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A study on Online Stock trading in India
Padmanabhan K REGN. NO.: A9C7510365
MADURAI KAMARAJ UNIVERSITY DIRECTORATE OF DISTANCE EDUCATION PALKALAI NAGAR, MADURAI – 625 021
A project report submitted in partial fulfillment of the requirement for the Degree of Master of Business Administration (MBA) In the Madurai Kamaraj University
This is to certify that the project work entitled “A study on Online Stock Trading in India” is a bonafide project work carried out by Padmanabhan K Enrollment No.: A9C7510365 in partial
fulfillment for the award of degree of MBA of Madurai Kamaraj University under my guidance. This project work is original one and not submitted earlier for the award of any degree / diploma elsewhere.
Student’s Signature Guide
Signature of the
Dharwad Duration 2 Years 4 Years Job Experience Company New Horizon College Of Engg Year Designation 2008 – till Asstt Professor date Krishna Institute of Engg & 2000 – 2008 Asstt Professor Technology I declare that the above details are true to the best of knowledge.E.E.Guide’s Bio-Data Name: Father Name: Qualification: Date of birth: Rakhi Mittal Dr. Kodihalli.. HAL III Stage. I Cross.(CS&E) Name of the College/University Punjabi University.Mittal B.M.Tech (IT) B. Patiala Karnataka University. Guide’s Signature -4– .S. 10th Main.Tech 11 Aug’78 Communication Address: 1547.C. Bangalore-560008 Nationality: Indian Academic Details Course M.
DECLARATION BY THE CANDIDATE I Padmanabhan K hereby declare that the project “A study on Online Stock Trading in India” submitted to the MADURAI KAMARAJ UNIVERSITY in the partial fulfillment of requirement for the award of the degree of MASTER OF BUSSINESS ADMINISTRATION is a record of original project done by me under the supervision of Ms Rakhi Mittal. Enrolment No: A9C7510365 Date: Signatu re -6– .
Last but not least I like to thank my parents. guidance and support of certain people who acted as guide. my beloved brother. I feel it my profound privilege to express my most sincere gratitude and indebtedness to Mrs. Sr Manager. and friends & colleagues for their moral support for completing this project work successfully PADMANABHAN KRISHNAMURTHY -7– . friend and torchbearers along the way. With this project I hope to develop a futuristic view of industry’s progress. Today I along with my wife and friends are involved in intra-day trading using tips from various trading agencies. I wish to express my sincere thanks to the almighty for showering his blessings on me to complete this project. I realized it even better during course of creating this project.Ryan Colaco.it is often said.ACKNOWLEDGEMENT At the outset. Axis Bank who had introduced me to world of online trading 6 years back by gifting me 100 shares of axis bank as result I had to open up my 1st demat account with icicidirect. I may not have come this far without help. Chandra Iyer and Mr. Success in not a destination but a journey.
Ltd. Stock markets refer to a market place where investors can buy and sell stocks. More and more people would want to buy this stock (i. Now investors dont have to gather at the Exchanges. high supply and low demand) for the stock of ABC Co. Consequently. buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT. high demand) and very few people will want to sell this stock at current market price (i. its price will fall down. brokerages compete in offering superior service quality. USA. most of the operations are done electronically and the stock markets have become almost paperless. less supply). France. if there are more sellers than buyers (i. To understand the online trading we need to know the history of stock trading in India and total exchange in India such has NSE and BSE.e. Therefore. Ltd. in the market. ease of use and reduced transaction charges. online services have grown rapidly and have emerged as a leading edge of service industry. Let us take an example for a better understanding of how market forces determine stock prices. Providing online services in developed stock exchange such as Japan. In earlier times. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd.e.e.Abstract Online services offer customers a splendid display of benefits such as enhanced control. demand and supply for a particular stock). History of the Indian Stock Market . ABC Co. Therefore.The Origin -8– . Singapore. On the contrary. UK and India has lead market to become more competitive.e. The price at which each buying and selling transaction takes is determined by the market forces (i. and can trade freely from their home or office over the phone or through Internet.
Trading list by the end of 1839 got broader Recognition from banks and merchants to about half 1840's: a dozen brokers Rapid development of commercial enterprise saw 1850's: brokerage business attracting more people into the business 1860's: The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of 1860-61: America. marking the beginning of the "Share Mania" in India 1862-63: The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example. the Indian Stock Markets have a 200 years old history.One of the oldest stock markets in Asia. 87) Pre-Independance Scenario . East India Company was the dominant institution and 18th Century: by end of the century. busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and 1830's: Cotton presses started in Bombay. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" 1874: 1875: 1880's: 1894: -9– . Bank of Bombay Share 1865: which had touched Rs. brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. 2850 could only be sold at Rs.Establishment of Different Stock Exchanges With the rapidly developing share trading business.
number of brokers came 1923: down to 3 and the Exchange was closed down 1934: Establishment of the Lahore Stock Exchange Merger of the Lahore Stock Exchange with the Punjab 1936: Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt. Lahore Estock Exchange was closed down after the partition of India. Calcutta 3.1880 . 1956.90's: Sharp increase in share prices of jute industries in 1870’s was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was 1908: formed Madras witnessed boom and business at "The Madras 1920: Stock Exchange" was transacted with 100 brokers. Madras . and later on merged with the Delhi Stock Exchange. The Exchanges that were recognized under the Act were: 1. When recession followed. Bombay 2. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963.10 – . Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" 1937: 1940: 1944: 1947: Post Independance Scenario The depression witnessed after the Independance led to closure of a lot of exchanges in the country.
7.11 – . 5. 1982) Pune Stock Exchange Limited (1982) Ludhiana Stock Exchange Association Limited (1983) Gauhati Stock Exchange Limited (1984) Kanara Stock Exchange Limited (at Mangalore. 1990) Coimbatore Stock Exchange Meerut Stock Exchange At present. 1989) Vadodara Stock Exchange Limited (at Baroda. 1986) • Jaipur Stock Exchange Limited (1989) Bhubaneswar Stock Exchange Association Limited (1989) Saurashtra Kutch Stock Exchange Limited (at Rajkot.4. There was a sharp increase in number of Exchanges. Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. listed companies as well as their capital Types of Transactions The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges: • • • • • • • • • • . 1985) • Magadh Stock Exchange Association (at Patna. 8. Ahmedabad Delhi Hyderabad Bangalore Indore Many more stock exchanges were established during 1980's. 6. namely: • Cochin Stock Exchange (1980) Uttar Pradesh Stock Exchange Association Limited (at Kanpur. there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
12 – . .• • • Indian stock exchange allows a member broker to perform following activities: Act as an agent. the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India. Lack of liquidity and transparency. On the basis of the recommendations of high powered Pherwani Committee. OTCEI was incorporated in 1990 under the Companies Act 1956. In order to overcome these inefficiencies. trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. Trading Pattern of the Indian Stock Market Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). long settlement periods and benami transactions are a few examples that adversely affected investors. Industrial Finance Corporation of India. SBI Capital Markets. Buy and sell securities on his own account and risk. Act as a trader or dealer as a principal. • Buy and sell securities for his clients and charge commission for the same. They are divided into two categories: National Stock Exchange In order to lift the Indian stock market trading system on par with the international standards. This age-old trading mechanism in the Indian stock markets used to create much functional inefficiency. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India. General Insurance Corporation and its subsidiaries and CanBank Financial Services. Industrial Credit and Investment Corporation of India. Industrial Development Bank of India. Over The Counter Exchange of India (OTCEI) Traditionally.
government securities. commercial papers etc.13 – .Similar to money market operations. selected commercial banks and others.Industrial Credit and Investment Corporation of India. debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instruments like treasury bills. all Insurance Corporations. Trading at NSE • Fully automated screen-based trading mechanism • Strictly follows the principle of an order-driven market • Trading members are linked through a communication network • This network allows them to execute trade from their offices • The prices at which the buyer and seller are willing to transact will appear on the screen • When the prices match the transaction will be completed • A confirmation slip will be printed at the office of the trading member • Advantages of trading at NSE • Integrated network for trading in stock market of India • Fully automated screen based system that provides higher degree of transparency • Investors can transact from any part of the country at uniform prices • Greater functional efficiency supported by totally computerized network Bombay Stock Exchange . NSE provides exposure to investors in two types of markets. Capital market Wholesale Debt Market . Industrial Finance Corporation of India. namely: 1. Wholesale debt market 2.
) who intend to expand the Indian stock exchange. BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). SENSEX. etc. Presently. traders. Exchange traded funds (ETF) on SENSEX.Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. brokers. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31. 2009). stock market's officials.14 – . which is a ISO version of BS 7799 for Information Security. 2010. Today. The results indicate how Indian traders' rank service quality factors and if online trading system could enhance their satisfaction level or not? Also factors which lead to dissatisfaction were collected and proper recommendations were given. we are ISO 27001:2005 certified. Futures and options on the index are also traded at BSE. Over the past 135 years. are listed on BSE and in Hong Kong. The companies listed on BSE command a total market capitalization of USD Trillion 1. It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. In next step a basic online trading model were offered which propose to replace with current . The BSE Index. the findings of this research are mostly useful to those (common man. Finally. is India's first and most popular Stock Market benchmark index. BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.28 as of Feb. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading System (BOLT).
system. Lastly.15 – . . roles of each involved party were identified in proposed online system.
16 – 8 ANALYSIS .7 5.9 (TME) 58 58 59 60 61 63 64 65 66 68 BENEFITS OF ONLINE TRADING TO INVESTORS COST OF ONLINE TRADING TO INVESTORS BENEFITS OF ONLINE TRADING TO BROKERS /FINANCIAL PLANNERS COST OF ONLINE TRADING TO BROKERS /FINANCIAL PLANNERS CHARACTERISTICS OF ONLINE TRADERS ONLINE TRADING INTERNATIONALLY THE FUTURE OF TRADITIONAL BROKERS AND ONLINE TRADING DISCUSSION AND IMPLICATIONS FOR THE FUTURE CONCLUSION 70 .5 5.7 3.6 7.8 7.1 7.2 3.6 3.7 7.2 5.1 3.5 7.1 ECOMMERCE 4.3 3.4 5.4 7.1 5.5 3.3 5.8 ICICI DIRECT RELIANCE MONEY SHARE KHAN KOTAK SECURITIES INDIABULLS MOTILAL OSWAL RELIGARE INDIA INFOLINE 6 7 GROWTH OF ONLINE TRADING EFFECTS OF ONLINE TRADING ON THE INVESTMENT 7.3 7.2 7.6 5.8 PROJECT TITLE TITLE JUSTIFICATION SCOPE OF THE STUDY RESEARCH OBJECTIVES RESEARCH METHODOLOGY RESEARCH DESIGN SAMPLING METHODOLOGY LIMITATION OF THE STUDY 4 LITERATURE REVIEW 4.4 3.2 ONLINE TRADING 5 THE EMERGENCE OF ONLINE TRADING IN INDIA 5.1 TABLE 1 2 3 TABLE OF OF CONTENTS 16 18 19 19 19 19 19 20 20 21 21 23 23 27 37 37 39 41 43 45 47 48 49 52 COMMUNITY CONTENTS EXECUTIVE INTRO PROJECT DETAIL 3.
