Project Report On Online Trading Bonanza
Project Report On Online Trading Bonanza
Project Report On Online Trading Bonanza
ONLINE TRADING
AT
By
HIMANSHU SHARMA
CHAPTER-1 Y
INTRODUCTION OF STUDY 1
CHAPTER-2 6
• LITERATURE REVIEW 42
CHAPTER-3
• COMPANY PROFILE 46
CHAPTER-4
CHAPTER-5 60
• OBSERVATIONS
• CONCLUSIONS
• SUGGESTIONS
CHAPTER-6
• BIBLIOGRAPHY 64
CHAPTER – 1
INTRODUCTION TO STUDY
DEMATERIALIZATION:
Dematerialization is the process of converting the physical form of shares into electronic
form. Prior to dematerialization the Indian stock markets have faced several problems like
delay in the transfer of certificates, forgery of certificates etc. Dematerialization helps to
overcome these problems as well as reduces the transaction time as compared to the
physical segment. The article discusses the procedures, advantages and problems of
dematerialization.
The Indian Stock markets have seen a major change with the introduction of depository
system and scrip less trading mechanism. There were various problems like inordinate
delays in the transfer of share certificates, delay in receipt of securities and inadequate
infrastructure in banking and postal segments to handle a large volume of application and
storage of share certificates .To overcome these problems physical dealing in securities
should be eliminated . The Indian stock market introduced the system of dematerialization
recognizing the need for scrip less trading.
According to the Depositories Act, 1996, an investor has the option to hold shares either in
physical or electronic form .The process of converting the physical form of shares into
electronic form is called dematerialization or in short demats. The converted electronic data
is stored with the depository from where they can be traded. It is similar to a bank where
an investor opens an account with any of the depository participants. Depository participant
is a representative of the depository .The DP maintains the investors securities account
balances and intimates him about the status of holdings.
ONLINE TRADING
Online Trading is an easy way to buy and sell shares from the comfort of one’s place instead of
trading through individual stockbroker and broking firms, the customer can transact with the help
of mouse click and his visits to the neighborhood broker will become a thing of the past. Even
the older generation is adapting the online trading route.
Find the right depository to provide with an online trading account can be difficult, but many
banks and companies offer excellent services for online trading. Our needs will determine which
online broker is best for us. Online trading brings in total transparency between broker an
investor in case of secondary market operation.
Whether we are buying a mutual fund, investing in commodities market or any other transaction
can be performed with minimal fuss. In India presently online trading can take place through
order routing system, which will route client orders to exchanges trading system for execution of
trade on stock exchange (NSE and BSE).
One of the measure attractions of online trading is the wealth of free commentary and analysis
about stock market and global economy. Any investor with an ounce of market saviness can
extract all the data needed to make trading decisions and complete the trades. An important
catalyst behind the emergence of thriving online brokerage system has been the buoyant stock
market. One can trade online with e-brokerage such as ICICI Direct, HDFC Securities, India
Bulls, Kotakstreet and India Info line’s 5paisa.com.
NEED OF STUDY:
With the emergence of the internet in everyday business, the significance of the online
stock market trading broker has gone up.
• It can be done from home at any desired fixed hours of the investor.
• The processing of the order is executed at proper timings as the servers of the online
trading portal are linked to the selected banks and stock exchanges though out twenty
four hours.
• The investments made are safe and secured and profit is earned at proper time without
any dispute.
• Online trading updates are also provided to the investors and also about the present grade
of their orders either through the interface or e-mail.
OBJECTIVES OF STUDY:
The data collection methods include both the primary and secondary
collection methods
Primary collection methods: This method includes the data collection from
the personal discussion with the authorized clerks and members of the
Net worth.
Secondary collection methods: The secondary collection methods includes
the lectures of the superintend of the department of market operations
and so on. Also the data collected from the news, magazines of the Net
worth and different books issues of this study.
SCOPE OF STUDY:
The study is limited to “Demat and Online Trading”.
And 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 are survived are getting the handsome returns also
attracting the foreign Investment Companies. Now a days this sector is facing cut-throat
Competition. And also provides huge growth prospects.
LIMITATIONS OF STUDY:
A good report tells us the results of the study. But every project has its own Limitations. These
• There is lack awareness among people about investing in stock market. So people who
are aware of such things were found in specific areas for survey purposes.
• Most people are comfortable with traditional system in small towns and like to trade from
their respective brokers, hence not providing their true opinions.
• Most of people are not using technology and Internet is growing still it is not at the
required level.
• Some of the respondents who did not do Online trading were able to respond only to
some questions.
• Limitations towards Demat and online trading confined to keep the study in manageable
limits.
REVIEW OF LITERATURE
INTRODUCTION
India Financial Market the India Financial market comprise of talks about the
primary market, FDIs, alternative investment options, banking and
insurance and the pension sectors, asset management segment as well.
With all these elements in the India Financial market, it happens to be
one of the oldest across the globe and is definitely the fastest growing
and best among all the financial markets of the emerging economies.
The history of Indian capital markets spans back 200 years, around the
end of the 18th century. It was at this time that India was under the rule
of the East India Company. The capital market of India initially
developed around Mumbai; with around 200 to 250 securities brokers
participating in active trade during the second half of the 19th century.
The NSE provides exposure to investors into two types of financial Markets:
1. Capital market.
2. Money market.
Capital market: Refers to all the facilities and Institutional arrangements for
borrowing and lending of term funds. It does not deal in capital goods but is
concerned with the raising of money capital. It consists of term lending institutions
and investing Institutions which mainly provide long term funds.
4) Financial Services.
