Professional Documents
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Religare Marketing and Promotion of Online Trading Account and Equity Research
Religare Marketing and Promotion of Online Trading Account and Equity Research
Religare Marketing and Promotion of Online Trading Account and Equity Research
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Chapter 1
INTRODUCTION
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INTRODUCTION
The Indian Retail Brokerage Industry consists of companies that primarily act as agents
for the buying and selling of securities (e.g. stocks, shares, and similar financial
instruments) on a commission or transaction fee basis.
Security Market
Which is the most televised structure in India? A study has revealed that it is not the
Rastrapati Bhawan or Parliament House; it is not the Taj Mahal; it is not even the abode
of Lord Tirupati; it is the Pheroze Jeejeebhoy Towers which houses the oldest securities
market participant in India, i.e. The Stock Exchange, Mumbai. This indicates our intimate
relationship with the securities market. In today’s rational world, it really means the
immense contribution of the securities market to our life and economy.
Which is the most reformed sector / segment / market in the Indian economy? Which
sector / segment / market of the economy has witnessed as much as nine special
legislative interventions during the last decade? Which market / segment / sector acquired
the first ever autonomous regulator (which in course time became the model regulator) in
India? Which sector / segment / market of the economy consumes 3/4th space of the pink
newspapers everyday? Which sector / segment / market of the economy most promptly
reflects the feel good factor? The answer to all these questions is the securities market. It
expresses the significance of the securities market in our life.
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Two years down the line, there are few questions to ask-Which is the securities market
first to set up demutualised stock exchanges in the World? Which is the securities market
first to use satellite communication technology for securities transactions? Which is the
securities market first to introduce the straight through processing in securities
transactions? Which major securities market has implemented T+2 rolling settlement?
Which is the largest market for stock futures? Which securities market started real time
on line position monitoring of brokers? Which is the securities market where trading
terminals go off automatically when the margins are exhausted? Probably answer to all of
these is the Indian securities market. This has earned a place of respect amongst the
comity of securities markets in the World.
The primary is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding
through the sale of a new stock or bond issue. This is typically done through a syndicate
of securities dealers. The process of selling new issues to investors is called underwriting.
In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a
commission that is built into the price of the security offering, though it can be found in
the prospectus.
In primary market certain companies issue their shares directly to the public, collect
applications and after sorting out the good issues, they put in their applications. The share
brokers get their brokerage on the transactions made.
The secondary market is the financial market for trading of securities that have already
been issued in an initial private or public offering.
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The secondary market comprises of brokerage that a broker earns in the buying and
selling of companies that are listed in the stock exchange. These people are in charge of
the conformation and carrying out of transactions. Orders are taken and deliveries are
made in the latter half of the day. The erratic fluctuation of rates in the share market
makes the activity in a trade market a dynamic process. It is necessary for a broker to
have adequate knowledge about the economic and political factors as they affect the
share market.
A Brief History :
1. Pre 1990
Though the historical records relating to securities market in India is meager and obscure,
there is evidence to indicate that the loan securities of the East Indian Company used to
be traded towards close of the 18th century. By 1830’s, the trading in shares of banks
started. The trader by the name of broker emerged in 1830 when 6 persons called
themselves as share brokers. This number grew gradually. Till 1850, they traded in shares
of banks and securities of the East India Company in Mumbai under a sprawling Banyan
Tree in front of the Town Hall, which is now in the Horniman Circle Park. It is no
surprise that the majestic Phiroze Jeejeebhoy Towers is located at the Horniman Circle.
In 1850, the Companies Act introducing limited liability was enacted heralding the era of
modern joint stock company which propelled trading volumes.
The American Civil War broke out in 1861 which cut off supply of cotton from the USA
to Europe. This heightened the demand for cotton from India. Cotton prices increased.
Exports of cotton grew, payments were received in bullion. The great and sudden spurt in
wealth produced by cotton price propelled setting up companies for every conceivable
purpose. Between 1863 and 1865, the new ventures raised nearly Rs.30 crore in the form
of paid up capital and nearly Rs. 38 crore of the premia. Rarely was a share which did not
command a premium between 1861 and 1865. The Back Bay Reclamation share with
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Rs.5,000 paid up was at Rs.50,000 premium, the Port Canning share with Rs. 1,000 paid
up was at Rs.11,000 premium, etc. There was a share mania and every body was after a
piece of paper, variously called ‘allotments’, ‘scrips’ and ‘shares’. The people woke up
only when the American Civil war ended. Then all rushed to sell their securities but there
were no buyers. They were left with huge mass of unsaleable paper. This occurred then.
This also occurs today at regular intervals. There is, little seems to have changed since
then; the bubbles and burst continue to be a perennial feature of the securities market
world over.
The depression was so severe that it paved way for setting up of a formal market. The
number of brokers, which had increased during the civil war to about 250, declined.
During the civil war, they had become so influential and powerful that even the police
had only salams for them. But after the end of the civil war, they were driven from pillar
to post by the police. They moved from place to place till 1874 when they found a
convenient place, which is now appropriately called Dalal Street after their name. They
organized an informal association on or about 9th July 1875 for protecting their interests.
On 3rd December 1887, they established a stock exchange called ‘Native Share and
Stock Brokers’ Association’. This laid the foundation of the oldest stock exchange in
India. The word ‘native’ indicated that only natives of India could be brokers of the
Exchange.
In 1880s a number textile mills came up in Ahmedabad. This created a need for trading
of shares of these mills. In 1894, the brokers of Ahmedabad formed "The Ahmedabad
Share and Stock Brokers' Association".
The 1870s saw a boom in jute prices, 1880s and 1890s saw boom in tea prices, then
followed coal boom. When the booms ended, there were endless differences and disputes
among brokers in eastern India which was home to production of jute, tea and coal. This
provoked the establishment of "The Calcutta Stock Exchange Association" on June 15,
1908.
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Then followed the proliferation of exchanges, many of them even do not exist today. The
rest is history.
In 1980s and 1990s, it was increasingly realized that an efficient and well developed
securities market is essential for sustained economic growth. Without venturing into a
detailed discussion, it would suffice if I just say that the securities market fosters
economic growth to the extent it augments the quantities of real savings and capital
formation from a given level of national income and it raises productivity of investment
by improving allocation of investible funds. The extent depends on the quality of the
securities market. In order to improve the quality of the market, that is, to improve market
efficiency, enhance transparency, prevent unfair trade practices and bring the Indian
market up to international standards, a package of reforms consisting of measures to
liberalize, regulate and develop the securities market is being implemented since early
1990s.
Legal Developments :
Control of capital issues was introduced through the Defence of India Rules in 1943
under the Defence of India Act, 1939 to channel resources to support the war effort. The
control was retained after the war with some modifications as a means of controlling the
raising of capital by companies and to ensure that national resources were channeled to
serve the goals and priorities of the government, and to protect the interests of investors.
The relevant provisions in the Defence of India Rules were replaced by the Capital
Issues (Continuance of Control) Act in April 1947.
Though the stock exchanges were in operation, there was no legislation for their
regulation till the Bombay Securities Contracts Control Act was enacted in 1925. This
was, however, deficient in many respects. Under the constitution which came into force
on January 26, 1950, stock exchanges and forward markets came under the exclusive
authority of the central government. Following the recommendations of the A. D.
