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Project Report ON Online Stock Trading in India: Submitted To Punjabi University, Patiala
Project Report ON Online Stock Trading in India: Submitted To Punjabi University, Patiala
ON
ONLINE STOCK TRADING IN INDIA
Session 2015-2016
SUBMITTED TO
SUBMITTED BY
Anshul Jain
Asst. Professor
TABLE OF CONTENTS
S.NO.
CONTENT
PAGE NO.
Declaration
Acknowledgement
Executive Summary
1.
6-
Company Profile
34-
33
2.
43
3.
Review of Literature
4.
Research Methodology
44-47
48-
51
Research Design
Scope of the Study
Objectives of the study
Sampling Design and Sample Size
Method of Data Collection
Tools of Analysis
Limitations of the study
5.
52-
72
6.
Findings
73
7.
Suggestions
75
8.
Conclusion
77
Bibliography
2
Annexure
DECLARATION
I hereby declare that the project report was submitted by me under the supervision and
guidance of Dr. Neeraj Goyal, Asst. Professor, Multani Mal Modi College, Patiala in partial
fulfillment of B.B.A. 6 th Semester. I further declare that I am solely responsible for omission
and commission of errors if any.
Anshul Jain
Univ. Roll No. 21008
B.B.A. 6th Semester
ACKNOWLEDGEMENT
The joy of ingenuity!!! This is doubtlessly what this project is about.
Before getting to brass tacks of things. I would like to add a heartfelt word for the people who
have helped me in bringing out the creativeness of this project.
To commence with things I would like to take this opportunity to gratefully and humbly thank
to Mr. Rajesh Jain, Vice President (Cluster Head), Kotak Securities, Patiala for being
appreciative enough by giving me an opportunity to work on project on the topic Online
Stock Trading .
My parents need special mentions here for their constant support and love in my life.
I also thank my friends and well wishers, who have provided their whole hearted support to
me in this exercise. I believe that this Endeavor has prepared me for taking up new
challenging opportunities in future.
Anshul Jain
Univ. Roll No. 21008
B.B.A. 6th Semester
EXECUTIVE SUMMARY
Constructive use of new technologies has always contributed positively towards improving
human life standards and economy of the country. Such as Online trading, in equity markets
it increased trade volume and number of investors trading in stock markets. Online trading
India is the internet based investment of the broker. There are many leading online trading
portals in India along with the online platforms of the biggest stock houses like National
stock exchanges and the Bombay stock exchange. As per the title suggest the project report
has been prepared regarding the growth and development of online trading in India. Online
trading was initiated by NSE in India and soon after the other exchanges also followed it.
Major findings indicates that out of a survey of 100 respondents it was seen that most of the
investors prefer online trading because of few major factors such as time saving convenience,
protection through Freudian brokers etc. although during my research project Ive seen that
most of the respondents feel online trading, a secure way of investing into stock market still a
few of them feel that its unsafe and a bit complicated but they posses information about
online trading.
Today the online trading companies having cut-throat competition in our offering whose
brokerage discounts lower margin money and zero balance accounts? Due to the rising
education awareness and use of internet there is a huge potential for online trading in future
and companies must come up with innovative offerings to capture the untapped market.
CHAPTER I
INTRODUCTION TO
THE TOPIC
East India Company was the dominant institution and by end of the
century, busuness in its loan securities gained full momentum
1830's:
1840's:
1850's:
1860's:
1860-61:
The American Civil War broke out which caused a stoppage of cotton
supply from United States of America; marking the beginning of the
"Share Mania" in India
1862-63:
1865:
A disastrous slump began at the end of the American Civil War (as an
example, Bank of Bombay Share which had touched Rs. 2850 could
only be sold at Rs. 87)
1875:
1880's:
1894:
1880 - 90's:
1908:
1920:
1923:
1934:
gather at a street (now well known as "Dalal Street") for the purpose of
transacting business.
"The Native Share and Stock Brokers' Association" (also known as
"The Bombay Stock Exchange") was established in Bombay
Development of cotton mills industry and set up of many others
Establishment of "The Ahmedabad Share and Stock Brokers'
Association"
Sharp increase in share prices of jute industries in 1870s was followed
by a boom in tea stocks and coal
"The Calcutta Stock Exchange Association" was formed
Madras witnessed boom and business at "The Madras Stock
Exchange" was transacted with 100 brokers.
When recession followed, number of brokers came down to 3 and the
Exchange was closed down
Establishment of the Lahore Stock Exchange
1936:
Merger of the Lahore Stock Exchange with the Punjab Stock Exchange
Re-organisation and set up of the Madras Stock Exchange Limited
1937:
1940:
1944:
1947:
10
Bombay
2.
Calcutta
3.
Madras
4.
Ahmedabad
5.
Delhi
6.
Hyderabad
7.
Bangalore
8.
Indore
Government policies during 1980's also played a vital role in the development of the Indian
Stock Markets. There was a sharp increase in number of Exchanges, listed companies as
well as their capital
3.2 Transaction
3.2.1 Types of Transactions
The flowchart below describes the types of transactions that can be carried out on the Indian
stock exchanges:
Indian stock exchange allows a member broker to perform following activities:
Act as an agent,
Buy and sell securities for his clients and charge commission for the same,
Act as a trader or dealer as a principal,
Buy and sell securities on his own account and risk.
3.2.2 Over The Counter Exchange of India (OTCEI)
Traditionally, trading in Stock Exchanges in India followed a conventional style where
people used to gather at the Exchange and bids and offers were made by open outcry.
This age-old trading mechanism in the Indian stock markets used to create much functional
inefficiency. Lack of liquidity and transparency, long settlement periods and benami
transactions are a few examples that adversely affected investors. In order to overcome these
inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is
the first screen based nationwide stock exchange in India created by Unit Trust of India,
Industrial Credit and Investment Corporation of India, Industrial Development Bank of
India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance
Corporation and its subsidiaries and CanBank Financial Services.
3.3 Trading Pattern of the Indian Stock Market
Indian Stock Exchanges allow trading of securities of only those public limited companies
that are listed on the Exchange(s). They are divided into two categories:
3.3.1 National Stock Exchange
In order to lift the Indian stock market trading system on par with the international
standards. On the basis of the recommendations of high powered Pherwani Committee, the
National Stock Exchange was incorporated in 1992 by Industrial Development Bank of
India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation
of India, all Insurance Corporations, selected commercial banks and others.
NSE provides exposure to investors in two types of markets, namely:
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1.
2.
Capital market
Wholesale Debt Market - Similar to money market operations, debt market operations
involve institutional investors and corporate bodies entering into transactions of high value
in financial instruments like treasury bills, government securities, commercial papers etc.
Trading at NSE
Fully automated screen-based trading mechanism
Strictly follows the principle of an order-driven market
Trading members are linked through a communication network
This network allows them to execute trade from their offices
The prices at which the buyer and seller are willing to transact will appear on the
screen
When the prices match the transaction will be completed
A confirmation slip will be printed at the office of the trading member
to
dissatisfaction were collected and proper recommendations were given. In next step a basic
online trading model were offered which propose to replace with current system.
Lastly, roles of each involved party were identified in proposed online system.
3.4 Online Trading
The Internet revolution has been changing the fundamentals of the society. It changes the
shape of communication and also trading process. It shifts closer and closer to vital sources
of information and new trading environment by the name of "online trading". It provides
users with means to directly interact with service- oriented computer systems tailored to
their specific needs; therefore, they can serve themselves better by making their own
decisions. There are lots of definitions for online trading. Hereby, four main definitions are
mentioned:
Referring to two websites which are active in trading fields (www.investorwords.com and
www.advfn.com) they define online trading in this manner: The increasingly popular activity
of buying and selling securities over the internet, or to a lesser extent, through a broker's
proprietary software. Likewise Fan et al. define it in this way: The 'online trading' is defined
as a process of trading financial products especially stocks over the Internet, and online stock
trading site is a web site that helps traders or customers to buy and sell the financial products
over the Internet.
