A Thesis on

Study on the attitude of investors towards online trading.

By

CHINMAYA H P

IUD NO 0801214200

A report submitted in partial fulfillment of

The requirements of
THE MBA PROGRAM
(The Class of 2010)

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 CERTIFICATE

This is to certify that the Management Thesis titled ___________________________________

______________________________________________________________________submitte

d during Semester _________________ of the MBA Program (The Class of 2010) embodies

original work done by me.

Signature of the Student

Name (in Capitals) :______________________________________________________

Enroll Number : ______________________________________________________

Campus : ______________________________________________________

Signature of the Faculty Supervisor

Name (in Capitals) :

Designation :

Campus :

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 ACKNOWLEDGEMENT

First, I would like to thank The Almighty for his perpetual blessings and guidance
through out this thesis work.

I express my deep sense of gratitude to our Campus head and the faculty guide
for this thesis work MR.: Ramachandra gunari, ICFAI national college shimoga, for
providing me an opportunity and continuous encouragement for doing this thesis.
His suggestions benefited immensely. Further, he also provided me with valuable
inputs and guidance in writing this live project.

I thank Mr. Nagaraj, Comtrade accounts officer in Karvy The finapolis, for his
valuable guidance, co-operation and support, which has been a major
contributing factor in the completion of this thesis.

I also like to remember and thank all the respondents who cooperated and
answered all my questions with patience.

Last but not the least, I thank my family and well wishers for their encouragement
and support who have stood by me during this project.

CHINMAYA.H.P

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 Contents TABLE OF CONTENTS page no.

i. Title page…………………………………………………………….…………………………1

ii. Certificate……………………………………………………………………………………..2

iii. Acknowledgments………………………………………………………………………..3

1. Introduction……………………………………………………………………………………….... 6-10

1.1 Definition and Overview…………………………………………………………………………..…7

1.2 BSE and NSE online trading system…………………………………………………………..…9

2. Literature review…….……………………………………………………………………….…. 11-28

2.1 literature review…………………………………………………………………...............................12

2.2 Research design method……………………………………………………………………………………25

2.3 Objective of the study…………………………………………………………….…………………………26

2.4 methodology of research………………………………………………….……………………………...27

2.5 Data collection techniques……………………………………………………………………..…………27

2.6 Scope of the study…………………………………………………………………………………………….28

2.7 Limitations……………………………………………………………………………………………………….28

3. Industry profile...………………………………………………………………………………... 29-47

2.1 Industry Overview………………………………………………..…………………...........................30

2.2 Investment…………………………………………………………………………...……………………………32

2.3 Capital Market and Depository…………………………………………………………………………..36

2.4 Trading online and its requirements……………………………………………………….…………46

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4. Data analysis and interpretation……………….………………………………………….. 48-62

4.1 Data Analysis………………………………………………………………………………………………………49

5. Discussions and implications…………………….………………………………………… 63-67

5.1 Discussions & Implications.…………………………………………………………………………………64

6. Conclusions and recommendations………….…………………………………………….68-71

6.1 Conclusions………………………………………………………………………………………………………….69

6.2 Recommendations……………………………………………………………………………………………….70

7. References……………………………………………………………………………………………72-73

7.1 reference sources……………………………………………………………………………………………….73

8. Annexure………………………………………………………………………………………………74-77

8.1 Questionnaire……………………………………………………………………………………………………..75

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CHAPTER - I

Introduction
1.1 Definition and Overview

1.2 BSE and NSE online trading system

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1.1 INTRODUCTION:

In olden days there was credence that, investments are for securing the
future and that was the only genuine objective of the people. Investments were
also happening only on government security instruments. But the trend have
changed and people like to invest on different type of government as well as semi
government and private securities not only to secure the upcoming but also to
have the benefit of present by making the large profit by their investments.

A Share market is the place where buying and selling of shares takes place.
Nowadays due to internet and advanced technology buying and selling of shares
takes place anywhere in India and also from foreign country, there is no need to
be physical present in exchanges like NSE and BSE.

When the people start accepting the changes, even the surrounding
environment also facilitates for the changes. The same when the people stated
thinking about a mixture of investments to make the profit, the existing market
also stared facilitating the investor. From these changes, the different type of
investment market came into existence.
When the market gets the importance as never seen before, many studies
will go on happening on the highlighted investment market. Similarly this study
puts the light on the different type of markets and the instruments which are
available for the investors to devote their money for their requirements
furthermore, the study try to come across the grounds, why people like to
transact with stock brokers or with any other support instead of doing the
transactions independently.

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 As mentioned, the main objective of the study is to know about the various
reasons why investors like to have support from the any means instead of doing
the same independently even though they have experience and knowledge in
investing and getting the adequate profit. Along with the main idea of the study,
there are some other objectives are also integrated with the study like, what is
trading online, the procedure included in trading online, materialized shares
trading, and what all the unidentified facts involved.

The study completely involves in detailing about the online trading system. Here
the different types of online trading system serviced by different stock exchanges
are given.

1. BSE online trading system[BOLT]

BSE On-Line Trading System, popularly known as the BOLT System

took its genesis in the year 1994, as part of the four-phase
computerization program to create an automated trading
environment. BOLT system aimed at converting the Open Outcry
System of trading to a Screen-based trading system (SBT). BSE had
the requisite knowledge base and virtue of more than 115 year track
record in the capital markets; BSE embarked on the specified project
in 1991 and seamlessly completed the fourth phase in March 1995.

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 BOLT is supported on the hardware front by the Tandem Non-
Stop Himalaya System which is specifically designed to cater to the
requirements of the On Line Transaction Processing (OLTP)
environment. BOLT System works on the Tandem S88016 * 2
platform running on 32 CPUs. The existing set-up, a fault tolerant
system with scalable architecture can handle a maximum of 2.5
million trades a day against a daily average of 75000 trades a day
when BOLT was started. Further, the average time of execution is
200 orders per second with a peaking speed of 250 orders per
second. The system comprises of a Tandem Himalaya S88016
machines acting as backend to more than 17000 Trader Work
Stations (TWS) networked on Ethernet, VSAT and LAN network.

2. National exchange for automated trading[NEAT]

The NEAT is an online trading system which is similar to the BOLT

online system of BSE. But the difference is like the interface of
operating and design of the system and software. The other trading
methodology is similar in both the systems.

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 The NEAT online trading system operates on the basis of four type of
market conditions like,

a. Normal market.

b. Odd lot market.

c. Auction market.

d. RTDEBT market.

The details will be discussed in analytical parts.

The study goes in detail about why investor takes the help of intermediary
to carry out with the stock market instruments when they have direct access to
the market through internet and other services and even there are few software
to transact in the market independently and also the help through online is also
available. Even investor can obtain the paid help services for the healthier
investments suggestions.

The literature review briefs the main theme of the report and tells ensures
the significance of conducting survey, and tells about the reliability and validity of
the things. Research design and analysis provides the sufficient data regarding the
findings and gives enough supports for the recorded proofs of the information.
Methodology enlightens the way of doing the work, and as a final point results,
analysis, conclusion and recommendations puts the ultimate outcome into
picture.

