“DEMATERIALISATION OF SECURITY OF FINANCE”

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF DEGREE OF

B.COM (ACCOUNTING & FINANCE)

UNDER THE FACULTY OF COMMERCE

By

Mr. Mayuresh Laxman Wagh

Under The Guidance Of

DR. NILESH EKANATH KOLI

CHANGU KANA THAKUR ARTS, COMMERCE AND SCIENCE COLLEGE,

AUTONOMOUS NEW PANVEL (W) 410 206.REACCREDITED WITH ‘A+’
GRADE BY NAAC (3RD CYCLE- CGPA 3.61)

March 2022

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 “DEMATERIALISATION OF SECURITY OF FINANCE”

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF DEGREE OF

B.COM (ACCOUNTING & FINANCE)

UNDER THE FACULTY OF COMMERCE

By

Mr. Mayuresh Laxman Wagh

Under The Guidance Of

DR. NILESH EKANATH KOLI

CHANGU KANA THAKUR ARTS, COMMERCE AND SCIENCE COLLEGE,

AUTONOMOUS NEW PANVEL (W) 410 206.REACCREDITED WITH ‘A+’
GRADE BY NAAC (3RD CYCLE- CGPA 3.61)

March 2022

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 CERTIFICATE

This is to certify that Mr. Mayuresh Laxman Wagh has worked and duly completed his
project work for the degree of B.Com. (Accounting and Finance) under the faculty of
Commerce in Changu Kana Thakur Arts, Commerce and Science college, New Panvel in
the subject of project work and his project is entitled “DEMATERIALISATION OF
SECURITY OF FINANCE.” under my supervision. I further certify that the entire work
has been done by the learner under my guidance and no part of it has been submitted
previously for any degree or diploma of any university.

It is his own work and facts reported by his personal findings and investigations.

Seal of the DR. NILESH KOLI.

College
Name and Signature of

Guiding Teacher

Date of Submission

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 DECLARATION BY LEARNER.

I the undersigned Mr. Mayuresh Laxman Wagh hereby, declare that the work
embodied in this project world titled “The Study of Dematerialisation of Security of
Finance.” forms my own contribution to research work carried out under guidance of Dr.
Nilesh Koli is a result of my own research work and has not been previously submitted to
any other university for any other degree/diploma to this or any other university.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Mr, Mayuresh Laxman Wagh

Name and signature of the learner

Certified by

DR.NILESH KOLI

Name and signature of guiding teacher

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimension in completion of this project.

I take this opportunity to thank University of Mumbai for giving me chance to this project.

I would like to thank my Principal Dr.S.K.Patil, for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our coordinator and project guide Dr. Nilesh Koli, for his
moral support and guidance that made this project successful.

I would like to thank my college library, for having provided various reference books and
magazines related to project.

Lastly I would like to thank each and every person who directly or indirectly helped me
in the completion of project especially my parents and peers who supported me
throughout the project.

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 INDEX

CONTENT:

SR NO PARTICULAR PAGE NO

CHAPTER INTRODUCTION
NO-II 1.1 DEMATERIALIZATION – MEANING 07-09
1.2 ADVANTAGES OF DEMATERIALIZATION 10
1.3 DISADVANTAGES OF 11-12
DEMATERIALIZATION
1.4 ONLINE TRADING-MEANING 12-13
1.5 HISTORY OF ONLINE TRADING 13
1.6 REMATERIALIZATION – MEANING 14
1.7 THE DEPOSITORY SYSTEM 14-15
1.8 DEPOSITORY PARTICIPANTS 15
1.9 LEGAL FRAMEWORK OF 15-16
DEPOSITORY SYSTEM
1.10 ADVANTAGES OF DEPOSITORY 17
1.11 PROCEDURE TO OPENING DEMAT A/C 18
1.12 PROCEDURE TO DEMATERIALIZE SHARES 19
1.13 STOCK TRADED UNDER DEMAT AC 19-20
1.14 HISTORY 20
1.15HOW TO COVERT PHYSICAL SHARES 21-23
INTO DEMAT
1.16NATIONAL SECURITIES DEPOSITORY 24-25
LIMITED (NSDL)
1.17 CENTRAL DEPOSITORY SECURITIES 25-26
LIMITED (CDSL)

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 1.18 FINANCE 26-27
1.19 FINANCIAL SYSTEM 27-28
1.20 FINANCIAL MARKET 28-29
1.21 CLASSIFICATION OF FINANCIAL MARKET 29-32
1.22 COMPANY PROFILE 33-39

CHAPTER RESEARCH METHODOLOGY

NO-II 2.1 RESEARCH METHODOLOGY 40
2.2 OBJECTIVES OF THE PROJECT 40-41
2.3 SCOPE OF THE STUDY 41
2.4 HYPOTHESIS OF PROJECT 42
2.5 LIMITATION OF THE STUDY 43
2.6 DATA COLLECTION 43-44
2.7 RESEARCH DESIGN 44
2.8 THE STUDY UNIVERSE 45
2.9LIST OF REGIONAL STOCK EXCHANGES 46
IN INDIA
CHAPTER REVIEW OF LITERATURE 47-51
NO-III
CHAPTER DATA ANALYSIS, INTERPRETATION 52-69
NO-IV AND PRESENTATION
CHAPTER CONCLUSION AND SUGGESTION 70-71
NO-V
CHAPTER BIBLIOGRAPHY 72
NO - VI

ABBREVIATIONS USED:

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 CHAPTER-I

INTRODUCTION

1.1 What is Dematerialization?

The history of online trading goes back to 1983, when the first online trade using
e-trade technology took place. What began with a single click over 28 years ago has now
taken the world by storm.The concept visualized by Bill Porter who provides online
quotes and trading services to many US firms like fidelity, Charles Schwab, and Quick
and Reilly. Bill happened to foresee that someday everyone would own computers and
invest through them with
unprecedented efficiency and control. And today his dream has become a reality.

