INNOVIZ

TEAM DC - “DREAM CATCHERS”

PARTCIPANTS FROM SRI KRISHNA COLLEGE OF ENGINEERING AND

TECHNOLOGY – MBA - (2020 - 2022) BATCH

1. Elakkiya S - Roll No:20MBA053 Mail: 20mba053@skcet.ac.in Ph: 7904848794

2. Jenifer A - Roll No:20MBA095 Mail: 20mba095@skcet.ac.in Ph: 7904236164
3. Nishanthini N - Roll No:20MBA026 Mail: 20mba026@skcet.ac.in Ph: 8428517475
What implication or has there been a contribution
of this factor in the overall market bull run?
• Yes, very much. The developments in stock trading has brought about greater participation in
stock market by the public in general and investors in particular.
• Dependency on conventional, full service stock brokers has been reduced to the minimum due
to free flow of information, which has led to healthy competition among the brokers to offer
better service to their clients
• Transparency in stock trading has increased, which has gone towards building confidence in the
minds of the people and many who were once hesitating to invest in stocks have come forward
to invest.
• Recent advancements in Technology has enabled customers to trade at their convenience, 24 X
7, through their smart phones
• Traditional stock brokers have started loosing ground and ‘Discount Brokers’ have come up in a
big way which has resulted in lowering of the cost of transactions considerably.
• All the above mentioned factors have attracted new investors into stock market and existing
investors have started participating more actively. These are responsible for the market bull
run.
What is the revenue model of a discount broker
behind providing zero commission trading?
• A Discount broker carries out buy/sell orders of their clients at a very low commission. Unlike
full-service brokers, Discount brokers do not provide investment advice or perform stock
market analysis on their client’s behalf.
• Discount brokers offer very low brokerage rates, high speed trading in stocks, commodities and
foreign exchange. There are two types of Discount brokers in India based on the way they
charge: a) Fixed price per trade b) Fixed monthly charge
• The charges in (a) above are very low, in the range of Rs. 9/- to Rs. 20/- per trade. This is
irrespective of the size of the trade.
• Regarding the option (b) above, they charge fixed monthly fee from traders, regardless of the
number of trades they perform in a month.
• Cross selling of Mutual Funds/Insurance products can add to their income stream.
What is the revenue model of a discount broker
behind providing zero commission trading?
• Though some Discount brokers in India do not charge any commission in cash segment, they
charge for intra-day, Futures & Options Trade and Derivative transactions which will add to
their revenue.
• In addition, Discount brokers can also generate income through ‘payment for order flow’,
loaning customers cash to buy stocks on margin and lending securities to short sellers.
• As the Discount brokers operate their business on-line, the overhead costs are very low.
• Wider client base coupled with a huge number of transactions give them the required revenue.
The overheads being less, profit forms a significant part of the revenue generated.
• Finlatics is having a simulation virtual trading platform. Which can be converted into a real
trading application; This application can be sold to clients with a provision to generate regular
income to Finlatics as the clients make use of the application for their stock transactions.
Should Finlatics venture into the brokerage business,
given the competition and the market size?
• Yes, Finlatics can venture into the brokerage business, especially as a Discount broker.
• Justificatons:
a) Statistics reveal that out of 1.30 billion population, only about 18 million invest in equity
market; Less than 1.5% of the population invest in Mutual funds. The main reason for the
low participation is partly due to lack of awareness and partly due to lack of trust in capital
market.
b) The situation is taking a course correction and Indian capital market finds increased
participation, both in terms of number of participants and volume of transaction. NSE, SEBI,
ICSI,AMFI and many such institutions have taken up providing Investor Awareness
programmes, seriously and these efforts have started yielding results.
c) It is predicted by experts that Nifty will be around 15000 next year; in the next 5 -10 years
the economy is expected to achieve what it achieved in the last 20 years.
Should Finlatics venture into the brokerage business,
given the competition and the market size?
d) As per CRISIL report, Diversified Equity funds in India have generated close to 18% annualised
return since 1997 to 2017. With the interest rates on safer investments like Fixed deposits
showing a negative trend over the past five years, more participation in the equity market is
expected in the coming years.
e) Even if the investor population increases by 1% in a span of 3 to 4 years, it will bring enormous
amount of money into capital market. Further, Discount brokers provide an attractive platform
for retail investors with their nil/very low fee.
f) Retails investors form major part of the clients of Discount brokers. Retail investors don’t hold
portfolios for long timer compared to institutional investors. As per Jefferies report, retail
investors in India bought stocks worth 12 billion dollars in between January-September 2020.
e) Hence, in spite of the given competition, Finlatics can venture into brokerage business as the
future is very promising.
Thank You