You are on page 1of 52

INTRODUCTION History of the Indian Stock Market - The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history.

Year

Event

18th Century 1830's 1840's 1850's 1860's 1860-61

East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum

Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India

1862-63 1865

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, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

Pre-Independence Scenario - Establishment of Different Stock Exchanges

Year

Event

1874

With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business.

1875

"The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay

1880's 1894 1880 - 90's 1908 1920 1923 1934 1936 1937

Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" 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 formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 & the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahore Stock Exchange with the Punjab Stock Exchange Re-organization and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies

1940 1944 1947

Uttar Pradesh Stock Exchange Ltd 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 and later on merged into "The Delhi Stock Exchange Association Limited" established

Post-Independence Scenario
The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore Stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 1. Bombay 1

2. Calcutta 3. Madras 4. Ahmedabad 5. Delhi 6. Hyderabad 7. Bangalore 8. Indore

Many more stock exchanges were established during 1980's, namely: 1. 2. 3. 4. 5. 6. 7. 8. 9. Cochin Stock Exchange (1980) Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) Pune Stock Exchange Limited (1982) Ludhiana Stock Exchange Association Limited (1983) Guwahati Stock Exchange Limited (1984) Kanara Stock Exchange Limited (at Mangalore, 1985) Magadh Stock Exchange Association (at Patna, 1986) Jaipur Stock Exchange Limited (1989) Bhubaneswar Stock Exchange Association Limited (1989)

10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange

At present, there are twenty two 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).

The list of the 22 stock exchanges in India is :


1. Bombay Stock Exchange 2. National Stock Exchange 3. Bangalore Stock Exchange 4. Bhubaneshwar Stock Exchange 5. Kolkata Stock Exchange 6. Cochin Stock E xchange 7. Coimbatore Stock Exchange 8. Delhi Stock Exchange 9. Guwahati Stock E xchange 10. Hyderabad Stock Exchange 11. Jaipur Stock Exchange 12. Ludhiana Stock Exchange 13. Madhya Pradesh Stock Exchange 14. Madras Stock Exchange 15. Mangalore Stock Exchange 16. Meerut Stock E xchange 17. OTC Stock Exchange 18. Pune Stock Exchange 19. Saurashthra Stock Exchange 20. Uttar Pradesh Stock Exchange 21. Vadodara Stock E xchange 22. Delhi Stock Exchange

Overview of the Stock Market:


Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors don t have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet. India has seen a tremendous change in the secondary market for equity. Its equity market will most likely be comparable with the world s most advanced secondary markets within a year or two.

The key ingredients that underlie market quality in India s equity market are: Exchanges based on open electronic limit order book; Nationwide integrated market with a large number of informed traders and fluency of short or long positions; and no counterparty risk. Among the processes that have already started and are soon to be fully implemented are electronic settlement trade and exchange-traded derivatives.

Before 1995, markets in India used open outcry, a trading process in which traders shouted and hand signaled from within a pit. One major policy initiated by SEBI from 1993 involved the shift of all exchanges to screen-based trading, motivated primarily by the need for greater transparency. T he first exchange to be based on an open electronic limit order book was the National Stock Exchange (NSE), which started trading debt instruments in June 1994and equity in November 1994. In March 1995, BSE shifted from open outcry to a limit order book market. Currently, 17 of India s stock exchanges have adopted open electronic limit order.

National Stock Exchange:


In order to lift the Indian stock market trading system on par with the international standards, on the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. NSE provides exposure to investors in two types of markets, namely: 1. Wholesale debt market 2. Capital market

Trading at NSE
1. 2. 3. 4. 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

5. The prices at which the buyer and seller are willing to transact will appear on the Screen 6. When the prices match the transaction will be completed

7. A confirmation slip will be printed at the office of the trading member

Advantages of trading at NSE


1. 2. Integrated network for trading in stock market of India Fully automated screen based system that provides higher degree of transparency 3

3.

Investors can transact from any part of the country at uniform prices

4. Greater functional efficiency supported by totally computerized network

Right from the beginning the stock broking industry has undergone a drastic change. Gone are the days when the individuals were acting as a stockbroker and just were serving a limited region. The industry structure has changed so much as the corporate giants entered into the stock broking industry.

Capital Market Reforms and Developments

Reforms in the Capital Market


Over the last few years, SEBI has announced several far-reaching reforms to promote the capital market and protect investor interests. Reforms in the secondary market have focused on three main areas: structure and functioning of stock exchanges, automation of trading and post trade systems, and the introduction of surveillance and monitoring systems. Computerized online trading of securities, and setting up of clearing houses or settlement guarantee funds were made compulsory for stock exchanges. Stock exchanges were permitted to expand their trading to locations outside their jurisdiction through computer terminals. Thus, major stock exchanges in India have started locating computer terminals in far-flung areas, while smaller regional exchanges are planning to consolidate by using centralized trading under a federated structure. Online trading systems have been introduced in almost all stock exchanges. Trading is much more transparent and quicker than in the past. Until the early 1990s, the trading and settlement infrastructure of the Indian capital market was poor. Trading on all stock exchanges was through open outcry, settlement systems were paper-based, and market intermediaries were largely unregulated. The regulatory structure was fragmented and there was neither comprehensive registration nor an apex body of regulation of the securities market. Stock exchanges were run as brokers clubs as their management was largely composed of brokers. There was no prohibition on insider trading, or fraudulent and unfair trade practices (see Appendix 2). Since 1992, there has been intensified market reform, resulting in a big improvement in securities trading, especially in the secondary market for equity. Most stock exchanges have introduced online trading and set up clearing houses/ corporations. A depository has become operational for scripless trading and the regulatory structure has been overhauled with most of the powers for regulating the capital market vested with SEBI. The Indian capital market has experienced a process of structural transformation with operations conducted to standards equivalent to those in the developed markets. It was opened up for investment by foreign institutional investors (FIIs) in 1992 and Indian companies were allowed to raise resources abroad through Global Depository Receipts (GDRs) and Foreign Currency Convertible Bonds (FCCBs). The primary and secondary segments of the capital market expanded rapidly, with greater Institutionalization and wider participation of individual investors accompanying this growth. However, many problems, including lack of confidence in stock investments, institutional overlaps, and other governance issues, remain as obstacles to the improvement of Indian capital market efficiency.

Stock Market Primary Market


Since 1991/92, the primary market has grown fast as a result of the removal of investment restrictions in the overall economy and a repeal of the restrictions imposed by the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised in the primary market. This figure rose to Rs276.21 billion in 1994/ 95. Since 1995/1996, however, smaller amounts have been raised due to the overall downtrend in the market and tighter entry barriers introduced by SEBI for investor protection (Table 1). Total market capitalization as of 1997/98 was Rs5, 898 billion (Table 2), equivalent to about half of India s annual gross domestic product (GDP) for the same fiscal year. India compares favorably with other emerging markets in this respect.