The Indian capital market witnessed an explosive growth between mid Eighties
and mid Nineties. The total number of companies listed in the stock exchanges had grown
by 72.3 percent. The market capitalization of the companies listed with stock exchanges
had gone up from Rs.21,000 crores in 1985 to more than Rs.4,50,000 crores in 1995.The
secondary market trading activity also gathered momentum. There has been tremendous
growth in secondary market trading at BSE and NSE. Other regional exchanges like
Calcutta and New Delhi have also become active players in the market. But the system
used was not able to withstand the strain caused by the tremendous growth in the
securities market. The entire securities market started experiencing a gridlock, posing
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obstacles in its growth. Moreover, this sudden growth has also magnified the risks that
have always been plaguing the Indian system, viz., credit risk and systematic risk. The
International institutional investors wanting to invest in India had become apprehensive
about the reliability of the trade settlement mechanisms used in the country, which did
not match international standards.

Besides affecting the inflow of foreign capital, the lack of efficient settlement systems
had affected the institutional investors, individual investors and brokers in the stock
market. The incidence of lost trading days (liquidity), lost scrips, improperly paid
dividends, mistaken registration, unnecessary financing cost, failure of counter party and
fraud were reported frequently. The awareness about the immense potential for growth
made the Indian stock markets very dear to the global investors and the access to internet
facility virtually at every part of the country made its momentum so fast. But the manual
and paper based settlement system, caused series of problems for the purchaser as well as
the seller. Delayed settlements, long settlement periods, high level of failed trade, high
cost of transaction and bad deliveries are some among them. Interestingly, the
stipulations contained in section 113 of Companies Act, 1956; section 22 A of the
Securities Contracts (Regulations) Act, 1956 failed to trace the delay as illegal. Large
number of bad deliveries, mismatch of signatures on transfer deeds, theft, forgery,
multination of certificates and other irregularities also had become rampant.

With the implementation of reforms measures, the Indian capital market has shown rapid
growth in the recent past with foreign investors, more stock exchanges and increased
market intermediaries. To eliminate paperwork, scrip less trading and electronic book
entry for the transfer of securities, and settlement with the new and modern system of
depositories came into operation. Accordingly the Government of India enacted the
Depositories Act in 1996 for the orderly growth and development of the Indian capital
market.

In finance and financial law, Dematerilization referes to the the substitution of paper-
form securities by book-entry securities. This is form of indirect holding system where an
intermediary such as a broker or a central securities depository,or the issuer itself. Eg
French system. Holds the record of the ownership of shares usually in electronic format.

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The dematerialization of securities such as as stocks has been a major trend since the
trend 1960 ,with the result that by 2010 , the majority of the global securities were held in
dematerialize form.

Dematerialization in short called as d-mat is the process by which an investor can get
physical certificates converted into electronic form maintained in an account with the
Depository Participant. The investors can dematerialize only those share certificates that
are already registered in their name and belong to the list of securities admitted for
dematerialization at the depositories.

Depositories Act, 1996 provides for the establishment of depositories in securities with
the objective of ensuring free transferability of securities with speed, accuracy and
security. The depositories make securities of public limited companies freely
transferable, subject to certain exceptions. They dematerialised the securities in the
depository mode and provide maintenance of ownership records in a book entry form.

The depository system comprises of the depositary participant, beneficial

owner/investor, the issuer and the depositary. A depositary is a firm wherein the
securities of an investor are held in electronic form in the same way a bank holds money.
It carries out the transactions of securities by means of book entry, without any physical
movement of securities. The depositary acts as a de facto owner of the securities lodged
with it from the limited purpose of transfer of ownership. It functions as a custodian of
securities of its clients. The name of the depositary appears in the records. Currently two
depositories are available in India and they are National Securities Depositary Ltd.
(NSDL) and Central Depositary Services (India) Ltd. (CDSL).

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1.2 ADVANTAGES OF DEMATERIALIZATION:

In the past few decades the Indian capital markets has undergone a phenomenal growth in
terms of listed companies number of stock exchange trades volume of scrips and investor
populations. This astounding growth of the capital markets in india has been primarily
due to introduction of the DEMAT account. DEMAT account is a type of account that
holds shares of securities in electronic form.

Online DEMAT account has become a necessity for an investor if he wishes to trade
stocks online.DEMAT account eliminates many problems that investors have to face
while dealing with securities They minimizes he paper work that is involved with the
ownerships, trading, and transfer of securities. There are wide range of advantages
associated with a DEMAT account such as;

1. The risk pertaining to physical certificates like loss, theft and damage are
eliminated completely with a DEMAT account.

