growth in the year 2005in the starting of 2008 the growth of online
share was good but at the mid of the year when subprime crisis affected India
including all over the world, market of online trading got shrunk by more than 50%

Now the growth of online trading is on its right track ,Indian stock market has
been announced the one of the Safe and stable market of the world, so here in
India the online trading is growing like anything in comparison to the whole world

At the end of July 2008, there were more than 168 registered brokers on the
NSE and the number of Internet trading subscribers to about 2.024 million. In the
year 2007 India has 8 crore (80 million) internet user, the % of internet user is
growing in each year

At the same time the number of subscribers trading through the portal of
Kotak Securities had gone up significantly by 150 per cent and the number of online
trading customers had grown from 30,000 to 75,000. And the company expected
to have at least 130,000 customers by the end of that fiscal. In the recent past years
of 2005 ICICIDirect and Indiabulls recorded an annual volume growth of 100 per
cent and Indiabulls had about 30 per cent of India's online trading volumes.

Today the total volume of online trade in India is about 29-31% of total trades.

According to brokers the better broadband connectivity across the country

and wider awareness of equity as an asset class will raise the online trade volumes
to over 50% of total trade.In India the demography is such that 75% of the
population is under the age of 36 and more than 50% of the 75% is under age of 25
and this is another supporting factor

92
 The Chief Executive of Reliance Money Ltd says that online investing is still at
a nascent stage in India and expects that Internet-based trading will eventually take
about half of the total stock market trading as like with developed markets such as
the US. Philippines has the highest online trade with about 55-60% execution of
trade is online. The reason is because they had wider Internet connectivity years
before India. The biggest challenge in India remains better Internet connectivity.
The earlier Web-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. Earlier the investors made trade calls over the phone which sometimes led
to the delays. Online share trading in India was at a boom in the end of 2006 with
daily-traded volumes more than tripling from Rs 1,500 crore to Rs 5,000 crore in the
last one year and terminals was set up in small towns such as Rajkot, Hubli and
Vijayawada .In that year the share of online trading rose dramatically from 7% last
year to 20% as a percentage of overall traded volumes. Due to this factor the top
five US brokerage firms decided to make a foray into India in the next year driven
by strategic interest. Also at that time non-metros accounted for half of the daily
turnover of online trading.

Graph is showing the declining in the turnover of online trading in Indian

stock exchange during slowdown in economy due to subprime mortgage crisis.

93
 TURNOVER OF NSE FROM ONLINE TRADING(IN CR.)
5,000
4,500 4,417
4,000
3,500 3,587
3,450
3,000 TURNOVER OF NSE FROM ONLINE
TRADING(IN CR.)
2,500
2,000
1,648
1,500
1,000
500
0
NOV.07 DEC.07 JAN.08 FEB. 08

A crash of the market in the early February 2008 the investors remained away
from online trading the turnover of the NSE from internet-based trading dipped to
a daily average of Rs 1,648 crore between February 1 and February 8 as compared
with Rs 3,450 crore in January 2008 Rs 3,587 crore in December 2007 and Rs 4,417
crore in November 2007 in the exchange’s cash market segment. In the mid
February 2008 it

accounted for just 12% of NSE’s total cash turnover as compared with a high of 24%
in November last year.

"Issues that need to be addressed are education on cyber crime and the
security solutions around it," says Vinesh Menon, Deputy CEO & Head for Online
Investment & Branch Channel, Bajaj Capital.

"It's a matter of time when we will see exponential growth in the online
trading segment, not just through the computer but also through our mobile
phones," adds Menon. With over 20 million investors,

94
 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 2000
onwards because of development of global Internet economy and for years 2000
to 2003 the stock market was under a bear hug. The intense competition among a
new wave of online brokerage companies hammered down brokerage rates from
1% (in 2000) to 0.25 %, or even lower to 5 paisa

The number of investors opting for online trading has gone up manifold,
according to the recently published 'India’s Leading Equity Broking Houses, 2008'
by Dun & Bradstreet (D&B). The publication says that less than 10% of the 191
broking firms surveyed reported huge growth in opening of e-broking accounts and
some firms saw a surge in value of up to 400% in e-broking during 2007