17 – .9 10 11 12 13 CONCLUSION RECOMMENDATIONS INDUSTRY RELEVANCE LEARNING BIBLIOGRAPHY 83 85 87 88 90 .
UTI securities etc. 2000 when lots of online trading companies came with a bang but only few were survived because of lack of computer knowledge and low internet penetration. Major findings indicates that out of a survey of 75+ respondents (Friends & colleagues) it was seen that most of the investors prefer online trading because of few major factors such as time saving convenience. Reliance Money etc. A study was undertaken to determine the growth of various online trading companies in India in terms of trade done by them through online and services provided by them. RelianceMoney. . Indiabulls. Today the online trading companies having cut-throat competition in our offering whose brokerage discounts lower margin money and zero balance accounts. Religare securities Angel Broking. protection through Freudian brokers etc. A few examples of banking online trading companies are HDFC securities. although during my research project I’ve seen that most of the respondents feel online trading. Online trading was initiated by NSE in India and soon after the other exchanges also followed it. ICICI direct.com.18 – . There are two types of online trading companies one is the banking online trading companies and the other is nonbanking trading. On the other hand non -banking trading companies are ICICDirect. There was a major boom in yr. . a secure way of investing into stock market still a few of them feel that it’s unsafe and a bit complicated but they posses information about online trading.2 EXECUTIVE INTRO As per the title suggest the project report has been prepared as a study on online stock trading in India using the current technology which has a great influence in growth of primitive stock trading which was earlier part of few specialized stock brokers has been thrown open to common people in India and across the globe. Due to the rising education awareness and use of internet there is a huge potential for online trading in future and companies must come up with innovative offerings to capture the untapped market.
It also affected the stock market all over the world including India. This study mainly deals with development and usage of online trading in India since its inception in the year 2000. To understand the customer perception of online trading. NASDAQ and S&P 500. To determine the growth and future of online trading industry in India 2.3 SCOPE OF THE STUDY Since the year 2000 a big boom has been witnessed in the Indian Stock Market when the market showed the coming up of Online Trading System.1 PROJECT TITLE To determine the “A study on Online Stock Trading in India” 3. The study then goes to evaluate and analyze the findings so as to present a clear picture of the trends in the online trading sector.2 TITLE JUSTIFICATION The above title is self explanatory.19 – .4 RESEARCH OBJECTIVES The objectives of my research project is – 1. The companies which survived are getting the handsome returns also attracting the foreign Investment Companies. Due to subprime mortgage crisis in year 2009-10 BSE. It is the challenge for the growth and development of trading in India that’s why I choose that particular topic for the study.3 PROJECT DETAIL 3. To see the type of technology used by stock exchanges and by the Indian customer in online trading . 3. 3. 3. Many online stock trading companies came but initially due to lack of online trading some companies vanished and some survived. two major stock exchange of the world entered into the bearish market. Nowadays this sector is facing cut-throat competition and also provides huge growth prospects.
5. The sample will consist of people who are employed or work as free lancers dealing in investment options to know their financial requirements.20 – .1 Non Probability The non –probability respondents have been researched by selecting the persons who do the stock trading. This also involves talking to their executives regarding various features provided to the customer along with their Brokerage structure. 3. Business development and revenue generation. 3. • Second Phase is Collection of Primary Data and Analysis: After collecting the Secondary data the next phase will be collection of primary data using Questionnaires.4. To determine what type of products the customers deal while doing the online trading.5 RESEARCH METHODOLOGY The research methodology for the project completed in two phases: • First Phase is the collection of Secondary Data: This involves the collection of Secondary data using internet and internal sources for comparison of Online trading account of other Broking houses in the market like ICICI Direct. . To be able to compare and analyze the various Financial Products. To understand the presence of major online traders in the Indian market and looking about the features provided by them 6. Based on these requirements different investments will be informed to them for further perusal. To find out the important factor which do mostly affect to the customer 7. To develop a good strategy and process that improves the business of the organization 8. 9. Religare and Reliance Money etc. Those persons who do not trade in stocks have not been interviewed.6.6 RESEARCH DESIGN 3. The questionnaire will be filled by around 75 people who will be mainly from Bangalore/Hyderabad/Mumbai region. MOTILAL Oswal.
2 Sampling Unit The respondents who were asked to fill out the.7. 3. People were not willing to answer the entire questionnaire due to the less time available to them. These respondents comprise of the persons dealing in stock trading.6. The secondary data has been taken by referring to various magazines.7. in front of the companies. . internal sources and internet to get the figures required for the research purposes.3.4 Sampling Area The area of the research was Bangalore/Hyderabad/Mumbai. 3.7 SAMPLING METHODOLOGY 3. 3. The objective of the exploratory research is to gain insights and ideas. newspapers.21 – . A well structured questionnaire was prepared for the primary research and personal interviews were conducted to collect the responses of the target population.8 LIMITATION OF THE STUDY The various limitations of the study are: 1.1 Sampling Technique Initially. telephonic interviews and through other sources also. The sources of information are both primary and secondary. 3. a rough draft was prepared a pilot study was done to check the accuracy of the Questionnaire and certain changes were done to prepare the final questionnaire to make it more judgmental.7. The people have been interviewed in the open market.7. 3.3 Sampling Size The sample size was restricted to only 75 respondents. The objective of the descriptive research study is typically concerned with determining the frequency with which something occurs.2 Exploratory and Descriptive Research The research is primarily both exploratory and descriptive in nature.
6. The survey was done in the some major metro cities and may not truly express the opinion of whole country. Most people are comfortable with traditional system in small towns and like to trade from their respective brokers.22 – . . Some respondents might be hesitant to divulge personal and financial 3. 5. 4. information which can affect the validity of all responses.2. Some of the respondents who did not do online trading were able to respond to only few questions. There is lack of awareness among people about investing in stock market. So the people who are aware of such things were found in specific areas for survey purposes. hence not providing a true opinion of theirs.
In order to perform one or more of the business functions Internet based e-commerce systems use World Wide Web based . drivers of growth and the necessity of its existence will be presented so that it becomes easier to understand the research area. the computer networks primarily the It is streamlining business processes. supply chain management. or ebusiness consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. inventory management systems. 4.1. restructuring whole industries and re-shaping of customer and supplier relationship (Daniel et al.1 E-commerce and the Position of Online Trading In business today electronic commerce (e-commerce) is one of the common topics being discussed..1 ECOMMERCE Electronic commerce. Kalakota and Whinston (1996) defined ecommerce as "The buying and selling of information. and automated data collection systems. networks. Internet marketing. vital literature about online trading along with key concepts of different terms. products and services being via computer Internet. 4. The use of commerce is conducted in this way.1. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle.23 – . electronic data interchange (EDI). spurring and drawing on innovations in electronic funds transfer. 4.1 Background This section is intended to offer sufficient background of the research area that covers the general idea of e-commerce and the position of online trading as one of the major element of each economy. commonly known as e-commerce or eCommerce. although it can encompass a wider range of technologies such as e-mail as well. First.1. online transaction processing.4 LITERATURE REVIEW This chapter brings up relevant literature required to find answers and connect to our research questions. 2002).
insiders' illegal activities and etc. 4. traders leave the market where there is no appropriate surveillance over the activities because the unsatisfied customer will not take all the risk in stock market. lot's of paperwork. conventional method in handling and controlling the Stock market is growing up and the number of traders rapidly increasing. Stock exchange was technology as well as other business influenced sectors.2 Online Trading and Customer Satisfaction Applying conventional trading problems systems cause in India leads to many and aspects of problems like manipulation. In fact electronic commerce is a way of conducting. managing and running business transaction using computer and Internet. the numbers of internet users' have been rapidly increasing and have widely spread into all aspects of life. by Internet Stock exchange as a critical pillar of each economy. providing a flow trading process and accelerating the transaction settlement can create more motivation for traders to join stock trading exchange likewise cooperate and invest in companies and finally.24 – . the index growth and tendency of individuals and legal entities crystallized if the economy of a country is flourishing or on the other hand continue recession conditions.1. internet creates an opportunity of reaching these goals. may in turn directs us to lose the potential power of this market in order to integrate the traders' small capital. in this manner. The most common use of e-commerce is to replace or enlighten conventional transaction methods and in the last few years a substantial growth of internet-based services being experienced. acts exactly the same as a thermometer of economical condition of the country. With no doubt. The volume of stock transactions. These the lack of traders' dissatisfaction technological foundations creates an inefficient market.1. It has opened up tremendous business opportunities for its users.application solutions. Therefore. According to an Angusreid group study (2008) of Internet users in 44 countries nearly 220 million of the estimated 500 million worldwide Internet users have already made a purchase or transactions online. Based on the significant power of World Wide Web and global ecommerce. So it is clear that if stock market as a supervision organization could not . therefore following market.
access. In other words. credibility. It includes – consideration for the customer's property. ability and ease of contact. Courtesy involves politeness. It means: the service is easily accessible. the services. But how the traders' satisfaction can be measured and how can be proved that. calling the customer back quickly and giving prompt service. Especially it involves: accuracy in billing. These dimensions are measured in order to find out the degree of satisfaction in current market and find the relationship between service qualities dimensions which online trading can provide and traders' satisfaction. communication. There are: reliability. Responsiveness concerns the willingness or readiness to provide service. and friendliness of contact personnel. Competence means possession of the required skills and knowledge to perform contact personnel. competence. hours of operation are convenient and location of service facility is convenient.1. market expansion is meaningless. It means that the firm performs the service right the first time. consideration. it seems that providing and recovering service quality in this market may enhance traders' satisfaction and encourage investing more and more. It involves: and of knowledge skill of and skill of the personnel.1. responsiveness.3 Different Models for Measuring Service Quality According to literature. Leading researcher (Berry) identified ten determinant of service quality. respect. understanding and tangibles. . there is a dramatically gap between what traders looking for and what traders receive as a service? 4. Reliability involves consistency of performance and dependability. security. service quality dimensions identified by different authors. knowledge research capability operational support the organization. It also means the firm honors its promises. waiting time to receive service is not extensive. clean and neat appearance of public contact personnel. Access involves approach.25 – . keeping records correctly. courtesy. It involves timeliness of services that means – mailing a transaction slip immediately.offer suitable services to the traders. and performing service at the designated time.