2. The lack of paperwork enables quicker transactions and higher efficiency in trading.

3. Trading has become more convenient as one can trade through computers at any
location without the need of visiting a broker.

4. The shares that are created through mergers and consolidation of companies are
created automatically in the DEMAT account.

5. There is no need of stamp duty for a transfer of securities; this brings down the cost
of transactions significantly.

6. Banks are also provides dedicated and trained customers care officers to assist
you through all the procedures.

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1.3 DISADVANTAGES OF DEMATERIALIZATION:

Although DEMAT accounts have simplified the lives of investors there are some
disadvantages of DEMAT accounts such as,

1. Annual Maintenance Charges:

When you have open a DEMAT account the first things that strikes your mind is the
annual maintenance charges or AMC associated with account. It can easily be considered
to be one of the disadvantages of DEMAT account. Even if you have a single share in
your name,you have to pay the annual maintenance charges which can sometimes be
greater than the rate of the singles shares held in your name.This charges varies from one
broker to another.

2. Tech Savvy:

This means that you will have to use your computer in order to trade in the share
market. Even when it comes to checking your shareholdings your portfolio and your
demat account in general you have to tech-savvy.

Without poper computers knowledge and skills you will find it very difficult to operate a
demat account. It is also suggested to keep a check on your demat account on a periodic
basis to avoid any wrong transactions. If you have never used a computer, all of this will
seem like an uphill task for you.

3. High Frequency of Shares Trading:

Due to Dematerialization of shares treding in the shares market is just a click away.

This often makes you check the stock price online,which was notthe case when the
shares were in physical form, As a result your tendency of investing for a long term
vanishes and you generate a habit of trading more often.

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4. Additional Contracts:

Some depository participants may include additional contracts at different levels in order
to complete the process of dematerialization.

This may often prove to be complex from an investors point of view and one of the
disadvantages of DEMAT account.

1.4 ONLINE TRADING:

The stock market has been a part of people*s lives throughout the twentieth centurv.
Millions of people around the world have invested money in their countries own
respective markets. Since the coming of age of online trading, more people have been
investing their monev in stocks than ever before because of the advantages it offers.
Online trading allows people to trade stocks quickly without the help of a broker, letting
the investor have more control over their transactions. The competition between
companies has helped decrease the cost of making the transactions. In addition to that,
ordinary people now have access to information that could only be seen by brokers.
Overall. online trading saves time, money and gives power to the investor rather than
the broker.Although trading online sounds great. there are still manv disadvantages. The
most important one being that many people that have little experience with the stock
market have started to invest in it. causing them to lose money. The privacy issue is
another problem of main concern. especially with the amount of hackers that exist. In
addition, the internet has constant failures that can never be predicted. Another
complaint that is made is the fact that some of these online trading companies take too
long to make transactions while they advertise them to be fast. Furthermore, these
investment firms are hard to contact in case there is an emergency. Despite these
problems many companies have emerged in the online trading world. Each of them
offèrs their own special way of attracting potential investors to deal with them. Charles
Schwab and E *Trade are the main companies leading the way in online trading.

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Although there are about 150 companies that offèr electronic trading these are the main
ones that will be discussed in further detail.

1.5 History of Online Trading:

In recent years the internet has become an increasing part of peoples lives. There are few
places in the world that it has no reached. Since the internet has the power to reach this
many people, many companies have started to conduct business on it. People can shop
online and purchase almost anything they want right from their homes. With the advent
of this new technology, the stock market was bound to become part of this new world.
Since this information can be gathered so quickly, it was not a shock when online trading
took off at such a rapid pace.The first major company to start trading online was Charles
Schwab in May of

1996. At first, they were hesitant because of the security risks involved and because at
that time the internet was not as fast as it now. They had planned to launch online
trading a vear before. but did not because thev wanted to be confident that the
transactions were safe. Some other companies that started before Charles Schwab were
the Lombard Institutional Brokerage, the Pawns Financial Network and E* Trade
Securities. Of those fòur companies E* Trade and Charles Schwab had the most success
Charles Schwabb is now the largest company in online trading. They realized that by
using the internet, they could reach customers that never would have dreamed of
investing in the stock market.

Another successful company to offer online trading was Fidelity. Fidelity was the first
investment firm to allow their customers to "move money from one investment option to
the other" in their 401 (k) and 403(b) retirement plans. (Houston Chronicle) customers
had total control over the investments that were being made into their retirement plans.
Many companies would eventually allow their customers to do the same. Fidelity
eventually allowed investors to buy and sell their own stocks on the market just as
Charles Schwab and E* Trade had done before. Now the United States has just over 1

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50 companies that allow investors to trade online and the number is continually
increasing.