Also online trading is described as service offered on the internet for purchase and sale of
shares. In the real world you place orders with your stockbroker. In online trading, you will
access a stockbroker's website through your internet-enabled PC and place orders through the
brokers internet-based trading engine. These orders are routed to the Stock Exchange
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Full-service
Discount
Online
Investors who do not have time to research investments on their own will likely rely on a
full-service broker to help them construct an investment portfolio, manage their investments,
or make recommendations regarding which investments to buy. Full-service brokers have
access to a wide range of reports and analyses from the company's large staff of financial
analysts. These analysts research companies and recommend investments to people with
different financial needs. Persons who prefer to select their own investments generally use a
discount or online broker and pay lower commission charges. Discount firms usually do not
offer advice about specific securities. Online brokerage firms make their trades over the
Internet in order to keep costs down and fees low. Discount brokerage firms usually have
branch offices, while online firms do not. Most brokerage firms now have call centers
staffed with both licensed sales agents and customer service representatives who take
orders and answer questions at all hours of the day. (www.trendtraders.com)
There are two basic ways to day trade electronically. The first is through "Conventional
Online Trading", using your Internet browser and a Web based broker. The second is by way
of "Direct Access Trading systems", using specialized software and a private network. It is
important for day traders to understand the key features of, and the differences between,
these two forms of electronic trading. Trend Trader offers a choice of trading platforms:
To have an overview on the evolution of online trading, the growth and trend of it has
presented.
15
Security issues fading: Concerns centered on security issues (encryption) and customer
service issues (upgraded server and network equipment) are fading as consumers become
accustomed to using the internet on a weekly or even daily basis for many types of
transactions.
Pricing stabilization: The online brokerage industry has seen severe price competition over
the last two years, with every competitor lowering commission rates in an attempt to gain as
16
many new accounts as possible. There is a belief that, prices have started to stabilize
and further price reductions are unlikely from the present level. While new entrants will
have to align commission rates lower to be competitive, rates of established online
brokerages will be stable over the next year.
3.4.3 Online Trading characteristics
High amounts spent on advertising: Because of relatively low barriers to entry, companies
in this industry spend heavily on advertising in order to create a "brand" or "portal
destination". The industry is in a race to lock up as many customers as possible, with the
idea that a company can retain those customers by creating switching costs. Each
company could create switching costs by customizing the company portal, making it
costly for a customer who switches to competitors' site.
are
not
Scale is important: With the large conventional brokerages entering the online
business, gaining economies of scale will be important. Heavy advertising costs will
need to be spread over a larger number of accounts. How successful a brokerage is at
gaining and retaining customers over the next year will determine which online
brokerages survive as independent businesses.
Quick access/Convenience: You can place your orders from anywhere and at any time.
All you need is a personal computer. When you trade online, you save yourself a lot of
17
time. You need not call your stockbroker to give your orders or to find out what happened
to your trade.
Efficiency: Getting information or feedback used to take minutes, sometimes even days.
With online trading, you get these faster because you get online, real-time information on
your account balance, order status, and stock quotes with the best three levels of bids and
offers.
Opportunity to take advantage of market movements: By trading online, you have the
ability to react quickly and take advantage of opportunities in the market that will
hopefully enhance the value of your investments
3.4.4.2 Disadvantages
Despite all the advantages of Online Trading there are a few disadvantages. However, these
disadvantages only apply to certain investors, the inexperienced investor, the traditional
investor, and the busy investor.
For the traditional investor Online trading also has one major disadvantage:
Informality:
investors grew up investing through a broker and interacting with that broker. Often
time's traditional investors have very close relationships with their brokers and online
trading eliminates the possibility of any relationships. Online trading might not be for
everyone and often times are not. However, 82 percent of those people who invest online
believe that most investors will invest online in five years. Whether or not this is true,
trading online has become very popular and has opened a door to whole new
perspective of investing. Whether you are a first time investor or a professional, online
trading offers convenience, lower costs, and empowerment to all users.
3.4.3 Indian Stock Exchange and Applied Trading System
The idea of having a well-organized stock exchange and to speed up the process of
industrialization of the country dates back to 1930's when SBI started a study about the
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subject. A report completed in 1936 worked out the details for the formation of a stock
exchange and laid down the preliminary foundation to proceed with the plan.
The outbreak of the World War II and subsequent economic and political events delayed the
establishment of the stock exchange up to the year 1967 when the Stock Exchange Act was
ratified. The Indian Stock Exchange opened in April 1968. Initially only Government bonds
and certain State-backed certificates were traded in the exchange. During 1970's the demand
for capital boosted the demand for stocks.
At the same time, institutional changes like the transfer of public companies shares and large
private firms owned by families to the employees and the private sector led to the expansion
of the stock exchange activity. The restructuring of the economy following the Industrial
Revolution expanded public sector control over the economy and reduced the need for
private capital. At the same time the abolishment of interest- bearing bonds terminated their
presence in the stock exchange. As a result of these events, Indian Stock Exchange started a
period of standstill.
Plan of the country since then the Stock Exchange has expanded continuously.
3.5. The Emergence Of Online Trading In India
This chapter brings up relevant literature required to find answers and connect to our
research questions. First, vital literature about online trading along with key concepts of
different terms, drivers of growth and the necessity of its existence will be presented so
that it becomes easier to understand the research area. Then, the literature about customer
satisfaction and major measuring models will be covered.
19
Times, 2015
http://www.icicidirect.com
ICICIDirect (or ICICIDirect.com) is stock trading company of ICICI Bank. Along with stock
trading and trading in derivatives in BSE and NSE, it also provides facility to invest in IPOs,
Mutual Funds and Bonds
ICICIDirect offers 3 different online trading platforms to its customers:
1. Share Trading Account:
Share Trading Account by ICICIDirect is mainly for buying and selling of stocks in
BSE and NSE. This account allows Cash Trading, Margin Trading, Margin Plus
Trading, Spot Trading, Buy Today Sell Tomorrow and Call and Trade on phone. They
also provide installable application terminal based application for high volume trader.
2. Wise Investment Account:
Along with MF and IPO investing in BSE and NSE, Wise Investment account also
provide options to invest in Mutual Funds, around 19 Mutual Fund companies and bonds.
ICICI Direct offers various options while investing in Mutual Funds like Purchase
Mutual Fund, Redemption and switch between different schemes, Systematic Investment
plans, Systematic withdrawal plan and transferring existing Mutual Funds in to electronic
mode. This account also provides facility to invest in Government of India Bonds and
ICICI Bank Tax Saving Bonds. ICICIDirect.com website is the primary tool to invest in
Mutual Funds, IPOs, Bonds and stock trading.
20
3-in-1 account integrates your banking, broking and demat accounts. All accounts are
from ICICI and very well integrated. This feature makes ICICI the most interesting
player in online trading facility.
Unlike most of the online trading companies in India which require transferring money to
the brokers pool or towards deposits, at ICICI Direct you can manage your own demat
and bank accounts through ICICIdirect.com.
Investment online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings Schemes all
from one website. General Insurance is also available from ICICI Lombard.
3.5.2 INDIABULLS
http://www.indiabulls.com
Indiabulls is India's leading Financial Services and Real Estate Company having presence
over 414 locations in more than 124 cities. Indiabulls Financial Services Ltd is listed on the
21
National Stock Exchange, Bombay Stock Exchange, Luxembourg Stock Exchange and
London Stock Exchange
Types of account:
1. Indiabulls Equity Trading Account
Indiabulls Equity Trading Account is standard Online trading account from India bulls
and along with online trading it also provides priority telephone access that gives you
direct access to your Relationship Manager and full access to 'Indiabulls Equity
Analysis'.
2. Power Indiabulls
Power Indiabulls trading terminal is the most advanced new generation trading
platform with great speed. This trading terminal is built in JAVA.
Advantages of Indiabulls
Provide trading terminal 'powerbulls', a java based software. It's very fast in terms of
speed and execution.
Disadvantages of Indiabulls
3.5.3 RELIGARE
http://www.religare.com
22
Religare Securities Ltd is a Ranbaxy promoter group company, is one of Indias largest and
fastest growing integrated financial services institutions. The company offers a large and
diverse bouquet of services ranging from equities, commodities, insurance broking, to wealth
advisory, portfolio management services, personal finance services, Investment banking and
institutional broking services.
