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A

PROJECT REPORT
ON

"TRADING IN CAPITAL MARKET & ONLINE SHARE


TRADING"
(WITH REFERENCE ARCADIA SHARES & STOCK PVT LTD.)
SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE
AWARD OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY:

SUBMITTED TO:

Pankaj Nayak

Miss Vaishali Jain

MBA IIIrd Sem.

Lecturer

St. Wilfreds Business School


2009-2011

PREFACE
I believe as expressed by ARISTOTLE that," What we have to learn, we learn by
doing".
Management education required close co-operation between business institutions.
Theory and practical are two inseparable part of any type of education and are essential
for management study. Practice makes a man perfect. A student gets theoretical
knowledge from classroom and gets practical knowledge from industrial training. When
these two aspects of theoretical knowledge and practical experience together then a
student is full equipped to secure his best.
The SIP in Arcadia was a unique experience for me. There is an OJT, which is
given to me. I have completed with hard & smart work. There are many strategies which
were adopted by me, like called call, references, canopy, Telecalling etc. I achieved
more than target, which were assigned to me. I also got good salary in my two months.

ACKNOWLEDGEMENT

I express my sincere thanks to my project guide, Mr. Pankaj Sancheti (Regional


Manager), for guiding me right from the inception till the successful completion of the
project. I sincerely acknowledge her for extending their valuable guidance, support for
literature, critical reviews of project and the report and above all the moral support she
had provided to me with all stages of this project.
I would also like to thank the supporting staff Mr. Chetan Sharma (Head Sales), for his
help and cooperation throughout our project.
I would also like to thank the supporting my college faculty Dr. Sonal Jain H.O.D., for
her help and cooperation throughout our project.

M.B.A. IIIrd Sem.

TABLE OF CONTENTS

S. No.

Particulars

Pages

1.

Introduction to Industry

2.

Introduction to the Beverage industry

3.

Research methodology

55

3.1

Title of the project

55

3.2

Duration of the project

55

3.3

Objective of study

55

3.4

Type of research

56

3.5

Sample size and method of selection sample

56

3.6

Limitation of study

57

4.

Facts and findings

59

5.

Analysis and interpretation

72

6.

SWOT

80

7.

Conclusion

83

8.

Recommendation and suggestions

84

9.

Appendix

85

10.

Bibliography

89

List of Abbreviations
ABC - Additional Base Capital
BMC -Base Minimum Capital
BSE -Bombay Stock Exchange
CDSL -Central Depositories Services Ltd.
CM -Capital Market
Co. -Company

DCA -Department of Company Affairs


DEA -Department of Economic Affairs
DP -Depository Participant
DPG -Dominant Promoter Group
DQ -Disclosed Quantity
DvP -Delivery versus Payment
FI -Financial Institution
FII -Foreign Institutional Investors
F&O -Futures and Options
FTP -File Transfer Protocol
IOC -Immediate or Cancel
IPF -Investor Protection Fund
ISIN -International Securities Identification Number
LTP -Last Trade Price
MBP -Market By Price
MTM -Mark To Market
NSE -National Stock Exchange
NSCCL -National Securities Clearing Corporation Limited
NSDL -National Securities Depository Ltd.
OTC -Over The Counter
NEAT -National Exchange for Automated Trading
NCFM -NSE's Certification in Financial Markets
NSCCL -National Securities Clearing Corporation Ltd.
RBI -Reserve Bank of India
RDM -Retail Debt Market
SAT -Securities Appellate Tribunal
SBTS -Screen Based Trading System
SC(R)A -Securities Contracts (Regulation) Act, 1956
SC(R)R -Securities Contracts (Regulation) Rules, 1957
SEBI -Securities and Exchange Board of India
SGF -Settlement Guarantee Fund
SRO -Self Regulatory Organization
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T+2 -Second day from the trading day


TM -Trading Member
UTI -Unit Trust of India
VaR -Value at Risk
VSAT -Very Small Aperture Terminal
WDM -Wholesale Debt Market

References and suggested readings


The readings suggested here are supplementary in nature and would prove to
be Helpful for those interested in acquiring advanced knowledge about Capital
Markets.
1. Indian Securities Market: A Review - NSEIL publication
2. NSE Newsletters
3. SC(R)A, 1956 & Rules
4. SEBI Act, 1992, Rules & Regulations
5. Depository Act, 1996 & Rules
6. Rules, Regulations and Byelaws of NSEIL & NSCCL
7. www.nseindia.com
8. www.sebi.gov.in
9. www.rbi.org.in
10. www.finmin.nic.in

INTRODUCTION TO THE INDUSTRY


Arcadia Shares &Stock Brokers Pvt Ltd
Selling the boat of visionary thoughts and adventured spirit, the idea of creating a
Financial Powerhouse was conceived in 1995 by a by a dynamic and renowned
Chartered Accountant and Financial Wizard Mr. K L Khandelwal christened it as

`Arcadia Group`. The group which started initially financial consultancy and cooperate
and corporate advisory services to SME segment through Arcadia Corporate Services
Ltd-Category | Merchant Banker, has since grown up having strategically branched into
different business units offering holistic finance and investment services to medium and
large organizations in the domestic as well as international markets.
The broking arm of the Arcadia Group offers personalized broking services to its
institutional, Corporate and individual clients. It has a strong presence across major
cities in India and is expanding rapidly across-to increase its client reach. It is proud to
be one of the few comprehensive broking houses in the country offering total integrated
services in broking to individuals and corporate groups. Arcadia Shares & Stock Brokers
Pvt. Ltd. is a member of BSE (Capital) segment, NSE (Capital and Future & Options)
segment and is also a depository participant of CDSL. With the Opening up Commodity
derivatives market in 2003, Southern Commodities Brokers Pvt Ltd. Was formed and
currently has membership in both the national level exchanges viz. MCX and NCDEX.
Mission:"To enhance the economic value of our client's business by providing integrated
financing & investment services and products."
VISION:"To figure among the top five Financial Powerhouses in India in next coming
years".

LIST OF ILLUSTRATIONS

Graph 1.1

Since how long you have account in ARCADIA?

Graph 1.2

Regarding investment in Mutual Funds and Life Insurance through


ARCADIA.

Graph 1.3

Why are you investing in Mutual Funds and Life Insurance through
ARCADIA?

Graph 1.4

In which area you invest through ARCADIA?

Graph 1.5

Are you satisfied with the services of ARCADIA?

Graph 2.1

Are you investing in Mutual Fund & life insurance Through offline?

Graph 2.2

Why are you investing in Mutual Fund & life insurance Through off line?

INDUSTRY PROFILE
BANKS IN INDIA
Banks in India traditionally offers mass banking problems. Most common
deposit product is Savings account, Current account, Term deposit account and lending
products being Cash Credit and Term Loans. Due to Reserve Bank of India guidelines,
Bank have had little to do besides accepting deposits at rates fixed by Reserve Bank of

India and lead amount arrived by the formula stipulated by RBI at rates prescribed by
the latter. There are 27 Public sector banks, 31 Private Banks and 29 foreign banks in
India. The Indian banking sector is headed for consolidation. The presence of many
regional players will see few banks emerging as global competitors.
A few foreign and private sector banks have already introduced customized
banking product like Investment Advisory Services, Photo-credit cards, Cash
Management services, Investment products and Tax Advisory services. A many banks
have gone in to market mutual funds schemes. The bank of the future has to be
essentially a marketing organization that also sells banking product.
ARCADIA is the first among the new private banks to launch net banking
services, called Infinity. It allows the users to access account information over a secure
line; request chequebooks and we can also transfer funds between ARCADIA
accounts. At March 31, 2005, the Company had a network of 510 branches and 52
extension counters in 367 centers across several Indian states and it also had 1,910
ATMs.

SECURITIES AND EXCHANGE BOARD OF INDIA


Major part of the liberalization process was the repeal of the Capital Issue
(Control) Act 1992. With this Government's control over issues of capital, pricing of the
issues, fixing of premium and rates of interest on debenture etc. ceased, and the office
which administered the act was abolished: the market was allowed to allocate resources
to competing uses. However, ensure effective regulation for the market. SEBI Act, 1992
was enacted to establish SEBI with Statutory powers for:

Protecting the interests of investors in securities

Promoting the development of the securities market

Regulating the securities market

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FUNCTIONS OF SEBI
SEBI has been obligated to protect the interests of the investors in securities
and to promote, development and to regulate the securities market by such measures
as it thinks fit.
SEBI has power for: Regulation the business in Stock exchange and other Securities
Promoting and regulating self-regulatory organizations
Promoting investors' education and training of intermediaries of securities
market.
Conducting research for the above purpose.
Regulating substantial acquisition of shares and take-over of companies.

INTRODUCTION TO THE ORGANIZATION


Trading in shares has become remarkably faster, easier and More transparent
especially for tech-savvy. It also expects from customers to have self-discipline in terms
of money, as any default will blacklist him. Trading with ARCADIA will help to learn the
tricks of the trades quite effortlessly. Trading with ARCADIA offers a wide choice of
product for investing in the stock market. It also allows you to invest in shares, mutual
fund and other financial product. Simply ARCADIA offers a product for almost every
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investment need and that too at and on simply basis. ARCADIA comes from ARCADIA,
the organization trusted by millions of Indians. It is a leading online share-trading site in
India. ARCADIA is the pioneer in online trading today with unique features as
mentioned below: It offers 3 in 1 account integrates your banking, trading and Demat account.
You can get the latest quotes of scripts on ARCADIA with grate speed.
Put in your trade through telephone from over 37 cities in India. This can be
done through our Call Trade Facility.
Track movement of your favorite script on mobile using ARCADIA direct Alerts.
Subscribe to mailers for a daily, weekly and monthly preview of the market.
ARCADIA SHARE & STOCK BROKERS PVT LTD
ARCADIA SHARE & STOCK BROKERS PVT Limited (ARCADIA), incorporated on
January 5, 1997, is a diversified financial services group providing a variety of banking
and financial services, including project and corporate finance, working capital finance,
venture capital finance, investment banking, treasury products and services, retail
banking, broking and insurance. The Company also has interests in the software
development, software services and business process outsourcing businesses.
ARCADIA is headquartered in Mumbai, India. The Company's operations have been
classified into three segments: Commercial Banking, Investment Banking and Others.
The Commercial Banking segment provides medium-term and long-term project and
infrastructure financing, securitization, factoring, lease financing, working capital finance
and foreign exchange services to clients. Further, it provides deposit and loan products
to retail customers. The Investment Banking segment deals in the debt, equity and
money markets, and provides corporate advisory products, such as mergers and
acquisition advice, loan syndication advice and issue management services. Others
consist of various operations, such as other financial services, including insurance. The
Company has subsidiaries in the United Kingdom, Canada and Russia, branches in

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Singapore and Bahrain, and representative offices in the United States, China, United
Arab Emirates, Bangladesh and South Africa. In May 2005, ARCADIA acquired
Investitsionno-Kreditny Bank, a Russian bank.
The Company's deposits totaled Rs.1, 016.5 billion ($23.3 billion) at March 31, 2005. Its
gross loan portfolio, which includes loans structured as debentures and preferred stock,
was Rs.1, 075.8 billion ($24.7 billion) at March 31, 2005. At March 31, 2005,
approximately 86.1% of the Company's gross loans were rupee loans. ARCADIA
delivers its products and services through a variety of channels, ranging from traditional
bank branches to Automated Teller Machines (ATMs), call centers and the Internet. At
March 31, 2005, ARCADIA offered one or more retail credit products in approximately
1,070 centers. At March 31, 2005, the Company had a network of 510 branches and 52
extension counters in 367 centers across several Indian states. At March 31, 2005,
ARCADIA had 1,910 ATMs.

An Overview of the Indian Securities Market


Introduction
Securities markets provide a channel for allocation of savings to those who have
a productive need for them. As a result, the savers and investors are not constrained by
their individual abilities, but by the economys abilities to invest and save respectively,
which inevitably enhances savings and investment in the economy?

