GAUHATI UNIVERSITY
A training report submitted in partial fulfillment of the requirement for the award of
degree of Master of Business Administration (Industry Integrated), Gauhati University on
FINANCE FOR SHAREKHAN LTD.
Under Organizational Guidance Of: Under Institutional Guidance Of:
MR. DEEPAK JAIN PROF. S. MUKHERJEE
(Re!"#$%&'#( M!%!)e*+ (D#*e,"$*+
HARIKISHAN INSTITUTE OF MANAGEMENT STUDIES
P*e(!*e- . S/01#""e- 234 GHYASUDDIN 5G. U. Re)#&"*!"#$% N$. 6 7789 $:
;7795;711
EC/#"#e& . De*#>!"#>e& 4
<omprehensive servi"es for
independent investors, a"tive traders
1 ,on7%esident Indians&
S'!*e?'!% eC/#"3
!%!3&#&
4
)remium resear"h on 3BD
"ompanies updated daily&
De($&#"$*3 Se*>#,e& 4
Ealue added servi"es for seamless
delivery
B
MY ROLE . RESPONSI2ILITY
My role was to get an idea about the future of :nline 8hare -rading&
I was assigned with the tas$ of "omparing different online bro$ing "ompanies and
predi"ting the future of online share trading in India&
I have underta$en this pro#e"t with "learly defined ob#e"tives, whi"h are;
Gathering data about the leading online bro$ing houses and "ompare the main
points and find the strengths of 8hare$han "ompared to them&
<ondu"ting Mar$et %esear"h in various parts of the "ity in order to get statisti"al
data for "ommenting on the future of online share trading in India&
<ustomer A"quisition through sales of -rading = 'e7mat A""ounts in order to get
a deep insight as to how the :rgani9ation a"tually performs these fun"tions&
COMPANY PROFILE
8hare$han, India6s leading sto"$bro$er is the retail arm of 88*I, an
organi9ation with over eight de"ades of sto"$ mar$et e0perien"e& Aith more
than 4?? share shops in over BBBB!. "ities, and a presen"e on Internet
through www&share$han&"om& India6s premier online trading destination, we
rea"h out to "ustomers li$e no one else&
8hare$han offers you trade e0e"ution fa"ilities on the B8( and the ,8(, for
"ash as well as derivatives, depository servi"es and most importantly,
investment advi"e tempered by ?B years of resear"h and bro$ing e0perien"e&
-o ensure that your trading e0perien"e with 8hare$han is fast, se"ure and
hassle free, we offer a suite of produ"ts and servi"es, providing you with a
multi7"hannel a""ess to the sto"$ mar$ets&
A0$/" SSKI )*$/(
!
80 years of taming
Bulls & Bears
88*I group also "omprises institutional bro$ing and "orporate /inan"e&
Ahile the institutional bro$ing division "aters to the largest domesti" and
foreign institutional investors, tele"om and media& 88*I holds a si9eable
portion of the mar$et in ea"h of these segments&
As the forerunner of investment resear"h in the Indian mar$et, we provide
the best resear"h "overage amongst bro$ing houses in India& :ur resear"h
team is rated as one of the best in the "ountry& Eoted four times as the -op
'omesti" Bro$erage Fouse by Asia7money 8urvey& 88*I is "onsistently
ran$ed amongst the top domesti" bro$erage houses in India&
SSKI G*$/( C$1(!%#e&
SSKI I%>e&"$* Se*>#,e& L"- (S'!*e?'!%+
S.S. K!%"#! I&'<!*! Se,/*#"#e&
SSKI C$*($*!"e F#%!%,e
I-*e!1 P*$-/,"#$%&
.
SSKI 6 CORPORATE STRUCTURE
3
CORPORATE MEM2ERS
TARUN P. SHAH (CEO+
E-/,!"#$% 4 2.S,.
ED(e*#e%,e 4 19 Ye!*&
P*e>#$/& ,$1(!%3 4 2ee% <#"' SSKI G*$/(
4
SHANKAR VAILAYA
DIRECTOR5OPERATIONS
E-/,!"#$% 4 C'!*"e- A,,$/%"!%"
P*e>#$/& ,$1(!%3 4 2ee% <#"' SSK
ED(e*#e%,e 4 19 3e!*&
JAIDEEP ARORA
D#*e,"$*5 P*$-/," . Te,'%$$)3
E-/,!"#$% 4 M2A
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5
SERVICES PROVIDED 2Y SHAREKHAN
>
SHAREKHAN SERVICES
EC/#"#e& !%- De*#>!"#>e&
:ur %etail (quity Business "aters to the needs of individual Indian and ,on7%esident
Indian (,%I) investors& 8hare$han offers bro$er assisted trade e0e"ution, automated
online investing and a""ess to all I):@s&
-hrough various types of bro$erage a""ounts, 8hare$han offers the pur"hase and sale of
se"urities, whi"h in"ludes (quity, 'erivatives and <ommodities Instruments listed on
,ational 8to"$ (0"hange of India 2td (,8(I2), -he 8to"$ (0"hange, Mumbai (B8()
and ,<'(G&
S'!*e?'!% C!&&#, !,,$/%" 7 <omprehensive servi"es in"luding resear"h and
investing guidan"e for independent investors&
S'!*e?'!% F!&" "*!-e 7 8hare$han is dedi"ated to empower A"tive -raders
through personal servi"e and advan"ed trading
te"hnology&
S'!*e?'!% eC/#"3 !%!3&#&
Building and maintaining your ideal portfolio demands ob#e"tive, dependable
information& 8hare$han (quity Analysis helps satisfy that need by rating sto"$s based on
"arefully sele"ted, fa"t7based measures& And be"ause we@re not fo"used on investment
ban$ing, we don@t have the same "onfli"ts of interest as traditional bro$erage firms& -his
ob#e"tivity is only one important differen"e in our ratings
T3(e $: ,!"e)$*#e&
1. (vergreen
2. Apple Green
3. (merging 8tar
4. Ugly 'u"$ling
?