Equity Price
For the past 12 years, equity prices have seen two extended periods of declining prices and two periods of rising prices. Between April 1986 and March 1988, Sensex decreased from 589 to 398, or by 32 percent. Prices also fell between March 1992, when the monthly closing level of Sensex was 4,258, and April 1993, when the level was 2,122, a decline of 50.5 percent. Prices generally rose for extended periods from March 1988 to March 1992 and from May 1993 to August 1994. The monthly closing level of Sensex climbed from 398 in March 1988 to 4,285 in March 1992, an increase of more than 10 times. In the second period of extended rising equity prices, Sensex increased 1.16 times. Since 1995, it has fluctuated around the 3,000-4,000 mark (see Figure 1). In April 1998, it hovered around 3,000. In the period of declining prices, from August 1994 to March 1998, the price-earnings (P/E) ratio fell more sharply than prices (Figure 1). In March 1998, the monthly average Sensex P/E ratio was 15.65 while the figure for October 1993 was 38.76.

Risk Management System


SEBI has taken several measures to improve the integrity of the secondary market. Legislative and regulatory changes have facilitated the corporatization of stockbrokers. Capital adequacy norms have been prescribed and are being enforced. A mark-to-market margin and intraday trading limit have also been imposed. Further, the stock exchanges have put in place circuit breakers, which are applied in times of excessive volatility. The disclosure of short sales and long purchases is now required at the end of the day to reduce price volatility and further enhance the integrity of the secondary market.

Mark-To-Market Margin and Intraday Limit


Under the current clearing and settlement system, if an Indian investor buys and subsequently sells the same number of shares of stock during a settlement period, or sells and subsequently buys, it is not necessary to take or deliver the shares. The difference between the selling and buying prices can be paid or received. In other words, the squaring-off of the trading position during the same settlement period results in non-delivery of the shares that the investor traded. A short-term and speculative investment is thus possible at a relatively low cost. FIIs and domestic institutional investors are, however, not permitted to trade without delivery, since non-delivery transactions are limited only to individual investors. One of SEBI s primary concerns is the risk of settlement chaos that may be caused by an increasing number of non-delivery transactions as the stock market becomes excessively speculative. Accordingly, SEBI has introduced a daily mark-to-market margin and intraday trading limit. The daily mark-to-market margin is a margin on a broker s daily position. The intraday trading limit is the limit to a broker s intraday trading volume. Every broker is subject to these requirements. Each stock exchange may take any other measures to ensure the safety of the market.BSE and NSE impose on members a more stringent daily margin, including one based on concentration of business. A daily mark-tomarket margin is 100 percent of the notional loss of the stockbroker for every stock, calculated as the difference between buying or selling price and the closing price of that stock at the end of that day. However, there is a threshold limit of 25 percent of the base minimum capital plus additional capital kept with the stock exchange or Rs1 million, whichever is lower. Until the notional loss exceeds the threshold limit, the margin is not payable. This margin is payable by a stockbroker to the stock exchange in cash or as a bank guarantee from a scheduled commercial bank, on a net basis. It will be released on the pay-in day for the settlement period. The margin money is held by the exchange for 6-12 days. This cost the broker about 0.4-1.2 percent of the notional loss, assuming that the broker s funding cost is about 24 -36 percent. Thus, 5

speculative trading without the delivery of shares is no longer cost-free. Each broker s trading volume during a day is not allowed to exceed the intraday trading limit. This limit is 33.3 times the base minimum capital deposited with the exchange on a gross basis, i.e., purchase plus sale. In event of brokers wishing to exceed this limit, they have to deposit additional capital with exchange and this cannot be withdrawn for 6 months.

Circuit Breaker
SEBI has imposed price limits for stocks whose market prices are above Rs10 up to Rs20, a daily price change limit and weekly price change limit of 25 percent. BSE imposes price limits as a circuit breaker system to maintain the orderly trading of shares on the exchange. BSEs computerized trading system rejects buy or sell orders of a stock at prices outside the price limits. The daily price limit of a stock is measured from the stock s closing price in the previous trading session. The weekly price limit is based on its closing price of the last trading in the previous week, usually its closing price on the previous Friday.

Short Sales and Long Purchases


SEBI regulates short selling in the stock market by requiring all stock exchanges to enforce reporting by members of their net short sale and long purchase positions in each stock at the end of each trading day.

Stock Lending
A scheme for regulating stock lending was introduced in February 1997, following changes in tax regulations. Stock lending can take place through an intermediary registered for this purpose with SEBI, and which has a minimum capital of Rs500 million. Lenders and borrowers of securities have to enter into agreements with the intermediary. Stock lending facilitates the timely settlement of transactions on the stock exchanges, especially in an environment where physical delivery of certificates is required for settlement.

Broking Insights :
The Indian broking industry is one of the oldest trading industries that have been around even before the establishment of BSE in 1875. Despite passing through a number of changes in the post liberalizations period, the industry has found its way towards sustainable growth. With the purpose of gaining a deeper understanding about the role of the Indian stock broking industry in the country s economy, we present in this section some of the industry insights gleaned from analysis of data received through primary research. Both primary and secondary market activity experienced sharp surge. Much progress was made in further strengthening and streamlining the risk management, market regulation and supervision. A few aspects of the major developments in the India s stock markets are described below. Indian securities market is fairly large as compared to the other emerging markets. There are 22 stock exchanges in the country, though the entire liquidity is shared between the countries two national level exchanges namely, The National Stock Exchange of India and the Bombay stock Exchange Ltd. The regional stock exchanges are in pursuit of business models that make them viable and vibrant. Meanwhile, these exchanges have become members of the national level exchanges through formation of subsidiaries whose business is showing continuous growth and progress.

Role of Stock Market in the Economy


Indian stock markets with over 20 million shareholders, India has the third largest investor base in the world after the USA and japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian Capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential. India s market capitalization was highest among the emerging markets. Total market capitalization of the BSE as on July 31,1997 was Rs5,573.07 billion growing by 18 percent over a period of twelve months and as of august 2005 was over $500billion (about Rs. 22 lakh crores). India has emerged as the world s 8th largest equity market after it added several companies to the billion dollar club in terms of capitalization of the last 3 months. India has become the largest Asian market (excluding japan and Australia) after having toppled Korea, China, Singapore that have 80, 50 and 47 firms with billion dollar market. 7

Infrastructure Development:
Traditionally brokers were serving the need of local public only as there was limited infrastructure development. But after the entry of corporate brokers, now they have not restricted them to local boundaries only, Brokers are going for expanding their network to the wide area. Every corporate broker is now trying to reach in each of the geographical corner of the country and providing as many services as possible to the investors.