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CHAPTER - II

Literature review

2.1 literature review

2.2 Research design method

2.3 Objective of the study

2.4 data collection techniques

2.5 Scope of the study

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2.1 LITERATURE REVIEW:

In a broadest intelligence, investment is a sacrifice of the current money or

any other resources for the future benefits. Numerous investment opportunities
are available in the market these days. Investor can simply deposit his/her money
in the bank to be risk free or they can invest their funds on the different source of
the investments like government secured investments or on the equity market or
any other type of investments if at all ready to bear risk factors. The two factors
of investments are time and risk factors. When it comes to the government
investment instruments, time element dominates but in the same time, risk
elements dominates if the investments are like share market instruments. This
factor mostly decides the investment alternatives and it changes the investors’
attitude towards the investments.

There are various factors to be considered while studying about the

investments and particularly about share market investments. Here the study
goes towards the searching of the factors which influences the investor to go
towards the share market investments and why investors likely to have an
additional support for their investments, but why they do not go autonomously as
an alternative.

Investors have several alternatives for their funds to be invested with. Like
that they have several people to support for the investments decisions like, stock
brokers who keep on updating the investor’s knowledge if they had put the
investments through the stock brokers. The main factors why the people like to
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go with the stock broker are the market unpredictability and the risk factor.
General investor always can not keep on thinking about their investment
variations so they may take the external support.

Mainly the Indian market conditions are always unsecured and it will be
varying all the time according to the main few stocks’ changeability in the stock
market. Doing the investments online with stock market independently is possible
with the support of the software which is provided for the transactions at the
same time few venture investors’ do the transactions independently but most of
the investors go with the stock brokers because of the lack of additional
knowledge and lack of confidence to go with the risk factors.

Here the main objective of the literature review is to detail the facts
regarding the study and to see an overview of the literatures which supports the
study. Basically a survey of the different investors in must for this type of study
because these studies are highly depended upon primary data. An interaction
with people makes the study better and comprehensible. Still many books and
other sources help the study to make more realistic.

For the further reference on the study, I studied the literatures of K

Sreepathi from his book, ‘The Dynamics of Indian financial markets’, Investment
analysis and portfolio management’ written by Prasanna Chandra, ‘financial
management’ written by B V Ragunandan.

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 From the study of the above literatures, book written by Prasanna Chandra,
‘The Dynamics of Indian financial markets’ contributed to a great extent. The
literature penned the main points regarding the approaches of the investments
also gave the principal reasons regarding the various investment alternatives and
the perception of the investor regarding the stock market returns. The author has
answered many questioned like, what is the relationship between risk and return.
What is the importance of diversified investments and how risks can be shared
within the diversification, how successful are the various strategies followed by
investment practitioners. As he says in the portfolio management process,
investment has five attributes like, rate of return, risk factor, marketability, tax
shelter, and convenience. Further he says, portfolio management process has
steps like,

1. Specification of investment objectives and constraints.

2. Choice of the asset mix.

3. Formulation of portfolio strategy.

4. Selection of securities.

5. Portfolio execution, revision and evaluation.

These are the main process involved in selecting the best alternative for the
investments and to select an intermediary for the investment suggestions. When
it comes to the process of port folio strategy and choice of asset mix and
securities, every investor feel to have an external help or support instead going
for independent investment decisions. So why most of the investments happens

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through stock brokers and other intermediaries. Even every investor need to
complete some formalities which can not be done independently. Like creating a
demat account is mandatory for the investment on shares. Maintaining the
accounts and time to time portfolio evaluation. Each and every person who
invests can’t keep on checking the port folio because he may have other tasks too
and even selection of securities needs much knowledge than having experience
so it needs good qualified suggestions.

On the other hand, one more author BV Ragunandan who says in his book
as, usually shares are bought through a stock broker, who is a licensed member of
a recognized stock exchange. So while buying shares, one need to locate a
registered stock broker. Further he says, there are many participants in the
market like,

A. Regulators who are the key agencies that have a significant regulatory
influence over the securities market.

B. Stock exchanges, brokers who are the institution where securities are
bought and sold and brokers who are the agents of the stock exchanges
respectively.

C. Other participants are, depositors who maintains the demat accounts

which are mandatory for the transactions. Merchant bankers, primary
dealers, registrars, underwriters, bankers, these are all the people come in
stock market transactions.

When it comes to the trading with the stock market instruments that means,
investing on stocks, we have two type of trading. Those are,
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 1. Open outcry system[offline trading]

2. Screen based trading[offline trading]

3. Internet trading[online trading]

As the literature of the different books and other sources reviles that,
under the open outcry system, trader need to be on the floor where trading
happens. Usually in stock exchanges where trader, means buyer have to bid their
price and seller have to offer his shares and finally closes with a mutually agreed
prices.

When it comes to screen based trading the trading, the trading happens
through computer screen and here distant participants can trade with each other
through the computer by having the internet connections. Screen based trading
system enhances the efficiency of the market. Speed of the transactions,
establishes transparency in the transactions and documentations. Till 1994,
trading on the stock market in India was based on the open outcry system and
trading was not dematerialized at that time. But after establishing national stock
exchange and SEBI, in 1994 the screen based system entered to India and in a
short span of time India could able establish the transparency like no other
countries did like that till now.

Internet trading or online trading was introduced in the year

2000.currently, ICICI Web trade, Sherekhan, kotakstreet, geogit securities,
investsmart, and others are offering the internet trading. To do internet trading,

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investor has to register himself as a client with the internet stock broker apart
from having a computer, a modem, and a telephone connection. Investor has to
keep a minimum balance with his bank account with the stock broker so that
broker can directly debit or credit.

Further, Dates of beginning of electronic trading by top leading exchange in

120 nations is provided in a Journal of Finance article published in 2005 “Financial
market design and the equity premium: Electronic vs. floor trading.” Leading
academic research in this field is carried out by Professor Ian Domowitz and
Professor Pankaj Jain. The same report states that, there are broadly two type of
trading in financial markets like,

 Business-to-business (B2B) trading. It conducted frequently on exchanges,

where large investment banks and brokers trade directly with one another,
transacting huge amounts of securities.
 Business-to-client (B2C) trading. Where retail (e.g. individuals transacting
literally small amounts of stocks and shares) and institutional clients (e.g.
hedge funds, fund managers or insurance companies, trading far larger
amounts of securities) buy and sell from brokers or "dealers", who act as
middle-men between the clients and the B2B markets.

Many of the existing analysis and findings by the reports have already given
what all the impacts of the electronic trading system, we shall have a look on it.

 Reduced cost of transactions- from the automation, many of the works can
be done possibly in a short time so the cost can be decreased.
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  Better liquidity- electronic systems make it easier to let many companies to
trade with one another, no matter where they are located. This leads to
greater liquidity for the security instruments.

 Greater competition- there will be a greater competition when there are

many companies existing in the market to provide the e trading system. So
the investor can catch out better service and he is deserved for that.

 Enhanced transparency level- E trading made the markets less opaque and
the market has given a greater transparency in transacting the instruments
and other securities. There will be direct access to the customer for his
transactions.

