FINANCIAL MANAGEMENT

PROJECT
Study on equity trading preferences, behaviors and problems
associated with online share trading practices in India.

Submitted to

Dr. S Srinivasan
Professor
National Institute of Technology, Trichy

Submitted by

Abhay Vishnu V S 215117060

Arjun J Poothara 215117018

NATIONAL INSTITUTE OF TECHNOLOGY, TIRUCHIRAPPALL

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Table of Contents

1 Abstract ..............................................................................................................................3
2 Introduction ..................................................................................................................... 4
3 Research Objectives ....................................................................................................... 5
4 Research Methodology ................................................................................................ 5
Research Design ....................................................................................................6
Sampling Methodology .........................................................................................6

5 Literature Review ......................................................................................................... 12

6 Questionnaire .............................................................................................................. 17
7 Analysis and Interpretation ......................................................................................... 18

8 Conclusion .................................................................................................................... 25

9 Reference ...................................................................................................................... 26

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1 ABSTRACT

The project report has been prepared as a study on online stock trading preferences, behaviors and
problem associated with online share trading in India. Online trading was initiated by NSE in India
and soon after the other exchanges also followed it. There are two types of online trading
companies one is the banking online trading companies and the other is non-banking trading.

Major findings indicate that out of a survey of 90 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 our research project we have seen that most of the
respondents feel online trading, a secure way of investing into stock market still a few of them feel
that it’s unsafe and a bit complicated but they possess information about online trading. Inadequate
availability of technology, chances of fraud and Poor communication network were identified as
the major problems associated with online share trading in India through the use of Garrett Charts.

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2 INTRODUCTION

The business of stock exchanges was originally done in mere two-and-half hours in the trading
rings through open outcry system. An investor, wishing to trade, had to call his broker’s office to
place his order. In turn it is the duty of the broker to pass on the order to his man assigned on the
trading ring. The broker’s man would then go to the stock counter to go through the transaction,
all the while jostling with a group of other sub-brokers who are also trying to trade on the counter.
Innumerable difficulties were there in the system since the broker’s man would have to revert to
his office to consult with the client if the price quoted did not match the order. All these took place
in an era where there was no proper communication system. In the absence of internet and business
channels on television, the only way to obtain the live stock quotes was the stock brokers. The
final closing price of a stock could be checked through the daily bulletin that was published every
evening by the stock exchange.

Internet trading is a method of trading in securities whereby it is possible for the investors to buy
and sell stocks through the internet. It is also called on-line trading; the trading takes place under
the “Order Routing System” [ORS] through registered stock brokers on behalf of clients for
execution of trades on stock exchange. Under this method of trading the information about
securities, brokers, dealers, prices etc., are communicated through the official websites of
concerned stock exchanges so as to facilitate buying and selling of securities.

Current developments are essentially converting off line practices to an online equivalent. The
private investor who may have received a stock broker’s report through the post and looked up
share prices in the morning paper can access the information online with the current market price
being available. The investor who might have made calculations about trends and valuations by
hand can down load the information from the web into a spreadsheet or a personal finance program
that runs on their PC. That same private investor who usually to rings up a stock broker to buy or
sell, a process that might take some time when the market is busy, can issue that same instruction
online for immediate execution.

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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.

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.

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:

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 National Stock Exchange

In order to lift the Indian stock market trading system on par with the international standards.
On the basis of the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit
and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.

NSE provides exposure to investors in two types of markets, namely:

1. Wholesale debt market
2. Capital market

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

Advantages of trading at NSE

• Integrated network for trading in stock market of India
• Fully automated screen-based system that provides higher degree of transparency
• Investors can transact from any part of the country at uniform prices
• Greater functional efficiency supported by totally computerized network

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Bombay Stock Exchange

Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as
the BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by
providing it with an efficient capital raising platform.

Today, BSE is the world's number 1 exchange in the world in terms of the number of listed
companies (over 4900). It is the world's 5th most active in terms of number of transactions
handled through its electronic trading system. And it is in the top ten of global exchanges in
terms of the market capitalization of its listed companies (as of December 31, 2009). The
companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb,
2010.

The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index.
Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and
options on the index are also traded at BSE.