5. Eulture@s )i"$
6. <annonball
De($&#"$*3 Se*>#,e&
8hare$han is a depository parti"ipant with the ,ational 8e"urities 'epository 2imited
and <entral 'epository 8ervi"es (India) 2imited for trading and settlement of
demateriali9ed shares& 8hare$han performs "learing servi"es for all se"urities
transa"tions through its a""ounts& Ae offer depository servi"es to "reate a seamless
transa"tion platform H e0e"ute trades through 8hare$han 8e"urities and settle these
transa"tions through the 8hare$han 'epository 8ervi"es& 8hare$han 'epository 8ervi"es
is part of our value added servi"es for our "lients that "reate multiple interfa"es with the
"lient and provide for a solution that ta$es "are of all your needs
PRODUCTS AND REEUIRED DOCUMENTS
CLASSIC ACCOUNT
-his a""ount allows the "lient to trade through our website and is suitable for the retail
investor who is ris$7averse and hen"e prefers to invest in sto"$s or who do not trade too
frequently&
Fe!"/*e&4
:nline trading a""ount for investing in (quity and 'erivatives
Integration of :n7line trading , 8aving Ban$ and 'emat A""ount
&
Instant "ash transfer fa"ility against pur"hase 1 sale of shares&
<ompetitive transa"tion "harges&
Instant order and trade "onfirmation by (7mail&
8treaming Iuotes&(<ash 1 'erivatives)
)ersonali9ed mar$et wat"h&
8ingle s"reen interfa"e for <ash and derivatives and more&
)rovision to enter pri"e trigger and view the same online in mar$et wat"h&
C
SPEEDTRADE
8)(('-%A'( is an internet7based software appli"ation that enables you to buy and sell
in an instant&
It is ideal for a"tive traders and #obbers who transa"t frequently during day6s session to
"apitali9e on intra7day pri"e movement&
Fe!"/*e&4
Instant order (0e"ution and <onfirmation&
8ingle s"reen trading terminal& (,8( A,' B8( B:-F)
%eal7time streaming quotes, ti"7by7ti" "harts&
Mar$et summary (<ost traded s"rip, highest value et"&)
Fot $eys similar to bro$ers terminal&
Alerts and reminders&
Ba"$7up fa"ility to pla"e trades on 'ire"t )hone lines&
DIAL5N5TRADE
Along with enabling a""ess for your trade online, the <2A88I< and 8)(('-%A'(
A<<:U,- also gives you our 'ial7n trade servi"es& Aith this servi"e, all you have to do
is dial our dedi"ated phone lines 7?BB7!!7>B4B&
IPO O%5#%e
Jou "an apply all the forth"oming I): online hasselfree&
CHARGE CLASSIC ACCOUNT SPEEDTRADE
ACCOUNT
S(e,#! *!"e $:
A,,$/%" O(e%#%) %s& >4B=7 %s& BBB=7
!B
M$%"'3
C$11#"1e%" C'!*)e
%s& ,I2 %s& 4BB=KL
R!"e $:
2*$?e*!)e&
Intraday7B&B4M
'elivery7B&4M
Intraday7B&B4M
'elivery7B&4M
%efundable in "ase the bro$erage is more than %s& 4BB=K p&m& :r quarterly
generated bro$erage to be 4BB=7&
-a0es as per govt&
De($&#"$*3 C'!*)e&
A""ount :pening <harges %s& ,I2
Annual Maintenan"e <harges %s& ,I2 first year
%s& 3BB=K p&a& from se"ond year onward
P*$-/," -e"!#& !*e 1e%"#$%e- 0e$<4 5
:nline and :ffline -rading
O%#%e T*!-#%)4
(!+ CLASSIC ACCOUNT; A=< :pening "harges; %s& >4B=K(life time "harges)
DEMAT AFC :*ee :$* :#*&" 3e!* and %s&3BB from !nd year
onward& (Maintenan"e "harges) -rading through website
2ive terminal&
,o bro$erage "ommitment required&
,8( and B8( online&
Both <ash 1 /1:&
(0+ SPEED TRADE ; A""ount :pening /ee; %s& BBB=7Both <ash 1 /1:&
M$%"'3 Re,/**#%) Fee;
2*$?e*!)e 4
!
