PROJECT REPORT

ON

STUDY OF BROKING INDUSTRY

IN

(INDIA INFOLINE LTD)

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR MASTER OF MANAGEMENT STUDIES (MMS) UNIVERSITY OF MUMBAI (2011 - 2012)

Submitted By: Mr. VISHAL ROHIDAS RAHATE Roll No 1110

UNDER THE GUIDANCE OF Prof. P. M. NAYAK (MIMR Faculty) Mr. MUKESH JHA (India Infoline)

MUMBAI INSTITUTE OF MANAGEMENT AND RESEARCH (WADALA EAST) MUMBAI 400037

STUDENT DECLARATION

I hereby declare that the project Study of Broking Industry conducted at India Infoline Ltd has been prepared by me under the guidance of Prof. Nayak I also declare that this project is the result of my own endeavor to understand various aspects of Broking Industry. This project has not been given to any other University or Institution for the award of any degree, or personal favors whatsoever. All the details and analysis provided in the report hold to the best of my knowledge.

Place: Mumbai Date: Reg. No- MMS/ ( VISHAL R RAHATE)

Certificate of Approval
Certified that this dissertation on Study of Broking Industry is a record of genuine work done by Mr. VISHAL R RAHATE, student of MMS of this college under my supervision and guidance and that is hereby approved for forwarding to the Examiners.

PROJECT GUIDE

DIRECTOR

(Prof. NAYAK)

(Prof. VISHWANATHAN)

MUMBAI INSTITUTE OF MANAGEMENT & RESEARCH

BGPSS BGPS S

MUMBAI INSTITUTE OF MANAGEMENT & RESEARCH

Founder Chairman : J K JADHAV
Former Director Of Industries, Govt Of Maharashtra

Ref No.: MIMR/11-12/

Date:

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Vishal R Rahate. is a bonafide student of our institute. He has successfully carried out his summer project titled STUDY OF BROKING INDUSTRY at INDIA INFOLINE LTD

This is the original study of Mr.VISHAL R RAHATE. and important sources of data used by him have been acknowledged in his report. The report is submitted in partial fulfilment of the requirement of two years full time course of MASTER IN MANAGEMENT STUDIES (M.M.S) of UNIVERSITY OF MUMBAI.

Prof. NAYAK (Project Guide)

Prof. VISHWANATHAN (Director)

J. K. KNOWLEDGE CENTRE, Near Mbpt Hospital, Wadala (E), Mumbai - 400037 Tel: 24110879, Fax: 2416513 Email: miomr@yahoo.com

COMPANY CERTIFICATE

ACKNOWLEDGEMENT

The satisfaction of the successful completion of any task wouldnt be complete without the expression of gratitude to the people who made it possible. I express my gratitude to Mr. MUKESH JHA (Branch Manager), Mr. Sudhir Ghule (Relationship Manager), Mr. Prashant. Patangrao, Mr. Farooq Quereshi (Relationship manager) India Infoline Ltd, for his support and guidance during the survey. I am very thankful to Prof . P. M. Nayak Faculty of Mumbai Institute Of Management and Research, Wadala for the guidance and interest evinced throughout the preparation of this project. I also extend my heartfelt gratitude and thanks to Mr. VISHWANATHAN, Director of Mumbai Institute Of Management and Research, Wadala. I take this opportunity, also to express my love and sincere thanks to my family members and friends for their support and advice during various stage of work. But last not the least I thank God almighty for giving me the support for the completion of the task.

Executive Summary

This report deals with the study of Broking Industry. Working in India Infoline Ltd had given me this opportunity to understand the Indian Stock Market. It gave me a chance to get valuable insights from a hoard of vastly experienced people in this field. The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. The evolution of the brokerage market is explained in three phases: pre1990, 1990-2000, post 2000. According to the study of the markets, it is being observed that markets are very volatile for equity market. In near future a proper financial planning is required to invest money in all type of financial product because there is good potential in market to invest. The report also highlights the products and services offered by the stock broking firms As the trading in equity market in India is increasing and now more and more companies are beginning on this market, so trading in equity market in future can go only in one direction that is up. The project is done to know the major players in the Stock Broking Industry in India. The Stock Broking industry is a fragmented industry. We cannot easily define that who is the key players in the industry. It is not easy to identify that are lading & dominating the industry. The products & the services are so much diverse in this industry. In this report we have just given the brief information about few big players in the stock broking industry in India. Some of the

important players in stock broking industry are India Infoline, Motilal Oswal, ShareKhan, ICICI Direct, India Bulls, Kotak Securities, Angel Broking

India is amongst the top fifteen stock exchanges in the world in respect of equity turnover. India emerged as a leading player in commodities futures market. India is amongst the top five in the number of transactions. India is among the top five in respect of volume traded in Stock Index Futures and Stock Futures. India is one of the few markets with extensive dematerialisation of shares. The project also helps to understand the role of Stock Broking Industry in Indian economy. Indian Stock Markets With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential. E - broking in India is becoming very famous today. People are also becoming aware about the many benefits of e broking. E broking is nothing but internet broking. Broking is done by brokers. They are usually helpers to people who want to trade in stocks, commodities, futures, options, securities etc. They give advice to these people on what to buy and when. They also counsel on when to sell a particular stock so as to gain maximum profit out of it. They charge a certain percentage of commission out of the gains for their services. Sometimes they themselves trade on behalf of the buyer if the buyer does not have time. Internet broking in India makes trading process very simple. It is very beneficial and advantageous for people who don't have time but want to invest in stocks.

INTRODUCTION
The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of the BSE in 1875. The roots of a stock market in India began in the 1860s during the American Civil War that led to a sudden surge in the demand for cotton from India resulting in setting up of a number of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities markets in Europe and the North America in the background of expansion of railroads and exploration of natural resources and land development. The last decade has been exceptionally good for the stock markets in India. In the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investment, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s. Total market capitalization of the BSE as on July 31, 1997 was Rs 5,573.07 billion growing by 18 percent over a period of twelve months and as of August 2005 was over $500 billion (about Rs 22 lakh crores). Indian Stock Markets With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. An online stock brokers (online service of stock broker) services definitely transcend the traditional format of trading in stocks personally or via the telephone. By using an online stock broker, the investor no longer faces the constraints of location and busy telephone lines. Information technology has made stock market software reliable means of trading in stock on the Internet, and an online stock broker uses this on his clients behalf. An online stock broker requires considerable working knowledge of the stock market to help investors trade in stocks. With proliferation of new markets and products, corporate nature of the memberships is enabling broking firms to expand the realm of their operations into other exchanges as also other product offerings Due to recession phase, the investor always feels finicky and shaky to invest as the fear of acquiring substantial profits increases manifold. The investment in the market becomes more unstable and it affects the economic growth. It leads to lowering of economic growth and simultaneously other related aspects of it.