On – line share trading in India

Many Indian investors are logging into the internet to put through their stock market trades. The
number of investors registered for online stock trading has raised three-fold to 30 lakhs, over the
past two years. Online trades now account for about 55 percent of the daily turnover on the NSE,
up from about 4 percent in 2004. According to brokerage industry estimates, ICICI Bank claims
to have a 60.65 percent share of the market, with eight lakh users on ICICI direct, its online trading
platform. The democracy of online trading is the key factors why the retail investors prefer to
transact over the internet their broker.

What makes the rise of the online investor in India is not a price that has fueled the boom. Thanks
to the news channel, volumes are growing faster in the non –metros, where transparency is low in
offline trading. Such high channel migration has changed the broking landscape from what it was

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in the late 1990s. The days are gone where the customers were made to pay higher charges by
small brokers, since they weren’t aware of the market rates. Traditional brokers are now
scrambling to scale up their online operations.

3 RESEARCH OBJECTIVES

The objectives of my research project are –

1. To determine the growth and future of online trading industry in India

2. To analyze the problem faced by online share traders

3. To offer suggestion based on the problem faced by online share traders
4. To understand the customer perception of online trading.
5. To find out the important factor which do mostly affect to the customer
6. To develop a good strategy and process that improves the business of the organization

4 RESEARCH METHODOLOGY

The collection of primary data using Questionnaires and Garrett’s ranking table. The questionnaire
will be filled by around 90 people who will be mainly from Trichy and Kerala. The sample will
consist of people who are employed in Financial Sector and MBA students.

Henry Garrett Ranking Techniques

This technique was used to evaluate the problems faced by the policy holders of Health Insurance
policy. In this method, the policy holders were asked to rank the given problem according to the
magnitude of the problem. The orders of merit given by the respondents were converted into
ranks by using the following formula.

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 100R ij  0.5
Percentage Position =
Nj

Where,

Rij = Rank given for ith item jth individual

Nj = Number of items ranked by j th individual

The percentage position of each rank thus obtained was converted into scores by referring
to the table given by Henry Garrett. Then for each factor the scores of individual respondents
were added together and divided by the total number of respondents for whom the scores were
added. These mean scores for all the factors were arranged in the order of their ranks and
inferences were drawn.

GARRET’S RANKING TABLE

PERCENTAGE SCORE PERCENTAGE SCORE

0.09 99 52.02 49
0.20 98 54.03 48
0.32 97 56.03 47
0.45 96 58.03 46
0.61 95 59.99 45
0.78 94 61.94 44
0.97 93 63.85 43
1.18 92 65.75 42
1.42 91 67.48 41
1.68 90 69.39 40
1.96 89 71.14 39
2.28 88 72.85 38
2.63 87 74.52 37
3.01 86 76.12 36
3.43 85 77.68 35
3.89 84 79.12 34
4.38 83 80.61 33
4.92 82 81.99 32
5.51 81 83.31 31

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 6.14 80 84.56 30
6.81 79 85.75 29
7.75 78 86.89 28
8.33 77 87.96 27
8.17 76 88.97 26
10.16 75 89.94 25
11.03 74 90.83 24
12.04 73 91.67 23
13.11 72 92.45 22
14.25 71 93.19 21
15.44 70 93.86 20
16.69 69 94.49 19
18.01 68 95.08 18
19.39 67 95.62 17
20.93 66 96.11 16
22.32 65 96.57 15
23.88 64 96.99 14
25.48 63 97.37 13
27.15 62 98.72 12
28.86 61 98.04 11
30.61 60 98.32 10
32.42 59 98.58 9
34.25 58 99.82 8
36.15 57 99.03 7
38.06 56 99.22 6
40.01 55 99.39 5
41.97 54 99.55 4
43.97 53 99.68 3
45.97 52 99.80 2
47.98 51 99.91 1
50.00 50 100 0

RESEARCH DESIGN

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

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Exploratory and Descriptive Research
The research is primarily both exploratory and descriptive in nature. The sources of information
are both primary and secondary. The objective of the descriptive research study is typically
concerned with determining the frequency with which something occurs. A well-structured
questionnaire and Garrett’s ranking table was prepared for the primary research and personal
interviews were conducted to collect the responses of the target population.

SAMPLING METHODOLOGY

Sampling Technique

Initially, a rough draft was prepared a pilot study was done to check the accuracy of the
Questionnaire and certain changes were done to prepare the final questionnaire to make it more
judgmental.

