Você está na página 1de 83

A Project Study Report On Training Undertaken at

Anand Rathi Share & Stock Brokers Ltd. On-Line

Trading

Submitted in partial fulfillment for the Award of degree of Bachelor of Business Administration

Submitted by:Manish Loudi BBA Final Year

Submitted to: Dr. A.K. Gupta

University of Commerce College, Jaipur Batch: 2010-2012

Preface
Anand Rathi Mutual Fund Company Ltd. is one of the leading share broking companies, having its head office in Mumbai; it has its branches in almost all the parts of India. The company is not just a share broking house it is a wealth management company which manages the wealth of its clients. The company has appointed a large number of franchisees across India and treats its franchisees as its business partner. The company earns maximum of its revenue through brokerage. The project is On-Line Trading
1. As the title suggests the basic objective of project is to understand the appropriate

organizational structure of the ANAND RATHI SHARE & STOCK BROKERS LTD. LTD 2. To analyze the online trading and its process.

ACKNOWLEDGEMENT
I express my sincere thanks to my project guide Sushil Kumar Jain, Manager-Depository, for guiding me right from the inception till the successful completion of the project. I sincerely acknowledge him for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he had provided to me with all stages of this project. I would also like to thank HR Head of ANAND RATHI Dr. A.K. Gupta Sir, for their help and cooperation throughout our project.

(Signature of Student) Manish Loudi

EXECUTIVE SUMMARY

For management career, it is important to develop managerial skills. In order to achieve positive and concrete results, along with theoretical concepts, the exposure of real life situation existing in corporate world is very much needed. To fulfill this need, this practical training is required. I took training in Anand Rathi Share & Stock Brokers Ltd.. It was my fortune to get training in a very healthy atmosphere. I got ample opportunity to view the overall working of the company. This report is the result of my 45 days of summer training in Anand Rathi Share & Stock Brokers Ltd., as a part of M.B.A. The subject of my report is- Online trading.

TABLE OF CONTENTS CHAPTE R

DESCRIPTION Certificate from the Company Preface Acknowledgement Executive Summary Share & Stock Brokers Ltd Anand Rathi Share & Stock Brokers Ltd Research Methodology 3.1 Title of the Study 3.2 Duration of the Project 3.3 Objective of Study 3.4 Type of Research 3.5 Sample Size 3.6 Scope of Study 3.7 Limitation of Study Facts and Findings Analysis and Interpretation SWOT Conclusion Recommendation and Suggestions Bibliography Appendix

PAGE

1. 2. 3.

07 24 31 32 55 55 56 57 58 59 60 66 78 80 81 82 83

4. 5. 6. 7. 8. 9. 10.

Share & Stock Brokers Ltd


ONLINE TRADING INFRASTRUCTURE The emergence of online exchanges has facilitated faster transactions by providing online trading portals and brokerage houses ease and flexibility. The Internet has indeed

opened up new opportunities for conducting the business. The worldwide stock exchanges has made a major shift from the traditional method of trading and now conduct a bulk of its business online through its brokers and partners. In the developed countries majorly all the exchange transactions are conducted online. The trend took off slowly in India and the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) two of the largest exchanges in India have been conducting online trade successfully for some time. WHY ONLINE TRADING ENTERED LATE IN INDIA? The Indian exchanges and brokering houses have been very slow in moving their transactions online and the major reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed User Groups (CUGs). This issue was resolved between the Department of Telecommunications (DoT) and the Finance Ministry around 1998 and after that soon came the online trading portals like IL&FS investsmart, ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity related issue was perhaps the most important technological factor.RBI made regulation that it is mandatory for company to store at least 7 year financial and transactional data. In the non-stop, 24 hours a day, seven days a week world of investing, we are able to Obtain investment news around the clock Check quotes on exchanges all over the world day or night Easily compare one investment to another via numerous ratios, charts, graphs, and tables Screen for the best investments to fit our individual goals and requirements Trade stocks as easily and quickly as professional traders Calculate retirement needs based on various scenarios Regularly monitor portfolios and make necessary changes quickly and almost effortlessly Control the routing of individual trades for the best possible price and execution

Even many years after the launch of the first online brokerage firm, there remain a large contingent of individual investors who still pick up the phone and call their stock broker to buy and sell investments. However, every year a growing number of investors are placing their trades using online brokers. INDIAN EXCHANGES: NSE and BSE

The NSE and BSE are among the largest exchanges in the country handling very large daily trading volumes, support large amounts of data traffic, and have a very large nationwide network. The trading volume in year 2000 was huge with the average daily turnover in the capital markets segment at NSE is around Rs 2300 crore and in the derivatives segment, around Rs 1300 crore. The average daily traffic volume was around one million trades per day in the capital markets segment and around 50,000 trades per day in the derivatives segment and there were around 13,000 registered users in both segments and an average of around 9500 users is logged in at a time. At BSE the average daily turnover in 2001-2002 (April-March) was Rs 1244.10 crore and the number of average daily trades was Rs 5.17 lakh. THE NETWORK DESIGN Any online exchange should always be-on, safe, secure, redundant and should have adequate backup & recovery processes. The Vice President of NSE-IT G.M Shenoy tells that the basic design. Objective of NSE was to provide fair, equal and transparent access across all NSE nationwide locations and to provide connectivity to the trading members as soon as possible. RECOMMENDATIONS OF SEBI The SEBI has also played an important role in the issue of the guidelines regarding online trading so that the chances of fraud and misrepresentation are minimized. The stock brokers which are being registered with Securities Exchange Board of India (SEBI) will have to apply to stock exchanges for a formal permission. The following conditions must be fulfilled-

The online trading company must have a minimum net worth of Rs 50 lakh The encryption technology should be there in the system used by the brokers to ensure the provision for confidentiality ,security ,justifiability and reliability of data .The user id, first level and second level password, automatic expiry of passwords at the end of a reasonable period,

The brokers must maintain adequate back-up systems and data storage capacity which must be checked by the stock exchanges. SEBI has recently announced that to reduce the fraud cases each and every broking house has to give back the full amount of customer after each three month, they will have to show the zero balance of every customers account at the end of every 3 month

The minimum qualification must be laid down by the stock exchange to ensure that the persons hired by the brokers must have the proper qualification regarding trading so as to guide the clients and he can communicate regarding trading instructions.

To ensure the authenticity and accuracy of data a certification agency must be appointed using the certification technologies when notified by the government or the SEBI. The better client and the broker relationship to be maintained. To determine the risk associated with the clients the brokers must have the have sufficient verifiable information about clients and the stock exchange must ensure it. The clients must be taken into an agreement stating about all the obligations and rights including the minimum service standards to be maintained by the service provider broker for services specified by SEBI/exchanges for Internet-based trading from time to time.

The web site of the broker providing the online trading facility should contain information rules and regulations affecting client broker relationship, arbitration rules, investor protection rules, etc meant for investor protection. It 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 the source of such information.