Industrial Securities Market has been further divided into two markets they are:
A. Primary Market.
B.Secondary Market.
Primary Market: Refers to the raising of new capital in the form of shares and
debentures, while Secondary Market deals with securities already issued by
companies. Both the markets are important, but the new issues market is much more
important from the point of view of economic growth.
Secondary Market: The market where securities are traded after they are
initially offered in the primary market. Most trading is done in the secondary
market. To explain further, it is trading in previously issued financial
instruments. An organized market for used securities. Bombay Stock
Exchange (BSE), National Stock Exchange NSE, bond markets, over-the-
counter markets, residential mortgage loans, governmental guaranteed
loans etc
Secondary Market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the Stock
Exchange. Majority of the trading is done in the secondary market.
Secondary market comprises of equity markets and the debt markets. For
the general investor, the secondary market provides an efficient platform for
trading of his securities. For the management of the company, Secondary
equity markets serve as a monitoring and control conduit—by facilitating
value-enhancing control activities, enabling implementation of incentive-
based management contracts, and aggregating information (via price
discovery) that guides management decisions.
18 Trading of shares of east India company in
00 Kolkata And Mumbai
Money market: Money Market is a market for short-term funds, which can be used for
overnights to one year duration. It also deals with the financial assets that constitute
near money which means that the assets can be converted into cash quickly with
minimum transaction cost and without a loss in value. It consists of commercial
banks, co-operative banks and other agencies which supply only short term funds. It
consists of
19 Scam of MS Shoes
91
19 CRB scam
97
200 Sexsex saw its down trend & highest ever loss
9 because of Satyam case.
Stock exchange is an organized market place where securities are traded. These
securities are issued by the government, semi-government bodies, public sector
undertakings and companies for borrowing funds and raising resources. Securities are
defined as any monetary claims (promissory notes or I.O.U) and also include shares,
debentures, bonds and etc., if these securities are marketable as in the case of the
government stock, they are transferable by endorsement and alike movable property.
They are tradable on the stock exchange. So are the case shares of companies.
A. Spot delivery deals are for deliveries of shares on the same day or the next day
as the payment is made.
B. Hand deliveries deals for delivering shares within a period of 7 to 14 days from
the date of contract.
C. Delivery through clearing for delivering shares with in a period of two months
from the date of the contract, which is now reduce to 15 days.(Reduced to 2
days in demat trading)
D. Special Delivery deals for delivering of shares for specified longer periods as
may be approved by the governing board of the stock exchange.
Except in those deals meant for delivery on spot basis, all the rest are
to be put through by the registered brokers of a stock exchange. The securities
contracts (Regulation) rules of 1957 laid down the condition for such trading, the
trading hours, rules of trading, settlement of disputes, etc. as between the members
and of the members with reference to their clients.
The origin of the Stock Exchanges in India can be traced back to the later half of
19th century. After the American Civil War (1860-61) due to the share mania of the
public, the number of brokers dealing in shares increased. The brokers organized an
informal association in Mumbai named “The Native Stock and Share Brokers
Association in 1875”.later evolved as Bombay stock exchange.
Till recent past, floor trading took place in all Stock Exchanges. In the floor
trading system, the trade takes place through open outcry system during the official
trading hours. Trading posts are assigned for different securities where by and sell
activities of securities took place. This system needs a face – to – face contact among
the traders and restricts the trading volume. The speed of the new information
reflected on the prices was rather than the investors.
The Setting up of NSE and OTCEI (Over the counter exchange of India with the
screen based trading facility resulted in more and more Sock exchanges turning
towards the computer based trading. BSE introduced the screen based trading system
in 1995, which known as BOLT (Bombay on – line Trading. System).
FUNCTIONS OF STOCK EXCHANGE
Maintain Active Trading: Shares are traded on the stock exchanges, enabling the
investors to buy and sell securities. The prices may vary from transaction to
transaction. A continuous trading increases the liquidity or marketability of the shares
traded on the stock exchanges.
Fixation of Prices: Price is determined by the transactions that flow from investors
demand and the supplier’s preferences. Usually the traded prices are made known to
the public. This helps the investors to make the better decision.
Ensures safe and fair dealings: The rules, regulations and bylaws of the Stock
Exchanges provide a measure of safety to the investors. Transactions are conducted
under competitive conditions enabling the investors to get a fair deal.
Performance Inducer: The prices of stocks reflect the performance of the traded
companies. This makes the corporate more concerned with its public image and tries
to maintain good performance.
This Securities Contract Regulation Act, 1956 and Securities and Exchange
board of India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier
regulatory structure comprising the ministry of finance, SEB1 and the Governing
Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.
One third of the elected members retire at annual general meeting (AGM).
The retired member can offer himself for election if he is not elected for two
consecutive years. If a member serves in the governing body for two years
consecutively, he should refrain offering himself for another two years.
The members of the governing body elect the president and vice-president. It
needs to approval from the Central Government or the Board. The office tenure for the
president and vice-president is on year. They can offer themselves for re-election, if
they have not held for two consecutive years. In that case they can offer themselves for
re-election after a gap of one-year period.
» Ahmedabad
» Bangalore
» Bhubaneshwar
» Calcutta
» Cochin
» Coimbatore
» Delhi
» Guwahati
» Hyderabad
» Jaipur
» Ludhiana
» Madhya Pradesh
» Madras
» Magadh
» Mangalore
» Meerut
» OTC Exchange Of India
» Pune
» Saurashtra Kutch
» UttarPradesh
» Vadodara
AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY ARE:
1) NSE
2) BSE
The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most
advanced exchange with 1016 companies listed and 726 trading members. Capital market
reforms in India and the launch of the Securities and Exchange Board of India (SEBI)
accelerated the incorporation of the second Indian stock exchange called the National Stock
Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock
exchange in India.