Sampling Unit

The respondents who were asked to fill out the. These respondents comprise of the persons dealing
in stock trading. The people have been interviewed in the open market, in front of the companies,
telephonic interviews and through other sources also.

Sampling Size

The sample size was restricted to only 90 respondents.

Sampling Area

The area of the research was Trichy and Kerala.

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5 LITERATURE REVIEW

Scope of Online Trading

In a country like India where penetration of online trading business services is very low, there is
a great scope for growth for any online business company now. The Government of India after
realizing the importance of saving the entire stock exchange industry from closing down which
was running in to huge losses before 90’s, decided to formulate New policy. The draft of the
new policy was circulated in December 1998 to all concerned for comments. The cabinet
approved the online trading ventures with the MNC’s. During those years because of
announcement of Lok Sabha Elections in April 1999, ventures could not be implemented to
existing service providers up till 2000. But that new policy of venturing in the online world of
business is now totally in force . Gradually from 2000 the online business has expanded so far.

Current Scenario of Online Trading

Dealings outside the country have reached to such a success for the enterprises that the amount
of tax has been lowering gradually and results to their profit in every quarter .As the economy is
growing with a pace forward , the desire of each and every individual is showing a greater ease
in terms of financial transaction, possession , delivery and every aspect . Online trading is fruitful
not only for the consumers but for the suppliers as well because they won’t require the possession
of goods to be further sold. A product is full of questions before being sold and those all question
can be availed with the answers at the website online for everyone. In the stock market, the
competition is on such a level of mastery that it can be accessed by every individual via various
peripherals.

Position of Online Trading

In business today electronic commerce (e-commerce) is one of the common topics being
discussed. Kalakota and Whinston (1996) defined e- commerce as "The buying and selling
of information, products and services via computer networks, the computer networks

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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. 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
(2008) of Internet users in 44 countries nearly 220 million of the estimated 500 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.

Online Trading and Customer Satisfaction

Applying conventional trading systems in India leads to many aspects of problems like
manipulation, lots of paperwork, insiders' illegal activities and etc. These problems cause
traders' dissatisfaction and the lack of technological foundations creates an inefficient
market. Stock market is growing up and the number of traders rapidly increasing, therefore
following conventional method in handling and controlling the market, may in turn directs us
to lose the potential power of this market in order to integrate the traders' small capital. With no
doubt, traders leave the market where there is no appropriate surveillance over the activities
because the unsatisfied customer will not take all the risk in stock market. So it is clear that if

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stock market as a supervision organization could not offer suitable services to the traders,
market expansion is meaningless. In other words, it seems that providing and recovering service
quality in this market may enhance traders' satisfaction and encourage investing more and
more. But how the traders' satisfaction can be measured and how can be proved that, there is a
dramatically gap between what traders looking for and what traders receive as a service?

Different Models for Measuring Service Quality

According to literature, service quality dimensions identified by different authors. These
dimensions are measured in order to find out the degree of satisfaction in current market and
find the relationship between service qualities dimensions which online trading can provide and
traders' satisfaction.
Leading researcher (Berry) identified ten determinant of service quality. There are: reliability,
responsiveness, competence, access, courtesy, communication, credibility, security,
understanding and tangibles.Reliability involves consistency of performance and dependability.
It means that the firm performs the service right the first time. It also means the firm honors its
promises. Especially it involves: accuracy in billing, keeping records correctly, and performing
service at the designated time. Responsiveness concerns the willingness or readiness to provide
service. It involves timeliness of services that means – mailing a transaction slip immediately,
calling the customer back quickly and giving prompt service. Competence means possession
of the required skills and knowledge to perform the services. It involves: knowledge and
skill of the contact personnel, knowledge and skill of operational support personnel,
research capability of the organization. Access involves approach, ability and ease of contact.
It means: the service is easily accessible, waiting time to receive service is not extensive, hours
of operation are convenient and location of service facility is convenient. Courtesy involves
politeness, respect, consideration, and friendliness of contact personnel. It includes –
consideration for the customer's property, clean and neat appearance of public contact personnel.
Communication means keeping customers informed in language they can understand. It also
means listening to customers. It may mean that the company has to adjust its language for
different customers- increasing the level of sophistication with well- educated customer and
speaking simple and plainly with a novice. It involves: explaining the service itself, explaining