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Market Segments
The securities market has two interdependent and inseparable segments: the
Primary and the secondary market. The primary market provides the channel for
Creation of new securities through issuance of financial instruments by public
Companies as well as Governments and Government agencies and bodies whereas the
secondary market helps the holders of these financial instruments to sale for Exiting
from the investment. The price signals, which subsume all information about the issuer
and his business including associated risk, generated in the
Secondary market, help the primary market in allocation of funds. The primary Market
issuance is done either through public issues or private placement. A public Issue does
not limit any entity in investing while in private placement, the issuance Is done to select
people. In terms of the Companies Act, 1956, an issue becomes Public if it results in
allotment to more than 50 persons. This means an issue resulting in allotment to less
than 50 persons is private placement. There are two major types of issuers who issue
securities. The corporate entities issue mainly debt and equity instruments (shares,
debentures, etc.), while the governments (central and state governments) issue debt
securities (dated securities, treasury bills).
The secondary market enables participants who hold securities to adjust their
holdings in response to changes in their assessment of risk and return. They also sell
securities for cash to meet their liquidity needs. The exchanges do not provide facility
for spot trades in a strict sense. Closest to spot market is the cash market in exchanges
where settlement takes place after some time. Trades taking place over a trading cycle
(one day under rolling settlement) are settled together after a certain time. All the 23
stock exchanges in the country provide facilities for trading of corporate securities.
Trades executed on NSE only are cleared and settled by a clearing corporation which
provides novation and settlement guarantee. Nearly 100% of the trades in capital
market segment are settled through Demat delivery. NSE also provides a formal trading
platform for trading of a wide range of debt securities including government securities in
both retail and wholesale mode. NSE also provides trading in derivatives of equities,
interest rate as well indices. In derivatives market (F&O market segment of NSE),

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standardized contracts are traded for future settlement. These futures can be on a
basket of securities like an index or an individual security. In case of options, securities
are traded for conditional future delivery. There are two types of options a put option
permits the owner to sell a security to the writer of options at a predetermined price
while a call option permits the owner to purchase a security from the writer of the option
at a predetermined price. These options can also be on individual stocks or basket of
stocks like index. Two exchanges, namely NSE and the Stock Exchange,
Mumbai (BSE) provides trading of derivatives of securities. Today the market
participants have the flexibility of choosing from a basket of products like:
Equities
Bonds issued by both Government and Companies
Futures on benchmark indices as well as stocks
Options on benchmark indices as well as stocks
Futures on interest rate products like Notional 91-day T-Bills, 10 year
National zero coupon bond and 6% notional 10 year bond.
The past decade in many ways has been remarkable for securities market in
India. It has grown exponentially as measured in terms of amount raised from the
market, number of stock exchanges and other intermediaries, the number of listed
stocks, market capitalization, trading volumes and turnover on stock exchanges, and
investor population. Along with this growth, the profiles of the investors, issuers and
intermediaries have changed significantly. The market has witnessed several
institutional changes resulting in drastic reduction in transaction costs and significant
improvements in efficiency, transparency, liquidity and safety. In a short span of time,
Indian derivatives market has got a place in list of top global exchanges. In single stock
futures category, the Futures Industry Association (FIA) placed NSE in second position
in the year 2000. Reforms in the securities market, particularly the establishment and
empowerment of SEBI, market determined allocation of resources, screen based
nation-wide trading, dematerialization and electronic transfer of securities, rolling
settlement and ban on deferral products, sophisticated risk management and
derivatives trading, have greatly improved the regulatory framework and efficiency of
trading and settlement. Indian market is now comparable to many developed markets in
terms of a number of qualitative parameters.
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Products and Participants


Financial markets facilitate the reallocation of savings from savers to
entrepreneurs. Savings are linked to investments by a variety of intermediaries through
a range of complex financial products called securities which is defined in the
Securities Contracts (Regulation) Act, 1956 to include shares, bonds, scripts, stocks or
other marketable securities of like nature in or of any incorporate company or body
corporate, government securities, derivatives of securities, units of collective investment
scheme, interest and rights in securities, security receipt or any other instruments so
declared by the central government.
It is not that the users and suppliers of funds meet each other and exchange
funds for securities. It is difficult to accomplish such double coincidence of wants. The
amount of funds supplied by the supplier may not be the amount needed by the
User. Similarly, the risk, liquidity and maturity characteristics of the securities
issued by the issuer may not match preference of the supplier. In such cases, they incur
substantial search costs to find each other. Search costs are minimized by the
intermediaries who match and bring the suppliers and users of funds together.
These intermediaries may act as agents to match the needs of users and
suppliers of funds for a commission, help suppliers and users in creation and sale of
securities for a fee or buy the securities issued by users and in turn, sell their own
securities to suppliers to book profit. It is, thus, a misnomer that securities markets
disinter mediates by establishing a direct relationship between the savers and the users
of funds. The market does not work in a vacuum; it requires services of a large variety
of intermediaries. The disintermediation in the securities market is in fact an
intermediation with a difference; it is a risk-less intermediation, where the ultimate risks
are borne by the savers and not the intermediaries. A large variety and number of
intermediaries provide intermediation services in the Indian securities market as may be
seen.
The securities market has essentially three categories of participants, namely
the issuers of securities, investors in securities and the intermediaries and products

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include equities, bonds and derivatives. The issuers and investors are the consumers of
services rendered by the intermediaries while the investors are consumers (they
subscribe for and trade in securities) of securities issued by issuers. In pursuit of
providing a product to meet the needs of each investor and issuer, the intermediaries
churn out more and more complicated products. They educate and guide them in their
dealings and bring them together. Those who receive funds in exchange for securities
and those who receive securities in exchange for funds often need the reassurance that
it is safe to do so. This reassurance is provided by the law and by custom, often
enforced by the regulator. The regulator develops fair market practices and regulates
the conduct of issuers of securities and the intermediaries so as to protect the interests
of suppliers of funds. The regulator ensures a high standard of service from
intermediaries and supply of quality securities and non-manipulated demand for them in
the market.

Profile
The past decade in many ways has been remarkable for securities market in
India. It has grown exponentially as measured in terms of amount raised from the
market, Number of stock exchanges and other intermediaries, the number of listed
stocks, Market capitalization, trading volumes and turnover on stock exchanges, and
Investor population. Along with this growth, the profiles of the investors, issuers
And intermediaries have changed significantly. The market has witnessed fundamental
institutional changes resulting in drastic reduction in transaction costs and significant
improvements in efficiency, transparency and safety.

Dependence on Securities Market


Three main sets of entities depend on securities market. While the corporate
and governments raise resources from the securities market to meet their obligations,
the households invest their savings in the securities.
Corporate Sector: The 1990s witnessed emergence of the securities market as a
major source of finance for trade and industry. A growing number of companies are
accessing the securities market rather than depending on loans from FI`s/banks. The

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corporate sector is increasingly depending on external sources for meeting its funding
requirements. There appears to be growing preference for direct financing (equity and
debt) to indirect financing (bank loan) within the external sources.
According to CMIE data, the share of capital market based instruments in
resources raised externally increased to 53% in 1993-94, but declined thereafter to 33%
by 1999-00 and further to 21% in 2001-02. In the sector-wise shareholding pattern of
companies listed on NSE, it is observed that on an average the promoters hold more
than 55% of total shares. Though the non-promoter holding is about 44%, Indian public
held only 17% and the public float (holding by FIIs, MF`s, Indian public) is at best 25%.
There is not much difference in the shareholding pattern of companies in different
sectors. Strangely, 63% of shares in companies in media and entertainment sector are
held by private corporate bodies though the requirement of public offer was relaxed to
10% for them. The promoter holding is not strikingly high in respect of companies in the
IT and telecom sectors where similar relaxation was granted.
Governments: Along with increase in fiscal deficits of the governments, the
dependence on market borrowings to finance fiscal deficits has increased over the
years. During the year 1990-91, the state governments and the central government
Financed nearly 14% and 18% respectively of their fiscal deficit by market Borrowing. In
percentage terms, dependence of the state governments on market Borrowing did not
increase much during the decade 1991-2001. In case of central
Government, it increased to 77.6% by 2002-03.
Households: According to RBI data, household sector accounted for 82.4% of gross
domestic savings during 2001-02. They invested 38% of financial savings in deposits,
33% in insurance/provident funds, 11% on small savings, and 8% in securities, including
government securities and units of mutual funds during 2001- 02. Thus the fixed income
bearing instruments are the most preferred assets of the household sector. Their share
in total financial savings of the household sector witnessed an increasing trend in the
recent past and is estimated at 82.4% in 200102. In contrast, the share of financial savings of the household sector in securities
(shares, debentures, public sector bonds and units of UTI and other mutual funds and
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government securities) is estimated to have gone down from 22.9% in 1991-92 to 4.3%
in 2000-01, which increased to 8% in 2001-02. Though there was a major shift in the
saving pattern of the household sector from physical assets to financial assets and
within financial assets, from bank deposits to securities, the trend got reversed in the
recent past due to high real interest rates, prolonged subdued conditions in the
secondary market, lack of confidence by the issuers in the success of issue process as
well as of investors in the credibility of the issuers and the systems and poor
performance of mutual funds. The portfolio of household sector remains heavily
weighted in favour of physical assets and fixed income bearing instruments.

Investor Population
The Society for Capital Market Research and Development carries out
periodical surveys of household investors to estimate the number of investors. Their first
survey carried out in 1990 placed the total number of share owners at 90-100 lakh.
Their second survey estimated the number of share owners at around 140-150 lakh as
of mid-1993. Their latest survey estimates the number of shareowners at around 2 crore
at 1997 end, after which it remained stagnant up to the end of 1990s. The bulk of
increase in number of investors took place during 1991-94 and tapered off thereafter.
49% of the share owners at the end of 2000 had, for the first time, entered the market
before the end of 1990, 44% entered during 1991-94, 6.3% during 1995-96 and 0.8%
since 1997. The survey attributes such tapering off to persistent depression in the share
market and investors bad experience with many unscrupulous company promoters and
managements.
Distribution of Investors: The Society for Capital Market Research & Development
estimates that 15% of urban households and only 0.5-1.0% of semi-urban and rural
households own shares. It is estimated that 4% of all households own shares.
Table 5.2: Distribution of Beneficial Accounts with NSDL at the end of Feb. 2003
S. No. States/Union Beneficial Accounts
Territories Number % to total

19

1 Andhra Pradesh 194,405 6.08


2 Bihar 27,340 0.85
3 Chandigarh 7,891 0.25
4 Delhi 323,693 10.12
5 Goa 11,374 0.36
6 Gujarat 536,720 16.78
7 Himachal Pradesh 3,706 0.12
8 Jammu & Kashmir 7,320 0.23
9 Karnataka 195,159 6.10
10 Kerala 76,793 2.40
11 Madhya Pradesh 71,158 2.23
12 Maharashtra 911,997 28.52
13 Orissa 14,701 0.46
14 Pondicherry 2,481 0.08
15 Punjab 52,434 1.64
16 Rajasthan 72,316 2.26
17 Tamil Nadu 230,407 7.20
18 Uttar Pradesh 188,835 5.90
19 West Bengal 214,432 6.71
20 Others 54,802 1.71
Total 3,197,964 100.00
An indirect, but very authentic source of information about distribution of investors is
the data base of beneficial accounts with the depositories. By February 2003, there
were 3 million beneficial accounts with the National Securities Depository Limited
(NSDL). The state-wise distribution of beneficial accounts with NSDL is presented in
Table 5.2. As expected Maharashtra and Gujarat account for nearly 45% of total
beneficial accounts.

Primary Market

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A total of Rs. 2,520,179 million were raised by the government and corporate
sector during 2002-03 as against Rs. 2,269,110 million during the preceding year.
Government raised about two third of the total resources, with central government alone
raising nearly Rs. 1,511,260 million.

Corporate Securities
Average annual capital mobilization from the primary market, which used to
be about Rs.70 crore in the 1960s and about Rs.70 crore in the 1970s, increased
manifold during the 1980s, with the amount raised in 1990-91 being Rs. 4,312 crore. It
received a further boost during the 1990s with the capital raised by nongovernmental
public companies rising sharply to Rs. 26,417 crore in 1994-95. The capital raised which
used to be less than 1% of gross domestic saving (GDS) in the 1970s increased to
about 13% in 1992-93. In real terms, the capital raised increased 4 times between
1990-91 and 1994-95. During 1994-95, the amount raised through new issues of
securities from the securities market accounted for about four-fifth of the disbursements
by FIs. Issuers have shifted focus to other avenues for raising resources like private
placement. There is a preference for raising resources in the primary market through
private placement of debt instruments. Private placements accounted for about 93% of
total resources mobilized through domestic issues by the corporate sector during 200203. Rapid dismantling of shackles on institutional investments and deregulation of the
economy are driving growth of this segment. There are several inherent advantages of
relying on private placement route for raising resources. While it is cost and time
effective method of raising funds and can be structured to meet the needs of the
entrepreneurs, it does not require detailed compliance with formalities as required in
public or rights issues. It is believed in some circles that private placement has crowded
out public issues. However, to prevent public issues from being passed on as private
placement, the Companies (Amendment) Act, 2001 considers offer of securities to more
than 50 persons as made to public.
Indian market is getting integrated with the global market though in a limited way
through euro issues. Since 1992, when they were permitted access, Indian companies
have raised about Rs. 34,264 million through ADRs/GDRs. By the end of March 2003,
502 FIIs were registered with SEBI. They had net cumulative investments over of US $

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15.8 billion by the end of March 2003. Their operations influence the market as they do
delivery-based business and their knowledge of market is considered superior. The
market is getting institutionalised as people prefer mutual funds as their investment
vehicle, thanks to evolution of a regulatory framework for mutual funds, tax concessions
offered by government and preference of investors for passive investing. The net
collections by MFs picked up during this decade and increased to Rs. 199,530 million
during 1999-00. This declined to Rs. 111,350 million during 2000-01 which may be
attributed to increase in rate of tax on income distributed by debt oriented mutual funds
and lacklustre secondary market. The total collection of mutual funds for 2002-03 has
been Rs. 105,378 million.
Starting with an asset base of Rs. 250 million in 1964, the total assets under
management at the end of March 2003 was Rs. 794,640 million. The number of
households owning units of MFs exceeds the number of households owning equity and
debentures. At the end of financial year March 2003, according to a SEBI press release
23 million unit holders had invested in units of MFs, while 16 million individual investors
invested in equity and or debentures.