An e-mail should be sent to he investor for the confirmation of his Order or trade. The limits of trading and exposure provided to the client must be set on system-based control and brokers and exchanges must ensure it. The limits must be predefined by the broker on the exposure and turnover of each client. The system of broker should be such that it is capable of assessing the risk of the client as soon as the order comes in. The system should inform the clients client the reports on margin requirements, payment and delivery obligations etc.

As per the regulations the Contract Notes must be issued to clients within 24 hours of the trade execution.

Cross trades of the clients will not be allowed with each other to the brokers using Internetbased systems for routing client order and all orders must be offered to the market for matching.

A separate working group has been set up to look into the surveillance and enforcementrelated issues arising due to Internet-based securities trading. However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices Regulations, 1995) will apply to all transactions involving securities or financial services, regardless of the medium

ONLINE TRADING

10

Online trading involves investment activity which takes place over the Internet and it does not require physical inclusion of the broker. An investor has to register with an online trading portal like Investsmart.in, ICICIdirect.com,Religare, motilaloswal.com and sharekhan.com and many companies like that and investor gets into an agreement with the firm to trade in different securities according to the terms and conditions given on the agreement. As the servers of the online trading portal are connected all the time to the stock exchanges and designated banks the order processing is done in real time and investors can also have updates on the trading. They can also check the status of their orders either through e-mail or through the interface that it cannot be accessed by a third party. Some options are usually given to users such as to link their bank account, Demat accounts and brokerage accounts into a single interface. A single window is also there for all exchanges and a single screen is there for the complete order routing mechanism. The hardware used comprises Web and application servers, switches, routers, firewalls and security devices, and specialized appliances. There are two broad models in play in the online brokerage space Bank-backed firms Entrepreneur-floated firms.

Bank-backed brokerages such as ICICIdirect and HDFC Securities have expanded on the basis of their brand name and the trust of investors in them. The integrated 3-in-1 accounts offered by these bank-backed brokerages help their parent bank by giving it accounts along with float income. In second case i.e. Entrepreneur-backed companies like Investsmart, Indiabulls, Sharekhan, Religare and IndiaInfoline have expanded by offering customers a mix of online and offline accounts, higher margin finance amounts and lower brokerage rates. Though the bank based has performed better but the latter have not lagged too far behind. The reason why online trading has developed over conventional offline brokerage firms is that this conventional method struggled with unfavorable economies. Staff cost is just one Example of it, as the markets opens for 335 minutes a day one dealer can at best execute 500 trades in a day while online company like ICICI direct executes 150,000-

11

200,000 trades a day on the National Stock Exchange alone accounting for 3-4% of NSE trades of 5 million a day. It would require a large amount of dealers to service this demand. Besides the salary costs it would also demand huge expenses in real estate and support systems. The offline model has got a downfall in the form of lower bandwidth and IT costs and the cost of bandwidth has fallen to one-eighth of what it was in 2000 giving online broking an advantage especially in the case of lower-volume retail investors. In 2004, 30% of volumes on the NSE comes from this and it gone up to 50% in year 2008-2009 providing explosive growth for online broking in India. To be a successful trading portal it will definitely depend on bunch of services provided by it for an end-user. Most of the portals charge a small registration fee and brokerage based on various conditions but it's important for the organization to keep focussed on customer-centric services and delivery models to actually enjoy the most attention. ADVANTAGES OF ONLINE TRADING 1. Provides with the Freedom of Information The Internet provides a new sense of controlling our financial future as the amount of investment information available online is truly outstanding. An investor can Know the price of any stock he desires at any point time on the internet. An investor can review the price history of any stock in chart format online An investor can follow in-depth the events happening in the market Helps an investor in receiving a wealth of free commentary and analysis about stock markets in the global economy Helps an investor to conduct an extensive financial research of any company he desires He may also consult with other investors online present around the world Some online stock broking companies provide real-time stock quotes, daily roundup of the stock market, expert commentary, and a deep community of fellow investors.

1. Provides Control to Investors Money

12

When an investor wants to buy or sell stock he no longer need to call his broker on the phone thus helping in the execution of the order instantly on the internet. 2. Provides access to the market Through the sophisticated information streams, dedicated trading platforms and Sophisticated tools the investor can access the markets which provide more agility in buying and selling stocks. 3. Ensures the best price for investors Some companies like Investsmart (IL&FS)specialize in the techniques which offers the best price deals for the buy and sell orders of the investors and traders providing the high level of transparency by displaying of information relating to the specific stocks and company profiles which helps in getting the best quote for the orders. 4. Online trading offers greater transparency Online trading offers the investors with greater transparency by providing with an audit trail. The process involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit into the depository account of the investor. All these stages are inspected which brings the transparency into the system. 5. Provides hassle free trading Online trading provides an integration of the bank account, trading account and demat accounts, which leads to easy and paperless trading for the client. 6. Online trading allows instant trade execution Online transactions helps in the quick execution of the entire trading transaction right from logging to the traders site and to the settlement of the bank account in a very short period of time. 7. It provides a level playing field Trading online gives even the smallest retail investor access to information which was earlier available only to the big traders. It has provided with a level playing field for all investors in the securities market.

8. Online trading reduces the settlement risk

13

This method of trading reduces the settlement risk for the investor as when a short sell order is played the orders are squared off at the specified cut-off time and are not allowed to be carried forward. 9. Provides live financial news & analysis The online sites also provide live terminals which provide streaming news to give investor the latest financial information as it occurs. 10. Online help desk Some companies provide online help desk an investor cancan contact the Tele Trading Executives from the Tele Trading team during and after market hours and can clarify questions. 11. Instant order trade confirmations Through online trading every trade is confirmed immediately and investor receives an on-screen confirmation following every trade with full details for the investors records which avoids costly errors that would have been discovered when it is too late. 12. Keeps Information Secure As per the guideline provided by SEBI every effort has to be made to keep the investors account and personal information secure by use of encryption technology and updated security technology to advanced fraud prevention measures. DISADVANTAGES OF ONLINE TRADING In online terminal, investor cant get customized expert advice, whereas in offline the broker gives suggestions according to investors strategy (i.e. short term or long-term) Brokerage is high compared to offline. Privacy is less due to hacking scandals Transactional errors due to technical problems

THE EMERGENCE OF ONLINE TRADING IN INDIA

14

The Indian trader is being fancied by the democratized world of online trading or also known as e-broking. The regular and attractive advertisements in the print media and electronic media have added to this fancy world But as we compare to the Western countries, in India online trading has not still grasped the market , but has done a very important amount of progress in the past years and the future of online trading is bright. That is why many new companies are coming into this form of business structure and the existing companies are changing to this new format besides offline and other traditional forms of business. With only a mere share of 10% online trading a combined gross turnover of around Rs. 12000-13,000 crores handled by the BSE and NSE together there is a much greater scope for online trading. The various players whos offering and facilities is different according to the individual investors. This will help us understand what processes and strategies competitors have adopted to attract and retain investors and satisfy their investments needs.