Tangibles physical evidence tools of or the service: equipment physical facilities. risk or doubt. It includes: learning the customer’s specific requirements. financial security and confidentiality. 2. Leading researcher (Parshuraman) came up with five determinants that can be used to measure service quality.Communication means keeping customers informed in language they can understand. it involves having the customer's best interests at heart. understanding the customer): Caring and individualized attention that the firm provides its . Understanding the customer means making the effort to understand what the customer's needs are. It may mean that the company has to adjust its language for different customers. other customers in the service facilities A number of research workers and others determinants by which a consequently result in satisfaction or not. It also means listening to customers. 4. This scale named SERVQUAL and has been developed for the service sector.26 – . Security is the freedom from danger. credibility and security): Knowledge and courtesy of employees and their ability to inspire trust and confidence. have tried to identify key customer assesses service quality and Reliability: Ability to perform the promised service dependably and 3. courtesy. personnel. physical representations of the service. 5. It has five generic dimensions or factors and is stated as follows: 1. used includes appearance the of to provide the service. Tangibles: Physical facilities. explaining how much the service will cost and assuring the customer that a problem will be handled. honesty. It involves: physical safety. It involves: explaining the service itself. Empathy (including access.increasing the level of sophistication with well.educated customer and speaking simple and plainly with a novice. Responsiveness: Willingness to help customers and provide prompt service. such as a plastic credit card or bank statement. providing individualized attention and recognizing the regular custom. Assurance (including competence. believability. equipment and appearance of personnel. accurately. Credibility involves trusts worthiness. communication.
Commitment. Leading researcher (Johnson) provides 18 service quality dimensions – Attentiveness/helpfulness. Flexibility. Availability. So it is desirable for responsible in stock exchange to uncover what attributes traders utilized in their assessment of service quality and satisfaction and which attributes are more important. Leading researcher (Gronroos) postulated six criteria of perceived good service quality.2 ONLINE TRADING . Good customer service quality is the main factor in creating satisfaction and enhances the level of traders' satisfaction.1. 4. Communication. Courtesy. accessibility reliability trustworthiness. as a main customer of this market. Cleanness/tidiness. Recently many stock exchanges all over the world have used the Internet as a new tool to offer their customers a variety of services 24 hours a day and offer better services to traders. becomes an important factor. reputation and credibility. and attitudes and behaviors. In this situation. create a situation that increase the risk of investing in this market.customers. poor surveillance power. 4. Care. Conventional trading system. stock exchange plays a critical role in each country's economy and understanding of traders’ needs.27 – . Comfort and Security. Access. Functionality. Aesthetics. satisfaction has great effect on traders retention and more important attract potential traders and as a result reach to more efficient market and the possibility of market expansion will be feasible. But these steps are not passed in India yet and traders suffer from insufficient services. Integrity.2 Motivation As it was mentioned. recovery. and skills. limit services and so many others short comings. and Professionalism flexibility. create a suitable situation for price manipulation. Reliability. Friendliness. Competence. wash sales and so many other frauds which in return lead to traders dissatisfaction and inefficiency of Indian stock exchange. responsiveness.
the time factor play a critical role in this business. E-business enables organizations to reduce cost. saving time and money and paperless process are the most significant goals of the online trading. E-businesses are defined as the use of Internet based information and communication technologies (ICT) by organizations to conduct transactions. . any commerce carried out using computer networks are called electronic commerce and has created an opportunity to do business and handle transactions electronically and stock trading domain makes the most of its chance all over the world. E-commerce is a subset of e-business and defined as buying and selling of goods and services on the Internet. increase demand and create new business models. Creating more convenience. internet quicken and streamline the trading process. especially the World Wide Web www.Countries all over the world have invested heavily to leverage the Internet and transform their conventional businesses into e-businesses.28 – .dotcom-productions. share information and maintain relationships. New technologies such as World Wide Web have made a profound on all business around the world. As. In fact.com).
2. It changes the shape of communication and also trading process. . four main definitions are mentioned: Referring to two websites which are active in trading fields (www. It provides users with means to directly interact with service. There are lots of definitions for online trading. or to a lesser extent. and online stock trading site is a web site that helps traders or customers to buy and sell the financial products over the Internet. therefore. It shifts closer and closer to vital sources of information and new trading environment by the name of "online trading". define it in this way: The 'online trading' is defined as a process of trading financial products especially stocks over the Internet. through a broker's proprietary software.investorwords.29 – . they can serve themselves better by making their own decisions.oriented computer systems tailored to their specific needs.4. Hereby.com and www. Likewise Fan et al.advfn.com) they define online trading in this manner: The increasingly popular activity of buying and selling securities over the internet.1 Definitions of Online Trading The Internet revolution has been changing the fundamentals of the society.
but a means to enter a trade. but something is common and that the services which have provided to traders. Online brokerage firms make their trades over the Internet in order to keep costs down and fees low. bond. Full-service brokers have access to a wide range of reports and analyses from the company's large staff of financial analysts.com) Each of these definitions describe online trading from somehow different aspect. Discount firms usually do not offer advice about specific securities. The first is through "Conventional Online Trading". (www. The second is by way of "Direct Access Trading systems".com) There are two basic ways to day trade electronically. These orders are routed to the Stock Exchange without manual intervention and executed thereon in a matter of a few seconds. using your Internet browser and a Web based broker.investsmartindia. These analysts research companies and recommend investments to people with different financial needs. Online trading is not a strategy. using specialized software and a private network. you will access a stockbroker's website through your internet-enabled PC and place orders through the broker’s internet-based trading engine.trendtraders. Online trading can be used to enter a short trade or day trade. They divided into three categories • • • Full-service Discount Online Investors who do not have time to research investments on their own will likely rely on a full-service broker to help them construct an investment portfolio.Also online trading is described as service offered on the internet for purchase and sale of shares. while online firms do not. Discount brokerage firms usually have branch offices. (www. commodity or option.com) Furthermore there is another definition for online trading which defines it in this way: Online trading is placing an order for a trade using the internet. or a longer-term position in a stock. Most brokerage firms now have call centers staffed with both licensed sales agents and customer service representatives who take orders and answer questions at all hours of the day. It is important for day traders to .30 – . Persons who prefer to select their own investments generally use a discount or online broker and pay lower commission charges. or make recommendations regarding which investments to buy. In online trading. In the real world you place orders with your stockbroker. (www. manage their investments.trendtraders.
4. Online trading has become so popular that several companies are now building systems to allow investors to trade electronically after normal stockexchange hours.understand the key features of. According to The Economist. It is expected that over the next three to five years. nearly all investors will use the Internet to access their accounts. Europe (United Kingdom.S. Hong Kong. according to Fletcher Research. By 2000. in online trading. DLJdirect. Japan. France). anywhere. Certainly. and perhaps 15% of all individual-investor brokerage accounts are Internet-based. With the overseas exchanges lagging behind the U. and Charles Schwab have established operations in Australia. Sweden.2 The growth of online trading The number of online investors has grown considerably since the first electronic brokerage opened its virtual doors in 1994. The European exchange alone. These e-brokerages have attracted 16 million investors in less than Seven years. an amazing four-fold increase in less than five years (Epstein. according to U. It is reported that the number of daily transactions was just under 1000.brokerages has also grown-from only 12 in 1994 to more than 160 in 2008. the growth and trend of it has presented.S.31 – . Canada. the number of online brokerage accounts increased from zero in 1994 to more than 25 million in 2008. It is estimated that about one in every three equity trades made by retail investors is now placed online. others are using pagers and other wireless devices to let customers trade anytime. according to Gomez Advisors. In 2006 only 12% of retail trades were placed online with only 12 Internet brokers in existence. Trend Trader offers a choice of trading platforms: To have an overview on the evolution of online trading. now accounting for over 40% of retail stock trades. Bancorp Piper Jaffray Inc. 1999). Online trading in America has shown amazing growth. 48% of trades are done online and over 100 firms are in business. The number of e. the leading American brokerage firms such as E*Trade. these two forms of electronic trading. could reach to 210 million by 2008 compared to the 38 million who were online at the end of 1998.2. . and New Zealand.000 per day. and the differences between.
Conventional brokerages are not accustomed to dealing with this additional layer of complexity. Each company could create switching costs by customizing the company portal.2. rates of established online brokerages will be stable over the next year. and system reliability.4 Online Trading characteristics • High amounts spent on advertising: Because of relatively low barriers to entry. making it costly for a customer who switches to competitors' site.2. prices have started to stabilize and further price reductions are unlikely from the present level.3 Online Trading trends • Security issues fading: Concerns centered on security issues (encryption) and customer service issues (upgraded server and network equipment) are fading as consumers become accustomed to using the internet on a weekly or even daily basis for many types of transactions. Importance of technology: Companies in the industry compete on speed of access. Scale is important: With the large conventional brokerages entering the online business. with every competitor lowering commission rates in an attempt to gain as many new accounts as possible. companies in this industry spend heavily on advertising in order to create a "brand" or "portal destination".4. with the idea that a company can retain those customers by creating switching costs. Established online brokerages have an advantage over newly entering conventional brokerages in this area. Heavy advertising costs will need to be spread over a larger number of accounts.32 – . Pricing stabilization: The online brokerage industry has seen severe price competition over the last two years. Convenience and low cost trades have been two primary drivers responsible for the significant transfer of investors from conventional brokerages to online brokerages. • • • . There is a belief that. Different service proposition: Online brokerages offer a different bundle of features compared to conventional brokerages. gaining economies of scale will be important. • 4. speed of order processing. How successful a brokerage is at gaining and retaining customers over the next year will determine which online brokerages survive as independent businesses. While new entrants will have to align commission rates lower to be competitive. Convenient. twenty-four hours access for trading and research are defining characteristics of the online business. The industry is in a race to lock up as many customers as possible.