Government Securities
The primary issues of the Central Government have increased many-fold during the
decade of 1990s from Rs. 89,890 million in 1990-91 to Rs. 1,511,260 million in 2002-03.
The issues by state governments increased by about twelve times from Rs. 25,690
million to Rs. 308,530 million during the same period. The Central Government
mobilised Rs. 1,250,000 million through issue of dated securities and Rs. 261,260
million through issue of T-bills. After meeting repayment liabilities of
Rs. 274,200 million for dated securities, and redemption of T-bills of Rs. 195,880 million,
net market borrowing of Central Government amounted to Rs. 1,041,180 million for the
year 2002-03. The state governments collectively raised Rs. 305,830 million during
2002-03 as against Rs. 187,070 million in the preceding year. The net borrowings of
State Governments in 2002-03 amounted to Rs. 290,640 million. Along with growth of
the market, the investor base has become very wide. In

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addition to banks and insurance companies, corporates and individual investors are
investing in government securities. With dismantling of control regime, and gradual
lowering of the SLR and CRR, Government is borrowing at nearmarket rates. The
coupons across maturities went down recently signifying lower interest rates. The
weighted average cost of its borrowing at one stage increased to 13.75% in 1995- 96,
which declined to 7.34% in 2002-03. The maturity structure of government
debt is also changing. In view of bunching of redemption liabilities in the medium term,
securities with higher maturities were issued during 2002-03. About 64% of primary
issues were raised through securities with maturities above 5 years and up to 10 years.
As a result the weighted average maturity of dated securities increased to 13.83 years
from 6.6 years in 1997-98.

Secondary Market
Corporate Securities
Selected indicators in the secondary market are presented in Table 4.3. The
number of stock exchanges increased from 11 in 1990 to 23 now. All the exchanges are
fully computerised and offer 100% on-line trading. 9,413 companies were available for
trading on stock exchanges at the end of March 2003. The trading platform of the stock
exchanges was accessible to 9,519 members from over 358 cities on the same date.
The market capitalisation grew ten fold between 1990-91 and 1999-00. It
increased by 221% during 1991-92 and by 107% during 1999-00. All India market
capitalisation is estimated at Rs. 6,319,212 million at the end of March 2003. The
market capitalisation ratio, which indicates the size of the market, increased sharply to
57.4% in 1991-92 following spurt in share prices. The ratio further increased to 85% by
March 2000. It, however, declined to 55% at the end of March 2001 and to 29% by end
March 2003. The trading volumes on exchanges have been witnessing phenomenal
growth during the 1990s. The average daily turnover grew from about Rs.1500 million in
1990 to Rs. 120,000 million in 2000, peaking at over Rs. 200,000 million. One-sided
turnover on all stock exchanges exceeded Rs. 10,000,000 million during 1998-99, Rs.
20,000,000 million during 1999-00 and approached Rs. 30,000,000 million during 200001. However, the trading volume substantially depleted to Rs. 9,689,541 million in 2002-

23

03. The turnover ratio, which reflects the volume of trading in relation to the size of the
market, has been increasing by leaps and bounds after the advent of screen based
trading system by the NSE. The turnover ratio for the year 2002-03 increased to 375 but
fell substantially due to bad market conditions to 119 during 2001-02 regaining its
position accounted 153.3% in 2002- 03.
The relative importance of various stock exchanges in the market has
undergone dramatic change during this decade. The increase in turnover took place
mostly at the large big exchanges and it was partly at the cost of small exchanges that
failed to keep pace with the changes. NSE is the market leader with more 85% of total
turnover (volumes on all segments) in 2002-03. Top 5 stock exchanges accounted
for 99.88% of turnover, while the rest 18 exchange for less than 0.12% during 2002-03
(Table 5.4). About ten exchanges reported nil turnover during the year.

Index Value
The relative importance of various stock exchanges in the market has undergone
dramatic change during this decade. The increase in turnover took place mostly at the
large big exchanges and it was partly at the cost of small exchanges that failed to keep
pace with the changes. NSE is the market leader with over 80% of total turnover
(volumes on all segments) in 2001-02. Top 6 stock exchanges accounted for 99.88% of
turnover, while the rest 17 exchange for less than 0.12% during 2002-03 (Table 5.4).
About a dozen exchanges reported nil turnover during the year.
The movement of the S&P CNX NIFTY, the most widely used indicator of the market, is
presented in Chart 5.1. In the very first year of liberalisation, i.e. 1991-92, it recorded a
growth of 267%, followed by sharp decline of 47% in the next year as certain
irregularities in securities transactions were noticed. The market picked up next year
thanks to increased inflow of foreign funds, and increased investor
interest. Thereafter the market remained subdued. The index recorded a decline of
3.47% during 1998-99 under the pressure of economic sanctions following detonation of
nuclear device, continuing woes of East Asian financial markets, volatility of Indian
currency and worries about financial health of UTIs US-64 scheme. The Union Budget
of 1999 brought cheers to the market. The market moved on a roller coaster ride, but a

24

distinct rising trend emerged due to all-round positive perception about strength of the
Government and also its commitment
towards second generation reforms, improved macro-economic parameters and better
corporate results. The S&P CNX Nifty firmed up during 1999-2000 by 42% which was
nearly four times the average return offered on bank deposits. The trend got reversed
during 2000-01, which witnessed large sell-offs in new economy stocks in global
markets and deceleration in the growth of the domestic economy. This brought down
Nifty from a high of 1636.95 in April 2000 to a low of 1108.20 in October 2000. The
market looked up in November-January in anticipation of a good budget. However it did
not last long as the market received shocking news about imminent payment crisis on
certain exchanges, large scale manipulations in stock prices and revelation of large
scale corruption in the procurement of defence equipments. The Nifty closed at 1148.20
at the end of March 2001 recording a fall of about 25% during 2000-01. The trend
precipitated further with introduction of rolling settlement and withdrawal of deferral
products in July 2002, suspension of repurchase facility under UTIs US-64 scheme,
terrorist attack on world Trade Centre in September 2002, etc. which caused a further
decline in S&P CNX Nifty by 1.6% during 2001-02. The Nifty closed at 978.2 at the end
of March 2003.

Government Securities
The trading volumes in government securities exceeded the combined trading volumes
in equity segments of all the exchanges in the country during 2002-03. The aggregate
turnover in central and state government dated securities, including

treasury bills,

through SGL transactions increased by manifold between 1994-95 and 2002-03. During
2002-03 it reached a level of Rs. 19,557,313 million, recording about 24.3% growth over
Rs.15,738,930 million in the previous year. Such growing

turnover reflects further

deepening of the market. The bulk of transactions during


2000-02 were on outright basis. The share of outright transactions in

overnment

securities increased from 23.2% in 1995-96 to 71.2% in 2002-03. The share of repo
transactions declined correspondingly from 76.8% in 1995-96 to 29% in 2002-03. The
share of WDM segment of NSE in total turnover for government securities decreased

25

marginally from 58.9% in 2000-01 to 52% in 2002-03. As compared to the increase in


overall turnover of government securities by 24%, the same on WDM grew by 11%
during 2002-03. Share of WDM in transactions of dated securities decreased from
61.1% in 2001-02 to 55.6% in 2002-03. Its share in transactions of T-bills decreased
from 27.4% in 2001-02 to 21.5% in 2002-03. Government debt, which constitutes about
three-fourth of the total outstanding debt, has the highest level of liquidity amongst the
fixed income instruments in the secondary market. The share of dated securities in total
turnover of government securities has been increasing over the years. Two-way quotes
are available for the active gilt securities from the primary dealers. Though many trades
in the gilts take place through telephone, a larger chunk of trades get routed through
NSE brokers.

Derivatives Market
Trading in derivatives of securities commenced in June 2000 with the enactment of
enabling legislation in early 2000. Derivatives are formally defined to include: (a) a
security derived from a debt instrument, share, loan whether secured or unsecured, risk
instrument or contract for differences or any other form of security, and (b) a contract
which derives its value from the prices, or index of prices, or underlying securities.
Derivatives are legal and valid only if such contracts are traded on a recognised stock
exchange, thus precluding OTC derivatives.
Derivatives trading commenced in India in June 2000 after SEBI granted the approval to
this effect in May 2000. SEBI permitted the derivative segment of two stock exchanges,
i.e. NSE and BSE, and their clearing house/corporation to commence trading and
settlement in approved derivative contracts. To begin with, SEBI approved trading in
index futures contracts based on S&P CNX Nifty Index and BSE-30 (Sensex) Index.
This was followed by approval for trading in options based on these two indices and
options on individual securities. The trading in
index options commenced in June 2001 and trading in options on individual securities
would commence in July 2001 while trading in futures of individual stocks started from
November 2001. In June 2003, SEBI/RBI approved the trading on interest rate
derivative instruments.

26

The total exchange traded derivatives witnessed a volume of Rs.4,423,333 million


during 2002-03 as against Rs. 1,038,480 million during the preceding year. While NSE
accounted for about 99.5% of total turnover, BSE accounted for less than 1% in 200203. The market witnessed higher volumes from June 2001 with introduction of index
options, and still higher volumes with the introduction of stock options in July 2001.
There was a spurt in volumes in November 2001 when stock futures were introduced. It
is believed that India is the largest market in the world for stock futures.

Market Design
Primary Market
1. Corporate Securities: The Disclosure and Investor Protection (DIP) guidelines
prescribe a substantial body of requirements for issuers/intermediaries, the broad
intention being to ensure that all concerned observe high standards of integrity and fair
dealing, comply with all the requirements with due skill, diligence and care, and disclose
the truth, whole truth and nothing but truth. The guidelines aim to secure fuller
disclosure of relevant information about the issuer and the nature of the securities to be
issued so that investors can take informed decisions. For example, issuers are required
to disclose any material' risk factors and give justification for pricing in their prospectus.
An unlisted
Company can access the market up to 5 times its pre-issue net worth only if it has track
record of distributable profits and net worth of Rs. 1 crore in 3 out of last five years. A
listed company can access up to 5 times of its pre-issue net worth. In case a company
does not have track record or wishes to raise beyond 5 times of its pre-issue net worth,
it can access the market only through book building with minimum offer of 60% to
qualified institutional buyers. Infrastructure companies are exempt from the requirement
of eligibility norms if their project has been appraised by a public financial institution and
not less than 5% of the project cost is financed by any of the institutions, jointly or
severally, by way of loan and/or subscription to equity. The debt instruments of
maturities more than 18 months require credit rating. If the issue size exceeds Rs. 100
crore, two ratings from different agencies are required. Thus the quality of the issue is
demonstrated by track record/appraisal by approved financial institutions/credit

27

rating/subscription by QIBs. The lead merchant banker discharges most of the pre-issue
and post-issue obligations. He satisfies himself about all aspects of offering and
adequacy of disclosures in the offer document. He issues a due diligence certificate
stating that he has examined the prospectus, he finds it in order and that it brings out all
the facts and does not contain anything wrong or misleading. He also takes care of
allotment, refund and despatch of certificates. The admission to a depository for
dematerialisation of securities is a prerequisite for making a public or rights issue or an
offer for sale. The investors, however, have the option of subscribing to securities in
either physical form or dematerialised form. All new IPO`s are compulsorily traded in
dematerialised form. Every public listed company making IPO of any security for Rs. 10
crore or more is required to do so only in dematerialized form.
2. Government Securities: The government securities market has witnessed
significant transformation in the 1990s. With giving up of the responsibility of allocating
resources from securities market, government stopped expropriating seigniorage and
started borrowing at near - market rates. Government securities are now sold at market
related coupon rates through a system of auctions instead of earlier practice of issue of
securities at very low rates just to reduce the cost of borrowing of the government.
Major reforms initiated in the primary market for government securities include auction
system (uniform
price and multiple price method) for primary issuance of T-bills and central government
dated securities, a system of primary dealers and non-competitive bids to widen
investor base and promote retail participation, issuance of securities across maturities
to develop a yield curve from short to long end and provide benchmarks for rest of the
debt market, innovative instruments like, zero coupon bonds, floating rate bonds, bonds
with embedded derivatives, availability of full range ( 91-day and 382-day) of T-bills, etc.