Three segments of the NSE trading platform were established one after another. The Wholesale
Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment
was opened at the end of 1994. Finally, the Futures and Options segment began operating in
2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior
Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50
stocks from 25 different economy sectors. The Indices are owned and managed by India Index
Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard &
Poor's.
In 1998, the National Stock Exchange of India launched its web-site and was the first exchange
in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership
in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by
Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine
(1999).
The NSE is owned by the group of leading financial institutions such as Indian Bank or Life
Insurance Corporation of India. However, in the totally de-mutualized Exchange, the ownership
as well as the management does not have a right to trade on the Exchange. Only qualified traders
can be involved in the securities trading.
The NSE is one of the few exchanges in the world trading all types of securities on a single
platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market
(CM), and Futures & Options (F&O) Market.
The main objectives of NSE are as follows
1). To establish a nation wide trading facility for equities, debt and hybrid instruments
2). To ensure equal access investors all over the country through appropriate
communication network.
3). To provide a fair, efficient and transparent securities market to investors using an
electronic communication network.
4). To enable shorter settlement cycle and book entry settlement system.
5). To meet current international standards of securities market.
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,
Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India, Punjab
National Bank, Infrastructure Leasing and Financial Services, Stock Holding Corporation fo India
and SBE capital market are the promoters of NSE.
NSE Nifty:
The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for large
companies on the National Stock Exchange of India. S&P CNX Nifty is a well diversified 50
stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index based derivatives and index funds.
Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later on,
it came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a
joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon
the index as a core product. IISL have a consulting and licensing agreement with Standard &
Poor's (S&P), who are world leaders in index services.
CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the
identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for
NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard &
Poor's Financial Information Services.
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly
called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located
at Dalal Street, Mumbai, India.
Bombay Stock Exchange was established in 1875. There are around 5,600 Indian companies
listed with the stock exchange, and has a significant trading volume. As of October2006, the
market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE
SENSEX (Sensitive index), also called the BSE 30, is a widely used market index in India and
Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions
volume.
History:
An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall
of Bombay from the mid-1850s, 1875, was formally organized as the Bombay Stock Exchange
(BSE).In January 1899, the stock exchange moved into the Brokers’ Hall after it was inaugurated
by James M MacLean. After the First World War, the BSE was shifted to an old building near
the Town Hall. In 1956, the Government of India recognized the Bombay Stock Exchange as the
first stock exchange in the country under the Securities Contracts (Regulation) Act.1995, when it
was replaced by an electronic (eTrading) system named BOLT,or the BSE Online Trading
system. In 2005, the status of the exchange changed from an Association of Persons (AoP) to a
full fledged corporation under the BSE (Corporatization and Demutualization) Scheme , 2005
(and its name was changed to The Bombay Stock Exchange Limited).
BSE Sensex:
The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30
scrips, with the base April 1979= 100. The set of companies which make up the index has been
changed only a few times in the last 20 years. These companies account for around one-fifth of
the market capitalization of the BSE.
The values of all BSE indices are updated every 15 seconds during the market hours and
displayed through the BOLT system, BSE website and news wire agencies.
SENSEX calculation:
SENSEX is calculated using a "Market Capitalization-Weighted" methodology.
As per this methodology, the level of index at any point of time reflects the total market value of
30 component stocks relative to a base period. (The market capitalization of a company is
determined by multiplying the price of its stock by the number of shares issued by the company).
An index of a set of combined variables (such as price and number of shares) is commonly
referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the
results of this calculation in order to make the value easier to work with and track over time. It is
much easier to graph a chart based on indexed values than one based on actual values. .
Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock
indices as well:
• BSE 500
• BSE PSU
• BSE MIDCAP
• BSE SMLCAP
• BSE BANK
The Securities and Exchange Board of India even though established in the
year 1988. Received statutory powers only on 30th January 1992. Under the
SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has
the powers to regulate the business of Stock Exchanges, other security and
mutual funds. Registration and regulation of market intermediaries are also
carried out by SEBI. It has responsibility to prohibit the fraudulent unfair
trade practices and insider dealings. Takeovers are also monitored by the
SEBI has the multi pronged duty to promote the healthy growth of the capital
market and protect the investors.
One third of the elected members retire at annual general meeting (AGM).
The retired member can offer himself for election if he is not elected for two
consecutive years. If a member serves in the governing body for two years
consecutively, he should refrain offering himself for another two years.
The members of the governing body elect the president and vice-president. It
needs to approval from the Central Government or the Board. The office tenure for the
president and vice-president is on year. They can offer themselves for re-election, if
they have not held for two consecutive years. In that case they can offer themselves for
re-election after a gap of one-year period.
The next step in planning of order for the purchase or sale of Securities with
the broker. The order is usually by telegram, telephone, letter, fax etc., or in person. To
avoid delay it is placed generally over the phone. The orders may take any one of the
forms such as at best order, limit order, immediate or cancel order, discretionary order,
limited discretionary order, open order and stop loss order.
ENTRY OF ORDER INTO THE BOOKS:
After receiving the order, the member enters them in his books and the
purchase and sale orders are distributed among his assistants to handle them separately
in non-specified and odd-lots.
EXECUTION OF ORDER:
Big brokers transact their business through their authorized clerk. Small ones
out their business personally. Orders are executed in the trading ring of the
ISE.Thisworks from 12:00 noon to 2:00 p.m discretionary order on all working days
from Monday to Friday and a special hour session on Saturday.