COMPANY PROFILE

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. IIFL recently received an inprinciple approval for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL also received membership of the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is one of Indias leading online destinations for personal finance, stock markets, economy and business. IIFL has been awarded the Best Broker, India by FinanceAsia and the Most improved brokerage, India in the AsiaMoney polls. India Infoline was also adjudged as Fastest Growing Equity Broking House Large firms by Dun & Bradstreet. A forerunner in the field of equity research, IIFLs research is acknowledged by none other than Forbes as Best of the Web and a must read for investors in Asia. Our research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers. A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. All our offices are connected with the corporate office in Mumbai with cutting edge networking technology. The

group caters to a customer base of about a million customers, over a variety of mediums viz. online, over the phone and at our branches.

About the IIFL (India Infoline) Group (Bloomberg: IIFL IN Equity) (Bloomberg: IIFL) The IIFL group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636, Bloomberg: IIFL) and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. It owns and manages the website, www.indiainfoline.com, which is one of Indias leading online destinations for

personal finance, stock markets, economy and business. IIFL has also been one of the first Indian broking houses to get memberships in the Singapore and Colombo stock exchanges.

IIFL has been assigned the highest broker grading BQ1 by CRISIL, while our Singapore subsidiary is the first India-based brokerage to get Securities Trading and Clearing memberships from SGX. IIFL is also the first foreign broking firm to be granted membership of Sri Lankas Colombo Stock Exchange. The company has set up an office in Sri Lanka as the first step towards full coverage of this small but highly promising market. To this end, it recently hosted several foreign and Indian institutional investors and some leading Sri Lankan corporations at its conference, Discover Sri Lanka 2010, at Colombo.

IIFL has been awarded the Best Broker, India by FinanceAsia and the Most improved brokerage, India in the AsiaMoney polls. IIFL was also adjudged as Fastest Growing Equity Broking House - Large firms by Dun & Bradstreet. Our chairman, Mr Nirmal Jain, was ranked 2nd in a study of Indias most valuable CEOs by BusinessWorld in November 2009. A forerunner in the field of equity research, IIFLs research is acknowledged by none other than Forbes as Best of the Web and a must read for investors in Asia. IIFLs research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers.

PRODUCTS AND SERVICES OF INDIA INFOLINE

India Infoline is a one-stop financial services shop, most respected for quality of its advice, personalized service and cutting-edge technology.

Equities IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depository participant and provides broking services in the cash, derivatives and currency segments, online and offline. IIFL is a dominant player in the retail as well as institutional segments of the market. It recently became the first Indian broker to get a membership of the Colombo Stock Exchange and is also the first Indian broker to have received an in-principle approval for membership of the Singapore Stock Exchange. IIFLs Trader Terminal, its proprietary trading platform, is widely acknowledged as one of the best available for retail investors. Investors opt for IIFL given its unique combination of superior Service, cutting-edge proprietary Technology, Advice powered by worldacclaimed research and its unparalleled Reach owing to its over 2500 business locations across over 500 cities in India. IIFL received the BQ1 broker grading (highest grading) from CRISIL. The assigned grading reflects an effective external interface, robust systems framework and strong risk management. The grading also reflects IIFLs healthy regulatory compliance track record and adequate credit risk profile. IIFLs analyst team won Zee Business Indias best market analysts awards 2009 for being the best in the Oil and Gas and Commodities sectors and a finalist in the Banking and IT sectors. IIFL has rapidly emerged as one of the premier institutional equities houses in India with a team of over 25 research analysts, a full-fledged sales and trading team coupled with an experienced investment banking team. The Institutional equities business conducted a very successful Enterprising India global investors conference in Mumbai in March 2010, which was attended by funds with aggregate AUM over US$5 trillion and CEOs and other executives representing corporates with a combined market capitalization of

over US$500 billion. The Discover Sri Lanka global investors conference, held in Colombo in July 2010, was attended by more than 50 leading global and major local investors and 25 Sri Lankan corporates, along with senior Government officials. Commodities IIFL offers commodities trading to its customers vide its membership of the MCX and the NCDEX. Our domain knowledge and data based on in depth research of complex paradigms of commodity kinetics, offers our customers a unique insight into behavioral patterns of these markets. Our customers are ideally positioned to make informed investment decisions with a high probability of success. Credit and finance IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage loans, margin funding, loans against shares) comprise 94% of the loan book. The Company has discontinued its unsecured products. It has robust credit processes and collections mechanism resulting in overall NPAs of less than 1%. The Company has deployed proprietary loan-processing software to enable stringent credit checks while ensuring fast application processing. Recently the company has also launched Loans against Gold. Insurance IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life Insurance Co. Ltds corporate agent. Later, it became an Insurance broker in October 2008 in line with its strategy to have an open architecture model. The Company now distributes products of major insurance companies through its subsidiary India Infoline Insurance Brokers Ltd. Customers can choose from a wide bouquet of products from several insurance companies including Max

New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life, Birla Sunlife, Life Insurance Corporation, Kotak Life Insurance and others. Wealth Management Service IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and corporate clients under the IIFL Private Wealth brand. IIFL Private Wealth is managed by a qualified team of MBAs from IIMs and premier institutes with relevant industry experience. The team advises clients across asset classes like sovereign and quasi-sovereign debt, corporate and collateralised debt, direct equity, ETFs and mutual funds, third party PMS, derivative strategies, real estate and private equity. It has developed innovative products structured on the fixed income side. It also has tied up with Interactive Brokers LLC to strengthen its execution platform and provide investors with a global investment platform. Investment Banking IIFLs investment banking division was launched in 2006. The business leverages upon its strength of research and placement capabilities of the institutional and retail sales teams. Our experienced investment banking team possesses the skill-set to manage all kinds of investment banking transactions. Our close interaction with investors as well as corporates helps us understand and offer tailor-made solutions to fulfill requirements. The Company possesses strong placement capabilities across institutional, HNI and retail investors. This makes it possible for the team to place large issues with marquee investors.