Secondary Market
(a) Corporate Securities: The stock exchanges are the exclusive centers for trading of
securities. Though the area of operation/jurisdiction of an exchange is specified at the
time of its recognition, they have been allowed recently to set up trading terminals

28

anywhere in the country. The three newly set up exchanges (OTCEI, NSE and ICSE)
were permitted since their inception to have nation wide trading. The trading platforms
of a few exchanges are now accessible from many locations. Further, with extensive
use of information technology, the trading platforms of a few exchanges are also
accessible from anywhere
through the Internet and mobile devices. This made a huge difference in a
geographically vast country like India.
(b) Exchange Management: Most of the stock exchanges in the country are organized
as mutual which was considered beneficial in terms of tax benefits and matters of
compliance. The trading members, who provide brokering services, also own, control
and manage the exchanges. This is not an effective model for self-regulatory
organizations as the regulatory and public interest of the exchange conflicts with private
interests. Efforts are on to demutualise the exchanges whereby ownership,
management and trading membership would be segregated from one another. Two
exchanges viz. OTCEI and NSE are demutualised from inception, where ownership,
management and trading are in the hands of three different sets of people. This model
eliminates onflict of interest and helps the exchange to pursue market efficiency and
investor interest aggressively.
(c) Membership: The trading platform of an exchange is accessible only to brokers.
The broker enters into trades in exchanges either on his own account or on behalf of
clients. No stock broker or sub-broker is allowed to buy, sell or deal in securities, unless
he or she holds a certificate of registration granted by SEBI. A broker/sub-broker
complies with the code of conduct prescribed by SEBI. Over time, a number of brokers proprietor firms and partnership firms - have converted themselves into corporate. The
standards for admission of members stress on factors, such as corporate structure,
capital adequacy, track record, education, experience, etc. and reflect a conscious
Endeavour to ensure quality broking services.
(d) Listing: A company seeking listing satisfies the exchange that at least 10% of the
securities, subject to a minimum of 20 lakh securities, were offered to public for
29

subscription, and the size of the net offer to the public (i.e. the offer price multiplied by
the number of securities offered to the public, excluding reservations, firm allotment and
promoters contribution) was not less than Rs. 100 crore, and the issue is made only
through book building method with allocation of 60% of the issue size to the qualified
institutional buyers. In the alternative, it is required to offer at least 25% of the securities
to public. The company is also required to maintain the minimum level of non-promoter
holding on a continuous basis. In order to provide an opportunity to investors to
invest/trade in the securities of local companies, it is mandatory for the companies,
wishing to list their securities, to list on the regional stock exchange nearest to their
registered office. If they so wish, they can seek listing on other exchanges as well.
Monopoly of the exchanges within their allocated area, regional aspirations of the
people and mandatory listing on the regional stock exchange resulted in multiplicity of
exchanges.
The basic norms for listing of securities on the stock exchanges are uniform for all the
exchanges. These norms are specified in the listing agreement entered into between
the company and the concerned exchange. The listing agreement prescribes a number
of requirements to be continuously complied with by the issuers for continued listing and
such compliance is monitored by the exchanges. It also stipulates the disclosures to be
made by the companies and the corporate governance practices to be followed by
them. SEBI has been issuing guidelines/circulars prescribing certain norms to be
included in the listing agreement and to be complied with by the companies. A listed
security is available for trading on the exchange. The stock exchanges
levy listing fees - initial fees and annual fees - from the listed companies. It is a major
source of income for many exchanges. A security listed on other exchanges is also
permitted for trading. A listed company can voluntary delist its securities from nonregional stock exchanges after providing an exit opportunity to holders of securities in
the region where the concerned exchange is located. An exchange can, however, delist
the securities compulsorily following a very stringent procedure.
(e) Trading Mechanism: The exchanges provide an on-line fully-automated screen
based trading system (SBTS) where a member can punch into the computer quantities
of securities and the prices at which he likes to transact and the transaction is executed
30

as soon as it finds a matching order from a counter party. SBTS electronically matches
orders on a strict price/time priority and hence cuts down on time, cost and risk of error,
as well as on fraud resulting in improved operational efficiency. It allows faster
incorporation of price sensitive information into prevailing prices, thus increasing the
informational efficiency of markets. It enables market participants to see the full market
on real-time, making the market transparent. It allows a large number of participants,
irrespective of their geographical locations, to trade with one another simultaneously,
improving the depth and liquidity of the market. It provides full anonymity by accepting
orders, big or small, from members without revealing their identity, thus providing equal
access to everybody. It also provides a perfect audit trail, which helps to resolve
disputes by logging in the trade execution process in entirety.
(f) Trading Rules: Regulations have been framed to prevent insider trading as well as
unfair trade practices. The acquisitions and takeovers are permitted in a well defined
and orderly manner. The companies are permitted to buy back their securities to
improve liquidity and enhance the shareholders wealth.
(g) Price Bands: Stock market volatility is generally a cause of concern for both policy
makers as well as investors. To curb excessive volatility, SEBI has prescribed a system
of price bands. The price bands or circuit breakers bring about a coordinated trading
halt in all equity and equity derivatives markets nation-wide. An index-based marketwide circuit breaker system at three stages of the index movement either way at 10%,
15% and 20% has been prescribed. The movement of either S&P CNX Nifty or Sensex,
whichever is breached earlier, triggers the breakers. As an additional measure of safety,
individual scrip-wise price bands of 20% either way have been imposed for all securities
except those available for stock options.
(h) Demat Trading: The Depositories Act, 1996 was passed to proved for the
establishment of depositories in securities with the objective of ensuring free
transferability of securities with speed, accuracy and security by
(a) Making securities of public limited companies freely transferable subject to certain
exceptions;
31

(b) Dematerializing the securities in the depository mode; and


(c) Providing for maintenance of ownership records in a book entry form. In order to
streamline both the stages of settlement process, the Act envisages transfer of
ownership of securities electronically by book entry without making the securities move
from person to person. Two depositories, viz. NSDL and CDSL, have come up to
provide instantaneous electronic transfer of securities. At the end of March 2002, 4,172
and 4,284 companies were connected to NSDL and CDSL respectively. The number of
dematerialised securities increased to 56.5 billion at the end of March 2002. As on the
same date, the value of dematerialised securities was Rs. 4,669 billion and the number
of investor accounts was 4,605,588. All actively traded scripts are held, traded and
settled in Demat form. Demat settlement accounts for over 99% of turnover settled by
delivery. This has almost eliminated the bad deliveries and associated problems. To
prevent physical certificates from sneaking into circulation, it has been mandatory for all
new IPO's to be compulsorily traded in dematerialised form. The admission to a
depository for dematerialization of securities has been made a prerequisite for making a
public or rights issue or an offer for sale. It has also been made compulsory for public
listed companies making IPO of any security for Rs. 10 crore or more to do the same
only in dematerialised form.
(i) Charges: A stock broker is required to pay a registration fee of Rs.

5,000 every

financial year, if his annual turnover does not exceed Rs. 1 crore. If the turnover
exceeds Rs. 1 crore during any financial year, he has to pay Rs. 5,000 plus onehundredth of 1% of the turnover in excess of Rs.1 crore. After the expiry of five years
from the date of initial registration as a broker, he has to pay Rs. 5,000 for a block of five
financial years. Besides, the exchanges collect transaction charges from its trading
members. NSE levies Rs. 4 per lakh of turnover. The maximum brokerage a trading
member can levy in respect of securities
Transactions are 2.5% of the contract price, exclusive of statutory levies like SEBI
turnover fee, service tax and stamp duty. However, brokerage charges as low as 0.15%
is also observed in the market.

32

(j) Trading Cycle: Rolling settlement on T+3 basis gave way to T+2 from April 2003.
The market has moved close to spot/cash market.
(k) Risk Management: To pre-empt market failures and protect investors, the
regulator/exchanges have developed a comprehensive risk management system, which
is constantly monitored and upgraded. It encompasses capital adequacy of members,
adequate margin requirements, limits on exposure and turnover, indemnity insurance,
on-line position monitoring and automatic disablement, etc. They also administer an
efficient market surveillance system to curb excessive volatility, detect and prevent price
manipulations. Exchanges have set up trade/settlement guarantee funds for meeting
shortages arising out of no fulfillment/ partial fulfillment of funds obligations by the
members in a settlement. A clearing corporation assures the counterparty risk of each
member and guarantees financial settlement in respect of trades executed on NSE.
(l) Government Securities: The reforms in the secondary market include Delivery
versus Payment system for settling scripless SGL transactions to reduce settlement
risks, SGL Account II with RBI to enable financial intermediaries to open custody
(Constituent SGL) accounts and facilitate retail transactions in scripless mode,
enforcement of a trade-for-trade regime, settlement period of T+0 or T+1 for all
transactions undertaken directly between SGL participants and up to T+5 days for
transactions routed through NSE brokers, routing transactions through brokers of NSE,
OTCEI and BSE, reports in all government securities with settlement through SGL,
liquidity support to PDs to enable them to support primary market and undertake market
making, special fund facility for security settlement, etc. As part of the ongoing efforts to
build debt market infrastructure, two new systems, the Negotiated Dealing System
(NDS) and the Clearing Corporation of India Limited (CCIL) commenced operations on
February 15, 2002. NDS, interalia, facilitates screen based negotiated dealing for
secondary market transactions in government securities and money market
instruments, online reporting of transactions in the instruments available on the NDS
and dissemination of trade information to the market. Government Securities (including
T-bills), call money, notice/term money, repos in eligible securities, Commercial Papers
and Certificate of Deposits are available for negotiated dealing through NDS among the
members. The CCIL facilitates settlement of transactions in government securities (both
33

outright and repo) on Delivery versus Payment (DvP-II) basis which provides for
settlement of securities on gross basis and settlement of funds on net basis
simultaneously. It acts as a central counterparty for clearing and settlement of
government securities transactions done on NDS.

Derivatives Market
The trading in index futures commenced in June 2000, index options in June
2001, stock options in July 2001 and stock futures in November 2001. The market
design for these products traded on NSE is presented. Trading in interest rate
derivatives commenced June 2003. Interest Rate Futures Contracts are contracts
based on the list of underlying as may be specified by the Exchange and approved by
SEBI from time to time. Interest rate futures contracts are available on Notional T- bills,
Notional 10 year zero coupon bond and Notional 10 year coupon bearing bond
stipulated by the Securities & Exchange Board of India (SEBI). The market design of
these products traded on NSE is presented.

Regulatory Framework
The four main legislations governing the securities market are: (a) the SEBI
Act, 1992 which establishes SEBI to protect investors and develop and regulate
securities market; (b) the Companies Act, 1956, which sets out the code of conduct for
the corporate sector in relation to issue, allotment and transfer of securities, and
disclosures to be made in public issues; (c) the Securities Contracts (Regulation) Act,
1956, which provides for regulation of transactions in securities through control over
stock exchanges; and (d) the Depositories Act, 1996 which provides for electronic
maintenance and transfer of ownership of demat securities.
Government has framed rules under the SCRA, SEBI Act and the
Depositories Act. SEBI has framed regulations under the SEBI Act and the Depositories
Act for registration and regulation of all market intermediaries, and for prevention of
unfair trade practices, insider trading, etc. Under these Acts, Government and SEBI
issue notifications, guidelines, and circulars which need to be complied with by market
participants. The SROs like stock exchanges have also laid down their rules of game.

34

The responsibility for regulating the securities market is shared by

epartment of

Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India
(RBI) and SEBI. The activities of these agencies are co-ordinated by the High Level
Committee on Capital Markets. Most of the powers under the SCRA are exercisable by
DEA while a few others by SEBI. The powers of the EA under the SCRA are also concurrently exercised by SEBI. The powers

in respect of the contracts for sale and

purchase of securities, gold related securities, money market securities and securities
derived from these securities and ready forward contracts in debt securities are
exercised concurrently by RBI. The SEBI Act and the Depositories Act are mostly
administered by SEBI. The rules and regulations under the securities laws are
administered by SEBI. The powers under the Companies Act relating to issue and
transfer of securities and non-payment of dividend are administered by SEBI in case of
listed public companies and publiccompanies proposing to get their securities listed.
The SROs ensure compliance with their own rules as well as with the rules.

Research in Securities Market


In order to deepen the understanding and knowledge about Indian capital
market, and to assist in policy-making, SEBI has been promoting high quality research
in capital market. It has set up an in-house research department, which brings out
working papers on a regular basis. In collaboration with NCAER, SEBI brought out a
Survey of Indian Investors, which estimates investor population in

India and their

investment preferences. SEBI has also tied up with reputed national and international
academic and research institutions for conducting research studies/projects on various
issues related to the capital market. In order to improve market efficiency further and to
set international benchmarks in the securities industry, NSE administers a scheme
called the NSE Research Initiative with a view to develop an information base and a
better insight into the working of securities market in India. The objective of this initiative
is to foster research, which can support and facilitate
(a) stock exchanges to better design market micro-structure,
(b) participants to frame their strategies in the market place,
(c) regulators to frame regulations,

35

(d) policy makers to formulate policies, and


(e) expand the horizon of knowledge. The Initiative has received
tremendous response.