Religares retail network spreads across the length and breadth of the country with its
presence through more than 900 locations across more than 300 cities and towns. Having
spread itself fairly well across the country and with the promise of not resting on its laurels, it
has also aggressively started eyeing global geographies
Unique features and benefits of trading through Religare:
Trade Reward - Trade Rewards is a unique offering from Religare that gives you dual
benefits of hassle free investment experience online and an opportunity to earn while
you invest.
Zero Brokerage - Break the shackles. Get freedom from brokerage and avail zero
brokerage on your trades through us.
Exposure up to 20 times on your margin - Allowing you the freedom to trade without
hassles throughout the day without having to worry about your cash margin. You can
get exposure (on cash Segment) as high as 20 times for intraday trades. Of course
conditions apply on above two.
Interest on cash margin - Even while you are waiting to make your next trade or
online investment, your unutilized cash does not lie idle with us. You earn interest on
your unutilized cash margin.
http://www.indiainfoline.com
The India Infoline group, comprising the holding company, India Infoline Limited and its
wholly-owned subsidiaries, straddle the entire financial space with offerings ranging from
Equity research, Equities and derivatives trading, Commodities trading, portfolio
management services, Mutual Funds, Life Insurance, Fixed Deposits, Gold Bonds and other
small savings instruments to loan products and investment banking. Website of India Infoline
for trading is www.5paisa.com.
The company has a network of 976 business locations (branches and Sub-brokers) spread
across 365 cities and towns. Today it has more than 800000 clients Trading Platform.
23
5 paisa offers charge only 5 paisa for Rs100 of intraday trade done, which is 0.05%
brokerage. In case of in delivery trade, they charge an additional 0.20% for back
office and securities handling.
Earlier the organizations which provided the facility of online trading was not safe enough to
invest but some of the changes in the past years in the Indian share market have created the
interest of trading in the shares by the people. Broadly we can classify three important factors
which have contributed to the development of online trading in IndiaFirstly the major step was taken by the National Stock Exchange (NSE) in the year 1994
which allowed the electronic trading and seeing to this various other stock exchanges in India
followed soon. This helped in making the fast, accurate and transparent transactions saving a
lot of time then the traditional method of trading. The investors were also saved by the
clutches of the fraud brokers at the times when the clients were not aware of the true prices
of the shares.
Secondly, in the year 1996 the dematerialization of the shares came (also known as DEMAT)
which avoided the online presence of shares in an electronic form avoiding them from theft,
pilferage or from other losses like counterfeiting and frauds regarding share transfer.
The third step was the rapid growth of computer education and learning of internet by the
people. With the evolving of internet the online trading became a hit and the investors
became confident in investing just with a click of a mouse.
With the happening of such events the ratio of trading has improved a lot. As it takes less
time people praise this technology for trading purposes. Some people who traded rarely now
24
even trades 2-3 times every day as it provides edge of researching about companies on the
internet. The number of small investors is increasing on the daily basis that trades on the
internet. If a person invests or trades in equities, derivatives, commodities etc through the use
Internet it is known as online trading enabling the investor to connect electronically to buy or
sell stocks, derivatives etc with the other investors. This can be done with the help of online
service providers like investsmart, indiaInfoline etc. A person can access a stockbroker's
website through a PC connected to Internet and can place his orders. The benefits areA person can see the latest market movement through streaming quotes.
A person can access his accounts and related information on the Website
Provides greater convenience of trade as a person can trade from home or other
convenient location.
The Internet revolution has changed the way to communicate and the way to do business in
todays society bringing us closer and closer to vital sources of information. It provides us
with means to directly interact with service-oriented computer systems tailored to our
specific needs; therefore, we can serve ourselves better by making our own decisions
This new access by the online trading customers to low-cost transactions and cutting-edge,
real-time market information that formerly belonged only to brokers has opened up
extraordinary new investment opportunities as well as a crucial need for state-of-the-art
information.
Today the investors use the Internet Client-Server technology to buy and sell the securities at
an instant at any point of time. People investing online have reached the proportions. Online
trading allows an investor to buy and sell shares on the exchange through Internet and helps
in the direct control of his investments.
3.6 Growth of Online Trading
According to an article by Krishnamurthy B in 2005 after inception of online trading in India
in the year 2000 online trading is gained momentum with trading volumes growing by 150
per cent per annum in the years 2014-2015. Now the growth of online trading is on its right
track ,Indian stock market has been announced the one of the Safe and stable market of the
25
world, so here in India the online trading is growing like anything in comparison to the whole
world
The Chief Executive of Reliance Money Ltd says that online investing is still at a nascent
stage in India and expects that Internet-based trading will eventually take about half of the
total stock market trading as like with developed markets such as the US. Philippines has the
highest online trade with about 55-60% execution of trade is online. The reason is because
they had wider Internet connectivity years before India. The biggest challenge in India
remains better Internet connectivity. The earlier Web-based technology used for Internet
trading has been replaced by specialized software which gives real-time global data
streaming rates to trader helping investors to analyze the market trends and helps in faster
execution of trades. Earlier the investors made trade calls over the phone which sometimes
led to the delays. Example of the tools used in these days online trading
Online share trading in India was at a boom in the end of 2015 with daily-traded volumes
more than tripling from Rs 1,500 crores to Rs 5,000 crores in the last one year and terminals
was set up in small towns such as Rajkot, Hubli and Vijayawada .In that year the share of
online trading rose dramatically from 7% last year to 20% as a percentage of overall traded
volumes. Due to this factor the top five US brokerage firms decided to make a foray into
India in the next year driven by strategic interest. Also at that time non-metros accounted for
half of the daily turnover of online trading.
Some online brokerage firms reported 100+ per cent annual growth rates through the year
2000. The increase was because of the benefits investors can gain from online investing.
These benefits include low transaction costs, speed, convenience, boundary spanning
abilities, and immediate access to financial information. According to, transaction costs
have been driven down because of the increased number of online brokerage firms. In
fact, the dramatic increase of online brokerage firms has led to increased competition and
lowered commissions that an investor must pay per trade.
Along with low transaction costs, the main strategy of online discount brokerages is the
speed and delivery of almost instantaneous transactions. In todays world of fast food and
24-hour service, investors cannot help but want the same type of fast service applied to
the financial industry. That is why many investors enjoy the conveniences e-brokerages
26
offer by allowing them to go online and complete transactions at almost any time during
the day or night. Time is saved because investors do not have to phone their broker
during normal business hours in order to complete their transactions.
Another benefit of online trading is its ability to span boundaries. Many investors are
interested in buying foreign stocks and with online trading systems in place; these
investors are drawn to its boundary spanning capabilities. This is also true for foreign
investors who want to invest in the U.S. market.
A final benefit investors can derive from online trading is access to instantaneous
information. Internet has given people access to immediate financial information
whenever they want it. They felt that the availability of this financial information should
lead investors to make better-informed choices.
Even with all of the benefits e-brokerages offer to their clients, there are still costs
associated with online investing. Some of these costs include unobservable costs,
information-processing costs, information illusion, frequent trading behavior, and the
lack of personal advice. Transaction costs have two components: observable costs and
unobservable costs. According to Konana, Menon, and Abramowitz (1999), observable
costs are the actual commissions that an investor is charged in order to complete a
transaction, where unobservable costs are the costs that are related to the transaction
being executed inefficiently and from information asymmetry. These unobservable costs
are determined by where e-brokerages choose to complete their transactions. For
example, they might not choose to complete the transactions at the actual exchanges, but
instead they might choose to use third-parties and market-makers in exchange for a
percentage of the bid-ask spread. Obviously investors must be aware of these
unobservable costs and the potential that they have to create opportunistic behavior by ebrokerages because of the commissions that they can receive from market-makers. To cut
down on this type of arbitrage, the Securities and Exchange Commission (SEC) could
help create transparency by putting into effect new regulations that state what information
must be provided to the investor.
volume of information found on the Internet that it can take investors a lot of extra time
to find, sort, and analyze all of the relevant information. This in turn can out-weigh the
benefits of online trading for some investors because they might not be able to afford the
opportunity costs associated with spending a lot of time doing research.