In FY10, the team advised and managed more than 10 transactions including four IPOs and four Qualified Institutions Placements

History & Milestones

1995 Commenced operations as an Equity Research firm 1997 Launched research products of leading Indian companies, key sectors and the economy Client included leading FIIs, banks and companies. 1999 Launched www.indiainfoline.com 2000 Launched online trading through www.5paisa.com Started distribution of life insurance and mutual fund 2003 Launched proprietary trading platform Trader Terminal for retail customers 2004 Acquired commodities broking license Launched Portfolio Management Service 2005 Maiden IPO and listed on NSE, BSE 2006

 Acquired membership of DGCX Commenced the lending business 2007 Commenced institutional equities business under IIFL Formed Singapore subsidiary, IIFL (Asia) Pte Ltd 2008 Launched IIFL Wealth Transitioned to insurance broking model 2009 Acquired registration for Housing Finance SEBI in-principle approval for Mutual Fund Obtained Venture Capital license 2010 Received in-principle approval for membership of the Singapore Stock Exchange Received membership of the Colombo Stock Exchange

List of Stock Exchanges: INDIA

There are 22 stock exchanges in India. These are shown below

Bombay Stock Exchange National Stock Exchange Bangalore Stock Exchange Bhubaneswar Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange Jaipur Stock Exchange Ludhiyuana Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange Magadha Stock Exchange Mangalore Stock Exchange

Meerut Stock Exchange OTC Stock Exchange Pune Stock Exchange Saurasthra Stock Exchange Uttar Pradesh Stock Exchange

Evolution of the Indian Brokerage Market

The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. The evolution of the brokerage market is explained in three phases: pre1990, 1990-2000, post 2000. Early Years The equity brokerage industry in India is one of the oldest in the Asia region. India had an active stock market for about 150 years that played a significant role in developing risk markets as also promoting enterprise and supporting the growth of industry. The roots of a stock market in India began in the 1860s during the American Civil War that led to a sudden surge in the demand for cotton from India resulting in setting up of a number of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities markets in Europe and the North America in the background of expansion of railroads and exploration of natural resources and land development.

Bombay, at that time, was a major financial centre having housed 31 banks, 20 insurance companies and 62 joint stock companies. In the aftermath of the crash, banks, on whose building steps share brokers used to gather to seek stock tips and share news, disallowed them to gather there, thus forcing them to find a place of their own, which later turned into the Dalal Street. A group of about 300 brokers formed the stock exchange in Jul 1875, which led to the formation of a trust in 1887 known as the Native Share and Stock Brokers Association. A unique feature of the stock market development in India was that it was entirely driven by local enterprise, unlike the banks which during the preindependence period were owned and run by the British. Following the establishment of the first stock exchange in Mumbai, other stock exchanges came into being in major cities in India, namely Ahmedabad (1894), Calcutta (1908), Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad (1944). The stock markets gained from surge and boom in several industries such as jute (1870s), tea (1880s and 1890s), coal (1904 and 1908) etc, at different points of time. Beginning of a new equity culture A new phase in the Indian stock markets began in the 1970s, with the introduction of Foreign Exchange Regulation Act (FERA) that led to divestment of foreign equity by the multinational companies, which created a surge in retail investing. The early 1980s witnessed another surge in stock markets when major companies such as Reliance accessed equity markets for resource mobilisation that evinced huge interest from retail investors. A new set of economic and financial sector reforms that began in the early 1990s gave further impetus to the growth of the stock markets in India. As a part of the reform process, it became imperative to strengthen the role of the

capital markets that could play an important role in efficient mobilisation and allocation of financial resources to the real economy. Towards this end, several measures were taken to streamline the processes and systems including setting up an efficient market infrastructure to enable Indian finance to grow further and mature. The importance of an efficient micro market infrastructure came into focus following the incidence of market abuses in securities and banking markets in 1991 and 2001 that led to extensive investigations by two respective Joint Parliamentary Committees. The Securities and Exchange Board of India (SEBI), which was set up in 1988 as an administrative arrangement, was given statutory powers with the enactment of the SEBI Act, 1992. The broad objectives of the SEBI include to protect the interests of the investors in securities to promote the development of securities markets and to regulate the

securities markets The scope and functioning of the SEBI has greatly expanded with the rapid growth of securities markets in India in the last fifteen years. Following the recommendations of the High Powered Study Group on Establishment of New Stock Exchanges, the National Stock Exchange of India (NSE) was promoted by financial institutions with an aim to provide access to investors all over the country. NSE was incorporated in Nov 1992 as a tax paying company, the first of such stock exchanges in India, since stock exchanges earlier were trusts, being run on no-profit basis. NSE was recognized as a stock exchange under the Securities Contracts (Regulations) Act 1956 in Apr 1993. It commenced operations in wholesale debt segment in Jun 1994 and capital market segment (equities) in Nov 1994. The setting up of the National Stock Exchange brought to Indian capital markets several innovations and modern practices and procedures such as nationwide trading network, electronic

trading, greater transparency in price discovery and process driven operations that had significant bearing on further growth of the stock markets in India. Faster and efficient securities settlement system is an important ingredient of a successful stock market. To speed the securities settlement process, The Depositories Act 1996 was passed that allowed for dematerialisation (and rematerialisation) of securities in depositories and the transfer of securities through electronic book entry. The National Securities Depository Limited (NSDL) set up by leading financial institutions, commenced operations in Oct 1996. Regulations governing selection of various types of market intermediaries as depository participations were made. Subsequently, Central Depository Services (India) Limited promoted by Bombay Stock Exchange and other financial institutions came into being. Rapid Growth The last decade has been exceptionally good for the stock markets in India. In the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investment, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s. Investor base continued to grow from domestic and international markets. The value of share trading witnessed a sharp jump too. Foreign institutional investment in Indian stock markets showed continuous rise reaching about USD10 bn in each of these years between FY04 to FY06. Stock markets became intensely technology and process driven, giving little scope for manual intervention that has been the source of market abuse in the past. Electronic trading, digital certification, straight through processing, electronic contract notes, online broking have emerged as major trends in technology. Risk

management became robust reducing the recurrence of payment defaults. Product expansion took place in a speedy manner. Indian equity markets now offer, in addition to trading in equities, opportunities in trading of derivatives in futures and options in index and stocks. ETFs are showing gradual growth. Within five years of introduction of derivatives, Indian stock markets now are ranked first in stock futures and fourth in index futures. Indian stock markets are transaction intensive and thus rank among the top five markets in this regard. Stock exchange reforms brought in professional management separating conflicts of interest between brokers as owners of the exchanges and traders/dealers. The demutualisation and corporatisation of all stock exchanges is nearing completion and the boards of the stock exchanges now have majority of independent directors. Foreign institutions took stake in Indias two leading domestic stock exchanges. While NYSE Group led consortium took stake in the National Stock Exchange, Deutsche Borse and Singapore Stock Exchange bought equity in the Bombay Stock Exchange Ltd.

ROLE OF INDUSTRY IN THE ECONOMY

Indian Stock Markets With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential. India's market capitalization was amongst the highest among the emerging markets. Total market capitalization of the BSE as on July 31, 1997 was Rs 5,573.07 billion growing by 18 percent over a period of twelve months and as of August 2005 was over $500 billion (about Rs 22 lakh crores).