15

APPROVED STOCK EXCHANGES IN INDIA 1. 2. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Up. Stock Exchange, Kanpur. Vadodara Stock Exchange, Vadodara Koyambtour Stock Exchange, Coimbatore Meerut Stock Exchange, Meerut Mumbai Stock Exchange, Mumbai Over the Counter Exchange of India, Mumbai National Stock Exchange, Mumbai Ahmedabad Stock Exchange, Ahmedabad Bangalore Stock Exchange, Bangalore Bhuvaneshwar Stock Exchange, Bhuvaneshwar Calcuttaa Stock Exchange, Calcutta Cochin Stock Exchange, Cochin Delhi Stock Exchange, Delhi Guwahati Stock Exchange, Guwahati Hyderabad Stock Exchange, Hyderabad Jaipur Stock Exchange, Jaipur Canara Stock Exchange, Mangalore

16

18 19 20 21 22 23 24

Ludhiana Stock Exchange, Ludhiana Chennai Stock Exchange, Chennai M.P. Stock Exchange, Indore Magadh Stock Exchange,, patna Pune Stock Exchange, Pune Saurashtra Stock Exchange, Rajkot. Capital Stock Exchange, Kerala Ltd. Tiruvananthapuram, Kerala

17

MAJOR STOCK EXCHANGES IN INDIA

Vision "Emerge as the premier Indian stock exchange by establishing global benchmarks"

INTRODUCTION Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors.The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from theparticipation of market intermediaries.

18

In terms of organisation structure, the Board formulates larger policy issues and exercises over-all control. The committees constituted by the Board are broad-based.The day-to-dayoperations of the Exchange are managed by the Managing Director and a management team of professionals. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietory system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.

NSE The Organisation The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.

19

QUALIFICATIONS FOR MEMBERSHIP OF A RECONGNISED STOCK EXCHANGE Persons satisfying following conditions are eligible to be elected as a member of a recognised stock exchange(a) (b) he is not less then twenty-one years of age; he is a citizen of India, unless the governing body has relaxed this condition with the prior approval of the Central Government; (c) (d) (e) (f) he has not been adjudged bankrupt; he has not compounded with his creditors unless he has paid them fully; he has not been convicted for an offence involving fraud or dishonesty; he is not engaged as principal or employee in any business other than that of securities except as a broker or agent not involving any personal financial liability; (g) (h) he has never been expelled or declared a defaulter by any other stock exchange; he has not been previously refused admission to membership unless a period of one year has elapsed since the date of such rejection. A person eligible for admission as a member shall be admitted as a member only if he satisfies the following additional conditions(i) he has worked for not less than two years as a partner with, or'an authorised assistant or authorised clerk or remisier or apprentice to a member; or (ii) he agrees to work for not less than two years as a partner with or representative member with another member and to enter into bargains on the floor of the stock exchange and not in his own name but in the name of such other member, or (iii) he succeeds to the established business of a deceased or retiring member who is his father, uncle; brother or any other person who is in the option of the governing body a close relative.

20

CORPORATISATION OF STOCK EXCHANGE The SEBI approved the Kania Committee report on corporatisation of the stock exchange on 29trh November 2002. A uniform model of corporatisation and dematualisation has been adopted for all exchanges from a not for profit entity into a for profit one. There is a serious attempt to free the stock exchange from the clutches of brokers by separating the trading and administration activities of stock exchange. In the new arrangement, brokers have no say in the administration of an exchange. A broker now gets only trading right after paying the fees fixed by the exchange. The ownership right vests in shareholders of the corporatised exchange. The shares of an exchange can also listed on other Exchange.

INDICES IISL Indices

Major Indices

Other Indices CNX Index CNX Bank Index CNX FMCG Index CNX PSE Index CNX MNC Index CNX Service Sector Index IT Sector

S&P CNX Nifty

CNX Nifty Junior CNX 100 S&P CNX 500 CNX Midcap * S&P CNX Defty

21

CNX Midcap 200 **

S&P CNX Industry Indices Customized Indices CNX Energy Index CNX Pharma Index

* CNX Midcap - Introduced from July 18, 2005 ** CNX Midcap 200 - Discontinued from July 18, 2005

Name of Share Price Indices Changed On 28 July 1998, main Share price indices have been renamed as follows: Old Name New Name

22

NSE-50 Crisil 500

S & PCNX Nifty S & PCNX-500

Main Share Price Index in Famous Share Market of the World

Mumbai

DOLEX SENSES S& PCNX NIFTY FIFTY

New York Tokyo Frankfurt (Germany) Hong Kong Singapore

DOW JONES NIKKEI MID DAX HANG SENG SIMEX STRAITS TIMES

Anand Rathi Share & Stock Brokers Ltd


COMPANY PROFILE

23

Anand Rathi (AR) set up in 1994,is one of Indias fastest growing full-service securities firm with a presence in more than 50 locations across India and has offices in Dubai & Bankok. AR provides wealth management services, investment banking, brokerage & distribution services in the areas of equities, commodities, mutual fund and insurance. The group caters to the financial needs of diversified group of clients, which include the well reputed corporate groups, institutions, foreign investors, individuals as well as wealthy families and was recently ranked by an Asia Money 2006 poll amongst south Asias top 5 managers for the ultra-rich. Anand Rathi is a leading full service investment bank providing a wide range of financial services. The firm, founded in 1994 by Mr. Anand Rathi, today has a pan India presence as well as international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth management services, investment banking, brokerage & distribution of equities, commodities, mutual funds and insurance, structured products-all of which are supported by powerful research teams. The firms philosophy is entirely clients centric ,with a clear focus on providing long term value addition to clients, while, maintaining the highest of excellence, ethics and professionalism. The entire firm activities are divide across distinct client groups individuals, Private clients, corporate and Institutions and was recently ranked by Asia money 2006 poll amongst South Asias top 5 wealth managers for the ultra rich. In year 2007 Citigroup Venture Capital International joined the group as a financial partner.

Anand Rathi provides many of financial and advisory services including following products: Equity & Derivatives Brokerage Mutual Funds Depository Services Commodities Insurance Broking IPOs

24

Portfolio Management Services (PMS) All these are managed by powerful research teams. There are some milestones for the group, which have the great role in the position of the company, these milestones have drastically changed the position of the company and move it ahead from what it was previously. These milestones changed the fate of the group. The group became able to have these milestones because of its continuous and dedicated performance. These milestones are: 1994: Started activities in consulting and Institutional equity sales with staff of 15 1995: Set up a research desk and empanelled with major institutional investors 1997: Introduced investment banking businesses Retail brokerage services launched 1999: Lead managed first IPO and executed first M & A deal 2001: Initiated Wealth Management Services 2002: Retail business expansion recommences with ownership model 2003: Wealth Management assets cross Rs1500 crores. Launch of Wealth Management services in Dubai Retail Branch network exceeds 50 2004: Commodities brokerage and real estate services introduced. senior research team put in place. Retail Branch network expands across 100 locations within India Wealth

Loan Against Shares

Management assets cross Rs3000crores. Institutional equities business re launched and

2005: Real Estate Private Equity Fund Launched. Retail Branch network expands across 200 locations within India 2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX) Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money 2006 poll

25

Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Net worth Individuals (HNI) Category Ranked 9th in the Retail Category having more than 5% market share Completes its presence in all States across the country with offices at 300+ locations within India. 2007: City Group Venture Capital International picks up 19.9% equity stake Retail customer base crosses 200 thousand

These were the milestones, which change the Anand Rathi group completely and launch it on the path of success.

