A REPORT ON

DEMAT AND ONLINE TRADING 

AT

NETWORTH STOCKBROCKING LIMITED

Project report Submitted in the

Partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION

By

K.PRADEEP KUMAR.

HALL TICKET NO.086-08-134

TKR INSTITUTE OF MANAGEMENT AND SCIENCE

MEERPET, SAROORNAGAR, HYD-500079.

(Affiliated to Osmania University)

Hyderabad-500007

 
 
 CONTENTS PAGE NO.S

CHAPTER-1

INTRODUCTION OF STUDY 1

CHAPTER-2 6

 LITERATURE REVIEW 42

CHAPTER-3

 COMPANY PROFILE 46

CHAPTER-4

 DATA & INTERPRETATION ANALYSIS

CHAPTER-5 60

 OBSERVATIONS
 CONCLUSIONS
 SUGGESTIONS

CHAPTER-6

 BIBLIOGRAPHY 64

         
 CHAPTER – 1

INTRODUCTION TO STUDY

DEMATERIALIZATION:
Dematerialization is the process of converting the physical form of shares into electronic
form. Prior to dematerialization the Indian stock markets have faced several problems like
delay in the transfer of certificates, forgery of certificates etc. Dematerialization helps to
overcome these problems as well as reduces the transaction time as compared to the
physical segment. The article discusses the procedures, advantages and problems of
dematerialization.

The Indian Stock markets have seen a major change with the introduction of depository
system and scrip less trading mechanism. There were various problems like inordinate
delays in the transfer of share certificates, delay in receipt of securities and inadequate
infrastructure in banking and postal segments to handle a large volume of application and
storage of share certificates .To overcome these problems physical dealing in securities
should be eliminated . The Indian stock market introduced the system of dematerialization
recognizing the need for scrip less trading.

According to the Depositories Act, 1996, an investor has the option to hold shares either in
physical or electronic form .The process of converting the physical form of shares into
electronic form is called dematerialization or in short demats. The converted electronic data
is stored with the depository from where they can be traded. It is similar to a bank where
an investor opens an account with any of the depository participants. Depository participant
is a representative of the depository .The DP maintains the investors securities account
balances and intimates him about the status of holdings.

ONLINE TRADING

Online Trading is an easy way to buy and sell shares from the comfort of one’s place instead of
trading through individual stockbroker and broking firms, the customer can transact with the help
of mouse click and his visits to the neighborhood broker will become a thing of the past. Even
the older generation is adapting the online trading route.
Find the right depository to provide with an online trading account can be difficult, but many
banks and companies offer excellent services for online trading. Our needs will determine which
online broker is best for us. Online trading brings in total transparency between broker an
investor in case of secondary market operation.
Whether we are buying a mutual fund, investing in commodities market or any other transaction
can be performed with minimal fuss. In India presently online trading can take place through
order routing system, which will route client orders to exchanges trading system for execution of
trade on stock exchange (NSE and BSE).
One of the measure attractions of online trading is the wealth of free commentary and analysis
about stock market and global economy. Any investor with an ounce of market saviness can
extract all the data needed to make trading decisions and complete the trades. An important
catalyst behind the emergence of thriving online brokerage system has been the buoyant stock
market. One can trade online with e-brokerage such as ICICI Direct, HDFC Securities, India
Bulls, Kotakstreet and India Info line’s 5paisa.com.

NEED OF STUDY:
 With the emergence of the internet in everyday business, the significance of the online
stock market trading broker has gone up.

 It can be done from home at any desired fixed hours of the investor.

 The processing of the order is executed at proper timings as the servers of the online
trading portal are linked to the selected banks and stock exchanges though out twenty
four hours.

 The investments made are safe and secured and profit is earned at proper time without
any dispute.

 Online trading updates are also provided to the investors and also about the present grade
of their orders either through the interface or e-mail.

 The investors increase shares and make development to the company..

OBJECTIVES OF STUDY:

 To Study & understood the concept of Online trading.

 To know the time information & importance & the role played by the stock exchanges in
the process of online trading.
 To know the reasons for the introduction of online trading and their Benefits.
 To review the changes that Online trading brought when compared with the previous
systems.

RESEARCH METHODOLOGY OF THE STUDY:

DATA COLLECTION METHODS

The data collection methods include both the primary and secondary collection methods

 Primary collection methods: This method includes the data collection from the personal
discussion with the authorized clerks and members of the Net worth .
 Secondary collection methods: The secondary collection methods includes the lectures of
the superintend of the department of market operations and so on. Also the data collected
from the news, magazines of the Net worth and different books issues of this study.
 SCOPE OF STUDY:
The study is limited to “Demat and Online Trading”.
And since the year 2000, a big boom has been witnessed in the Indian stock Market when the
market showed the coming up of Online Trading System. Many Online stock trading
companies came but initially due to lack of Online Trading some Companies Vanished and
some survived. The Companies which are survived are getting the handsome returns also
attracting the foreign Investment Companies. Now a days this sector is facing cut-throat
Competition. And also provides huge growth prospects.

LIMITATIONS OF STUDY:

A good report tells us the results of the study. But every project has its own Limitations. These

Limitations can be in terms of:

 There is lack awareness among people about investing in stock market. So people who
are aware of such things were found in specific areas for survey purposes.
 Most people are comfortable with traditional system in small towns and like to trade
from their respective brokers, hence not providing their true opinions.
 Most of people are not using technology and Internet is growing still it is not at the
required level.
 Some of the respondents who did not do Online trading were able to respond only to
some questions.
 Limitations towards Demat and online trading confined to keep the study in
manageable limits.
REVIEW OF LITERATURE
 INTRODUCTION
India Financial Market the India Financial market comprise of talks about the primary
market, FDIs, alternative investment options, banking and insurance and the pension
sectors, asset management segment as well. With all these elements in the India Financial
market, it happens to be one of the oldest across the globe and is definitely the fastest
growing and best among all the financial markets of the emerging economies. The history
of Indian capital markets spans back 200 years, around the end of the 18th century. It was
at this time that India was under the rule of the East India Company. The capital market of
India initially developed around Mumbai; with around 200 to 250 securities brokers
participating in active trade during the second half of the 19th century.

Scope of the India Financial Market –The financial market in India at present is more
advanced than many other sectors as it became organized as early as the 19th century with
the securities exchanges in Mumbai, Ahmedabad and Kolkata. In the early 1960s, the
number of securities exchanges in India became eight – including Mumbai, Ahmedabad and
Kolkata. Apart from these three exchanges, there was the Madras, Kanpur, Delhi, Bangalore
and Pune exchanges as well. Today there are 23 regional securities exchanges in India.

The financial market used to give financial services to the Industries

The NSE provides exposure to investors into two types of financial Markets:

1. Capital market.

2. Money market.

Capital market: Refers to all the facilities and Institutional arrangements for
borrowing and lending of term funds. It does not deal in capital goods but is
concerned with the raising of money capital. It consists of term lending institutions
and investing Institutions which mainly provide long term funds.

Capital market has its growth includes:

1) Gilt-edged Securities Market

2) Industrial Securities Market

3) Development Banks and

4) Financial Services.

Industrial Securities Market has been further divided into two markets they are:

A. Primary Market.

B.Secondary Market.

Primary Market: Refers to the raising of new capital in the form of shares and
debentures, while Secondary Market deals with securities already issued by
companies. Both the markets are important, but the new issues market is much more
important from the point of view of economic growth.