Country 1 2 3 4 5 6 7 8 9 10 11 USA Japan United Kingdom France Germany Canada Hong Kong Switzerland Italy Spain Australia

Market cap (US$ billion) 15,517 4,079 3,067 1,828 1,256 1,239 1,001 872 788 688 687

% of world 39.5 10.4 7.8 4.7 3.2 3.2 2.6 2.2 2.0 1.8 1.8

12 13 14 15

Russia South Korea India Taiwan

592 557 506 475

1.5 1.4 1.3 1.2

Worldwide Stock Markets Source: ETIG India has emerged as the worlds 14th largest equity market after it added several companies to the billion dollar club in terms of capitalization in the last three months, taking the total to 81 companies. India has become the third largest Asian market (excluding Japan and Australia) after having toppled Korea, China and Singapore that have 80, 50 and 47 firms with billion-dollar market a. INFRASTRUCTURE DEVELOPMENT

Traditionally brokers were serving the need of local public only as there was limited infrastructure development. But after the entry of corporate brokers, now they have not restricted themselves to local boundaries only, Brokers are going for expanding their network to the wide area. Every corporate broker is now trying to reach in each of the geographical corner of the country & providing as many services as possible to the investors. b. MAJOR DEVELOPMENTS

i) Corporate memberships There is a growing surge of corporate memberships (92% in NSE and 75% in BSE), and the scope of functioning of the brokerage firms has transformed from that of being a family run business to that of professional organized function that lays greater emphasis on observance of market principles and best

practices. With proliferation of new markets and products, corporate nature of the memberships is enabling broking firms to expand the realm of their operations into other exchanges as also other product offerings. Memberships range from cash market to derivatives to commodities and a few broking firms are making forays into obtaining memberships in exchanges outside the country subject to their availability and eligibility. ii) Wider product offerings The product offerings of brokerage firms today go much beyond the traditional trading of equities. A typical brokerage firm today offers trading in equities and derivatives, most probably commodities futures, exchange traded funds, distributes mutual funds and insurance and also offers personal loans for housing, consumptions and other related loans, offers portfolio management services, and some even go to the extent of creating niche services such as a brokerage firm offering art advisory services. In the background of growing opportunities for Investors to invest in India as also abroad, the range of products and services will widen further. In the offing will be interesting opportunities that might arise in the exchange enabled corporate bond trading, soon after its commencement and futures trading that might be introduced in the near future in the areas of interest rates and Indian currency. iii) Greater reliance on research Client advising in India has graduated from personal insights, market tips to becoming extensively research oriented and governed by fundamentals and technical factors. Vast progress has been made in developing company research and refining methods in technical and fundamental analysis. The research and advice are made online giving ready and real time access to market research for investors and clients, thus making research important brand equity for the brokerage firms.

iv) Accessing equity capital markets Access to reliable financial resources has been one of the major constraints faced by the equity brokerage industry in India since long. Since the banking system is not fully integrated with the securities markets, brokerage firms face limitations in raising financial resources for business and expansion. With buoyancy of the stock markets and the rising prospects of several well organized broking firms, important opportunity to access capital markets for resource mobilization has become available. The recent past witnessed several leading brokerage firms accessing capital markets for financial resources with success. v) Foreign collaborations and joint ventures The way the brokerage industry is run and the manner in which several of them pursued growth and development attracted foreign financial institutions and investment banks to buy stakes in domestic brokerage firms, paving the way for stronger brokerage entities and possible scope for consolidation in the future. Foreign firms picked up stake in some of the leading brokerage firms, which might lead to creating of greater interest in investing in brokerage firms by entities in India and abroad. vi) Specialized services/niche broking While supermarkets approach are adopted in general by broking firms, there are some which are creating niche services that attract a particular client group such as day traders, arbitrage trading, investing in small cap stocks etc, and providing complete range of research and other support to back up this function. vii) Online broking Several brokers are extending benefits of online trading through creation of separate windows. Some others have dedicated online broking portals.

Emergence of online broking enabled reduction in transaction costs and costs of trading. Keen competition has emerged in online broking services, with some of these offering trading services at the cost of a few basis points or costs which are fixed in nature irrespective of the volume of trading conducted. A wide range of incentives are being created and offered by online brokerage firms to attract larger number of clients. viii) Compliance oriented With stringent regulatory norms in operation, broking industry is giving greater emphasis on regulatory compliance and observance of market principles and codes of conduct. Many brokerage firms are investing time, money and resources to create efficient and effective compliance and reporting systems that will help them in avoiding costly mistakes and possible market abuses. Brokerage firms now have a compliance officer who is responsible for all compliance related aspects and for interacting with clients and other stake holders on aspects of regulation and compliance. ix) Focus on training and skill sets Brokerage firms are giving importance and significance to aspects such as training on skill sets that could prove to be beneficial in the long run. With the nature of markets and products becoming more complex, it becomes imperative for the broking firms to keep their staff continuously updated with latest development in practices and procedures. Moreover, it is mandated for certain types of dealers/brokers to seek specific certification and examinations that will make them eligible to carry business or trade. Greater emphasis on aspects such as research and analysis is giving scope for in-depth training and skills sets on topics such as trading programs, valuations, economic and financial forecasting and company research. x) From owners to traders

A fundamental change that has taken place in the equity brokerage industry, which is a global trend as well, is the transformation of broking from owners of the stock exchange to traders of the stock market. Demutualization and corporatisation of stock exchanges bifurcated the ownership and trading rights with brokers vested only with the later and ownership being widely distributed. Demutualization is providing balanced welfare gains to both the stock exchanges and the members with the former being able to run as corporations and the latter being able to avoid conflict of interests that sometimes came as a major deterrent for the long term growth of the industry.

1.3. Emerging challenges and outlook for the brokerage industry Brokerage firms in India made much progress in pursuing growth and building professionalism in operations. Given the nature of the brokerage industry being very dynamic, changes could be rapid and so as the challenges that emerge from time to time. A brief description on some of the prospects and challenges of the brokerage firms are discussed below. i) Fragmentation Indian brokerage industry is highly fragmented. Numerous small firms operate in this space. Given the growing importance of technology in operations and increasing emphasis on regulatory compliance, smaller firms might find it constrained to make right type of investments that will help in business growth and promotion of investor interests. ii) Capital Adequacy Capital adequacy has emerged as an important determinant that governs the scope of business in the financial sector. Current requirements stipulation capital adequacy in regard to trading exposure, but in future more tighter norms

of capital adequacy might come into force as a part of the prudential norms in the financial sector. In this background, it becomes imperative for the brokerage firms to focus on raising capital resources that will enable to give continuous thrust and focus on business growth. iii) Global Opportunities Broking in the future will increasingly become international in character with the stock markets being open for domestic and international investors including institutions and individuals, as also opportunities for investing abroad. Keeping abreast with developments in international markets as also familiarization with global standards in broking operations and assimilating major practices and procedures will become relevant for the domestic brokerage firms. iv) Opportunities from regional finance Regional economic integration such as that under the European Union and the ASEAN have greatly benefited businesses in the individual countries with cross border opportunities that helped to expand the scope and significance of the business. Initial measures to promote South Asian economic integration is being made by governments in the region first at the political level to be followed up in regard to financial markets. South Asian economic integration will provide greater opportunities for broking firms in India to pursue cross border business. In view of several of common features prevailing in the markets, it would be easier to make progress in this regard.