Testing and Certification


The intermediaries, of all shapes and sizes, who package and sell securities,
compete with one another for the chance to handle investors/issuers money. The
quality of their services determines the shape and health of the securities market. In
developed markets and in some of the developing markets, this is ensured through a
system of testing and certification of persons joining market intermediaries in the
securities market. A testing and certification mechanism that has become extremely
popular and is sought after by the candidates as well as employers is a unique on-line
testing and certification programme called National Stock Exchanges Certification in
Financial Markets (NCFM). It is an on-line fully automated nation-wide testing and
certification system where the entire process from generation of question paper,
invigilation, testing, assessing, scores reporting and certifying is fully automated - there
is absolutely no scope for human intervention. It allows tremendous flexibility in terms of
testing centres, dates and timing and provides easy accessibility and convenience to
candidates as he can be tested at any time and from any location. It tests practical
knowledge and skills,that are required to operate in financial markets, in a very secure
and unbiased manner, and certifies personnel who have a proper understanding of the
market and business and skills to service different constituents of the market. It offers 9
financial market related modules.

Legal Framework
This section deals with legislative and regulatory provisions relevant from the
viewpoint of a trading member. The four main legislations governing the securities
market are:(a) the Securities Contracts (Regulation) Act, 1956, which provides for
regulation of transactions in securities through control over stock exchanges; (b) the
Companies Act, 1956, which sets out the code of conduct for the corporate sector in
relation to issue, allotment and transfer of securities, and disclosures to be made in
public issues; (c) the SEBI Act, 1992 which establishes SEBI to protect investors and

36

develop and regulate securities market; and (d) the Depositories Act, 1996 which
provides for electronic maintenance and transfer of ownership of dematerialised
securities.

Legislations
Capital Issues (Control) Act, 1947
The Act had its origin during the war in 1943 when the objective was to channel
resources to support the war effort. It was retained with some modifications as a means
of controlling the raising of capital by companies and to ensure that national resources
were channelled into proper lines, i.e., for desirable purposes to serve goals and
priorities of the government, and to protect the interests of investors. Under the Act, any
firm wishing to issue securities had to obtain approval from the Central Government,
which also determined the amount, type and price of the issue. As a part of the
liberalisation process, the Act was repealed in 1992 paving way for market determined
allocation of resources.

Securities Contracts (Regulation) Act, 1956


It provides for direct and indirect control of virtually all aspects of securities
trading and the running of stock exchanges and aims to prevent undesirable
transactions in securities. It gives Central Government regulatory jurisdiction over (a)
stock exchanges through a process of recognition and continued supervision, (b)
contracts in securities, and (c) listing of securities on stock exchanges. As a condition of
recognition, a stock exchange complies with conditions prescribed by Central
Government. Organised trading activity in securities takes place on a specified
recognised stock exchange. The stock exchanges determine their own listing
regulations which have to conform to the minimum listing criteria set out in the Rules.

SEBI Act, 1992


The SEBI Act, 1992 was enacted to empower SEBI with statutory powers for
(a) protecting the interests of investors in securities,
(b) promoting the development of the securities market, and

37

(c) regulating the securities market. Its regulatory jurisdiction extends over corporates in
the issuance of capital and transfer of securities, in addition toall intermediaries and
persons associated with securities market. It can conduct enquiries, audits and
inspection of all concerned and adjudicate offences under the Act. It has powers to
register and regulate all market intermediaries and also to penalise them in case of
violations of the provisions of the Act, Rules and Regulations made thereunder. SEBI
has full autonomy and authority to regulate and develop an orderly securities market.

Depositories Act, 1996


The Depositories Act, 1996 provides for the establishment of depositories in
securities with the objective of ensuring free transferability of securities with speed,
accuracy and security by (a) making securities of public limited companies freely
transferable subject to certain exceptions; (b) dematerialising the securities in the
depository mode; and (c) providing for maintenance of ownership records in a book
entry form. In order to streamline the settlement process, the Act envisages transfer of
ownership of securities electronically by book entry without making the securities move
from person to person. The Act has made the securities of all public limited companies
freely transferable, restricting the companys right to use discretion in effecting the
transfer of securities, and the transfer deed and other procedural requirements under
the Companies Act have been dispensed with.

Companies Act, 1956


It deals with issue, allotment and transfer of securities and various aspects
relating to company management. It provides for standard of disclosure in public issues
of capital, particularly in the fields of company management and projects, information
about other listed companies under the same management, and management
Perception of risk factors. It also regulates underwriting, the use of premium and
discounts on issues, rights and bonus issues, payment of interest and dividends, supply
of annual report and other information.

38

Rules and Regulations


The Government has framed rules under the SC(R)A, SEBI Act and the
Depositories Act. SEBI has framed regulations under the SEBI Act and the Depositories
Act for registration and regulation of all market intermediaries, for prevention of unfair
trade practices, insider trading, etc. Under these Acts, Government and SEBI issue
notifications, guidelines, and circulars, which need to be compiled with by market
participants. The self-regulatory organizations (SROs) like stock exchanges have also
laid down their rules of game.

Regulators
The regulators ensure that the market participants behave in a desired
manner so that the securities market continue to be a major source of finance for
corporate and government and the interest of investors are protected. The responsibility
for regulating the securities market is shared by Department of Economic Affairs (DEA),
Department of Company Affairs (DCA), Reserve Bank of India (RBI),
Securities and Exchange Board of India (SEBI) and Securities Appellate Tribunal (SAT)

SEBI
* Government has issued notifications providing that the contracts for sale and
purchase of government securities, gold-related securities, money market securities
and securities derived from these securities and ready forward contracts in debt
securities shall be regulated by RBI. Such contracts, if executed on stock exchanges,
shall, however, be regulated by SEBI in a manner that is consistent with the guidelines
issued by RBI.*
Most of the powers under the SC(R)A are excercisable by Department of
Economic Affairs (DEA), while a few others by SEBI. The powers of the DEA under the
SC(R)A are also con-currently exercised by SEBI. The powers in respect of the
contracts for sale and purchase of securities, gold-related securities, money market
securities and securities derived from these securities and ready forward contracts in

39

debt securities are exercised concurrently by RBI. The SEBI Act and the Depositories
Act are mostly administered by SEBI. All these are administered by SEBI. The powers
under the Companies Act relating to issue and transfer of securities and non-payment of
dividend are administered by SEBI in case of listed public companies and public
companies proposing to get their securities listed. The SROs ensure compliance with
their own rules relevant for them under the securities laws.

Securities Contracts (Regulation) Act, 1956


The Securities Contracts (Regulation) Act, 1956 [SC(R)A] was enacted to
prevent undesirable transactions in securities by regulating the business of dealing
therein and by providing for certain other matters connected therewith. This is the
principal Act, which governs the trading of securities in India. The definitions of some of
the important terms are given below:
Recognised Stock Exchange means a stock exchange, which is for the time being
recognised by the Central Government under Section 4 of the SC(R)A.
Stock Exchange means any body of individuals, whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities.
As per Section 2(h), the term "securities" include(i) shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated
company or other body corporate,
(ii) derivative,
(iii) units or any other instrument issued by any collective investment
scheme to the investors in such schemes,
(iv) Security receipts
(v) government securities,
(vi) such other instruments as may be declared by the Central
Government to be securities, and

40

(vii) rights or interests in securities.


As per section 2(aa), Derivative includes(A). A security derived from a debt instrument, share, loan whether
secured or unsecured, risk instrument or contract for differences or
any other form of security;
(B). A contract which derives its value from the prices, or index of
prices, of underlying securities;
Section 18A provides that notwithstanding anything contained in any other law for the
time being in force, contracts in derivative shall be legal and valid if such contracts are(i) Traded on a recognised stock exchange;
(ii) settled on the clearing house of the recognised stock exchange, in
accordance with the rules and bye-laws of such stock exchanges.
"Spot delivery contract" has been defined in Section 2(i) to mean a contractwhich
provides for(a) Actual delivery of securities and the payment of a price therefore
either on the same day as the date of the contract or on the next day,
the actual period taken for the dispatch of the securities or the remittance of money
therefore through the post being excluded from the computation of the period aforesaid
if the parties to the contract do not reside in the same town or locality;
(b) Transfer of the securities by the depository from the account of a
beneficial owner to the account of another beneficial owner when
such securities are dealt with by a depository.
The SC(R)A deals with1. Stock exchanges, through a process of recognition and continued
supervision,
2. Contracts in securities, and
3. Listing of securities on stock exchanges.

41

Recognition of stock exchanges


By virtue of the provisions of the Act, the business of dealing in securities
cannot be carried out without registration from SEBI. Any Stock Exchange which is
desirous of being recognised has to make an application under Section 3 of the Act to
SEBI, which is empowered to grant recognition and prescribe conditions. This
ecognition can be withdrawn in the interest of the trade or public.SEBI is authorised to
call for periodical returns from the recognised Stock Exchanges and make enquiries in
relation to their affairs. Every Stock Exchange is obliged to furnish annual reports to
SEBI. Recognised Stock Exchanges are
allowed to make bylaws for the regulation and control of contracts but subject to the
previous approval of SEBI and SEBI has the power to amend the said bylaws. The
Central Government and SEBI have the power to supersede the governing body of any
recognised stock exchange.

Contracts in Securities:
Organized trading activity in securities takes place on a recognised stock
exchange. If the Central Government is satisfied, having regard to the nature or the
volume of transactions in securities in any State or area, that it is necessary so to do, it
may, by notification in the Official Gazette, declare provisions of section 13 to apply to
such State or area, and thereupon every contract in such State or area which is
entered into after date of the notification otherwise than between members of a
recognised stock exchange in such State or area or through or with such member shall
be illegal. The effect of this provision clearly is that if a transaction in securities has to be
validly entered into, such a transaction has to be either between the members of a
recognised stock exchange or through a member of a Stock Exchange.

Listing of Securities
Where securities are listed on the application of any person in any recognised
stock exchange, such person shall comply with the conditions of the listing agreement
with that stock exchange (Section 21). Where recognised stock exchange acting in
pursuance of any power given to it by its bye-laws, refuses to list the securities of any

42

company, the company shall be entitled to be furnished with reasons for such. Refusal
and the company may appeal to Securities Appellate Tribunal (SAT) against such
refusal.

Securities Contracts (Regulation) Rules, 1957


The Central Government has made Securities Contracts (Regulation) Rules,
1957, as required by sub-section (3) of the Section 30 of the Securities Contracts
(Regulation) Act, 1956 for carrying out the purposes of that Act. The powers under the
SC(R)R, 1957 are exercisable by SEBI.

Contracts between members of recognized stock exchange:


All contracts between the members of a recognized stock exchange shall be
confirmed in writing and shall be enforced in accordance with the rules and byelaws of
the stock exchange of which they are members (Rule 9). Books of account and other
documents to be maintained and preserved by every member of a recognized stock
exchange:
(i) Every member of a recognized stock exchange shall maintain and b
Preserve the following books of account and documents for a period
of five years:
(a) Register of transactions (Sauda book).
(b) Clients' ledger.
(c) General ledger.
(d) Journals.
(e) Cash book.
(f) Bank pass-book.
(g) Documents register showing full particulars of shares and securities
received and delivered.
(2) Every member of a recognised stock exchange shall maintain and
preserve the following documents for a period of two years:
(a) Members' contract books showing details of all contracts entered into
by him with other members of the same exchange or counter-foils or

43

duplicates of memos of confirmation issued to such other members.


(b) Counter-foils or duplicates of contract notes issued to clients.
(c) Written consent of clients in respect of contracts entered into as
principals.
(Rule 15)

Securities and Exchange Board of India Act, 1992


Major part of the liberalisation process was the repeal of the Capital Issues
(Control) Act, 1947, in May 1992. With this, Governments control over issues of capital,
pricing of the issues, fixing of premia and rates of interest on debentures etc. ceased,
and the office which administered the Act was abolished: the market was allowed to
allocate resources to competing uses. However, to ensure effective
Regulation of the market, SEBI Act, 1992 was enacted to establish SEBI with statutory
powers for:
(a) Protecting the interests of investors in securities,
(b) Promoting the development of the securities market, and
(c) Regulating the securities market.
Its regulatory jurisdiction extends over companies listed on Stock Exchanges
and companies intending to get their securities listed on any recognized stock exchange
in the issuance of securities and transfer of securities, in addition to all intermediaries
and persons associated with securities market. SEBI can specify the matters to be
disclosed and the standards of disclosure required for the protection of investors in
respect of issues; can issue directions to all intermediaries and other persons
associated with the securities market in the interest of investors or of orderly
development of the securities market; and can conduct enquiries, audits and inspection
of all concerned and adjudicate offences under the Act. In short, it has been given
necessary autonomy and authority to regulate and develop an orderly securities market.
All the intermediaries and persons associated with securities market, viz., brokers and
sub-brokers, underwriters, merchant bankers, bankers to the issue, share transfer
agents and registrars to the issue, depositories, depository participants, portfolio

44

managers, debentures trustees, foreign institutional investors, custodians, venture


capital funds, mutual funds, collective investments schemes, credit rating agencies, etc.,
shall be registered with SEBI and shall be governed by the SEBI Regulations pertaining
to respective market intermediary.