Frequent trading is another cost associated with online investing. Low transaction costs
can encourage frequent trading according to Konana, Menon and Balasubramanian
(2000). In fact, in Singapore, 71.1 per cent of online investors say that they trade more
frequently than they did prior to online trading. This increase is troubling because people
who trade the most generally have the worst performance.
Finally, the downside of investing online is the lack of personal advice from those in the
financial field. According to Phelan (2001), the Web will never be able to substitute for
the judgment and expertise of financial planners, nor will it be able to protect investors
from all of the scams that are abundant on the Internet. So the bottom line is that the
investors must weigh these costs against the benefits and decide whether online trading is
right for them.
The investors are just one group affected by the development of online investing; another
group that has been influenced is the brokers/financial planners. With e-brokerages
attracting twelve million investors from 1994 to 2000, it may seem like traditional
financial planners will soon be extinct. However, this is not the case, as many people in
the financial industry have witnessed that the growth of online trading has created
benefits for them as well. This includes increased publicity, lower start-up costs,
increased client base, ease of communication, and risk management. The attention that
has been given to online brokerages in terms of advertising has encouraged more people
to trade and thus, in the long run, this has created more business for the financial markets
in general. Financial planners feel that average people will be drawn into trading online
because of its novelty and then they will eventually realize that they need a financial
planner in order to help them get a comprehensive view of their finances.
28
A second benefit, according to Barber and Odean (2001), is that the fixed start-up costs of
opening an online brokerage are far lower than opening a traditional brokerage service.
Therefore, many brokers might consider putting a part of their services online, thus
reduce their staff costs. The staff costs can be reduced because it does not take as many
personnel to run an e-brokerage site as it does to manage a traditional brokerage firm.
E-brokerages have also allowed brokers wider access to a variety of different people,
therefore increasing their client base and allowing them to offer many different types of
services to their customers.
Another benefit to brokers is ease of communication. Many financial planners see the
greatest gift that the Internet has given them as allowing them to improve communication
with their clients. They appreciate the fact that the Internet has saved them money by
reducing the costs of communication and by making it easier to get information to their
customers.
One final benefit that online trading has for brokers is that it makes risk management
much easier. When an investor places a trade online, the system first can check the
investors bank account to make sure that the individual has the funds available to make
the trade and this lowers the credit and payment risk that traditional brokers have had to
deal with in the past.
The costs of online trading to brokers and financial planners are fairly obvious and
straightforward. Lower transaction costs online have led many investors to e-brokerages
and away from traditional brokers to place their trades. Yet, with the media talking
constantly about how easy online trading is, one cannot really blame brokers clients for
wanting to try it. Brokers might be concerned that the bid-ask spread, used to gauge
trading costs, and has dropped 30 per cent since Electronic Communication Networks
(ECNs) have surfaced.
Another concern is that since investors feel that they can distinguish between the good
and bad advice that they find on the Internet, they therefore might not be willing to
continue to pay a financial planner solely for their expert opinion. This is in part due to
the information illusion discussed previously where investors feel that since they have
access to so much information that they can do it better on their own.
Finally, many investors, especially entrepreneurs, want to see if they can make better
investments than what their financial advisors are already doing for them, so it becomes a
29
game that they want to win. To try to keep some of their clients from turning to online
trading alone, many advisors have placated them by setting aside play money that they
can invest on their own so that they will feel more in control of their investments.
3.8 Characteristics Of Online Traders
According to research by Barber and Odean (2002), many online shareholders share
similar characteristics. The majority of them are young men without children and a high
level of income. They found that active traders with a propensity for high investment risk
and an unusually strong performance in the stock market are all characteristics shared by
many investors who decide to trade online.
Opiela (2000) quotes a research firm as saying that the two types of investors that are
trading online are by their definition the Aggressive Affluent and those who would like
to Get Rich Quick. On that note, Hurley (2000) states that online trading is spawning a
younger type of client that is more aggressive and well informed. It has also been stated
that investors who participate in online trading generally have a higher education level,
are at ease navigating the Internet for relevant information, and know how to apply it in
order to make their transactions.
Konana, Menon, and Abramowitz (1999) break online investors into two categories: the
early adopters and the late adopters. They state that the early adopters are aggressive doit-yourself types of investors whereas the late adopters rely more on a brokers advice
before going through with trades. But even if they rely on a broker for some forms of
advice, most online investors have to be self-directed because online brokerages do not
make a habit of giving advice on what or when to trade.
It is also interesting that once investors start trading, many of them become very
overconfident according to a study by Barber and Odean (2002). This is due to an illusion
of knowledge and an illusion of control. An illusion of knowledge is when investors
believe that since they have access to additional information that they become better
investors and they will not listen to information that states otherwise. In fact, usually
because they have access to so much information, investors suffer from information
overload and their actual predictive skills for picking stocks begin to decline. An illusion
of control is when an investor believes that his involvement will change the outcomes.
They will feel that since they are in control of their investments that they have control
over their returns and can therefore beat the market. As a result of this illusion of control,
these investors will have a tendency to trade too often and too speculatively.
30
Online trading is not a phenomenon that is sweeping only the United States; it is being
implemented in other countries as well. For the purpose of this study, articles regarding
online trading that took place in Switzerland, India, and Singapore were analyzed. In
Switzerland, 40 per cent of the shareholders search for their financial information via the
Internet and more than 25 per cent of people between the ages of eighteen and twentynine also place their orders via the Internet. The characteristics of online investors are
very similar to those in the U.S. Swiss Internet investors are generally male professionals
with a high level of education and income. They also are very self-directed individuals
that make decisions regarding their finances on their own.
In India, trading via the Internet refers to giving your orders to brokers via a website and
not directly on an exchange. Goswami (2003) also explains how the Internet in India acts
as an Order Routing System since all orders must be routed through the same exchange
mechanisms this helps to ensure transparency and security. India investors are
professional self-directed people that are highly educated. Goswami rates convenience,
low cost, and speed as the benefits of online trading that are most important to the Indian
investors.
Finally in Singapore, the self-investing trend has led to many e-brokerages with lower
fees than traditional brokerages. The majority of investors in Singapore are young
professional males with at least one college degree. However, since stock trading on the
Internet has become so accepted in Singapore, it is not correct to say that investors are
only the young and the educated. Instead, Internet trading is appealing to investors across
different age levels and different educations. Nevertheless, according to Teo, Tan and
Peck, the one characteristic that almost all online investors have is high-level incomes.
Even though the Internet is being used more and more for investing purposes, it is highly
unlikely that virtual brokerages will replace full service traditional brokerages over the
long run. In fact, many financial planners feel that online trading will not hurt their
businesses since the greater part of them work with the wealthiest portion of the
population who do not have time to do their own investing.
31
Many brokers may have clients that want to try to invest on their own but do not have a
large amount of play money to set aside to invest, as was mentioned in a previous
section. One option for this type of client is for the broker to open an account online for
the customer that the broker can oversee and step in if it looks like his client is heading
for trouble.
With regards to online investing, many e-brokerages are trying to expand to offer newer
and better services to clients. One option is for e-brokerages to offer more knowledge
and information support and in turn raise the commissions in order to cover the costs
associated with offering this service. This can be done by adding knowledge-based
transaction processing systems to e-brokerages that can give investors more personalized
advice. By simply adding artificial intelligence systems to the original transaction
processing systems that are already found on most online investing websites, e-brokers
can create a knowledge-based system. Online investing firms might also consider adding
educational web pages and other services that will teach beginning investors how to
invest online.
The purpose of any efficient market is to bring all possible buyers and sellers together so
that all the preferences are reflected in the market price. Online investing benefits the
financial industry by helping the stock market to reach this goal.
Some fear that online investing will increase market fragmentation, which is when too
many competitive suppliers enter an active or new market. Although that may happen
over a short period of time, in the long run, the number of suppliers and consumers
should even out as more people start using the Internet to trade.