1.6 REMATERIALIZATION:

Rematerialization is the process of converting securities, held in a demat account (i.e.

electronic form) to physical form. A BO (Beneficiary Owner) intending to convert the
securities into physical form submits a Demat request to the DP in a Rematerialization
Request Form (RRF).
DP verifies the information on the RRF and enters the details in the system to setup a
request electronically. The system generates a unique serial number called as
Rematerialisation Request Number (RRN), which can be used for future reference. The
DP sends the RRF to the concerned Issuer/RTA.
If the Demat request is in order, the Issuer/RTA approves the same and confirms the
RRN electronically to CDSL. On receiving such confirmation, CDSL debits the BO
account. Physical certificates are sent by the Issuer/RTA directly to the investor.

1.7 THE DEPOSITORY SYSTEM:

MEANING:

A depository is a file or set of files in which data is stored for the purpose of safekeeping
or identity authentication. In general, a depository is a physical site where data is kept in
the form of hard copies, magnetic disks, magnetic tapes, compact disks (CDs), and
similar media. The concept of Depository is known to the world since 1949 when the
first depository was set up in Germany.

The depository model in India is a competitive multi depository system. In India the
system of dematerialisation is followed, wherein the securities will be cancelled as
against the system of immobilization in which the securities are kept in custody

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The organization responsible to maintain investor's securities in the electronic form is
called the depository. In other words, a depository can therefore be conceived of as a
"Bank" for securities. In India there are two such organizations viz. NSDL and CDSL.
The depository concept is similar to the Banking system with the exception that banks
handle funds whereas a depository handles securities of the investors. An investor
wishing to utilize the services offered by a depository has to open an account with the
depository through a Depository Participant.

1.8 DEPOSITORY PARTICIPANTS:

The market intermediary through whom the depository services can be availed by the
investors is called a Depository Participant (DP). As per SEBI regulations, DP could be
organizations involved in the business of providing financial services like banks, brokers,
custodians and financial institutions. This system of using the existing distribution
channel (mainly constituting DPs) helps the depository to reach a wide cross section of
investors spread across a large geographical area at a minimum cost. The admission of
the DPs involve a detailed evaluation by the depository of their capability to meet with
the strict service standards and a further evaluation and approval from SEBI. Realizing
the potential, all the custodians in India and a number of banks, financial institutions and
major brokers have already joined as DPs to provide services in a number of cities.

1.9 LEGAL FRAMEWORK OF DEPOSITORY SYSTEM:

The operations of the depositories are primarily governed by the Depositories Act, 1996,
SEBI (Depositories & Participants) Regulations, 1996, Bye- Laws approved by SEBI,
and Business Rules framed in accordance with the Regulations and Bye-Laws. The Act
enables the setting up of multiple depositories in the country to see that there is
competition in the service and there is more than one depository in operation. Only a
company registered under the Companies Act, 1956 and sponsored by the specified
category of institutions can set up a depository in India. Before commencing operations,

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depositories should obtain a certificate of registration and a certificate of commencement
of business from SEBI.

Every depository must have adequate mechanisms for reviewing, monitoring and
evaluating the depository's controls, systems, procedures and safeguards. It should
conduct an annual inspection of these procedures and forward a copy of the inspection
report to SEBI. The depository is also required to ensure that the integrity of the
automatic data processing systems is maintained at all times and take all precautions
necessary to ensure that the records are not lost, destroyed or tampered with. In the event
of loss or destruction, sufficient back up of records should be available at a different
place. Adequate measures should be taken, including insurance, to protect the interests of
the beneficial owners against any risks.

Every depository is required to extend all such co-operation to the beneficial owners,
issuers, issuers' agents, custodians of securities, other depositories and clearing
organisations, as is necessary for the effective, prompt and accurate clearance and
settlement of securities transactions and conduct of business. The depository should
indemnify beneficial owners of securities for any loss caused to them due to the
negligence of the DP. However, where the loss is caused due to the negligence of a DP,
the depository shall have the right to recover it from such DPs.

Generally, the following securities are eligible for dematerialization:

(a) Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other body
corporate.
(b) Units of mutual funds, rights under collective investment schemes and venture
capital funds, commercial paper, certificates of deposit, securities debt, money
market instruments, government securities, national saving certificates, Kisan Vikas
Patra and unlisted security.
(c) (c)Securities admitted to NSDL depository are notified to all DPs through circulars
sent by email.

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1.10 ADVANTAGES OF DEPOSITORY:

Trading in d-mat segment completely eliminates the risk of bad deliveries. In case of
transfer of electronic shares, you save 0.5% in stamp duty. Avoids the cost of courier/
notarization/ the need for further follow-up with your broker for shares returned for
company objection No loss of certificates in transit and saves substantial expenses
involved in obtaining duplicate certificates, when the original share certificates become
mutilated or misplaced. Increasing liquidity of securities due to immediate transfer &
registration Reduction in brokerage for trading in dematerialized shares Receive bonuses
and rights into the depository account as a direct credit, thus eliminating risk of loss in
transit. Lower interest charge for loans taken against d-mat shares as compared to the
interest for loan against physical shares. RBI has increased the limit of loans availed
against dematerialized securities as collateral to Rs 20 lakh per borrower as against Rs 10
lakh per borrower in case of loans against physical securities. RBI has also reduced the
minimum margin to 25% for loans against dematerialized securities, as against 50% for
loans against physical securities.