Secondary Market: The market where securities are traded after they are initially offered in
the primary market. Most trading is done in the secondary market. To explain further, it is
trading in previously issued financial instruments. An organized market for used securities.
Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond markets, over-the-counter
markets, residential mortgage loans, governmental guaranteed loans etc

Secondary Market refers to a market where securities are traded after being initially offered to
the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is
done in the secondary market. Secondary market comprises of equity markets and the debt
markets. For the general investor, the secondary market provides an efficient platform for
trading of his securities. For the management of the company, Secondary equity markets serve
as a monitoring and control conduit—by facilitating value-enhancing control activities, enabling
implementation of incentive-based management contracts, and aggregating information (via
price discovery) that guides management decisions.

Money market: Money Market is a market for short-term funds, which can be used for
overnights to one year duration. It also deals with the financial assets that constitute
near money which means that the assets can be converted into cash quickly with
minimum transaction cost and without a loss in value. It consists of commercial
banks, co-operative banks and other agencies which supply only short term funds. It
consists of
  Organized Money Markets. And Un Organized money markets
 The Call Money Market, Treasury Bill Market, Collateral Money market,
Commercial paper and Certificate of deposits.

180 Trading of shares of east India company in Kolkata And

0 Mumbai

185 Joint stock company came into existence

0

186 Speculation and feverish dealing in securities

0

187 Formulation of stock exchange of Mumbai

5

189 Formulation of Ahmadabad stock exchange

4

INDIAN CAPITAL MARKET AT GLANCE

1.

20th century

190 Formulation of Calcutta stock exchange

8

193 Formulation of Lahore and madras stock exchange

9

194 Formulation of U.P and Delhi stock exchange

0
 195 Securities contract and regulation act enacted
6

195 Scam of Haridas Mundhra

7

198 Securities and exchange board of India set up

8

199 Scam of MS Shoes

1

199 SEBI given power Under SEBI act,1992

2

199 Formation of National stock exchange

3

199 HARSHAD MEHTA Scam

5

199 SESA GOA Scam

5

199 CRB scam

7

199 BPL And Videocon Scam

8

21st century

2000 Depositories came into existence (electronic form of

shares)

2001 Ketan Parekh scam

2002 Start of rolling settlement and banning of Badla trading

2002 Introduction of T+3 settlement in April

2003 Introduction of T+2 settlement in April

 2005 BSE Sensex touches all time high 6954 in January

2006 BSE Sensex touches all time high 12500,the highest

intraday fall of 1100

2007 BSE reaches the level of

2008 BSE touches all time high in January 2008

2008 Sensex saw its highest ever loss of 1,408 points at the end
of the session.

2008 Sexsex saw its 15 month low,from its all time high

2009 Sexsex saw its down trend & highest ever loss because of
Satyam case.

STOCK MARKETS IN INDIA:

A stock market is a marketplace where organized exchange (buying and selling) of stocks or
equities takes place. Indian stock markets are one of the most dynamic and efficient stock
markets in Asia. In terms of the make up and overall dynamics, the Indian stock markets are
at par with international standards. The two national exchanges operating in India are the
National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These exchanges are
well equipped with electronic trading platforms and handle large volume of transactions on a
daily basis.

DEFINATION OF STOCK EXCHANGE:

Stock exchange is an organized market place where securities are traded. These
securities are issued by the government, semi-government bodies, public sector
undertakings and companies for borrowing funds and raising resources. Securities are
defined as any monetary claims (promissory notes or I.O.U) and also include shares,
debentures, bonds and etc., if these securities are marketable as in the case of the
government stock, they are transferable by endorsement and alike movable property.
They are tradable on the stock exchange. So are the case shares of companies.
            Under the Securities Contract Regulation Act of 1956, securities’ trading is
regulated by the Central Government and such trading can take place only in stock
exchanges recognized by the government under this Act. As referred to earlier there
are at present 23 such recognized stock exchanges in India. Of these, major stock
exchanges, like Bombay Stock Exchange National Stock Exchange,Inter-Connected
Stock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are
permanently recognized while a few are temporarily recognized. The above act has
also laid down that trading in approved contract should be done through registered
members of the exchange. As per the rules made under the above act, trading in
securities permitted to be traded would be in the normal trading hours (09:15 A.M to
3.30 P.M) on working days in the trading ring, as specified for trading purpose.
Contracts approved to be traded are the following:

A. Spot delivery deals are for deliveries of shares on the same day or the next day
as the payment is made.
B. Hand deliveries deals for delivering shares within a period of 7 to 14 days from
the date of contract.
C. Delivery through clearing for delivering shares with in a period of two months
from the date of the contract, which is now reduce to 15 days.(Reduced to 2
days in demat trading)
D. Special Delivery deals for delivering of shares for specified longer periods as
may be approved by the governing board of the stock exchange.

                          Except in those deals meant for delivery on spot basis, all the rest are
to be put through by the registered brokers of a stock exchange. The securities
contracts (Regulation) rules of 1957 laid down the condition for such trading, the
trading hours, rules of trading, settlement of disputes, etc. as between the members
and of the members with reference to their clients.  
 
 
 
 HISTORY OF STOCK EXCHANGE IN INDIA

  The origin of the Stock Exchanges in India can be traced back to the later half of
19th century. After the American Civil War (1860-61) due to the share mania of the
public, the number of brokers dealing in shares increased. The brokers organized an
informal association in Mumbai named “The Native Stock and Share Brokers
Association in 1875”.later evolved as Bombay stock exchange.
                            Increased activity in trade and commerce during the First World
War and Second World War resulted in an increase in the stock trading.  The Growth of
Stock Exchanges suffered a set after the end of World War.  World wide depression
affected them most of the Stock Exchanges in the early stages had a speculative nature
of working without technical strength.  After independence, government took keen
interest to regulate the speculative nature of stock exchange working.  In that
direction, securities and Contract Regulation Act 1956 was passed, this gave powers
to Central Government to regulate the stock exchanges.  Further to develop secondary
markets in the country,  stock exchanges established at Mumbai, Chennai, Delhi,
Hyderabad, Ahmedabad and Indore.  The Bangalore Stock Exchange was recognized
in 1963.  At present there are 23 Stock Exchanges.

            Till recent past, floor trading took place in all Stock Exchanges.  In the floor
trading system, the trade takes place through open outcry system during the official
trading hours.  Trading posts are assigned for different securities where by and sell
activities of securities took place.  This system needs a face – to – face contact among
the traders and restricts the trading volume.  The speed of the new information
reflected on the prices was rather than the investors.

            The Setting up of NSE and OTCEI (Over the counter exchange of India with the
screen based trading facility resulted in more and more Sock exchanges turning
towards the computer based trading.  BSE introduced the screen based trading system
in 1995, which known as BOLT (Bombay on – line Trading.  System).

FUNCTIONS OF STOCK EXCHANGE

      Maintain Active Trading:  Shares are traded on the stock exchanges, enabling the
investors to buy and sell securities.  The prices may vary from transaction to
transaction.  A continuous trading increases the liquidity or marketability of the shares
traded on the stock exchanges.
Fixation of Prices:  Price is determined by the transactions that flow from investors
demand and the supplier’s preferences.  Usually the traded prices are made known to
the public.  This helps the investors to make the better decision.

      Ensures safe and fair dealings:  The rules, regulations and bylaws of the Stock
Exchanges provide a measure of safety to the investors.  Transactions are conducted
under competitive conditions enabling the investors to get a fair deal.

      Aids in financing the Industry:  A continuous market for shares provides a

favourable climate for raising capital.  The negotiability and transferability of the
securities, investors are willing to subscribe to the initial public offering (IPO).  This
stimulates the capital formation.