Major Developments:

Corporate memberships:
There is a growing surge for corporate memberships(92% NSE and 75% BSE), and the scope of functioning of the brokerage firms has transformed from that of being a family run business to that of professional organized function that lays greater emphasis on observance of market principles and best practices. With proliferation of new market and products, corporate nature of the memberships is enabling broking firms to expand the realm of their operations into other exchangesas also other product offerings. Memberships range from cash market to derivatives to commodities and a few broking firms are making forays into obtaining memberships in exchanges outside the country subject to their availability and eligibility.

Wider product offerings :


The product offerings of brokerage firms today go much beyond the traditional trading of equities. A typical brokerage firm today offers trading in equities and derivatives, most probably commodities, futures, exchange traded funds, distributes mutual funds and insurance and also offers personal loans for housing, consumptions and other related loans, offers portfolio management services, and some even go to the extent of creating niche services such as a brokerage firm offering art advisory services. In the 8

background of growing opportunities for investors to invest in India as also abroad, the range of products and services will widen further. In the offering will be interesting opportunities that might arise in the exchange enabled corporate bond trading, soon after its commencement and futures trading that might be introduced in the near future in the areas of interest rates and Indian currency.

Greater Reliance on Research :


Client advising in India has graduated from personal insights, market tips to becoming extensively research oriented and governed by fundamentals and technical factors. Vast progress has been made in developing company research and refining methods in technical and fundamental analysis. The research and advice are made online giving ready and real time access to market research for investors and clients, thus making research important brand equity for the brokerage firms.

Accessing Equity Capital Markets :


Access to reliable financial resources has been one of the major constraints faced by the equity brokerage industry in India since long. Since the banking system is not fully integrated with the securities market, brokerage firms face limitations in raising financial resources for business and expansion. With buoyancy of the stock markets and the rising prospects of several well organized broking firms, important opportunity to access capital markets for resource mobilization has become available. The recent past witnessed several leading brokerage firms accessing capital markets for financial with success.

Foreign Collaborations and Joint Ventures:


The way the brokerage industry is run and the manner in which several of them pursued growth and development attracted foreign financial institutions and investment banks to buy stakes in domestic brokerage firms, paving the way for stronger brokerage entities and possible scope for consolidation in the future. Foreign firms picked up stake in some of the leading brokerage firms, which might lead to creating of greater interest in investing in brokerage firms by entities in India and abroad.

Specialized Services/niche broking :


While supermarkets approach are adopted in general by broking firms, there are some which are creating niche services that attract a particular client group such as day traders, arbitrage trading, investing in small cap stocks etc. and providing complete range of research and other support to back up this function.

Online Broking :
Several brokers are extending benefits of online trading through creation of separate windows. Some others have dedicated online broking portals. Emergence of online broking enabled reduction in transaction cost and cost of trading. Keen competition has emerged in online broking services, with some of these offering trading services at the cost of a few basis points or costs which are fixed in nature irrespective of the volume of trading conducted. A wide range of incentives are being created and offered by online brokerage firms to attract larger number of clients.

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). They are divided into two categories:

Listed Securities of Public Limited Companies

Specified Securities (Forward Lists)

Non- specified Securities (Cash List)

Equity shares of company that are: Dividend paying Growth oriented Has more than 20k shareholders

Equity Shares of companies not covered in specified securities

Paid up capital of atleast 50 million

10

Types of Transactions:
The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges:

Transactions on Indian Stock Exchanges

Spot Delivery Transactions Includes transactions that require Delivery and payment within stipulated Time period at the time of entering into the contract.

Forward Transactions Transactions in which delivery and payment can be extended by further period of 14 days each

This period shall not be more than 14 Days following the date of the contract

The overall period should not exceed 90 days from the date of the contract

Indian stock exchange allows a member broker to perform following activities: 1. Act as an agent, 2. Buy and sell securities for his clients and charge commission for the same, 3. Act as a trader or dealer as a principal, 4. Buy and sell securities on his own account and risk.

Over The Counter Exchange of India (OTCEI)


Traditionally, 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. This age-old trading mechanism in the Indian stock markets used to create much functional inefficiency. Lack of liquidity and transparency, long settlement periods and benami transactions are a few examples that adversely affected investors. In order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.

11

Advantages of OTCEI
1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India 2. 3. 4. The screen-based scriptless trading ensures transparency and accuracy of prices Faster settlement and transfer process as compared to other exchanges Shorter allotment procedure (in case of a new issue) than other exchanges

DETAILED STUDY/ RESEARCH PROJECT


The number of investors opting for online trading has gone up manifold according to the recently published India s Leading Equity Broking Houses, 2008 by Dun & Bradstreet (D&B). The publication says that less than 10% of the 191 broking firms surveyed reported huge growth in opening of e-booing accounts and some firms saw a surge in value of up to 400% in e-booking during 2007. According to the report, numbers of e-broking accounts registered in 2007 have grown exponentially. India bulls Securities Ltd. Added 4, 51,611 accounts while a relatively new firm in the industry, Reliance Money added 2, 15,678 accounts during the same time period. Motilal Oswal Securities Ltd managed to add 19,605 accounts while Unicon Financial Intermediates Pvt Ltd. Could increase their e-broking accounts 13,787. A new class of tech-savvy investors is increasing in India and also the maturity level of these investors is reaching new heights. E-broking also makes good business sense as the manpower cost gets reduced also the reach is amazing. The broking firms can get away from expansion cost and risk management system is quite robust when technology is used. I see the trend in the e-broking increasing in the years to come and as of now I don t see any major roadblocks in the way. According to market watchers, the rise in the value of online transactions is also because of sustained Bull Run witnessed in the recent years. E-broking is contributing a sizeable portion of the trading volumes and also to the revenue generated for leading stock broking firms. Some example of the percentage contribution to trading volumes contributed by e-broking are 91% in case of Reliance Money, 62% for India Bulls, 20% for ASL Capital and Shreyas stock, 19% Angel Broking and 15% Farsight Capital. Another Significant trend is the growth in international business of broking firms. Firms that reported presence of offices outside India include Reliance Money, Motilal Oswal, Karvy Stock Broking, RG Securities, Vogue and Bonanza Portfolio.