Moreover, some of the findings of several existing thesis reports said these points
about online trading system;

“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”.

The given information is like; 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

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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, 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:

With all the ease of online trading, there are still investors who favor the old
fashion way of offline trading. Offline trading has lot its recognition but it is still
the core form of investing. Offline trading offers many benefits as well.

1. The one benefit that an investor be grateful for 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.

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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.

DIFFERENCE BETWEEN ONLINE TRADING AND OFFLINE TRADING SYSTEM

ARE:

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.

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INTERNET BASED TRADING THROUGH ORDER ROUTING SYSTEMS:

Internet based trading on conventional exchanges, uses the Internet as a

medium for communicating client orders to the exchange, through broker web
sites. Broker’s web sites may serve a variety of functions. These may include;

 Allowing the clients to trade directly through investors;

 promote the broker dealers’ services to potential investors;
 Offer market information and investment tools similar to those offered
by information vendor or SRO web sites;
 Offer real-time or delayed quote information, continuously update
quotes while the user visits other sites, or allow investors to create a
personal stock ticker;
 Provide market summaries and commentaries, analyst reports and
trading strategies and market data on currencies, mutual funds, options,
market indices and news; and
 Offer investors access to portfolio management tools and analytic
programs;
 Information on commission and fees; and
 Account information and research reports.

In an Order Routing system, a broker offering Internet trading facility

provides an electronic template for the customer to enter the name of the
security, whatever it is to be bought or sold, the quantity and whatever the order
is a market or limit order. Once the broker’s system receives this information.

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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.

The Bombay stock exchange as well as national stock exchange has given the
highlighted points as the main features they are providing for the investors
through online trading system. These are given by the stock exchanges in its
websites;

1. Freedom of information.

2. Control and security of investors’ money.

3. Access to the market directly.

4. Ensures the best price for the investors.

5. Offers enhanced transparency.

6. Enables irritation free trading.

7. Allows instant trading execution.

8. Reduces settlement risk.

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 9. Integrated depositary accounts with bank accounts.

Further more, the famous writer of the book “Intelligent stock market
investing” Mr. N J Yasaswy, and the book “financial markets and services” by
Mr. Y Chandra sekhar written in their book regarding the benefits of the online
trading as,

1. It is less costly.

2. Peace of mind. It means, 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 properly and access to information and investment tools

trough direct internet access.

4. It reduces the settlement risk and offers superior transparency.

The books which are mentioned above are very much useful to give
suggestions on the findings because the authors have explained the topic
thoroughly and given the good suggestions to overcome the problems regarding
the investment decisions and trading decisions.

Investors’ expectations are very high most of the times and very rarely they have
come down with the changing realities like softening of inflation, interest rates,
excess capacity in the industry, reduction of the import duties etc. “there is a
strong need for a shift in the investors’ mental programming of high return on
equity investments” opines the author.

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 So from the above reviews of the literatures we can give further as, under the
existing legal and regulatory framework of SEBI registered brokers can offer
trading on Internet through order is routing systems. This would reduce the risk
factors which are in offline trading system and also increases the transparency.
Still there are few problems are there in trading online like problem of hacking
the data, online crimes, phishing the banking information and passwords,
problem of taking the decision independently, breakdown of the computers,
servers and internet connection etc. still we need to adapt the changes and
further technology so its better to en cash the opportunity of changes.

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2.2 RESEARCH DESIGN AND METHODOLOGY:

Problem definition:

A research problem, in general, refers to some difficulty which a researcher

experiences in the context of either a theoretical or practical situation and wants
to obtain a solution for the same.

A problem clearly stated is a problem half solved. Thus, defining a research

problem properly is a prerequisite for any study and is a step of highest
importance. It is only on careful detailing the research problem that we can work
out the research design and can smoothly carry on all the consequential steps
involved while doing the research.

The investments are subjected to risk. What ever may the type of
investment the investor like to make but it has its risk factors. There are several
type of investments available in the market but here the topic is only
concentrated on share market transactions hence, we are going to discuss upon
the various factor influences the investor to go for these investments and
investors are like to have a good intermediary for their transactions.

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 In the light of the above background, we can illustrate the main problem
definition for the study as, what are the different type of investments are
available for the investor in the stock market, through what all the way an
investor can transact and why most of the investors desire to have assistance
from an adviser of the investments though he can transact independently through
online.

2.3 OBJECTIVES OF THE STUDY:

1. To make out what stock market investments is and what is online trading
system.
2. To know the peoples’ awareness regarding online stock market
transactions.
3. To study the investor’s opinion towards independent trading and de
materialized share trading.
4. Revealing what all the unknown things involved in the stock trading.

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2.4 METHODOLOGY OF RESEARCH:

Effective research need to take up the following steps so these are the
steps taken largely for the study.

1) Defining the problem and research objectives.

2) Developing the research plan.

3) Collecting the information.

4) Analyzing the information.

5) Presenting the findings.

2.5 DATA COLLECTION:

The required data for the study collected from the primary source of data
as well as secondary source of the data. Time required to obtain the primary data
is higher compared to that required for collecting secondary data.

Primary data collection is directly from respondents. The respondents are

the people who are already invested on shares and other type of investments and
people who are interested to invest and people who have information regarding
the independent online trading.

Primary data collection is through structured questionnaire as well as

personal meetings.

Secondary data is collected through different books, magazines, E books

and from various web sites. The details regarding the secondary data source is
given in the bibliography at the end of the report.

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2.6 SCOPE OF THE STUDY:

The scope of the study is mainly to bring out the total and true facts
regarding the share market and the trading system through online transactions.
The research was focused on various reasons for the investments and the ways of
investments the investor goes to make hence the findings are fair reflection of the
respondents.

2.7 LIMITATIONS OF THE STUDY:

Every study will have its own limitation and limitation for further study of
the topic. Like that this study also has its own limitation. The very few limitations
are given below:

1. Enough investors for the sample size. Finding out the investor who trade
online is a bit difficult task.
2. Availability of information is limited regarding online trading system.
3. Truthfulness of the information provided by the investors. Each and
every information may not be the fact.

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CHAPTER - III

Industry Profile

2.1 Industry Overview

2.2 Investment

2.3 Capital Market and Depository

2.4 Trading online and its requirements

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2.1 INDUSTRY OVERVIEW:
Globalization of the financial market has led to a manifold increase in
investment. New markets have been opened; new instruments have been
developed and new services have been launched.

India has a well established capital market mechanism where in effective

and efficient transfer of money capital or financial resources from the investing
class to the entrepreneur class in the private and public sector of the economy
occurs. Indian capital market has a long history of organized trading which started
with the transaction in loan stocks of the East India Company from that time it has
undergone drastic changes to meet the requirements of the globalization. The
Indian Capital Market had been dormant in the 70's and 80's has witnessed
unprecedented boom during the recent years. There has been a shift of
household savings from physical assets to financial assets, particularly the risk
bearing securities such as shares and debentures. Capital markets structure has
also undergone sea changes with number of financial services and banking
companies, private limited companies coming in to the scene which made the
competition in the market stiffer.