4.2.5 Advantages and Disadvantages of online trading
Trading online the same as other systems has advantages and also disadvantages. Below the main points are summarized: Advantages
Quick access/Convenience: You can place your orders from anywhere and at any time. All you need is a personal computer. When you trade online, you save yourself a lot of time. You need not call your stockbroker to give your orders or to find out what happened to your trade. Control/Transparency: With online trading, power is literally at your fingertips. With a few keystrokes, you can place your orders and get all the information you need without any assistance or intervention of a stockbroker. You do not have to discuss or reveal your trades or plans with your stockbroker. You become an empowered, self-directed investor. Efficiency: Getting information or feedback used to take minutes, sometimes even days. With online trading, you get these faster because you get online, real-time information on your account balance, order status, and stock quotes with the best three levels of bids and offers. Opportunity to take advantage of market movements: By trading online, you have the ability to react quickly and take advantage of opportunities in the market that will hopefully enhance the value of your investments
Disadvantages Despite all the advantages of Online Trading there are a few disadvantages. However, these disadvantages only apply to certain investors, the inexperienced investor, the traditional investor, and the busy investor. • Expertise: Nobody involved in financial markets claims to know all the right moves, but everyone involved in the markets has an understanding of how things work. For an individual who knows nothing about stocks and nothing to look for might have a problem with online trading. Online trading does provide investors with sufficient research to make educated investments, but investors must be able to interpret the research and put it to use. Those individuals who do not have an understanding of the information might be better off letting a broker make the decisions.
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Time: There are a lot of investors out there that are very well educated in the financial markets but are too busy doing other things. Online trading requires an individual to do his or her own analysis. The research is provided by the online company, but the investor must go through the information and determine what is valuable to their investment strategies. This often times requires an individual to have some free time. Many investors just do not have the time to go through the research; therefore, using a broker is the only other option.
For the traditional investor Online trading also has one major disadvantage:
Informality: Using an online service to make trades is very informal. Traditional investors grew up investing through a broker and interacting with that broker. Often time's traditional investors have very close relationships with their brokers and online trading eliminates the possibility of any relationships. Online trading might not be for everyone and often times are not. However, 82 percent of those people who invest online believe that most investors will invest online in five years. Whether or not this is true, trading online has become very popular and has opened a door to whole new perspective of investing. Whether you are a first time investor or a professional, online trading offers convenience, lower costs, and empowerment to all users.
4.2.6 Indian Stock Exchange and Applied Trading System
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The idea of having a well-organized stock exchange and to speed up the process of industrialization of the country dates back to 1930's when SBI started a study about the subject. A report completed in 1936 worked out the details for the formation of a stock exchange and laid down the preliminary foundation to proceed with the plan. The outbreak of the World War II and subsequent economic and political events delayed the establishment of the stock exchange up to the year 1967 when the Stock Exchange Act was ratified. The Indian Stock Exchange opened in April 1968. Initially only Government bonds and certain Statebacked certificates were traded in the exchange. During 1970's the demand for capital boosted the demand for stocks. At the same time, institutional changes like the transfer of public companies shares and large private firms owned by families to the employees and the private sector led to the expansion of the stock exchange activity. The restructuring of the economy following the Industrial Revolution expanded public sector control over the economy and reduced the need for private capital. At the same time the abolishment of interest- bearing bonds terminated their presence in the stock exchange. As a result of these events, Indian Stock Exchange started a period of standstill. This stop came to an end in 1989 with the revitalization of the private sector through privatization of state-owned enterprises and promotion of private sector economic activity based on the First Five-year Development
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Plan of the continuously.
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5 THE EMERGENCE OF ONLINE TRADING IN INDIA
This chapter brings up relevant literature required to find answers and connect to our research questions. First, vital literature about online trading along with key concepts of different terms, drivers of growth and the necessity of its existence will be presented so that it becomes easier to understand the research area. Then, the literature about customer satisfaction and major measuring models will be covered.
5.1 ICICI DIRECT
ICICIDirect (or ICICIDirect.com) is stock trading company of ICICI Bank. Along with stock trading and trading in derivatives in BSE and NSE, it also provides facility to invest in IPOs, Mutual Funds and Bonds
ICICIDirect offers 3 different online trading platforms to its customers:
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Wise Investment account also provide options to invest in Mutual Funds. It allows investor to use online and offline stock trading.1% to 0.75% on delivery based trades. This account also provides facility to invest in Government of India Bonds and ICICI Bank Tax Saving Bonds.38 – . ICICI Direct offers various options while investing in Mutual Funds like Purchase Mutual Fund. Systematic withdrawal plan and transferring existing Mutual Funds in to electronic mode. 3.425% for squared off trades and 0. ICICIDirect.com website is the primary tool to invest in Mutual Funds. Margin Trading. Brokerage and fees: Brokerage: ICICIDirect. service taxes and courier charges for contract notes. Wise Investment Account: Along with MF and IPO investing in BSE and NSE. This account allows Cash Trading. Bonds and stock trading. Active Trader also provides commodity trading.15% for margin trades. Systematic Investment plans. Share Trading Account: Share Trading Account by ICICIDirect is mainly for buying and selling of stocks in BSE and NSE. 0.2% to 0.4% to 0. around 19 Mutual Fund companies and bonds. It also provides with independent market expertise and support through a dedicated Relationship Manager from ICICI. 2.1. Redemption and switch between different schemes. Buy Today Sell Tomorrow and Call and Trade on phone.com brokerage varies on volume of trade and inclusive of demats transaction charges. It ranges from 0. They also provide installable application terminal based application for high volume trader. Spot Trading. Active Trader Account: Active Trader account gives more personalized investment options to the investors. Margin Plus Trading. . IPOs.
• • • Disadvantages of ICICIDirect: • • • • Getting access to ICICIDirect. Unlike most of the online trading companies in India which require transferring money to the broker’s pool or towards deposits. Company recently entered in to Wealth Management with tools like investment in equity-linked portfolio management services. ICICI Direct brokerage is high and not negotiable.Advantages of ICICIDirect: • 3-in-1 account integrates your banking. Derivatives. is the financial services division of the Rs 10000 crores Reliance Anil Dhirubhai Ambani Group. All accounts are from ICICI and very well integrated. broking and demat accounts.com. Life Insurances. IPO Investment. General insurances. Mutual Funds. Forex exchange. structured products. . Reliance Money has over 22 lakhs customers and more than 10'000 branches in around 5000 cities in India.2 RELIANCE MONEY Reliance Money. Trading is available in both BSE and NSE. at ICICI Direct you can manage your own demat and bank accounts through ICICIdirect. This feature makes ICICI the most interesting player in online trading facility. Commodity Trading.com website during market session can be frustrating. RelianceMoney.39 – . A group company of Reliance Capital Limited. Company is among the largest broking and distribution house of financial products and having share of more than 3% of total stock market volume at BSE & NSE. and Postal Savings Schemes all from one website. Investment online in IPOs.com enables its customer to invest & manage most of the services provided by Reliance Money including Equity (Stock) Trading. GOI Bonds. General Insurance is also available from ICICI Lombard. Gold Coins and Credit Cards Services. Money Transfer. insurance and mutual funds. Not all stocks are available under Margin Plus Facility for linking account of ICICI Bank Only 5. Mutual Fund Investment.
99% pure.com is available for BSE and NSE stock exchanges. Crude etc. Post the trail period. 179 for 6 months/ Rs. Fast Trade 3.40 – . Insta Trade 2. currencies and indexes. Stock Trading through RelianceMoney. Mutual Fund Investment Life & General Insurance ‘Pure Swiss' Gold Coins (99. a Canada based company. 299 for a year. commodities.. Offline trading is also available through Reliance Money partners in more than 5000 city across India and through phone by dialing 02239886000 The investment options available with Reliance Money online portal are as below: • • • • • • • • Equity (Stock) Trading at BSE.. Reliance Money Brokerage and fees: . NCDEX and NMCE. 24 carat) Trading platforms: Reliance Money provides 3 different trading platforms for equity trading: 1. less than Re 1 a day. Easy trade Reliance Money Technical Analysis (A paid service): Reliance Money offers a simplified. has proprietary pattern recognition technology capable of recognizing patterns in the price charts of any publicly traded financial instrument including stocks. NSE and NSE F&O IPO Investment Derivatives Trading Forex Trading Commodity Trading (Gold. 99 for 3 months/ Rs.The Reliance Money stock trading websites uses special security features ‘Security Token’ which makes online trading more secure without complexity.. Silver.e.. automated. bonds. funds. i.) at MCX. The technical services are available for introductory free 7-day trial period to Reliance Money users. Recognia. this service is available to users at a nominal subscription of Rs. sophisticated technical analysis to Indian retail broking consumers with the help of Recognia's Technical Analysis tools.
com website. 5. Commodity. mutual funds and IPOs. Kantilal Ishwarlal Securities Limited (SSKI) has been among India’s leading broking houses for more than a century. NSE. Along with Sharekhan.Reliance Money offers lowest brokerage rates in today's online stock trading industry in India.500 companies for in-depth information. provider of Indiabased investment banking and corporate finance service. • Disadvantages of Reliance Money • • Customer Service is not that good. easy and fast online stock trading. details about more than 1. Share khan has state of art web portal providing fundamental and statistical information across equity. You can also access other market related details .02 for now delivery. The brokerages are as low as 0. which is the most secure and tested technology in computer world.41 – . Forex. Sharekhan has around 510 offices (share shops) in 170 cities around the country. Derivatives. Sharekhan's equity related services include trade execution on BSE. Small cap stocks are not available for trading. IPO. depository services.S. Derivatives. For more detail about Reliance Money’s brokerage and fees visit the below section of this webpage. online trading and investment advice. Branches are available in all major cities and the number is growing. Simple. commodities.500 mutual fund schemes and IPO data. Almost all investment options are available under one account including Equity Trading. Advantages of Reliance Money • • • Extra security features with 'Security Token’'. S.3 SHARE KHAN Sharekhan is online stock trading company of SSKI Group. Mutual Funds and Insurance. You can surf across 5. Sharekhan is one of the largest stock broking houses in the country. Trading is available in BSE and NSE.075% for delivery based trading and 0.
Unlike ICICI Direct. Sharekhan Speed Trade account This account for active traders who trade frequently during the day’s trading session. Sharekhan charges 0. Type of Account: 1. Real-time portfolio tracking with price alerts and Instant credit & transfer. stock recommendations etc. Sharekhan has ability to transfer funds from most banks. Allow investor to buy and sell stocks online along with the following features like multiple watch lists. demat and digital contracts. They provide good quality of services like daily SMS alerts.such as board meetings. buying/selling by mutual funds and much more. Following are few popular features of SpeedTrade account: o o o o o Brokerage: Some stock trading companies charge direct percentage while others charge a fixed amount per Rs 100.5% for inter day shares and 0. 2. result announcements. HDFC Sec. Integrated Banking.42 – . so investor not really needs to open an account with a particular bank as it can establish link with most modern banks.1% for intraday or you could say Sharekhan charges 50 paise per Rs 100. etc. Advantages of Sharekhan: • • Single screen interface for cash and derivatives Real-time streaming quotes with Instant order Execution & Confirmation Hot keys similar to a traditional broker terminal Alerts and reminders Back-up facility to place trades on Direct Phone lines • Online trading is very user friendly and one doesn't need any software to access. mail alerts. Sharekhan Classic account: FII transactions. Disadvantages of Sharekhan: ..