500000 451611
450000

400000

350000

300000 indiabulls
reliance money
250000 215678
unicom
200000 motilal oswal

150000

100000
19,065 13,787
50000

0
acount added by the company

95
 According to the report, numbers of e-broking accounts registered in 2007
have grown exponentionally. Indiabulls Securities Ltd added 4,51,611 accounts while
a relatively new firm in the industry, Reliance Money added 2,15,678 accounts
during the same time period. Motilal Oswal Securities Ltd managed to add 19,065
accounts while Unicon Financial Intermediates Pvt Ltd could increase their e-
broking accounts by 13,787

According to market watchers, the rise in the value of on line transactions is

also because of sustained bull run witnessed in 2007, when the 30-share Sensex of
the Bombay Stock Exchange (BSE) gained from 13,842 points to 20,207 points, a
gain of 6,365 points (up 47%).

100% 91%
90%

80%

70% 62%
reliance money
60%
indiabulls
50% Shreyas Stock
Angel Broking
40% Farsight Capital
30% 20% 19%
15%
20%

10%

0%
% contribution to trading volumes contributed by e-broking

E-broking is contributing a sizeable portion to the trading volumes and also

to the revenue generated for leading stock broking firms. Some examples of the
percentage contribution to trading volumes contributed by e-broking are 91% in

96
case of Reliance Money, 62% for India Bulls, 20% each for ASL Capital and Shreyas
Stock, 19% Angel Broking, and 15% Farsight Capital. In respect of revenues generated
from e-broking, India Bulls (63%), Reliance Money (54%), Unicon Financial (30%) and
Shreyas Stock (20%) reported higher shares in 2007. Ashika reported 98% growth in
e-broking business in the first 10 months of 2007.

Another significant trend is the growth in international business of broking

firms. Firms that reported presence of offices outside India include Reliance Money,
Motilal Oswal, Karvy Stock Broking, JRG securities, Vogue and Bonanza Portfolio.

HDFC Securities have 500,000 online customers’ deals in daily online trades worth
Rs 250-300 crore is also in the black. The revenues it had in 2007-08 is Rs 100 crore.
HDFC Securities had revenues of Rs 67 crore and a net profit of Rs 7.21 crore in
2006-07. ICICIdirect has 1.5 million online broking accounts and parent ICICI
Securities reported revenues of Rs 750 crore for March 2008. The new player
Reliance Money has 2 million online accounts trades worth Rs 2,000 to Rs 3,000
crore per day.

97
 RESEARCH METHODOLOGY

 Type of Research: Descriptive

 Type of Data Collected: Primary Data
 Data Collection Technique: Questionnaire
 Data Collection Method: Survey Method
 Universe of the Study: Investors of Varanasi
 Sample Size: 100
 Sample Area: Varanasi
 Statistical Tools: percentages
 Data Analysis Instruments: Bar Diagram, Pie Chart
 Sampling Technique: Convenience.

98
 Analysis and Interpretation
What is your education qualification?

QUALIFICATION OF PEOPLE 49
50

45   higher Secondary
22 2 11
40
  higher Secondary   senior secondary
35

  senior secondary 30   Graduate

22
25
  Graduate Post Graduate
20 16
16 Post Graduate 11
15 professional degree holder
professional degree holder 10
49 2
5

0
QUALIFICATION OF PEOPLE

To invest in the stock market minimum 100000 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.

99
1. For how long you have been trading with on line-trading?
(a) 1 year (b) 2 year
(c) 3 year (d) 4 year

1 year 2 year 3 year 4 year

44

26 19
11

4 year

3 year

2 year
YEAR
1 year

According to this survey we find that 44% people says that we are investing
the money online from one year and 26% people says that we are investing the
money online from 2 years and 19% to 11% people says that we are investing money
online from 3 to 4 year. so we can say that now online trading is very popular in the
modern market.

2. How will you describe your experience with on-line trading till date?

100
(a) Very easy to operate
(b) Very difficult to operate
(c) Not secure
(d) Any other

70

60

50 I find it very easy to operate

I find it very difficult to
operate
40
I feel it is not secure
Any other
30

20

10

0
Experience

According to this survey we find that 60% of people find very easy to operate
and 15% people find difficult two operate and 10% and 15% people find no secure and
any other. so we can say that online trading is very simple to operate and easy to
understand.