The Companies Act 1850, introduced the concept of limited liability to

India, served to stimulate the activity in the stock market. From then number of
acts are passed to boost the revolutionary change. The global capital market
registered spectacular growth in the decade of 1990's which had an effect on the
growth of Indian market. The world market capitalization grew at an average
annual rate of 16% during the decade, it grew from about US $ 9.3 trillion in 1990
to about US $ 36 trillion in 2000 but fell to about US $ 28 trillion by 2001. The
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turnover on all markets taken together has grown nearly 19 times from US $ 5.5
trillion in 1990 to US $ 48 trillion in 2000 before depleting to about US $ 42 trillion
in 2001. The turnover in developed markets has, however, grown more sharply
than that in emerging markets. The US alone accounted for about 70% of world
wide turnover in 2001. Despite having a large number of companies listed in its
stock exchanges, India accounted for a merger of 59% in 2001 down from 1.06%
in 2000.

The stock markets world wide has grown in size as well as depth over
last one decade. During the decade 1990-2000, the world market
capitalization/GDP ratio more than doubled from 51% to 120%. Value traded GDP
rose from 29% to 103% and turn over ratio shot up from 48% to 89%. The
combined market capitalization of a select 22 emerging economies increased
from US $ 339 billion in 1990 to US $ 2.2 trillion in 2000. The average market
capitalization increased from 3.6% to 7%, annual value of shares traded increased
from $ 180 billion to $ 2.2 trillion and GDP increased from 16.7% to 45.5%. For
India the total capitalization grew from $ 38,567 million at the end of 1990 to $
110,396 million at the end of 2001. Turn-over of stocks

Increased from $ 21,198 million in 1990 to $ 249,298 million in 2001.

Market capitalization as a percentage of GDP grew from 12.2% in 1999 to 32.4%
in 2001 while turnover ratio went up from 65.9% in 1999 to 191.4% in 2000. The
number of listed companies in India was 5,975 as at end of 2001. There are very
few countries, which have higher turnover ratio than India. Standard and Poor
(SP) ranked India, 25th in terms of market capitalization, 15th in terms of total
value traded in stock-exchanges and 6th in terms of turn-over ratio.

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2.2 Investment:

Investment means buying securities or other monetary or paper (financial)

assets in the money markets or capital markets, or in fairly liquid real assets, such
as gold as an investment, real estate, or collectibles. Valuation is the method for
assessing whether a potential investment is worth its price. Types of financial
investments include shares or other equity investment, and bonds (including
bonds denominated in foreign currencies). These investments assets are then
expected to provide income or positive future cash flows, but may increase or
decrease in value giving the investor capital gains or losses

Characteristics of Investment:

(i) Interest (return)

When we borrow money, we are expected to pay for using it – this is

known as Interest. Interest is an amount charged to the borrower for the privilege
of using the lender’s money. Interest is usually calculated as a percentage of the
principal balance (the amount of money borrowed). The percentage rate may be
fixed for the life of the loan or it may be variable, depending on the terms of the
loan.

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 What factors determine interest rates?

The factors which govern these interest rates are mostly economy related and
are commonly referred to as macroeconomic factors. Some of these factors are:

 Demand for money

 Level of Government borrowings
 Supply of money
 Inflation rate

(ii) Risk

Risk may relate to loss of capital, delay in repayment of capital non-

payment of interest, or variability of return. While some investment such as
government securities and bank deposits are almost without risk, others are more
risky. The risk of an investment is determined by the investment’s maturity
period, repayment capacity, nature of return commitment, and so on.

(iii) Safety

Every investor expects to get back the initial capacity on maturity without
loss and without delay. Investment safety is gauged through the reputation
established by the borrower of the fund. A highly reputed and successful
corporate entity assures investors of their initial capital.

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(iv) Liquidity

An investment which is easily saleable or marketable without loss of money

and without loss of time is said to be possess the characteristic of liquidity. Some
investments such as deposit in unknown corporate entities, bank deposit, post
office deposit, national saving certificate, and so on are not marketable.

An investor tends to be prefer maximization of expected return,

minimization of risk, safety of fund, and liquidity of investment

The three golden rules for all investors are:

 Invest early
 Invest regularly
 Invest for long term and not short term

One needs to invest for

 Earn return on your idle resources

 Generate a specified sum of money for a specific goal in life
 Make a provision for an uncertain future
 To meet the cost of inflation

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Sources of study for investors:

A look out for new investment opportunities helps investors to beat the
market. There are many sources from which investors can gather the required
information. Such as;

(i) Financial institutions

Corporate house, government bodies and mutual funds are the main
source of investment information. Many of these enterprises have their own
website and post investment related information on their websites.

(ii) Financial market

Stock exchange and regulated bodies also provide useful information to

investor to make there investment decisions. With respect to secondary market,
the Securities and Exchange Board of India uses various modes to promote
investors education and takes great effort to achieve an investor friendly
secondary market in India. The Reserve Bank of India also provide useful
information relating to the prevent interest rates and non-banking financial
intermediaries that mobiles money through deposit schemes.

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(iii) Financial service intermediaries

These are intermediaries who promote securities among the public. Many
of these intermediaries are the agencies of specific instruments especially tax
saving instruments. These intermediaries offer to share their commission from
there concerned organization with the individual investor thus investor get
additional advantages while investing through intermediaries.

(iv) Media

Press sources such as financial news papers, financial magazine, business

news channel, websites etc. provide information related to investment to the
public. Besides information on securities, these sources also provide analysis of
information and in certain instance suggest suitable investment decisions to be
made by investor

2.3 Capital Markets and Depository:

About Capital Market:

The function of the financial market is to facilitate the transfer of funds

from surplus sectors (lenders) to deficit sectors (borrowers). A financial market
consists of investors or buyers of securities, borrowers or sellers of securities,
intermediaries and regulatory bodies. Indian financial system consists of money
market and capital market.

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 The capital market consists of primary and secondary markets. The primary
market deals with the issue of new instruments by the corporate sector such as
equity shares, preference shares and debt instruments. The secondary market or
stock exchange is a market for trading and settlement of securities that have
already been issued. The investors will holding securities or sell securities through
registered brokers/sub-brokers of the stock exchange.

The introduction of NSE & BSE has increased the reach of capital market
manifold which in turn increased the number of investors participating in the
capital market and thus creates the possibility of a bad delivery. The cost & time
spend by the brokers for rectification of this bad delivery tends to be higher with
the geographical spread of the clients. The increase in trade volumes leads to
exponential rise in the back office operation. The inconvenience faced by the
investors (in area that are far long & away from the main metros) in the
settlement of the trade also limits the opportunity for such investors in
participating in auction trading.

This has made the investors as well as brokers wary of Indian capital
market. The erstwhile settlement system on Indian stock exchanges was
inefficient and increased risk, due to the time that elapsed before trades was
settled. The transfer was by physical movement of papers. There had to be a
physical delivery of securities - a process fraught with delays and resultant risks.