PRODUCT AND SERVICES

26

Equity & derivatives brokerages Anand Rathi provides end to end equity solutions to institutional and individual investors. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established us a competent and reliable research unit across the country. Clients can trade through AR online on BSE & NSE for both equities and derivatives. They are supported web or SMS. Mutual Funds AR is one of the Indias top Mutual fund distribution houses. AR success lies inn its philosophy of providing consistently superior, independent and unbiased advice to ARs clients backed by in-depth research. AR family believes in the importance of selecting appropriate asset allocations based on the clients risk profile. AR have a dedicated mutual fund research cell for mutual funds that consistently churns out superior investment ideas, picking best performing funds across asset classes and providing insight into performance of select funds. by dedicated sales & trading desks across the country. Research and investment ideas can be accessed by clients either through their designated dealers, email,

Depository Services

27

AR Depository Services provides with a secure and convenient way for holding your securities on both CDSL & NSDL. AR Depository services include settlement, clearing and custody of securities, registration of shares and dematerialization. AR offer daily updated internet access to holding statement and transaction summary. Commodities Commodities broking-a whole new opportunities to hedge business risk and an attractive investment opportunity to deliver superior returns for investors .ARs commodities broking services include online futures trading through NCDCX & MCX and depository services through CDSL. Commodities broking is supported by a dedicated research cell that provides both technical as well as fundamental research. ARs research covers a broad range of traded commodities including precious and base metals, oil and oilseeds, agri -commodities such as wheat, chana, guar, gum and spices. Insurance Broking As an insurance broker, AR provides to its client comprehensive risk management techniques, both within the business as well as on the personal front .Risk management includes identification, measurement and assessment of the risk and handling of the risk, of which insurance is an integral part. The firm deals with both life insurance and general insurance products across all insurance companies.

28

IPO Management

Anand Rathi is a leading primary market distributor across the country. ARs strong performance in IPOs has been a result of its vast experience in the market, a wide network of branches across India, strong distribution capabilities and a dedicated research team. Anand Rathi has been consistently ranked among the top 10 distributors of IPOs on all major offerings .ARs IPOs research team provides clients with in depth overview of forthcoming IPOs as well as investment recommendations. Online filling of form is also available. Loan Against Shares Registration of Client Minimum Rs.2 lacs portfolio of approved shares. Rs 1.00 lacs Margin either in Cash or Eligible Securities To Execute Master Loan Agreement To Execute general power of attorney To sign Loan documents Opening of HDFC Bank A/c to be operated by RGFL.

29

Requirement: Client should already have a Trading and DP Account with Anand Rathi Financial Services Ltd / Anand Rathi Shares & Stock Brokers Ltd with Auto-Pay-in Facility. Execution of Master Loan Agreement.& Bank Account Opening Form Portfolio Management Portfolio Management is an important foundation of shares and mutual fund business. From the investors perspective. Active Portfolio Management function is obviously important. Active portfolio management requires detailed research of stock traded in the market. While the objective of research is to establish a view on the future stock prices. it usually takes any of the following three alternate forms. Fundamental Analysis:-This analysis involves research into the operations and finances of the company with the objective of estimating its future earnings and risk profile. The researchers consider many factors such as companys position relative to other industry players, impact of the regulatory environment and quality of management. Technical Analysis:-. Technical analysis is second analysis tool for short term or for day trading. As fundamental analysis is used for long term investments analysis likewise technical analysis is made for day trading or short term trading. Technical analysis also make use of volumes, support and resistance levels, technical indicators and other parameters which are useful to analyze the share price movements in short term or in day trading Quantitative Analysis:- This analysis uses mathematical models for equity valuation and may also use fundamental and technical information. In todays environment computers based models form the basis for such analysis. This analysis is more likely to be done to evaluate the market as whole or particular sector/industry.

30

RESEARCH METHODOLOGY
The basic task of research is to generate accurate information for use in decision making. Research can be defined as the systematic and objective process of gathering, recording and analyzing data for aid in making business decisions. There are basically two techniques adopted for obtaining information:

1. Primary Data. 2. Secondary Data.

Primary Data
Primary Data is gathered specifically for the project at hand through personal interviews with the accounts officers. Secondary data is previously collected and assembled for some 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 Anand Rathi Share & Stock Brokers Ltd.

31

ONLINE TRADING
CONCEPT OF SHARE TRADING The concept of share broking emerged after the establishment of the joint stock companies. The ownership of the companies was divided into small parts and that every part was called share. So, the term Share denominates some part in the ownership of the company. The shares are freely transferable subject to the some certain restrictions. When the need was felt to sell the shares by the owner of the shares, it was difficult to find out the buyers of the shares who want to buy the shares at the price the seller want to sell. At that time a need was felt to bring the buyers and sellers on a common platform. These persons are called the share Brokers who find the persons who wish to buy or sell their securities. The whole process of finding the buyers and sellers of the securities by the brokers is called the Share Broking. The origination of the Indian securities market may be traced back to 1975, when 22 enterprise brokers under a Banyan tree established the Bombay Stock Exchange (BSE).

32

ON LINE TRADING Meaning of Online Trading Change is the law of nature. There were times when man was a wanderer or a normal. He himself had to go place to place in search of food, water and now everything is available at your doorstep just at the click of the mouse. The growth of information technology has affected almost all sectors of life. Internet has enabled us to get every information at our doorstep. When Internet has affected all sectors he could stock markets the most important player of the economy, has remained far behind? Like all other sectors Internet has set its feet in the stock markets also. Internet trading commissions are clearly posted on the websites of the various services, and are typically a fixed rate charge, depending upon the type of security being traded and the size of trade. In theory, therefore, an Interest investor always knows what commission he is being charged on each trade. Internet investors can take as much time as they would like to take prior to placing a trade order. Similarly the online investor likely does not have to worry that his broker is making unauthorized trades. Since there is no individual broker making a commission, the only person who is authorized to trace in a the account is the actual investor. Furthermore, the internet investor can never become a victim of excessive trading (where for the broker) since the investor maintains total control over the number of transactions which take place in the account. All of these positive features of internet trading may lead the unwary investor to believe that Internet trading is a way to take control of their finances and save more money in the process. Unfortunately, this is not always the case. The advantages of Internet stock trading have also its weaknesses and these weaknesses present significant drawbacks for the average investor.