B&B.M )lus -a0es for (a"h leg of Intra7day trade
B&.B M )lus -a0es for trades resulting in delivery
EBPOSURE ; 3 -: 5&5 -IM(8 (:, MA%GI, M:,(J)
:nline I):@s available
T#e /( <#"' T<e>e 0!%?& #.e. HDFC= O2C= ID2I= U2I= CITI =ICICI=2ANK OF
INDIA=YES 2ANK= UTI 0!%? :$* $%#%e 1$%e3 "*!%&:e*.
DOCUMENTS4
P'$"$ ID P*$$: Re&#-e%,e P*$$:
)assport
)an <ard(Mandatory)
'riving 2i"en"e
Eoter@s I'
)assport(valid)
Eoter@s I'
'riving 2i"en"e (valid)
Ban$ 8tatement (latest)
-elephone Bill (latest)
(le"tri"ity Bill (latest)
%ation <ard
/lat Maintenan"e Bill (latest)
Insuran"e )oli"y (latest)
2eave72i"en"e=)ur"hase
Agreement(latest)
; P'$"$)*!('&
1 C'eC/e $: R&.A@7FGI% F!>$/* $: S'!*e?'!% L"-
O*
1 C'eC/e $: R&.1777FGI% F!>$/* $: S'!*e?'!% L"-
P!% ,!*- #& 1/&"
!!
2RANCHES ALL OVER INDIA
!.
CAPITAL MARKET IN INDIA
Capital market facilitates the free trading (buy and sell) in all securities.
it has two mutually supporting and invisible segments, these are
1. Primary market
2. econdary market
PRIMARY MARKET
!n the primary market companies issue new securities to raise funds.
hence it also referred as new issue market. in primary market companies
interact with investors directly.
Primary capital market is responsible for the sale of new securities. "ew
or listed companies may make the public issues of shares. #he initial
public offering (!P$) are the public issues of securities by new companies
for the first time.
!n the !P$%s or public offerings by the establish companies, securities are
sold to the public&all individuals and institutional investors.
'(uity and debt are the two basic instruments of raising capital from the
primary markets.
Companies in practice offer a number of variations of e(uity and debt
securities. they include)
$rdinary shares
Preference shares
*ebentures + bonds
Convertible debentures
ecurities with options to buy or sell i.e. *erivative securities
,orrowings from financial institutions.
SECONDARY MARKET
#he secondary market deals with the second hand securities i.e.
securities that have already been issued by companies that are listed in
stock e-change. econdary market is also called the Stock market or
Stock exchange.
!3
#he secondary market, based on all available information, determines
the price and risk of the issued securities. !t provides useful signals to
both listed companies and investors to act in the primary markets.
. stock e-change provides the following useful economic functions)
/elp determining fair prices based on demand and supply forces
and all available information.
Provide easy marketability and li(uidity for investors.
0acilitate in capital allocations in primary markets through price
signaling.
'nables investors to ad1usting portfolios of securities.
!ndia has one of the oldest stock markets in asia,vi2., the ,ombay stock
e-change(,').,' was established in 1345.later on, many more stock
e-change were established in other !ndian cities like
.hmedabad, kolkata, madras, kanpur etc.#he number has now increased
up to 25.
/owever in terms of business activities, the two most prominent all !ndia
stock e-changes are the Bombay Stock Exchange(BSE) and National
Stock Exchange(NSE)."' was set up in 6une 1778."' started the
screen-base traing in !ndia which has been now adopted by ,' and
other stock e-changes as well.
DEPOSITORY AND DIPOSITORY PARTICIPANTS
. e!ository holds shares in demateriali2ed (*'9.#) form and maintains
ownership. .ll transactions take place through computers without paper
work.
. e!ository is an organisation where the securities of a shareholder are
held in the electronic form at the re(uest of the shareholder through the
medium of depository participant. . depository can be compared to a
bank. !f an investor wants to utilise the services offered by a depository,
the investor has to open an account with the depository through
depository participant. #his is very similar to the opening of an account
!4
with any of the branches of a bank in order to utilise the services of that
bank.
!n !ndia there are two depositories&NS"# and $"S# and they compete
with each other.
"e!ository %artici!ant ("%) is an agent of the depository, who is the
interacting medium between the depository and the investor. . *P is
responsible for maintaining your securities account and handling the
securities account in accordance with your written instructions.
'very depository participant is registered through either of depositories
i.e. "*: or C*:./.;'</." ltd is registered through "*: as well as
C*:.
!5
'I):8I-:%J
< ' 8 2
')s
(8FA%(*FA,)
, 8 ' 2
OPERATIONS OF NSDL
"*: has been established with a view to provide holding of securities in
the electronic form and settlement of trades done for these electronic
holdings. .s re(uired by the .ct, "*: is responsible to every investor
who holds electronic balances with the depository. #he depository
participant acts an agent of "*: for providing its services to the
investors.