Kotak Securities is one of the largest broking houses in India with wide geographical reach.000 to 5. 00. Kotak Securities is a corporate member of both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Anybody can activate Kotak securities gateway account with any amount between Rs 20. This can be in form of cash deposit or the value of the shares you buy. Classic account holders cannot trade commodities. Kotak gateway user can trade anywhere. Kotak securities online trading is the online trading portal of the Kotak Securities Ltd. research report. Currently. They do not provide facility to book limit order trades during afterhours. Brokerage will be charged based on the account type. The online division of Kotak Securities Limited provides services like internet broking services.• • • • • They charge minimum brokerage of 10 paisa per stock would not let you trade stocks below 20 Rs. a subsidiary of Kotak Mahindra Bank.4 KOTAK SECURITIES Kotak Securities Limited. online IPO and mutual fund investments. They provide sms alert.43 – . Kotak also offers call and trade facility. the leading stock broking house of India. free news and market updates. Kotak Gateway • Kotak securities gateway account opens the gateway to a world of investing opportunities for beginners. For intraday trading brokerage • • . you will lose majority of your money in brokerage). anytime using internet. Hidden conditions and charges. (If you trade. Types of accounts: Kotak offers different account types according to user’s requirement: 1. Best feature of Kotak gateway is call and trade facility. Cannot purchase mutual funds online.000. 5. was set up in 1994.
000/.at a fixed brokerage. 00.as margin. by way of cash or stock. by way of cash or stock.000/. One can activate Kotak securities freeway with any amount less than Rs. They provides KEAT premium which is an exclusive online tool that lets you monitor what is happening in the market and view your gains and losses in real-time. Kotak Freeway • Frequent trader use this account type because freeway account enables it’s users to trade as many times as they like . Trader can apply paper free order for IPO. 10. Kotak Flat .44 – . The minimum brokerage that is applicable in the Kotak high trader account is 4 paisa on delivery and 4 paisa in the cash segment.a month and on delivery transaction brokerage is .as margin. Trader can get the 6 times exposure on the margin.03% for more than 25 crores. • 3. 25. Kotak Privilege Circle • This is the premium account for its users. • One can activate Kotak securities high trader with any amount less than Rs 5. • 5.023% for more than 25 crores. They charge fixed brokerage of Rs. 00. 2.999/. One can activate Kotak securities privilege circle account with any amount more than Rs. Along with kotak gateway account benefits they provides independent market expertise and support through a dedicated relationship manager and a dedicated customer service desk which provides assistance in opening accounts.18% on more than 2 crores.06% both sides for less than 25 lakhs and . and more. 1. Kotak High Trader • This is the best offer for daily trader or intraday traders. They provide all the benefits which kotak gateway and privilege account provides. by way of cash or stock. For intraday trading brokerage is .as margin. This is an Auto Square Off product where you can enjoy the benefits of intra-day trading.000/. handling day-to-day problems.59% on less than 1lakhs and .06% both sides for less than 25 lakhs and . 4.is .
For delivery trading. This account provides Complete assistance on all your financial investment. Kotak flat introduces the international trend of charging brokerages on per trade basis.5 INDIABULLS .45 – . Kotak Assist • This account most suits to long term investors.018% for intraday trades.18% on delivery trades and 0. periodical research reports. the bank account to have a minimum of Rs. stock recommendations etc. Kotak brokerage is around 0.1000 to start with.2500. Advantages of Kotak Securities Limited: • Kotak provides a Call & Trade facility to its customers wherein they can place and track their orders through phone when they are away from home. • Kotak provides exclusive online tool to monitor what is happening in the market and also investor can view gains/losses in real-time. • They provide daily SMS alerts. Disadvantages of Kotak Securities Limited: • In online trading sometimes delay comes.05%. Kotak brokerage is around 0.45%. Brokerage: • • For Intra-day trading. 6.• This product is best suited for the needs of the Indian retail investor who actively invests through the internet. market pointers. Brokerage and Account opening fees: A trading account in Kotak requires you to have a minimum of Rs. So it can be frustrating 5. Brokerage rate works up to 0.
.Demat Account opening charge 750/. Provide trading terminal 'powerbulls'. 2. Luxembourg Stock Exchange and London Stock Exchange Types of account: 1. This trading terminal is built in JAVA. Tic by Tic Live Charts.Indiabulls is India's leading Financial Services and Real Estate Company having presence over 414 locations in more than 124 cities. Indiabulls Equity Trading Account Indiabulls Equity Trading Account is standard Online trading account from India bulls and along with online trading it also provides priority telephone access that gives you direct access to your Relationship Manager and full access to 'Indiabulls Equity Analysis'.Equity Trading Account opening charge 200/.Software changes Advantages of Indiabulls • • Brokerage is less compare to other online trading companies.46 – . non-refundable) as below: • • • 250/. Technical Analysis. Brokerage and fees: Account opening fees: Rs 1200/. It's very fast in terms of speed and execution.(One time. Disadvantages of Indiabulls • Faces lots of complaints regarding portal breakdown. Fast Order Entry and execution. Power Indiabulls • • Power Indiabulls trading terminal is the most advanced new generation trading platform with great speed. Live News and Alerts. Bombay Stock Exchange. Power Indiabulls is extremely reach in features including Live Streaming Quotes. Indiabulls Financial Services Ltd is listed on the National Stock Exchange. Extensive Reports for Real-time Accounting. a java based software.
execution and monitoring a range of investment products. An established brand name and extensive geographic network covering 1. Though all these business are linked to capital market. It has also forayed into related businesses like investment banking. a leading brokerage firm. The company has classified its clients into three segments – Mass Retail. We believe the stock offers quality exposure to the domestic equity broking and financial services market. Strong competitive positioning MOSL is one of the leading stock broking firms in India with a rapidly growing client base and wide distribution network. It has consistently improved its market share in terms of traded volumes on the stock exchanges Diversifying into related businesses MOSL has forayed into related business like investment banking.5. According to the needs of each segment.339 locations in over 426 cities and towns would provide it ample opportunities to cross-sell products and services.47 – . These services include planning. private equity and asset management. has exhibited robust and consistent growth in both institutional and retail broking. private equity and asset management. The growing client bases of its broking and distribution businesses would be a captive source for cross. we believe the move would bring in various diversification benefits for the company going forward Customized investment management services MOSL offers customized investment management services to its retail clients. It also provides wealth management services. products and services are offered through the company’s business locations and online channels. MOSL has a discretionary portfolio management business. Mid-Tier Millionaire and (PCG) Private Client Group. The company is seeking to build this business rapidly. The company also has a strong institutional equity business. A respected research presence and extensive reach has resulted in robust growth in its retail business. The target customer segment for wealth management business would largely be the HNW (high net-worth) segment. which has impressive growth potential. advisory.6 MOTILAL OSWAL Motilal Oswal Financial Services (MOSL).
Having spread itself fairly well across the country and with the promise of not resting on its laurels. is one of India’s largest and fastest growing integrated financial services institutions. portfolio management services. Investment banking and institutional broking services.7 RELIGARE Religare Securities Ltd is a Ranbaxy promoter group company. Strategy adopted by Motilal Oswal 5.selling these products. . personal finance services. Religare’s retail network spreads across the length and breadth of the country with its presence through more than 900 locations across more than 300 cities and towns. to wealth advisory. it has also aggressively started eyeing global geographies Unique features and benefits of trading through Religare: • Trade Reward . MOSL has recently launched a separate branded product (Purple) for catering to the needs of this segment.Trade Rewards is a unique offering from Religare that gives you dual benefits of hassle free investment experience online and an opportunity to earn while you invest. commodities. insurance broking.48 – . The company offers a large and diverse bouquet of services ranging from equities.
Life Insurance. Trader Terminal (TT): . The company has a network of 976 business locations (branches and Subbrokers) spread across 365 cities and towns. Fixed Deposits. which is another product provided by 5Paisa. • • 5.5paisa. Get freedom from brokerage and avail zero brokerage on your trades through us.8 INDIA INFOLINE The India Infoline group. Today it has more than 800000 clients Trading Platform. Gold Bonds and other small savings instruments to loan products and investment banking. 5Paisa offers 2 different online trading terminals to its customers: 1.Even while you are waiting to make your next trade or online investment. India Infoline Limited and its wholly-owned subsidiaries. Exposure up to 20 times on your margin . Commodities trading. You can get exposure (on cash Segment) as high as 20 times for intraday trades.Allowing you the freedom to trade without hassles throughout the day without having to worry about your cash margin. Investor Terminal (IT): Investor Terminal is 5Paisa's equity trading terminal for low volume trader. portfolio management services. This is web based terminal and could access from anywhere. 2. straddle the entire financial space with offerings ranging from Equity research. Interest on cash margin .• Zero Brokerage . You earn interest on your unutilized cash margin.“Break the shackles”.com. your unutilized cash does not lie idle with us. comprising the holding company. Equities and derivatives trading. Of course conditions apply on above two. Mutual Funds. This product provides limited features in comparison of Trader Terminal.49 – . Website of India Infoline for trading is www.
With the evolving of internet the online trading became a hit and the investors became confident in investing just with a click of a mouse. This can be done with the help of online service providers like investsmart. Secondly. Broadly we can classify three important factors which have contributed to the development of online trading in IndiaFirstly the major step was taken by the National Stock Exchange (NSE) in the year 1994 which allowed the electronic trading and seeing to this various other stock exchanges in India followed soon. This helped in making the fast. As it takes less time people praise this technology for trading purposes. they charge an additional 0. pilferage or from other losses like counterfeiting and frauds regarding share transfer. In case of in delivery trade. The number of small investors is increasing on the daily basis that trades on the internet. Trader Terminal provides high volume trading with powerful interface and fast order execution Brokerage and Account opening fees: • • Account opening fees Rs 500/.50 – . derivatives etc with the other investors. in the year 1996 the dematerialization of the shares came (also known as DEMAT) which avoided the online presence of shares in an electronic form avoiding them from theft. If a person invests or trades in equities. accurate and transparent transactions saving a lot of time then the traditional method of trading. Some people who traded rarely now even trades 2-3 times every day as it provides edge of researching about companies on the internet. With the happening of such events the ratio of trading has improved a lot. derivatives. Earlier the organization’s which provided the facility of online trading was not safe enough to invest but some of the changes in the past years in the Indian share market have created the interest of trading in the shares by the people.onetime non refundable Brokerage. 5 paisa offers charge only 5 paisa for Rs100 of intraday trade done. . The investors were also saved by the clutches of the fraud brokers at the times when the clients were not aware of the true prices of the shares.05% brokerage.Trader Terminal is for high volume equity traders. which is 0. The third step was the rapid growth of computer education and learning of internet by the people.20% for back office and securities handling. commodities etc through the use Internet it is known as online trading enabling the investor to connect electronically to buy or sell stocks.