33

First and foremost, the average investor is not an expert in the financial markets. There is a danger for allowing the autonomy of online trading to hull you into the belief that you are an expert investor. An online investor sitting at home at a personal computer also foregoes proper investment advice and financial planning, perhaps among the most valuable services provided by traditional brokers. There are, of course, additional risks relative to performing transactions over the Internet especially on a shared computer. Those people whom investors have provided their account number and password can freely trade that account while the investor will have little, if any, resource against the brokerage firm for the breach of security. When was online trading introduced in INDIA? Online trading started in India in February 2000 when a couple of brokers started offering an online trading platform for their customers. ONLINE TRADING BY NSE & BSE The central computer located at the Exchange is connected to the workstations of the Brokers through satellite using Very Small Aperture Terminals (VSATs). Orders placed at the Brokers' workstations reach the central computer and are matched by the computer based on price and time priority. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The scrips traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group shares represent those, which are in the carry forward system (Badla). The 'F' group represents the debt market (fixed income securities) segment. The 'Z' group scrips are the blacklisted companies. The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights renunciations. key regulator governing Stock Exchanges, Brokers,

34

Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.

DIFFERENCE BETWEEN ONLINE AND OFFLINE TRADING Nevertheless, with all the convenience of online trading there are still investors who prefer the old fashion way of offline trading. Offline trading has lost some popularity but it is still the main form of investing. Offline trading offers many benefits as well. 1. The one benefit that an investor appreciates the most is that they are not alone when making investment decisions. 2. There are experienced and professional brokerage companies that handle their investments for them. 3. Investors are not faced with the challenge of making these vital investment decisions; especially, if they do not have the experience necessary to make the appropriate investments. 4. Also, there is someone there to answer any questions that may cause concerns. Not to mention, with offline trading mistakes are less likely to take place. No one wants to throw their money away or stand by and watch someone else throw their money away. It may be wise to hire a professional to assist you in making the correct investment decisions if you feel you lack the knowledge necessary. Points of difference between online trading and ofline trading are as follows: 1. Online trading is very expensive as compare to manual trading or offline trading. 2. Online trading consumes less time as compare to manual trading. 3. Online trading has very helpful to finding the records easily but offline trading takes more time to finding the records. 4. In the help of online trading, there is no chance of any errors while doing the trading. in offline trading there are some errors exist like barriers of communication . 5. With the help of online trading, we know the international market rate of share very easily.

35

DEMATERIALISATION OF SHARES Dematerialization is the process wherein shares certificates or other securities held in physical form are converted into electronic form and credited to demat account of an investor opened with a depository participant. SEBI has made compulsory trading of shares of all the companies listed in stock exchanges in demat form with effect from 2 nd January 2002.The procedure of opening a demat account with DP is similar to opening an account with a bank. ELECTRONIC SETTLEMENT OF TRADE A. Procedure for purchasing dematerialized securities The procedure for purchasing dematerialized securities is also similar to the procedure for buying physical securities. 1. Investor instructs DP to receive credits into his account in the prescribed form. There may be one time standing instruction or separate instruction each time to receive credits. 2. Investor purchases securities in any of the stock exchanges linked to depository through a broker. 3. Broker receives payment from investor and arranges payment to clearing corporation. 4. Broker receives credit to securities in clearing account on the payout day. 5. Broker gives instructions to DP to debit clearing account and credit clients account. Investor receives shares into his account by way of book entry. B. Procedure of selling dematerialized securities The procedure for selling dematerialized securities in stock exchanges is similar as selling physical securities. The only major difference is that instead of delivering physical securities to the broker, the investor instructs his DP to debit his demat account with the number of securities sold by him and credit the brokers clearing account. The procedure for selling dematerialized securities is given below: 1. Investor sells securities in any of the stock exchange linked to depository through a broker. 2. Investor instructs his DP to debit his demat account with the number of securities sold and credit the brokers clearing account.

36

3. Before the pay-in-day, broker of the investor transfers the securities to clearing corporation. 4. The broker receives payment from the stock exchange. 5. The investor receives payment from the broker for sale of securities in the same manner as received in case of sale of physical securities. REMATERILISATION OF SHARES Rematerialization is the process of conversion of electronic holdings of securities into physical certificate form. For rematerilisation of scrips, the investor has to fill up a remat request form (RRF) and submit it to the DP. The DP forwards the request to depository after verifying the investors balances. Depository in turn initiates the registrars and transfer agent or the issuer company. RTA/ Company prints the certificates and dispatches the same to the 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: Normal Market / Exercise Market Open time Normal market close Set up cut of time for Position limit/Collateral value Trade modification end time / Exercise Market : 09:55 hours : 15:30 hours : till 15:30 hrs : 16:15 hours

37

38

Use of Internet for making Initial Public Offerings Issues of securities of using the Internet to communicate directly with their shareholders, potential investors and analysts by disseminating corporate information. In foreign jurisdiction, they are also using the Internet to communicate to the public for the following: Public offerings; Private offerings; and Disclosure and communication Issuers are using the Internet to market themselves to potential investors. The Internet is also being used for fulfilling necessary disclosure requirements, for disseminating the prospects in electronics form and even for receiving share applications in public issues electronically. In India, SEBI has taken initiative in permitting use of the network of stock exchange for collection of investor applications in public offerings by the issuer companies.

Investment Advisory Services Brokers as well as other service provides such as investment firms, research outfits etc. are using the Internet for marketing and advertising purposes, for presenting information on portfolio analysis and market information, and for communicating with and receiving orders from potential investors. The services offered by the service providers to the investors are generally the following: Advertising Providing investment information and investment advice; Underwriting Communicating with the investors; Customer orders; and

39

Record keeping Working Groups set up by the Committee Considering the present state of capital markets in India and keeping in view the ongoing developments in Internet based securities business, it was felt that SEBI as a regulator could strive to identify areas where use of Internet in the capital market is possible within the existing legal framework. One such area identified by the Committee, which is also the central within the existing legal framework. One such area identified by the Committee, which is also the central theme of this report, is the area of Internet trading on existing electronic exchange. In this area, through early introduction of Cyber Laws would be highly describe but their existence is not a necessary precondition. To look into the existing regulatory scenario and to bring out some ground rules for use of the medium of Internet, the Committee therefore constituted the following two working groups to look into the area of:

i. ii.

Security protocols and standardization of interfaces for Interest based securities trading, chaired by Prof. Deepak B. Phatak, IIT, Pawai, Mumbai Surveillance and monitoring related issues arising due to Interest based securities trading, chaired by Shri. L.K. Singhvi, Sr. ED, SEBI

The committee also requested Ms D N Raval, Executive Director, SEBI to examine the legality of introduction of Internet trading and issue of Alternative trading systems. This report of the standing committee examines the regulatory and security requirements Internet Based Trading on Conventional Exchanges. Separate reports (s) will cover the other areas related to Internet applications in the securities markets. The report of the first working group on security protocols and standardization of interfaces has since been submitted and incorporated in the report. The committee would like to place on record its sincere thanks to Dr. D.B. Phatak, Ms. D.N. Raval and their team members. The global financial market is undergoing a transformation due to rapid technological developments. It thus becomes imperative that for developing in effective regulatory framework developments in other parts of the world should be studies and analyzed.