The second aspect of the settlement related to transfer of shares in favor of

the purchaser by the company. The system of transfer of ownership was grossly
inefficient as every transfer involves physical movement of paper securities to the

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issuer for registration, with the change of ownership being evidenced by an
endorsement on the security certificate. In many cases the process of transfer
would take much longer than the two months stipulated in the Companies Act
and a significant proportion of transactions would end up as bad delivery due to
faulty compliance of paper work. Theft, forgery, mutilation of certificates and
other irregularities were rampant. In addition, the issuer had the right to refuse
the transfer of a security. All this added to costs and delays in settlement,
restricted liquidity and made investor grievance redress time consuming and, at
times, intractable.

To obviate these problems, the Depositories Act, 1996 was passed. It

provides for the establishment of depositories in securities with the objective of
ensuring free transferability of securities with speed, accuracy and security.

2 Depository:

Depository is an organization where the securities of a shareholder are held

in the electronic form at the request of the shareholder through a medium of a
Depository Participant (DP). The principal function of a Depository is to de-
materialize securities and enables their transaction in book-entry form
electronically.

Depository functions like a security bank, where the dematerialized

securities are traded and held in custody. This facilitates faster, risk-free and low
cost settlement similar to bank.

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 Following tables compares the two;

BANK DEPOSITORY

Hold funds in account Hold securities in accounts

Transfer funds between accounts Transfer securities between accounts

Transfer without physically handling Transfer without physically handling

money securities

Safekeeping of money Safekeeping of securities

In India the Depository Act defines a Depository to mean, a company

formed and registered under the Companies Act, 1956 and which has been
granted a certificate of registration under sub-section (1A) of section 12 of the
Securities and Exchange Board of India Act, 1992

Depositories in India
There are two depositories in India, which provide dematerialization of
securities.
 National Securities Depository Limited (NSDL)
 Central Depository Services Limited (CDSL)

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Benefits of participation in a depository

 Immediate transfer of securities

 No stamp duty on transfer of securities

 Elimination of risks associated with physical certificates such as bad delivery,

fake securities, etc.

 Reduction in paperwork involved in transfer of securities

 Reduction in transaction cost

 Ease of nomination facility

Depository Participant
The Depository provides its services to investors through its agents called
Depository Participants (DPs). These agents are appointed by the depository with
the approval of SEBI. According to SEBI regulations, amongst others, three
categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading
members can become DPs. The depository has not prescribed any minimum
balance. Customer can have zero balance in his account.

ISIN
ISIN (International Securities Identification Number) is a unique identification
number for a security.

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Custodian
A Custodian is basically an organization, which helps register and safeguard the
securities of its clients. Besides safeguarding securities, a custodian also keeps
track of corporate actions on behalf of its clients:

 Maintaining a client’s securities account

 Collecting the benefits or rights accruing to the client in respect of
securities

 Keeping the client informed of the actions taken or to be taken by

the issue of securities, having a bearing on the benefits or rights
accruing to the client.

Dematerialization of securities
In order to dematerialize physical securities, one has to fill a Demat Request Form
(DRF) which is available with the DP and submit the same along with physical
certificates. Separate DRF has to be filled for each ISIN number. Odd lot share
certificates can also be dematerialized. Dematerialized shares do not have any
distinctive numbers. These shares are fungible, which means that all the holdings
of a particular security will be identical and interchangeable. One can
dematerialize his debt instruments, mutual fund units, government securities in
his single demat account.

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Re-materialization
If one wishes to get back his securities in the physical form means, he has
to fill in the Remat Request Form (RRF) and request his DP for rematerialisation of
the balances in his securities account.

Legal framework:

The Depositories Act 1956 provides the regulation of depositories in

securities.

SEBI formulated the Depositories and participants Regulation Act, 1996 to

oversee the matter regarding admission and working of Depositories and its
participant. The Depositories Act passed by parliament received the President’s
assents on August 10, 1996. The Act enables the setting up of multiple
depositories in the country. Only a company registered under the companies Act
(1956) and sponsored by the specified categories of institution can setup
depository in India. The Depository offers services relating to holding of securities
and facility processing of transaction in such securities in book entry form. The
transaction handled by depositories includes settlement of market trades,
settlement of off-market trades, securities lending and borrowing, pledge &
hypothecations.

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 Function of Depository Participant:
 Dematerialization:
One of the primary functions of depository is to eliminate or minimize the
movement of physical securities in the market. This is done through converting
securities held in physical form in to holdings in to back entry form.

 Account Transfer:
The depository gives effects to all transfer resulting from the settlement of
trade and other transaction between various beneficial owners by recording
entries in the accounts of such beneficial owners.

 Transfer & Registration:

A transfer is a legal change of ownership of a security in the records of the
insurer. Transfer of securities under demat occur merely by passing book-
entries in the records of the depositories, on the instruction of beneficial
owners.

 Pledge and hypothecation:

Depositories allow the securities with them to be used as collateral to secure
loans and other credits. The securities pledged are transferred to a segregated
or collateral account through book-entries in the records of the depository.

 Linkage with clearing system:

The clearing system performs the function of ascertainment in the pay in
(sell) or payout (buy) of brokers who leave traded on the stock exchange.
Actually delivery of securities from the clearing system is from the selling
brokers and delivery of securities from the clearing system to the buying broker
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 is done by depository. To achieve this depositories and the clearing system are
linked electronically.
To handle the securities in electronic form as per the Depositories Act 1996
two depositories are registered with SEBI. They are

1) NSDL -- National securities depository limited.

2) CDSL -- Central depository service (India) limited.

NSDL
India had a vibrant capital market, which is more than a century old, the
paper-based settlement of trades caused substantial problems like bad delivery
and delayed transfer of title till recently. The enactment of Depositories Act in
August 1996 paved the way for establishment of NSDL, the first depository in
India. NSDL promoted by institutions of national stature responsible for economic
development of the country has since established a national infrastructure of
international standard that handles most of the trading and settlement in
dematerialized form.

Using an innovative and flexible technology system, NSDL works to support

the investors and brokers in the capital market of the country. NSDL aims at
ensuring the safety and soundness of Indian marketplaces by developing
settlement solutions that increase efficiency and minimizing risk and cost. In the
depository system, securities are held in depository accounts, which is more or
less similar to holding funds in bank accounts. Transfer of ownership of securities
is done through simple account transfers.

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 This method does away with all the risks and hassles normally associated
with paperwork. Consequently, the cost of transacting in a depository
environment is considerably lower as compared to transacting in certificates.

CDSL
CDSL was set up with the objective of providing convenient, dependable
and secure depository services at affordable cost to all market participants. CDSL
received the certificate of commencement of business from SEBI in February
1999.

Depository facilitates holding of securities in the electronic form and

enables securities transactions to be processed by book-entry by a Depository
Participant (DP), who as an agent of the depository, offers depository services to
investors. According to SEBI guidelines, financial institutions, banks, custodians,
stockbrokers, etc. are eligible to act as DPs. The investor who is known as
beneficial owner (BO) has to open a demat account through any DP for
dematerialization of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL
can be obtained through the DP. The DP is required to provide the investor, at
regular intervals, a statement of account, which gives the details of the securities
holdings and transactions. The depository system has effectively eliminated
paper-based certificates, which were prone to be fake, forged, counterfeit
resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of
securities.