Key Details about Stock Broking


12

Stock market transactions are carried out on computerized systems and deals are recorded for inspection at any time. Stock Brokers may independently operate for Pvt. Clients and institutional clients. Some brokers act only as dealers (client investment managers) while others are principally advisors (equity sales advisors). Some brokers provide services for portfolio management and constantly review investments in the light of trends and developments in the market. Financial services brokers specialize in the bond issues, handling institutional accounts or mutual funds. In large firms, stock brokers deal with and advise smaller

firms. Securities brokers work on behalf of firms with private clients to understand the investment plans and objectives of the client i.e. expectation for returns and interest in risk taking. They are representatives of brokerage firms and execute orders to buy and sell securities. T hey are equipped with both knowledge and experience to give advice on the sale and purchase of scrips and management of financial services. They advise for investments and carry out market transactions. The financial services in firms concerns presales, sales and after sales-services. These firms have departments to manage the sales and trading for the owner of securities, investment banking for firms and the government for the issue of securities, and capital markets form an essential arm for trading activities. As securities Analysts: Brokers may be required to advise on floatation of shares in conjunction with the merchant banks. They are expected to have knowledge of the market to be able to anticipate certain trends and make predictions. As investment analysts: The investment Analysts provide accurate information to investors and fund managers.

Stock Exchanges and Broking Firm:


In a modern stock exchange, there are usually three entities: the exchange, the brokers and the investors (clients). In order to trade on the stocks, brokers must deposit a minimum amount with the exchange, a sum known as margin. Based on this deposit, they are granted permission to trade up to a certain amount, known as the exposure limit. A broker cannot exceed his exposure limit unless additional funds are deposited with the exchange. At the end of every training day, every broker s outstanding dues are calculated, and payment is collected by the exchange on T +2 days, through a system of direct debit from the broker s account. Whether or not the client has paid the broker is immaterial to the exchange. If the broker fails to maintain a sufficient balance on the schedules day of payments, he is heavily penalized by the exchange. Thus if the client defaults, the exchange does not lose any money, it is the broker who bears the risk of default. 13

Buying Of Stocks
There are various methods of buying and financing stocks. The most common means is through a stock broker. Whether they are a full service or discount broker, they arrange the transfer of stock from a seller to a buyer. Most trades are actually done through brokers listed with a stock exchange. There are many different stock brokers from which to choose, such as full service brokers or discount brokers. The full service brokers usually charge more per trade, but give investment advice or more personal service; the discount brokers offer little or no investment advice but charge less for trades. Another type of broker would be a bank or credit union that may have a deal set up with either a full service or discount broker. There are other ways of buying stock besides through a broker. One way is directly from the company itself. If at least one share is owned, most companies will allow the purchase of shares directly from the company through their investor relations departments. However, the initial share of stock in the company will have to be obtained through a regular stock broker. Another way to buy stock in companies is through Direct Public Offerings which are usually sold by the company itself. A direct public offering is an initial public offering in which the stock is purchased directly from the company, usually without the aid of brokers. When it comes to financing a purchase of stocks there are two ways: purchasing stock with money that is currently in the buyer's ownership, or by buying stock on margin. Buying stock on margin means buying stock with money borrowed against the stocks in the same account. These stocks, or collateral, guarantee that the buyer can repay the loan; otherwise, the stockbroker has the right to sell the stock (collateral) to repay the borrowed money. He can sell if the share price drops below the margin requirement, at least 50% of the value of the stocks in the account. Buying on margin works the same way as borrowing money to buy a car or a house, using a car or house as collateral. Moreover, borrowing is not free; the broker usually charges 810% interest.

Selling of Shares
Selling stock is procedurally similar to buying stock. Generally, the investor wants to buy low and sell high, if not in that order (short selling); although a number of reasons may induce an investor to sell at a loss, e.g., to avoid further loss. As with buying a stock, there is a transaction fee for the broker's efforts in arranging the transfer of stock from a seller to a buyer. This fee can be high or low depending on which type of brokerage, full service or discount, handles the transaction. After the transaction has been made, the seller is then entitled to all of the money. An important part of selling is keeping track of the earnings. Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have to be paid on the 14

additional proceeds, if any, that are in excess of the cost basis.

Types of Order:
Placing orders correctly is probably one of the most important aspects of trading. It is vital that you understand and use the correct order when you trade.

Market Order
This simply tells your broker to buy or sell at the current market price. This is preferable in fast market conditions or when you want to ensure that a position is taken and to protect against missing an opportunity. The broker will attempt to buy or sell the security at the current market rate.

Limit Order
This order can be used to enter or exit a trade. It specifies a price that the trader is willing to pay or accept (or better). A buy limit order is placed below the current market price and states the highest price the trader is willing to pay for a purchase. A sell limit order is placed over the current market price and is the lowest price the seller is willing to accept. If you already have a position in the market e.g. you were long the market, you could use a limit order to tell the broker at what price you wanted to sell once your price objective had been reached. You could also use the order to tell the broker at what price you want to enter the market. If ABC Company was trading at 45.50 and you wanted to buy that company at 44.00 you could use a buy limit order to take you into the market.

Stop Loss Order


This is probably the most important and most commonly used order. It can be used to establish a new position, limit a loss on an existing position, or protect a profit. A stop order specifies a price at which an order is to be executed. A buy stop is placed above the market and a sell stop is placed below the market. Once the stop price is hit, the order becomes a market order and is executed at the best price possible. On a long position, a sell stop is placed below the market to limit a loss. After the market moves higher, the stop can be raised to protect the profit (a trailing stop). You could also use the sell stop to enter the market as the market declines. A buy stop could be placed above the market to initiate a new long position or close an existing short position. Since the stop order becomes a market order, the actual 'fill' price may be beyond the stop price, especially in a fast market. 15

Stop Limit Order


This order is a combination of both a stop and a limit order. This type of order specifies both a stop price where the trade is activated and a limit price to close the position. Once the stop is elected, the order becomes a limit order. This type of order is useful when the trader wants to buy or sell a breakout, but wants to control the price paid or received.

Good Till Canceled


This type of order is also known as an 'open order' the order remains in effect until the order is executed or the trader cancels the order.

Fill Or Kill (FOK)


This order is sent to the pit and should be executed immediately. If the order cannot be filled immediately the order is canceled.

All Or None
This is essentially a limit order to buy or sell a security. The important point of this order is that the total order must be filled or none of it.

Day Order
This is an order that terminated automatically at the end of the day. If you have placed an order to buy or sell a security at a particular price and it is not filled the order is terminated at the end of the day.

WithDrawals
T+1 System: The decision to withdraw the profit or the total margin money is at the discretion of the client. All payments from the company are by the account payee cheques only. T he client would 16

be issued the withdrawal cheque on the next working from date of submission of the signed withdrawal slip.