Online trading allows an investor to buy and sell shares on the exchange through Internet and helps in the direct control of his investments. • A person can access his accounts and related information on the Website • Provides greater convenience of trade as a person can trade from home or other convenient location. The benefits areA person can see the latest market movement through streaming quotes. Today the investors use the Internet Client-Server technology to buy and sell the securities at an instant at any point of time. therefore. • Reduces time lag due to self-execution and instant confirmation. . It provides us with means to directly interact with serviceoriented computer systems tailored to our specific needs. People investing online have reached the proportions. real-time market information that formerly belonged only to brokers has opened up extraordinary new investment opportunities as well as a crucial need for state-of-the-art information. A person can access a stockbroker's website through a PC connected to Internet and can place his orders.indiaInfoline etc. • Empowers traders to have a complete control over their trading decisions. • It is cheap in terms of cost associated and offers reduction in overheads • A trader can view the historical charts on his computer The Internet revolution has changed the way to communicate and the way to do business in today’s society bringing us closer and closer to vital sources of information.51 – . we can serve ourselves better by making our own decisions This new access by the online trading customers to low-cost transactions and cutting-edge.
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 crores (Rs 1 billion) in June 2003 to over Rs 950 crores (Rs 7 billion) in July 2008 which was a 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. Now the growth of online trading is on its right track .000 customers by the end of that fiscal.000 to 75. market of online trading got shrunk by more than 50%.6 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 2005-2008 and it was more than approx. 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. 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. 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. Today the total volume of online trade in India is about 29-31% of total trades.52 – .Indian stock market has been announced the one of the Safe and stable market of the world. 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.024 million. the % of internet user is growing in each year. 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. Philippines has the highest online trade . And the company expected to have at least 130.000. 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. In the year 2010 India has 8 crores (80 million) internet user.
Example of the tools used in these days online trading . The biggest challenge in India remains better Internet connectivity.53 – . The reason is because they had wider Internet connectivity years before India. 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.with about 55-60% execution of trade is online.
000 crores in the last one year and terminals was set up in small towns such as Rajkot.In that year the share of online trading rose dramatically from 7% last year to 20% as a percentage of overall traded .54 – .Online share trading in India was at a boom in the end of 2006 with dailytraded volumes more than tripling from Rs 1. Hubli and Vijayawada .500 crores to Rs 5.
" says Vinesh Menon. "It's a matter of time when we will see exponential growth in the online trading segment. 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.417 crores in November 2010 in the exchange’s cash market segment. 20 million investors are expected next 5 yrs.55 – .587 crores in December 2010 and Rs 4. India boasts of the third highest investor base in the world. Also at that time non-metros accounted for half of the daily turnover of online trading. The intense competition among a new wave of online brokerage companies hammered .450 crores in January 2008 Rs 3. unthinkable till a few years ago." adds Menon. Deputy CEO & Head for Online Investment & Branch Channel.648 crores between February 1 and February 8 as compared with Rs 3.volumes. not just through the computer but also through our mobile phones. Graph is showing the declining in the turnover of online trading in Indian stock exchange during slowdown in economy due to subprime mortgage crisis 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. 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. 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. Bajaj Capital. "Issues that need to be addressed are education on cyber crime and the security solutions around it.
according to the recently published 'India’s Leading Equity Broking Houses. The number of investors opting for online trading has gone up manifold.51. . the rise in the value of on line transactions is also because of sustained bull run witnessed in 2010. when the 30-share Sensex of the Bombay Stock Exchange (BSE) gained from 13.065 accounts while Unicon Financial Intermediates Pvt Ltd could increase their e-broking accounts by 13.56 – . Motilal Oswal Securities Ltd managed to add 19. 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 2010. 2008' by Dun & Bradstreet (D&B).down brokerage rates from 1% (in 2000) to 0. a gain of 6.611 accounts while a relatively new firm in the industry. According to the report. Reliance Money added 2. Indiabulls Securities Ltd added 4.15.25 %.787.842 points to 20. According to market watchers.207 points.678 accounts during the same time period. or even lower to 5 paisa.365 points (up 47%). numbers of e-broking accounts registered in 2010 have grown exponentionally.
Karvy Stock Broking. HDFC Securities have 500. ICICIdirect has 1.000 crores per day. . Unicon Financial (30%) and Shreyas Stock (20%) reported higher shares in 2010. Firms that reported presence of offices outside India include Reliance Money.000 to Rs 3. JRG securities.5 million online broking accounts and parent ICICI Securities reported revenues of Rs 750 crores for March 2008. HDFC Securities had revenues of Rs 67 crores and a net profit of Rs 7. The new player Reliance Money has 2 million online accounts trades worth Rs 2. Motilal Oswal. 19% Angel Broking.E-broking is contributing a sizeable portion to the trading volumes and also to the revenue generated for leading stock broking firms. 20% each for ASL Capital and Shreyas Stock. The revenues it had in 2010-08 is Rs 100 crores. 62% for India Bulls.000 online customers’ deals in daily online trades worth Rs 250-300 crores is also in the black. and 15% Farsight Capital. Ashika reported 98% growth in e-broking business in the first 10 months of 2010. Some examples of the percentage contribution to trading volumes contributed by e-broking are 91% in case of Reliance Money.57 – . Reliance Money (54%). India Bulls (63%). Another significant trend is the growth in international business of broking firms. Vogue and Bonanza Portfolio. In respect of revenues generated from e-broking.21 crores in 2006-07.
investors cannot help but want the same type of fast service applied to the financial industry. Another benefit of online trading is its ability to span boundaries. A final benefit investors can derive from online trading is access to instantaneous information.1 BENEFITS OF ONLINE TRADING TO INVESTORS • ON THE Some online brokerage firms reported 100+ per cent annual growth rates through the year 2000. In today’s world of fast food and 24-hour service. market. transaction costs have been driven down because of the increased number of online brokerage firms. boundary spanning abilities. the dramatic increase of online brokerage firms has led to increased competition and lowered commissions that an investor must pay per trade. According to. Many investors are interested in buying foreign stocks and with online trading systems in place. with the Internet. the main strategy of online discount brokerages is the speed and delivery of almost instantaneous transactions. The increase was because of the benefits investors can gain from online investing. That is why many investors enjoy the conveniences e-brokerages offer by allowing them to go online and complete transactions at almost any time during the day or night.S. speed.7 EFFECTS OF ONLINE TRADING INVESTMENT COMMUNITY (TME) 7. Along with low transaction costs. they have easier access to make their overseas transactions. and immediate access to financial information. In fact. Now. This thought is also shared by Bhasin (2005-2006). They felt that the availability of this financial information should lead investors to make better-informed choices. these investors are drawn to its boundary spanning capabilities. Time is saved because investors do not have to phone their broker during normal business hours in order to complete their transactions. convenience. Vakil and Lu (2005) stated that the Internet has given people access to immediate financial information whenever they want it. This is also true for foreign investors who want to invest in the U. especially since • • • . These benefits include low transaction costs.58 – .
they might not choose to complete the transactions at the actual exchanges. frequent trading behavior. This in turn can out-weigh the benefits of online trading for some investors because they might not be able to afford the opportunity costs associated with spending a lot of time doing research. and the lack of personal advice. the Securities and Exchange Commission (SEC) could help create transparency by putting into effect new regulations that state what information must be provided to the investor. 7.the information that is now available to the average investor was once only available to people working in the business of finance. Hong also stated that because of the huge volume of information found on the Internet that it can take investors a lot of extra time to find. A second cost created by online investing is the cost of processing information. These unobservable costs are determined by where e-brokerages choose to complete their transactions. there are still costs associated with online investing. Another cost to be aware of in regards to online trading is information illusion. observable costs are the actual commissions that an investor is charged in order to complete a transaction. sort. Information-processing costs are the costs that online investors sustain before they actually make a transaction and it is defined by the time and energy that the investor expands trying to reach an investment decision. information illusion. but instead they might choose to use third-parties and market-makers in exchange for a percentage of the bid-ask spread. where unobservable costs are the costs that are related to the transaction being executed inefficiently and from information asymmetry.59 – . According to Konana. This illusion results when investors think that because they have access to so much information via the Internet that they have an advantage over the entire market and this can lead them to make bad • • . For example.2 COST OF ONLINE TRADING • TO INVESTORS Even with all of the benefits e-brokerages offer to their clients. Transaction costs have two components: observable costs and unobservable costs. Obviously investors must be aware of these unobservable costs and the potential that they have to create opportunistic behavior by e-brokerages because of the commissions that they can receive from market-makers. Some of these costs include unobservable costs. and analyze all of the relevant information. and Abramowitz (1999). Menon. To cut down on this type of arbitrage. information-processing costs.
According to Phelan (2001). • 7. These investors then have an exaggerated sense of control over the outcomes of their investments. increased client base. The attention that has been given to online brokerages in terms of advertising has encouraged more people to trade and thus. Financial planners feel that average people will be drawn into trading online because of its novelty and then they will eventually realize that they need a financial planner in order to help them get a comprehensive view of their finances. many brokers might consider putting a part of their services online. 71. it may seem like traditional financial planners will soon be extinct. A second benefit. this is not the case. nor will it be able to protect investors from all of the scams that are abundant on the Internet. the downside of investing online is the lack of personal advice from those in the financial field. thus reduce their . Low transaction costs can encourage frequent trading according to Konana. In fact. • Frequent trading is another cost associated with online investing. lower start-up costs. in Singapore.3 BENEFITS OF ONLINE TRADING TO BROKERS/FINANCIAL PLANNERS • The investors are just one group affected by the development of online investing. Menon and Balasubramanian (2000). is that the fixed start-up costs of opening an online brokerage are far lower than opening a traditional brokerage service. Finally.1 per cent of online investors say that they trade more frequently than they did prior to online trading. This increase is troubling because people who trade the most generally have the worst performance. However.investment decisions. So the bottom line is that the investors must weigh these costs against the benefits and decide whether online trading is right for them.60 – • . ease of communication. and risk management. according to Barber and Odean (2001). This includes increased publicity. in the long run. the Web will never be able to substitute for the judgment and expertise of financial planners. another group that has been influenced is the brokers/financial planners. With e-brokerages attracting twelve million investors from 1994 to 2000. this has created more business for the financial markets in general. as many people in the financial industry have witnessed that the growth of online trading has created benefits for them as well. Therefore.