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Trading online and its requirement.

There are many stock broking companies which are providing the account
for the customers to trade online and here the investor need to be the member of
that company and its depository to have an account with the broking company.
The company itself provides the software which is to be used to trade directly
through online and the customer can not trade with the other companies
software unless and until he makes an account with them or trade with them .the
investor can take the suggestion from the broking company at any time of the
working hour.

The major thing which comes under consideration is, the investor who
trades independently is needed to maintain a bit high amount in his account.
Means nearly the double of the amount which a traders trade offline. Here
investor will be in contact to the trade directly and will be in contact with the
market.

The software on which the BSE online system works is given in the next
page as a snapshot image. This is the software which is used by the Bombay stock
exchange people who trade over there but the software which is provided by the
stock brokers to the investors are some what different from the software which is
given in the image.

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47 | P a g e
 CHAPTER IV

Data Analysis and Interpretation

4.1 Data Analysis

Findings & Interpretations.

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 As I have explained in the methodology section that, the study is based on
the opinions of the different authors who wrote books regarding the online
trading and also a large amount of the analysis is based on the opinion of the
investors regarding the online and offline trading. The data which is collected for
the analysis is through the questionnaires which are given to the customers who
trade offline and online.

Searching for the investors who trade online is a bit difficult in the sub
urban cities and the people stay over there, they will not be ready to take
financial risk. In cities like shimoga, hardly we found people who trade completely
through online. Still I have taken the opinion of those investors which I met.

The analysis of the data and findings will be given in the next continuing
pages.

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 Respondents on the basis of age group
age group respondents
below 20 0
20-35 10
35-50 8
50 and above 2

Findings:
From the above information which is given in the table, we can interpret as,
he people who belongs to the age group of 35 to 50 will invest more due to the
sufficiency of the earning and the people who belongs to the age group of 20 to
35 will invest comparatively less than the latter group because may be the time
and fund deficiency and other reasons. Here most of the online traders come in
the age group of 20 to 35 because of their knowledge and fast thinking and
decision making as well as interest to do the trade.

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 Table showing the occupation of the investors:
Occupation Respondents Percentage
Employed 9 45
Self employed 10 50
Retired 1 5
Not employed 0 0
students 0 0
Total 20 100

Findings:
From the above information we can say that the people who are self
employed, they show much interest to invest in the equity market and it is
comparatively less in the case of employed in different organization. Reason may
be the time required to do the transaction and the availability of the fund to
invest. The data says, nearly 55% of the people who trade in stock, they are self
employed and the rest 45% of people are employed in different organizations.
The people who are in the evening of their life is less in stock trading due to the
security reason.

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 Respondents based on the annual income
annual investments[weighted
Annual income Respondents avg] Percentage
Below 150000 0 0 0
150000-300000 6 50000 30
300000-450000 10 75000 50
450000- Above 4 100000 20
Total 20 100

Findings:

From the above information we can understand that, the people in the
income group below 150000Rs per annum, they do not show much interest in
investing their money on share market. The people belongs to the group in
between 300000RS and 150000RS, they show interest towards share investments.
But the large group of investors who belong to the higher income group like the
group which has income more than 4 lacks and above they shows much
significance for share trading. Here we can say that, the income of the investors
ought to be taken in to consideration whether they are interested in long term or
short term and whether they are concerned in online or offline trading.

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 Based on the terms of the investments
Term of investments respondents Percentage
Long term 5 25
Short term 12 60
Both 3 15
Total 20 100

Findings:
From the above information we can interpret the survey as, half of the
investor would like invest for the short term gains because as per their mind set
they say they like to gain more from the short term instead putting money in the
long term investments. The rest of the people, means the rest 25% of the people
would prefer long term due to the increasing and balanced returns and 10% of
the people like to deploy their funds in both the investment types.

Also we can state that, the people who belongs to the income group of
300000 and less, they mostly go for the long term investment because the loosing
percentage is less and return will be balanced than loosing more.

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 Analysis based on showing frequent investment:
Gap of investments respondents Percentage
Weekly 8 40
Monthly 5 25
Quarterly 3 15
half yearly 2 10
Yearly 2 10
Total 20 100

Findings:
The table says that, most of the investors are time oriented. It means the
short term investors who trade online as well as offline, they go for the frequent
trading like daily trading or few days in a week or once in month like but when it
comes to the long term investors, they trade once or twice for months or for
quarterly once. Even many of the long term investors go for the trading jus once
in six months and in a year also. The table says that, weekly traders are high. Long
term investors mostly go for the initial public offers and they go for the banking
shares also most of the time.
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Analysis on the basis of reason for opting online trading system:

Type of trading adopted respondents percentage

online trading system 6 30
offline trading system 14 70
Both 0 0
Total 20 100

Findings:
This is the major deciding factor for this thesis work because the whole
work is based on the choice of trading system by the investor. Here we can make
out that people like to for the offline trading more than the online trading system.
Reason may the risk factor or may be lack of information regarding the market
and may be lack of experience and decision making power.

There might be many more reasons for the right selection of the system to
work on with. 70 to 75% of the people still like to go with the offline trading and
the rest of the people may opt for the online trading system. The main reason
behind the choice is the risk factor involved in the decision making and lack of
knowledge about trading online.
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Reasons for opting independent trading [online trading]:
Reason for opting online trading Respondents Percentage
A freedom of trading 6 out of 6 100
B direct access to the market 6 out of 6 100
C frequent transactions 6 out of 6 100
D less brokerage charges 3 out of 6 50
E other reasons 4 out of 6 65
total 6 100

Findings:
Here the highlighted reasons for choosing the online trading are freedom of
trading so the investor can trade independently. Direct access to market so that
the investor need not to ask the broker every time for his transactions. Frequent
transactions can be made by having online trading system and also the other
reasons are brokerage charges. Brokerage charges are less but the trader may
occur other charges like installation of computer, telephone charges and other
such costs. There were some other reasons like, no need of going to the brokers
for the documentation and no risk of transactions without permission, 100%
transparency will be there in dealings.
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 Selection of offline trading facilitators:
type of offline service providers respondents percentage
A. Independent brokers 2 10
B. brokerage agencies 11 55
C. banks and IPO 5 25
D. others 2 10
Total 20 100

Findings: The selection of the service providers is depending upon the security
for the transactions and even emotions also attached with it. Partially it is based
on how the service provider treats the customer and how the customer gets the
respect for the small transactions etc.

Here in this most of the investors go for reputed brokerage agencies like
Karvy, geojit, way to wealth etc. these investors are all short term frequent
traders. When it comes to the reason like going for banking shares and initial
public offers, the percentage is quite less and only up to 25% and 10% of the
investors go for the suggestions of independent brokers and they even trade on
the basis of others account also. And 10 of the investors go for the other sources.