"*: has designed the software for the operating systems in such a way
that the software systems at the depository and the depository
participant office are connected. #hus, a highly integrated set up for
maintenance of investor accounts through the depository participants has
been developed and implemented. "*: has access to all the accounts of
individual investors maintained by the depository participants to ensure
ade(uate control.
#he operating system of "*: also maintains continuous electronic
connectivity with the registrar and transfer agents of the companies
whose securities can be dematerialised in "*:. #his is done in order to
perform a daily reconciliation of all the account balances held with "*:
=hen a company signs an agreement with "*: for offering its investors
an option of dematerialised mode of holding, physical as well as
depository mode of securities co&e-ist and are traded on the stock
e-changes separately as two distinct securities.
OPERATIONS OF CDSL
Central *epository ervices (!ndia) :imited (C*:), the second depository
in !ndia, is set up to meet the ob1ectives of the *epositories .ct, 177>.
C*: secured its certificate for commencement of business on 0ebruary
3, 1777 from ',!. #he depository system offers an efficient transfer
mechanism by interfacing with the stock market and related clearing
operations. .lankit .ssignments :td., as a depository participant of C*:,
offers services at competitive rates to investors, brokers + issuers of
securities through this depository as well.
&b'ecti(es
#he main ob1ectives of C*: are)
#o accelerate scripless trading
!>
#o make a ma1or thrust in the individual investors? participation in
the depository system
#o create a competitive environment and be responsive to users?
interest and concerns.
TRADING AND SETTLEMENT
!nvestors can carry out their operations (buying & selling) of securities
through brokers and sub&brokers. ,uying and selling of shares is an
agreement between the brokers and sub&brokers and the client
(investors) once the client has filled in the client registration. #he broker
charges a fee (,rokerage), which is between @.5@A and 1A of the value of
transaction.
. broker is an enrolled member of a stock e-change who is authori2ed to
the stock e-change trade.
Sub-brokers are affiliated to the members (brokers) of the stock
e-change and registered with ',! as sub&brokers.
ON5LINE SHARE TRADING
#he trading on stock e-changes in !ndia used to take place through open
outcry without use of information technology for immediate matching or
recording trades. #his was time consuming and inefficient. #his imposed
limits on trading volumes and efficiency.
!n order to provide these "' introduced a nationwide online fully
automated screen&based trading system where a member can punch into
the computer (uantities of securities and the price at which he likes to
transact and the transaction is e-ecuted as soon as it finds a matching
sale or buy order from a counter party.
#he premier stock e-changes of the country, ,' and "', have both
moved to electronic trading from the traditional outcry system. #ata
Consultancy ervices has helped both the e-changes make the change.
TECHNOLOGY AT BSE AND NSE
!?
NSE
#ata Consultancy ervices is providing a total turnkey solution for the
money market and capital market?s floorless trading system.
#he aim was to enable "' to provide nation&wide electronic trading
with highest transparency in the market place. Bsing the client&server
architecture, fault&tolerant computing and in&memory database gives "'
high visibility and impact.
#ata Consultancy ervices also developed the local and nationwide
clearing and settlement system to run in $racle ;*,9 environment. 0or
the year 2@@1&2@@2 the "ational ecurities Clearing and ettlement
system ("C) processed settlements for over 142 million trades with a
turnover of around ;s 5,@3,121 crore. #ata Consultancy ervices also
developed the trading, clearing and settlement system for "'?s futures
and options segment. !n the year 2@@1&2@@2, nearly 8.2 million contracts
were traded on "' 0+$ system with a notional turnover of ;s 1,@1,725
crore.
BSE
,$:# i.e., ,'?s online trading system, the screen&based trading system
replaced the manual out&cry method of trading in the ring and went live
on 9arch 1775.
#his enabled ,' to provide floorless and fully automated screen&based
trading facilities in capital market (C9) instruments with e(ual access to
investors all over the country.
Currently, ,' with around >35 members, has seen an average daily
turnover of ;s 1,1>2 crore in 6uly 2@@2.
0or further e-pansion of its activities, ,' decided to provide web&based
trading facility to the members as it was felt that !nternet trading would
fundamentally change the way e-change and brokers interact with their
customers. o a system developed that is (,' =ebC) with the ob1ective
of enabling the e-change to service its members and the customers of
the members in an efficient and cost&effective manner using the
!nternet.
DEMATERIALISATION OF SHARES
!C
*ematerialisation is a process by which the physical certificates of an
investor are taken back by the Company and e(uivalent number of
securities are credited in the electronic holdings of that investor. #his is
done at the re(uest of the investor. .n investor will have to first open an
account with a depository participant and then re(uest for the
dematerialisation of his certificates through the depository participant so
that the dematerialised holdings can be credited into that account.
*ematerialisation of shares in !ndia was introduced in 1773."ow almost
1@@ A trades are settled in demat form. #he growth of demateriali2ation
in !ndia has been the fastest in emerging capital market and most
developed markets.
0eatures of demateriali2ation)
0all in settlement and other charges.
"o stamp duty
,readth and depth of investment culture has further got e-tended
to interior areas of the country faster.