Constitution of SEBI
The Central Government has constituted a Board by the name of SEBI under
Section 3 of SEBI Act. The head office of SEBI is in Mumbai. SEBI may establish offices
at other places in India.
SEBI consists of the following members, namely:(a) A Chairman;
(b) Two members from amongst the officials of the Ministries of the
Central Government dealing with Finance and administration of
Companies Act, 1956;
(c) One member from amongst the officials of the Reserve Bank of
India;
(d) Five other members of whom at least three shall be whole time
members to be appointed by the Central Government.
The general superintendence, direction and management of the affairs of SEBI vests in
a Board of Members, which exercises all powers and do all acts and things which may
be exercised or done by SEBI. The Chairman and the other members are from amongst
the persons of ability, integrity and standing who have shown capacity in dealing with
problems relating to securities market or have special knowledge or experience of law,
finance, economics, accountancy, administration or in any other discipline which, in the
opinion of the Central Government, shall be useful to SEBI.

Functions of SEBI
SEBI has been obligated to protect the interests of the investors in securities
and to promote and development of, and to regulate the securities market by such
measures as it thinks fit. The measures referred to therein may provide for:-

45

(a) Regulating the business in stock exchanges and any other securities
markets;
(b) Registering and regulating the working of stock brokers, sub-brokers,
share transfer agents, bankers to an issue, trustees of trust deeds,
registrars to an issue, merchant bankers, underwriters, portfolio
managers, investment advisers and such other intermediaries who
may be associated with securities markets in any manner;
(c) Registering and regulating the working of the depositories,
participants, custodians of securities, foreign institutional investors,
credit rating agencies and such other intermediaries as SEBI may, by
notification, specify in this behalf;
(d) Registering and regulating the working of venture capital funds and
collective investment schemes including mutual funds;
(e) Promoting and regulating self-regulatory organisations;
(f) Prohibiting fraudulent and unfair trade practices relating to securities
markets;
(g) Promoting investors' education and training of intermediaries of
securities markets;
(h) Prohibiting insider trading in securities;
(i) Regulating substantial acquisition of shares and take-over of
companies;
(j) Calling for information from, undertaking inspection, conducting
inquiries and audits of the stock exchanges, mutual funds, other
persons associated with the securities market, intermediaries and selfregulatory organisations in the securities market;
(k) Calling for information and record from any bank or any other
authority or board or corporation established or constituted by or
under any Central, State or Provincial Act in respect of any
transaction in securities which is under investigation or inquiry by
the Board;
(l) Performing such functions and exercising according to Securities
46

Contracts (Regulation) Act, 1956, as may be delegated to it by the


Central Government;
(m) Levying fees or other charges for carrying out the purpose of this
section;
(n) Conducting research for the above purposes;
(o) Calling from or furnishing to any such agencies, as may be specified
by SEBI, such information as may be considered necessary by it for
the efficient discharge of its functions;
(p) Performing such other functions as may be prescribed.
SEBI may, for the protection of investors, (a) specify, by regulations, (i) the matters
relating to issue of capital, transfer of securities and other matters incidental thereto;
and (ii) the manner in which such matters, shall be disclosed by the companies and (b)
by general or special orders, (i) prohibit any company from issuing of prospectus, any
offer document, or advertisement soliciting money from the public for the issue of
securities, (ii) specify the conditions subject to which the prospectus, such offer
document or advertisement, if not prohibited may be issued.
(Section 11A).
SEBI may issue directions to any person or class of persons referred to in section 12, or
associated with the securities market or to any company in respect of matters specified
in section 11A. if it is in the interest of investors, or orderly development of securities
market to prevent the affairs of any intermediary or other persons referred to in section
12 being conducted in a manner detrimental to the interests of investors or securities
market to secure the proper management of any such intermediary or person (Section
11B).

Registration of Intermediaries
The intermediaries and persons associated with securities market shall buy,
sell or deal in securities after obtaining a certificate of registration from SEBI, as
required by Section 12:
1) Stock-broker,

47

2) Sub- broker,
3) Share transfer agent,
4) Banker to an issue,
5) Trustee of trust deed,
6) Registrar to an issue,
7) Merchant banker,
8) Underwriter,
9) Portfolio manager,
10) Investment adviser
11) Depository,
12) Depository Participant
13) Custodian of securities,
14) Foreign institutional investor,
15) Credit rating agency or
16) Collective investment schemes,
17) Venture capital funds,
18) Mutual fund, and
19) Any other intermediary associated with the securities market
152

SEBI (Stock Brokers & Sub-Brokers) Rules, 1992


In exercise of the powers conferred by section 29 of SEBI Act, 1992, Central
Government has made SEBI (Stock-brokers and Sub-brokers) Rules, 1992. In terms of
Rule 2(e), Stock-broker means a member of a stock exchange. In terms of Rule 2(f),
Sub-broker means any person not being a member of a stock exchange who acts on
behalf of a stock-broker as an agent or otherwise for assisting the investors in buying,
selling, dealing in securities through such stock broker. A stock-broker or sub-broker
shall not buy, sell, and deal in securities, unless he holds a certificate granted by SEBI
(Rule 3).
Capital Adequacy Norms for Brokers
Each stockbroker is subject to capital adequacy requirements consisting of two

48

components:
(1) Base minimum capital, and
(2) Additional or optional capital related to volume of business.
The amount of base minimum capital varies from exchange to
exchange. The form in which the base minimum capital has to be
maintained is also stipulated by SEBI. Exchange may stipulate
higher levels of base minimum capital at their discretion.
Conditions for grant of certificate to stock-broker (Rule 4):SEBI may grant a certificate to a stock-broker subject to the following conditions
namely:
(a) He holds membership of any stock exchange,
(b) He shall abide by the rules, regulations and bye-laws of the stock
Exchange or stock exchanges of which he is a member;
(c) In case of any change in the status and constitution, the stock broker
shall obtain prior permission of SEBI to continue to buy, sell or deal
in securities in any stock exchange;
(d) He shall pay the amount of fees for registration in the manner
provided in the regulations; and
(e) He shall take adequate steps for redressal of grievances of the
investors within one month of the date of the receipt of the complaint
and keep SEBI informed about the number, nature and other
particulars of the complaints received from such investors.

Conditions of grant of certificate to sub-broker (Rule 5)


SEBI may grant a certificate to a sub-broker subject to the following
conditions, namely:
(a) He shall pay the fees in the manner provided in the regulations,
(b) He shall take adequate steps for redressal of grievances of the
investors within one month of the date of the receipt of the complaint
49

and keep SEBI informed about the number, nature and other
particulars of the complaints received,
(c) In case of any change in the status and constitution, the sub- broker
shall obtain prior permission of SEBI to continue to buy, sell or deal
in securities in any stock exchange, and
(d) He is authorised in writing by a stock-broker being a member of a
stock exchange for affiliating himself in buying, selling or dealing in
securities.

SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992


In terms of regulation 1(g), small investor' means any investor buying or
selling securities on a cash transaction for a market value not exceeding rupees fifty
thousand in aggregate on any day as shown in a contract note issued by the
stockbroker.

Registration of Stock Broker


A stock broker applies in the prescribed format for grant of a certificate through
the stock exchange or stock exchanges, as the case may be, of which he is admitted as
a member (Regulation 3). The stock exchange forwards the application form to SEBI as
early as possible as but not later than thirty days from the date of its receipt. SEBI takes
into account for considering the grant of a certificate all matters relating
to buying, selling, or dealing in securities and in particular the following, namely,
whether the stock broker:
(a) Is eligible to be admitted as a member of a stock exchange,
(b) Has the necessary infrastructure like adequate office space,
equipment and man-power to effectively discharge his activities,
(c) Has any past experience in the business of buying, selling or dealing
in securities,
(d) Is subjected to disciplinary proceedings under the rules, regulations
and byelaws of a stock exchange with respect to his business as a
stock-broker involving either himself or any of his partners, directors

50

or employees, and
(e) Is a fit and proper person.
SEBI on being satisfied that the stock-broker is eligible, grants a certificate to the
stock-broker and sends intimation to that effect to the stock exchange or stock
exchanges, as the case may be. Where an application for grant of a certificate does not
fulfill the requirements, SEBI may reject the application after giving a reasonable
opportunity of being heard.

Fees by stock brokers:Every applicant eligible for grant of a certificate shall pay such fees and in such
manner as specified in Schedule III. Provided that SEBI may on sufficient cause being
shown permit the stock-broker to pay such fees at any time before the expiry of six
months from the date for which such fees become due (Regulation 10). Where a stockbroker fails to pay the fees, SEBI may suspend the registration certificate, whereupon
the stock- broker shall cease to buy, sell or deal in securities as a stock- broker.

Appointment of Compliance Officer:Every stock broker shall appoint a compliance officer who shall be responsible
for monitoring the compliance of the Act, rules and regulations, notifications, guidelines,
instructions etc issued by SEBI or the Central Government and for redressal of
investors grievances. The compliance officer shall immediately and independently
report to SEBI any non-compliance observed by him (Regulation 18A).

Code of conduct
The stock-broker holding a certificate at all times abides by the Code of
Conduct as given hereunder:
I. General:1. Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and
fairness in the conduct of all his business.

51

2. Exercise of Due Skill and Care: A stock-broker, shall act with due skill, care and
diligence in the conduct of all his business.
3. Manipulation: A stock-broker shall not indulge in manipulative, fraudulent or
deceptive transactions or schemes or spread rumors with a view to distorting market
equilibrium or making personal gains.
4. Malpractices: A stock-broker shall not create false market either singly or in concert
with others or indulge in any act detrimental to the investors' interest or which leads to
interference with the fair and smooth functioning of the market. A stock-broker shall not
involve himself in excessive speculative business in the market beyond reasonable
levels not commensurate with his financial soundness.
5. Compliance with Statutory Requirements: A stock-broker shall abide by all the
provisions of the Act and the rules, regulations issued by the Government, SEBI and the
stock exchange from time to time as may be applicable to him.
II. Duty to the investor
1. Execution of Orders: A stock-broker, in his dealings with the clients and the general
investing public, shall faithfully execute the orders for buying and selling of securities at
the best available market price and not refuse to deal with a small investor merely on
the ground of the volume of business involved. A stock-broker shall promptly inform his
client about the execution or nonexecution of an order, and make prompt payment in
respect of securities sold and arrange for prompt delivery of securities purchased by
clients.
2. Issue of Contract Note: A stock-broker shall issue without delay to his client a contract
note for all transactions in the form specified by the stock exchange.
3. Breach of Trust: A stock-broker shall not disclose or discuss with any other person or
make improper use of the details of personal investments and other information of a
confidential nature of the client which he comes to know in his business relationship.
4. Business and Commission:
(a) A stock-broker shall not encourage sales or purchases of securities
with the sole object of generating brokerage or commission.
52

(b) A stock-b roker shall not furnish false or misleading quotations or


give any other false or misleading advice or information to the
clients with a view of inducing him to do business in particular
securities and enabling himself to earn brokerage or commission
thereby.
5. Business of Defaulting Clients: A stock-broker shall not deal or transact business
knowingly, directly or indirectly or execute an order for a client who has failed to carry
out his commitments in relation to securities with another stockbroker.
6. Fairness to Clients: A stock-broker, when dealing with a client, shall disclose whether
he is acting as a principal or as an agent and shall ensure at the same time that no
conflict of interest arises between him and the client. In the event of a conflict of interest,
he shall inform the client accordingly and shall not seek to gain a direct or indirect
personal advantage from the situation and shall not consider clients' interest inferior to
his own.
7. Investment Advice: A stock-broker shall not make a recommendation to any client
who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The stockbroker should seek such information from clients, wherever he feels it is appropriate to
do so.
8. Investment Advice in publicly accessible media:
(a) A stock broker or any of his employees shall not render, directly or
indirectly, any investment advice about any security in the publicly
accessible media, whether real - time or non real-time, unless a
disclosure of his interest including the interest of his dependent
family members and the employer including their long or short
position in the said security has been made, while rendering such
53

advice.
(b) In case, an employee of the stock broker is rendering such advice, he
shall also disclose the interest of his dependent family members and
the employer including their long or short position in the said
security, while rendering such advice.
9. Competence of Stock Broker: A stock-broker should have adequately
trained staff and arrangements to render fair, prompt and competent
services to his clients.
III. Stock-brokers vis-a-vis other stock-brokers
1. Conduct of Dealings: A stock-broker shall co-operate with the other
contracting party in comparing unmatched transactions. A stockbroker shall not knowingly and willfully deliver documents which
constitute bad delivery and shall co-operate with other contracting
parties for prompt replacement of documents which are declared as
bad delivery.
2. Protection of Clients Interests: A stock-broker shall extend fullest cooperation to other stock-brokers in protecting the interests of his
clients regarding their rights to dividends, bonus shares, right shares
and any other rights related to such securities.
3. Transactions with Stock-Brokers: A stock-broker shall carry out his
transactions with other stock-brokers and shall comply with his
obligations in completing the settlement of transactions with them.
4. Advertisement and Publicity: A stock-broker shall not advertise his
business publicly unless permitted by the stock exchange.
5. Inducement of Clients: A stock-broker shall not resort to unfair means
of inducing clients from other stock- brokers.
6. False or Misleading Returns: A stock-broker shall not neglect or fail
or refuse to submit the required returns and not make any false or
misleading statement on any returns required to be submitted to the
Board and the stock exchange.
54

Registration of Sub-Broker
An application by a sub-broker for the grant of a certificate is made in the
prescribed format accompanied by a recommendation letter from a stock-broker of a
recognised stock exchange with whom he is to be affiliated along with two references
including one from his banker (Regulation 11). The application form is submitted to the
stock exchange of which the stock- broker with whom he is to be affiliated is a member.
The eligibility criteria for registration as a sub-broker are as follows:
(i) In the case of an individual:
(a) The applicant is not less than 21 years of age,
(b) The applicant has not been convicted of any offence involving
fraud or dishonesty,
(c) The applicant has atleast passed 12th standard equivalent
examination from an institution recognised by the Government,
and
(d) The applicant is a fit and proper person.
Provided that SEBI may relax the educational qualifications on
merits having regard to the applicant's experience.
(ii) In the case of partnership firm or a body corporate the partners or
directors, as the case may be, shall comply with the following
requirements:
(a) The applicant is not less than 21 years of age,
(b) The applicant has not been convicted of any offence involving fraud
or dishonesty, and
(c) The applicant has atleast passed 12th standard equivalent
examination from an institution recognised by the Government.