LITERATURE REVIEW

Competitor-oriented Objectives: The Myth of Market Share

J. Scott Armstrong and Kesten C. Green 17

Competitor-oriented objectives, such as market-share targets, are promoted by academics and are commonly used by firms. A 1996 review of the evidence, summarized in this paper, found that competitor-oriented objectives reduced profitability.. The evidence says that competitor-oriented objectives are harmful, especially when managers receive information about competitors market shares. The evidence appears to have had little effect on managers decisions and on what is taught in business schools. The pursuit of competitor-oriented objectives is consistent with the long-held belief that business is like warfare. In the late 19th century, it was popular for executives to strive for revenue maximization. To see how well they were doing, they compared themselves to their competitors in the industry. Competitor-oriented objectives, typically expressed in terms of market share, were commonly utilized by large firms well before the 1950s.

Make it big in the stock market as a beginner - Warren Buffet


If you want to make money, you should surely give stock trading a try. If you have been running way from this trade thus far, it is time you brought some changes in the way you think about the stock markets. Stock markets are really fun. Youll just need to have the necessary knowledge on finance and how things work. This will make sure youre not among those who step into this trade without preparation and end up losing their fortunes. This article intends to provide you some tips on how you can start off with stock trading on a bright note. There are some dos and donts that you should always keep in mind before you try your hand at this trade. Never buy and sell stocks frequently stop trading your securities if thats what you like doing most of the time. Remember, frequent trading is not going to make you any richer than you already are. The brokers are the people who get benefitted the most. Frequent trading allows the brokers to make lots of money. There is no way you will ever become rich by being greedy. The short term capital gain taxes along with the trading fees are going to make sure you dont make a lot in the stock markets. It is always wise to hold your nerves if you want to earn profits in this trade. Know the strategies focusing more on the investment strategies is going to help you reach greater heights. For example, investing in highly priced and undervalued stocks will place you on the winning side in the future. Stocks like these have a very high growth and earning potential. Similarly, you can count on technical analysis to make a healthy prediction of stock movements.

Use Market Developments and Money Managing Techniques for Share Trading (from: investopedia.com)
18

Money management with stock market trading and investment is a dynamic prospect. The possibility of high gains and fast income is the biggest pull for anyone looking to enhance their existing pot of money by funneling it into a more resourceful process such as stock trading and investment. However, these benefits come with a fine print. Short term trading or long term investment in stock markets is highly susceptible to risk failure. If one gets into the process unaware, unprepared and without a calculated risk assessment, the likelihood of incurring heavy losses is very strong. Particularly when one decides to trade beyond ones financial limits, there is a chance that with a drop in the market, losses will axe ones capital investment altogether, leaving them financially and security-wise broke. One way to avert this drastic turn of events is by trading market trends. The concept of trend trading considers that a definite market trend is likely to culminate and continue for a certain period of time before another similar trend emerges. And it is within the parameters of such trends that stock trading and investments are carried out so as to avert risk damage as far as possible.

Stock Market Crash of 1929 (from: investopedia.com) Panic


Panic crisis in financial and economic conditions, marked by public loss of confidence in the financial structure. Panics are characterized by a general rush of investors to convert their assets into cash, with runs on banks and a rapid fall of the securities market. Bank failures and bankruptcies naturally follow. Students of economic cycles have paid much attention to the process of panics, but without definitive result. Perhaps the earliest panic of modern capitalism occurred during 1720 in France and England. Known as the "Mississippi Bubble," it was touched off by wild speculation in the stock of John Law's colonizing company. The first major panic in the United States came in 1819, after the War of 1812. The panic of 1837 was much more severe; it was brought on primarily by irresponsible financial operations in Western lands. Another crisis in 1857 was caused in part by massive European speculation in American railroads. Thus, when the panic struck it affected both Europe and the United States. In 1869 stock manipulations brought on the panic known as Black Friday. In 1873 there was a financial crisis in Vienna, as well as an American panic marking the bitter contest between agrarians (see Populist party), caught by overextended credit, and the financial interests. That conflict continued and was again reflected in the crises that came in the panics of 1893 and 1907. No great panic occurred again until 1929, when the U.S. stock market crash helped to precipitate a worldwide financial 19

crisis. Confidence was not restored until after 1933, and the effects of the panic were felt throughout the Great Depression of the 1930s. Since 1929, central banks have been quick to provide liquidity to falling markets in order to prevent panics. For example, when the New York Stock Exchange dropped over 508 points (22.6%) on Oct. 19, 1987, the Federal Reserve released a large sum of money overnight to meet demands on brokers. In Sept.Oct., 2008, the Federal Reserve and U.S. Treasury took more drastic and wide-ranging measures to ensure liquidity and stability in a financial system reeling from the effects of a collapsing housing bubble and the resulting credit crunch and accelerating stock market decline.

OBJECTIVES

20

I carried out my internship in Kaynet Finance Ltd. for a period of 7 weeks from 5th June 2012 to 21st July 2012 . I carried out my internship in the company, under the supervision of Mr. Sumit Malik . The purpose of my Corporate Internship for 7 weeks was to connect theory and practice, obtain knowledge & awareness of the functioning of various departments of the corporate and its environment which is utmost necessary for the success of the budding managers.

The basic objectives of my Corporate Internship were: 1. 2. 3. 4. 5. To understand the business and competitive environment in which the organization is operating. To analyze and understand the financial position of the organization viz. a viz. competitors. To study at least one management department and its practices. To test what I had learnt in the foundation courses in the first year. To get a feel of corporate life and its functioning & understand various interaction styles.

21

COMPANYS PROFILE

Kaynet was established in 1994 with a view to provide diversified investment solutions to its customers. With a blend of a dedicated team, accurate research results and high customer focus, they are all set to expand. Servicing 30,000+ customer accounts, they provide a diverse range of investment options and continuously strive to introduce innovative investment solutions based on the demands of their customers. Their current businesses include Equities, Commodities, Currency, IPO's, Mutual Funds Trading, DP Services, Fixed Deposits/ Bonds, Structure Product, Insurance, securities and commodity broking and investment management. Operating from over 21 locations across India, they specialize in providing efficient financial solutions to its clients, having branches in Mumbai, Delhi, Kolkata, Pune, Jodhpur, Jaipur and other major cities with operations starting soon at Chennai, Bangalore and Hyderabad. They are members of National Stock Exchange (NSE), Bombay Stock Exchange (BSE), Multi Commodity Exchange of India Limited (MCX), National Commodity & Derivatives Exchange (NCDEX), Currency Exchange, Central Depository Services Limited (CDSL) and Association of Mutual fund in India (AMFI). Their services cater to a wide range of clients like corporations, institutional investors, retail clients and high net-worth individuals. They adopt a success mantra of due diligence. Over the years, Kaynet has accumulated rich experience and a strong foundation to grow.