'-plicit transaction cost has been falling.
!ncreased growth in turnover.
STOCK AND STOCK MARKET
WHAT IS STOCK
. stock, also referred to as a share, is commonly a share of ownership in
a corporation.
tock is the ownership of a corporation represented by shares that are a
claim on the corporation%s earnings and assets. #here are many kinds
of stocks, the most widely known being C$99$" #$C<, which
usually entitles a stockholder to vote in the election of directors and
other corporate matters.
!magine that you own a business. !f you were to divide that business up
into small pieces and sell those pieces, you would essentially have issued
stock.
#he money you raise from selling those DpiecesD of your business can be
used to build new plants and facilities, pay down debt, or ac(uire
another company. . smart owner will keep at least 51A of the stock,
which will allow them to retain control of the day to day activities. .ny
person or institution that owns over a ma1ority of the stock is called the
)controlling shareholer). 'ssentially, this person can do anything they
want & right down to firing the C'$.
.B
WHAT IS STOCK MARKET
tock market is known as the cradle of capitalism. !t is a place where
companies come to raise their share capital and investors go to invest
their surplus funds.
tock 9arket is a place where financial instruments like shares,
debentures, commercial papers, bonds etc are bought and sold. tock
markets are popularly known as stock e-changes. #here are many
popular stock markets in the world. ".*E, #okyo tock '-change,
:ondon tock '-change are the most popular of the lot. #here are many
participants in a stock market. !nvestors, peculators, .rbitrators,
#raders are different type of participants of a tock 9arket. ,rokers are
intermediaries who bring together various participants in a tock 9arket.
FUNCTION OF STOCK MARKET
. stock market (also known as a stock e-change) has two main functions.
*. #he first function is to provide companies with a way of issuing shares
to people who want to invest in the company.
**. #he second function of the stock market, related to the first, is to
provide a (enue for the buying and selling of shares.
9ost important function of the stock market is to facilitate trading of
financial instruments. ,rokers submit a (uote at the stock market on
behalf of their clients. Euotes are specific to the scrip. #he (uote of
the buyer is matched to the (uote of the seller and the transaction takes
place.
.ll transactions entered in a stock market are guaranteed by the tock
'-change. #hat means if the buyer or seller fails to meet his obligation,
the stock e-change steps in and meets the commitment of the
participant. #his instills a lot of confidence and credibility about the
sanctity of the transaction amongst the investing public. #hat is the
reason why a stock e-change is preferred by investing public to a gray
market in shares even though the latter has much lower transaction cost.
.ll the participants in the stock market have the same ob1ective i.e. to
make a profit. !nvestors invest in the stock market with the hope that
market value of their investment will go up and they will be able to make
higher returns than in bank deposits. .rbitrages buy in one market and
sell in another market with an ob1ective of making a profit
.
INDIAN STOCK MARKET
I%-#!% S"$,? M!*?e" O>e*>#e<
-he Bombay sto"$ e0"hanges (B8() and the ,ational 8to"$ (0"hange of India 2td
(,8() are the two primary e0"hange in India& In addition, there are !? %egional 8to"$
(0"hanges Fowever, the B8( and ,8( have established themselves as the two leading
e0"hanges and a""ount for about ?BM of the equity volume traded in India&
-he average daily turnover at the e0"hanges has in"reased from %s& ?4 "rore in CC>7C?
to %s& ,!?3 "rore in CC?7CC and further to %e& !!>. "rore in CCC7!BBB (April7 August
CCC)& ,8( has around 4BB shares listed with a total mar$et "apitali9ation of around %s&
C!4BB "rore (%s& C!4 Bln)& -he B8( has over 5BBB sto"$s listed and has a mar$et
"apitali9ation of around %s& C5?BBB "rore (C5?B Bln)& Most $ey sto"$s are traded on both
the e0"hanges and hen"e the investor "ould buy them on either e0"hange& Both e0"hanges
have a different settlement "y"le, whi"h allows investors to shift their positions on the
.!
bourse& -he primary inde0 of B8( is B8( 8ense0 "omprising .B sto"$s& ,8( has the
81) ,8( 4B inde0 (,ifty), whi"h "onsists of fifty sto"$s&
-he B8( 8ense0 is the older and more widely followed inde0& Both these indi"es are
"al"ulated on the basis of mar$et "apitali9ation and "ontain the heavily traded shares
from $ey se"tors& -he mar$ets are "losed on 8aturdays and 8undays& Both the e0"hanges
have swit"hed over from the open out"ry trading system to a fully automated
"omputeri9ed mode of trading $nown as B:2- (B8( :nline -rading) and ,(A-
(,ational (0"hange Automated -rading) 8ystem& It fa"ilitates more effi"ient pro"essing,
automati" order mat"hing, faster e0e"ution of trades and transparen"y&
-he 8"ripts traded on the B8( have been "lassified into NA6, NB6, NB!6, N<6, N/6 and NO6
groups& -he NA6 group shares represent those, whi"h are in the "arry forward system
(Badla)& -he N/6 group represents the debt mar$et (fi0ed in"ome se"urities) segment& -he
NO6 group s"ripts are the bla"$listed "ompanies& -he N<6 group "overs the odd lot
se"urities in NA6, NB61 NB!6 groups and %ights renun"iations& -he $ey regulator
governing 8to"$ (0"hanges, Bro$ers, 'epositories, 'epository parti"ipants, Mutual
/unds, /IIs and other parti"ipants in Indian se"ondary and primary mar$et is the
8e"urities and (0"hange Board of India (8(BI) 2td&
..