40

Internet trading is being facilitated by large brokerage houses, thus changing the total concept of securities trading. A team comprising of members from stock exchanges and SEBI visited the United states to these development and had interactions with brokerages houses, Internet service providers and other agencies involved in facilitating Internet trading. The team also discussed the developments in the emerging regulatory and supervisory framework in United States with the Securities and Exchange Commission officials. They were also tripped of the various initiatives taken by SEC in this regard. These inputs have been utilized while drafting this report. Recommendations of the Committee Application for Permission by Brokers SEBI registered Stock Brokers interested in providing Internet based trading services will be required to apply to the respective stock exchange for a formal permission. The stock exchange should grant approval or reject the application as the case may be, and communicate its decisions to the number within 30 calendar days of the date of completed application submitted to the exchange. The stock exchange, before giving permission to brokers to start Internet based services shall ensure the fulfillment of the following minimum conditions. Net worth Requirement The broker must have a minimum net worth of Rs. 50 lacs if the broker is providing the Internet based facility on his own. However, if some brokers collectively approach a service provider for providing the interest trading facility, net worth, criteria as stipulated by the stock exchange will apply. The net worth will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16, 1998. Operational Integrity: The stock Exchange must ensure that the system used by the broker has provision for security, reliability and confidentiality of data through use of encryption technology. This stock exchange must also ensure that records encryption technology. The stock Exchange must also ensure the records maintained in electronic from by the broker are not susceptible to manipulation. System Capacity

41

The stock Exchange must ensure that the brokers maintain adequate backup systems and data storage capacity. The stock Exchange must also ensure that the workers have adequate system capacity for handling data transfer, and arranged for alternative means of communications in case of Internet link failure. Qualified Personnel: The stock Exchange must lay down the minimum qualification fro personnel to ensure that the broker has suitably qualified and adequate personnel to handle communication including instructions as well as other back office work which is likely to increase because of higher volumes. Written Procedures: Stock Exchange must develop uniform written procedures to handle contingency situations and for review of incoming and outgoing electronic correspondence. Signature Verification/ Authentication: It is desirable that participants use authentication technologies. For this purpose is should be mandatory for participants to use certification agencies as and when notified by Government/SEBI. They should also clearly specify when manual signatures would be required.

Client Broker Relationship

42

Know Your Client: The stock Exchange must ensure that brokers have sufficient, verifiable information about clients, which would facilitate risk evaluation of clients. Broker- Client Agreement: 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. Order/Trade Confirmation: Order/Trade confirmation should also be sent to the investor through email at clients discretion at the time specified by the client in addition to the other made of display of such confirmation of real time basis on the broker web site. The investor should be allowed to specify the time interval on the web site itself within which he would like to receive this information through email. Facility for reconfirmation of orders which are larger than that specified by the member's risk management system should be provided on the internet based system. Handling Complaints by Investors:

43

Exchanges should monitor complaints from investors regarding service provided by brokers to ensure a minimum level of service. Exchange should have separate cell specifically to handle Internet trading related complaints. It is desirable that exchanges should also have facility for on-line registration of complaints on their web site. 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 of the trade execution. 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. It is emphasized that in addition to the requirements mentioned above, all existing obligations of the broker as per current regulation will continue without changes. Exchanges may also like to specify more stringent standards as they may deem fit for allowing Internet based trading facilities to their brokers. 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

44

FEATURES OF ONLINE TRADING The Online Trading is having many features which make it most suitable for the investors to go for. Some of these features are as follows:

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

One of the great appeals of using an online trading account is the fact that the account belongs to you, and is under your direct control. When you want to buy or sell stock, you no longer need to call your broker on the phone; hope that he is in the office to place your order; possibly argue with the broker about the order; and hope that the transaction is executed instantly.

45

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.

46

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. In the case of a demat account your demat account is checked by us before executing your sell transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities and for you as a seller of the securities

Every trade is confirmed immediately and you will receive an on-screen confirmation following every trade with full details for your records. This avoids costly errors that would have been discovered when it is too late.

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.

BENEFITS OF ONLINE BROKING 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.

47

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 ones disposal for research and analysis. 4) Access to Information and investment Tools: Most online investing sites have a wealth of information for their registered members. This includes research reports, results, analysis and even gossip and the buzz in the market. 5.) Unparalleled Liquidity: 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 ones 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 savings account to his trading account and make profits. 6.) Unparalleled Safety: Most sites are secure using 128-bit algorithms -highest available commercially anywhere in the world. Moreover even if somebody broke in and tampered with ones account the money from the stocks he sold or the stock bought from the money in his account is in his account only. 7.) Reduces the settlement risk: 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. 8.) Offers greater transparency: Online trading gives greater transparency to the investors by providing them an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a

48

credit to the depository account of the investor. All these stages are subject to inspection, thus bringing in transparency into the system. 9.) Ease of trade: 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. Other than the above-mentioned advantages, Internet trading provides some additional advantages to the investors, brokers and also helps the nation to channelize the resources. Net trading would increase competition in the market hence increase in the bargaining power of the investors. The entire communication between the investor, broker and exchange would take place within milliseconds.

PROBLEMS OF ONLINE BROKING

There is a flip side to everything and online trading is no exception.

49

Source:- www.lse.co.in 27% Loyality is of traditional broker 23% people says that online trading is more costly than manual trading. 21% people not prefer online trading because of lack of knowledge.

So, the main problems of online trading are as follows: 1.) "Server not found": This may appear on ones 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. 2.) Connectivity of the Broker with NSE: Recently ICICI Direct had a connectivity problem with the NSE for two and half hours during trading hours. This problem is rare but be alive to its possibility. 3.) Cyber attack: In the event of a malicious attack on the systems of ones broker he is protected only if the company is taking proper precautions against such attacks and if proper backup is regularly been taken. He may like to choose a brokerage that has a stated security policy and contingency plan in place. 4.) Non-availability of a seamless interface: 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. 5.) Non- availability of personalized advice: 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. 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,

50

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. 8.) Increased charges: 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.

PROCESS OF ONLINE TRADING An investor interesting in trading through Internet shall have to, firstly register himself with an Internet brokerage firm. Some formalities such as filling the account opening form of the e-broker, copies of identity proof, copy of residence proof are made to register himself with the e-trader. Secondly, the investor would be required to open a bank account with a scheduled bank and sufficient balance should be kept in the account. Thirdly he would be required to open account with a depository participant because only dematerialized shares can be traded on Internet.

The client places order via the net by logging on to his Brokers site. The broker accepts and executes the order and places it with the exchange

The exchange accepts the order after checking the share limit for the day.

51

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.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through the demat or via e-mail.

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.

52

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.