Whether to switch to online trading is something that investors will have to decide for
themselves. At this time, average Internet traders might fall into the category of young
highly educated men with larger incomes, but this is sure to change. Women are now
beginning to use the Internet more for online shopping and paying bills so using the
Internet to invest should follow. Also a number of inexperienced investors have started
trading online because of the amount of publicity touting its ease and convenience.
These immature investors will need a lot of knowledge and advice from e-brokerages,
and online investing firms must take a step up and be available for more personal advice.
That may mean that transaction costs will go up for more nave investors who request
more personalized service, but it will be worth it for them in the long run.
32
It is also important to educate new investors that investing online tends to make them
look to the short term instead of investing for the long term, and that this can cause them
to trade more frequently, thereby lowering their returns. Buying individual stocks can be
very risky and without the right advice on how to diversify investments, a nave investor
could end up losing a lot of money.
Since no online investing firms are the same, investors will value certain ones over
others based on their needs. The new breed of investor that enjoys risk and likes to trade
frequently will favor sites that gives them low transaction costs and lots of control.
However, beginning investors will want sites that give them more advice and
handholding tools. More value-added knowledge should be added to as many sites as
possible.
More traditional brokers will need to start offering services via the Internet if they have
not already. However, they should not go completely online as a majority of the
investors like the security of knowing that there is an actual physical location where they
can go if they need expert advice. For investors that want to experiment with online
investing but are already clients of traditional brokers, the idea of setting up play
money for them to invest with is a suitable idea. Also, brokers could set up a mixture
that allows both online trading and traditional trading. Traditional brokers should
consider offering other services such as estate planning and tax planning, which will not
be as easy to offer online.
However, there are indications that online trading has somewhat dampened since 2000.
What began as an economic slowdown only got worst with the September 11th terrorists
attacks. Investors have generally have become less tolerant and more risk averse. When
dramatic events such as September 11th happen, it directly affected the overall
performance of the economy and investors have the tendency to stay with approaches
that they are most comfortable with and not try anything new (like online trading) while
at the same time investing less (sine investments involve risk). If the market picks up
speed, investors will change their minds. But, given the uncertainty in global oil prices
and other issues, including ballooning U.S. trade deficits and the war on terrorism,
investors are very unlikely to return to online trading in the near future. However, they
will do so as soon as the market picks up and they once again become comfortable with
this new approach to trading.
33
The Internet is drastically changing how everyone does business, including the financial
industry. Online investing has benefits to offer investors as well as brokers. These benefits
include low transaction costs, convenience, speed, boundary spanning, improved
communication, and risk management. However, these benefits do not come without costs.
Some costs of online trading include information-processing costs, unobservable costs,
information illusion, and smaller commissions for brokers.
The characteristics of online traders are somewhat different from traditional investors.
Online traders tend to be males in their early twenties to mid-thirties, with high income and
education levels. Yet this will be changing as more people gain access to the Internet and
start doing more everyday things online. Foreign investors will also increase trading in U.S.
stocks, and U.S. investors will begin investing in foreign markets.
Although online investing is gaining prominence, it will not be for everyone. Some will not
trust the security of trading online and others will not have the time to do the research
required and will prefer to have traditional brokers invest for them. Overall, online investing
will only encourage new investors to trade in the stock market, bringing together buyers and
sellers to make the market more efficient. After some of the kinks are worked out of online
trading, it will tend to be more beneficial to the financial industry in the long run without
many negative effects.
Even though online trading has slowed down somewhat at the present time, it is our belief
that it will pick up speed in the future. Once investors have become more comfortable with
the current economic conditions and foresee brighter economic conditions they will return.
34
CHAPTER II
COMPANY PROFILE
35
1. COMPANY PROFILE
The Indian financial services sector is one of the most complex, yet one of the most robust
service segments of the Indian economy. Spanning from financial service to capital markets,
banking to foreign direct investments (FDI) and from mutual funds to private equity (PE)
investments, the financial services sector covers all related segments under its umbrella.
Having major effects in its abstract as well as physical form post liberalisation, the financial
services segment is undoubtedly the mainstay of Indian economy.
Today it is at par with the international financial frameworks and promises to surpass them
in terms of performance in the years to come. This is very much evident from the fact that
Indian financial services industry was amongst the least affected during the crisis the world
faced in 2010-11. Major developments pertaining to the sub-segments of Indian financial
services industry are discussed hereafter.
Financial service Sector
Indian life financial service sector collected new business premiums worth Rs
11,742.7 crore (US$ 1.96 billion) for April-May 2013, according to data from the
Financial service Regulatory and Development Authority (IRDA). Life insurers
collected Rs 1, 07, 010.7 crore (US$ 17.84 billion) worth of new premiums for the
financial year ended March 31, 2015
Meanwhile, the general financial service industry grew by 19.6 per cent in AprilMay period of FY14, wherein the non-life insurers collected premium worth Rs
13,552.46 crore (US$ 2.26 billion)
Banking Services
According to the Reserve Bank of India (RBI)s Quarterly Statistics on Deposits and
Credit of Scheduled Commercial Banks, September 2012, Nationalised Banks
accounted for 52.0 per cent of the aggregate deposits, while the State Bank of India
(SBI) and its Associates accounted for 22.3 per cent. The share of New Private
Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks
in aggregate deposits was 13.6 per cent, 4.8 per cent, 4.3 per cent and 2.9 per cent,
respectively
Nationalised Banks accounted for the highest share of 50.9 per cent in gross bank
credit followed by State Bank of India and its Associates (22.1 per cent) and New
36
Private Sector Banks (14.7 per cent). Foreign Banks, Old Private Sector Banks and
Regional Rural Banks had shares of around 4.9 per cent, 4.9 per cent and 2.6 per
cent, respectively
India's foreign exchange (forex) reserves stood at US$ 280.167 billion for the week
ended July 5, 2013, according to data released by the central bank. The value of
foreign currency assets (FCA) - the biggest component of the forex reserves stood
at US$ 252.103 billion, according to the weekly statistical supplement released by
the RBI
Private equity (PE) firms upped their investments in India Inc by a hefty 42 per cent
to US$ 5.4 billion through 197 deals during the first half of 2013; major deal being
the US$ 1.2 billion-Bharti Airtel deal, according to a report by EY India (formerly
Ernst & Young).
Meanwhile, Merger and acquisition (M&A) activity in India was also quite intense in
April-June 2013 period. The deal tally stood at US$ 10.9 billion across 130
transactions, according to global deal tracking firm Mergermarket.
Foreign investors have immense faith in Indian financial markets. The fact is
substantiated through statistics which show that they pumped massive US$ 10 billion
in Indian markets in January-March 2013 quarter. Moreover, FII ownership in top
500 companies is highest at 21.2 per cent for the reported quarter. It increased by
1.28 per cent in the January-March quarter alone and 2.87 per cent in 2012-13.
The number of registered FIIs in India stood at 1,757 in FY 2012-13 while the
number of FII sub-accounts rose to 6,335, from 6,322 at the end of 2011-12.
37
Meanwhile, US-based Customers Bancorp Inc (CUBI) has plans to infuse US$ 51
million in multiple securities of Religare Enterprises Ltd. Religare is currently
aspiring for a banking licence to enter the banking industry.
The investments will take place through a combination of primary and secondary
market transactions.
The Finance Ministry has constituted a standing council of experts to assess the
international competitiveness of the Indian financial sector. The council, to be
headed by the Secretary, Department of Economic Affairs, will analyse various
monetary and non-monetary transaction costs (of doing business in the Indian
market), and make recommendations for improving its competitiveness.
The council will also examine related policies and operating frameworks and the
performance of various segments of the Indian capital market. It will also study and
suggest possibilities for reform measures aimed at improving transparency,
promoting development and strengthening governance in the Indian capital markets,
while ensuring that risks are limited and investor interests are sustained.
Also, the RBI has, for the time being, relaxed the norm that stipulates non-banking
finance companies (NBFCs) to have a minimum gap of six months between two nonconvertible debentures (NCDs) issues. The move is aimed at streamlining the process
of moving into a more robust asset-liability management framework in a nondisruptive manner.