      Dissemination of Information:  Stock Exchanges provide information through

their various publications.  They publish the share prices traded on their basis along
with the volume traded.  Directory of Corporate Information is useful for the
investor’s assessment regarding the corporate.  Handouts, handbooks and pamphlets
provide information regarding the functioning of the Stock Exchanges.

      Performance Inducer:  The prices of stocks reflect the performance of the traded
companies.  This makes the corporate more concerned with its public image and tries
to maintain good performance.

Self-regulating organization:  The Stock Exchanges monitor the integrity of the

members, brokers, listed companies and clients.  Continuous internal audit safeguards
the investors against unfair trade practices.  It settles the disputes between member
brokers, investors and brokers.
  

 REGULATORY FRAME WORK

This Securities Contract Regulation Act, 1956 and Securities and Exchange board of
India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier
regulatory structure comprising the ministry of finance, SEB1 and the Governing
Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.

Ministry of finance: The Stock Exchange division of the Ministry of Finance has
powers related to the application of the provision of the SCR Act and licensing of
dealers in the other area. According to SEBI Act, The Ministry of Finance has the
appellate and the supervisory power over the SEBI. It has powered to grant recognition
to the Stock Exchange and regulation of their operations. Ministry of Finance has the
power to approve the appointments of executives chiefs and the nominations of the
public representatives in the government Boards of the Stock Exchanges. It has the
responsibility of preventing undesirable speculation.

The Securities and Exchange Board of India

 The Securities and Exchange Board of India even though established in the
year 1988. Received statutory powers only on 30th January 1992. Under the SEBI Act,
a wide variety of powers are vested in the hands of SEBI. SEBI has the powers to
regulate the business of Stock Exchanges, other security and mutual funds. Registration
and regulation of market intermediaries are also carried out by SEBI. It has
responsibility to prohibit the fraudulent unfair trade practices and insider dealings.
Takeovers are also monitored by the SEBI has the multi pronged duty to promote the
healthy growth of the capital market and protect the investors.The Governing Board of
stockexchanges: The Governing Board of the Stock Exchange consists of elected
members of directors, government nominees and public representatives. Rules, by laws
and regulations of the Stock Exchange substantial powers to the executive director for
maintaining efficient and smooth day-to day functioning of Stock Exchange. The
Governing Board has the responsibility to maintain and orderly and well-regulated
market.

The Governing body of the Stock Exchange consists of 13 members of which

A. Six members of the Stock Exchange are elected by the members of the Stock
Exchange.
B. Central Government nominates not more than three members.
C. The board nominates three public representatives.
D. SEBI nominates persona not exceeding three and
E. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM).
The retired member can offer himself for election if he is not elected for two
consecutive years. If a member serves in the governing body for two years
consecutively, he should refrain offering himself for another two years.
 The members of the governing body elect the president and vice-president. It
needs to approval from the Central Government or the Board. The office tenure for the
president and vice-president is on year. They can offer themselves for re-election, if
they have not held for two consecutive years. In that case they can offer themselves for
re-election after a gap of one-year period.

 VARIOUS STOCK EXCHANGES IN INDA:

List of Stock Exchanges in India

» Bombay Stock Exchange

» National Stock Exchange
» Regional Stock Exchanges

» Ahmedabad
» Bangalore
» Bhubaneshwar
» Calcutta
» Cochin
» Coimbatore
» Delhi
» Guwahati
» Hyderabad
» Jaipur
» Ludhiana
» Madhya Pradesh
» Madras
» Magadh
» Mangalore
» Meerut
» OTC Exchange Of India
» Pune
» Saurashtra Kutch
» UttarPradesh
» Vadodara
 AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY ARE:

1) NSE
2) BSE

NATIONAL STOCK EXCHANGE

      The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most
advanced exchange with 1016 companies listed and 726 trading members. Capital market
reforms in India and the launch of the Securities and Exchange Board of India (SEBI)
accelerated the incorporation of the second Indian stock exchange called the National Stock
Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock
exchange in India.

Three segments of the NSE trading platform were established one after another. The Wholesale
Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment
was opened at the end of 1994. Finally, the Futures and Options segment began operating in
2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior
Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50
stocks from 25 different economy sectors. The Indices are owned and managed by India Index
Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard &
Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first exchange
in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership
in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by
Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine
(1999). 

The NSE is owned by the group of leading financial institutions such as Indian Bank or Life
Insurance Corporation of India. However, in the totally de-mutualized Exchange, the ownership
as well as the management does not have a right to trade on the Exchange. Only qualified traders
can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a single
platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market
(CM), and Futures & Options (F&O) Market.
 The main objectives of NSE are as follows
1). To establish a nation wide trading facility for equities, debt and hybrid instruments
2). To ensure equal access investors all over the country through appropriate
communication network.
3). To provide a fair, efficient and transparent securities market to investors using an
electronic communication network.
4). To enable shorter settlement cycle and book entry settlement system.
5). To meet current international standards of securities market.
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,
Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India, Punjab
National Bank, Infrastructure Leasing and Financial Services, Stock Holding Corporation fo India
and SBE capital market are the promoters of NSE.

NSE Nifty:

The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for large
companies on the National Stock Exchange of India. S&P CNX Nifty is a well diversified 50
stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index based derivatives and index funds.

Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later on,
it came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a
joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon
the index as a core product. IISL have a consulting and licensing agreement with Standard &
Poor's (S&P), who are world leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the
identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for
NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard &
Poor's Financial Information Services. 
 

NSE other indices:

 S&P CNX Nifty

 CNX Nifty Junior
 CNX 100
 S&P CNX 500
  CNX Midcap
 S&P CNX Defty
 CNX Midcap 200

BOMBAY STOCK EXCHANGE:

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly
called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located
at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600 Indian companies
listed with the stock exchange, and has a significant trading volume. As of October2006, the
market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE
SENSEX (Sensitive index), also called the BSE 30, is a widely used market index in India and
Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions
volume.

History:

An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall
of Bombay from the mid-1850s, 1875, was formally organized as the Bombay Stock Exchange
(BSE).In January 1899, the stock exchange moved into the Brokers’ Hall after it was inaugurated
by James M MacLean. After the First World War, the BSE was shifted to an old building near
the Town Hall. In 1956, the Government of India recognized the Bombay Stock Exchange as the
first stock exchange in the country under the Securities Contracts (Regulation) Act.1995, when it
was replaced by an electronic (eTrading) system named BOLT,or the BSE Online Trading
system. In 2005, the status of the exchange changed from an Association of Persons (AoP) to a
full fledged corporation under the BSE (Corporatization and Demutualization) Scheme , 2005
(and its name was changed to The Bombay Stock Exchange Limited).

BSE Sensex:

The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30
scrips, with the base April 1979= 100. The set of companies which make up the index has been
changed only a few times in the last 20 years. These companies account for around one-fifth of
the market capitalization of the BSE.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-Weighted"

methodology of 30 component stocks representing a sample of large, well-established and
financially sound companies. The base year of SENSEX is 1978-79. The index is widely
reported in both domestic and international markets through print as well as electronic media.
SENSEX is not only scientifically designed but also based on globally accepted construction and
review methodology. From September 2003, the SENSEX is calculated on a free-float market
capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is a
widely followed index construction methodology on which majority of global equity benchmarks
are based.
The growth of equity markets in India has been phenomenal in the decade gone by. Right from
early nineties the stock market witnessed heightened activity in terms of various bull and bear
runs. More recently, the bourses in India witnessed a similar frenzy in the 'TMT' sectors. The
SENSEX captured all these happenings in the most judicial manner. One can identify the booms
and bust of the Indian equity market through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market hours and
displayed through the BOLT system, BSE website and news wire agencies.