3. What amount of money you invest normally?

101
(a) 50000 (b) 100000 to 150000
(c) 150000 to 2000000 (d) Any other amount

35

30

25
50000
20
100000to150000
15 150000to200000

Any Other
According to
10
this survey we
5
find that 35% of
0
Money people invest
money normally
50000 and 28%
of people invest money 100000to150000 and 23% and 14% of people invest money
between 150000to200000 and any other. So we can say that the people are not
invest more money in the share market because there is a great risk involved while
doing the trading.

4. How often do you trade?

(a) Daily (b) Weekly
(c) Monthly (d) More than one month

102
 40
35
30
25 daily

20 weekly
monthly
15
more than 1 month
10
5
0
Time

According to this survey we find that 10% of people do trade Daily and 40%
people do trade weekly and 32% and 18% people do trade month and more than
month. So we can say that people are generally invest in stock market weekly basis.

5. Which trading you prefer?

(a) On line trading (b) Offline trading
(c) Both

103
 50
45
40
35
30 On line trading
25
Offline trading
20
Both
15
10
5
0
Relationship

According to this survey we find that 20% people prefer online trading and 32%
people prefer offline trading rest of 48% people prefers both. So we can say that
mostly people are not awareness about the online trading and because of this
reason the mostly people are optimizing offline trading.

6. What shortcomings do you feel in Indian Online trading?

(a) Lack of awareness the investors about on-line trading
(b) Shortage of domestic technical expertise
(c) Shortage Of Infra structure

104
(c) any other

50
45
40
Lack of awareness
35
30
Shortage of expertise
25
20 Shortage Of Infra structure
15
10 any other
5
0
Shortcomings

According to this survey we find that 15% of people says lack of awareness 49%
says Shortage of expertise and 14% people says Shortage Of Infrastructure and 22%
says any other. So we can say that mostly people are shortage of experience about
the Indian derivatives market or share market.

7. Which media would you prefer the most for investment?

(a) T.V (b) Newspaper
(c) Magazines (D) Journals

105
 60

50

40
T.V

30 Newspaper

Magazines
20
Journals

10

0
Media

According to this survey we find that 55% people Prefer T.V and 25% people
prefer newspaper and 10% people prefer magazines and 10% people prefer journals.
So we can suggest that mostly people are very easily grapped the knowledge
through T.V.

8. What is your annual income?

106
 INCOME LEVEL OF THE INVESTOR 58
60

12 7 2 50

40   Below 100000   1,00,000 – 2,00,000

  Below 100000   1,00,000 – 2,00,000

30
21   2,00,000 – 3,00,000   3,00,000 – 4,00,000

  2,00,000 – 3,00,000   3,00,000 – 4,00,000 20

12
21 7
58 10   Above 4,00,000
2
  Above 4,00,000
0
INCOME LEVEL OF THE INVESTOR

INTERPRETATION

58%respondent are having the income level of 100000-200000 ,21% is having

200000-300000 , 12% in having300000-400000 , 7% of the total respondent are
having income more than 400000 per annum and only 2% are having less than
100000 per annum.
To invest in the stock market minimum 100000 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.

9. What percentage of your monthly household income could be available for

investment?

107
 INVESTMENT FROM THE MONTHLY INCOME
45 41

40
13% 2% 23%
35
30
23
  Less than 5%   5% to 10% 25 21   Less than 5%
21%   5% to 10%
20   10% to 15%
13   15% to 20%
  10% to 15%   15% to 20% 15
  More than 20%
10
41%   More than 20% 2
5
0
INVESTMENT FROM THE MONTHLY INCOME

According to the data 23% of the total respondent invest less than 5% of their
income,41% respondents are saying that they invest 5%-10% of their monthly income
(which is highest)Whereas the 21% investor do the investment 10%-15% of their total
monthly income,13 invest between 15%-20% of the total income and only 2% does
more than 20% of their income invest in the market . We can easily understand that
75% 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 market91% of respondent is in the income level of 100000 –
300000 (according to the last question analysis). So we can say that stock
brokerage houses will have to do a good business with the help of Online trading
system with few value addition services.