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Gorwala Committee in 1951, the Securities Contracts (Regulation) Act, 1956 was
enacted to provide for direct and indirect control of virtually all aspects of securities
trading and the running of stock exchanges and to prevent undesirable transactions in
securities.
3. Post 2000
Gone are the days when you left orders with your broker, received conformations on the
price and quality of the shares at the end of the day and the payment made upfront or
received after delays. Your securities settlement took days to reflect in your account.
Internet has changed the way you do trading. The entire process is speedy with limited to
zero paper work. NSE launched internet trading in early February 2000. It is the first
stock exchange in the country to provide a web-based access to investors to trade directly
on the exchange.
The process : Log on to the brokers site of your choice where you get real time quotes,
place a buy or sell order on the spot, and direct the site to debit the requisite amount. In
some time you get confirmation and after the trade settlement your bank and depository
account will reflect the changes which you can view anywhere, anytime. Online trading
has become seamless. All that you need is a PC, a modem, subscription to an Internet
Service Provider (ISP), a saving and a depository account with any bank providing online
trading facility. Along with stocks one can trade in mutual funds and investment
instruments. The advantage with online trading that you can operate in both BSE and
NSE depending on the broking firm.
NSE introduced for the first time in India a fully automated screen based trading. It uses a
modern fully computerized trading system designed to offer investor across the length
and breadth of country a safe and easy way to invest. The NSE trading system called
“National Exchange for Automated Trading” (NEAT) is a fully automated screen-based
trading system which adopts the principle of an order driven market.
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STOCK EXCHANGES AND STOCK BROKERS
The number of companies listed on the Bombay Stock Exchange has registered a
phenomenal increase from 992 in the year 1980 to about 4800 companies by the end of
July 2005 and their combined market capitalization rose from Rs. 5,421 crores to around
Rs. 18, 00,000crores at end of July 2005.
These factors necessitated compilation of a new broad-based index series reflecting the
present market trends in a more effective manner and providing a better representation of
the increased equity stocks, market capitalization as also the newly emerged industry
groups. Towards this end, the Exchange constructed and launched on 27th May 1994,
two index series viz. the BSE-200 and the DOLLEX.
Coverage: The equity shares of 200 selected companies from the specified and non-
specified lists of this Exchange have been considered for inclusion in the sample for
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`BSE-200'. The selection of companies has primarily been done on the basis of current
market capitalization of the listed scrips on the exchange. Besides market capitalization,
the market activity of the companies as reflected by the volumes of turnover and certain
fundamental factors were considered for the final selection of the 200 companies.
Choice of Base Year: The financial year 1989-90 has been chosen as the base year for
the price stability exhibited during that year and due to its proximity to the current period.
The 13-year-old National Stock Exchange (NSE) has outshined the 130 years old
Bombay Stock Exchange (BSE) in terms of turnover and volumes. The BSE has lost its
market share in these segments from 36 per cent to 31 percent in last three years. The
turnover in BSE stood at around Rs 2,950 crore as on August 17, 2005 while the turnover
in NSE was Rs 3,926 crore. The volumes (numbers of shares traded) of NSE at 2.94 crore
was also much higher than the volumes of BSE. The NSE has rewritten a number of rules
and upset many traditions. As the derivatives segment has immense effect on the cash
market, the movement in this segment mostly determines the trend in the market.
Against nearly 1,400 companies listed on the NSE, the BSE has nearly 4,800 listed
companies. Despite such a huge number of listed companies, the total market
capitalization of BSE is around Rs 20 lakh crore while on the other hand NSE has a total
market capitalization of Rs 19.7 lakh crore.
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The most tracked index on NSE, CNX Nifty also has more number of stocks than the
BSE Sensex. Nifty represents 50 stocks while the Sensex represents only 30 stocks. The
presence of more stocks on Nifty gives a better valuation than Sensex.
STOCK BROKERS
A stockbroker is a person who buys and sells stocks on behalf of another person (or
company). Stockbrokers also sometimes or exclusively trade on their own behalf, as a
principal, speculating that a share or other financial instrument will increase or decline in
price. In such cases the term broker makes little sense and the individuals or firms trading
in a principal capacity sometimes call themselves dealers, stock traders or simply traders.
In the US: When acting as an agent, the stockbroker typically charges the client a flat fee
and/or a percentage-based commission for undertaking the trade, and the price quoted the
client must be the best price available in the market. When acting as a principal, the trade
could be with another market participant or one of the stockbroker's clients. When trading
in a principal capacity with a client, the broker informs the client and charges the client a
markup or markdown from the prevailing market price.
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In the UK: When acting as an agent, the stockbroker charges the client a flat fee and/or a
percentage-based commission for undertaking the trade, and the price quoted the client
must be the best price available in the market. When acting as a principal, the trade could
be with another market participant or one of the stockbroker's clients. When trading in a
principal capacity with a client, the broker is obliged to inform the client and no
commission is charged
Roles similar to that of a stock broker include investment advisor, financial advisor, and
probably many others. A stockbroker may or may not be also an investment advisor.
Similarly, investment advisor may or may not be a stockbroker.
The Certified Financial Planner designation initially offered by the American College in
Pennsylvania is considered by many to be the next educational step a stock broker can
take in order to be consider a legitimate and ethical financial consultant.
The stock market will have either one or a number of stock exchanges.
In India, the most famous are the Bombay Stock Exchange and the National Stock
Exchange.
Then there are regional exchanges like the Ahmedabad Stock Exchange, Calcutta Stock
Exchange and the Cochin Stock Exchange.
The two most prominent ones are the BSE and NSE. Together, they account for most of
the stock trades in the country. This means that if they catch a cold, exchanges all over
the country will sneeze
People like you and me just cannot go to a stock exchange and buy and sell shares. If we
want to do so, we have to get in touch with someone who is a member of the stock
exchange. This means we need to talk to a stockbroker.
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Stockbrokers buy and sell shares for themselves to make a profit. They also buy and sell
shares on behalf of people like you and me and take a commission for doing so (more on
this on another day).
Every stockbroker has to be registered with the Securities and Exchange Board of India,
which is the stock market regulator. SEBI's main function is to make sure those who
invest in the stock market follow the rules and no scams take place. It is supposed to act
as a watchdog on behalf of the investors.
Readers from Mumbai may have seen the imposing stock exchange building called
Jeejeebhoy Towers. That's the home of the BSE.
But you would be disappointed if you think you can step inside the building and watch
the market excitement firsthand as brokers frenziedly trade stocks. That's because all
stock markets in India are now electronic.
Brokers have BSE computer terminals in their offices, from which they trade. They also
have BSE terminals in other cities and don't have to be physically present in Mumbai to
trade on the BSE. This means that even if you stay outside Mumbai, you can contact a
BSE broker and buy or sell stocks on the BSE.
Years ago, the BSE was a place where brokers physically bought and sold stocks and
shares through a system known as 'open outcry'. As a result, the market then resembled
a fish or vegetable market.
If you watch CNBC, you'll find that the New York Stock Exchange still follows that
system, with traders rushing around on the trading floor, scribbling trades on little slips of
paper.