The floor of the stock exchange is divided into number of markets (pits)
according to the nature of security deal in. The authorized clerk/broker goes to the pit
and jobbers offer two way quotes for the scrips they deal in. they act as market makers
and provide liquidity to the market. The system has been designed to get the bet lids and
offers from the jobber’s book as well as the best buy and sell orders from the book. If
the quotation is not acceptable to the brokers, he may make a counter bid/offer.
Ultimately the bargains may be closed at a price mutually acceptable to both
the parties. In case the quotation is not acceptable to him, the broker may go to another
dealer and make a bargain. All bargains on the stock exchanges are settled by word of
mouth and there is no written contract signed immediately by the parties concerned.
Once the transaction is finalized, the deals are recorded in a Chaupri Rough notebook or
transaction note or confirmation memos. Soudha block books or confirmation memos
are provided by the stock exchange. The details are recorded in these books also. The
prices at which different scrips are traded on a particular day published on the next day
in the newspapers. An authorized representative of the stock exchange is also present in
the hall to supervise the trading.
LIMIT ORDER:
“Buy 100 XYZ Ltd. At Rs 100”, it is an order for the purchase of shares at a specified
price by the client.(Rs 100)
LIMITED DISCRETIONARY ORDER:
“Buy 1000 XYZ Ltd., around Rs.100”. it gives discretion to the broker. The price can be
a little above Rs 100. How much discretion is implied depends on how the broker and
client define around.
OPEN ORDER:
It is an order to buy or sell without fixing any time or price limit on the execution of the
order.
STOP LOSS ORDER:
“Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10”. It means buy 100 XYZ Ltd securities at
the market rate of Rs. 12 but if on the same day the price falls to Rs. 10 immediately sell
of the securities /shares. Thus an attempt is made to limit the loss of sudden unfavorable
shift in the market.
DEPOSITORY SYSTEM:
A "Depository" is a facility for holding securities, which enables securities transactions to be processed
by book entry. To achieve this purpose, the depository may immobilize the securities or dematerialise
them (so that they exist only as electronic records).India has chosen the dematerialisation route. In
India, a depository is an organisation, which holds the beneficial owner's securities in electronic form,
through a registered Depository Participant (DP). A depository functions somewhat similar to a
commercial bank. To avail of the services offered by a depository, the investor has to open an account
with a registered DP.
In the depository system, the ownership and transfer of Securities takes place by
means of electronic book entries. At the outset, this system rids the capital
market of the danger related to handling of paper. NSDL provides numerous
direct and indirect benefits, like:
Although India had a vibrant capital market which is more than a century
old, the paper-based settlement of trades caused substantial problems
like bad delivery and delayed transfer of title till recently. The enactment
of Depositories Act in August 1996 paved the way for establishment of
NSDL, the first depository in India. This depository promoted by
institutions of national stature responsible for economic development of
the country has since established a national infrastructure of international
standards that handles most of the securities held and settled in
dematerialized form in the Indian capital market.
Promoters / Shareholders
NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the largest
development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and
National Stock Exchange of India Limited (NSE) - the largest stock exchange in India. Some of
the prominent banks in the country have taken a stake in NSDL.
Promoters
Other Shareholders
• State Bank of India
• Oriental Bank of Commerce
• Citibank NA
• Standard Chartered Bank
• HDFC Bank Limited
• The Honkong and Shanghai Banking Corporation Limited
• Deutsche Bank
• Dena Bank
• Canara Bank
• Union Bank of India
A Depository facilitates holding of securities in the electronic form and enables securities
transactions to be processed by book entry by a Depository Participant (DP), who as an agent of
the depository, offers depository services to investors. According to SEBI guidelines, financial
institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. The investor who is
known as beneficial owner (BO) has to open a demat account through any DP for
dematerialization of his holdings and transferring securities.
The balances in the investors account recorded and maintained with CDSL can be obtained
through the DP. The DP is required to provide the investor, at regular intervals, a statement of
account which gives the details of the securities holdings and transactions. The depository
system has effectively eliminated paper-based certificates which were prone to be fake, forged,
counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of
securities.CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading
banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard
Chartered Bank, Union Bank of India and Centurion Bank.
Promoters &shareholders
CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with Bank of
India, Bank of Baroda, State Bank of India and HDFC Bank. BSE has been involved with this
venture right from the inception and has contributed overwhelmingly to the fruition of the
project. The initial capital of the company is Rs.104.50 crores. The list of shareholders with
effect from 11th December, 2008 is as under.
•
Sr. Name of shareholders Value of % terms
No. holding (in to total
Rupees Lacs) equity
1 Bombay Stock Exchange Limited 3,825.46 36.61
2 Bank of India 1,000.00 9.57
3 Bank of Baroda 1,000.00 9.57
4 State Bank of India 1,000.00 9.57
5 HDFC Bank Limited 1,500.00 14.36
6 Standard Chartered Bank 750.00 7.18
7 Canara Bank 674.46 6.45
8 Union Bank of India 200.00 1.91
9 Bank of Maharashtra 200.00 1.91
10 The Jammu and Kashmir Bank 200.00 1.91
Limited
11 The Calcutta Stock Exchange 100.00 0.96
Association Limited
12 Others 0.08 --
TOTAL 10,450.00 100.00
•
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DEMATERIALIZATION
Dematerialization is a process by which physical shares of investors are converted to an
equivalent number of Securities in electronic form and credited in the investor’s account with his
Depository Participant.
FEATURES OF DEMAT:
• In case you want to convert your existing shares into Demat format, you can view
securities available for Demat
• You can view the details of your transactions including settlement date, pay in date, pay
out date using the View Settlement calendar option
Approach a DP.