v) Product Dynamics As domestic finance matures and greater flow of cross border flows continue, new market segments will come into force, which could benefit the domestic brokerage firms, if they are well prepared. For instance, in the last three to four

years, brokerage firms had newer opportunities in the form of commodities futures, distribution of insurance products, wealth management, mutual funds etc, and as the market momentum continues, broking firms will have an opportunity to introduce a wider number of products. vi) Competition from foreign firms Surging markets and growing opportunities will attract a number of international firms that will increase the pace of competition. Global firms with higher levels of capital, expertise and market experience will bring dramatic changes in the brokerage industry space which the local firms should be able to absorb and compete. Domestic broking firms should always give due focus to emerging trends in competition and prepare accordingly. vii) Investor Protection Issues of investor interest and protection will assume centre stage. Firms found not having suitable infrastructure and processes to ensure investor safety and protection will encounter constraints from regulation as also class action suits that investors might bring against erring firms. The nature of penalties and punitive damages would become more severe. It is important for brokerage firms to establish strong and streamlined systems and procedures for ensuring investor safety and protection.

A Financial Analysis of Broking Industry

Companies selected for this financial analysis comprise listed (excluding Z group companies) and unlisted securities broking houses. These companies were further screened and selected based on the availability of audited financials for FY10. Every company in the sample has generated a portion of income from brokerage services during FY10. To focus solely on performance of the equity broking industry, we excluded companies that operate in insurance or commodity broking. Thus, the final sample comprises 33 companies including 16 listed ones. To capture the dynamic nature of the broking industry, we have categorised these companies as large ( 3,500 mn or more), medium (between 500 mn and 3,500 mn), and small companies (less than 500 mn) based on broking income.

Revival in derivatives and cash turnover buoys income growth of broking companies Turnover in the cash and derivatives segment recovered significantly in FY10. The cash segment, which slumped almost 25% during FY09, grew 43.2% to 55.2 trillion1. Turnover in the NSE cash market surged 50% to 41.4 trillion while that in the BSE cash market increased 25.3% to 13.8 trillion.

Turnover in the equity derivatives market jumped 60.3% to 176.6 trillion in FY10. NSE remained the dominant exchange with more than 99% share in equity derivatives turnover. The NSEs average daily turnover increased significantly by 59.1% y-o-y to 720.97 bn during the fiscal.

Improvement in cash and equity derivatives turnover of the BSE and NSE in FY10 translated into healthy income growth of 20.8% to 54,983 mn for the sample broking companies. Large companies constituted 64.7% of the overall income while mid-size and small ones accounted for 26.8% and 8.5%

respectively. Three financial services segment (fund-based services, fee-based services and treasury operations) are the key sources of operational income for the sample broking companies. Fee-based services, including broking services, contributed to 83.8% of these companies income. Overall fee-based services of the sample broking companies grew by a healthy 31.8% to 46,064.4 mn during the fiscal. On the other hand, income from fund-based services (10.4% share) and treasury operations (4.2% share) declined 15.5% and 0.3% respectively.

Growth in total income of broking companies was largely led by income from broking services, whose share in total income increased from 66.4% in FY09 to 74.9% in FY10. Large companies, which have a much more diversified business compared with mid-size and small broking firms, generated 72.9% of total income through broking in FY10. Aggregate broking income of these companies grew 34.1% y-o-y to 25,934.2 mn during the fiscal. Mid-size broking companies generated the highest proportion (78.6%) of income through broking during FY10. Their broking income grew a healthy 39.8% y-o-y to 11,573 mn. Broking income of small broking companies grew the fastest among the rest, increasing 40.8% to 3,665.9 mn. Robust performance of large, midsize and small broking companies in the broking segment led to overall growth of 36.2% to 41,173.1 mn in broking income of the sample companies.

Moderate growth in employee cost keeps overall expenses under check Major cost overheads of broking companies remained the same across the three categories (large, medium and small) during FY10. Employee compensation was the major cost, with aggregate share of 34.2% in overall expenses of the sample companies in FY10. Employee compensation was 34.1% of total expenses at 9,367.1 mn for large broking companies during the year. This proportion for mid-size sample companies was the highest at 35.6%, while for the small sample companies it was the lowest at 30.4%.

Financial services expenses (including fund-based and fee-based financial services) were the next major cost component for broking companies, accounting for 18.9% of overall expenses during FY10. Large companies spent a relatively higher proportion in financial services expenses at 20.8% of total expenses. On the other hand, mid-size broking houses spent the least (14.2%) among the sample companies. The only cost component that varied across the large, mid-size and small broking companies was marketing expenses. Large broking companies spent 1.5%, whereas mid-size and small firms spent a much higher 7.5% and 14.9%, respectively, on marketing during FY10. The growth trend in expenses of sample companies was dominated by large broking houses, which constituted almost 62% of overall expenses in FY10. Aggregate expenses of large broking companies grew approximately 5% y-o-y

to 27,468.6 mn, in tandem with the 5.7% increase in their employee expenses during the year. Fee-based financial services expenses of large companies rose the sharpest (60.4%) among the sample companies. Aggregate expenses of mid-size and small broking houses grew relatively faster than large companies, corresponding to higher growth in their business. Total expenses of mid-size broking companies grew 12.1% to 12,218.8 mn. Employee expenses and fee based financial services expenses rose significantly by 27.8% and 23.9%, respectively, while marketing expenses spiked 118.9%. Aggregate expenses of small broking companies grew the fastest at 14.1% to 4,329.9 mn during FY10. Employee expenses increased a moderate 7.4% y-o-y while marketing and fee based financial service expenses surged more than 40%. Overall profit of broking companies soar; small companies see a turnaround Aggregate profit2 of the broking companies eroded more than 60% and 70% at the operating (EBIDTA) and net (PAT) levels, respectively, in FY09 because of repercussions of the global financial crisis on the Indian stock market. The profit trend changed for the companies with overall profit at the operating level growing 86% to 19,990 mn during FY10. Operating profit of the large companies, which contributed almost 72% to overall operating profit of the sample, grew 53% to 14,369.4 mn during the year. Aggregate operating profit of mid-size companies, which slumped 83% to 1,293.6 mn during FY09, jumped more than three times to 4,747.1 mn in FY10. Small broking companies also saw substantial growth from 52.8 mn in FY09 to 341.7 mn in FY10. Overall net profit of the sample broking companies increased substantially by 178% to 10,965.2 mn during FY10. Net profit of the large firms increased 95% to 8,131.3 mn while that of mid-size ones increased more than 20 times from 109.2 mn in FY09 to 2,492.2 mn during the year. Small companies,

which had recorded a loss of 330.6 mn at the net level during FY09, saw a turnaround, recording profit of 341.7 mn.