Fill up the account opening form, which is available with the DP. Sign the DP-client
agreement, which defines the rights and duties of the DP and the person wishing to open
the account. Receive your client account number (client ID). This client id along with
your DP id gives you a unique identification in the depository system. Fill up a
dematerialization request form, which is available with your DP. Submit your share
certificates along with the form; (write "surrendered for d-mat" on the face of the
certificate before submitting it for d-mat) Receive credit for the dematerialized shares
into your account within 15 days.

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1.11 PROCEDURES TO OPENING OF DEMAT A/C

To open a demat account you must approach your Depository Participants (DP). The
Depository Participants could be your broker or a bank. While you will open your demat
account with the DP, the actual shares will be held in custody by one of the depositories
(CDSL or NSDL). These are institutions sponsored by large institutions with
government participation and hence you are assured of safety and security.

The next steps is to submit your KYC (Know your Client) documents. Along with filling
the account opening form and filling all the details you will also the required to submit
copies of your passport size photographs and your PAN card. Additional you need to
furnish one proof of identity and one proof of your current address. The KYC form has
the DP investor agreement which lays out the rules and the regulations and your rights
and your obligations.Do read the fine print in details.

At the third stage most DPs will insist on an in person verification (IVP).Either you can
personally visit the center or the representative will visit your place. Some brokers permit
IVP over the webcam ,although most brokers still insist on IVP.

The last step is the allocation of the Beneficiary ID (demat account number) once all the
documents are in place and verified. The DP ID and the Beneficiary id combined
becomes your unique DP code for all future transactions, IPO applications etc. Demat
account can be only hold shares in custody and you still need a trading account with a
broker to buy and sell shares.

A few basic things to take care of here! all documents should be self –attested and
originals produced on request. Proof of identity and address provided should exactly
match with the details provided in the account opening form.

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1.12 PROCEDURES TO DEMATERIALIZE YOUR SHARES:

Firstly, you will have to open an account with the DP and get a unique client id number
Thereafter, you will have to fill up a Dematerialization Request Form (DRF)provided by
the DP and surrender the physical shares which you want to be dematted to the Dp.

The DP upon receipt of the shares and the DRF will send an electronic request to the
company’s register and shares transfer agents through the depository for confirmation of
demat .each request will bear a unique transaction number.

The DP will simultaneously surrender the DRF and shares to the company’s register and
shares transfer agent with the covering letter requesting the register and shares transfer
agent of the company to confirm demat. The company’s register and shares transfer agent
after necessary verification of the documents received from the DP will confirm demat to
the depository.

This confirmation will be passed on from the depository to the DP, which holds your
account. After receiving this confirmation from the depository, the DP will credit the
account with the shares so dematerialized .The DP will holds the shares in the
dematerialized from thereafter on your behalf. And you will become beneficial owner of
these dematerialized shares.

1.13 STOCK TRADED UNDER DEMAT ACCOUNT:

Securities and Exchange Board of India (SEBI) has already specified for settlement only
in the dematerialized form in for 761 particular scripts. Investors interested in these
stocks receive shares only in d-mat form without any instruction to your broker. While
SEBI has instructed the institutional investors to sell 421 scripts only in the d-mat form.
The shares by non-institutional investors can be sold in both physical and d-mat form. As

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there is a mix of both form of stocks, it is possible if you have purchased a stock in this
category, you may get delivery of both physical and d-mat shares.

Opening of a d-mat account through ICICI Direct:

Opening an e-Invest account with ICICI Direct, will enable you to automatically open a
d-mat account with ICICI, one of the largest DP in India, thereby avoiding the hassles of
finding an efficient DP. Since the shares to be bought or sold through ICICI Direct will
be only in the d-mat form, it will avoid the hassles of instructing the broker to buy
shares only in d-mat form. Adding to this, you will not face problems like checking
whether your broker has transferred the shares from his clearing account to your d-mat
account.

1.14 HISTORY:

Although the phenomenon is ancient, since book entry systems for recording securities
have been noted from civilizations as early as Assyria in 2000 BC, it gained new
prominence with advent of computer technology in the late 20th century. Even during the
period when paper certificates were popular,book entry systems continued since many
small firms could not afford printing secured paper from securities. These books entry
securities were often held in the under the control of an attorney who act as a notary to
certify the existence of the securities as well as their authent.

However, the phenomena of Dematerialization of securities issued by large firms is

mostly under taken via Central Depository Securities a national or regional institution
holding the notary function such as the Depository Trust Company (DTC)is the United
State of Euro clear group in part of the EU, which itself entrust banks and investments
funds to act as intermediaries between issuers and investors for the custody of these

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securities.Therefore dematerialized securities are often referred as intermediated

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securities in particular by the unidroit convention on substantive rules for intermediated
securities.

1.15 HOW TO CONVERT PHYSICAL SHARES INTO D-MAT A STEP BY

STEP:

If you have shares in physical form and wish to transfer them after 1st April 2019, you
may not be able to do so. According to a notification by the Securities and Exchange
Board of India (Sebi) in June this year, you can hold shares in the physical form after
April 1, 2019, but cannot transfer these securities unless they are in the d-mat form.

