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Black Book (Project)
Black Book (Project)
The commencement of E-Trading and Demat has transformed the capital market in India.
With the help of Demat and Trading account, buying and selling of shares has become a
much faster and even process than trading with the assistance of a physical broker. It provides
for the assimilation of bank, broker, stock exchange and depository participants. This helps to
get rid of the painstaking procedure of investing in stock exchange . Today, if one wants to
invest in stock market, he has to contact a broker on phone or meet him personally to place
order. A broker generally gives such importance and additional services only a high net worth
customers. But the introduction of Internet trading, even a common or a small investor gets
an opportunity to avail the services at an affordable price which is much lesser than what is
charged by a physical broker over the phone. Online trading has given customer a real time
access to account information, stock quotes elaborated market research and interactive
trading. The prerequisition of Internet trading are a computer, a modern and a telephone
connection, registration with broker a bank ac and depository account. The introduction of
depository services is considered as the beginning of the trading of Stocks @ click. This
means that you can arrange delivery of scrips sold anytime, anywhere to anyone by click of a
mouse. Dematerialization facilities to keeps the securities in electronic form instead of paper
form. It offers more advantageous than the physical certificate form. Despite the advantages
of Dematerialization, the awareness levels among the investors relating to Demat account is
not adequate because of numerous reasons. The investors are not sufficiently responsive of
the concept of Demat account and the various financial institution providing such services.
This study involves understanding the various concepts of Demat and analyzing the
investment pattern of individuals in India and a study on Analysis of awareness among
investors regarding Online Trading and Dematerialization has been submitted to Pune
Institute of Business management, Pune in partial fulfillment of post graduate programme.
INTRODUCTION
1.1 Meaning-
What is Dematerialisation ?
Online trading is the act of purchasing and selling financial products on the
Internet. The trader buys and sells using an online trading platform. Online
trading may include trading in bonds, stocks (shares), future, international
currencies and other financial instruments. Most people trade online through
an online broker. An online broker is a brokerage firm that offers its services
on the Internet. Unlike traditional brokers, the investor does not meet the
broker face-to-face or via the telephone. Everything happens on the web.
According to iForex.com:
“Online trading is basically the act of buying and selling financial products
through an online trading platform.”
The online trader has much more control over trades than the traditional
trader. They can execute trades considerably faster than they ever could
face-to-face or over the telephone. Apart from being able to manage
multiple position simultaneously, the online trader has access to extensive
data. Online brokers and other websites provide comprehensive information
on companies, exchanges and markets. The Internet has opened the door to
the investment world to a wide range of people. Today, not only can wealthy
people execute trades, but also individuals further down the socioeconomic
ladder.
“The market has become more accessible, but that doesn’t mean you should
take online trading lightly.”
PROFITS AND RISKS ON ONLINE TRADING
Because of the nature of financial leverage and the rapid returns that are
possible, day trading results can range from extremely profitable to
extremely unprofitable, and high-risk profile traders can generate either
huge percentage returns or huge percentage losses.
Because of the high profits (and losses) that day trading makes possible,
these traders are sometimes portrayed as “bandits” or “gambles” by other
investors.
The digital demat and trading account we take for granted nowadays had
very humble beginnings. Read on, to find out about the evolution of demat
and trading accounts.
We belong to a new era where transformation and change are the only
constants. It can also be safely reiterated that communication and
knowledge-driven technology are the ruling orders of the day. It also applies
to India, which is now playing a significant role in the global marketplace
and is predicted to be one of the strongest and fastest growing economies in
the foreseeable future. In other words, what was once a predominantly
agricultural economy is all set to transform into a digital one.
The Indian capital market has always been a vibrant one and contributed
largely to the nation’s economic development and growth. This is evident
from the volume of transactions conducted daily at the Bombay Stock
Exchange (BSE) and the National Stock Exchange (NSE) which perpetually
attract potential investors to join the share trading fraternity to reap huge
benefits, either for the short or long term.
Post 1991, when the winds of change started blowing across the Indian sub-
continent, the Indian capital market started undergoing modernization,
particularly in the spheres of trading & settlement. It all began with the
creation of the Demat – a fully automated mechanism for trading. Since
today’s investor no doubt is tech-savvy, the Demat system had ensured sheer
transparency in the process of trading while also eliminating risks associated
that had hitherto been associated with bad deliveries. Moreover, Demat,
which in other words is the transformation of stocks held in paper form to
electronic form has eliminated huge loads of unnecessary paperwork. There
was also the risk of loss or theft of share certificates which no longer exists.