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how much the service will cost and assuring the customer that a problem will be handled.
Credibility involves trusts worthiness, believability, honesty; it involves having the customer's
best interests at heart. Security is the freedom from danger, risk or doubt. It involves: physical
safety, financial security and confidentiality. Understanding the customer means making the
effort to understand what the customer's needs are. It includes: learning the customer’s specific
requirements, providing individualized attention and recognizing the regular custom. Tangibles
includes the physical evidence of the service: physical facilities, appearance of personnel,
tools or equipment used to provide the service, physical representations of the service, such as
a plastic credit card or bank statement, other customers in the service facilities
A number of research workers and others have tried to identify key determinants by which
a customer assesses service quality and consequently result in satisfaction or not.

Leading researcher (Parshuraman) came up with five determinants that can be used to measure
service quality. This scale named SERVQUAL and has been developed for the service sector.
It has five generic dimensions or factors and is stated as follows:
1. Tangibles: Physical facilities, equipment and appearance of personnel.
2. Reliability: Ability to perform the promised service dependably and accurately.
3. Responsiveness: Willingness to help customers and provide prompt service.
4. Assurance (including competence, courtesy, credibility and security): Knowledge and
courtesy of employees and their ability to inspire trust and confidence.
5. Empathy (including access, communication, understanding the customer): Caring and
individualized attention that the firm provides its customers.

Motivation

As it was mentioned, stock exchange plays a critical role in each country's economy and
understanding of traders’ needs, as a main customer of this market, becomes an important factor.
In this situation, satisfaction has great effect on traders retention and more important attract
potential traders and as a result reach to more efficient market and the possibility of market
expansion will be feasible. Good customer service quality is the main factor in creating
satisfaction and enhances the level of traders' satisfaction. So it is desirable for responsible in

15
stock exchange to uncover what attributes traders utilized in their assessment of service quality
and satisfaction and which attributes are more important.Recently many stock exchanges all over
the world have used the Internet as a new tool to offer their customers a variety of services 24
hours a day and offer better services to traders. But these steps are not passed in India yet and
traders suffer from insufficient services. Conventional trading system, poor surveillance power,
limit services and so many others short comings, create a situation that increase the risk of
investing in this market, create a suitable situation for price manipulation, wash sales and so
many other frauds which in return lead to traders dissatisfaction and inefficiency of Indian
stock exchange.

Henry Garrett Ranking Techniques

This technique was used to evaluate the problems faced by the policy holders of Health
Insurance policy. In this method, the policy holders were asked to rank the given problem
according to the magnitude of the problem. The orders of merit given by the respondents were
converted into ranks by using the following formula.

100R ij  0.5
Percentage Position =
Nj

Where,

Rij = Rank given for ith item jth individual

Nj = Number of items ranked by j th individual

The percentage position of each rank thus obtained was converted into scores by referring
to the table given by Henry Garrett. Then for each factor the scores of individual respondents
were added together and divided by the total number of respondents for whom the scores were
added. These mean scores for all the factors were arranged in the order of their ranks and
inferences were drawn.

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6 QUESTIONNAIRES

1.What is your education qualification?

a. Senior Secondary b. Higher Secondary c. Graduate d. Post Graduate
e. Professional degree

2 What percentage of your monthly household income could be available for investment?
a. Less than 5% b. 5-10% c. 10-15% d. More than 20%

3 Where do you often invest your money?

a. Equity b. Mutual fund c. Insurance d. Fixed deposits e. Others

4 What is the primary objective of your investment?

a. Capital appreciation b. Source of income c. Retirement planning d. Wealth
preservation e. Others

5 To operate a computer is easy for me

a. Strongly agree b. Agree c. Can’t Say d. Disagree e. Strongly disagree

6 Online trading is a secure way of trading?

a. Strongly agree b. agree c. Can’t say d. Disagree e. Strongly disagree

7 online trading is easy and fast way of trading?

a. Strongly agree b. agree c. Can’t say d. Disagree e. Strongly disagree

8 Introduction of online trading helped to attract the new Investors thus increasing the
trading volumes at Stock Market?
a. Strongly agree b. agree c. Can’t say d. Disagree e. Strongly disagree

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9. Rank the Problems faced during online share trading from a scale of 1 to 8, with scale 1
denoting most important problem and scale 8 denoting the least important one.