A2OUT NSE
-he ,ational 8to"$ (0"hange of India 2imited has genesis in the report of the Figh
)owered 8tudy Group on (stablishment of ,ew 8to"$ (0"hanges, whi"h re"ommended
promotion of a ,ational 8to"$ (0"hange by finan"ial institutions (/Is) to provide a""ess
to investors from all a"ross the "ountry on an equal footing& Based on the
"ommendations, ,8( was promoted by leading /inan"ial Institutions at the behest of the
Government of India and was in"orporated in ,ovember CC! as a ta07paying "ompany
unli$e other sto"$ e0"hanges in the "ountry&
:n its re"ognition as a sto"$ e0"hange under the 8e"urities <ontra"ts (%egulation) A"t,
C45 in April CC., ,8( "ommen"ed operations in the Aholesale 'ebt Mar$et (A'M)
segment in +une CC3& -he <apital Mar$et ((quities) segment "ommen"ed operations in
,ovember CC3 and operations in 'erivatives segment "ommen"ed in +une !BBB&
NSE G*$/(
NSCCL
IISL
NSE.IT
NSDL
D$"ED I%". L"-.
.3
A2OUT 2SE
-he 8to"$ (0"hange, Mumbai, popularly $nown as H2SEH was established in ?>4 as
HT'e N!"#>e S'!*e !%- S"$,? 2*$?e*& A&&$,#!"#$%H. It is the oldest one in Asia, even
older than the -o$yo 8to"$ (0"hange, whi"h was established in ?>?& It is a voluntary
non7profit ma$ing Asso"iation of )ersons (A:)) and is "urrently engaged in the pro"ess
of "onverting itself into demutualised and "orporate entity& It has evolved over the years
into its present status as the premier 8to"$ (0"hange in the "ountry& It is the first 8to"$
(0"hange in the <ountry to have obtained permanent re"ognition in C45 from the Govt&
of India under the 8e"urities <ontra"ts (%egulation) A"t, C45&
-he (0"hange, while providing an effi"ient and transparent mar$et for trading in
se"urities, debt and derivatives upholds the interests of the investors and ensures redressal
of their grievan"es whether against the "ompanies or its own member7bro$ers& It also
strives to edu"ate and enlighten the investors by "ondu"ting investor edu"ation programs
and ma$ing available to them ne"essary informative inputs&
A Governing Board having !B dire"tors is the ape0 body, whi"h de"ides the poli"ies and
regulates the affairs of the (0"hange& -he Governing Board "onsists of C ele"ted
dire"tors, who are from the bro$ing "ommunity (one third of them retire ever year by
rotation), three 8(BI nominees, si0 publi" representatives and an (0e"utive 'ire"tor 1
<hief (0e"utive :ffi"er and a <hief :perating :ffi"er&
-he (0e"utive 'ire"tor as the <hief (0e"utive :ffi"er is responsible for the day7to7day
administration of the (0"hange and the <hief :perating :ffi"er and other Fead of
'epartments assist him&
-he (0"hange has inserted new %ule ,o&!5 A in its %ules, Bye7laws 1 %egulations
pertaining to "onstitution of the (0e"utive <ommittee of the (0"hange& A""ordingly, an
(0e"utive <ommittee, "onsisting of three ele"ted dire"tors, three 8(BI nominees or
publi" representatives, (0e"utive 'ire"tor 1 <(: and <hief :perating :ffi"er has been
"onstituted& -he <ommittee "onsiders #udi"ial 1 quasi matters in whi"h the Governing
Board has powers as an Appellate Authority, matters regarding annulment of transa"tions,
admission, "ontinuan"e and suspension of member7bro$ers, de"laration of a member7
bro$er as defaulter, norms, pro"edures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member bro$ers to the (0"hange,et"&
.4
SIOT ANALYSIS OF ONLINE SHARE TRADING
S"*e%)"'&
-he Pdo7it7yourself@ framewor$ of online share trading offers retail investors the three
benefits of transparen"y, a""ess and effi"ien"y& )aperwor$ diminishes signifi"antly, and
no more painful trips to your bro$er to "he"$ if everything@s in order& :nline trading has
made it possible to universali9e a""ess to retail investors& -his was earlier very diffi"ult,
as the "ost of servi"ing often7outweighed transa"tion volumes& :nline bro$erage ranges
between B&B47B&!B per"ent of the value of transa"tions for non7delivery7based trades, and
between B&!47B&C4 per"ent for delivery7based trades& :n"e ma#or investments in online
infrastru"ture are over and done with 7 and with the e"onomies of s"ale "oming into play
7 it is e0pe"ted that bro$erage rates would head further downwards&
A""ess to online trading and latest finan"ial happenings, apart from quotes and unbiased
investment analyses, all "onsolidate into a value7added produ"t mi0 in tandem with
evolving mar$ets that are freer and fairer& -he ,et result; An inquisitive, informed and
demanding investor& -oday@s investor is more involved in managing his or her assets and
analy9ing a vast array of investment options& -e"hnology and today@s enabled investor
have, in turn, driven "ompetition, resulting in redu"ed "osts of trading, transparen"y in
dealings, and pri"ing info that is a""urate and real7time& More and more investors now
want to $now how their trades are e0e"uted, and whether they have re"eived the best