Fill up an account opening form.
Sign on an agreement with the DP.
Application is forwarded to NSDL by DP.
NSDL allots a number identified as CM-BP-ID.
* The investors account will be credited/debited by the DP only on the basis of valid
instruction from the client.
* The system driven mandatory reconciliation is done between the DP and NSDL.
* The data interchange between NSDL and its business partners is protected by standard
protection measures such as encryption.
* No direct communication links exist between two business partners and all
communications are routed through NSDL.
* The investor has the right to approach NSDL if the grievances of the investors are not
resolved by the concerned DP.
Advantages of dematerialization:
An online stock broker is an investor’s means of buying and selling shares via the Internet, just
like a regular stock broker, wherein an individual or a brokerage firm acts as one’s link to
the stock exchange. Are such services necessary? Is it, after all, not true that anyone can
engage in online trading today, and that it is possible to invest in stocks with one’s own
computer?
The fact is, only a registered (SEBI) stock broker can buy and sell shares in the stock market. Such an
individual is registered on one or many stock exchanges and is authorized to transact on behalf of
others. Apart from that, an online stock broker is very valuable to investors who are not
technically inclined and have no or little prior knowledge of stock trading. Such investors
can use their own online stock trading accounts to obtain necessary information and place
online trades at any time of the day. Others, however, still require a human interface - a real
person who will place trades on their behalf.
. INTRODUCTION TO ONLINETRADING
The Internet revolution has been changing the fundamentals of our society. It shapes the way we
communicate and the way we do business. It brings 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 prevailing shift of the business paradigm is reshaping the financial industry
and transforming the way people invest.
In the old days, because of the limitations of communications technology, Wall Street was the
center for most of the Stock Exchange and Brokerage firms. Today, at this millennial transition,
investors can use revolutionary Internet Client-Server technology to trade stocks nearly
anywhere, anytime, independent of brokers' fees and service limitations.
The act or practice of buying and selling securities over the Internet.
Generally speaking, online trading occurs when an investor makes an order
to a broker online; the broker then executes the order through the ordinary
means. Online trading became more common in the 1990s as more
brokerages offered their services online, often for a small fee rather than a
commission on the trade.
• Life insurance
• Equities,
• Portfolio management
• Mutual funds
• Loans
• General insurance
• Share trading
• Commodities trading
• Financial planning.
National stock exchange and Bombay stock exchange: In spite of many private stock
houses at present involved in online trading in India, the NSE and BSE are among the largest
exchanges. They handle huge daily trading volumes, supporting large amounts of data traffic,
and possessing a countrywide network. The automated online systems used for trading by the
national stock exchange and the Bombay stock exchange are the NIBIS or NSE's Internet Based
Information System and NEAT for the national stock exchange and the BSE Online Trading
system or BOLT for the Bombay stock exchange.
• Customers willing to purchase the product should provide the credit card details and
personal contact information online and once the payment is being made the product is
shipped to the address of the customer as provided earlier generally after two business
days.
Features of information.
The Internet can provide a new sense of control over your financial future. The
amount of investment information available online is truly astounding. It's one of
the best aspects of being a wired investor. For the first time in history, any
individual with an Internet connection can:
• Know the price of any stock at any time
• Review the price history of any stock in chart format
• Follow market events in-depth
• Receive a wealth of free commentary and analysis about stock
markets and the global economy
• Conduct extensive financial research on any company
Access to Market:
At the most basic level, an online trading account gives you more agility in buying
and selling stocks. This is through sophisticated information streams, dedicated
trading platforms and sophisticated tools for accessing the markets.
Every broker house aims at providing the investor with the best price available. Also
due to the high level of transparency with regard to display of information relating
to the specific stocks
and company profiles, you will be able to get the best quote for your orders.
Online trading offers you greater transparency by providing you with an audit trail.
This involves a complete integrated electronic chain starting from order placement,
to clearing and settlement and finally ending with a credit into your depository
account. All these stages are subject to inspection, thus bringing in transparency
into the system.
Online trading integrates your bank account, your trading account and your demat
accounts, which leads to easy and paperless trading for you.
You as an Investment online customer will be able to execute the entire trading
transaction, right from logging on to our site, to the execution and settlement of
your bank account, in a very short period of time.
Trading on the net, gives even the smallest retail investor access to information
that earlier was available only to the big traders. This provides a level playing field
for all investors in the securities market.
This method of trading reduces the settlement risk for the investor, as in this case
all short sell orders are squared off at the specified cut-off time and not allowed to
be carried forward.
Your Bank, Depository and online account are integrated for your convenience.
Various broking houses provide access to many of the popular banks.
Broking houses work hard to keep our account and personal information secure.
From updated security technology to advanced fraud prevention measures, they
have the people and tools in place to provide a strong defense against electronic
scams and fraud.
1) Less Costly:
The most significant advantage of the Online broking is the cost reduction in the
brokerage. Due to the power of the Internet one has the privilege of becoming the
clients of really large brokerages with the benefits of enjoying the low charges
hithelio before enjoyed only by the big players. As the DP account has got linked to
the trading account most players do not charge a minimum transaction cost thus
truly allowing one to buy a single share and achieve meaningful rupee price
averaging whatever be your buying power.
2) Peace of Mind:
One can never have complete peace of mind but online investing does away with
the hassles of filling up instruction slips, visits to the broker for handing over these
slips and consequent costs.
3) Keeping Records:
The site one trades on keeps a record of all transactions down to unexecuted orders
and cancelled orders thus keeping one abreast of all your transactions 24 hours a
day. No paperwork means more time at one’s disposal for research and analysis.