Mission:
To be ahead of the market always.

Vision:
To become a preferred and cordial partner for retail and institutional investors by offering comprehensive and research-based financial solutions.

Core Values :
Trust comes before all transactions. Both protection and growth are of paramount importance. Knowledge will keep us as well as our clients ahead. Their management comprises a diverse talent pool that brings together rich experience from across the 22

industry.

DIRECTORS

Mr. Mukesh Shah (Director)


With more than 27 years of expertise in the finance sector, Mr. Mukesh Shah possesses a sound understanding of the Indian capital market. With a Bachelor s degree in Engineering, Mr. Shah has been a member of the Pune Stock Exchange for a long time. He is responsible for managing all the financial aspects of the business. His positive attitude lends high optimism and confidence to his team.

Mr. Sanjay Shah (Director)


A co-founder of the Kaynet Group, Mr. Sanjay Shah is a commerce graduate with more than 22 years of experience in stock broking and allied services. With a keen eye on the world markets, Mr. Shah has profound understanding of market movements. Responsible for Kaynet s Arbitrage services, he is a team player and an asset to this company.

Mr. Paresh Shah (Director)


A commerce graduate, Mr. Paresh Shah has over 20 years of experience and expertise in stock broking and associated services. With impressive relationship management skills and exceptional knowledge of wealth management, he looks after our select HNI Clients. Having an amicable nature and being a good listener he wins the confidence of his clients with ease.

Mr. Girish D. Kulkarni (Executive Director)


With over 21 years of experience and expertise in many areas of broking industries, market operations and front office as well as back office, Mr. Kulkarni is a B.C.S and M.C.M post graduate. He is working with Kaynet since 1998 and presently heads the front and back office operations of the Kaynet group for all segments. Mr. Kulkarni is responsible for corporate planning, business solutions 23

group and investor relations function.

Mr. Shankar Pandurang Mane (Executive Director)


With over 20 years of market experience, Mr. Mane possesses expert knowledge on market operations and handling front and back offices. A commerce graduate, he has worked with companies like Saraf Associates as a Chartered Accountant, R K Agashe & CO., BSE Broker as an Accounts & Back Office Head. Responsible for the Mumbai office business along with clients dues, Mr. Mane has been an integral part of Kaynet since 1996. A cordial man, he treats his clients with great respect and believes in working towards their development.

CORE MANAGEMENT TEAM Mr. Sumit Tuteja (Executive Director)


With over a decade of experience in stock market, Mr. Tuteja has worked with brands like Indiabulls and Almondz Global Securities Limited. An MBA in Finance & Marketing, he was instrumental in building the sales team of Kaynet from scratch. Responsible for driving sales and ensuring that the organizations systems are in place, his passion and dynamism brings energy to everyone around him. A family man who loves spending time with his children, he is also a movie-buff.

Mr. Manoj Tikoo (Vice President- Operations)


With 13 years of industry experience and financial expertise, Mr. Tikoo has held senior positions with reputed companies like Emkay Global Financial Services Ltd., Angel Broking Ltd., Indus Portfolio, etc. A firm believer in honesty, commitment and team work, he is responsible for overall operations and risk management systems. A science graduate with a post-graduation in tourism, he has diverse interests like traveling, reading and listening to music.

24

SWOT ANALYSIS OF KAYNET

STRENGTHS:
Online Trading Facility 18 years of Experience in securities market Dedicated and responsive workforce/staff Research Centre Membership of NSE & BSE Trading option like Future & Option and Commodities Volume based differentiated product.

WEAKNESSES:
Less informative website Problems due to network crash Unawareness among Investors

OPPORTUNITY:
Collaboration with international financial institution To tap the Untapped market To capture the market lost to its Competitors. To focus on developing a superior and powerful portal To spread awareness of its Brand Name.

25

THREATS:
Follow government laws Competitors develops Prolonged depression and high volatility in the market New Entrants.

RESEARCH METHODOLOGY

Research Design
This is a descriptive research as it will clarify the doubts about Stock market. It would give us a clear picture on the products and services offered by Kaynet Finance Limited and its competitors.

Data Collection
Primary Data: Personal interview, Questionnaire Secondary Data: Online reports related to Stock markets

Sample Universe
Basis of sampling: Sample should be literate Should have basic knowledge about stock market

Sampling Technique
Convenience Sampling technique and Judgemental sampling Techniques have been used.

Sampling Unit

26

The sampling unit here is the end consumers

Sample Size
The sample size taken here is 100

DATA COLLECTION AND ANALYSIS

ANALYSIS Comparison of Kaynet with other stock broking firms


This section contains a comparison of the services offered by Us and our competitors and the charges we take for the same:

Kaynet Finance Ltd. Account Opening Charge (AOC): Rs. 200 Annual Maintenance Charge (AMC): Rs. 0 Brokerage: 50p (delivery), 5p (intra-day). Enquiry: 011-30185455

Angel Broking Account Opening Charge (AOC): Rs. 491 Annual Maintenance Charge (AMC): 1 st year free. Rs. 300 2 nd year on. Brokerage: 40p (delivery ), 8p (intra-day). Browsers: IE 6.0+ Enquiry: No toll-free number

HDFC Securities Account Opening Charge (AOC): Rs. 799 27

Annual Maintenance Charge (AMC): Rs. 750 (up to 10 transactions), Rs.550 (from 11-25 transactions), Rs. 300 (over 25 transactions) Brokerage: Higher of Rs. 25 or 0.5% of transaction value (delivery). Higher of Rs. 25 or 0.1% of transaction value (intra-day). Browsers: IE 5.0+, NN 8.1+ and FF 1.5+ Enquiry: 1-800-209-9700

ICICI Direct Account Opening Charge (AOC): Rs. 975 Annual Maintenance Charge (AMC): Rs. 500 (paper statements), Rs. 450 (email statements) Brokerage: 0.55% (delivery). 0.05% of transaction value (intra-day). Browsers: IE 5.5+ , NN 4.7 and FF 2.0+ Enquiry: No toll-free number

IDBI Paisa builder Account Opening Charge (AOC): Rs. 700 Annual Maintenance Charge (AMC): Rs. 350 Brokerage: 0.5% (delivery), 0.05% (intra-day). Browsers: IE 6.0+ Enquiry: 1-800-223-366

Indiabulls Account Opening Charge (AOC): Rs. 900 Annual Maintenance Charge (AMC): Nil (lifetime free) Brokerage: 0.25% (delivery). 0.03% (intra-day). Browsers: IE 4.0+ Enquiry: No toll-free number