Paper share certificates are an anachronism in these days of electronic trading and the
Internet. Today, most shares are in dematerialized form, that is, in electronic form. There
are no paper certificates, and your shares are held in what is called a d-mat account,
keeping a record of the shares you own. All d-mat accounts in India are maintained by
two authorities — the National Securities Depository Limited (NSDL) and the Central
Depository Services Limited (CDSL).

It’s estimated that a little over 2% of shares are still held in paper form. If you still have
physical share certificates lying in a cupboard somewhere, it’s time to dust them out and
convert them in to dematerialized form. Why, you may ask? In a bid to bring in more
transparency in shareholding of companies and to prevent frauds, Sebi has made it
mandatory to transfer shares only in d-mat form from April 1. However, this does not
mean that you cannot hold shares in the physical form, but you cannot transfer them,
which can affect their value.

Here’s what you need to convert your physical shares into d-mat form.

Step 1: Open a d-mat account

The first step is to open a d-mat account. This can be done by a depository participant
(DP), which could be your bank or your stockbroker. You need to fill a form and submit

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copies

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 of proof of address and identity documents (PAN card, Aadhar card, passport), along
with a passport-size photograph.

After processing the document, the DP will open a d-mat account in your name, with an
account number of your own. The d-mat account is just like a bank account, keeping a
record of your shares instead of money.

Some brokers allow you to open a d-mat account online. To do this, you have to submit
scanned copies of the required documents. An in-person verification will be done using
online video chat.

Step 2: Surrender the share certificates

After opening the DP account, you need to surrender the physical certificates to the DP
along with a Dematerialization request form (DRF). You should use separate DRFs for
securities of different companies.

Before you submit the certificates, you must deface them by writing “SURRENDERED
FOR DEMATERIALISATION” on the certificates. The DP will then verify that all the
details in the form are correct, like the number of certificates, securities, type and so on.
After that it will issue an acknowledgement slip to you.

Here are some of the things you may have to fill up on the DRF:

 DP-ID (ID issued to you by your depository participant)

 Account number

 Date

 Choose physical certificate or option letter surrendered

 Account Holder Name

 The number of securities to be dematerialized

 Name of the security (as it is on the certificate)

[25]
 The face value of the security

 Type of security (equity or debenture or any other)

 Folio number, certificate number and distinctive number

 Total number of shares surrendered

 Signature

 Acknowledgement

Step 3: Wait for credit of shares to your d-mat account

After you submit the DRF and share certificates, the depository participant will send the
certificate, form and covering letter to the issuer or R&T (registrar and transfer) agent. If
everything is in order, the issuer or R&T agent will accept the dematerialization request
in his system and forward it to the National Securities Depository Ltd (NSDL), the
central securities depository. The depository module of the NSDL will then authorize the
creation of appropriate credit balances in your account for the surrendered shares. After
that, you can check your d-mat account if everything is in order

[26]
1.16 National Securities Depository Limited {NSDL}

In a span of about nine years, investors have switched over to electronic [Demat]
settlement and National Securities Depository Limited (NSDL) stands at the center of this
change. In order to provide quality service to the users of depository, NSDL launched a
certification program in depository operations in May 1999. This certification is
conducted using NCFM infrastructure created by NSE and is called "NSDL - Depository
Operations Module". The program is aimed at certifying whether an individual has
adequate knowledge of depository operations, to be able to service investors. Depository
Participants are required to appoint at least one person who has qualified in the
certification program at each of their service centers. This handbook is meant to help the
candidates in their preparation for the certification program.
National Securities Depository Limited is the first depository to be set-up in India. It
was incorporated on December 12, 1995. The Industrial Development Bank of India
(IDBI) - the largest development bank in India, Unit Trust of India (UTI) - the largest
Indian mutual fund and the National Stock Exchange (NSE) - the largest stock exchange
in India, sponsored the setting up of NSDL and subscribed to the initial capital. NSDL
commenced operations on November 8, 1996.
Ownership
NSDL is a public limited company incorporated under the Companies Act, 1956. NSDL
had a paid up equity capital of Rs. 105 crore. The paid up capital has been reduced to Rs.
80 crore since NSDL has bought back its shares of the face value of Rs. 25 crore in the
year 2000. However, its net worth is above the Rs. 100 crore, as required by SEBI
regulations.

The following organizations are shareholders of NSDL as on March 31, 2019.

 Axis Bank
 State Bank of India
 Oriental Bank of Commerce
[27]
  Citibank
 Standard Charted Bank
 HDFC Bank
 HSBC Bank India
 Deutsche bank
 Bank of Baroda

1.17 Central Depositary Securities Limited {CDSL}

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

[28]
  Honorable Union Finance Minister, Shri. Yashwant Sinha flagged off the
operations of CDSL on July 15,1999.
 Settlement of trades in the Demat mode through BOI Shareholding Limited, the
clearing house of BSE, started in July 1999.
 All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi stock Exchange, The Stock Exchange, Ahmedabad, etc have
established connectivity with CDSL.
 As at the end of Dec 2007, over 5000 issuers have admitted their securities
(equities, bonds, debentures, commercial papers), units of mutual funds,
certificate of deposits etc. into the CDSL system.

1.18 FINANCE:

Finance is the study of money how it is used. Specifically, it deals with the questions of
how an individual company or government acquires the money needed -called Capital in
money context –and how they then spend or invest that money Finance is
correspondingly often split into three areas; personal finance corporate finance and
Public finance.