The. bank account linked with the trading account invariably has an A TM free. Most
partner banks offer Internet banking as well. This results in one’s money becoming
available to him whenever he like from his trading account. Conversely in case he
spot an opportunity in the market he can immediately allocate money from his
Most sites are secure using 128-bit algorithms -highest available commercially
anywhere in the world. Moreover even if somebody broke in and tampered with
one’s account the money from the stocks he sold or the stock bought from the
money in his account is in his account only.
This method of trading reduces the settlement risk for the investor, as in this case
no Short sale is possible i.e. the seller will not be able to sell the securities unless he
has their actual possession. In the case of a demat account (required for an online
transaction), when a seller wants to sell the securities, his demat account is
checked by the Depository Participant before executing the sale transaction. This
reduces the settlement risk for the buyer, who is assured of the delivery of the
securities.
It is the ease of doing the trade through net, with a click of mouse, one can buy or
sell any share that is dematerialized.
between the investor, broker and exchange would take place within milliseconds.
PROBLEMS OF ONLINE BROKING
Chart
Source:- www.lse.co.in
23% people says that online trading is more costly than manual trading.
This may appear on one’s screens when he is desperately trying to get out of an
unprofitable position. Some of the online sites are providing a telephone number for
use in case their sites are overloaded or their server down.
Recently ICICI Direct had a connectivity problem with the NSE for two and halfhours
during trading hours. This problem is rare but be alive to its possibility.
As a client one will access the NSE through a server of the online brokerage and this
may involve queuing delays. If a number of client access the server the server takes
its own time sending the orders to the NSE server. He must check out the
seamlessness of this interface before selecting an online brokerage. The faster the
orders are processed the more seamless is the interface.
6.) Margin:
If Internet trading alone is not fast and furious enough; many people are trading on
margin. That is where the brokerage firm lends you money by leveraging his
account, allowing him to buy a large amount of securities by putting up only a small
amount of money. He may have forgotten what he read in the small print of his
agreement, but the brokerage firm has the right to change the maintenance margin
requirements without any warning or notice to him. In fact, the firm has the right to
liquidate his securities holdings (and it can pick and choose which ones) without any
notice to one if he fail to meet the margin call. And there he was leveraged to the
hilt, hoping to hit a home run when he discovered that he is required to make a
large deposit that he cannot make. The next thing one know, the firm is selling off
his securities at a point in time that is not the best for him. These are the perils of
trading on margin.
The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market. Many would not like to rely on
research reports, which are there for all. So, net investors will have to do their own
research and take their own decision, whether wild or wise.
Some of the brokers are of the view that they would have to provide advisory
services to the customers. But with increased volumes, they will have to follow the
international practice of charging a little more than the normal charges from a
customer looking for personal advice.
WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING
Several broking houses now offer online trading facilities. You can trade online with
e-brokerages such as ICICI Direct, Kotakstreet, India bulls, India info line’s
5paisa.com and HDFC securities.
If you are already comfortable trading with your regular broker, here are few
reasons why you may consider switching to trading online, or at least another
avenue of trading. an obvious advantage of online trading is that your transaction
would be virtually paperless. Your trading account would be linked to your demat
and bank account, ensuring a smooth transaction process. This is especially helpful
in the extent T+2 settlement system, where you have just two days to settle your
transaction.
The normal process of issuing of delivery note, in case of a sale, or arranging for a
payment in case of purchaser of shares, is all taken care of the minute your order is
executed online. The absence of manual intervention ensures that you are
completely in control of all transaction.
There is also little room for error, as your order is always confirmed before it is
executed. You can also make better decision as you have a clear record of all your
previous transaction. When you trade offline, a demat statement is normally sent to
you only on a quarterly basis .keeping track of your portfolio can be a hassle in such
a case. The inter net can provide a new sense of control over your financial future.
The amount of investment information available online is truly astounding. Its one
of the best aspect of being a wired investor for the first time in history, any
individual with an internet connection can:
What is more, the time difference, in some cases, can work to their advantage
.Antony, an NRI-based in New York, places his order in the evening after work, when
it is day time India and the markets are open. We also have access to considerable
information online. By just logging on to ICICI direct online, for instance, we can get
the latest news, market information and company research.
Moreover, if our connection is maddeningly slow and we want to get your order
executed immediately, most e-brokerages also provide a facility to trade offline by
placing our order via the phone.
Broker’s site.
The broker makes the payment either directly via the client
bank account or pays through its own account and recovers
it later from the client.
So, generally following steps are followed while doing the trading through
the Internet:
Step-I:
Those investors interested in doing the trading over Internet system, that
is,NEAT - ISX (NSE), should approach the brokers and register with the Stock
Broker.
Step-2:
After registration, the broker will provide to them a login name, password
and a personal identification number (PIN).
Step-3:
Actual placement of an order, Using the place order window as under can
then place an order:
(a) First by entering the symbol and series of stock and other parameters
such as quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step-4:
It is the process of review. Thus, the investor has to review the order placed
by clicking the review option. He may also re-set to clear the values.
Step-5:
After the review has been satisfactory; the order has to be sent by clicking
on the send option.
Step-6:
The investor will receive an "Order Confirmation" 'message along with the
order number and the value of the order.
Step- 7:In case the order is rejected by the Broker or the Stock Exchange for
certain reasons such as invalid price limit, an appropriate message will
appear at the bottom of the screen. At present, a time lag of about ten
seconds is there in executing the trade.