Overall NPM of broking companies improved 1122 bps in FY10 Broking companies efficiently managed costs, which resulted in significant improvement in operating profit margin (OPM) during FY10. Overall OPM of the broking sample companies expanded 1468 bps y-o-y to 33.76%. OPM of large companies, which was the highest among the sample, expanded 1183 bps to 37.49%. Mid-size companies saw the highest improvement of 2247 bps to 30.52%. Small companies had the least OPM of 15.38% among the sample companies during FY10.

Overall net profit margin (NPM) of the broking companies expanded 1122 bps to 20.04% during FY10. The NPM of large broking companies increased 920 bps to 22.9% while that of mid-size firms recorded an expansion of 1600 bps to 17%.

Total assets of broking companies grew 22.1%

Current assets and investments are major assets of the broking companies. Current assets constituted 73% while investments formed 21.8% of the total asset base of broking companies in FY10. Total assets held by large companies grew 19.1% to 131,861.1 mn during the year. Current assets, which constituted almost 70% of the assets of large companies, grew a healthy 29.7% to 92,750 mn. The book value of investments made by large broking companies declined a marginal 0.1% to 33,546.9 mn during the year. Mid-size companies, on the other hand, increased their total assets by 29.6% to 32,966.9 mn. Current assets of mid-size companies, which constituted 82.3% of their total asset base, increased 37.5% to 27,126.7 mn. Growth in assets of small companies was the fastest among the sample broking companies 36.4% to 13,915.4 mn. Current assets of these companies grew 41.7% to 10,693.1 mn while the book value of investments made by these companies increased 50.9% to 2,121.1 mn.

The investment break-up of broking companies reveals that substantial proportion of their investments is in equity shares and mutual funds. Large broking companies invested almost 75% of their total investments ( 25,122.9 mn) in equity shares during FY10. The book value of investments in equity shares by a large company declined 1.8%. Investments made through mutual funds, on the other hand, increased 51.2% y-o-y to 7,646.6 mn during the same period. Mid-size broking houses invested 50.2% and 47.3% of their total investment in equity shares and mutual funds, respectively. Their book value of investments in equity shares and mutual funds increased 0.3% and 18.2% to 1,672.8 mn and 1,577.7 mn respectively. The investment value of small companies grew the fastest among broking companies. The total book value of their investments in equity shares and mutual funds increased 16.1% and 316.6% to 1,349.8 mn and 695.3 mn, respectively. Mid-size broking companies recorded the best RONW Healthy growth in overall profit translated into better return on networth (RONW), which increased substantially from 6.5% in FY09 to 15.71% in FY10. Small companies had the lowest RONW of 5.8% while mid-size ones recorded the highest RONW of 21.1% among the sample broking companies

during FY10. Large companies, which had majority share in overall profit, had a RONW of 15.61% and dominated the trend in the sample.

A more detailed analysis of the RONW of broking companies was done using the DuPont Analysis. The DuPont method analyses the RONW based on the asset turnover, NPM and leverage ratio (Assets/Equity) of the companies. The improvement in the RONW can be due to growth in the NPM and/or asset turnover ratio which are healthy signs for the company. On the other hand, DuPont method also reveals whether the improvement in RONW is mainly due to additional leverage that the company has taken to improve its shareholders returns, thus making it more risky. The study reveals that the asset turnover of large broking companies reduced from 27.3% in FY09 to 26.9% in FY10 while their leverage factor remained unchanged at 2.5 times during the same period. The improvement in RONW of large companies was largely because of the improvement in their NPM by 920 bps to 22.9% during the year. Therefore, the large companies registered a better RONW largely because of an improvement in the operational efficiency during FY10.

Mid-sized broking companies, on the other hand, managed to improve their asset turnover along with an increase in their leverage factor and NPM during FY10. Asset turnover of mid-sized broking companies, which was the highest among the sample companies, increased from 43% in FY09 to 44.4% in FY10 while their leverage factor increased from 2.2 times in FY09 to 2.8 times in FY10. Despite higher leverage, mid-sized broking companies managed to improve their NPM from 1% during FY09 to 17% in FY10. Thus, the higher RONW of mid-sized companies was due to the combination of higher asset turnover, leverage factor and significant improvement in their operational efficiency during FY10

Major Players in Broking Industry

Brief Introduction of Different Players in Broking Industry

Share khan Depository Services offers dematerialization services to individual and corporate investors. Share khan, one of India's leading brokerage houses, is the retail arm of SSKI. With over 240 share shops in 110 cities, and India's premier online trading portal www.sharekhan.com, our customers enjoy multi-channel access to the stock markets.

Background of HDFC HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

About HDFC Sec. HDFC sec is a brand brought to you by HDFC Securities Ltd, which has been promoted by the HDFC Bank & HDFC with the objective of providing the diverse customer base of the HDFC Group and other investors a capability to transact in the Stock Exchanges & other financial market transactions

Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and Goldman Sachs (holding 25% - one of the world's leading investment banks and brokerage firms) is India's leading stock broking house with a market share of around 8%. Kotak Securities Ltd. has been the largest in IPO distribution. Kotak Securities has 122 branches servicing more than 1,70,000 customers and a coverage of 187 cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments.

India Info line was founded by a group of professionals in 1995, a seemingly distant past in the Internet age. Our meticulous research was published and distributed in printed form to a client base comprising the who's who of Indian business including leading MNCs, investment banks and consulting firms.

In early 1999, when Internet penetration in India was at its infancy and the future unknown, we took the hard decision of killing our earlier business model and embracing the Internet. We discontinued delivery of reports in printed form and made available quality research at the click of a mouse. Thus, was born www.indiainfoline.com. We forayed into investment transaction space in early 2000 to complete the value chain. www.5paisa.com was launched for online trading in mid-2000. India Info line Securities Pvt Ltd is a 100% subsidiary of India Info line Ltd, which is engaged in the businesses of Equities broking and Portfolio Management Services. It holds memberships of both the leading stock exchanges of India viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.

India bulls Financial Services Ltd. is a public company and listed on the National Stock Exchange, Bombay Stock Exchange, Luxembourg Stock Exchange and London Stock Exchange. The company ranks at 82nd position in the list of most valuable companies in India has a market capitalization of approx US $ 800 million. The consolidated net worth of the company is approx US $ 400 million. India bulls, along with its subsidiary companies, offer consumer loans, brokerage and depository services, personal loans, home loans and other financial products and services to the retail markets. India bulls Resources Ltd, a 100 per cent subsidiary of India bulls Financial Services Ltd., has been established with the objective of evolving as an independent oil company over time. The immediate short-term goal is to partner with oil companies who are willing to come to India and bid in the current NELP-6 round. Through its group companies, India bulls are also engaged in real estate development. The company is in the process of developing modern commercial complexes in the heart of Mumbai. India bulls Estates Pvt Ltd. the real estate

arm of India bulls Financial Services will set up an integrated township spread across 100 acres in Sonepat, 15 km from Delhi.