10. Where do you often invest your money?

108
 INVESTMENT PATTERN OF INVESTOR
70 65

9 12 60

50
  Equity   Mutual fund

40   Equity
  Mutual fund
  Insurance   Term deposits   Insurance
30
  Term deposits
14
14 Others
20 12
Others 9
65
10
0
0
INVESTMENT PATTERN OF INVESTOR

Highest number of respondent is having their investment in the equity that is

65% whereas the investment available for the mutual fund, term deposit and
insurance is 14% ,12% and 9%
So the investor for equity is high which is again showing the n number of
opportunity for online trading

11. What is the primary objective of your investment?

109
 objective of investment 77
80

77 70

60   Capital appreciation
  Capital appreciation
50
  Source of income   Source of income
40
  Retirement planning 30   Retirement planning

20 13
  Wealth preservation   Wealth preservation
5 4 4 5
13 10 1
Education funding /others
0 Education funding /others

1 objective of investment

13% 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 10%
From the analysis we can have idea that the main objective of the investor to
earn the money through trading in stock market 77% of the respondent achieve
their objective with the help of investment in the equity market, because most of
the investment take place in the form of equity (explanation of 4 th ans. ) So we can
say that there is a huge potential in the market for the trading in the stock market

12. Do you owe a Computer?

110
 78
80
70
60
50
40
  Yes   No
30 22

20
10
0
own a computer

78% of the total respondent who are dealing with the stock market is having
computer in their house and only 22% is not having computer in their house
The people who is having computer that is 78% can also go for online trading
which can be a large number of people who will go for online trading. they don’t
need to do a additional investment for computer to go for online trading

13. Online trading is a secure way of trading?

111
 Online trading is a secure 37
40
34
35

30
14   Strongly agree   Agree
4
  Strongly agree   Agree
25
37
20
14
11   Can’t say   Disagree
15 11
  Can’t say   Disagree
10
4
5 Strongly disagree
Strongly disagree
34 0
Online trading is a secure

INTERPRETATION

71% of the respondent is having a positive thinking that online trading is a

secure way of trading whereas 185 of the respondent believes that online trading is
not a secure way of trading
Satisfaction 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

14. Online trading is easy and fast way of trading?

112
 Online trading is easy and fast 34
35

30
21 17
25 21
20
17   Strongly agree   Agree
20
  Strongly agree   Agree
15
  Can’t say   Disagree
  Can’t say   Disagree 8
10

20 Strongly disagree
Strongly disagree 5
34
8 0
Online trading is easy and fast

INTERPRETATION

51% of the total respondent believe that online trading is a easy task Whereas 41%
of the respondent believes that to deal with online Trading is not a easy task and 85
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 don’t believe is
not very big that is only 10% , 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. So there is a need of proper training to do trading online

15. Introduction of online trading helped to attract the new Investors thus
increasing the trading volumes at Stock Market?

113
 HELPED TO ATTRACT NEW INVESTORS
45 41

40 36
12
7 4 35
  Strongly agree   Agree
36 30

  Strongly agree   Agree 25

  Can’t say   Disagree
20
12
  Can’t say   Disagree 15
7 Strongly disagree
10 4
Strongly disagree 5
41 0
HELPED TO ATTRACT NEW INVESTORS

INTERPRETATION

36% of the total respondent believe that online trading help to attract new
customer while 41% of the respondent too agree with this statement we can say
that knowledge of computer and internet operation is very high among the
investors/respondent.

FINDINGS

114
 According to this survey we find that people are investing the money online.
So we can say that now online trading is very popular in the modern market.
According to this survey we find that people find very easy to operate. So we
can say that online trading is very simple to operate and easy to understand
According to this survey we find that people invest money normally between
50000 to 200000. So we can say that the people do not invest more money in the
share market because there is a great risk involved while doing the trading.
According to this survey we find that people do trade Daily/weekly. So we can
say that people are generally invested in stock market Daily/weekly basis.
According to this survey we find that people prefer online trading. So we can
say that the awareness of online-Trading among investor is very high.
According to this survey we find that there is Shortage of expertise. So we can
say that mostly people have lack of experience about the Indian derivatives market
or share market.
According to this survey we find that investors Prefer T.V to grape the
knowledge before investing.
According to this survey we find that online trading helps to attract new
Investors thus increasing the trading volumes at Stock Market.