Inadequate availability of technology

Risk of system failure

Lack of professional management

High Transaction cost

Lack of sufficient information

More chances of fraud

Poor communication Networks

Lack of transparency

7 ANALYSIS AND INTERPRETATION

Below is the analysis done while doing the study on Online Trading in India.

1 What is your education qualification?

Education qualification Response

Senior Secondary 3%
Higher Secondary 10%
Graduate 39%
Post Graduate 16%
Professional degree 32%

Interpretation

The people who are dealing with the stock market either online or offline. Most of them are
graduate, 39% of the total respondent who are dealing with the stock market are graduate, then
16% are post graduate and 32% 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 pattern

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2 What percentage of your monthly household income could be available for investment?

Monthly household
income for Investment Response
Less than 5% 19%
5-10% 41%
10-15% 29%
15- 20% 6%
More than 20 % 5%

Interpretation

According to the data 19% of the total respondent invest less than 5% of their income, 41%
respondents are saying that they invest 5%-10% of their monthly income (which is highest)
Whereas the 29% investor do the investment 10%-15% of their total monthly income,6 invest
between 15%-20% of the total income and only 5 % does more than 20% of their income invest
in the market

3. Where do you often invest your money?

Education qualification RESPONSE

Equity 40%
Mutual fund 5%
Insurance 6%
Fixed Deposits 35%
Others 14%

Interpretation

Highest number of respondent is having their investment in the equity that is 40% whereas the
investment available for the mutual fund, term deposit and insurance is 5%, 35% and 6%. So, the
respondents like to invest in equity and fixed deposits. It shows the opportunity for online trading

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4 What is the primary objective of your investment?

Primary objective for

Investment RESPONSE
Capital appreciation 24%
Source of income 54%
Retirement planning 7%
Wealth preservation 7%
Others 8%

Interpretation

23% 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 (54%). The retirement plan, wealth
preservation and other are only 22 %

From the analysis we can have idea that the main objective of the respondents is to earn the money
through trading in stock market 54 % 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.
So, we can say that there is a huge potential in the market for the trading in the stock market

5 To operate a computer is easy for me

Ease of operating Computers RESPONSE

Strongly agree 51%
Agree 31%
Can’t Say 4%
Disagree 8%
Strongly disagree 6%

Interpretation

82% (51+31) of the total respondent believe that operating a computer is easy for them whereas
14% of the respondent is having problem to operate a computer while 4% said can’t say. So, most
people doing Online trading are comfortable with using computers.

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6 Online trading is a secure way of trading?

Interpretation

71% (37 +34) of the respondent is having a positive thinking that online trading is a secure way
of trading whereas 18% (14+4) 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.

7 Online trading is easy and fast way of trading?

Easiness of Online trading RESPONSE

Strongly agree 34%
Agree 30%
Can’t Say 5%
Disagree 16%
Strongly disagree 15%

Interpretation

64% of the total respondent believe that online trading is an easy task Whereas 31% of the
respondent believes that to deal with online Trading is not an easy task and 5% was confused to
anything about that the trading via internet is an easy task or not.There is a difference between
the people who believe and who don’t believe in speed and easiness of online trading is 33 %.
So, there is a need for proper training to do trading online

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8 Introduction of online trading helped to attract the new Investors thus increasing the
trading volumes at Stock Market?

Interpretation

77% (36 +41) 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 doesn’t affect the trading volume

9. Garrett’s Scale Analysis

Question: Rank the Problems faced during online share trading from a scale of 1 to 8, with
scale 1 denoting most important problem and scale 8 denoting the least important one.

Table 1: Problems faced during online share trading from a scale of 1 to 8

SL No: Problems I II III IV V VI VII VIII Total

Inadequate availability of
1 technology 17 13 10 14 11 10 8 7 90
2 Risk of system failure 10 8 13 9 10 11 15 14 90
Lack of professional
3 management 4 12 15 15 10 9 10 15 90
4 High Transaction cost 13 12 8 10 12 14 13 8 90
5 Lack of sufficient information 5 10 8 12 11 10 16 18 90
6 More chances of fraud 14 12 12 13 13 10 8 8 90
7 Poor communication network 15 14 11 8 13 11 10 8 90
8 Lack of transparency 12 9 13 9 10 15 10 12 90
Total 90 90 90 90 90 90 90 90