Actually, the improvements in the BSE came about when the government promoted the
NSE. The NSE was an electronic exchange from the beginning and it started competing
with the BSE, which in turn forced the BSE to tone up its act.
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1.2 COMPANY PROFILE
Introduction
Religare is driven by ethical and dynamic process for wealth creation. Based on this, the
company started its endeavor in the financial market.
Today, it has 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.
Unlike a traditional broking firm, Religare group works on the philosophy of partnering
for wealth creation. We not only execute trades for our clients but also provide them
critical and timely investment advice. The growing list of financial institutions with
which Religare is empanelled as an approved broker is a reflection of the high-level
service standard maintained by the company.
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GROUP COMPANIES
RSL is one of the leading broking houses of India and are dealing into Equity Broking,
Depository Services, Portfolio Management Services, Internet Trading, Institutional
Equity Brokerage & Research, Investment Banking, Merchant Banking and Corporate
Finance.
To facilitate free and fare trading process Religare is a member of major financial
institutions like, National Stock Exchange of India, Bombay Stock Exchange of India,
Depository Participant with National Securities Depository Limited and Central
Depository Services (I) Limited, and a SEBI approved Portfolio Manager.
RSL serves a platform to all segments of investors to avail the opportunities offered by
investing in Indian equities either on their own or through managed funds in Portfolio
Management
Religare is a member of NCDEX and MCX and provides platform for trading in
commodities, which is an online facility also.
RCL provides platform to both agro and non-agro commodity traders to derive the actual
price of the commodity and also to trade and hedge actively in the growing commodity
trading market in India.
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With this realization, Religare Commodities is coming up with its branches at mandi
locations. It is a flagship effort from our team which would be helpful in facilitating trade
and speculating price of commodities in future.
3. Religare Finvest
RFL is primarily engaged in the business of providing finance against securities in the
secondary market. It also provides finance for application in Initial Public Offers to non-
retail clients in the primary market .
RFL is also planning to initiate personal loan portfolio as fund based activity and mutual
fund distribution as fee based activities.
Along with this, the company also undertakes non-fund based advisory operations in the
field of Corporate Financing in the nature of Credit Syndication which includes inter
alias, bills discounting, inter corporate deposit, working capital loan syndication,
placement of private equity and other structured products.
Religare has been taking care of financial services for long but there was a missing link.
Financial planning is incomplete without protective measure i.e. structured products to
take care of event of things that may go wrong
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This service will take benefit of Religare’s vast business empire spread throughout the
country -- providing our valued clients insurance services across India. We aim to have a
wide reach with our services – literally! That’s why we are catering the insurance
requirements of both retail and corporate segments with products of all the insurance
companies on life and non-life Still, there is more in store. We also cater individuals with
a complete suite of insurance solutions, both life and general to mitigate risks to life and
assets through our existing network side.
For corporate clients, we will be offering value based customized solutions to cover all
risks, which their business is exposed to. Our clients will be supported by an operations
team equipped with the best of technology support
Religare Insurance Broking aims to provide neutral, transparent and professional risk
transfer advice to become the first choice of India
Vision
Providing integrated financial care driven by the relationship of trust and confidence.
Mission
To be India's first Multinational providing complete financial services solution across the
globe.
Brand Essence
Company Philosophy
The company believes that “The knowledge combined with investors trust and
involvement will lead to the growth of wealth and make it an exciting experience”.
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Why customer trade with Religare?
1. Personal Assistance
• Daily capsule of Market indices and index movement, national and international
corporate news, and their performance along with forth coming IPO tracker.
3. Add-Ons
• Access to all your accounts through your Customer Relationship Number (CRN)
• Access your ledger balances and account information over internet, branch and
call center
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PRODUCT & SERVICES
Commodity
Depository
NRI Services
Investment Banking
Religare has failed to evolve into a widespread Internet broking firm because of its un-
focused promotional strategies (advertisements in electronic media, newspapers, etc)
across the length and breadth of India. Although it is a well-known broking house in
some states like Maharashtra, Gujarat, etc. It still lacks considerable awareness in the
northern parts of India where its competitors have been building their reputation very
rapidly.
The other problem faced by Religare is that they give more attention to HNIs (high
networth individuals) as compared to retail investors or individuals; this is why volumes
of trading at Religare are less as compared to its competitors.
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1.4 COMPETITION INFORMATION
5paisa.com
Sherkhan.com
India Bulls
Bonanza
Strengths
2. It is a pioneer in online trading with a turn over of Rs.400 crores and more than
800 peoples working in the organization.
4. Religare has dedicated research teams for fundamental and technical research,
Which constantly track the pulse of the market and provide timely investment
advice free of cost to its clients which has a strike rate of 70-80%.
Weakness
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3. Lesser emphasis on customer retention.
4. Focuses more on HNIs than retail investors which results in meager market-share
as compared to close competitors.
Opportunities
1. With the booming capital market it can successfully launch new services and raise
its client’s base.
2. It can easily tap the retail investors with small saving through promotional
channels like print media, electronic media, etc.
3. As interest on fixed deposits with post office and banks are all time low, more and
more small investors are entering into stock market.
4. Abolition of long-term capital gain tax on shares and reduction in short term
capital gain is making stock market as hot destination for investment among small
investors.
Threats
3. More and more players are venturing into this domain, which can further reduce
the earnings of Religare.
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Chapter 2
RESEARCH
METHODOLOGY
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RESEARCH METHODLOGY
• This project is very useful to study the awareness level of clients about various
Broking Houses
• To study the effectiveness of the Stock Exchange as this is one of the best way of
Investment.
The size of samples was drawn from the Connaught Place (C.P.) area because of the
prospectiveness of this particular area. For e.g., if a particular research area consisted of
Offices then the sample size would obviously be higher. This is because Office
employees constitute the service sectors who are the active investors of today. Also, the
office areas consist of people from the business class who have always been in the hunt
for quick money, not to forget that smart and timely investment in the share market can
yield to enormous returns.
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After selecting the target audience, they were probed using Interviews and
questionnaires. These were later analyzed to draw out conclusive results.
The leads for customer acquisition primarily came from the questionnaires filled up by
prospective customers. Apart from these customers were also pitched through personal
references and contacts. Moreover the organization takes every possible effort in order to
spread mass awareness. As a result of this publicity campaign, influenced prospective
customers approach the organization. There are various ways to make people aware about
the organization as such Marketing Research, Canopy, Personal References, Pop-up
windows having collaboration with various portals e.g. Rediffmail.com etc. Person with
adequate interest leaves his contact information. Later on these leads are contacted
personally for further development. The organization has efficient sales stuff that excels
in this job. Part time trainees are also appointed for the same. This work force been
perfectly supervised by the Managers. Thus all these factors sum up into a result oriented
work force. These leads were the contacted through tele-calling and after developing a
relationship, they were pitched in at the addresses provided by them. After giving them a
presentation about the product and its advantages over its competitors, they were
promised of a Demo by company sales force in case a sale had resulted. Also references
were collected from such people and the same methodology was repeated. For each and
every customer personal quarries have been entertained after the sale is done.
RESEARCH DESIGN
The study of research method provides us with the knowledge and skills we need to solve
the problem and meet the challenges of the fact- based decision. Business Research is a
systematic inquiry whose objective is to provide information to solve managerial
problem.