SENSEX calculation:   
SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this methodology, the level of index at any point of time reflects the total market value of
30 component stocks relative to a base period. (The market capitalization of a company is
determined by multiplying the price of its stock by the number of shares issued by the company).
An index of a set of combined variables (such as price and number of shares) is commonly
referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the
results of this calculation in order to make the value easier to work with and track over time. It is
much easier to graph a chart based on indexed values than one based on actual values.  .

BSE - other Indices:

Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock
indices as well:

 BSE 500
 BSE PSU
 BSE MIDCAP
 BSE SMLCAP
 BSE BANK

The Securities and Exchange Board of India

The Securities and Exchange Board of India even though established in the year 1988. Received
statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of powers are
vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock Exchanges,
other security and mutual funds. Registration and regulation of market intermediaries are also
carried out by SEBI. It has responsibility to prohibit the fraudulent unfair trade practices and
insider dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to
promote the healthy growth of the capital market and protect the investors.

The Governing Board of stock exchanges:

The Governing Board of the Stock Exchange consists of elected members of directors,
government nominees and public representatives. Rules, by laws and regulations of the
Stock Exchange substantial powers to the executive director for maintaining efficient
 and smooth day-to day functioning of Stock Exchange. The Governing Board has the
responsibility to maintain and orderly and well-regulated market

The Governing body of the Stock Exchange consists of 13 members of which Six
members of the Stock Exchange are elected by the members of the Stock Exchange.

F. Central Government nominates not more than three members.

G. The board nominates three public representatives.
H. SEBI nominates persona not exceeding three and
I. The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM).
The retired member can offer himself for election if he is not elected for two
consecutive years. If a member serves in the governing body for two years
consecutively, he should refrain offering himself for another two years.

The members of the governing body elect the president and vice-president. It
needs to approval from the Central Government or the Board. The office tenure for the
president and vice-president is on year. They can offer themselves for re-election, if
they have not held for two consecutive years. In that case they can offer themselves for
re-election after a gap of one-year period.

SEBI GUIDELINES TO SECONDARY MARKETS:

The Securities and Exchange Board of India even though established in the
year 1988. Received statutory powers only on 30th January 1992. Under the
SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has the
powers to regulate the business of Stock Exchanges, other security and mutual
funds. Registration and regulation of market intermediaries are also carried
out by SEBI. It has responsibility to prohibit the fraudulent unfair trade
practices and insider dealings. Takeovers are also monitored by the SEBI has
the multi pronged duty to promote the healthy growth of the capital market
and protect the investors
MANUAL MODE OF TRADING:

TRADING PROCEDURE BEFORE ONLINE

THE TRADING RING:

 Trading on stock exchanges is officially done in the ring for a few hours from
11.00 A.M to 2.30P.M. Trading before or after official hour is called KERB TRADING.
In the trading ring space is provided for specified and non-specified sections. The
members of their authorized assistants have to wear a badge or carry with them identify
cards given by the exchange to enter the trading ring. They carry a Sauda book or
confirmation memos duly authorized by exchange. The stock exchanges operations at
floor level are highly technical in nature. Non-members are not permitted to enter into
stock market. Hence, various stages have to be completed in executing a transaction at a
stock exchange. The steps involved in the methods of trading have been given below:
A.CHOICE OF BROKER:
The prospective investor who wants to buy shares or the investor who wants to sell
his shares cannot enter into hall of the exchange and transact business. They have to act
through only member brokers. They can also appoint their bankers for this purpose.
Since, bankers can become members of stock exchange as per the present regulations.
So, the first task in transacting business on stock exchanges is to choose a broker of
repute or banker. Such people’s can ensure prompt and quick execution of a transaction
at the possible price.
At present there are 4500 authorized brokers in ISE.
PLACEMENT OF ORDER:

The next step in planning of order for the purchase or sale of Securities with
the broker. The order is usually by telegram, telephone, letter, fax etc., or in person. To
avoid delay it is placed generally over the phone. The orders may take any one of the
forms such as at best order, limit order, immediate or cancel order, discretionary order,
limited discretionary order, open order and stop loss order.
ENTRY OF ORDER INTO THE BOOKS:
 After receiving the order, the member enters them in his books and the
purchase and sale orders are distributed among his assistants to handle them separately
in non-specified and odd-lots.

EXECUTION OF ORDER:
Big brokers transact their business through their authorized clerk. Small ones
out their business personally. Orders are executed in the trading ring of the
ISE.Thisworks from 12:00 noon to 2:00 p.m discretionary order on all working days
from Monday to Friday and a special hour session on Saturday.
The floor of the stock exchange is divided into number of markets (pits)
according to the nature of security deal in. The authorized clerk/broker goes to the pit
and jobbers offer two way quotes for the scrips they deal in. they act as market makers
and provide liquidity to the market. The system has been designed to get the bet lids and
offers from the jobber’s book as well as the best buy and sell orders from the book. If
the quotation is not acceptable to the brokers, he may make a counter bid/offer.
Ultimately the bargains may be closed at a price mutually acceptable to both
the parties. In case the quotation is not acceptable to him, the broker may go to another
dealer and make a bargain. All bargains on the stock exchanges are settled by word of
mouth and there is no written contract signed immediately by the parties concerned.
Once the transaction is finalized, the deals are recorded in a Chaupri Rough notebook or
transaction note or confirmation memos. Soudha block books or confirmation memos
are provided by the stock exchange. The details are recorded in these books also. The
prices at which different scrips are traded on a particular day published on the next day
in the newspapers. An authorized representative of the stock exchange is also present in
the hall to supervise the trading.

PREPARATION OF CONTRACT NOTES

 Usually, the authorized clerks enter the particulars of the business transacted
during a particular day in ‘Kacha Sauda Book’ they are transferred to ‘Pucca Sauda
Book’, which are maintained separately for the ready delivery contracts. Then the
broker/authorized clerk prepares a contract note. A contract note is a written agreement
between the broker and his client for the transaction executed. It contains the details of
the contract made for the purchase/sale of Securities, the brokerage chargeable, name of
the company, number of shares bought/sold, net rate, etc., it is prepared in a prescribed
from and a copy of it is also sent to the client.

PLACING ORDER WITH THE BROKER:

 The next step is placing an order for the purchase/sale of securities with the
broker. The order is usually placed over telephone, fax. It can also take the
form of telegram or letter or in person. The order placed may be any of the
following varieties (largely classified on the basis of price limits that it
imposes.).

 AT BEST ORDER (OR) BEST RATE ORDER:

“Buy 1000 XYZ ltd.”, it does not specify any price. It means buy XYZ Ltd. Securities at
the prevailing market price. These are executed very fast as there is no price limits.

 LIMIT ORDER:
“Buy 100 XYZ Ltd. At Rs 100”, it is an order for the purchase of shares at a specified
price by the client.(Rs 100)
  LIMITED DISCRETIONARY ORDER:
“Buy 1000 XYZ Ltd., around Rs.100”. it gives discretion to the broker. The price can be
a little above Rs 100. How much discretion is implied depends on how the broker and
client define around.

 OPEN ORDER:
It is an order to buy or sell without fixing any time or price limit on the execution of the
order.
 STOP LOSS ORDER:
“Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10”. It means buy 100 XYZ Ltd securities at
the market rate of Rs. 12 but if on the same day the price falls to Rs. 10 immediately sell
of the securities /shares. Thus an attempt is made to limit the loss of sudden unfavorable
shift in the market.