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 Reasons for opting offline trading:
Reasons for opting offline trading. Respondents Percentage
Helps in decision making 12 out of 14 85.7142857
No much risk in handling transaction 14 out of 14 100
Provision of additional limit 8 out of 14 57.1428571
Others 8 out of 14 57.1428571
Total 14 100

Findings:
Many reasons may affect the choice of offline trading system because as
per the survey we got the expected finding as people like to go with offline
trading than online trading because of the reasons which are given already in the
discussion. Here we can see the opinions of the sample group of investors which I
selected for the study. As per the answers given by the investors, all the investors
accept that, risk involved in handling transaction is less when it compared to the
online trading. 85% of the investors states that, doing trading offline helps in
decision making because there the investor will get the suggestions from the
trading people and they will suggest which shares are in good movement and
which shares can be bought and sold.
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 When it comes to the reason of availability of the extra limit of the fund for
the transaction, 50% of investors accept this reason and the rest of investors says,
additional limit is available only to the investor who transact large amount in
trading and who have a good image in the eyes of the stock brokers. Each and
every investor can not make out this option without having goodwill and image.
50% of investors add their own reasons for opting the offline system for trading
like, time matters because in offline trading the investor can call the broker and
say to trade on behalf of the investor and even he can give permission to the
trader up to a limit without asking for the permission.

This is because for small amount of trading the investor can’t spend his
time. The other reasons are like documentation, remainder service and research
calls. Brokers will do all the required documentation for the convenience of the
customer and they will be informing the investors about the increasing and
decreasing of the share values. Even they inform the status of the trading account
and what are need to be done and other things. One more thing is the research
calls. This calls will be given from the R&D department of the company about
which is the next move can be done to trade. Brokers will suggest the investors
according to the research call. This helps the investor to feel secured because
they think that someone is taking care about their investments.

one of the other reason which the investor felt important is lacking in
computer knowledge and skills. They feels that they are not capable of doing the
computer work and they do not have enough time to learn the basi computer
skills also. Even they feels that maintaining the telephone connections and other
things are risky so it is better to go for offline trading.

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 Basis of investments:
Basis of investments Respondents Percentage
A. Self analysis 1 5
B. financial advice from investors 2 10
C. advice from brokers 10 50
D. friends and relatives advice 3 15
E. chartered accountants advice 2 10
F. others 2 10
G. Total 20 100

Findings:
From the above information we can understand that, half of the offline
traders would like to go for the suggestions of the brokers and a very few people
do self analysis for the investments. Fifteen to twenty percent of the people take
the suggestions from the family members and friends and rest of the people goes
for the suggestions of chartered accountants and other people like tax
consultants and others. It means that, people prefer to go for the experienced
advice than just few suggestions. Investor looks over the return and in the same
time they expect the security also for their investments.

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Analysis based on grounds to choose various investment alternatives:
Grounds to choose alternatives Respondents percentage
Risk involved 20 out of 20 100
Returns on investments 20 out of 20 100
Future growth 15 out of 20 75
past performance 15 out of 20 75
Others 10 out of 20 50
Total 20 100

Findings:
The above table shows the data of the grounds on which the investor
prefer to choose one investment instrument amongst the available. All the
investors most of the time looks upon the risk involved in the instrument or we
can say a share. Return on the investment also they take in to consideration like
how much return the company is giving on its share and what is the market value
of the share etc...

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 75% and above people look upon the future growth of the share in the
market as well as the growth of the company too. Even they come across the past
performance of the share resembling what was the issue value and what is the
market value the company gained in last few years etc. Many additional causes
are there to choose the better alternative like, better for long term investment, to
gain loans from banks by pledging the shares, to have a part in the ownership
value of the company and also to gaining the reputation by holding certain most
valued shares.

This is the analysis and findings part of the study where we could able to
find the answer for the defined objectives of the study and we could interpret the
investors opinions concerning to the trading system. In this part we searched out
the major facts regarding why investors prefer to go offline trading more than
going towards online trading. We found out many other reasons which affect the
investors to go towards the different trading system and also what are the
reasons behind the choice of different alternative investment instruments.

Here our study is only based upon the trading of the shares and not based
on the commodities market and multi commodities exchange market. That
market is entirely different and the investor’s opinion about that market also
different. Though the commodities trading also done by the same system and the
trading techniques also same. Still we can not consider both markets in to
consideration because it is beyond the scope of the project work.

In this work, I included the analysis and finding part in the same chapter so
that the reader can understand the questions and the answer from the investors
and the reader can make out the findings and what exactly the investor is telling
about his opinion. Instead of putting the findings in the different chapters and
making the reader to come again and again to the question and findings section, I
combined both the section in to one and added graphs and charts to understand
easily.

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CHAPTER V

Discussions and implications

5.1 Discussions.

Implications.

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5.1 Discussion and implications:
Most of the topics, questions answers and opinions of the investors are
already discussed in the analysis and findings part. Here we can discuss regarding
the final results of the study and the points what I mentioned in the part of
literature review and we need to compare the results with the points which I
mentioned in the literature review and need to give justification for the study so
we need to look over the points which different authors mentioned, what
journals given and points which are given by the different books.

Most of the points which are given by the authors regarding the opinions of
the investors towards online trading are true because the study revealed those
particulars and investors behaves same most of the time as told by the authors in
their books. As Mr. Prasanna Chandra has mentioned three types of trading like
open outcry system, screen based system and internet based system. Here in the
real market, open outcry system is not in existence but only the next two are in
use. Like that many things will come to know in this study even many unknown
factors regarding the selection of trading system also will come to know.

In the beginning days of online trading there was a myth that, comparing to
offline trading system online trading is very costly and it requires greater skill so
only few people can only handle the trading through online but recent days the
phenomenon has changed and comparing to the brokerage charges and time
required for offline trading both the online and offline costs similar and regarding
the knowledge, now a days everybody use computers for one or the other
purpose so knowledge is not the problem for handling the trading through online.

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 There is a saying that, it is hard to become good analyst but it is harder to
become good trader. It means what ever may be the trading system but the trade
is completely depends upon the knowledge and experience of the investor. How
much he knows about the market trends. Which is the better time to invest and
other thins. An unknown person also can invest on the stock market but very soon
he will go out of the market because the active mind is important and also
knowledge matters much for the investment value variation.

Just knowing about the computer is not at all sufficient for trading in stock
market. Beginners often assume that they can make money because they are
smart, elegant, and Computer-literate and have a record of victory in business.
You are capable of getting a speedy computer and even buy a back tested system
from a vendor, but putting money on it is like trying to sit on a three-legged stool
with two legs missing. The two other factors are psychology and money
management.
Dr. Alexander elder says in his book, “Come in to my trading room” as
People buy and sell on the basis of their knowledge and the latest price
represents everything known about that market. This is a valid observation, from
which the efficient market gang draws the curious conclusion that no one can
beat the market. Markets know everything, they say, and trading is like playing
chess against someone who knows more than you. Don’t waste your time and
money—simply index your portfolio and select stocks based on volatility. This
says what the observation skill needed for the investor and based on the volatility
investor must go for investing his/her money.