India Infoline 28

Account Opening Charge (AOC): Rs. 750 Annual Maintenance Charge (AMC): 1 st year free. Rs. 249 2 nd year on. Brokerage: 50p (delivery). 5p (intra-day). Browsers: IE 4.0+ Enquiry: No toll-free number

Kotak Securities Account Opening Charge (AOC): Rs. 750 Annual Maintenance Charge (AMC): 1 st year free. Rs. 360 2 nd year on. Brokerage: 59p (delivery). 6p (intra-day). Browsers: IE 6.0+ Enquiry: 1-800-209-9191, 1-800-222-299

Reliance Money Account Opening Charge (AOC): Rs. 750 Annual Maintenance Charge (AMC): 1 st year free. Rs. 200 2 nd year on. Brokerage: Offline - 35p (delivery). 5p (intra-day) Browsers: IE 6.0+ Enquiry: No toll-free number

Religare Account Opening Charge (AOC): Rs. 2500 Annual Maintenance Charge (AMC): 1st year free. Rs. 360 (email statements), Rs. 480 (paper statements) Brokerage: 25p (delivery) 2.5p (intra-day) 0.06% (futures). Browsers: IE 5.5+ Enquiry: 1-860-258-8888

SBI Account Opening Charge (AOC): Rs. 500 Annual Maintenance Charge (AMC): Rs. 386 Brokerage: 50p (delivery). 15p (intra-day). Browsers: IE 6.0+ and FF 1.5+ 29

Enquiry: 1-800-223-345

Sharekhan Account Opening Charge (AOC): Rs. 750 Online, (Rs. 500 Offline, plus Rs.160 franking charge) Annual Maintenance Charge (AMC): 1 st year free. Rs. 400 2 nd year on. Brokerage: Higher of 0.5% or 10p (delivery). 0.1% or 5p (intra-day). Browsers: IE 6.0+ and Opera 7.0+ Enquiry: 1-800-227-500

QUESTIONNAIRES:

Q1.

Do you invest in Equity Market?


[ ] Yes [ ] No Particulars Yes No Total Investing 119 56 175 Percentage 68% 32% 100%

30

Investing In Equity Market


140 120 100 80 60 40 20 0 Yes No 56 Investing 119

Investing In Equity Market


( In Percentage)
36% Yes No 68%

Interpretation:
According to the above chart we can see that: 68%of investors (119) are investing in Equity Market. While 36% of investors (56) are not investing in Equity Market.

31

Q2.

If you want to invest, which investment option will provide the best returns?
[ ] Equity Share [ ] IPO [ ] Mutual Funds [ ] Bonds [ ] Fixed Deposits [ ] If any other _________

32

Investment option Equity Share IPO Mutual Funds Bonds Fixed Deposits Other

Investors in Percentage 53% 18% 8% 7% 4% 10%

Investors are investing in various Investment option


4% 7% 8% 53% 10% (Investors in Percentage)

Equity Share IPO Mutual Funds Bonds Fixed Deposits Other

18%

Interpretation:
According to the previous chart: As we can see that according to 53% of investors, Equity market will provide the best returns in comparison to other investment option. 18% of investors believe that IPO (Primary Market)will provide the best returns. 8% of investors think that Mutual Fundswill provide the best returns. 7% of investors believe that Bonds Market will provide the best returns. 4% of investors trust that Fixed Deposits will provide the best returns. According to 10% of investors, other investment option will provide the best returns.

According to them other investment options are: Commodity Market Insurance 33

Government Securities etc.

Q3.

Which factors motivate you for investing in Equity Market?


[ ] Return [ ] Liquidity [ ] Safety [ ] Capital Appreciation 34

[ ] Other _____________

Motivation Factors Return Liquidity Safety Capital Appreciation Other

Investors in Percentage 49% 26% 7% 17% 1%

Motivating factors for Investors to invest in Equity Market (Investors in Percentage)


5% 16% Return 6% 48% Liquidity Safety Capital Appreciation 25% Other

Interpretation:
According to the Previous Figure: 49% of investors are motivated by Return to invest in Equity market. 35

26%of investors are motivated by Liquidity to invest in Equity market. 6%of investors are motivated by Safety to invest in Equity market. 16%of investors are motivated by Capital Appreciation to invest in Equity market. While 5%of investors are motivated by other factors like-Investment, Profit etc. to invest in Equity market.

Q4.

How much percentage of your income you invest in Equity Market?

36

[ ] Less than 5% [ ] 5%-10% [ ] 10%-15% [ ] 15%-20% [ ] 20%- 25% [ ] More than 25%

Percentage of Income Less than 5% 5%-10% 10%-15% 15%-20% 20%- 25% More than 25%

Investors in Percentage 23% 45% 17% 7% 5% 3%

Percentage of income investors are investing in Equity Market


(Investors in Percentage)
5% 7% 3% 23% Less than 5% 5%-10% 10%-15% 15%-20% 20%- 25% More than 25% 45%

17%

37

Interpretation:
According to the Previous Figure: 23% of the investors are investing Less than 5% of theirincome in Equity Market. 45%of the investors are investing5%-10% of theirincome in Equity Market. 17% of the investors are investing10%-15% of theirincome in Equity Market. 7% of the investors are investing15%- 20%of theirincome in Equity Market. 5% of the investors are investing20%-25% of theirincome in Equity Market. While 3% of the investors are investing More than25% of their income in Equity Market.

38

Q5.

How do you trade in Equity Market?


[ ] Intraday [ ] Delivery [ ] Speculation [ ] Arbitragers [ ] Hedging [ ] If any other please specify _____________

Types of Trade Intraday Delivery Speculation Arbitragers Hedging Other

Investors in Percentage 13% 31% 26% 17% 11% 2%

Investors are Trade in Equity Market


(Investors in Percentage)
11% 2% 13% Intraday Delivery Speculation 17% Arbitragers 31% Hedging Other 26% 39

Interpretation:
According to the Previous Figure: 13% of the investors are doing Intraday trading in Equity Market. Intraday Trading is trading for that one day only. Means any securities are purchase & sell within the day. 31% of the investors are investing in Equity Market as a Delivery based Trading. Delivery based trading is normally considered as a safer approach for trading in shares when compared to day trading. Delivery based trading involves buying shares on a market day and selling them only after receiving the delivery of those shares in demat account. 26% of the investors are trading in Equity Market as a Speculator. Speculators are those classes of investors who willingly take higher-than-average risk in return for a higherthan-average profit potential in future. Speculators aim primarily at quick profit from a short-term acquisition of assets. 17% of the investors are Arbitragers in Equity Market. Arbitrager means who purchases securities in one market for immediate resale in another in the hope of profiting from the price differential 11% of the investors are trading in Equity Market as Hedgers. Hedging means reducing or controlling risk. Hedgers wish to eliminate or reduce the price risk to which they are already exposed.