When an investor places a trade online. While this is good for the investor. One final benefit that online trading has for brokers is that it makes risk management much easier. used to gauge trading costs. the system first can check the investor’s bank account to make sure that the individual has the funds available to make the trade and this lowers the credit and payment risk that traditional brokers have had to deal with in the past. Yet. • E-brokerages have also allowed brokers wider access to a variety of different people. Another benefit to brokers is ease of communication. and has dropped 30 per cent since Electronic Communication Networks (ECNs) have surfaced. they therefore might not be willing to continue to pay a financial planner solely for their expert opinion. Lower transaction costs online have led many investors to e-brokerages and away from traditional brokers to place their trades. The staff costs can be reduced because it does not take as many personnel to run an e-brokerage site as it does to manage a traditional brokerage firm. This is in part due to the information . therefore increasing their client base and allowing them to offer many different types of services to their customers. Ameritrade and E-Trade are examples of firms that have found new ways to deliver traditional services and new services. They appreciate the fact that the Internet has saved them money by reducing the costs of communication and by making it easier to get information to their customers. • • 7. it leads to smaller commissions for the broker. one cannot really blame brokers’ clients for wanting to try it. Brokers might be concerned that the bid-ask spread.4 COST OF ONLINE PLANNERS • TRADING TO BROKERS/FINANCIAL The costs of online trading to brokers and financial planners are fairly obvious and straightforward.61 – • .staff costs. with the media talking constantly about how easy online trading is. Many financial planners see the greatest gift that the Internet has given them as allowing them to improve communication with their clients. Another concern is that since investors feel that they can distinguish between the good and bad advice that they find on the Internet.
. To try to keep some of their clients from turning to online trading alone. especially entrepreneurs.illusion discussed previously where investors feel that since they have access to so much information that they can do it better on their own.62 – . want to see if they can make better investments than what their financial advisors are already doing for them. many advisors have placated them by setting aside “play money” that they can invest on their own so that they will feel more in control of their investments. • Finally. so it becomes a game that they want to win. many investors.
Konana. The majority of them are young men without children and a high level of income. They found that active traders with a propensity for high investment risk and an unusually strong performance in the stock market are all characteristics shared by many investors who decide to trade online. investors suffer from information overload and their actual predictive skills for picking stocks begin to decline. This is due to an illusion of knowledge and an illusion of control. many of them become very overconfident according to a study by Barber and Odean (2002). and Abramowitz (1999) break online investors into two categories: the early adopters and the late adopters. Opiela (2000) quotes a research firm as saying that the two types of investors that are trading online are by their definition the “Aggressive Affluent” and those who would like to “Get Rich Quick. and know how to apply it in order to make their transactions. many online shareholders share similar characteristics. Menon. But even if they rely on a broker for some forms of advice. It is also interesting that once investors start trading.7.63 – . It has also been stated that investors who participate in online trading generally have a higher education level.” On that note. Hurley (2000) states that online trading is spawning a younger type of client that is more aggressive and well informed. usually because they have access to so much information.5 CHARACTERISTICS OF ONLINE TRADERS • According to research by Barber and Odean (2002). They state that the early adopters are aggressive ‘do-it-yourself’ types of investors whereas the late adopters rely more on a broker’s advice before going through with trades. In fact. most online investors have to be self-directed because online brokerages do not make a habit of giving advice on what or when to trade. An illusion of knowledge is when investors believe that since they have access to additional information that they become better investors and they will not listen to information that states otherwise. They will feel that since they are in control of their investments that they have control over their returns and can therefore beat the • • • . are at ease navigating the Internet for relevant information. An illusion of control is when an investor believes that his involvement will change the outcomes.
according to Teo. Instead. In Switzerland. However. and Singapore were analyzed. India. They also are very self-directed individuals that make decisions regarding their finances on their own. As a result of this illusion of control. For the purpose of this study. Tan and Peck. Finally in Singapore. In India.market. Goswami (2003) also explains how the Internet in India acts as an Order Routing System since all orders must be routed through the same exchange mechanisms – this helps to ensure transparency and security. They found that this was because most local online brokerages require a deposit of at least $1000 (Singapore dollars) in order to start trading. articles regarding online trading that took place in Switzerland. India investors are professional self-directed people that are highly educated. it is not correct to say that investors are only the young and the educated. Swiss Internet investors are generally male professionals with a high level of education and income. 40 per cent of the shareholders search for their financial information via the Internet and more than 25 per cent of people between the ages of eighteen and twenty-nine also place their orders via the Internet. The characteristics of online investors are very similar to those in the U. The majority of investors in Singapore are young professional males with at least one college degree. Internet trading is appealing to investors across different age levels and different educations. 7. • • . since stock trading on the Internet has become so accepted in Singapore. trading via the Internet refers to giving your orders to brokers via a website and not directly on an exchange. Goswami rates convenience. the one characteristic that almost all online investors have is highlevel incomes. it is being implemented in other countries as well.64 – . and speed as the benefits of online trading that are most important to the Indian investors. Nevertheless. the self-investing trend has led to many ebrokerages with lower fees than traditional brokerages.S. low cost.6 ONLINE TRADING INTERNATIONALLY • Online trading is not a phenomenon that is sweeping only the United States. these investors will have a tendency to trade too often and too speculatively.
as was mentioned in a previous section.7. This can be done by adding knowledge-based transaction processing systems to e-brokerages that can give investors more personalized advice. e-brokers . for the first time in 2000 since the midnineties. Many brokers may have clients that want to try to invest on their own but do not have a large amount of “play money” to set aside to invest. According to Hurley (2000).65 – • • • . many investors made large returns by trading individual stocks and wondered why they should even pay for financial advice from an advisor. One option for this type of client is for the broker to open an account online for the customer that the broker can oversee and step in if it looks like his client is heading for trouble. when the market was going strong. many e-brokerages are trying to expand to offer newer and better services to clients. With regards to online investing. many online investors continued to trade online. but they went back to financial planners for advice (Vakil & Lu. These investors became overconfident and suffered from the illusion of control that Barber and Odean (2001) researched in their study. One option is for e-brokerages to offer more knowledge and information support and in turn raise the commissions in order to cover the costs associated with offering this service. This is because many online traders only focus on the here and now and do not look at the whole picture or at the future as financial advisors are trained to do. By simply adding artificial intelligence systems to the original transaction processing systems that are already found on most online investing websites. the highly diversified low risk portfolios that financial planners created have produced better results than portfolios that their clients were managing by themselves online. However. It was interesting to discover that in the late nineties. In fact. after the market drop in 2001. many financial planners feel that online trading will not hurt their businesses since the greater part of them work with the wealthiest portion of the population who do not have time to do their own investing. 2005).7 THE FUTURE OF TRADITIONAL BROKERS AND ONLINE TRADING • Even though the Internet is being used more and more for investing purposes. it is highly unlikely that “virtual” brokerages will replace full service traditional brokerages over the long run.
66 – . a naïve investor could end up losing a lot of money. Online investing benefits the financial industry by helping the stock market to reach this goal. and online investing firms must take a step up and be available for more personal advice. Whether to switch to online trading is something that investors will have to decide for themselves. thereby lowering their returns.8 DISCUSSION AND IMPLICATIONS FOR THE FUTURE • Has online investing benefited or impaired the financial industry? The purpose of any efficient market is to bring all possible buyers and sellers together so that all the preferences are reflected in the market price. Buying individual stocks can be very risky and without the right advice on how to diversify investments. investors will value certain ones over others based on their needs. Women are now beginning to use the Internet more for online shopping and paying bills so using the Internet to invest should follow. Some fear that online investing will increase market fragmentation. These immature investors will need a lot of knowledge and advice from e-brokerages. average Internet traders might fall into the category of young highly educated men with larger incomes. The new breed of • • • • . in the long run. but it will be worth it for them in the long run. which is when too many competitive suppliers enter an active or new market. and that this can cause them to trade more frequently. Online investing firms might also consider adding educational web pages and other services that will teach beginning investors how to invest online. It allows more buyers and sellers to come together to carry out transactions.can create a knowledge-based system. 7. It is also important to educate new investors that investing online tends to make them look to the short term instead of investing for the long term. That may mean that transaction costs will go up for more naïve investors who request more personalized service. the number of suppliers and consumers should even out as more people start using the Internet to trade. At this time. Since no online investing firms are the same. Although that may happen over a short period of time. but this is sure to change. Also a number of inexperienced investors have started trading online because of the amount of publicity touting its ease and convenience.
investors will change their minds.S. More traditional brokers will need to start offering services via the Internet if they have not already. Investors have generally have become less tolerant and more risk averse. For investors that want to experiment with online investing but are already clients of traditional brokers. Foreign investors will now be able to pay lower transaction fees and stop paying higher fees to their brokers for international trades. However. trade deficits and the war on terrorism. they should not go completely online as a majority of the investors like the security of knowing that there is an actual physical location where they can go if they need expert advice. • As the Internet becomes available to more people all over the globe. brokers could set up a mixture that allows both online trading and traditional trading. given the uncertainty in global oil prices and other issues.S. The same can be said about U.67 – . investors will begin to diversify by including more foreign stocks in their portfolios. More value-added knowledge should be added to as many sites as possible. investors are very unlikely to return to online trading in the near future. Many advisors suggest holding foreign stocks in a portfolio as it actually reduces undiversifiable risk. beginning investors will want sites that give them more advice and handholding tools.S. which will not be as easy to offer online. However. they will do so as soon • • . the idea of setting up “play money” for them to invest with is a suitable idea. However. stocks more conveniently and at lower costs. stock and U.investor that enjoys risk and likes to trade frequently will favor sites that gives them low transaction costs and lots of control. If the market picks up speed. Traditional brokers should consider offering other services such as estate planning and tax planning. including ballooning U. investors trading foreign stocks. there are indications that online trading has somewhat dampened since 2000. What began as an economic slowdown only got worst with the September 11th terrorists attacks.S. foreign investors will increase their purchases of U. But. it directly affected the overall performance of the economy and investors have the tendency to stay with approaches that they are most comfortable with and not try anything new (like online trading) while at the same time investing less (sine investments involve risk). These foreign investors will appreciate the opportunity to invest in U. Also. However. so online investing will give investors an easier way to acquire these international stocks. When dramatic events such as September 11th happen.S.