At the same time finance is about the overall system. i.e.financial markets that allows the
flow of money via investments and other financial instruments between and within these
areas.this flows facilitated by the financial services sector. A major focus within finance
is the investment management – called money management for individuals and assets
management for institutions and finance then includes the associated activities of
securities trading and stock broking investment banking financial engineering and risk
management. Finance is the process of conversion of accumulated funds to productive
usage. Finance helps to direct the flow of economic & facilitate in the firm's smooth
operations.

According to HOWARD AND OPTIONS Finance is defined as "the administration area

of set of administrative functions in an organization which has to do with the

[29]
management of flow of cash so that the organization will have the means 2 carry out its
objectives as satisfactory as possible and at the same time meet the obligations as they
become due".

[30]
More abstractly, finance is concerned with the investment and deployment of assets and
liabilities over “space and time” i.e.it is about performing valuation and assets allocation
todays based on risk and uncertainity of future outcomes, incorporating the time value of
money As an academic field finance theory is studied and developed within the discipline
of managements,economics ,accountancy and applied mathematics. Correspondingly
given its wide applications there are several related professionals qualifications that can
lead to the field.

1.19 FINANCIAL SYSTEMS:

The economic scene is the most independence period has seen a sea change, the end
result being that the economy has been made enormous progress in diverse fields. There
has been a quantitative expansion as well as diversification of economic activities. The
experiences of the 1980s have led to the conclusion that to obtain all the benefits of
greater reliance on voluntary, market based decision-making India needs efficient
financial systems.

The Financial systems is possibly the most important institutional and functional vehicles
for economic transformation. Finance is a bridge between the present and the future and
whether it to be mobilization of savings or their efficient, effective and equitable
allocations for investments is the success with which the financial systems performs its
functions that sets the pace for the achievements of broader national securities.

[31]
DEFINITION:

The term financial system is the set of inter related activities/services working together to
achieve some predetermined purpose and goals. It includes different markets, the
institutions, instruments, services and mechanism which influences the generation of
savings, investments, capital formation and growths.

According to the Robinson, the primary function of the system is “to provide a link
between savings and investments for a creation of new wealth and to permit portfolio
adjustment in the composition of the existing wealth.”

From the above definitions, it may be said that the primary functions of the financial
systems is the mobilizations of savings and their distributions for industrial investments
and stimulating capital formation to accelerate the process of economic growth.

1.20 FINANCIAL MARKET:

Financial markets in India comprise the money market Government securities market,
capital market, insurance market, and the foreign exchange market. Recently, the
derivatives market has also emerged1. With banks having already been allowed to
undertake insurance business, bane assurance market has also emerged in a big way.

Till the early 1990s most of the financial markets were characterized by controls over the
pricing of financial assets, restrictions on flows or transactions, barrier to entry, low
liquidity and high transaction costs. These characteristics came in the way of
development of the markets and allocative efficiently of resources channeled through

[32]
them. From 1991 onward, financial market reforms have emphasized the strengthening
of the price discovery process easing restrictions on transactions, reducing transaction
costs and enhancing systemic liquidity.

1.21 CLASSIFICATION OF FINANCIAL MARKETS:

Financial markets are classified in different ways, which are given below:

I. On the Basis of Claim on Financial Assets.

II. On the Basis of Maturity of the claims.

II. On the Basis of Domicile.

I] On the Basis of Claim on financial Assets:

The claims traded in a financial market may be for either a fixed amount or a residual
amount. Based on claim on financial assets, financial markets are following two types:
Equity market and Debt Market.

(A) Equity Market:

Securities are conventionally divided into equities and debt securities. Financial markets
in which equity instruments are traded are known as equity market. This market is also
referred as the stock market. Two types of securities are traded in an equity market
namely equity shares and preference shares. Preferred stock represents an equity claim
that entitles the investor to receive a fixed amount of dividend. An important distinction
between these two forms of equity securities lies in the degree to which they may

[33]
participate in any distribution of earnings and capital and the priority given to each in the
distribution of earnings.

(B) Debt Market:

Financial markets in which debt instruments are traded are referred as debt market. Debt
instruments represent contracts whereby one party lends money to another on pre-
determined terms and based on rate of interest to be paid by the borrower to the lender,
the periodicity of such interest payment and the repayment of the principal amount
borrowed. Debt securities are normally issued for a fixed term and are redeemable by the
issuer at the end of that term. Debt securities include debentures, bonds, deposits, notes
or commercial papers. Debt market is also called fixed income market. Generally, debt
securities and preferred stock are classified as part of the fixed income market. That
sector of the stock market which does not include preferred stock is called the common
stock market.

II] On the Basis of Maturity of the Claims: Another way of classifying financial
markets is on the basis of maturity/period of the claims. Based on this, financial markets
are following two types: Money market and Capital market.