Birth of Demat
The revolutionary process of Dematerialization began with the
stockholder opening a Demat account with his broker. This was somewhat
similar to opening a bank account where his physical certificates would get
transformed into an electronic and fungible form maintainable with his Demat
account. This balance, moreover, would be devoid of distinguishing features of
any sort. Ever since its evolution, the Demat account has substantially
eliminated the problems of fake documents, stolen shares, forged & mismatched
signatures, mutilation and duplication of share certificates and other transfer
problems which led to multiple arbitration cases and other investor disputes.
With the promulgation of the Depository Ordinance 1995, the Indian
Government promoted a highly technical and fully automated model for all
stock exchanges that offered screen-based trading as also depositories as a
panacea to all investor problems. The implementation of the Depositories Act of
1996, moreover, has ensured the success of the depository concept in the capital
markets of India and in trading & settlement — hitherto a time consuming and
cumbersome process – is now possible at the touch of a button.
The Indian Depository System: An Overview
The discussion on dematerialization remains incomplete if one ignores the role
played in it by the National Securities Depository Ltd (NSDL), India’s first and
biggest depository, set up in 1996. The NSDL was promoted by certain national
institutions which were principally responsible for the country’s economic
development. Its prime objective was to establish and maintain an infrastructure
that matched international standards for dealing in securities in demat form. By
using flexible and innovative technology systems, NSDL ensures the soundness
and safety of the Indian capital market. It also develops suitable settlement
solutions thus, increasing efficiency, minimizing risk and reducing costs. NSDL
also enables the processing of securities transactions by book entries. A DP or
Depository Participant, the NSDL’s agent offers depository services to all
investors. As per SEBI guidelines, banks, financial institutions, stockbrokers
and custodians are eligible for being DPs. The investor, also called the BO or
beneficial owner opens a Demat accountwith any DP to dematerialize his
holdings and to trade in and/or transfer them subsequently.
The Central Depository Services (India) Ltd (CDSL) came next in February
1999, with the BSE Ltd as its main promoter. It was a joint venture with leading
nationalized banks such as SBI, Bank of Baroda, Bank of India and Union Bank
of India with Standard Chartered Bank and HDFC Bank also participating. The
principal aim of the CDSL is to provide dependable, convenient & secure
depository services to investors at affordable costs. It is also linked with all
other major Indian stock exchanges such as the BSE Ltd; NSE & the MCX
Stock Exchange. The balance shown in the investor’s account which is
maintained and recorded with the CDSL is obtainable from the DP. The DP
provides an account statement to the investor periodically and this gives out
details of his holdings as also transactions.
Angel Broking is spearheading the digital revolution in the brokerage industry
and has launched its digital KYC facility, an ultra-fast account opening
experience through digital signature using bio-metric devices. The e-KYC
facility allows investors to fill up a simple form, provide biometric
authentication at their home, receive account activation and start trading within
an hour. Use form to take advantage of Angel Broking’s eKYC.
Technology has indeed come a long way and still continues to shape the stock
market into a more investor friendly place. Let’s see what the future has in store.
The Indian share market (capital market) is divided into two segments:
Primary market
Secondary market
The Primary market is that market where new securities (like shares,
debentures, government bonds, CDs, CPs, etc.) are issued to the public.
Investors can subscribe to IPO of companies to buy new shares directly from
the issuer of shares i.e. the company. The company receives the proceeds from
the sale of these shares and uses it to fund its operations and expand its
business. The Primary Market is also known as the New Issues Market.
In the primary market, share prices are set by the merchant bankers using
valuation methodologies, while the share prices in the secondary market are
determined by the market forces of supply and demand. The share market of
India is regulated by the Securities and Exchanges Board of India (SEBI). The
primary objective of SEBI is to promote healthy and orderly growth of the share
market and secure investor protection. The SEBI also regulates the share
transactions done by foreign investors and traders and also keeps check against
malpractices in the share market.
The scope of the share market in India has widened tremendously over the past
few years, thanks to the launch of a variety of products and services. Share
markets are, by nature, extremely volatile and hence the risk factor is an
important concern for the intermediaries. To reduce this risk, the concept of
derivatives comes into the picture. Derivatives are products whose values are
derived from one or more underlying assets. These assets can be forex, equity,
etc. The derivatives market in India is also expanding immensely with an
increased number of market participants using derivatives.
RESEARCH METHODOLOGY
The Survey was conducted with following objectives:
Personal Interview
Close Observation
Survey Conduction
Internet
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