 NET RATE ORDER:

“Buy 1000 XYZ Ltd. @Rs.30 net “would mean that the client is willing to buy 1000
XYZ Ltd. For no more than Rs.30 per security inclusive of brokerage payable to the
broker. Net rate is purchase or sale rate minus brokerage.
 MARKET RATE ORDER:
Market rate is net rate plus brokerage for purchase and net minus brokerage for sale. So,
“Buy 1000 XYZ Ltd. @Rs.30 market” would mean that the client is willing to pay
Rs.30 plus brokerage for each security of XYZ Ltd.

DISADVANTAGES OF MANUAL TRADING:

1) Manual records are very difficult to be maintained safe

2) Manual records are subject to greater human error
3) Business can see itself in fines and penalties if records are lost
 4) Manual records are easier to be falsified, modified, altered or vanished, as compared
to computerized records which become very safe when using passwords, firewalls,
and back-ups.

DEPOSITORY SYSTEM:
A "Depository" is a facility for holding securities, which enables securities transactions to be processed
by book entry. To achieve this purpose, the depository may immobilize the securities or dematerialise
them (so that they exist only as electronic records).India has chosen the dematerialisation route. In
India, a depository is an organisation, which holds the beneficial owner's securities in electronic form,
through a registered Depository Participant (DP). A depository functions somewhat similar to a
commercial bank. To avail of the services offered by a depository, the investor has to open an account
with a registered DP.

BENEFITS OF DEPOSITORY SYSTEM:

In the depository system, the ownership and transfer of Securities takes place by means of electronic
book entries. At the outset, this system rids the capital market of the danger related to handling of
paper. NSDL provides numerous direct and indirect benefits, like:

 Elimination of bad deliveries-in the depository environment, once holding of an investor are
Dematerialized, the question of bad delivery does not arise i.e. they cannot be hold “under
objection”.
 Elimination of all risks associated with physical certificates-dealing in physical Securities have
associates security risks of stocks, mutilation of certificates, loss of certificates during movements
through and from the registrars, thus exposing the investor to the cost of obtaining duplicate
certificates and advertisement, etc.., This problem does not arise in the depository environment.
SERVICES AVAILABLE IN DEPOSITORY SYSTEM:

NSE AND BSE.

NSDL: NATIONAL SECURITY DEPOSITORY LIMITED

Although 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. This depository promoted by
institutions of national stature responsible for economic development of the country has
since established a national infrastructure of international standards that handles most of
the securities held and settled in dematerialized form in the Indian capital market.

Using innovative and flexible technology systems, 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, minimize risk and reduce costs. At NSDL, we play a quiet but central role in
developing products and services that will continue to nurture the growing needs of the
financial services industry.

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. 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.

Promoters / Shareholders

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the largest
development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and
National Stock Exchange of India Limited (NSE) - the largest stock exchange in India. Some of
the prominent banks in the country have taken a stake in NSDL.

Promoters

 Industrial Development Bank of India Limited (Now, IDBI Bank Limited)

 Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit Trust of
India)
 National Stock Exchange of India Limited

Other Shareholders
  State Bank of India
 Oriental Bank of Commerce
 Citibank NA
 Standard Chartered Bank
 HDFC Bank Limited
 The Honkong and Shanghai Banking Corporation Limited
 Deutsche Bank
 Dena Bank
 Canara Bank
 Union Bank of India

CDSL: CENTRAL DEPOSITORY SERVICES LIMITED:

A 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.CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading
banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard
Chartered Bank, Union Bank of India and Centurion Bank.

Promoters &shareholders

CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with Bank of
India, Bank of Baroda, State Bank of India and HDFC Bank. BSE has been involved with this
venture right from the inception and has contributed overwhelmingly to the fruition of the
project. The initial capital of the company is Rs.104.50 crores. The list of shareholders with
effect from 11th December, 2008 is as under.

Sr. Name of shareholders Value of % terms

No. holding (in to total
Rupees Lacs) equity
1 Bombay Stock Exchange Limited 3,825.46 36.61
 2 Bank of India 1,000.00 9.57
3 Bank of Baroda 1,000.00 9.57
4 State Bank of India 1,000.00 9.57
5 HDFC Bank Limited 1,500.00 14.36
6 Standard Chartered Bank 750.00 7.18
7 Canara Bank 674.46 6.45
8 Union Bank of India 200.00 1.91
9 Bank of Maharashtra 200.00 1.91
10 The Jammu and Kashmir Bank 200.00 1.91
Limited
11 The Calcutta Stock Exchange 100.00 0.96
Association Limited
12 Others 0.08 --
  TOTAL 10,450.00 100.00

DEMATERIALIZATION

Dematerialization is a process by which physical shares of investors are converted to an

equivalent number of Securities in electronic form and credited in the investor’s account with his
Depository Participant.
 Dematerialized trading is now compulsory for all investors. Beginning of first week of
January 1999, investor can trade in specific scripts in the Demoralization form. They can provide and
receive delivery only in a Dematerialized form and share certificate will not be changed for these
scripts.

A depository is an organization where Securities of shareholder are held in the electronic form at the
request of the shareholder through Depository Participant (DPs). The system is comparable to that in
a bank. If an investor wants services offered by a depository, he would have to open an account with
it through a DP- similar to opening an account with any other branches of the bank in order to avail of
its services.

Dematerialization is a process by which physical certificates of an investor are taken back by the
company/registrar and actually destroyed and an equivalent number of Securities are credited in the
depository account of those investors. A Depository Participant is investor’s agent in the system. He
maintains investor’s Securities account and intimates the status of holdings from time to time to the
investor.

FEATURES OF DEMAT:

 In case you want to convert your existing shares into Demat format, you can view
securities available for Demat
 You can view the details of your transactions including settlement date, pay in date, pay
out date using the View Settlement calendar option

OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF TRADES:

All the trades executed at the exchanges are settled by the clearing member
(CM), as in the case of Securities in the physical form. To settle trades in Demat
segment each CM should open one clearing account with any of the DP.
The procedure for opening clearing accounts is:

 Approach a DP.
 Fill up an account opening form.
 Sign on an agreement with the DP.
 Application is forwarded to NSDL by DP.
 NSDL allots a number identified as CM-BP-ID.

DP opens account and an account number is providing along with CM-BP-ID to the
clearing member.

 After opening an account with the DP the investor should surrender the physical
certificates held in his name to a depository participant. These certificates will be
sent to the respective companies where they will be cancelled after dematerialization
and will credit the investors account with the DP. The securities on dematerialisation
will appear as balances in the depository account. These balances can be transferred
like the shares held in physical form. Dematerialised shares are in the fungible form
and do not have any distinctive or certificate numbers .The securities in the demat
can again be converted into physical form   which is called as rematerialisation.

Safety to the investor

* Securities Exchange Board of India (SEBI) has laid down certain rules and regulations for
getting registered as a depository participant. With the recommendation of the Depository
and SEBI's own independent evaluation a DP will be registered under SEBI.

* The investors account will be credited/debited by the DP only on the basis of valid
instruction from the client.

* The system driven mandatory reconciliation is done between the DP and NSDL.

* Periodic inspections of both DP and R&T agent are conducted by NSDL

* The data interchange between NSDL and its business partners is protected by standard
protection measures such as encryption.

* No direct communication links exist between two business partners and all
communications are routed through NSDL.

* A statement of account is received periodically by the investors. NSDL sends statement of

account to a random sample of investors a s a counter check.