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Before completing this chapter we need to know that, there are certain important
barriers which make some losses for the investors without knowing. Those costs
are unstoppable and investor has to bear those losses while trading on stock
market. They are,
1. Slippage:
Slippage is the difference between the price at the time you placed
your order and the price at which that order got filled. Slippage tends to be
a much bigger expense than commissions. Slippage means nothing but,
let’s take an example. Think that we are buying the shares of reliance when
the price reaches to a level of 150Rs. We places an order of buying 100
shares at 11.45am but the order executes at 11.55 am but at that time the
price falls to 148Rs. So here the investor bears a loss of 2Rs without
knowing. He should bear the loss of 2Rs. This is nothing but slippage.
2. Commissions:
Commissions may appear to be a minuscule expense. Most traders
Neglect them, but if you add them up, you’re likely to find that your broker
ends up with much of your profit. Usually brokers charges 0.05%
commission on the traded amount every time whether it may be buying
transaction or may be selling but they charge this fixed amount and they
may charge for the stamp duties of the transactions from investor itself.
Brokers provide discount for the regular investors and for large trading also
but the discounts will be jus 0.02% maximum.

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3. Expenses:
Some expenses are unavoidable. Especially in the beginning investor
will have to buy a few books, download or subscribe trading software, sign
up with a data service, opening several accounts and documentation
process and so on. It is important to keep your expenses as low as possible.
Brokers and brokerage agencies sometime facilitates traders’ trading-
related expenses, such as computers, subscriptions, and advisory services,
and software in a discounted costs without taking full money. That helps
the investor to lessen their expenses. These are the few barriers in trade
profits which can be avoided and which will incur every time.

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 CHAPTER VI

Conclusion and recommendations

6.1 Conclusions.

6.2 Recommendations

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CONCLUSIONS:

We have examined all the reasons which affect the selection of the trading
system and we have discussed about the Indian stock market, which all comes
under the stock market, who all trades inside the stock market, what all the things
will be traded under the stock market and many other facts regarding the stock
market and the stock market transactions.

In the meanwhile we discussed about the stock traders, who all can trade
the equities, what all the minimum requirements for the equity trading, Bodies
and boards who controls the share market and the stock exchanges etc… many
more thing we discussed in detail in this study so this is the time to give a better
conclusion regarding the study what I performed.

As in the discussion space we have seen that who ever trades in the market
or which ever may be the system of trading, knowledge is essential for trading
and possession of the skill is an important task. Attentive mind will succeed in the
stock market trading. Still most of the time the trading system puts its effect on
trading. Main thing is decision making about the shares because people unaware
regarding the stock market variation most of the time so they need a better
advisers to understand the situation so preferably they go for the brokers. So we
say here that the offline screen based trading is much popular than online
independent trading.

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 Both the system has its own advantages but as per the survey, as per the
analysis, as per the investors opinions we can say that people attitude and
perception supports the offline trading much more than online trading. From the
study we came to know that most of the investors are unaware about the online
trading and they are not confident that they can also do trading independently.
They lack in decision making.

One more thing we can state here that, online trading has a bright future in
the upcoming days because of the technological development and people can get
the market information easily from media and also investors becoming more and
more time conscious so they like to do other works also along the trading in
market so online trading is getting importance more and more in India. Foreign
markets are already covered with online trading. In USA people do not go for the
suggestions from the brokerage agencies and they trade independently. The same
trend is coming to India also.

Recommendations & suggestions:

As already we have discussed the advantages of the online trading and even we
have discussed about the future development of the online trading system and
the opportunities which are awaiting form the side of online trading so here I
would like to suggest few points how the online trading can be well developed
and what are the corrections to be done to erase the myths which are stuck in the
mind of the investor. They are,

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1. Investor awareness should be done to teach the investor regarding
the usage of the internet trading so the investor can trade
independently.
2. Investor orientation programs can be done by the institutional
trader so that they can make the common man to learn how to
invest.
3. The brokerage agencies should provide enough trading limit to the
online traders also. Than only the investors show interest on
investments through online.
4. Brokerage agencies should provide the updated information to the
online investors also and they should provide the information which
they get from the research calls of their R&D department.
5. Totally when the investor gets all the information which he gets
from offline, than only he will show interest upon the online trading
so that should be done to assure that he is going to get all the
information.
6. Service provider of IT should secure the investor against the system
breakdown. He must give all the securities.
7. Finally, investors goes to the option where the cost is less so when
the total cost goes down for trading online than offline,
automatically investor shows a greater interest and sure they will try
to learn the new system which are helpful for them.

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 PART VII

References

7.1 reference sources.

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6.1. REFERENCE SOURCES.

i. N J Yasaswy., “Intelligent stock market investing”.

ii. Y Chandra sekar. “Financial markets and services”.
iii. B V Raghunandan. “financial management”
iv. Prasanna Chandra, “The Dynamics of Indian financial markets”
v. Professor Ian Domowitz and Professor Pankaj Jain., ““Financial market
design and the equity premium: Electronic vs. floor trading”. Journal.
2005.
vi. Training material of BOLT, “Bombay stock exchange Ltd” BSE Training
institute [BTI].
vii. National stock exchange. “Understanding the NEAT system”, Chapter 1.
Issued by National stock exchange.
viii. “Stock market”. Article published by Wikipedia the German
encyclopedia.
Link, file:///D:/SHARE%20MARKET/Stock%20market%20-
%20Wikipedia,%20the%20free%20encyclopedia.htm.
ix. “Come in to my trading room”. Alexander elder.

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 PART VIII

Annexure.

8.1 Questionnaire.

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 Questionnaire

Dear Respondent,

As I am a Management Student, undertaking my management thesis with

the topic "study on investors’ attitude towards online trading " I request you to
spare some time of yours to fill this questionnaire to provide me the information
regarding the reasons of using online trading or offline trading [trading through
brokers and stock brokerage agencies].Your response will be kept strictly
confidential.

Name of investor: ________________________________

1. Age group:
Below 20

20 to 35

35 to 50

50 and above

3. Occupation:

Employed:

Private Sector Public Sector

Self-Employed:

Business Profession

Retired Not Employed

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4. Annual income:
Below 150000 150000 to 300000

300000 to 450000 450000 and above

5. Are you a short term investor or long term investor?

Short term investment

Long term investment

Both

6. What is your investment per annum?

Below 20000 20000 to 40000

40000 to 80000 80000 and above

7. How frequently do you invest:

Weekly Monthly

Quarterly Half yearly yearly

8. Do you personally follow the stock market?

 Yes  No

9. If yes, then how frequently do you watch market?

 Daily  Twice a week  Weekly  Fortnightly

10.Do you trade independently?

 Yes  No
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11.If yes, why do you like to trade independently?
Freedom of trading direct access to the market
Frequent transactions free of brokerage charges others

12. If you are not trading independently, in which way do you like to trade?
Through independent brokers through broking agencies

Through banks others

Others please specify: __________________

13. What is the reason to go for the above way one which you selected?

Help for decision making No risk of handling transaction

Provision of additional limit option Others

14.Basis for Investment:

Self Analysis Financial Advice from investors

Brokers Advice Friends/Relatives Advice

Charted Accountant Advice Others

13. Source of study:

Business Channels Business Papers

Business Magazines Internet

14. How do you choose your various investment alternatives?

Risk involve Return they give

Future growth Past performance

If others, please specify:

_____________________________________________________________
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