While 2% of the investors are trade in Equity Market for Other Purpose.

40

Q6.

What is the time horizon for investing in Equity Market?


[ ] Less than 1 Months [ ] 1 to 3 Months [ ] 3 to 6 Months [ ] 6 to 12 Months [ ] More than 12 Months

Time Horizon Less than 1 Months 1 to 3 Months 3 to 6 Months 6 to 12 Months More than 12 Months

Investors in Percentage 14% 28% 15% 18% 25%

41

Investors Time Horizon for investing in Equity Market (Investors in Percentage)


30% 25% 20% 15% 10% 5% 0% Less than 1 Months 1 to 3 Months 3 to 6 Months 6 to 12 Months More than 12 Months 14% 15% 18% 28% 25%

Interpretation:
According to the Previous Figure: 14%of investors invest in Equity market for Less than 1 Months. 28% of investors invest in Equity market for the period of 1 to 3 Months. 15% of investors time horizon for in Equity market is 3 to 6 Months. 18% of investors time horizon for in Equity market is 6 to 12 Months. 25%of investors invest in Equity market for more than12 Months.

42

Q7.

Are you satisfied with the current performance of the Equity Market in terms of expected return?
[ ] Fully Satisfied [ ] Satisfied [ ] Neutral [ ] Unsatisfied [ ] Fully Unsatisfied

Rate of Return Fully Satisfied Satisfied

No. of Investors 30 73

Percentage 17% 42%

43

Neutral Unsatisfied Fully Unsatisfied Total

49 18 5 175

28% 10% 3% 100%

Investors satisfaction level From Equity Market (Investors in Numers)(Total 175)


80 70 60 50 40 30 30 20 10 0 Fully Satisfied Satisfied Neutral Unsatisfied Fully Unsatisfied 18 5 49 73

Interpretation:
According to the Previous Figure: 30 investors are Fully Satisfied from current performance of Equity market. 73 investors are Satisfied from Equity market. 49 investors are Neutral with current performance of Equity market. 44

18 investors are Unsatisfied from Equity market. While 5 investors are Fully Unsatisfied from Equity market.

Q9.

Who advised you to enter in Equity Market?


[ ] Friends [ ] Relatives 45

[ ] Advisers [ ] Media [ ] Research Report [ ] Magazines [ ] If any other ___________

Particulars Friends Relatives Advisers Media Research Report Magazines Other

Investors in Percentage 28% 12% 25% 17% 10% 5% 3%

Investor's Referance for enter into Equity Market


(Investors in Percentage) 5% 3% 10% 28% Friends Relatives Advisers Media 17% 12% 25% Research Report Magazines Other

Interpretation:

46

According to the Above Figure: Friends motivate 28% of the investors to enter into the equity market. Relatives motivate 12%of the investors to enter into the equity market. 25% of investors enter in Equity market by the Advise of Financial Advisor. Media motivate 17% of the investors to enter into the equity market. Magazines motivate 10% of the investors to enter into the equity market. 5% of investors are motivated by Reading Magazines to enter in Equity market. While other factors like self-Study, their own View etc. motivate 3%of the investors to enter into the equity market.

Q10. What do u prefer out of Equity and Commodity


47

Out of the 100 respondents 77(77%) of them chose to invest in the equity market and 33(33%) of the remaining were interested in the commodities market.

The main reason for this trend is the lack of awareness or knowledge with the investors. Most of the investors are unaware about the functioning of the commodities market. The functioning of the equity market is easily understandable to them, hence majority of the people prefer to invest in the equity market instead of the commodities market. Also, due to the high volatility of the commodities market, say for eg: silver, the investors hesitate to invest in the commodities market. Hence equity market is more preferred.

48

Q11. Which one is better- Intraday or Delivery?

It was found that only 41(41%) clients preferred intraday out of the total 100. The remaining 59(59%) preferred to invest in Delivery. The reason being, if the price of a stock falls, then in intraday the investor is sure to lose out the money invested and incur a loss. But, in delivery he has the choice to wait for the stock to gain back position to prevent the loss and try to gain some profit out of it.

49

Q12. Which trading is better Cash or Derivatives?


Out of 100, only 32 clients agree to invest in derivates, the remaining 68 are keen and comfortable to invest in the cash market. Below is a graph showing the same.

50

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

Findings:
Most of the respondents invest in the security market. Investors feel secure in investing in the security market. In todays market, still most of the investors are doing the trading through offline medium Market survey provided me knowledge that 72% investors are aware with online trading. Though the awareness level about the offline trading is very high, still there is feeling of reluctance among the respondents and they prefer to trade offline. Consumption level is high comparatively the income of the customers related to the Indian perspective because only 10% is being invested in the savings by the customers. The consumers are more speculative in behavior in the Indian economy. They have no high risk-taking attitude that means they do not want to take high risk. A large number of respondents have taken their loans from investment agencies. The reason of this is: 1. Easy Documentation and Quick disbursal 2. Good Ambience 3. Prompt Action 4. Easy monthly repayment and installment(EMI) The awareness level about Kaynet is satisfactory. Still most of the respondents are not aware of the product and services of Kaynet. There are major player in online trading are giving good competition to Kaynet.

Suggestions
There is a rigid and complex organizational structure so complete transparency must be required within the employees. Customers do not have enough idea about the products, services and brokerage offerings of Kaynet, so it must be full with crystal clear view. Awareness about the product such as personal loans, insurance should be created. Most of the customers 51

don t know about the brand so, promotional activity is required. Most of the customers also don t have clear view that in which segment Kaynet is actually dealing with, so consistent and clear messages regarding the products must be provided to the customer. Customer s grievances should be attempted in clear and prompt way.

REFERENCE

WEBLIOGRAPHY:
http://www.indiabulls.com http://www.sharekhan.com http://www.icicidirect.com http://www.sebi.com http://www.nseindia.com http://www.bseindia.com http://www.hdfcsec.com http://www.kotakstreet.com http://www.5paisa.com http://www.religare.com http://www.moneycontrol.com http://www.investopedia.com http://www.adb.org/documents/books/rising_to_the_challenge/india/india-cap.pdf http://www.tracenotes.com/reports/brokers-india.html http://www.chittorgarh.com/newportal/online-stock-brokers-detail.asp?a=3

BIBLIOGRAPHY:

Financial Management by P.K Jain and M.Y. Khan Dealers (Derivatives) Module provided by NSE

52