53

THE MECHANICS OF ONLINE TRADING TheCLIENTthe of Places an the on Accepts EXCHANGE STOCK the order Receives order Accepts BROKER Pays settlement thethechecking the after net andthe order, Checks money on Exchange deal (buy/sell order)gets website completeshis the brokers the scripclients Through of the limit reflected inthe day broker account owns forand Identity his settlement through the Demat account . and receivesI.D. places order it distinctive Executes the order The client client from the is code intimated about the account. execution of the deal by e mail Pays the broker
pending physical delivery

54

Rolling Settlement Cycle In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. At NSE and BSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE/BSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on.

55

Concept of Buying Limit Suppose you have sold some shares on NSE and are trying to figure out that if you can use the money to buy shares on NSE in a different settlement cycle or say on BSE. To simplify things for ICICI Direct customers, we have introduced the concept of Buying Limit (BL). Buying Limit simply tells the customer what is his limit for a given settlement for the desired exchange. Assume that you have enrolled for a ICICI Direct account, which requires 100% of the money required to fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C and you set aside Rs 50,000 for which you would like to make some purchase. Your Buying Limit is Rs 50,000. Assume that you sell shares worth Rs 1,00,000 on the NSE on Monday. The BL therefore for the NSE at that point of time goes upto Rs 1,50,000. This means you can buy shares upto Rs 1,50,000 on NSE or BSE. If you buy shares worth Rs 75,000 on Tuesday on NSE your BL will naturally reduce to Rs75,000. Hence your BL is simply the amount set aside by you from your bank account and the amount realized from the sale of any shares you have made less any purchases you have made. Your BL of Rs 50,000, which is the amount set aside by you from your Bank account for purchase is available for BSE and NSE. As you have made the sale of shares on NSE for Rs.100000, the BL for NSE & BSE rises to 1,50,000. The amount from sale of shares in NSE will also be available for purchase on BSE. ICICI Direct

Future Agenda: Under the existing legal and regulatory framework, SEBI registered brokers can offer trading on Internet through order is routing systems. However, with the rapid development of the technology, we have to evolve fisher steps in this direction it is therefore proposed that as the next step link between the depositories and banks shall be established after the necessary regulations have been passed. This would reduce the clearing and settlement time and would also minimize the risk of all the participants involved in the transactions. We have to look forward towards achieving an ideal scenario where all the services related to securities markets including marketing of initial public offers on internet, providing

56

investment advisory services to the clients, broking, clearing and settlement etc., are provided on the Internet by an intermediary. In a nutshell it can be said that we are moving towards a one-stop service center.

DURATION OF STUDY
The duration of study of the project is 45 Days. From 15 May to 30 June 2011

OBJECTIVE OF STUDY

57

In present era the stock market is one of the popular markets in India, the economy of any country affects very much by the bull and bear condition of the stock market. Previously all trade in the stock exchanges were done in the physical form of the share certificates but presently because of the inconvenience of that physical mode all the trades in stock exchanges are done in Demat mode. And my main objectives to have my training in Anand Rathi Share & Stock Brokers Ltd. are: -

1. To understand the appropriate organizational structure of the ANAND RATHI SHARE & STOCK BROKERS LTD. LTD
2. To analyze the online trading and its process.

TYPES OF RESEARCH
The various kinds of research are: EXPERIMENTAL RESEARCH DESIGN EXPLORATORY RESEARCH DESIGN

58

DESCRIPTIVE& DIAGNOSTIC RESEARCH Exploratory Research Design: This research design is preferred when researcher has a vague idea about the problem the researcher has to explore the subject. Experimental Research Design: The research design is used to provide a strong basis for the existence of casual relationship between two or more variables.

Descriptive Research Design: It seeks to determine the answers to who, what, where, when and how questions. It is based on some previous understanding of the matter.

Diagnostic Research Design: It determines the frequency with which something occurs or its association with something else. Research Design Used in this Project: Research Design chosen for this study is Descriptive Research Design. Descriptive study is based on some previous datas . Research has got a very specific objective and clear cut data requirements.

SAMPLE SIZE

SAMPLING METHODOLOGY
Sampling Technique

59 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 questionnaire in the National Capital Region are the sampling units. 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

Sample Size
The sample size was restricted to only 100 respondents.

Sampling Area
The area of the research was Jaipur.

SCOPE OF STUDY

60 Since the year 2000 a big boom has been witnessed in the Indian Stock Market when the market showed the coming up of Online Trading System. Many online stock trading companies came but initially due to lack of online trading some companies vanished and some survived. The companies which survived are getting the handsome returns also attracting the foreign Investment Companies. Nowadays this sector is facing cut-throat competition and also provides huge growth prospects. The study then goes to evaluate and analyze the findings so as to present a clear picture of the trends in the online trading sector.

The study is limited to Anand Rathi Share & Stock Brokers Ltd., Jaipur Data Collection: Data is collected from secondary sources.

Sources of data collection are: 1) www.rathi.com 2) www.nseindia.com 3) www.bseindia.com 4) www.on-linetrading.com

61

LIMITATIONS OF STUDY

There were certain limitations faced during the study.

Some people were not willing to disclose the investment profile

.The biasedness was being taken care of.

The area of sample was decided after taking into consideration the major factors like

Availability of investors Approachability, Time available with investor for interaction, etc.

62

FACTS & FINDINGS


1. For how long you have been trading with on line-trading? (a)1 year (c) 3 year (b) 2 year (d) 4 year

Findings: According to this survey we find that 44% people says that we are investing the money online from one year and 26% people says that we are investing the money online from 2 years and 19% to 11% people says that we are investing money online from 3 to 4 year. so we can say that now online trading is very popular in the modern market.

2. How will you describe your experience with on-line trading till date? (a) very easy to operate (b) very difficult to operate (c) not secure (d) Any other

63

Sample size 100

Findings: 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 ? (a) 50000 (c) 150000 to 2000000 Sample size 100 (b) 100000 to 150000 (d) Any other amount

Findings: According to this

64

survey we find that 35% of people invest money normally 50000 and 28% of people invest money 100000to150000 and 23% and 14% of people invest money between 150000to200000 and any other. So we can say that the people are not invest more money in the share market because there is a great risk involved while doing the trading.

How often do you trade? (a)Daily (c) Monthly Sample Size 100 (b) Weekly (d) More than one month

Findings: According to this survey we find that 10% of people do trade Daily and 40% people do trade weekly and 32% and 18% people do trade month and more than month. So we can say that people are generally invest in stock market weekly basis.

65

5. Which trading you prefer? (a) On line trading (c) Both Sample Size 100 (b) Manual trading

Findings: According to this survey we find that 20% people prefer online trading and 32% people

prefer offline trading rest of 48% people prefers both. So we can say that mostly people are awareness about the on line trading and because of this reason the mostly people are optimizing offline trading.

6. Whether online trading settled in Indian investor psyche (a) Yes Sample Size 100 (b) No

66

Findings: 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 ? (a) Lack of awareness the investors about on-line trading (b) Shortage of domestic technical expertise (c) Shortage Of Infra structure (c) Any other Sample Size 100 Findings: According to this survey we find that 15% of people says lack of awareness 49% says Shortage of expertise and 14% people says Shortage Of Infra structure and 22% says any other. So we can say that mostly people are shortage of experience about the Indian derivatives market or share market.