• Descriptive Research
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Descriptive study is a fact- finding investigation with adequate interpretation. It is the
simplest type of research. It is more specific than an explanatory study, as it has focus on
particular aspect of the problem studied. It is designed to get her descriptive information
and provide information for formulating more sophisticated studies.
DATA COLLECTION
Data used for the research work was primary and secondary in nature. The data used in
this project is primary data collected from the various categories of investors from
different areas.
Primary Data is gathered for a specific. It is first hand information that the researcher
collects. It helps in collecting useful and most accurate information that is needed for the
researcher to do his research.
• Questionnaire
• Interview Schedule
Secondary Data is the data that was collected from another purpose and already exists
somewhere. It also help researcher to get elaborate information to do his research.
• Internet
• Journals
SAMPLING TECHNIQUE
The Basic idea of sampling is that by selecting some of the element in a population in
order to get first hand information of study.
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There are two types of sampling i.e. Probability Sampling & Non-probability sampling
and in this research; I have used the probability sampling.
Probability Sampling:
Probability Sampling is based on the concept of Random Selection, the members of the
sample are on a probability basis.
In this the population is sub divided into homogenous groups on strata and from each
strata random sample is drawn.
Sample Size:
Sample size for the questionnaire prepared for Investors & non-investors was 100.
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Chapter 3
CONCEPTUAL
DISCUSSION
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CONCEPTUAL DISCUSSION
R-ACE clients also have the option to trade on following types of product.
A. R-ACE
B. R-ACE Lite
C. R-ACE pro
R-ACE
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• Trade online and over phone
• Access your ledger balances and account information over Internet, SMS and
phone.
R-ACE lite
• Alerts
• Access your ledger balances and account information over Internet, SMS and
phone.
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• Integrated DP, back- office and trading account
R-ACE pro
• Advanced alerts
• Derivative chains
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• Access your ledger balances and account information over Internet, SMS and
phone.
RELIGARE’s ALLY also known as R-ALLY is a perfect partner for savvy investors.
It has been designed to provide world-class experience and expertise to investors. Clients
opting for this service would be provided services managed by a team of dedicated
relationship managers and experienced trade dealers. They would not only assist the
client in information dissemination but would also take care of all post trade requirements
R-ALLY clients also have the option to trade on following types of product.
A. R-ALLY
B. R-ALLY Lite
C. R-ALLY pro
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R-ALLY
• R-ALLY clients have no option to trade on their own through our online platforms.
• No subscription fees
• No Enrolment Deposit
• Brokerage :
R-ALLY lite
• Browser based platform, easily accessible over internet explorer from anywhere
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• Trade Online and Over phone at Branch
• Brokerage:
R-ALLY pro
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• View charts
• Brokerage:
2, 00,000 + retail customers being serviced through centralized call centre / web
solution.
DEPOSITORY SERVICES
Religare is a depository participant with the National Securities Depository Limited and
Central Depository Services (India) Limited for trading and settlement of dematerialized
shares. Religare performs clearing services for all securities transactions through its
accounts. We offer depository services to create a seamless transaction platform –
execute trades through Religare Securities and settle these transactions through the
Religare Depository Services. Religare Depository Services is part of our value added
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services for our clients that create multiple interfaces with the client and provide for a
solution that takes care of all your needs.
Dematerialization and trading in the demat mode is the safer and faster alternative to the
physical existence of securities. Demat as a parallel solution offers freedom from delays,
thefts, forgeries, settlement risks and paper work. This system works through depository
participants (DPs) who offer demat services and the securities are held in the electronic
form for the investor directly by the Depository. Religare Depository Services offers
dematerialization services to individual and corporate investors. We have a team of
professionals and the latest technological expertise dedicated exclusively to our demat
department, apart from a national network of franchisee, making our services quick,
convenient and efficient.
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COMPETITORS ANALYSIS
5paisa.com
Company Background
Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000
e-broking was started under the brand name of 5 paisa.com. Apart from offering online
trading in stock market the company offers mutual funds online. It also acts as a
distributor of various financial services i.e. GOI securities, Company Fixed Deposits,
Insurance. It has a limited ground network, present in 20 Cities.
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PRICING FOR RETAIL CLIENTS
Investor Terminal:-
•Brokerage:
Trader Terminal
•Brokerage:
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(Negotiable to 0.05% each side & 0.25%)
PROBLEMS OF 5 PAISA
•Downtime
Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency downtime
between 3 – 3:30 p.m due to server load (as their T.T is feature heavy compared to
Speedtrade charting)
•Manual Accounting
The 5 paisa accounting system is manual, Online fund transfer through bank is not
credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit
released for shares sold under BTST is manual Delay in receiving pay-out of clear funds
from trading to Bank Account.
KOTAK SECURITIES
Company Background
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Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture
between Kotak Mahindra Bank and Goldman Sachs.
Pricing of KOTAK
PROBLEMS OF KOTAKSTREET
• Rigid Account Opening Terms
• No Flexibility of A/c opening charges (Rs 500) + Compulsory margin Rs 5000/-
Account opening free with Rs 10,000 Margin OR Competitor Contract Note.
• No Flexibility in Leverage – Dependent on Type of Account ( 4 to 6 times only)
No flexibility in Brokerage, driven by slab structure.
• No Customization of commercial Terms.
• Restricted Access to Terminal like product
• KEAT Desktop restricted distribution on payment of Rs 500 Non refundable.
41
• DP incoming charges extra, 0.02%
• Rs 1,000 as retainable Margin to keep account active
• Rs 25 per call after 20 calls for the month
42
INDIABULLS
Company Background
•Signature Account: Plain Vanilla Account with focus on Equity Analysis. The equity
analysis is a paid service even for A/c holders
•Power Indiabulls: Account with sophisticated trading tools, low commissions and
priority access to R.M
Pricing of IB Accounts
Signature Account
43
Power IndiaBulls
•Account Opening: Rs 750
•Demat: Rs 200 if POA is signed, No AMC for this DP
•Initial Margin: NIL
•Brokerage: Negotiable
PROBLEMS OF INDIABULLS
Charges are levied to move shares from IB pool Account to client DP account All shares
held by client trading with IB are moved to IB Pool Account and the same is shown as a
reflection in client DP account.
44
ICICI DIRECT
Company Background
Account Types
Premium trading interface of ICICIDirect Link is given to DBC partners and HNI’s Plain
Vanilla Account with focus on 3 in 1 advantage. Differentiated in services within the
account.
1. Cash on spot
2. MarginPlus
45
PROBLEMS OF ICICI DIRECT
Restriction of BTST
The sale of shares purchased is restricted to T+1 day and is not permitted on T+2 Day.
46
Higher Brokerage rates with slabs
The delivery brokerage is pegged at 0.75% and trading at 0.10% each side, this makes is
very unviable for customers dealing in large volumes. Although progressively the
delivery and trading brokerage reduce as volumes go up.
47
RECENT DEVELOPMENTS OF RELIGARE
Online Trading
Online Trading is a service offered on the internet for purchase and sale of shares. In the
real world, you place orders on your stockbroker either verbally (personally or
telephonically) or in a written form (fax). In Online Trading, you will access
stockbroker's website through your internet-enabled PC and place orders through the
broker's internet-based trading engine. These orders are routed to the Stock Exchange
without manual intervention and executed thereon in a matter of a few seconds. .