CONCLUSION

115
 Online trading is the new concept in the stock market. In India, online trading
is still at its infancy stage. Online trading has made it easy to trade in the stock
market as now people can trade while sitting at their home. Now stock market is
easily accessible by the people. There are some problems while doing the trade
through the internet. Major problem faced by online trader is that the investors are
loyal to their traditional brokers; they rely upon the suggestions given by their
brokers. Another major problem is that the people don't have full knowledge
regarding online trading. They find it difficult to trade them, as a wrong entry made
by them, can bring them huge losses.

Nevertheless to say that online trading has the bright future as the
percentage of the trade done through online trading is increasing day by day

116
 LIMITATIONS

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

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

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

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

117
 Suggestions

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. Every thing is just a few clicks away. This makes
online trading most convenient. But there are still 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.
Not 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. Online trading dynamically continues to
be redefined. Services have expanded to include integrated management of
additional financial accounts. Not to mention, it has subsequently expanded in
conjunction with ground-breaking improvements to the traditional trading
interface, such as telephone interface systems.

118
 Of course, online trading has many pros. There are several wonderful reasons
to invest online and consider online trading.

1. Money saving opportunities The amount of money you save depends

primarily on the online brokerage firm that you choose. No two firms are the
same. There may be different regulations, similar to bank regulations. There
are minimum deposits required that must be maintained. As mentioned
above, this will depend on the online brokerage firm

2. Instant online access: You can gain instant access to your account, the value
of your portfolio updates immediately before your eyes.

3. Enter online trades at anytime : You 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. Not to mention, it is especially fit for
investors with busy schedules.

4. With online trading you are in charge: You are in control of your investments.
No sales pitches and no hassle. You decide where to invest your money.

BIBLIOGRAPHY

119
BOOKS:
 C. R. Kothri, Research Methodology,

 MAGAZINES
 Business World

 KOTAK Magazine

INTERNET SITES:
 www.nseindia.com
 www.bseindia.com
 www.on-linetrading.com
 www.sebi.gov.in
 www.kotaksecurities.com

ANNEXURE
120
 Questionnaire
Summer training Project on

“Overall Study Of Online-Trading In KOTAK SECURITIES LTD.”

Dear sir/madam,

I am conducting this survey for the partial fulfillment of my course PGDM in the” SCHOOL
OF MANAGEMENT SCIENCES” at Varanasi.

The information provided by you will be used for educational purpose only.

Thanks & Best Regards,

Sumit Kumar
PG/15/105

(Respondent Details)

Name : - …………………………………..

Gender : - Male  Female 

Qualification : - (Please specify) ……………………..………

Age :- ………

Marital status : - Single  Married 

1. For how long you have been trading with on line-trading?

(a)1 year (b) 2 year
(c) 3 year (d) 4 year

121
2. How will you describe your experience with on-line trading till date?
(a) very easy to operate
(b) very difficult to operate
(c) not secure
(d) Any other
3. What amount of money you have invested ?
(a) 50000 (b) 100000 to 150000
(c) 150000 to 2000000 (d) Any other amount
4. How often do you trade?
(a)Daily (b) Weekly
(c) Monthly (d) More than one month
5. In which trading you will prefer?
(a) Online trading (b) offline trading
(c) Both
6. What shortcomings do you feel in Indian On-line Trading ?
(a) Lack of awareness the investors about on-line trading
(b) Shortage of domestic technical expertise
(c) Shortage Of Infra structure
(d) If any other

7. Which media would you prefer the most for investor?

(a) T.V (b) Newspaper
(c) Magazines (d) Journals
8. What is your annual income?

122
 (a) Below 100000 (b) 1,00,000 – 2,00,000

(c) 2,00,000 – 3,00,000 (d) 3,00,000 – 4,00,000

9. What percentage of your monthly household income could be

available for investment?

(a) Less than 5% (b) 5% to 10%

(c) 10% to 15% (d) 15% to 20%

10. Where do you often invest your money?

(a) Equity (b) Mutual fund

(c) Insurance (d) Term deposits

(e) Others

11. What is the primary objective of your investment?

(a) Capital appreciation (b) Source of income

(c) Retirement planning (d) Wealth preservation

(e) Education funding /others

12. Do you owe a Computer?

(a) Yes (b) No

13. Online trading is a secure way of trading

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

123
14. Online trading is easy and fast way of trading?

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

15. Introduction of online trading helped to attract the new Investors

thus increasing the trading volumes at Stock Market?

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

124