possible pri"e& <riti"al "omponents of e0e"ution quality in"lude the pri"es at whi"h
orders were e0e"uted as well as the speed of e0e"ution& -he quality of e0e"ution, in turn,
hinges on effi"ient order routing& Ae owe this to our investor fraternity&
T'*e!"&
:n to some threat per"eption 7 'omesti" funds, foreign institutional investors and
operators "omprise the three main mar$et "onstituents& And all three in"lude term
investors as well as opportunists in their pe"$ing order& 8ome, for instan"e, hit"h their
fate with what the /IIs are up to& All this spells spurting volumes& But nobody gives a
damn about the resultant volatility& And some, not all, offer free investment advi"e over
the ,et to lure roo$ie investors with misleading information& )ri"es of s"ripts "an also be
influen"ed to the advantage of vested interests, "ourtesy the ,et& Unli$e in the U8,
sto"$bro$ers out here willingly (or under the for"e of "ir"umstan"e) assume the role of
Padvisors@, sans the neutral, non7vested stan"e&
Ie!?%e&&e&
(very thing in the world has a flip side to it 7 -ransa"tion velo"ity is "ru"ial& And more
often than not, "onne"tions are lousy& -here@s also a degree of investor s$epti"ism about
online payment and settlement me"hanisms in spite of all the en"ryption and fire walling
brought into play& -ime and te"hnology will soon assuage these "on"erns, whi"h har$
ba"$ to the Pphysi"al@ days&
.5
Q-he three main te"hnology obsta"les whi"h have prevented Internet bro$ing from ta$ing
off are;
2a"$ of Internet penetration
Bandwidth infrastru"ture
)oor quality of I8) infrastru"ture&R
O(($*"/%#"#e&
Jou have some money to dabble with& -rading shares on B8(=,8( has always been your
dream& Ahen will you ever find the timeS And besides, the hassle of finding a bro$er is
not easy& -his is your main opportunity&
%eali9ing there is untapped mar$et of investors who want to be able to e0e"ute their own
trades when it suits them, bro$ers have ta$en their trading rooms to the Internet& *nown
as online bro$ers, they allow you to buy and sell shares via Internet&
-here are ! types of online trading servi"e; dis"ount bro$ers and full servi"e online
bro$er. 'is"ount online bro$ers allow you to trade via Internet at redu"ed rates& 8ome
provide quality resear"h, other don6t& /ull servi"e online bro$erage is lin$ed to e0isting
bro$erages& -hese bro$ers allow their "lients to pla"e online orders with the option of
tal$ing= "hatting to bro$ers if advi"e is needed& Bro$erage rates here are higher&
4)aisa&"om, I<I<I'ire"t&"om, IndiaBulls&"om, 8hare$han&"om, Geo#it se"urities&"om,
F'/<se"&"om, -atatdw&"om, *ota$street&"om are some of the online bro$ing sites in
India&
And daily trading turnover is estimated in the vi"inity of B&>4 per "ent of the "ombined
B8( and ,8( daily turnover of about %8 ,BBB "roreTTT -he point is, there@s tremendous
s"ope for growth& (spe"ially when you "onsider the U8, where trading over the ,et
a""ounts for about 44 per "ent of the total volumes& And, I believe, in some Asian
mar$ets the figures as high as >B per "ent
H/*-e& :$* O%#%e S'!*e T*!-#%)
1. I%"e*%e" :*!/-
In India, we see this $ind of frauds happening in different way due to nature of our
so"iety& Fere when you tal$ to bro$er@s staff while buying or selling, he will usually
advise you to buy share whi"h he has bought and plans to dump when pri"e goes up&
Ae have seen enough of )UM) and 'UM) even without help of internet in "ases of
Farshad Mehta boom of CC! and *etan )are$h boom of !BBB (he even had "ult
following with Inde0 of B shares "alled *7B)&
.>
-oday lot of investor6s depending on -E "hannel for re"ommendation about sto"$s to
sell, or buy or hold& <hannels li$e <,B8 offer array of e0perts from e"onomist to bro$ers
to analyst& Most of these people have vested interest in sto"$s they re"ommend and
promote&
:ne of the most "ommon forms of se"urities fraud on the Internet involves an imposter
who attempts to manipulate the pri"e of a sto"$ by disseminating phony press releases or
information, or "reating phony websites& A re"ent e0ample of this s"heme is the hoa0
perpetrated against U8 based, )air Gain -e"hnologies&
;. V$!"##"3 $: I%-#!J& S"$,? M!*?e"&
%e"ent mar$et developments have on"e more fo"used attention on the volatility that has
"ome to "hara"terise India6s sto"$ mar$ets&
Movements in the 8ense0 during the two years have "learly been driven by the behaviour
of foreign institutional investors (/IIs), who were responsible for net equity pur"hases of
as mu"h as U5&5 and U?&4 billion respe"tively in !BB. and !BB3& -hese figures "ompare
with a pea$ level of net pur"hases of U.& billion as far ba"$ as CC5 and net investments
by /IIs of #ust U>4. million in !BB!& In sum, the sudden /II interest in Indian mar$ets in
the last two years a""ount for the two bouts of medium7term buoyan"y that the 8ense0
re"ently displayed.