There are 2 types of online trading service: discount brokers and full service online
broker. Discount online brokers allow you to trade via Internet at reduced rates. Some
provide quality research, other don't. Full service online brokerage is linked to existing
brokerages. These brokers allow their clients to place online orders with the Option of
talking/ chatting to brokers if advice is needed. Brokerage rates here are
higher.5Paisa.com, ICICIDirect.com, IndiaBulls.com, Religare.in,Geojitsecurities.com,
HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in
India.
The various transactions involved in online trading can be shown from the point of view
of the
• Client
• Broker
• Stock Exchange
The client places an order via the net by logging on to his broker’s site. The broker
accepts and executes the order, and places it with the exchanges.
The exchange accepts the order after checking the share limit for the day.
48
The brokers makes the payment either directly via the client’s bank account or pays
through his own account and recovers it later from the client.
The client is intimated about the settlement either through the demat account or via E-
mail.
This mode of trading has shifted the trading power from stockbrokers to individual
investors. The advantages are that it:
This technique offers the best price for the buying and selling transactions of the
investors, by ensuring proper matching of their orders within the communication network
itself. Also due to the high level of transparency with regard to display of information
relating to the specific stocks and company profiles ,the investors will be able to get the
best quote for the shares. This leads to a reduction in the transaction cost for the
investors.
Online trading offers 24-hour trading facilities. or trading for longer hours when
compared to the traditional stock exchanges. This provides added liquidity to the
investors.
Online trading gives greater transparency to the investors by providing them an audit
trail. This involves a complete integrated electronic chain starting from order placement,
to clearing and settlement and finally ending with a credit to the depository account of the
49
investor. All these stages are subject to inspection, thus bringing in transparency into the
system.
Online trading integrates the bank, the brokerage and the demat accounts, which leads to
easy and paperless trading for the client.
The investor will be able to execute the entire trading transaction, right from logging on
to the broker's site, to the execution and settlement of his 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
investors in the securities market.
This method of trading reduces the settlement risk for the investor, as in this case no short
sale is possible. That is .the seller will not be able to sell the securities unless he has their
actual possession. In the case of a demat account (required for an online transaction),
when a seller wants to sell the securities, his demat account is checked by the Depository
Participant before executing the sale transaction. This reduces the settlement risk for the
buyer, who is assured of the delivery of the securities.
50
HURDLES FOR ONLINE SHARE TRADING
1. Internet fraud
In India, we see this kind of frauds happening in different way due to nature of our
society. Here when you talk to broker's staff while buying or selling, he will usually
advise you to buy share which he has bought and plans to dump when price goes up.
We have seen enough of PUMP and DUMP even without help of internet in cases of
Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult
following with Index of 10 shares called K-10).
One of the most common forms of securities fraud on the Internet involves an imposter
who attempts to manipulate the price of a stock by disseminating phony press releases or
information, or creating phony websites. A recent example of this scheme is the hoax
perpetrated against US based, PairGain Technologies.
Recent market developments have once more focused attention on the volatility that has
come to characterise India’s stock markets.
Movements in the Sensex during the two years have clearly been driven by the behaviour
of foreign institutional investors (FIIs), who were responsible for net equity purchases of
as much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare
with a peak level of net purchases of $3.1 billion as far back as 1996 and net investments
by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in
51
the last two years account for the two bouts of medium-term buoyancy that the Sensex
recently displayed.
Given the presence of foreign institutional investors in Sensex companies and their active
trading behaviour, their role in determining share price movements must be considerable.
Indian stock markets are known to be narrow and shallow in the sense that there are few
companies whose shares are actively traded. Thus, although there are more than 4700
companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies,
trading in whose shares is seen as indicative of market activity. This shallowness would
also mean that the effects of FII activity would be exaggerated by the influence their
behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs
when making their investment decisions.
3. Rampant Speculation
The Indian stock markets are perhaps the only place in the world where you can buy
shares without having to put money on the table and sell shares you do not own. This
extraordinary situation has facilitated rampant speculation by all sorts of operators – the
indigenous variety, FIIs and even our own native financial institutions (FIs) as the
massive UTI scandal of recent years has demonstrated. So, when the stock markets were
made to collapse by a record 800-plus points on May 17 under the pretext that the Left is
opposed to divestment, the profits reaped by short sellers were astronomical and
incalculable.
Could this situation have been avoided? As aforesaid, the answer is yes. The electronic
monitoring system in both the Bombay Stock Exchange and the bigger National Stock
Exchange automatically stopped trading for half-an-hour when the two markets
respectively collapsed by 10 percentage points. Thereafter when trading resumed and the
markets fell further to another stipulated lower level, the electronic system automatically
stopped all trading again for another two hours.
A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist
attacks in New York City. At the end of the day the stock exchange authorities of both
52
the New York Stock Exchange and the heavily-weighted software exchange called
NASDAQ suspended all trading for the remainder three working days during that fateful
week to safeguard investor interests.
As per the directive by SEBI, all transactions in all groups of securities in the Equity
Segment and Fixed Income securities listed on the Exchange are required to be settled on
T+2 basis w.e.f. from April 1, 2003. The settlement calendar, which indicates the dates of
the various settlement related activities, is drawn by the Exchange in advance and is
circulated among the market participants.
Under rolling settlements, the trades done on a particular day are settled after a given
number of business days. A T+2 settlement cycle means that the final settlement of
transactions done on T, i.e., trade day by exchange of monies and securities between the
buyers and sellers respectively takes place on second business day (excluding Saturdays,
Sundays, bank and Exchange trading holidays) after the trade day.
The Exchange has introduced a new segment named “BSE Indonext” w.e.f. January 7,
2005. “S” group consists of scrips from “B1” & “B2” group on BSE and companies
exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All
trades in this segment are done through BOLT system under S group.
53
The transactions in 'F' group securities representing "Fixed Income Securities" and "G"
group representing Govt. Securities for retail investors are also settled at the Exchange on
T+2 basis.
In case of Rolling Settlements, pay-in and pay-out of both funds and securities is
completed on the same day.
The members are required to make payment for securities sold and/ or deliver securities
purchased to their clients within one working day (excluding Saturday, Sunday, bank &
Exchange trading holidays) after the pay-out of the funds and securities for the concerned
settlement is completed by the Exchange. This is the timeframe permitted to the members
of the Exchange to settle their funds/ securities obligations with their clients as per the
Byelaws of the Exchange.
The following table summarizes the steps in the trading and settlement cycle for scrips
under CRS :
DAY ACTIVITY
T Trading on BOLT and daily downloading of statements
showing details of transactions and margins at the end of each
trading day.
Downloading of provisional securities and funds obligation
statements by member-brokers.
6A/7A* entry by the member-brokers/ confirmation by the
custodians.
T+1 Confirmation of 6A/7A data by the Custodians upto 11:00 a.m.
Downloading of final securities and funds obligation statements
by members .
T+2 Pay-in of funds and securities by 11:00 a.m. and pay-out of
funds and securities by 1:30 p.m. The member-brokers are
required to submit the pay-in instructions for funds and securities
to banks and depositories respectively by 10: 30 a.m.