55

The stock exchange on receipt of an application, verifies the information contained


therein and certifies that the applicant is eligible for registration. The stock exchange
forwards the application form of such applicants who comply with all the requirements
specified in the Regulations to SEBI as early as possible, but not later than thirty days
from the date of its receipt. SEBI on being satisfied that the sub-broker is eligible, grants
a certificate to the sub-broker and sends intimation to that effect to the stock exchange
or stock exchanges as the case may be. SEBI grants a certificate of registration to the
appellant subject to the terms and conditions as stated in rule 5. Where an application
does not fulfill the requirements, SEBI may reject the application after giving a
reasonable opportunity of being heard. The sub-broker shall (a) pay the fees as specified in Schedule III,
(b) Abide by the Code of Conduct specified in Schedule II, and
(c) Enter into an agreement with the stock-broker for specifying the
scope of his authority and responsibilities. Schedule I of these
Regulations.

Data Analysis of Contents and Project


PRODUCT
AND FEATURES
ARCADIA is the most comprehensive website, which allows you to invest in Shares,
Mutual Fund, Derivatives (Future & Options) and other financial product.

56

TRADING IN SHARES:ARCADIA allows you various options while trading in shares.


Cash trading:This is a delivery based trading system, which is generally done with the
intention of talking delivery of shares or money.
Margin Trading (Intra-day Trading):Margin trading at ARCADIA direct refers to Intra day trading. You can also do an intrasettlement trading up to 5 times your available funds. ARCADIA also helps you to
square off the position, in case the same is kept open till the end of settlement timing.
Margin PLUS:Margin PLUS is a unique offering of ARCADIA. This is ideal for customers who
require very high leverage to do intra day trading. Margin PLUS offers you a leverage of
up to 20 times of yours available fund.
BTST (Buy Today Sell Tomorrow):If you have bought the shares in delivery and before the same have gone to
your Demat account, you can still sell the same through ARCADIA. BTST allows you to
sell the shares on T+1 and T+2 days (T= Trading Day).
Spot Trading:-

57

This facility can be used only for selling your demat stocks which are already
existing in your demat account. When you are looking at an immediate liquidity option,
'Cash on Spot' may work the best for you, on selling shares through 'Cash on Spot',
money is credited to your bank account on the same day after 4:00 PM.

TRADING IN DERIVATIVES:FUTURE
Through ARCADIA, you can now trade now trade in index and stock futures on
the NSE. In futures trading, you take buy/ sell position in index or stock(s) contracts
having a longer contract period of up to 3 months.
If during the course of the contract life, the price moves in your favor (i.e. rise in
case you have a buy position or falls in case you have sell position), you make a profit.
Calculate Index and know your Margin is tools to help you in calculating your
margin requirement and also the index & stock price movements. The ARCADIA direct
University on the home page is a comprehensive guide on futures and trading.
OPTION
An option is a contract, which gives the buyer the rights to buy or sell shares at
a specific price, on or before a specific date. For this, the buyer has to pay to the seller
some money, which is called premium. There is no obligation on the buyer to complete
the transaction if the price is not favorable to him.
The Buyer of a Call Option has the Right but not the Obligation to Purchase the
Underlying Asset at the specified strike price by paying a premium whereas the Seller of
the Call has the obligation of selling the selling the Underlying Asset at the specified
Strike price.
58

The Buyer of a Put Option has the Right but not the Obligation to sell the
Underlying Asset at the specified strike price by paying a premium whereas the Seller of
the put has the obligation of buying the Underlying Asset at the specified Strike price. By
paying lesser amount of premium, you can create positions under OPTIONS and take
advantage of more trading opportunities.
Mutual Fund
ARCADIA brings you the same convenience while investing in Mutual Fund.
You can invest in mutual fund without the hassles of filling application forms or any other
paperwork. You need no signatures or proof of identity for investing.
Your bank account are automatically debited or credited while
simultaneously crediting or debiting your unit holding. You can invest in top 20
Mutual Funds.
ARCADIA offers you various options while investing in Mutual Funds:
Purchase:You may invest/purchase Prudential ARCADIA MF, JM MF, Alliance MF,
Franklin Templeton MF, Sundaram MF, Birla Sun Life MF, HDFC MF, Principal MF, UTI
MF, Standard Chartered MF, Reliance MF, Kotak MF, Tata MF,DSP merrill lynch MF,ING
Vysya MF, CHOLA-MANDALAM MF, Deutsche MF, HSBC MF and Fidelity MF without
the

hassles

of

filling

application

forms.

Redemption:In addition to giving hassle-free paperless redemption, ARCADIA offers faster


liquidity. You can redeem the mutual fund units through ARCADIA. The money will be
credited to your bank account automatically 3 days after the order placement date.

59

Switch:To suit your changing needs you may wish to shift monies between different schemes.
You can switch your monies online from one scheme to another in the same fund family
without any hassles.
Systematic Investment plans (SIP):SIP allows you to invest a certain sum of money over a period of time
periodically. Just fill in the investment amount, the period of investment and the
frequency of investing and submit. ARCADIA will do the rest for you automatically
investing periodically for you.
Systematic withdrawal plan:This allows you to withdraw a certain sum of money over a period of time
periodically.
Transfer-in:You can convert your existing Mutual funds into electronic mode through a
transfer-in request.

IPO'S & Bonds:You could also invest in Initial Public Offers (IPO's) and Bonds online without
going through the hassles of filling ANY application form/ paperwork.
Get in-depth analyses of new IPO's issues (Initial Public Offerings), which are
about to hit the market and analysis on these. IPO calendar, recent IPO listings,
prospectus/offer documents, and IPO analysis are few of the features, which help you,
keep on top of the IPO markets.

60

POSTAL SAVING:We can also invest in NSC (National Savings Certificate) and KVP (Kisaan Vikas
Patra) through online with the help of ARCADIA. It offers a very simple way to invest in
postal savings without paper work, investment depend on yours click.
INSURANCE:ARCADIA Prudential Life-Insurance and ARCADIA Lombard General Insurance
are also on ARCADIA. We can get facilitates to buy the insurance policies online and
make us secure and we can also get tax benefits also.
CONTENT- FEATURES:There are a host of features on ARCADIA that shall help you make informed
investment decisions. It provides you with the indices of major world markets, nifty
futures and ADR prices of Indian scripts. Get daily share prices of all scripts, monthly
and yearly high/lows etc through Market Watch. Get breaking news from CNBC and
Reuters. Catch a glimpse of News Headlines through scrolling Direct News Headlines.
Get a snapshot of the latest developments in the markets through the day
using Market Commentary. You can get weekly snapshots also. Use Pick of the week,
which focuses on fundamental stocks with sound prospects. Catch interviews, reactions
and comments from industry leaders with CEO Call. Track the movement of leading
scripts within a sector across 12 sectors using Market@Desktop. Equip yourself with
our barometers. Market Barometer gives you in-depth information of the weightings of
shares on Nifty and Sensex. Get a glimpse of the performance of various industry
sectors through Industry Barometer. Direct Technical Charts offer interactive charting
with advanced indicators. Gets a bird's eye view of over 5000 companies at a single
click using Company Snapshot? Glance through analyst recommendations using Multex
Global Estimates.In case, you are not too comfortable with share trading, try our
Learning Center, which is a tutorial on investments and My Research that helps you to
research a stock better.

61

COUSTOMER SERVICE FEATURES:With 'ARCADIAdirect Customer Tools & Updates' you can trouble shoot all your
problems online.
Address your trading queries on-line through "Easy Mail". You can view and
change your profile or password on-line through General Profile option.

Get details of ARCADIA Centers, our sales and service offices, across India
through branch locator.

View your Account Statement and Bill Summary of your transactions online using
bills & accounts.
View your Digital Contract Notes instantly. View various charges through the Fee
Schedule option.
Give your feedback or viewpoint through the Viewpoint online.

Brokerage Charges
What are the charges for your product?

ARCADIA account can be opened for a one-time non-refundable fee of Rs 410/-.

The brokerage rates are very reasonable. The rates vary according to the volume of
trades done by you.

62

The brokerage rates of ARCADIA SHARES are inclusive of demat transaction


charges, service taxes and courier charges for contract notes.
It ranges from 0.1% to 0.15% for margin trades, 0.2% to 0.425% for squared off trades
and 0.4% to 0.85% on delivery based trades.
To give an idea, an investor having a daily average trading volume of Rs 65000/will be paying an effective brokerage of 0.50% only, and that too inclusive of all
charges.

Demat account charges: For all trades done through ARCADIA, there are NO

separate charges. However, for all other trades and services like demat, pledge etc, the
charges shall be as per the existing rate card of ARCADIA demat. An annual
maintenance fee of Rs.300/- (Rs.250/- for customers receiving statement by e-mail) per
account is charged. However, the first year annual maintenance charges are waived for
on all accounts opened through ARCADIA.

For bank account, a minimum quarterly average balance of Rs 5000/- needs to be


maintained.

Why should you open an account with ARCADIA? You may be wondering about
why we charge you 0.85%, while your broker may claim only say 0.5%.
Firstly, the brokerage rates of ARCADIA are inclusive of dematting transaction charges,
service taxes and courier charges for contract notes.
Secondly, brokerage rates on ARCADIA are dependent on the volume of transactions
done and also the type of trade put in by you. As mentioned earlier, investors with
reasonable trading volumes anyways get less than 0.5% brokerages (all inclusive).
Even if we assume very low volumes of trading and that too only on Delivery based
trading, our brokerage rates are still economical. Let us take an example
ARCADIA
direct
63

Other broker

0.85% max

Normal brokerage
A

Transaction value

Brokerage (Rs.)

Service Tax (5% of B)

Other charges (0.03% of A)

Demat charges

Total charges (Rs.) B+C+D+E

Lets say
0.50%

10000

10000

85.00

50.00

NIL

2.50

NIL

3.00

NIL

25.00

85.00

80.50

How much do you pay for averages demat transaction?

ARCADIA Demat has a Market Buy rate of 0.03% or Rs 25/-, whichever is higher,
for EVERY trade. If you calculate, an investor has to buy at least up to Rs
83333/- worth of shares to pay 0.03% in EVERY Trade. Obviously not many
people pay 0.03%. They pay Rs 25/- instead.

Suppose an average person trades in Rs10000/- in every trade, he shall pay Rs


25/- for demat charges. This comes to 0. 25% of his trade amount.

So he pays at least 0.75% and not 0.50%. Add other charges to this and it will go
up to at least 0.80%. On top of it, one may incur the local conveyance directly or
indirectly in collecting/sending cheques/TIFDs with the broker concerned. More
importantly, one has to find time and person to chase the broker.

Add to this, ARCADIA direct credits the funds to your bank account on the payout
day itself (one can even withdraw it on the same day).

To summarize, ARCADIA ensures a hassle free, fast, transparent, easy and


trustworthy service at reasonable rates. More it also gives you latest market
64

updates, live quotes and market charts to help you GET CONTROL of your own
trade.