Foreign investments fuel Indian financial markets in a big way. Experts believe that India
has fared really well over the past few years and the similar macroeconomic trends would
continue in 2016.
38
COMPANY PROFILE
Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and
distribution arm of the Kotak Mahindra Group. It is a corporate member of both the Bombay
Stock Exchange and the National Stock Exchange of India. Kotak Securities was founded in
1994 and is headquartered in Mumbai, India.
Kotak Securities Limited is a financial services company. Its major business comes from stock
brokerage service for investors and traders.
The stock broker offers services such as share trading, derivatives trading, mutual funds, IPO,
Exchange Traded Funds, Currency Derivatives, Tax Free bonds, portfolio management, Stock
Lending and Borrowing and Interest Rate Futures.
Kotak Securities was founded in 1994 as a subsidiary of Kotak Mahindra Bank and is proud
to be the nations largest stock broker today.
Their numbers speak for themselves:
Rs 287 crore of Assets Under Management (AUM) as on 31st March 2015
10.58 Lakh customer accounts
Over 5 Lakh trades per day
1128 branches, franchisees and satellite offices
352 cities across India
VISION AND MISSION
Vision
To positively contribute towards economic, environmental and social well-being of
communities through Corporate Social Responsibility agenda.
Mission
Create a lasting value for communities by:
o Promoting and supporting education and other interventions for the under privileged
o Encouraging employee volunteering
39
CORPORATE AFFAIRS
The company also has a research division involved in macroeconomic studies, sectoral
research and company-specific equity research, which regularly publishes stock market
analysis.
40
SERVICES
So what does investing with Indias largest stock broking firm mean for you as a customer?
Well, all your stock broking needs get managed under one roof. No more running from pillar
to post, to keep track of your finances!
41
Research Expertise
Benefit from in-depth stock market analysis thanks to their dedicated research division. They
publish various sector-specific research, company-specific research, macroeconomic studies,
fundamental and technical analysis of stocks that you can avail before investing your hardearned money.
International Reach
Your financial interests go beyond India? Dont worry, so do themselves! Kotak Securities has
a well-entrenched presence in the Asia Pacific, European, Middle Eastern and American
markets. You can trust us with your money in any part of the globe.
MILESTONES
1995: The brokerage and distribution businesses of Kotak Mahindra Bank are
incorporated into a separate company named Kotak Securities.
42
Broker of the Year in India in The Asian Banker Financial Markets Awards 2014
Awarded My FM- Stars of the Industry Award for Excellence in Online Demat
CSR INITIATIVES
0
o Enhancing vocational skills and livelihood projects: The Company will work
towards imparting vocational skills to deserving children and youth, women, elderly, and the
differently-abled. The programme aims at holistic development of these children and youth,
women, elderly, and the differently-abled through technical and soft skills and enhances
their livelihood opportunities. The vocational skills and livelihood projects will be primarily
implemented through Kotak Education Foundation (KEF) and the Banks CSR team.
1
preventive health care and sanitation by providing health checkups for children covered
under education initiatives and sensitizing the children on personal and community health
and hygiene. These initiatives will be implemented through Kotak Education Foundation
(KEF). On a case by case basis, the Company will also support various NGOs working in
43
the fields of healthcare, sanitation, eradication of hunger and malnutrition, and provision of
access to safe drinking water. The Company shall conduct periodic blood donation drives.
0
The Company shall support NGOs working towards rehabilitating socially and economically
backward sections of society by providing safe houses through community house building
initiatives. The Company shall also support NGOs working towards promoting gender
equality, empowering women, setting up homes and hostels for women and orphans,
aanganwadis, panchayats, community halls, setting up old age homes, day care centers and
other such facilities for senior citizens and reducing inequalities faced by socially and
economically backward groups including tribals, marginal / landless farmers, landless
labourers, such people who are below the poverty line across all segments.
0
Company and its subsidiaries will support relief and rehabilitation activities undertaken by
the Prime Ministers National Relief Fund, Chief Ministers Relief Fund or any Central or
State Government Body / Bodies or NGOs, Corporate entity or a group of Corporates
including the Kotak Mahindra Bank or its Subsidiaries or the Kotak Education Foundation
directly
0
o Clean India: The Company, Kotak Mahindra Bank or its Subsidiaries and / or
Kotak Education Foundation will work directly and / or support NGOs working towards
making India clean but not limited to initiatives such as Swacch Bharat Kosh, Clean Ganga
Fund, etc. This would encompass a broad spectrum of initiatives including cleaning of
roads, bus stations, railway platforms and such other public facilities, building communal
toilets and public sanitation facilities, cleaning Ganga and other rivers, education and
awareness generation on personal, household and environmental sanitation.
44
45
CHAPTER III
REVIEW OF
LITERATURE
46
2. REVIEW OF LITERATURE
2.1 REVIEW OF LITERATURE
This chapter brings up relevant literature required to find answers and connect to our
research questions. First, vital literature about online trading along with key concepts of
different terms, drivers of growth and the necessity of its existence will be presented so
that it becomes easier to understand the research area.
In business today electronic commerce (e-commerce) is one of the common topics being
discussed (Daniel et al., 2002). Kalakota and Whinston (1996) defined ecommerce as "The
buying and selling of information, products and services via computer networks, the computer
networks primarily being the Internet. It is streamlining business processes, restructuring
whole industries and re-shaping of customer and supplier relationship (Daniel et al., 2002). In
order to perform one or more of the business functions Internet based e-commerce systems
use World Wide Web based application solutions. In fact electronic commerce is a way of
conducting, managing and running business transaction using computer and Internet. Based
on the significant power of World Wide Web and global e-commerce, the numbers of internet
users' have been rapidly increasing and have widely spread into all aspects of life. It has
opened up tremendous business opportunities for its users (Ho and Wu, 1999). The most
common use of e-commerce is to replace or enlighten conventional transaction methods and
in the last few years a substantial growth of internet-based services being experienced.
According to an Angusreid group study (2004) of Internet users in 34 countries nearly 120
million of the estimated 300 million worldwide Internet users have already made a purchase
or transactions online. Stock exchange was influenced by Internet technology as well as other
business sectors. Stock exchange as a critical pillar of each economy, acts exactly the same as
a thermometer of economical condition of the country. The volume of stock transactions, the
index growth and tendency of individuals and legal entities crystallized if the economy of a
country is flourishing or on the other hand continue recession conditions. Therefore, providing
a flow trading process and accelerating the transaction settlement can create more motivation
for traders to join stock trading exchange likewise cooperate and invest in companies and
finally, in this manner, internet creates an opportunity of reaching these goals.
Countries all over the world have invested heavily to leverage the Internet and transform their
conventional businesses into e-businesses. E-businesses are defined as the use of Internet
based information and communication technologies (ICT) by organizations to conduct
transactions, share information and maintain relationships (Poon and Swatman, 1999). New
47
technologies such as World Wide Web have made a profound on all business around the
world. E-business enables organizations to reduce cost, increase demand and create new
business models (Dunt and Harper, 2002) E-commerce is a subset of e-business and defined as
buying and selling of goods and services on the Internet, especially the World Wide Web
(www.dotcom productions.com). In fact, any commerce carried out using computer networks
are called electronic commerce and has created an opportunity to do business and handle
transactions electronically and stock trading domain makes the most of its chance all over the
world. As, the time factor play a critical role in this business, internet quicken and streamline
the trading process. Creating more convenience, saving time and money and paperless process
are the most significant goals of online trading. Referring to two websites which are active in
trading fields (www.investorwords.com and www.advfn.com) they define online trading in
this manner: The increasingly popular activity of buying and selling securities over the
internet, or to a lesser extent, through a broker's proprietary software.
Likewise Fan et al. define it in this way: The 'online trading' is defined as a process of trading
financial products especially stocks over the Internet, and online stock trading site is a web
site that helps traders or customers to buy and sell the financial products over the Internet (Fan
et al., 2000).