T+3
Auction on BOLT at 11.00 a.m.
54
Thus, the pay-in and pay-out of funds and securities takes places on the second business
day (i.e., excluding Saturday, Sundays and bank & Exchange trading holidays) of the day
of the execution of the trade.
One look at the accompanying derivatives ‘report card’ and you will probably conclude
that these instruments are a roaring success in India. Six years after its debut, the
derivatives market is flourishing, riding largely on the ongoing bull run. It has filled the
void left by the old badla system of trading, increasing the liquidity in the underlying
cash market and providing both traders and investors with new opportunities. But that is
only one part of the story. Dig beneath all the optimism and you will find that the
derivatives market is in desperate need for more products, more initiatives and a lot more
innovation.
55
director, Benchmark AMC. There is also need for a roll-market that simplifies the
rollover process, feels C.K. Narayan, vice–president, ICICI Securities.
Further, most of the trading happens in the near-month series (contracts that expire in the
same month as the day of trade), stock options are very illiquid, and India’s ranking is
relatively low among world exchanges in value terms, even though the volumes are high.
But the high volumes needn’t necessarily mean that the markets are mature. Much of the
volume comes from arbitrage, where traders merely exploit risk-less spreads. Only 20 per
cent of the trades take a directional view on the market estimates Narayan.
Near-month contracts are more liquid than the rest, the world over. But in India’s case,
the disparity is rather extreme. On a typical trading day in the middle of the month, about
98 per cent of the turnover comes from near-month contracts, while less than 0.5 per cent
comes from the far-month series. Of the 124 symbols available for futures trading, far-
month contracts of only about 10 per cent are traded. The concentration of volumes in the
near-month series means that this is a speculator’s market, points out Susan Thomas,
assistant professor, Indira Gandhi Institute of Development Research (IGIDR). (She had
earlier worked on the project that led to the construction of NSE’s Nifty index.) In 2005,
non-institutional trade accounted for over 93 per cent of total trade in the derivatives
segment, much higher than their 83 per cent share in the cash market.
Despite its strong growth in the last six years, NSE has lagged behind global peers in
value terms. The Korea Stock Exchange — the country’s financial reforms began in the
early 1990s along with India’s — is 32 times the size of NSE (across all segments). NSE
ranks No. 1 in the world in the stock futures segment, but that’s only because the top
exchanges do not trade that product. In index futures, NSE ranked 15th with a turnover of
$38.7 billion in September. But this is less than 1 per cent of Chicago Mercantile
Exchange’s (CME) turnover of $4,431 billion.
The futures market — accounting for 87 per cent — has been the main growth driver of
the Indian derivatives market. But stock options are pathetically illiquid, accounting for
just 3 per cent of total turnover. On the positive side, the share of index derivatives has
56
steadily increased to 44 per cent from about 11 per cent four years ago. That’s close to
global norms of about 60 per cent, implying that some amount of hedging, not mere
speculation, is being done.
Dematerialization
Rematerialization
Custodial services
Hypothecation
This is an illustrative list of services available. The system of charging a fee for the
services extended to an investor is in two-layers. The Depository charges the DPs and
DPs in turn collect fee/charges from the investor. Each DP uses different norms to
classify charges depending on the extent of services rendered.
NSDL has a provision for collecting a one-time fee of 0.05 percent of market
capitalization of the company, as custody fees for life. For these companies, no custody
charge is supposed to be charged from the investors for life.
However, it is not clear whether DPs are passing this benefit to investors.
57
Since 2-3 years with changing trends of industry and increased competition, broking
houses reduce brokerage rates to very much extent.
Advanced technology:
The growth in technology and communications has impacted every aspect of business in
some or the other form. These effects are enduring and have changed the very way in
which business is carried out.
The stock market is one such institution whose very existence has been challenged by the
growth in information technology. IT has turned the very idea of a stock market on its
head.
Technology has impacted the working of stock markets in every sense. However, a useful
starting point for this study would be the study of dematerialization, or demat as it is
popularly known as. This is simply because demat has changed the way stocks are held
and traded and therefore has effect on every other function of the market.
Demat, enabled by the use of technology is probably is single most important factor
which has repercussions on every aspect of the stock markets.
Demat in India started with the creation of NSDL (National stock depository limited) in
1996. UTI, was one of the first institutions to use demat when it decided to dematerialize
50% of its holdings in 1997. SEBI gave a boost to demat, with compulsory trading on
shares in demat form in specified scrips by institutional investors from Jan 15, 1998.
58
Process of conversion of securities into the demat form
Securities specified as being eligible for dematerialization by the depository in its bye
laws and as under the SEBI (Depositories and Participants) Regulations, 1996 (the
Regulations) can be converted or issued in a dematerialized form. The process of
conversion of securities into a dematerialized form or the issuance of the same in a
dematerialized form can be explained thus:
Firstly, the issuer company, whose securities are eligible for dematerialization,
has to enter into an agreement with a depository for dematerialization of securities
already issued, or proposed to be issued to the public or existing shareholders.
The investor is given an option to hold the securities in a dematerialized form and
it is his prerogative to exercise the option to hold the securities in that manner.
The depository enters into an agreement with the participants who are the agents
of the depository and co-functionaries in the process of dematerialization of
securities.
Any person can then enter into an agreement, through the participant, with the
depository for availing the services provided by the depository.
Upon the entering into such agreement with the depository, the person has to
surrender the certificate pertaining to the securities sought to be dematerialized to
the issuer. This surrender is affected in the following manner:
The person (beneficial owner) who has entered into an agreement with the
participant for dematerialization of the securities has to inform the participant
about the details of the certificate of such securities.
The beneficial owner has to then surrender the said certificate to the participant.
59
The participant informs the depository about the particulars of the securities to be
dematerialized and the agreement entered into between him and the beneficial
owner.
The participant then transfers the certificate pertaining to the said securities to the
issuer along with the details and particulars of the securities.
These certificates are mutilated upon receipt by the issuer and substituted in the
records against the name of the depository, who is the registered owner of the said
securities. A certificate to this effect is sent to the depository and all stock
exchanges where the security is listed.
Subsequent to this, the depository enters the name of the person who has
surrendered the certificate of security as the beneficial owner of the
dematerialized securities.
The depository also enters the name of the participant through whom the process
has been carried out and sends an intimation of the same to the said participant.
NSDL carries out its activities through various functionaries called business partners who
include Depository Participants (DPs), Issuing companies and their Registrars and Share
Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. NSDL is
electronically linked to each of these business partners via a satellite link through Very
Small Aperture Terminals (VSATs) or through Leased landlines. The entire integrated
system (including the electronic links and the software at NSDL and each business
partner's end) is called the "NEST" [National Electronic Settlement & Transfer] system.
60
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 dangers
related to handling of paper. NSDL provides numerous direct and indirect benefits, like:
61
• No stamp duty: For transfer of any kind of securities in the depository. This
waiver extends to equity shares, debt instruments and units of mutual funds.
• Faster settlement cycle: The exclusive demat segments follow rolling settlement
cycle of T+2 i.e. the settlement of trades will be on the 2nd working day from the
trade day. This will enable faster turnover of stock and more liquidity with the
investor.