DEMAT V/S PHYSICAL


DEMAT VERSUS PHYSICAL
A comparison of investment in securities in physical and depository modes-

65

IN DEMAT FORM

IN PHYSICAL FORM

This function can be clubbed with other

Exclusive manpower to be

functions. No Exclusive manpower is

allocated

required
Pledging in safe and easy

Pledging of shares is

Periodic statement of holding is made

cumbersome
Laborious inventory verification during

available by the DP's Easy verification

internal stock talking and audits.

of audits.
No risk of theft/Forgery
No insurance required
Inconvenience in portfolio shuffling and

Risk or theft/ Forgery


Insurance is required
Convenient portfolio shuffling and

transactions within the group since

adjustments within the group since

buy/sell adjustments need movement

delivery is through a single instrument,

of paper

registration, instantaneous and cost

Faster and hassle free receipt of

less
Receipt of corporate benefits need

corporate benefits

monitoring and risk of loss in transit not


ruled out
Space required for storage and safety

No space required
WHAT IS MUTUAL FUND?

Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in
offer document. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual
funds are known as unit holders.

66

The investors in proportion to their investments share the profits or losses. The
mutual funds normally come out with a number of schemes with different investment
objectives, which are launched from time to time. A mutual fund required to be
registered with Securities and Exchange Board of India (SEBI), which regulates
securities markets before it can collect funds from the public. There are different types
of schemes according to the customer's requirement.
Types of Schemes
By Structure
Open Ended Schemes
Close Ended Schemes
By Investment Objectives
Growth Schemes
Income Schemes
Balance Schemes
Money Market Schemes
Other Schemes
Tax Saving Schemes

INTRODUCTION OF LIFE INSURANCE

INSURANCE:-

67

Insurance legal contract that protects people from the financial costs that
result from loss of life, loss of health, lawsuits, or property damage. Insurance provides
a means for individuals and societies to cope with some of the risks faced in everyday
life. People purchase contracts of insurance, called policies, from a variety of insurance
organizations.

LIFE INSURANCE:Life insurance provides compensation to specified individuals or groups such


as to family members or charities when the policyholder dies. Some policies also
provide funds for people to use during periods of their life when they will no longer be
able to earn income through work, such as in the final stages of a terminal illness. Life
insurance allows people to use some of their earnings to assure that money will be
available in the case of death. Individuals can purchase life insurance coverage
individually from insurance companies. There is also different type of policies according
to customers need and requirement.

RESEARCH METHODOLOGY
Title of the project

68

Compassion of trading in online with offline


(Mutual Fund and Life Insurance)

1. SCOPE OF THE REPORT


1.1 FOR THE ORGANITATION

This project is helpful for the organization to come to know the current market
position of awareness about the product.

This project is also helpful to know about the other service provider.

Market for invests in Mutual Fund and Life Insurance.

1.2 FOR THE RESEARCHE

The researcher not only fulfilled his requirement of MBA degree programmed, but
also learned a lot in field of market research.

Lastly it provides a good scope for developing necessary managerial skills and
positive attitude.

It provides a platform to show our talent and gives us direct exposure.

1.3 FOR THIRD PARTY

This study can be important secondary sources for all those who may have
professional or academic in this topic.

OBJECTIVES OF THE STUDY

69

Study of awareness among prospects those having a/c in ARCADIA or not


having any demat a/c.

To create awareness among market about ARCADIA.

Difference between facilities that are provided by others and us.

Benefits for costumers like tax saving return potential.

Customer satisfaction factor.

Mapping up of potential customers for ARCADIA.

70

Limitations of the study

Through every care has been taken to make this report as authentic as possible, yet
there has been some negative factors which might have had their influence on the
report. This study is also not an exception to this limited experience of the in the field of
research may have let to some errors.

Lake of experience of knowledge.

The survey was costly and tedious.

In view of limited recourses in term of money and time it has not been possible to
enlarge the scope.

Some of the respondents did not have serious attitude towards the interview and
the questionnaire and hence their responses may not reflect the real picture.

In view of limited resources in terms of money & time it has not been possible to
enlarge the scope.

Methodology

71

Data collection
Data was collected through primary as well as secondary sources of data.

Primary Sources
Collected data through direct interaction with the prospect.
Secondary Sources
The information collected from Internet, Magazines and through interaction with
company's employees.

Tools of the data collection


The major chunk of information was collected with the help of schedule. The
major emphasis in this was given in collecting the information regarding the various
service providers. An extensive survey was conducted for collecting the above
information.
Sample size and sample unit
Sample size of the study is 100. 50 of them are account holder in ARCADIA and
50 of them those persons who have not any demat account. I collect all information
through personal interaction with prospects with the help of questionnaire.

ANALYSIS
AND INTERPRETATION
72

ANALYSIS AND INTERPREATATION:-

There are different account holders with different age group. Some of them
are more than one year with their account in ARCADIA. And some of them are different
time with their account.Through the III rd question it has been concluded that all of the
account holder are invest in Mutual Fund & life insurance. But investors are deferent
according their age and according their needs. Most of them investor are belongs to age
group 50 and above. There is reason behind them; they want Security of their hardly
earned money. The second large investors are age group of 40-50. This age groups
investors needs are different from other group. They want tax benefits and growth with
securities.
There are different views of different customers to invest in M.F & life
insurance. Some of them say that services if ARCADIA is Faster, some says Securities,
some says there is no need to fill any form, but most of them says that Brand name.
They say that they need all these facilities and they got all these facilities with
ARCADIA.
The second part of study is that those people who have not any demat account
and they may be future customer of ARCADIA. The sample size is also 50 here. More
than 75% of them invest in M.F.& Life insurance. There are also different reasons to
invest in these items through offline. The main reason is unawareness of Internet (88%),
the other reason unknown about ARCADIA. but percentage for that is very low. There is
also some percentage of other reason.

1. Since how long you have an account in ARCADIA?


73

From last 4 Months

From last 6 Months

20

From last 8 Months

15

From more than 1 year

20
15
10
CUSTOMER
5
0

From 4
months

From 6
months

From 8 More than


months
1 year
Illustration 1.1

2. Regarding investment in Mutual Funds and Life Insurance through ARCADIA.

74

AGE

INVESTOR

20-30

30-40

40-50

17

50-above

20

20
15
10

INVESTOR

5
0

20-30

30-40

40-50

50-above

Illustration 1.2

Interpretation:
Table 2 show that as the age is going up investment in M.F. & life insurance is going
high. There are different reasons to investment.

3. Why are you investing in Mutual Funds and Life Insurance through ARCADIA?

75

SERVICES
Faster
Security
Less document
Brand name

OUT OF FIFTY
21
15
9
5

PERCENTAGE
42%
30%
18%
10%

25
20
15
10

Customer

5
0
Faster

Security

Less
Document

Brand
name

Illustration 1.3
Interpretation:
There are different views of different customers to invest in M.F & life insurance. Most of
them say that services if ARCADIA is Faster, some says Securities, some says there is
no need to fill any form, but most of them says that Brand name.

4. In which area you invest through ARCADIA?

Mutual Fund

48

76

Lice insurance

50
40
30
Customer

20
10
0

Mutual Fund

Life insurance

Illustration 1.4

Interpretation:
There is a big gap between investors in M.F. & L.I. Most of them customers are
investing in M.F. rather than life insurance. There is only one reason that is commotion

5. Are you satisfied with the services ARCADIA?

77

Satisfied

31

Neutral

11

Dissatisfied

Can't say

35
30
25
20
Customer

15
10
5
0
Satisfied

Neutral

Dissatisfied

Can't say

Illustration 1.5

6. Are you investing in Mutual Fund & life insurance through


offline?

78

Yes

37

No

13

40
35
30
25
20
15
10
5
0

Customer

Yes

No

Illustration 2.1

7. Why are you investing in Mutual Fund & life insurance


Through off line?

79

Unaware of using Net

43

Unaware if ARCADIA

Other Reasons

45
40
35
30
25
20
15
10
5
0

Custome

Unaware of
using Net

Unawere Of
OtherReasons
ICICIdirect.com

Illustration 2.2
Interpretation:
There are also different reasons to invest in these items through offline. The main
reason is unawareness of Internet (88%), the other reason unknown about ARCADIA.
but percentage for that is very low. There is also some percentage of other reason.

FACT & FINDINGS

80

Based on the market survey, we got the view about the customer who having
account with ARCADIA and those prospects who has not having any demat account.
These prospects may be customer in future.
Those customers who has account in ARCADIA. They are satisfied with the
services. And those are also investing in M.F & Life insurance.
Most of Investors in these items are belongs to 40 and above. There is also
different view about investing in those items. 42% of them say that services are
faster, 30% says that securities, 9% says no documentation and 10%says brand
name.
Satisfaction factor is high of customers, but they also having some problems,
they say that the brokerage at low volume of trading is high. They also required
training section for the trading.
The other part of the study shows that, about 75% of are investing in M.F & life
insurance through offline. There are different view regarding this, 86% of them
are not PC and they also dont know about Net. 4% of them they dont know
about ARCADIA. Age group (50-above) comes in this 4% comes mostly.

SWOT ANALYSIS
81

STRENGTHS: Linking of three accounts i.e. saving, trading, demat.


Trading on the exchange NSE & BSE, F&O and NCDEX.
Trader can also invest in Insurance & RBI Bonds.
We can also trade through CallNTrade.
WEAKNESS:

Brokerage for the low volume trade is high.

Do not have access on regional Exchange.

CallNTrade's call charges are very high.

OPPORTUNITIES: Already exist good market access through different product of


ARCADIA SHARE & STOCK BROKERS PVT Ltd.
Working with a Demat a/c not with a pool account like others.
We can invest in shares through unique feature like margin, margin plus etc.

THREATS:-

82

Saving account with ARCADIA is mandatory and client has to maintain Rs.
5000/- quarterly balance.
Highier amount for opening demat account with ARCADIA.
High brokerage as compare to other online players.

83

CONCLUSION
ARCADIA offers a unique combination of saving, trading and demat account.
Satisfaction factor of the customer is high. Mostly account holders investing in Shares
with many options, IPO, M.F., Bonds and Postal savings.
Most of the customers of ARCADIA are from last 6 months. So that is the
reason not much friendly with site of ARCADIA. Thats why, customer trade through
cyber cafe or with the help of others. Because mostly of them dont have PC or
knowledge of net. Many other players in market allow to customer "come and trade
here". And they also arrange training section for their customers.
Between Mutual Fund & life insurance, many of them invest in M.F. not in
insurance. They are satisfied with the facilities for M.F. but they dont satisfied with
insurance. There is a big gap between investors in M.F. & L.I. The only one reason that
is commission.
In offline, more than 60% of investors invest in mutual fund & L.I. Approximate
86% persons dont know how to operate the Net. And 8% of them, they dont know
about ARCADIA. In this 8% only those persons are comes whose age is 50 or above in
Alwar City. So advertise should be consider with this age group.
ARCADIA can easily influence sophisticated customer e.g. Businessman, Doctors, Army
persons, Judge, Engineers, who dont like to trade through brokers.

ANNEXURE
84

COMPARSION OF ONLINE VS OFFLINE IN


MUTUAL FUND & LIFE INSURANCE
NAME ..................................................................
OCCUPTION.....................................................................................
AGE

a) 20-30

b) 30-40

c) 40-50

d) 50-60

______________________________________________________

1) Which company's Demat service are you using?


a) ARCADIA

b) NO

if (b) than go with (8)


2) Since how long you have account in ARCADIA ?
a) from 4 months

b) from 6 months

c) from 8 months

d) more than one year

3) In which area you invest through ARCADIA?


a) Mutual fund

b) Life insurance

4) What are the reasons to invest in M.F. & Life Insurance?


a) Security

b) Tax benefits
85

c) Growth

d) Others

5) On which base you invest in Mutual Funds and Life Insurance through
ARCADIA? Please rank these according your choice.
a) Faster Service

b) No Documentation

c) Security

d) Brand name

6) Are you satisfy with the services of ARCADIA?


a) Satisfied

b) Neutral

c) Dissatisfy

c) Can't say

7) Any other facilities you want from ARCADIA?


a) Yes

b) No

if (a) than what type of


1.
2.
3.
8) Are you investing in Mutual Fund & life insurance?
a) Yes

b) No

9) Why are you investing in Mutual Fund & life insurance through off line?
a) Unaware of ARCADIA

b) Unaware of using Net

c) Other reasons
10) Any suggestions from yours side?

BIBLIOGRAPHY

86

http\eb trade\Company Profile Reuters_com.htm


web trade\ARCADIA Online demat.htm
ARCADIA direct com -Advantages.htm
ARCADIAdirect_com - Brokerage Charges.htm
ARCADIAdirect_com - Products and Services.htm
ARCADIAdirect_com - Why Online Share Trading.htm
Indian Banking Industry - Research and Markets - Market Research Reports.htm
http://www.arcadiastock.com
Booklet of ARCADIA( SHARE ANALYSIS)
Mutual Funds India Primer.htm
Mutual Funds India Tax benefits.htm
WWW.google. com

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