The number of online investors has grown considerably since the first electronic brokerage
opened its virtual doors in 1994(Fahri and Movassaghi, 2001). These e-brokerages have
attracted 12 million investors in less than five years, now accounting for over 33% of retail
stock trades (Konana, 2000). The number of ebrokerages has also grown-from only 12 in 1994
to more than 120 in 1999, according to Gomez Advisors (www.gomez.com).
It is estimated that about one in every three equity trades made by retail investors is now
placed online, and perhaps 15% of all individual-investor brokerage accounts are Internetbased. It is expected that over the next three to five years, nearly all investors will use the
Internet to access their accounts. In 1996 only 8% of retail trades were placed online with only
12 Internet brokers in existence (Carey, 2000). By 2000, according to U.S. Bancorp Piper
Jaffray Inc. (www.pjc.com), 48% of trades are done online and over 100 firms are in business.
It is reported that the number of daily transactions was just under 900,000 per day. Certainly,
Online trading in America has shown amazing growth.
Online trading has become so popular that several companies are now building systems to
allow investors to trade electronically after normal stock-exchange hours; others are using
pagers and other wireless devices to let customers trade anytime, anywhere (Cullen, 1999).
48
Motivated by the significance of online stock trading services and the limited and inconsistent
empirical findings, we examined the interaction of experience clues with flow experience and
investigated their influence on customer satisfaction in online stock trading services using a
survey dataset from U.S.-based online stock traders. The concept of flow in human-computer
interaction is defined as a sensation occurs with significant cognitive involvement in a task (Li
& Brown, 2006). Prior research has established the connection between flow experience and
consumer behavior, such as attitude and loyalty (Novak, Huffman, & Yung, 2000). However,
it is unclear whether such a connection exists between flow experience and customer
satisfaction in online stock trading services. Therefore, our first research question is: how does
flow experience affect customer satisfaction in online stock trading services?
According to Haeckel, Carbone, and Berry (2003) and Berry, Wall, and Carbone (2006),
customers rely on the numerous clues embedded in performance when choosing services and
evaluating their service experiences. Despite the well developed structure of flow experience
(Csikszentmihalyi, 1991; Luna, Peracchio, & Juan, 2002) and experience clues (Haeckel,
Carbone, & Berry, 2003; Berry, Wall, & Carbone, 2006), few research has attempted to bridge
experience clues with flow experience by examining how such clues facilitate experience. In
this study, we measure the experience clues in online stock trading services with humanic
clues (i.e., customer service), functional clues (i.e., system), and mechanic clues (i.e., product
offerings and commission).
The major findings of the study are the Indian investors are more conservative, they do not
change brokers for trading, whereas net traders are more comfortable with online trading for
its transparency and complete control of the terminal
49
CHAPTER IV
RESEARCH
METHODOLOGY
50
4. RESEARCH METHODOLOGY
4.1 RESEARCH DESIGN
A research design is a framework of blueprint for conducting on the marketing research
project. It details the procedures necessary for obtaining the information needed to structure
and solve marketing research problems. Although a broad approach to the problem has
already been developed, the research design specifies the details- the nuts and bolts- of
implementing that approach. A research design lays the foundation for conducting the
project.
Non Probability
The non probability respondents have been researched by selecting the persons who do the
stock trading. Those persons who do not trade in stocks have not been interviewed.
Exploratory and Descriptive Research
The research is primarily both exploratory and descriptive in nature. The sources of
information are both primary and secondary. The secondary data has been taken by referring
to various magazines, newspapers, internal sources and internet to get the figures required for
the research purposes. The objective of the exploratory research is to gain insights and ideas.
The objective of the descriptive research study is typically concerned with determining the
frequency with which something occurs. A well structured questionnaire was prepared for the
primary research and personal interviews were conducted to collect the responses of the target
population.
4.1.1 SCOPE OF THE STUDY
Scope of the study includes the following: Since the year 2000 a big boom has been witnessed in the Indian Stock Market when the
market showed the coming up of Online Trading System. Many online stock trading
companies came but initially due to lack of online trading some companies vanished and
some survived. The companies which survived are getting the handsome returns also
attracting the foreign Investment Companies. Nowadays this sector is facing cut-throat
competition and also provides huge growth prospects. The study then goes to evaluate and
analyze the findings so as to present a clear picture of the trends in the online trading sector.
51
According to the nature of major research question, the quantitative approach is chosen and in
this case a questionnaire is prepared to measure the traders' satisfaction in two steps. Hence,
primary data will be extracted from the traders who are the critical focus point of this study.
53
CHAPTER V
DATA ANALYSIS &
INTERPRETATION
54
5. ANALYSIS
Below is the analysis done while doing the study on Online Trading in India.
5.1 Gender:
Table: 5.1
Male
59
Female
41
Graph: 5.1
INTERPRETATION: According to 100 respondents 59% of them are male and rest 41% of
them are female.
55
5.2Age Group
Table: 5.2
18-25
26-40
41-55
Above 55
21
37
22
20
Graph: 5.2
INTERPRETATION: According to 100 respondents 21% of them are between 18-25 years
of age, 37% of them are between 26-40 years of age, 22% of them are between 41 -55 years
of age, and rest 20% of them are above 55 years of age.
56
29
Married
71
Graph: 5.3
INTERPRETATION: According to 100 respondents 29% of them, say that they are single
and rest 71% of them say that they are female.
57
5.4 Occupation
Table: 4.4
Service
33
Self employed
House Wife
Student
Retired / Other
19
25
13
10
Graph: 5.4
INTERPRETATION: According to 100 respondents 33% of them say that they are in
service, 19% of them say that they are self employed, 25% of them say that they are house
wives, 13% of them say that they are students and rest 10% of them say that they are
retired/other.
58
5.5. Could you kindly tick your group as per Total Family Income per month?
Table: 5.5
Less than 20,000
20,000 50,000
50, 000 1, 00,000
Above 1, 00, 000
29
58
10
3
Graph: 5.5
INTERPRETATION: According to 100 respondents 29% of them say that their total
family income per month is less than 20,000, 58% of them say that their total family income
per month is 20,000 -50,000, 10% of them say that their total family income per month is
50,000 100000, and rest 3% of them say that their total family income per month is above
100000.
59
5.6 Are you aware of online share trading and share market?.
Table: 5.6
AWARE OF ONLINE SHARE TRADING
%OF RESPONDENTS
Yes
100%
No
0%
Graph: 5.6
Interpretation: - With the increase in cyber education the awareness towards online share
trading has increased by leaps and bounds. the awareness is expected to increase further with
the increase in internet education.
60
%OF RESPONDENTS
Yes
100%
No
0%
Table: 5.7
INTERPRETATION
The person who are doing a job or studying 100% people invested in the stock market.
61
RESPONDENTS
Higher Secondary
Senior Secondary
11
Graduate
49
Post Graduate
16
22
Graph: 5.8
INTERPRETATION
The people who are dealing with the stock market either online or offline. mort of them are
graduate, 49%of the total respondent who are dealing with the stock market are graduate,
then 16% are post graduate and 22% people is having professional degree. So here this is
showing that qualification up to graduation or more than that is in the favor of the online
trading patterns
62
RESPONDENTS
200000-300000
300000 400000
400000 - 500000
12
500000 600000
21
Above 600000
58
Graph: 5.9
INTERPRETATION
2% respondent are having the income level of 200000-300000 ,7% is having 300000-400000,
12% in having 400000-500000 , 21% respondent are having the income level of 500000600000 and only 58% are having above 600000 per annum.
To invest in the stock market minimum 100000 or more than this should be the annual
income level of the people. In India the per capita income in also increasing so we can say
that there is a good opportunity for the online trading market
63
RESPONDENTS
Equity
65
Mutual Fund
14
Insurance
Term Deposit
12
Others
Graph: 5.10
INTERPRETATION
Highest number of respondent is having their investment in the equity that is 65% whereas
the investment available for the mutual fund, term deposit and insurance is 14%, 12% and
9% So the investor for equity is high which is again showing the number of opportunity for
online trading
64
RESPONDENTS
Capital Appreciation
13
Source of Income
77
Retirement Planning
Wealth Preservation
Education Funding/Others
Graph: 5.11
INTERPRETATION
13% of the respondent invests the money for the reason capital appreciation but most of the
investor is having same motive that is source of income and retirement plan, wealth
preservation and education funding for children or other are only 10%
From the analysis we can have idea that the main objective of the investor to earn the money
through trading in stock market 77% of the respondent achieves their objective with the help
of investment in the equity market, because most of the investment takes place in the form of
equity (explanation of 4th ans.)