Given the presen"e of foreign institutional investors in 8ense0 "ompanies and their a"tive
trading behaviour, their role in determining share pri"e movements must be "onsiderable&
Indian sto"$ mar$ets are $nown to be narrow and shallow in the sense that there are few
"ompanies whose shares are a"tively traded& -hus, although there are more than 3>BB
"ompanies listed on the sto"$ e0"hange, the B8( 8ense0 in"orporates #ust .B "ompanies,
trading in whose shares is seen as indi"ative of mar$et a"tivity& -his shallowness would
also mean that the effe"ts of /II a"tivity would be e0aggerated by the influen"e their
behaviour has on other retail investors, who, in herd7li$e fashion tend to follow the /IIs
when ma$ing their investment de"isions&
.?
COMPETITIVE ANALYSIS
T'e M!K$* ,$1(e"#"$*& !*e;
L @(!#&!.,$1
L K$"!?Se,/*#"#e&.,$1
L I%-#! 0/&
L ICICID#*e,".,$1
L HDFC&e,/*#"#e&
@(!#&!
C$1(!%3 2!,?)*$/%-
Indiainfoline was founded in CC4 and was positioned as a resear"h firm& In !BBB e7
bro$ing was started under the brand name of 4 paisa&"om& Apart from offering online
trading in sto"$ mar$et the "ompany offers Mutual funds online& It also a"ts as a
distributor of various finan"ial servi"es i&e& G:I se"urities, <ompany /i0ed 'eposits,
Insuran"e& 2imited ground networ$, present in !B <ities
O%#%e A,,$/%" T3(e&4
Investor -erminal ; Investors = 8tudents
-rader -erminal ; 'ay -raders = F,I6s
.C
PRICING FOR RETAIL CLIENTS
I%>e&"$* Te*1#%!
A,,$/%" O(e%#%) 4 %s 4BB
De1!" 1
&"
Y*
4 %s !4B
I%#"#! M!*)#% 4 %s !4BB(<ompulsory)
M#% M!*)#% Re"!#%!0e 4 %s BBB
V2*$?e*!)e 4
7-rading B&B4M ea"h side D 8-
7'elivery B&4BM ea"h side D 8-
PRICING FOR HNI CLIENTS
T*!-e* Te*1#%!
A,,$/%" O(e%#%) 4 %s 4BB
De1!" 1
&"
Y*
4 %s !4B
I%#"#! M!*)#% 4 %s 4BBB(<ompulsory)
M#% M!*)#% Re"!#%!0e 4 %s BBB
V2*$?e*!)e 4
-rading B&B4M ea"h side D 8-
'elivery B&4BM ea"h side D 8-
(,egotiable to B&B4M ea"h side 1 B&!4M)
3B
VA,,$/%" A,,e&& C'!*)e&
7 Monthly %s ?BB, ad#ustable against Bro$erage
7 Jearly %s ?BBB, ad#ustable against bro$erage
De! C#%,'e*& >F& @ P!#&!
LC$1(!%3 2!,?)*$/%-
,ot having a very positive image, relatively new in the bro$ing arena, limited networ$
VD$<%"#1e
%e"ent past 4 paisa -rader -erminal (-&-) is e0perien"ing high frequen"y downtime
between . H .;.B p&m due to server load ( as their -&- is feature heavy "ompared to
8peetrade "harting)
VM!%/! A,,$/%"#%)
-he 4 paisa a""ounting system is manualW online fund transfer through ban$ is not
"redited instantly&
2imit is provided (:' for shares sold from '), or "all
8imilarly limit released for shares sold under B-8- is manual
'elay in re"eiving pay7out of "lear funds from trading to Ban$ A""ount
VM#% A,,$/%" 2!!%,e
<on"ept of Min %s ,BBB to be maintained in form of "ash = se"urities to $eep a""ount
a"tive& -his "an be withdrawn only on "losure of a""ount&
KOTAK SECURITIES
C$1(!%3 2!,?)*$/%-4
*ota$ 8e"urities is the sister "on"ern of *ota$ Mahindra ban$& *ota$ 8e"urities limited
is a #oint venture between *ota$ Mahindra Ban$ and Goldman 8a"hs&
3
O%#%e A,,$/%" T3(e&