• Faster disbursement of non cash corporate benefits like rights, bonus, etc.
NSDL provides direct credit of non cash corporate entitlements to an investors
account, thereby ensuring faster disbursement and avoiding risk of loss of
certificates in transit.
62
• Ease in portfolio monitoring: Since statement of account gives a consolidated
position of investments in all instruments.
Disadvantages of Dematerialization
It is incumbent upon the capital market regulator to keep a close watch on the
trading in dematerialized securities and see to it that trading does not act as a
detriment to investors. The role of key market players in case of dematerialized
securities, such as stock-brokers, needs to be supervised as they have the
capability of manipulating the market.
Dematerialization is the process by which a client can get physical certificates converted
into electronic balances maintained in his account with the DP.
63
Features:
Structure of holding in the securities should match with the account structure of
the depository account. Now shares in different order of names can also be
demat-ted.
Example:
If the shares are in the name of X and Y, the same cannot be dematerialized into the
account of either X or Y alone. However if the shares are in the name of X first and Y
second, and the account is in the name of Y first and X second, then these shares can be
dematerialized in this account.
Only those holdings that are registered in the name of the account holder can be
dematerialized. Physical shares which have not been transferred and are still there with a
transfer deed cannot be dematted. Only a few companies have been given the permission
to offer Transfer-cum-Demat. The list of these companies can be viewed here.
Rematerialization:
Rematerialization is the process by which a client can get his electronic holdings
converted into physical certificates. The client has to submit the rematerialisation request
to the DP with whom he has an account along with a Remat request form. The physical
shares will be posted by the company directly to the clients.
Trades
For all sales made by clients, the shares will have to be given to the broker, so that the
Pay In can be made by the broker to the stock exchange concerned. For that it's essential
that the shares be transferred to the account of the broker well before the deadline date.
64
You must confirm with your broker the settlement date and settlement number and then
submit your instructions to your DP. Also it's important to give the instructions to your
DP as early as possible.
Pledge
Pledge enables you to obtain loans against your dematerialised shares. So you get
liquidity without having to sell your shares. A highly simplified procedure may be
availed of for pledging of securities in the electronic mode. The pledged securities
continue to be reflected in the DP account of the clients (pledgor) but the concerned
securities are "blocked" and cannot be used for any transactions. As and when the pledge
is to be removed, based on confirmations received from both the pledgor and the pledgee,
the blocked securities will be released to "Free Balance" of the account holder.
In five years of its existence in India, online broking has grown to account for a tenth of
the total trading volumes. If the numbers are considered for only the retail segments, the
growth is starker. Almost half of the Rs 5,000 crore-6,000 crore daily market volumes on
the NSE are accounted for by non-retail entities such as foreign institutional investors,
domestic institutions, mutual funds and arbitrage traders. Institutions aren't online
customers anyway. Of the rest of the retail segment, current estimates suggest that online
broking's reach is close to 30 per cent.
As of September this year, there were 11.7 lakh Internet trading accounts registered with
the NSE, of which roughly 9.5 lakh are unique users. It's still a small proportion of the
estimated 3 crore Internet users in the country. As more surfers take to trading online,
analysts expect their number to keep doubling every year until 30-40 per cent of India's
overall trades are done online, as is the case in some mature Internet markets like South
Korea's.
The Internet's effect here has more to do with the bandwidth it has created for both
brokers and clients. Banga, director of indiabulls offers an example. "Traders from Ajmer
65
use our online platform. It would otherwise have been prohibitively loss-making to open
a branch there." Thanks to the new channel, volumes are growing faster in the non-
metros, where transparency is low in offline trading. "These customers were made to pay
higher charges by small brokers, since they weren't aware of the market rates," says
Prasanth Prabhakaran, head of Kotaksecurities.com. That is one of the reasons why more
than 60 per cent of Kotak's daily online trading turnover comes from non-metros.
12,000
10,000
8,000
6,000
4,000
2,000
0
2002- 2003- 2004- 2005- 06-Apr Mar-07
03 04 05 06
Years/Month
66
Porter's Five Forces Analysis Of Online Brokerage Industry
Buyer Power
Earlier retail investors often lack the knowledge and expertise in the financial sector that
called them to approach the broking houses.
But nowadays TV channels like CNBC and financial magazines, newspapers are giving a
brief knowledge and updates of financial sector to retail investors, also they provide
investors tips to invest their money in stock market.
The retail broking services provided by the various companies are homogeneous with
very low product differentiation. This allows customers to enjoy a greater bargaining
power.
Supplier Power
There is a growing dependence of corporate on broking houses with the rising number of
IPO's coming to the market.
We see traction when initial public offers (IPOs) are announced. People find the online
platform a very convenient way to enter the market.
In 2004-05, Rs 25,526 crore was raised in the markets, almost 450 per cent more than the
amount raised in 2002-03. For instance, in the month that the Maruti IPO was announced,
300,000 demat accounts were opened. In an average month, the figure is about 100,000.
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Since 2002, the number of demat accounts has doubled to 7.1 million, many of them
belonging to new investors applying for IPOs.
INTENSITY OF COMPETITORS
The bigger trend in the industry is consolidation, just like it happened in the US and
South Korea, where 90 per cent of online trades are with the top 10 players.
Says Banga: "As the industry grows, people prefer going to solid brands that have strong
balance sheets. The big guys can invest in infrastructure, technology and risk
management systems." As a result, several sub-brokers have been pushed by client
demand to take up franchises of the bigger brokers.
The consolidation in the broking industry should see more and more businesses shifting
from small, hole-in-the-wall brokerages to big players.
Lot of brokerage companies is moving towards consolidation with the smaller ones
becoming either franchisees for the larger brokers or closing operations.
Many leading banks are coming into retail broking field like ICICI , HDFC , UTI etc.
Actually as online trading has come into feature; it would be easy for banks to give online
trading platform with depositary services. Although they are into only online trading,
they are not dealing with proper services of RM (Risk manager0.
Even the foreign players are seeing opportunities in the Indian markets. Various foreign
banks like ABN Amro and others are planning to enter the Indian retail brokerage
industry.US-based E*Trade took a 34 per cent stake in IL&FS Investsmart (along with
Softbank) in March 2004.
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Online Trading Competes with Traditional Brokerage
There is an increasing demand for online trading due to consumer's growing preference
for internet as compared to approaching the brokers.
In India, the economics don't allow it to be a cost game. Says Bagchi: "Brokerage costs
are already so low (0.1-0.5 per cent for delivery) that the online medium doesn't really
offer any significant price advantages."
Traditional brokers are now scrambling to scale up their online operations. Meanwhile,
ICICI Direct & Indiabulls have raced ahead of the others. The other online players that
make up the top six - Sharekhan (owned by SSKI), Religar(earlier fortis securities),
Kotak Securities, HDFC Securities and 5paisa (owned by Indiainfoline) - all have hybrid
models. Collectively, these players have 75-80 per cent of the market.
The remaining 130 players, who were given licenses to open online trading platforms by
the NSE, can be divided into three categories - those that are active businesses but have
less than 5 per cent of the online market (Motilal Oswal among them); those that invested
in the technology but weren't able to get their projects off the ground (the Lalbhai Group's
Anagram Securities), and those that simply bid for the licence but didn't pursue business.