ICICI WEB TRADE LIMITED is a company that is venture of ICICI Bank, ICICI Limited to produce an integrated offering of e-broking services. This service is the combination of these entire three organizations. Promotions are looked after ICICI web Trade that has made e-invest facility, commonly known as ICICI Direct.com possible. This company is 100% subsidiary of ICICI Limited. The company enables to have the facility of having all the facilities online. One can view his banking transactions online, view the Demat balance with the latest market values and at the same time buy and sell shares online. This company has pioneered the concept of e-broking in India. The company went online with NSE on 15th April 2000.

Ranbaxy Promoter Group is India's leading business house having diversified interests in Pharmaceuticals, Healthcare, Pathological Labs and Financial Services through Ranbaxy Laboratories Limited, Fortis Healthcare Limited, SRL Ranbaxy Limited and Religare Enterprise Limited respectively. Religare is driven by ethical and dynamic process for wealth creation. Based on this, the company started its endeavor in the financial market.

Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Enterprises Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Broking Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, we provide various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot more to come your way. Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 3000 highly skilled professionals who subscribe to Religare philosophy and are spread across its country wide branches. Today, they have a growing network of more than 300 branches and more than 580 business partners spread across more than 300 cities/towns in India and a fully operational international office at London.

Activation ,brokerage and other charges of different stock broking companies

ANGEL BROKING

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges) Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges

ANGEL STOCK BROKING 660 Classic plan: 3p ,20p Freedom plan; 1p,10p Rs.225 6times,4 times(minimum stock Rs 50000) 18 %pa T+2 DAYS Both online and offline 5000,5000,10000 No extra charges

CRITERIA Demat a/c opening charges Brokerage intra day, delivery

RELIGARE SECURITIES LTD 299, 499, 999

Classic plan: 5p ,50p Freedom plan; 3p,30p AMC (Annual Maintenance Charges) No amc Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges 6times,4 times(minimum stock rs 500000) 18 %pa T+2 DAYS Both online and offline 5000,5000,10000 No extra charges

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges) Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges

ICICI DIRECT RS 750/50P,75P RS 500/3-4 times of the available funds. 18% p.a. T+2 DAYS Both Online & Offline -

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges)

Kotak securities .com RS 550 2.5P,25P RS 30pm

Trading funding intra day, delivery Interest rate Debit period

7times,4 times 21% T+2

Mode of trading Margin money Software installation charges

Offline Rs8000/_

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges) Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges

HDFC securities Rs 799/15p,50p Nil 10times,4 times T+ 2days Both 5000,10000 -

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges) Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges

Anand Rathi Rs 633/ 3p(1p),30p(10p) 6 times,4 times 18%p.a. T+2 Both 5000 1000

CRITERIA Demat a/c opening charges Brokerage intra day, delivery AMC(Annual Maintenance Charges) Trading funding intra day, delivery Interest rate Debit period Mode of trading Margin money Software installation charges

ALLIANZ SECURITIES Rs 500/3-2P,30-20P NIL 10 times,4 times T+2 OFFLINE NIL -

Various Important Measures Taken By The Indian Government To Improve The Condition Of Indian Stock Market.

Measures Allow foreign institutional investors to invest in equity and debt markets

Objective Liberalization of stock market to attract foreign investment in order to boost economic growth.

Status Foreign investment up to 49% will be allowed in these companies with a separate FDI cap of 26% and FII cap of 23% after approval from FIPB Outstanding limit for FII investment in debt securities raised from USD1.75 bn to USD2.0 bn and the same for the corporate debt raised from USD0.5 bn to USD1.5 bn

Expanding the product Bring Indian market range offered by the stock at par with the exchanges international standards and diversify product portfolio.

Allowing Indian companies to issues ADRS and GDRS Allow Indian nationals and companies to invest abroad

Divestment of government ownership

SEBI approved new derivative products : mini-contracts on equity indices, options with longer life/tenure, volatility index and F&O contracts, Options on Futures, Bond Indices and F&O contracts, Exchange-Traded Currency (Foreign-Exchange) Futures and Options and Exchange Traded products to cater to different investment strategies Facilitate market Mutual funds were allowed to invest integration and in ADRs/GDRs and foreign give freedom to securities within the overall limit of the companies. USD4 bn Access to more Venture capital funds were allowed funds for to invest in foreign securities investment Guidelines on issue of Indian Depository Receipts (IDRs) were issued Facilitate growth Providing minimum public through privatization shareholding of 25% in all listed

companies Strengthening of To ensure institutional framework in transparency primary and secondary Investor markets protection Provide a Demutualization standard framework for operations Deregulation Reduces the conflict of interest BSE and NSE to set up and maintain corporate bond reporting platforms To capture all information relating to trading. Investor protection SEBI permitted listed companies to send abridged annual report to the shareholders Exclusive email ID to be given by the primary market intermediaries for registering investor complaints Stock exchanges advised to update the applicable VAR margin rates at least five times in a day SEBI approved and notified the Corporatization and Demutualization Schemes of 19 stock exchanges BSE and NSE began maintaining a reporting platform for corporate bonds. BSE and NSE jointly launched a common portal at www.corpfiling.co.in to disseminate filings made by companies listed in both the exchanges. PAN made compulsory for all categories of investors for opening a DEMAT account with effect from Apr 1, 2006 It was made mandatory.

Making PAN compulsory Strengthening KYC (Know Your Client)

Transactions necessarily settled through the clearing corporations/clearing house Permit Gold Exchange Traded Funds Introduction of mutual fund schemes

Investor protection and greater control.

Generate options for companies and investors Minimize risk for investors and ensure returns.

SEBI allowed the launch of Gold Exchange Traded Funds (GEFTs) Mutual funds were allowed to invest in ADRs/GDRs and foreign securities within the overall limit of USD4 bn Mutual fund trustees are required to certify that the scheme approved by

them is a new product and is not a minor modification of an existing scheme/product SEBI Mutual Fund regulations were amended so as to permit the launch of Capital Protection Oriented schemes SEBI directed MFs to dispatch statement of accounts to unit holders under SIP/STP/SWP on every quarter.

The Evolution of Stock Brokers with Online Trading

The fact is, only a registered (SEBI) stock broker can buy and sell shares in the stock market. Such an individual is registered on one or many stock exchanges and is authorized to transact on behalf of others. Apart from that, an online stock broker is very valuable to investors who are not technically inclined and have no or little prior knowledge of stock trading. Such investors can use their own online stock trading accounts to obtain necessary information and place online trades at any time of the day. Others, however, still require a human interface - a real person who will place trades on their behalf.