* The investor has the right to approach NSDL if the grievances of the investors are not
resolved by the concerned DP.

Advantages of dematerialization:
 There is no risk due to loss on account of fire, theft or mutilation.

 There is no chance of bad delivery at the time of selling shares as there is no

signature mismatch.

 Transaction costs are usually lower than that in the physical segment.

 The bonus /rights shares allotted to the investor will be immediately credited into
his account.

 Share transactions like sale or purchase and transfer/transmission etc. can be

effected in a much simpler and faster way.

 A safe and convenient way to hold securities

 ; Immediate transfer of securities;

 No stamp duty on transfer of securities;

 Elimination of risks associated with physical certificates such as bad delivery, fake
securities, delays, thefts etc.;

 - Reduction in paperwork involved in transfer of securities;

 - Reduction in transaction cost;

- No odd lot problem, even one share can be sold;

 - Nomination facility;

 - Change in address recorded with DP gets registered with all companies in which
investor holds securities electronically eliminating the need to correspond with each of
them separately;

 - Transmission of securities is done by DP eliminating correspondence with companies;

 - Automatic credit into demat account of shares, arising out of

bonus/split/consolidation/merger etc.

 - Holding investments in equity and debt instruments in a single account.

 Disadvantages of Demat account -

 There is no as such disadvantage of Demat account. And even if there is any

disadvantage of Demat account than by law, In India we Must have to use Demat
accounts to do share transactions.
A. Procedure for purchasing dematerialized securities

The procedure for purchasing dematerialized securities is also similar to the procedure for
buying physical securities.

1. Investor instructs DP to receive credits into his account in the prescribed form. There may be
one time standing instruction or separate instruction each time to receive credits.
2. Investor purchases securities in any of the stock exchanges linked to depository through a
broker.
3. Broker receives payment from investor and arranges payment to clearing corporation.
4. Broker receives credit to securities in clearing account on the payout day.

5. Broker gives instructions to DP to debit clearing account and credit client’s account. Investor
receives shares into his account by way of book entry.

B. Procedure of selling dematerialized securities

The procedure for selling dematerialized securities in stock exchanges is similar as selling physical
securities. The only major difference is that instead of delivering physical securities to the broker, the
investor instructs his DP to debit his demat account with the number of securities sold by him and credit
the brokers clearing account. The procedure for selling dematerialized securities is given below:

1. Investor sells securities in any of the stock exchange linked to depository through a
broker.
2. Investor instructs his DP to debit his demat account with the number of securities sold
and credit the broker’s clearing account.
3. Before the pay-in-day, broker of the investor transfers the securities to clearing
corporation.
4. The broker receives payment from the stock exchange.
5. The investor receives payment from the broker for sale of securities in the same manner
as received in case of sale of physical securities.
The Evolution of Stock Brokers with Online Trading

An online stock broker is an investor’s means of buying and selling shares via the Internet, just
like a regular stock broker, wherein an individual or a brokerage firm acts as one’s link to the
stock exchange. Are such services necessary? Is it, after all, not true that  anyone can engage in
online trading today, and that it is possible to invest in stocks with one’s own computer?

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.

. INTRODUCTION TO ONLINETRADING

The Internet revolution has been changing the fundamentals of our society. It shapes the way we
communicate and the way we do business. It brings us closer and closer to vital sources of
information. It provides us with means to directly interact with service-oriented computer
systems tailored to our specific needs; therefore, we can serve ourselves better by making our
own decisions. This prevailing shift of the business paradigm is reshaping the financial industry
and transforming the way people invest.

In the old days, because of the limitations of communications technology, Wall Street was the
center for most of the Stock Exchange and Brokerage firms. Today, at this millennial transition,
investors can use revolutionary Internet Client-Server technology to trade stocks nearly
anywhere, anytime, independent of brokers' fees and service limitations.

Definition: Online Trading

The act or practice of buying and selling securities over the Internet. Generally speaking, online
trading occurs when an investor makes an order to a broker online; the broker then executes
the order through the ordinary means. Online trading became more common in the 1990s as
more brokerages offered their services online, often for a small fee rather than a commission
on the trade.
Online trading should be distinguished from electronic trading, which occurs on an exchange.
See also: Discount brokerage. Online trading in India is the internet based investment activity
that involves no direct involvement of the broker. There are many leading online trading portals
in India along with the online trading platforms of the biggest stock houses like the National
stock exchange and the Bombay stock exchange. The total portion of online share trading India
has been found to have grown from just 3 per cent of the total turnover in 2003-04 to 16 per cent
in 2006-07

Facilities of the online trading in India:

The investor has to register with an online trading portal and get into an agreement with the firm
to trade in different securities following the terms and conditions listed down on the agreement.
The order processing is done in correct timings as the servers of the online trading portal are
connected to the stock exchanges and designated banks all round the clock. They can also get
updates on the trading and check the current status of their orders either through e-mail or
through the interface. Brokerage also provides research content on their websites, such that the
clients can take their own decisions on stocks before investing.

Products and services of the online trading in India:

Varieties of financial products and services of the online trading are available in India such as:

 Life insurance
 Equities,
 Portfolio management
 Mutual funds
 Loans
 General insurance
 Share trading
 Commodities trading
 Financial planning.

National stock exchange and Bombay stock exchange: In spite of many private stock
houses at present involved in online trading in India, the NSE and BSE are among the largest
exchanges. They handle huge daily trading volumes, supporting large amounts of data traffic,
and possessing a countrywide network. The automated online systems used for trading by the
national stock exchange and the Bombay stock exchange are the NIBIS or NSE's Internet Based
Information System and NEAT for the national stock exchange and the BSE Online Trading
system or BOLT for the Bombay stock exchange.

 .Online trading is termed as selling products or good services through Internet.

 Customers willing to purchase the product should provide the credit card details and
personal contact information online and once the payment is being made the product is
 shipped to the address of the customer as provided earlier generally after two business
days.

 The product is shipped to the customer from the retailer only.

 Online trading is treated as the most effective process to make money with the help of
Internet by sitting at home only.
 But is not easy and simple as it requires constant supervision and once people attains the
appropriate skill can gain profit in huge amount.
 In order to make a business successful a plan need to be prepared first then multiple
sources of income policy should be opened so that the plan at later time should be
incorporated in to the business.

Companies provide Online Trading in India:-

Online Trading in India

:: India Stock :: BSEIndia

:: A1 Technology Online Trading :: JV Financial Online

:: Best online trading :: Kotak Securities Online Trading

:: Bonanza Online Trading :: Mansukh Securities Online Trading

:: BullishIndian.com Online Trading :: Quote.com Online Trading

:: Express Computer Online Trading :: SHCL Online Trading

:: Geojit Securities Online :: STC Online Trading

:: ICICI Online Trading :: Technical Analysis Trading

:: Indiabulls Online :: Union Bank of India Online Trading

:: India Insurance :: Best Online Trading

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

Features of information.
The Internet can provide a new sense of control over your financial future. The amount of investment
information available online is truly astounding. It's one of the best aspects of being a wired investor.
For the first time in history, any individual with an Internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and the
global economy
 Conduct extensive financial research on any company

Control of your money:

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

Access to Market:

At the most basic level, an online trading account gives you more agility in buying and selling stocks. This
is through sophisticated information streams, dedicated trading platforms and sophisticated tools for
accessing the markets.

Ensures the best price for Investor:

Every broker house aims at providing the investor with the best price available. Also due to the high
level of transparency with regard to display of information relating to the specific stocks

and company profiles, you will be able to get the best quote for your orders.