So we can say that there is a huge potential in the market for the trading in the stock market
65
Table: 5.12
INVESTED IN THE MARKET
%OF RESPONDENTS
Yes
100%
No
0%
Graph: 5.12
INTERPRETATION
100% of the total respondent who are dealing with the stock market is having computer in
their house.
The people who is having computer that is 100% can also go for online trading which can be
a large number of people who will go for online trading.
66
RESPONDENTS
Strongly Agree
26
Agree
51
Cant Say
Disagree
13
Strongly Disagree
Graph: 5.13
INTERPRETATION
76% (26+51) of the total respondent believe that operate a computer is easy for me whereas
20%(13+7) of the respondent is having problem to operate a computer out of that 20% , 75
believe that they cant go for computer
So, if 78% of the people who are dealing with the stock market is having computer at their
house and around 76% of the same population dont have any problem to operate a computer
So around 60 % is there who is having computer and they dont have problem to operate a
computer
67
RESPONDENTS
Strongly Agree
37
Agree
34
Cant Say
11
Disagree
14
Strongly Disagree
Graph: 5.14
INTERPRETATION
71% of the respondent is having a positive thinking that online trading is a secure way of
trading whereas 18 of the respondent believes that online trading is not a secure way of
trading Satisfaction about the process, by which they will be going to do a trading that is
online trading, should be there in the mind of the customer.
If they believe that there is no risk over the money which they are going to invest in the
market with the help of online trading, there will be a perception to go for online trading at
least one time
68
5.15
TABLE 5.15
Long term
Short term
59
41
Graph 5.15
From the study it is clear that long term investor or short term investor.
59% of people preferred to invest in long term, which enables them to wealth
maximization.
41% of people preferred to invest in short term, by which they want to earn profit
from the fluctuations and volatilizing of stock market remaining 21% of respondents are
looking at their traditional investment avenues like bank deposits and real estate to have the
liquidity as safely.
69
of
of
1 year
1yr - 2 yrs
2yr 5 yrs
Above 5 yrs
25
45
21
Table 5.16
From the study it is clear that the how long people trading online. 75% of the
respondents are long term users of online trading mechanism. The period of their usage rates
from 2 years to 5 years.
Hence the data reveals that many of the investors are fully aware of online trading
mechanism of various financial products.
70
36
34
30
Graph 5.17
About 36% of respondents are aware of access online trading by their own. About 34% of
respondents who are not aces online trading only through brokers for instructions and 30% of
respondents are also not aware only thorough phone instruction to broker.
Hence it is concluded that the only the investors executing transactions on their own
computers so they are well aware of accessing the online trading.
71
By Post
By Broker Email
39
33
28
Graph 5.18
72
RESPONDENTS
Office Hours
65
Free Time
35
Graph: 5.19
INTERPRETATION
65% of the total respondents do trading in office timing while 35% of the respondents do the
trading in free time. Here the people who do the trading in office timing they face the
problem of not in the continuous touch of the stock market, so online trading can be one of
the good solution of this problem.
73
5.20 Introduction of online trading helped to attract the new Investors thus increasing
the trading volumes at Stock Market?
Table: 5.20
ATTRACTING NEW CUSTOMERS
RESPONDENTS
Strongly Agree
36
Agree
41
Cant Say
Disagree
12
Strongly Disagree
Graph : 5.20
INTERPRETATION: 76% of the respondents believe that the introduction of online trading
helped to attract the new customer became the reason to increase the trading volume of the
market. On the other side 16% of the respondents believe that it doesnt affect the trading
volume.
74
CHAPTER VI
FINDINGS
75
6. FINDINGS
With the increase in cyber education the awareness towards online share trading has
increased by leaps and bounds. the awareness is expected to increase further with the
increase in internet education.
The person who are doing a job or studying 100% people invested in the stock
market.
Qualification up to graduation or more than that is in the favor of the online trading
patterns
In India the per capita income in also increasing so we can say that there is a good
opportunity for the online trading market
Investor for equity is high which is again showing the n number of opportunity for
online trading
Many of the investors are fully aware of online trading mechanism of various
financial products
Only the investors executing transactions on their own computers so they are well
aware of accessing the online trading
Investors are well known that after placing the order they are getting confirmation of
trading by e-mail directly
People who do the trading in office timing they face the problem of not in the
continuous touch of the stock market, so online trading can be one of the good
solution of this problem.
76
CHAPTER VII
SUGGESTIONS
77
7. SUGGESTIONS
The companies should come up with more and more innovative features in their web
portals.
Product change is necessary according to the need of the customers as there is a good
opportunity for the online trading market.
We should also focus upon the value added services. Generally company does claim
that if you will by the product you will get these benefits but company doesnt
provide the services here. So services always does matter when we talk of online
trading.
Company should also look for the problem which customer generally face when they
do trading (like problem of operating properly)
The customer should be educated regularly regarding the new technologies and
techniques of trading online and also other relevant information.
The companies should look after to develop more safe and secure ways of
transacting business online and companies should make maximum efforts to detect
fraud cases and minimize them.
78
CHAPTER VIII
CONCLUSION
79
8. CONCLUSION
Researcher attempted to cover every aspect which somehow related to this research, but
anyhow due to some limitations like, time shortage and resource restrictions, still there is a
wide area in online trading word and identifying how it can impact on customer satisfaction.
Therefore in further researches the obstacles and limitations should be overcome.
My research project is quite relevant to the today generation of online trading community.
The following things can be useful for online trading community
They should probe the broking company to get know some areas of improvement.
The changing perception of market and the companies will also be made clear.
They should get the broking companies to do effective segmentation of their market
based their research analysis teams for better trading.
Everyone should understand the effects & advantages of todays changing technology and
should keep themselves abreast with the changing & upcoming technology.
The last four months has been a great learning experience for me because I came to know
about many aspects of online trading which I didnt know in last 6 years of using the online
trading facilities. Some of the learning of mine is:
I learnt about the consumer perception about the stock market and online trading.
Patience was the thing I learnt the most as I have to approach various persons to whom I
had to explain same things again and again while approaching or calling them at regular
Intervals.
80
BIBLIOGRAPHY
81
BIBLIOGRAPHY
ARTICLES/RESEARCH PAPERS
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WEBSITES
http://rbidocs.rbi.org.in/rdocs/Wss/DOCs/databse/lending.borrowing.pdf
http://rbidocs.rbi.org.in/rdocs/Wss/DOC/databse/forex.reserve.pdf
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83
ANNEXURE
84
ANNEXURE: QUESTIONNAIRE
Please tick your response whenever appropriate:
Name: ______________________
1. Gender:
Male
Female
2. Age Group
18-25
26-40
41-55
Above 55
3. Marital Status
Single
Married
4. Occupation
Service
Self employed
House Wife
Student
Retired / Other
5. Could you kindly tick your group as per Total Family Income per month?
Less than 20,000
20,000 50,000
No
No
Senior Secondary
Graduate
Post Graduate
300000 400000
500000 600000
Above 600000
400000 - 500000
Mutual Fund
Insurance
Term Deposit
Others
85
Source of Income
Wealth Preservation
Education Funding/Others
Retirement Planning
No
Agree
Cant Say
Disagree
Strongly Disagree
14. Online trading is a secure way of trading?
Strongly Agree
Agree
Cant Say
Disagree
Strongly Disagree
15. Are you a Long term investor or short term investor
Long term
Short term
1yr - 2 yrs
2yr 5 yrs
Above 5 yrs
By Post
By Broker Email
Free Time
20. Introduction of online trading helped to attract the new Investors thus increasing
the trading volumes at Stock Market?
Strongly Agree
Agree
Cant Say
Disagree
Strongly Disagree
86