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Table 2: Garrett’s value from Garrett’s Table

SL No: Percent Position Garrett Value

1 6.25 80
2 18.75 68
3 31.25 60
4 43.75 53
5 56.25 47
6 68.75 41
7 81.25 33
8 93.75 20

100R ij  0.5
Percentage Position =
Nj

Table 3: Calculated Garrett’s Score

Total
Sl. Garrett’s
no Problems I II III IV V VI VII VIII Score
Inadequate availability of
1 technology 1360 884 600 742 517 410 264 140 4917

2 Risk of system failure 800 544 780 477 470 451 495 280 4297
Lack of professional
3 management 320 816 900 795 470 369 330 300 4300

4 High Transaction cost 1040 816 480 530 564 574 429 160 4593

5 Lack of sufficient information 400 680 480 636 517 410 528 360 4011

6 More chances of fraud 1120 816 720 689 611 410 264 160 4790

7 Poor communication network 1200 952 660 424 611 451 330 160 4788

8 Lack of transparency 960 612 780 477 470 615 330 240 4484

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Table 4: Ranking of Problems

Total Garretts
RANK Problems Score Average Garretts Score

1 Inadequate availability of technology 4917 54.63

2 More chances of fraud 4790 53.22

3 Poor communication network 4788 53.20

4 High Transaction cost 4593 51.03

5 Lack of transparency 4484 49.82

6 Lack of professional management 4300 47.78

7 Risk of system failure 4297 47.74

8 Lack of sufficient information 4011 44.57

Inadequate availability of technology, chances of fraud and Poor communication network were
identified as the major 3 problems associated with online share trading in India through the use of
Garrett Charts.

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8 CONCLUSION

Major findings indicate that out of a survey of 90 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. The online trading is growing with a rapid pace with the rising level
of education among the customers. The other factors being that the Indian Investor nowadays
wants to deal himself in trading rather than depending upon other middlemen. They also consider
the factors like time saving in doing the online transactions, convenience etc. Although some
people feel that online trading is not secure but the people doing the trading online is happy about
the increasing security concerns among the companies.

Inadequate availability of technology, chances of fraud and Poor communication network were
identified as the major 3 problems associated with online share trading in India through the use of
Garrett Charts. Major hurdles for the growth of online stock trading are computer illiteracy, poor
infrastructure, risk adverse attitude of investors etc. So, with the growth of educated investors and
support from SEBI, online trading is sure to grow faster. When one buys a share of a company,
one would become a shareholder in that company. Equities (shares) have the potential to increase
in value over time.

Research studies have proved that the equity returns have outperformed the returns of most other
forms of investments in the long term. Investors buy equity shares or equity based mutual funds
because equities are considered the most rewarding, when compared to other investment options
if held over a long duration. However, this does not mean all equity investments would guarantee
similar high returns. Equities are high risk investments. Higher the risk, higher the potential
returns; high risk also indicates that the investor stands to lose some or all his investments if prices
move unfavorably. One needs to study equity markets and stocks in which investments are being
made carefully before investing.

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REFERENCES

[1] Nidhi walia & Ravinder Kumar, “online stock Trading in India”, An Empirical Investigation‟,
Indian Journal at marketing volume xxx VIII, April 2007.

[2] Madan Lal Bhasin, “E-Broking as a Tool” Journal of services Research volume 5
number 2 [Oct 2005 – mar 2006].

[3] S. Balasubramanian, P. Konana, and N. Menon, “Understanding online investors: An analysis

of their investing behavior and attitudes,” Working Paper. University of Texas, Austin, 1999.

[4] J. Ong, “An exploratory study of critical issues in online securities trading: The Hong Kong
perspective,” in Proc. 3rd International Conference on Electronic Business, Singapore, December
9-13, 2003.

[5] Dr. Dhanavandan S. Application of garret ranking technique: practical approach , Vol. 6(3)
Jul-Sep, 2016 , International Journal of Library and Information Studies

[6] S. Balasubramanian, P. Konana, and N. Menon, “Customer satisfaction in virtual

environments: A study of online investing,” Management Science, vol. 49, no. 7, pp. 871-889, July
2003.

[7] C. Chiu, “A study on importance and satisfaction of service quality for online stock trading,”
Journal of International Management Studies, vol. 6, no. 2, pp. 1-7, May 2011.

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