Offers grater transperancy:

Online trading offers you greater transparency by providing you with an audit trail. This involves a
complete integrated electronic chain starting from order placement, to clearing and settlement and
finally ending with a credit into your depository account. All these stages are subject to inspection, thus
bringing in transparency into the system.

Enables hassle free trading:

Online trading integrates your bank account, your trading account and your demat accounts, which
leads to easy and paperless trading for you.

You as an Investment online customer will be able to execute the

entire trading transaction, right from logging on to our site, to the execution and settlement of your
bank account, in a very short period of time.

Trading on the net, gives even the smallest retail investor access to information that earlier was
available only to the big traders. This provides a level playing field for all investors in the securities
market.

This method of trading reduces the settlement risk for the investor, as in this case all short sell orders
are squared off at the specified cut-off time and not allowed to be carried forward.

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

Every trade is confirmed immediately and you will receive an on-screen confirmation following every
trade with full details for your records. This avoids costly errors that would have been discovered when
it is too late.
Your Bank, Depository and online account are integrated for your convenience. Various broking houses
provide access to many of the popular banks.

Broking houses work hard to keep our account and personal information secure. From updated security
technology to advanced fraud prevention measures, they have the people and tools in place to provide a
strong defense against electronic scams and fraud.

Advantages

with access to advanced trading tools.

* Online trading of stock allows trading in real-time market data and multiple
markets and products.

* Possible to indulge in faster trade execution that have any geographical

limitations.

* Online trading favors active traders, who trade in bulk but demands lesser
commission.

Disadvantages

* Fully automated trading process

* Online trading is risky if trading is done extensively on margin

* There are chances of trading loss in case of mechanical/platforms failure

* Online traders fall sort of constant support and suggestion

* The fee of online brokers vary facilitates day traders in swing trading.

* It is easy to open and manage an account and does not

PROCEDURE FOR ON-LINE TRADING:

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

The client places order via the net by logging on to his

Broker’s site.

The broker accepts and executes the order and places it with
the exchange

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

The broker makes the payment either directly via the client bank account
or pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through

the demat or via e-mail.
So, generally following steps are followed while doing the trading through the Internet:

Step-I:

Those investors interested in doing the trading over Internet system, that is,NEAT - ISX (NSE),
should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a personal
identification number (PIN).

Step-3:

Actual placement of an order, Using the place order window as under can then place an order:

(a) First by entering the symbol and series of stock and other parameters such as quantity and
price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

Step-4:

It is the process of review. Thus, the investor has to review the order placed by clicking the
review option. He may also re-set to clear the values.

Step-5:

After the review has been satisfactory; the order has to be sent by clicking on the send option.

Step-6:

The investor will receive an "Order Confirmation" 'message along with the order number and
the value of the order.

Step- 7:In case the order is rejected by the Broker or the Stock Exchange for certain reasons
such as invalid price limit, an appropriate message will appear at the bottom of the screen. At
present, a time lag of about ten seconds is there in executing the trade.
 Step-8:

It is regarding charging payment, for which there are different modes. Some brokers will take
some advance payment from the, investors and will fix their trading limits. When the trade is
executed, the broker will ask the investor for transfer of funds by the investor to his account.

When was online trading introduced in INDIA?

Online trading started in India in February 2000 when a couple of brokers started offering an online
trading platform for their customers.

THE MECHANICS OF ONLINE TRADING

CLIENT BROKER STOCK EXCHANGE

Accepts
on the net on the the order,
broker’s Checks
website thethe
through client’s Identity
distinctive I.D.and places
Accepts
code the
the order
order withchecking
after the stock exchange
the scrip limit of the broker for the day

Executes the order

buy/sell order) gets reflected in his Demat account.

t the execution of the deal by e-mail. Pays the broker pending physical delivery.
Pays the
Exchange
though his owns account and receives it from the client account.

Receives the money and completes the settlement

The benefits of investor due to Online Investing:

a) Independence and freedom due to enjoyed by an individual access to the markets: This is
conceivably the greatest advantage of online brokerages. A novice investor with an Internet
connection can know there all time stock quotes, historical stock price trends, have a handle
on market events, access vast amounts of economic and market analysis, do research on firms,
and interact with other investors via forums or chat rooms. This, in combination with time, can
transform even the most novice investor with an active interest in investments into a
knowledgeable and powerful investor.

b) Elimination of the “middle man”:

Investing online gives the investor a sense of control over their wealth. Buying and selling of
stock no longer requires another individual to carry it out. It saves the investor the added worries
that come with busy phone lines; broker not being in, etc. when wanting to do an important trade.
It can be done whenever and wherever by the Investor themselves.
c) Elimination of Losses on account of Brokers: Most brokers live on commissions, hence the
tactics used by them are in the favor of the broker first, the brokerage house next and finally the
client. Online brokerages pay financial advisors a fixed salary, thus eliminating the chance for an
investor doing unnecessary trades for the benefit of the brokerage firm and the broker.
d) Inexpensive and affordable commission charges: Commissions per trade online are much
lower than when compared to that charged by traditional brokerage houses like Merrill Lynch,
etc. This is the fulcrum on which online brokerages leverage. Cheap transaction costs along with
the immense amount accessible online are the biggest reasons for the clients to move online.
Traditional brokerage houses
e) Internet as an InformationSuperhighway: Information related to stocks, company
Fundamentals, etc., which were once only available to licensed brokers, are now at the finger tips
of anyone and everyone. Online brokerages are inconstant endeavor to bridge the gap between
the investor and the market.
f) Diverse range of investment products and choices: Online brokerages are offering more
Products to the consumer, so as to give the consumer a wider choice and also to accommodate
consumers that have niche tastes. Investors can invest in stocks, bonds, mutual funds, mortgages.

g) Speed of trade execution: Keeping time in mind, online trading is much quicker – as far as
accessibility and availability to investment information and execution of trades areconcerned.
Online have decreased the time for total completion of a trade from the regular T+3 days to a
matter of minutes.

The costs borne by an Individual Investor from Online Investing

a) Technical Reliability: The greatest disadvantage of online trading is the inability of a
network to be fail-safe. Computers in spite of the technological advances are by no means
perfect. There are various things that could go wrong like failure to log on to the network,
network blackout due to failure power, server crash resulting in site failure, traffic overload thus
causing site freeze. Site freeze can happen on extremely demanding days with large amounts of
orders going over the networks.
b) The investor is alone: Another disadvantage may be the penalty of a bad investment.
The do it yourself attitude that empowers the investor over his own money, can give a sense of
autonomy previously not experienced when dealing with traditional brokerages. But it can also
spell investment failure.

The Limitations of Online Investing to an individual investor:

Besides advantages and disadvantages, there exists the possibility of limitations of what online
brokerages can do for an individual investor. Though the Internet has allowed more players into
the investment playing field, some investors like the institutional investors still have an
advantage over the individual investors in spite of the Internet and all its advantages. It can be
assertively said, “Size does matter”.
Firstly, because of the sheer size of resources and contacts, institutional investors almost always
get exclusive access to the hottest Initial Public Offering (IPO) deals before it goes into the
markets. Individual investors usually gain access to these stocks after the initial price gain is
already lost. Online brokerages do offer IPO deals –provided the trading account has between
$100,000 to $500,000.

Client Broker Relationship

Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable information about clients, which
would facilitate risk evaluation of clients.

Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and rights. This agreement
should also inter alia, the minimum service standards to be maintained by the broker for such service
specified by SEBI/Exchange for the internet based trading from time to time. Exchange will prepare a
model agreement for this purpose. The broker agreement with clients should not have any clause that is
less stringent/contrary to the conditions stipulated is the model agreement.
Investor Information:

The broker web site providing the internet based trading facility should contain information meant for
investor protection such as rules and regulations affecting client broker relationship arbitration rules,
investor protection rules etc. The broker web site providing the Internet based trading facility should
also provide and display prominently, hyper link to the web site/page on the web site of the relevant
stock exchange (s) displaying rules/ regulations/ circulars. Ticker/quote/order book displayed on the
web-site of the broker should display the time stamp as well as source of such information against the
given information.

Order/Trade Confirmation: Order/Trade confirmation should also be sent to the investor through
email at client’s discretion at the time specified by the client in addition to the other made of display of
such confirmation of real time basis on the broker web site. The investor should be allowed to specify
the time interval on the web site itself within which he would like to receive this information through
email. Facility for reconfirmation of orders which are larger than that specified by the member's risk
management system should be provided on the internet based system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service provided by brokers to ensure a
minimum level of service. Exchange should have separate cell specifically to handle Internet trading
related complaints. It is desirable that exchanges should also have facility for on-line registration of
complaints on their web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the trading limits of clients, and
exposures taken by clients. Brokers must set predefined limits on the exposure and turnover of each
client. The broker systems should be capable of assessing the risk of the client as soon as the order
comes in. The client should be informed of acceptance/rejection of the order within a reasonable
period. In case system based control rejects an order because of client having exceeded limits etc., the
broker system may have a review and release facility to allow the order to pass through.
Contract Notes:

Contract notes must be issued to clients as per existing regulations, within 24 hours of the trade

execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as III the case of existing
system, brokers using Internet based systems for routing client orders will also not be allowed to cross
trades of their clients with each other. All orders must be offered to the market for matching.

It is emphasized that in addition to the requirements mentioned above, all existing obligations of the
broker as per current regulation will continue without changes. Exchanges may also like to specify more
stringent standards as they may deem fit for allowing Internet based trading facilities to their brokers.

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

STOCK MARKET TRADING ON INTERNET

The major events that will take place in the Indian Capital Market are introduction of index-based
futures trading on internet. Trading on internet means that the investor’s will actually buy and sell the
stocks on-line through the net. A committee was setup by SEBI to develop regulatory parameters for use
internet trading. SEBI approved the report on the committee. SEBI decided that internet trading could
take place in India within the existing legal framework through use of order routing system, which will
route order from client to brokers, for trade execution on registered stock exchanges. The broad also
took note of the recommended minimum technical standards for ensuring safety and security of
transaction between clients and brokers, which will be forced by the respective stock exchanges.

Easier transaction processing

Profit in time: Investor can make profits by selling shares when the going is good. They do not have to
instruct their brokers on the cut off price to sell shares.
Ease and transparency: Since the broking, bank and demat account are all electronically connected, all
transaction get updated, demat account shows the latest stockholding statement while the bank
account shows the balance amount after buying or selling of shares.

Precaution: Check for hidden costs of broker’s age. Beware of net seamstress. Never double click the
mouse during execution of trade avoids cyber cafes and change password regularly.

Less fees: shares traded online require no human intervention to match buys and sells. This means that
commission costs are cut dramatically for the frequent investor.

Market timings:

Trading on the derivatives segment takes place on all days of the week (except Saturdays
and Sundays and holidays declared by the Exchange in advance). The market timings of the
derivatives segment are:

Normal Market / Exercise Market Open time : 09:55 hours

Normal market close : 15:30 hours
Set up cut of time for Position limit/Collateral value : till 15:30 hrs
Trade modification end time / Exercise Market : 16:15 hours

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 directly trade through investors;

 Advertise 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.
 COMPANY PROFILE

.
Networth
has been
successfully providing premium financial services and information for more than a
decade. Our aim has consistently been to empower investors to take charge of their
financial future & help them grow their Networth.   

Networth has always endeavored to make a difference in the financial services space. It
constantly focuses on scaling and upgrading the technology infrastructure so as to
provide the best services to the investors. We have a presence of over 300 centre’s
across India.   

We are .

 Managed by a talented team of over 2475 professionals.

 Serving nearly 100,000 clients across the country.
 ISO 9001:2000 Certified Software Division.
 Winner of CNBC-TV18’s Financial Advisor Awards 2008 for Best Regional Level
Financial Advisor.
 Proclaimed amongst the most read research analyst (Team Networth) by Thomson
Reuters consistently over a period of time.
 A Charter member of Financial Planning Standards Board of India [FPSB].
 Alliance partners with PNB for online trading.
 Corporate Agents for MetLife India Insurance Co. Ltd.

OUR GROUP COMPANIES

Networth Stock Broking Ltd. [NSBL]

NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the Bombay
Stock Exchange Ltd (BSE) in the Capital Market and Derivatives (Futures & Options)
segment. NSBL has also acquired membership of the currency derivatives segment
with NSE, BSE & MCX-SX. It is Depository participants with Central Depository
Services India (CDSL) and National Securities Depository (India) Limited (NSDL). With
a client base of over 1L loyal customers, NSBL is spread across the country though its
over 300+ branches. NSBL is listed on the BSE since 1994.  
 
 
Networth Wealth Solutions Ltd. [NWSL] 

NWSL is into the business of delivery of Financial Planning & Advice. It’s vision is to
‘Advice & Execute money related solutions to/for our customers in the most Convenient
& Consolidated manner, while making sure that their experience with us is always
pleasant & memorable resulting in positive advocacy’. The product & Services include
Financial Planning, Life Insurance, On-line Trading Account, Mutual Funds,
Debentures/Bonds, General Insurance, Loans and Depository Services.   
 

Networth Commodities & Investments Limited [NCIL]

NCIL is the commodities arm of NSBL. It is a member at the Multi Commodity Exchange
of India (MCX), National Commodity & Derivatives Exchange (NCDEX) and ICEX & is
backed by solid research & analytics in Commodities.  

Networth Soft Tech Ltd. [NSL]

NSL is an ISO 9001:2000 Certified Company. It is into Application Development &

maintenance. Building & Implementation of packaged software across various functions
within the Financial Services Industry is at its core. It also provides data center services
which include hosting of websites, applications & related services. It combines a unique
delivery model infused by a distinct culture of customer satisfaction.   

Ravisha Financial Services Pvt. Ltd. [RFSL]

RFSL is a RBI registered NBFC engaged in financing, primarily it provides loan against
securities.

 
 

Management

Name Designation

R Sankaran Chairman

Girish Dev Executive Director

Ms. Trupti Lalpuria Company Secretary & Compliance Officer

Ownership Pattern
 

Networth ( Registered & Head Office) 

2nd Floor, D.C.Silk Mills Compound,  
Kondivita Road, Opp. J. B. Nagar Market 
Andheri (East) 
Mumbai - 400059  
Maharashtra. 
Phone Nos. : 022 – 30641600.

Hyderabad ( Champapet )

Networth, F.No:- 405, Jitta Anji Reddy Complex, Above More Super Market, Champapet,
Hyderabad - 500059, India. Tel: +91-40-2407 6688 / 3258 6688

Hyderabad

 
 
 
 

Depository Equity & Derivatives  

General Insurance     Commodities

Life Insurance One window   Currency Derivatives

all Products
Loans, Bonds     IPO
& FD

  Mutual Funds PMS  

 
 
 
 
 
 
 
 
DATA AND INTERPRETATION ANALYSIS
COMPANY PROFILE