Step-8:
It is regarding charging payment, for which there are different modes. Some
brokers will take some advance payment from the, investors and will fix their
trading limits. When the trade is executed, the broker will ask the investor
for transfer of funds by the investor to his account.
Online trading started in India in February 2000 when a couple of brokers started
offering an online trading platform for their customers.
Exchange
The client is
though his
intimated about Receives the
owns account
the benefits
The execution of
of investor due to Online Investing:it money and
and receives
the deal by e-mail. completes the
from the client
Pays the broker settlement
account.
pending physical
delivery.
a) Independence and freedom due to enjoyed by an individual access to the markets: This is
conceivably the greatest advantage of online brokerages. A novice investor with an Internet
connection can know there all time stock quotes, historical stock price trends, have a handle
on market events, access vast amounts of economic and market analysis, do research on firms,
and interact with other investors via forums or chat rooms. This, in combination with time, can
transform even the most novice investor with an active interest in investments into a
knowledgeable and powerful investor.
g) Speed of trade execution: Keeping time in mind, online trading is much quicker – as far as
accessibility and availability to investment information and execution of trades areconcerned.
Online have decreased the time for total completion of a trade from the regular T+3 days to a
matter of minutes.
Firstly, because of the sheer size of resources and contacts, institutional investors almost always
get exclusive access to the hottest Initial Public Offering (IPO) deals before it goes into the
markets. Individual investors usually gain access to these stocks after the initial price gain is
already lost. Online brokerages do offer IPO deals –provided the trading account has between
$100,000 to $500,000.
The stock Exchange must ensure that brokers have sufficient, verifiable information
about clients, which would facilitate risk evaluation of clients.
Brokers must enter into an agreement with clients spelling out all obligations and
rights. This agreement should also inter alia, the minimum service standards to be
maintained by the broker for such service specified by SEBI/Exchange for the
internet based trading from time to time. Exchange will prepare a model agreement
for this purpose. The broker agreement with clients should not have any clause that
is less stringent/contrary to the conditions stipulated is the model agreement.
Investor Information:
The broker web site providing the internet based trading facility should contain
information meant for investor protection such as rules and regulations affecting
client broker relationship arbitration rules, investor protection rules etc. The broker
web site providing the Internet based trading facility should also provide and display
prominently, hyper link to the web site/page on the web site of the relevant stock
exchange (s) displaying rules/ regulations/ circulars. Ticker/quote/order book
displayed on the web-site of the broker should display the time stamp as well as
source of such information against the given information.
Risk Management:
Exchanges must ensure that brokers have a system-based control on the trading
limits of clients, and exposures taken by clients. Brokers must set predefined limits
on the exposure and turnover of each client. The broker systems should be capable
of assessing the risk of the client as soon as the order comes in. The client should
be informed of acceptance/rejection of the order within a reasonable period. In case
system based control rejects an order because of client having exceeded limits etc.,
the broker system may have a review and release facility to allow the order to pass
through.
Contract Notes:
Contract notes must be issued to clients as per existing regulations, within 24 hours
Cross Trades:
As a matter of abundant precaution, the committee seeks to reiterate that as III the
case of existing system, brokers using Internet based systems for routing client
orders will also not be allowed to cross trades of their clients with each other. All
orders must be offered to the market for matching.
Enforcement: A separate working group has been set to look into the
surveillance and enforcement related issues arising due to Internet based securities
trading. However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade
Practices Regulations, 1995) would apply to all transactions involving securities or
financial services, regardless of the medium.
The major events that will take place in the Indian Capital Market are introduction of
index-based futures trading on internet. Trading on internet means that the
investor’s will actually buy and sell the stocks on-line through the net. A committee
was setup by SEBI to develop regulatory parameters for use internet trading. SEBI
approved the report on the committee. SEBI decided that internet trading could
take place in India within the existing legal framework through use of order routing
system, which will route order from client to brokers, for trade execution on
registered stock exchanges. The broad also took note of the recommended
minimum technical standards for ensuring safety and security of transaction
between clients and brokers, which will be forced by the respective stock
exchanges.
Profit in time: Investor can make profits by selling shares when the going is good.
They do not have to instruct their brokers on the cut off price to sell shares.
Ease and transparency: Since the broking, bank and demat account are all
electronically connected, all transaction get updated, demat account shows the
latest stockholding statement while the bank account shows the balance amount
after buying or selling of shares.
Precaution: Check for hidden costs of broker’s age. Beware of net seamstress.
Never double click the mouse during execution of trade avoids cyber cafes and
change password regularly.
Less fees: shares traded online require no human intervention to match buys and
sells. This means that commission costs are cut dramatically for the frequent
investor.
Market timings:
Trading on the derivatives segment takes place on all days of the week
(except Saturdays and Sundays and holidays declared by the
Exchange in advance). The market timings of the derivatives
segment are:
COMPANY PROFILE
Bonanza a leading Financial Services & Brokerage House working diligently since
1994 can be described in a single word as a "Financial Powerhouse". With
acknowledged industry leadership in execution and clearing services on
Exchange Traded Derivatives and cash market products. Bonanza has spread its
trustworthy tentacles all over the country with more than 1025 outlets spread
across 340 cities.
It provides an extensive smorgasbord of services in equity, commodities, currency
derivatives, wealth management, distribution of third party products etc. Keeping in
par with the modern tech-savvy world , Bonanza makes an integrated and
innovative use of technology; it also enables its clients to trade online as well as
offline and the strategic tie-ups with the latest technology partners has earned
Bonanza this prestigious place in one of the top brokerage houses in the country.
Client -focused philosophy backed by memberships of all principal Indian Stock and
Commodity Exchanges makes Bonanza stand apart from its competitors and a
preferred service provider in the industry for value-based services.