67

8. Which media would you prefer the most for investment? (a) T.V (c) Magazines (b) Newspaper (D) Journals

Findings: 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. Sample size 100

68

ANALYSIS & INTERPRETATION

Q. 1 what is your annual income?

INTERPRETATION

58% respondent are having the income level of 100000-200000 ,21% is having 200000300000 , 12% in having300000-400000 , 7% of the total respondent are having income more than 400000 per annum and only 2% are having less than 100000 per annum. To invest in the stock market minimum 100000 or more than this should be the annual income level of the people. In India the per capita income in also increasing so we can say that there is a good opportunity for the online trading market.

Q. 2 what percentage of your monthly household income could be available for investment?

69

INTERPRETATION According to the data 23% 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 21% investor do the investment 10%-15% of their total monthly income, 13 invest between 15%-20% of the total income and only 2% does more than 20% of their income invest in the market We can easily understand that 75% of the total population is having a good amount of investment, so the investment is there in the market; good number of people is ready to invest a good amount in the market 91% of respondent is in the income level of 100000 300000 (according to the last question analysis). So we can say that stock brokerage houses will have to do a good business with the help of Online trading system with few value addition services Q. 3 where do you often invest your money?

INTERPRETATION Highest number of respondent is having their investment in the equity that is 65% whereas the investment available for the mutual fund, term deposit and insurance is 14%, 12% and 9%

70

So the investor for equity is high which is again showing the n number of opportunity for online trading.

Q. 4 to operate a computer is easy for me

INTERPRETATION

76% (26+51) of the total respondent believe that operate a computer is easy for me whereas 20%(13+7) of the respondent is having problem to operate a computer out of that 20% , 75 believe that they cant go for computer So, if 78% of the people who are dealing with the stock market is having computer at their house and around 76% of the same population dont have any problem to operate a computer So around 60 % is there who is having computer and they dont have problem to operate a computer

Q. 5 Do you use online trading facility?

71

Interpretation

It was observed that 83% of total sample people dont like online trading. And 17% of total sample people are using online trading.

It seems that online trading is not so much popular or if it is popular that people dont trust on online trading. According to that person online trading is not so user friendly.

Q.6 According to you online trading is a secure way of trading

INTERPRETATION

71% of the respondent is having a positive thinking that online trading is a secure way of trading whereas 185 of the respondent believes that online trading is not a secure way of trading

72

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 their 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

Q.7 Online trading is easy and fast way of trading?

INTERPRETATION

51% of the total respondent believe that online trading is a easy task Whereas 41% of the respondent believes that to deal with online Trading is not a easy task and 85 was confused to anything about that the trading via internet is a easy task or not There is a difference between the people who believe and who dont believe is not very big that is only 10% , the reason of this problem can be if a person is doing its investment on its own he or she think of the problem of being mistaken in the transaction. So there is a need of proper training to do trading online

73

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

INTERPRETATION

76% of the respondent 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 respondent believe that it doesnt affect the trading volume

Q9. What factor would you consider before choosing an account in a brokerage house?

74

Interpretation 29% of total sample population go for brand name, 32% of total sample population go for services by broking firms, 21 % people care for brokerage and other kind of charges, 11% ask for online trading facility & 7% people go according to other reasons. This shows that most of people are brand loyal and service oriented.

Q10. Do you think online trading has affected the trend of trading?

Interpretation

39% of total sample people say that they feel online trading has affected the trading patterns, 47% of total people deny and feel that online trading has not affected any pattern and 14% people are not sure about anything. They can not say anything about the online trading.

75

Q11. Online trading is better tool to trade in comparison of traditional trading

Interpretation

It is interpreted that 17% of total sample population strongly agree that online trading is better tool, 19% total population agree, 23% cant say, 17% disagree with this and 24% people say that online trading dont have any effect on traditional trading

Q.12 Are you satisfied regarding online trading services by your broking house? INTERPRETATION

76

26% of total sample people told that they are not satisfied with the online trading facility. They face some problems while using online trading and 74% of total people told that they are fully satisfied with the online trading facility. So we can say that there is a huge potential in the market for the trading in the stock market

SWOT ANALYSIS
Strength 1. Low cost of investing. 2. Minimum investment maximum profit. 3. Define your loss through only risk of premium losing. 4. Good hedging instrument. 5. Different Option strategies make profit in rang bound market. 6. Huge option category to choose.

Weakness 1. Low volume in stock option.

77

2. High volatility in price change. 3. Behavior of option to minimize the time value according nearness of expiry date. 4. Time value makes huge difference in investing money. 5. Difficult to understand by normal investor.

Opportunity

1. Opportunity of making money with less money through purchase the call and put. 2. Hedging opportunity through which loss can be minimized 3. Use strike price as your base price and use the movement of stock and index through option investing. 4. There are trend of bullness
5. Sectors are growing those are base for economic growth.

6. There is stability in the government at center. 7. Foreign institutional investment is likely to be positive.

78

Threats

1. Cash market investment is safer than to come in option investing. 2. Complicated strategies of Option make reluctant to investor.

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.

79

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

80

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. Kothari, Research Methodology, Vishwa Prakashan

MAGAZINES

Business World LSEs Magazine

81

Economics Today

INTERNET SITES

www.nseindia.com www.bseindia.com www.rathi.com www.on-linetrading.com www.sebi.gov.in

APPENDIX
NAME AGE ___________________________ ______________________________

GENDER ____________________________ MOBILE_______________________________ OCCUPATION__________________________

1. What is your annual income? Below 100000

82

1. 1. 1.

1,00,000 2,00,000 2,00,000 3,00,000 3,00,000 4,00,000 Above 4,00,000 What percentage of your monthly household income could be available for investment? Less than 5% 5% to 10% 10% to 15% 15% to 20% More than 20% Where do you often invest your money? Equity Mutual fund Insurance Term deposits Others To operate a computer is easy for me Strongly agree Agree Cant say Disagree Strongly disagree

1. Do you use online trading facility? Yes No 1. According to you online trading is a secure way of trading Strongly agree Agree Cant say Disagree Strongly disagree

1.

Online trading is easy and fast way of trading? Strongly agree Agree Cant say

83

Disagree Strongly disagree 1. Introduction of online trading helped to attract the new Investors thus increasing the trading volumes at Stock Market? Strongly agree Agree Cant say Disagree Strongly disagree 1. 1. What factor would you consider before choosing an account in a brokerage house? Brand Name Customer Service Brokerage Charged Online Trading Facility Others Do you think online trading has affected the trend of trading Yes No Cant say

1. Online trading is better tool to trade in comparison of traditional trading Strongly Agree Agree Cant Say Disagree Strongly Disagree 1. Are you satisfied regarding online trading services by your broking house Yes No