Overall. 7. However. improved communication. investors will begin investing in foreign markets.as the market picks up and they once again become comfortable with this new approach to trading. Online traders tend to be males in their early twenties to mid-thirties. Foreign investors will also increase trading in U. bringing together buyers and sellers to make the market more efficient. it will not be for everyone.68 – . Some costs of online trading include information-processing costs. boundary spanning. Once investors have become more comfortable with the current economic conditions and foresee brighter economic conditions they will return.S. information illusion. with high income and education levels. The characteristics of online traders are somewhat different from traditional investors. it will tend to be more beneficial to the financial industry in the long run without many negative effects. Some will not trust the security of trading online and others will not have the time to do the research required and will prefer to have traditional brokers invest for them. Yet this will be changing as more people gain access to the Internet and start doing more everyday things online. speed. it is our belief that it will pick up speed in the future.S. stocks. After some of the kinks are worked out of online trading. unobservable costs. Online investing has benefits to offer investors as well as brokers. convenience. These benefits include low transaction costs. online investing will only encourage new investors to trade in the stock market. these benefits do not come without costs. and smaller commissions for brokers. Even though online trading has slowed down somewhat at the present time.9 CONCLUSION • The Internet is drastically changing how everyone does business. including the financial industry. and risk management. Although online investing is gaining prominence. and U. • • • .
69 – ..
Ans.8 ANALYSIS Below is the analysis done while doing the study on Online Trading in India. mort of them are graduate.1 What is your education qualification? INTERPRETATION The people who are dealing with the stock market either online or offline. So here this is showing that qualification up to graduation or more than that is in the favor of the online trading pattern Ans.70 – . 49%of the total respondent who are dealing with the stock market are graduate. then 16% are post graduate and 22% people is having professional degree. 2 What is your annual income? .
71 – ..
good number of people are ready to invest a good amount in the market 91% of respondent is in the income level of 100000 – 300000 (according to the last question analysis).21% is having 200000-300000 . 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.INTERPRETATION 58% respondent are having the income level of 100000-200000 . To invest in the stock market minimum 100000 or more than this should be the annual income level of the people.72 – . 12% in having 300000-400000 .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.3 What percentage of your monthly household income could be available for investment? INTERPRETATION According to the data 23% of the total respondent invest less than 5% of their income. . In India the per capita income in also increasing so we can say that there is a good opportunity for the online trading market Ans. so the investment is there in the market. 7% of the total respondent are having income more than 400000 per annum and only 2% are having less than 100000 per annum.
73 – .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 .
term deposit and insurance is 14%.4 Where do you often invest your money? INTERPRETATION Highest number of respondent is having their investment in the equity that is 65% whereas the investment available for the mutual fund.5 What is the primary objective of your investment? INTERPRETATION 13% of the respondent invests 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% .Ans.74 – . 12% and 9% So the investor for equity is high which is again showing the n number of opportunity for online trading Ans.
75 – .6 Do you owe a Computer? INTERPRETATION 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 .) So we can say that there is a huge potential in the market for the trading in the stock market Ans.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 achieves their objective with the help of investment in the equity market. because most of the investment takes place in the form of equity (explanation of 4th ans.
Ans.7 To operate a computer is easy for me INTERPRETATION 76% (26+51) of the total respondent believe that operate a computer is easy for me whereas 20%(13+7) of the respondent is having problem to operate a computer out of that 20% .8 Online trading is a secure way of trading? INTERPRETATION . 75 believe that they can’t go for computer So. if 78% of the people who are dealing with the stock market is having computer at their house and around 76% of the same population don’t have any problem to operate a computer So around 60 % is there who is having computer and they don’t have problem to operate a computer Ans.76 – .
So there is a need of proper training to do trading online. there will be a perception to go for online trading at least one time.9 online trading is easy and fast way of trading? 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 an easy task or not.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. . If they believe that there is no risk over the money which they are going to invest in the market with the help of online trading.77 – . should be there in the mind of the customer. There is a difference between the people who believe and who don’t believe is not very big that is only 10% . Ans. by which they will be going to do a trading that is online trading. 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.
10 At what time do you trade? INTERPRETATION 45% of the total respondents do trading in office timing while 32% do trading in non office timing and 23% of the respondents do the trading in free time Here the people who do the trading in office timing they face the problem of not in the continuous touch of the stock market.11 Introduction of online trading helped to attract the new Investors thus increasing the trading volumes at Stock Market? INTERPRETATION .Ans. so online trading can be one of the good solution of this problem. Ans.78 – .
76% of the respondents believe that the introduction of online trading helped to attract the new customer became the reason to increase the trading volume of the market On the other side 16% of the respondents believe that it doesn’t affect the trading volume Ans 12.880 Cronbach's Alpha Based on Standardized .880 that is more than good . . so here we can say that data is reliable enough to go further analysis DESCRIPTIVE STATISTICS ANALYSIS OF THE DATA In the descriptive statistics analysis we calculate the MEAN and STANDARD DEVIATION Where low mean shows the average of the respondent who think that these quality should be in the product and deviation showing the differentiation in opinion of the respondent Low S.79 – . What factor would you consider before choosing an account in a brokerage house? RELIABILITY ANALYSIS OF THE DATA We calculate the value of cronbach’s Alpha to calculate how reliable the data collected by the sampling Reliability Statistics Cronbach's Alpha . means small difference in the opinion about the particular factor which should in the product.D.875 Items N of Items 21 we also look for that if the value of cronbach’s Alpha is more than average so that data collected by the sample is showing the habit of the population the data is representing the whole population we are having the value of cronbach’s Alpha of 21 features that is .
Variety of products offered Helpline services. Brand. Efficiency at peak hours. FACTOR NANLYSIS In the factor analysis we look for the few component and each component is having 1 or more than 1 features of the product . The mean of the given component is around 1. of the product features Guidance. Compliance system. Variety of products offered.80 – . infrastructure is less than 1. Compliance system. That is showing that customer is looking theses component in the product. Regular delivery of contract notes. Guidance.5 – 1. These are Brand.D. infrastructure. S. we will find that few features are most important for the customer. Efficiency at peak hours.99.If we do the analysis the data through value. Research reports and Access to back office. Time to open an account. Here the respondent is not having different opinion about these components.
Customer services. Brokerage charged. Market exposure.81 – . Customer relationship. Helpline services.If we analyze the given Rotated Component Matrix and Component Transformation Matrix we will find that there are six component are coming and each of them component include one or more than 1 features in its own If we talk of component 1 it include few features which are most important while designing the product Variety of products offered. Software. Time to open an account. In component 3 it include four features of the online trading product . Research reports and infrastructure In component 2 it include four features of the online trading product that is Efficiency at peak hours.
Customer services. In component 4 there are three factor which are most important for the product and they are Access to back office. Comprehensive stock trading portal. Employees skill According to component 5 there is only a single feature which is Time to open an account is important And the component 6 is also having only a single product feature that is Recording confirmation. Software. Time to open an account. If we gone through the all component of the product we will find that there are few quality or features which a product like online trading should have. Brokerage charged. These are Variety of products offered. Research reports .that is Effective execution.82 – . Regular delivery of contract notes.
The other factors being that the Indian Investor nowadays wants to deal himself in trading rather than depending upon other middlemen.2010. waiving a/c opening fee and AMC etc. . Now if the existing company will have to capture the market they will have to look for the innovation in their product as well as service mix. Also there is an intense competition among the companies and the companies come up with new and new promotion schemes such as discounted and negotiable brokerages. Also people trade very less in the bearish market and the company’s profits against brokerage fees soars downwards. This is due to the fact that at these times people do not prefer to open the DMAT and Trading accounts. Although some people feel that online trading is not secure but the people doing the trading online is happy about the increasing security concerns among the companies. The year 2008 has not been so good for the stock market and the Sensex and Nifty has been dipping and affecting the business negatively for these companies but the same trend reversed in 2009 . The mantra for success in the current situation will be educating the customers about the benefits of online trading and the amount of ROI that can be generated through it. They also consider the factors like time saving in doing the online transactions.83 – . convenience etc. Zero balance accounts. As the internet penetration is growing in India this business holds a huge potential for growth. It is also a found fact that during the bearish market the ratio of online trading becomes very less.9 CONCLUSION The online trading is growing with a rapid pace with the rising level of education among the customers. So the companies have to reduce their account opening fees to attract more and more customers.
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• We should also focus upon the value added services.10 RECOMMENDATIONS The companies should come up with more and more innovative features in their web portals. Generally company does claim that if you will by the product you will get these benefits but company doesn’t provide the services here. • We came to know about most important factor about the product with the help of factor analysis.85 – . • The companies should look after to develop more safe and secure ways of transacting business online. so we should go for change the product according to the customer need. • The companies should make maximum efforts to detect fraud cases and minimize them . So services always does matter when we talk of ONLINE TRADING • Company should also look for the problem which customer generally face when they do trading (like problem of operating properly) • The customer should be educated regularly regarding the new technologies and techniques of trading online and also other relevant information.
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The changing perception of market and the companies will also be made clear. They should get the broking companies to do effective segmentation of their market based their research analysis teams for better trading. The following things can be useful for online trading community • • • • • They should know their market position with other competitors. Everyone should understand the effects & advantages of today’s changing technology and should keep themselves abreast with the changing & upcoming technology.11 INDUSTRY RELEVANCE My research project is quite relevant to the today generation of online trading community. .87 – . They should probe the broking company to get know some areas of improvement.
88 – . • • • • . I became aware about various aspects of working of stock exchange I learnt few things about back office work I learnt about the consumer perception about the stock market and online trading.12 LEARNING The last two months has been a great learning experience for me because I came to know about many aspects of online trading which I didn’t know in last 6 years of using the online trading facilities. Some of the learning of mine is: • I improved my communication skills by learning how to talk to different kind of people as it requires the different approach to handle each person. Patience was the thing I learnt the most as I have to approach various persons to whom I had to explain same things again and again while approaching or calling them at regular Intervals.
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rediff.wikipedia.com www.com www.com www.kotaksecurities.com/home www.investsmartindia.reliancemoney.sebi.trendtraders.kotakstreet.com www.90 – .com http://en.13 BIBLIOGRAPHY • • • • • • • • • • • • • • • • • • • • • money.com www.bseindia.indiainfoline.bseindia.htm .advfn.religaresecurities.com/content/us/us_factsfigures.nseindia.icicidirect.com www.com www.com www.com www.co.com www.sharekhan.com www.investorwords.world-exchanges.com www.in www.com www.org/wiki/National_Stock_Exchange_of_India http://www.com www.nse-india.indiabulls.com www.org/statistics/ytd-monthly http://www.motilaloswal.