An online stock brokers (online service of stock broker) services definitely transcend the traditional format of trading in stocks personally or via the telephone. By using an online stock broker, the investor no longer faces the constraints of location and busy telephone lines. Information technology has made stock market software reliable means of trading in stock on the Internet, and an online stock broker uses this on his clients behalf. An online stock broker requires considerable working knowledge of the stock market to help investors trade in stocks. Though they are independent of established brokerage firms, they are still bound by the same SEBI regulations that govern offline as well as online stock firms. They have in-depth experience in dealing with actively traded commodities and stocks.

By using such a stock broker, one gains greater access and can also save money on stock trades. Because of this, there are now many investors in the stock market than there have ever been previously. There are now any number of investment choices available, and online brokers can leverage these by the power of the Internet coupled with their own expertise and experience. There can be occasional hiccups while using the services of ones online stock broker. For instance, the accelerated growth of online trading can cause busy servers at certain times of the day. This makes it difficult to log on to ones brokers website. This is not a serious limitation, and invariably applies only to the first and last thirty minutes of a stock market day. Even this limitation will become history as online trading matures. The most successful traders often have as

many as four or five brokers, though a single reliable broker suffices for those who only trade occasionally.

By using such a stock broker, one gains greater access and can also save money on stock trades. Because of this, there are now many investors in the stock market than there have ever been previously. There are now any number of investment choices available, and online brokers can leverage these by the power of the Internet coupled with their own expertise and experience. There can be occasional hiccups while using the services of one's online stock broker. For instance, the accelerated growth of online trading can cause busy servers at certain times of the day. This makes it difficult to log on to one's broker's website. This is not a serious limitation, and invariably applies only to the first and last thirty minutes of a stock market day. Even this limitation will become history as online trading matures. The most successful traders often have as many as four or five brokers, though a single reliable broker suffices for those who only trade occasionally

BENEFITS OF ONLINE TRADING IN STOCK MARKET

Regardless of whether youre an experienced stock trader or new to trading stock, you may never have experienced the joy of stock trading online. If thats the case, and you are currently thinking of trading online, you may want to know what all the fuss is about! To help you understand, the following are just some of the benefits of online stock market trading: Commissions One of the biggest, if not the biggest, benefit of trading stocks online is the reduced stock broker commissions youll be expected to pay. In most cases,

when trading stock online, brokers will charge you a commission of between $7 and $10 per trade. However, if you trade in sufficiently large enough volume, it is possible for you to negotiate with your broker so that these brokers fees can be as low as $0.01 of the transaction value.

Control When you use a broker in the real world you may find that your broker will not agree to execute a trade, believing your decision to buy or sell the stock in question is flawed. When you trade stock online this is no longer a problem, your broker has no input as to when you buy and sell stock you do! Portfolio In the real world some brokers will not buy certain stock for example, some penny stocks. This may limit the stock you are able to have as part of your investment portfolio. However, when you trade online, subject to availability, you can trade in any stock - on any stock exchange - you want! Information With the use of computer software programs, you can use stock charts, technical indicators and real time stock prices to help you make the investment decision you want to make, when you want to make it. Time One of the essential elements about trading stock is the time it takes to execute the trade, as this can mean the difference between making a profit and making a loss. In the real world you have to phone your broker and ask him to sell/buy the stock. The broker then phones the trader, who gives the broker the price. The broker than tells you the price and you either agree to buy/sell or not to. If

you agree to buy/sell, the trader then phones the order through to the trader. Online you push your mouse over a cursor and press buy/sell. A much quicker sell!

Volume Assuming you are happy paying the commission, you can trade as large or small as you want over the Internet. In the real world, most brokers require a minimum buy/sell that is out of the reach of most individual traders. Finally All in all, online stock trading is about you. It provides you with the opportunity to trade in stocks without having to pay large commissions while keeping control over your investment decisions.

EFFECT OF RECESSION ON STOCK MARKET

Recession is often considered as a synonym to depression, in emotional terms. Its a fact that recession is decelerated phase where everything goes downhill and everything goes berserk. To reconcile, recession means decline, downturn, collapse or depression, in common understanding. In short, recession is decline in a countrys GDP growth for two or more consecutive quarters of a year and is a phase where profits, employment, investment spending and household incomes experiences a regular fall-down. As we discussed that recession is negative economic growth for two consecutive quarters, it signifies a fall in real GDP, lower National income and lower National Output. Recession has negative impact on economic growth and makes unconstructive impact on the nation. The impact of recession is often characterized by following factors impulsive rise in unemployment, rise in government borrowing, sharp decline in stock markets and share prices, lower inflation and fall in investment. It was in news that almost thousands of employees of a private aircraft went jobless as the company fired them from job. They were terminated for no personal reasons but because the company is reeling under the pressure of recession and was not able to cope up with the expenses of their salaries and perks. Recession leads to impulsive rise in unemployment and it can be viewed in every sector and industry. The problem of unemployment in India is deeprooted and it intensified to extra quarters, in phases of recession. In recession phase, government is always pressurized to large extent as it comes like an unwanted bad news for them. It results into lower tax revenues because of lower income tax and lower corporation tax revenues. Government is expected to spend higher for unemployment benefits and so it lead to higher borrowing to make both ends meet. Recession becomes a pessimistic phase for the ruling government as it is burdened up with extra weight of borrowing. Recession makes a resounding impact on share markets and so it affects share prices to great extent. It is because recession leads to lower profitability and also lower dividends. It makes share market look shaky and share-holders often face disappointment. Many a times shares fall sharp as an anticipation of

predictable financial disaster, arising out from the fear of recession. It is not always that share prices fall as there can be any other reasons for their decline. A recession will reduce the appropriate demand and correspondingly will enforce pressure on the prices and will rage out price-war in the market. To retain consumers, the price-wars may lead to decline in rates and so it might results into lower inflation rates. Due to lower spending capacity, the lowered prices may sound impossible for many but the fact is that recession leads out cut-throat competition and that sometimes affects the quality of the product. Due to recession phase, the investor always feels finicky and shaky to invest as the fear of acquiring substantial profits increases manifold. The investment in the market becomes more unstable and it affects the economic growth. It leads to lowering of economic growth and simultaneously other related aspects of it.

BIBLIOGRAPHY:
BOOKS: 1) Research Methodology, written by Uma Sekaran 2) Financial Management, written by I M Pandey Websites: 1) www.indiainfoline.com 2) www.google.com 3) www.nse.india.com 4) www.cdsl.com 5) http://www.dnb.co.in/EquityBroking 6) www.nsdl.com 7) www.business-standard.com OTHERS: 1. LMS (Lead Management System) 2. YELLOW PAGES.