ACHIEVEMENTS
3. 6th in terms of trading terminals in for two consecutive years 2007- 2008*.
The company has Corporate Tie ups with Birla Sunlife ,Bajaj Allianz, ICICI
Prudential, SBI , Aviva , Kotak Mahindra and Reliance for Life Insurance and
General Insurance.
2. Insurance
• Life Insurance
• General Insurance
3. PMS
4. Share Broking
5. IPO
6. Currency Derivatives
7. Share Broking
8. Commodity Broking
.
COMPETITORS
RESEARCH METHODOLOGY
Primary Data.
Secondary Data.
project other than the one at hand. It is gathered and recorded by someone
else prior to current needs of the researcher. It is less expensive than the
primary data.
SECONDARY DATA
Secondary data was collected from Ludhiana Stock Exchange
Scope of study:
The study is limited to Ludhiana Stock Exchange , Firoz Gandhi Market Ludhiana
Data Collection:
2) www.nseindia.com
3) www.bseindia.com
4) www.on-linetrading.com
For the successful research the manipulation of certain things, concepts, and
symbols for the purpose of generalization is inevitable. Research is simply the pursuit of
truth with the help of the study.
Analysis and Interpretation
According to this survey we find that 60% of people find very easy to
operate and 15% people find diffcuilt two operate and 10% and 15%
people find no secure and any other. so we can say that online trading
is very simple to operate and easy to understand.
3. what amount of money you invest normally ?
35
30
25
50000
20
100000to150000
15 150000to200000
10 AnyOther
5
0
Money
(c) Both
According to this survey we find that 30% people says yes and 70%
people says no. so we can find that on line trading is not settled in
the Indian psyche because some people are not experience towards
online trading.
7. What shortcomings do you feel in Indian On-Line trading ?
According to this survey we find that 55% people Prefer T.V and 25%
people prefer newspaper and 10% people prefer magazines and 10%
people prefer journals. So we can suggest that mostly people are very
easily grapped the knowledge through T.V.
FINDINGS
1. For how long you have been trading with on line-trading?
2. How will you describe your experience with on-line trading till date?
According to this survey we find that 60% of people find very easy
to operate. and15% people find no secure. so we can say that online
trading is very simple to operate and easy to understand
.
10. The USP of Bonanza Portfolio Ltd.
11.Biggest Competitor of Bonanza Portfolio Ltd.
14. How often do you attend the training Session organized in the company?
15.The Reasons for not attending the Training Sessions
CONCLUSION
Online trading is the new concept in the stock market. In India, online trading is still
at its infancy stage. Online trading has made it easy to trade in the stock market as
now people can trade while sitting at their home. Now stock market is easily
accessible by the people. There are some problems while doing the trade through
the internet. Major problem faced by online trader is that the investors are loyal to
their traditional brokers, they rely upon the suggestions given by their brokers.
Another major problem is that the people don't have full knowledge regarding
online trading. They find it difficult to trade themselves, as a wrong entry made by
them, can bring them huge losses.
Nevertheless to say that online trading has the bright future as the percentage of
the trade done through online trading is increasing day by day.
LIMITATIONS
Despite of the training my level best, there were still some limitation
which I think remains there to draw fruitful conclusion. There were
some practical problem which come across and could not be properly
death with
As a client one will access the NSE through a server of the online
brokerage and this may involve queuing delays
If one like to ask his broker "Aaj kya achcha lag raha hai" he may not
be able to do so. If he want advice on a particular stock in his portfolio
he may not even be able to get that.
Suggestions
The introduction of the Internet has surprisingly changed our way of life as a
society. It has defined the way we do business and the way we correspond.
The Internet has opened many opportunities for online trading. The financial
industry revolves around the Internet. Every thing is just a few clicks away.
This makes online trading most convenient. But there are still investors who
prefer the old fashion way of offline trading and they mainly prefer offline
trading for security reasons.
Internet has introduced a way for consumers to manage their money online.
Not to mention, Internet has transformed the way investment companies
operate their business and has made it easy for private investors to gain
straight access to a range of different markets and online tools that were at
one point only reserved by the use of investment professionals. Consumer
investing and online trading has dramatically changed over the last decade.
Online trading dynamically continues to be redefined. Services have
expanded to include integrated management of additional financial
accounts. Not to mention, it has subsequently expanded in conjunction with
ground-breaking improvements to the traditional trading interface, such as
telephone interface systems.
Of course, online trading has many pros. There are several wonderful
reasons to invest online and consider online trading.
1. Money saving opportunities The amount of money you save depends
primarily on the online brokerage firm that you choose. No two firms are the
same. There may be different regulations, similar to bank regulations. There
are minimum deposits required that must be maintained. As mentioned
above, this will depend on the online brokerage firm.
2. Instant online access You can gain instant access to your account, the
value of your portfolio updates immediately before your eyes.
3. Enter online trades at anytime You can enter online trades at anytime and
from anywhere. This is very convenient if you live in a different time zone
than the country you are trading in. Not to mention, it is especially fit for
investors with busy schedules.
4. With online trading you are in charge You are in control of your
investments. No sales pitches and no hassle. You decide where to invest
your money.
BIBLIOGRAPHY
BOOKS
• C. R. Kothri, Research Methodology, Vishwa
Prakshan
MAGAZINES
• Business World
• LSE’s Magazine
INTERNET SITES
• www.nseindia.com
• www.bseindia.com
• www.on-linetrading.com
• www.sebi.gov.in
• www.lse.co.in
Questionnaire
Dear respondent,
(c) Both