Most players fall in the last category.
As it is already discussed above, many foreign players like ABN Amro and US-based
E*Trade are taking place in Indian retail brokerage industry.
69
New forms of trading
New forms of trading including T+2 settlement system, dematerialization etc are
strengthening the retail brokerage market and attracting foreign companies to enter the
Indian industry
THREAT OF SUBSTITUTES
Various alternative forms of investment including fixed deposits with banks and post
offices etc act as substitutes to retail broking products and services.
The most important alternative investment form is Mutual Fund investment in which gain
is as higher as in share investment but risk is too low.
70
Chapter 4
DATA ANALYSIS
71
DATA ANALYSIS AND INTERPRETATION
75 16 7 2
16%
Only shares
Mutual funds
Bonds
Derivatives
75%
Interpretation: This shows that although the mutual funds market is on the rise yet, the
most favored investment continues to be in the Share Market. So, with a more transparent
system, investment in the Stock Market can definitely be increased.
72
Q2. Are you aware of online Share trading?
Yes 91
No 9
No 9
Yes 91
0 20 40 60 80 100
Interpretation: With the increase in cyber education, the awareness towards online share
trading has increased by leaps and bounds. This awareness is expected to increase further
with the increase in Internet education.
73
Q3. Have you ever heard about Religare?
Yes 40
No 60
70
60
50
40 Yes
30 60 No
20 40
10
0
Yes No
Interpretation: This pie chart shows that Religare has a less amount of Brand awareness
in terms of a premier Retail stock broking company. The company to increase its market
share over its competitors should further leverage this brand image.
74
Q4. Do you know about the facilities provided by Religare?
Yes 17
No 83
17%
Yes
No
83%
Interpretation: Although there is not sufficiently high brand equity among the target
audience yet, that why it is to be noted that the customers are not aware of the facilities
provided by the company meaning thereby, that, the company should concentrate more
towards promotional tools and increase its focus on product awareness rather than brand
awareness.
75
Q5. With which company do you have your DEMAT account?
20 18 27 24 11
Others Religare
11% 20%
IndiaBulls
24%
ICICI Direct
18%
Kotak
Securities
27%
Interpretation: This shows that with not sufficiently high Brand Equity, Religare ranks
only 3rd amongst the Demat account providers. This is probably because of two main
reasons:
Hence, the company should crystallize its products and should indulge in aggressive
marketing and promotion.
76
Q6. Are you currently satisfied with your Share trading company?
Yes 19
No 81
YES
NO
81%
Interpretation: This pie chart accentuates the fact that Strategic marketing, today, has
gone beyond only meeting Sales targets and generating profit volumes. It shows that all
the competitors are striving hard not only to woo the customers but also to make them
Brand loyal by generating customer satisfaction.
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Q7. How often do you trade?
9 27 53 11
Yearly Daily
11% 9%
We ekly
27%
Monthly
53%
Interpretation: In spite of the huge returns that the share market promises, we see that
there is still a dearth of active traders and investors. This is because of the non –
transparent structure of the Indian share market and the skepticism of the target audience
that is generated by the volatility of the stock market. It requires efficient bureaucratic
intervention on the part of the Government.
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Q8. What percentage of your earnings do you invest in share trading?
3 7 19 71
0 20 40 60 80
Interpretation: This shows that people invest only upto 10% of their earnings in the
stock market, again reiterating the volatile and non-transparent structure of the Indian
stock market. Hence, effective and efficient steps should be undertaken to woo the
customers to invest more in the lucrative stock market.
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FINDINGS
AND
RECOMMENDATIONS
80
FINDINGS
In spite of these optimistic numbers, online trading in India is at a very nascent stage
(about 5-8 percent of total traded volumes) compared to countries like South Korea (60
percent), US (40 percent) and UK (20 percent). Online trading in the year 2000-2001
accounted for only Rs 50,170 crore out of total traded volume of Rs 25,08,445 crore.
There are currently close to 50 online brokerages in India with ICICIDirect, KotakStreet,
Religare, MotilalOswal, IndiaBulls and 5Paisa being some major players. However, due
to limited volumes, no online brokerage is currently making money and a shakeout is
imminent in the near future. The going is expected to get tougher with the advent of
capital account convertibility. On an average, Rs 40 crore per day (Rs 1,000 crore per
month) is likely to be the threshold breakeven for online brokerages. There is scope for
multiple players as the entire segment is in a growth stage.
While there are many factors that need to be understood to justify this assertion, one
simple fact is worthy of note. The average age of the Indian Internet user as cited by a
recent IDC survey is 27 years. The average age of the head (and financial decision taker)
of the Indian equity-investor household, as revealed by the SEBI-NCAER study of Indian
investors in 2000 is 45 years. The older, experienced equity investor is not online today
and the fact that older, mature investors are not ‘tech-positive’ and hence unlikely to
move to online trading is a major barrier to the growth of e-broking in India.
Here, the numbers of banks with a strong online presence are very few - again, dominated
by new private banks and foreign banks. Both have lesser reach owing to a smaller
network in the country. The relative inability of large public-sector banks to offer-
facilities for Internet banking is a barrier in this regard. Besides, Internet penetration in
India is still very low and concerns about security also tend to predominate. In markets
like the US, online brokerages are advertised very heavily. Online trading in India has so
far not seen similar levels of aggressive advertising, with the exception of ICICI Direct
and India bulls. Besides, only scripts that have been compulsorily dematerialized can be
traded on the net here.
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Brand building, assurances of security, developing multiple delivery channels with
anytime telephonic grievance redressed options is some directions, which may be of use
for the immediate future. Online trading firms can also market themselves aggressively to
students who are entering the professional arena, ensuring that their entry into equity
happens online. One of the major issues governing trading is the prevailing uncertainty in
the market.
Hence, not withstanding the current sentiment in the market, potential for online trading
is still immense in India. With a more transparent system, increased awareness, and a
sustained bullish market we would surely be heading to become the largest online stock
trading country by the turn of the next decade.
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RECOMMENDATIONS
4. Concept of margin funding should be introduced, as more and more people are
asking for it.
5. Religare should contact with their clients regularly for knowing the problems
faced by them. This will help Religare in providing best services to customers. This will
result in additional customer base by getting further references from satisfied clients.
6. To launch slab wise brokerage structure as Religare has fixed brokerage structure,
which cannot be negotiated. But other players in the market offer launch slab wise
brokerage structure, which motivate customers to increase their volumes.
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ANNEXURE
84
QUESTIONNAIRE
Yes No
Yes No
Yes No
Q6. Are you currently satisfied with your Share trading company?
Yes No
85
Q8. What percentage of your earnings do you invest in share trading?
Q9. What are the factors that you consider before investing in a particular company?
a) Financial Position [ ]
b) Current Market position [ ]
c) Goodwill/Brand name [ ]
d) Future prospects [ ]
e) Any other (Please specify) [ ]
Q10. What more facilities do you think you require with your DEMAT account?
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THANK YOU
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BIBLIOGRAPHY
87
BIBLIOGRAPHY
www.religare.in
www.indiainfoline.com
www.economictimes.com
http://www.investopedia.com/articles/
www.nseindia.com
www.bseindia.com
www.moneycontrol.com
www.business-standard.com
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