(A) Money Market:

A financial market for short-term financial assets is called the money market. It is a
market for dealing in monetary assets of shorts-term nature. The traditional cut off
period for short term and long term claim is one year. Financial asset with a maturity of
one year or less than one year is considered short term and therefore part of the money
market. It is the central wholesale market for short-term debt securities, or for the
temporary investment of large amount of short-term funds. Money market is a collective
name given to various firms and institutions that deal with various grade of near-money.
It includes trade bills, promissory notes and government securities. Money market
instruments have the characteristics of quick liquidity and minimum transaction cost.

The instruments in money markets are relatively risk-free and the relationship between
the lender and borrower is largely impersonal. Borrowers in the money market are the

[34]
central government, state governments, local bodies, traders industrialists, farmers,
exporters, importers and others.

III] On the Basis of Domicile:

Another way of classifying financial markets is on the basis of domicile. Based on

domicile way of classifying financial markets is on the basis of domicile. Based on
domicile financial markets can be divided into two viz. International Market and
Domestic Market.

(A) International Market:

International market is the markets were the issuances of securities are offered
simultaneously to investors of a number of globalization, deregulation and liberalization
of financial markets the companies and the investors in any country seeking to raise
funds are not limited to the financial assets issued in their domestic market.

(B) Domestic Market:

Domestic market is that part of a nation‘s internal market representing the mechanisms
for issuing and trading securities of entities domiciled within that nation. It is a market
where issuers who are domiciled in the country issue securities and where those
securities are subsequently traded. It is otherwise called national or internal market.
Domestic financial markets can be divided into different sub types like.

(i) Gilt-edged Market:

It is a market for government and semi government securities, which carries fixed
interest rates. Major players in the gilt-edged securities market in India are the Reserve
Bank of

[35]
India, State Bank of India, private and public sector commercial banks, co-operative
banks and financial institutions.

(ii) Housing Finance Market:

Housing finance market is characterized as a mortgage market, which facilitates the
extent of credit, to the housing sector. National housing bank is an apex bank in the field
of housing finance in India. It is a wholly owned subsidiary of the RBI. The primary
responsibility of the bank is to promote and develop specialized housing finance
institutions to mobilize resources and extent credit for house building.

(C) Foreign Exchange Market:

Foreign exchange market or Forex-market facilities the trading of foreign exchange. RBI
is the regulatory authority for foreign exchange business in India. The foreign exchange
market in India prior to the 1990s was characterized by strict regulations, restrictions on
external transactions, barriers to entry, low liquidity and high transaction costs.

[36]
 COMPANY PROFILE

India is on the threshold of entering a new economic era. An era of fast paces economic
growth. With various new commercial opportunities opening up. These new industries
and business ventures are often global -Multi nationals, collaborations, joint ventures,
technology transfers are the new buzz words. Establishing and developing these genres of
companies is a complicated process. In today's scenario of frenetic activity, the need for
quality financial services is acute.

SHAREKHAN LTD.is one of the leading retail stock broking house of SSKI group
which are running successfully since 1992 in the country. It is the retails broking arms in
the Mumbai based SSKI group which has over eights decades of experience in the stock
broking business. Sharekhan offers its customers a wide range of equity related services
includes trade execution on BSE, NSE ,Derivatives , Depository services etc. The firms
online trading and investment sites – www.sharekhan.com – was launched on Feb
8,2000. The sites give access to superior content and transaction facility to retailers
customers across the country. Know for its jargon-free, investor friendly languages and
high quality research the site has registered based over one lakh customers. The content
rich and research oriented portal has stood out among its contemporaries because of its
steadfast dedications to offering customers best of breed technology and superior market
information. The objective has been to let customers make informed decisions and to
simplify the process of investing in stocks.

On April 17,2002 Sharekhan launch Speed Trade, a net based executable applications
that emulates the broker terminals along with the of other information relevant to the day

[37]
traders. This was for the first time that a net based trading station of this caliber was
offered to the traders. In the last six months Speed Trade has become a de facto standard
for the Day Trading Community over the net.

SHAREKHAN’S ground network includes over 331 centers in 137 cities in India
which provides a host of trading related services:

Sharekhan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun
Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Verisign
Financial Technologies India Ltd. To build its trading engine and contents.

The Morakhiya family hold a majority stake in the company. HSBC, Intel & Carlyle are
the other investors. With a leagacy of more than 80 years in the stock markets, the SSKI
group ventured into institutional broking and finance 18 years ago. Presently SSKI is one
of the leading players in the institutional broking and corporate finance activities. SSKI
holds a sizeable portion of the market in each of the segments. SSKI institutional broking
arm account for 7% of the market for Foreign Institutional Portfolio Investment and 5%
of all domestic Institutional portfolio investment in the country. It has 60 institutional
clients spread over the India.

[38]
PRODUCTS AND SERVICES OF SHAREKHAN LTD.

The different types of products and services offered by Sharekhan Ltd. are as follows;

 Equity and Derivatives trading

 Depository services
 Online services
 Commodities trading
 Dial n Trade
 Portfolio Management
 Shares Shops

[39]
  Fundamental Research
 Technical Research

Online products offered by Sharekhan are as follows:

1. CLASSIC ACCOUNT:

This account allows the client to the trade throughout website and is
suitable for the retail investors. Our online trading website also
comes with the Dial Trade service that enables you to buy and sell
shares by calling their dedicated toll free number.

2.SPEEDTRADE:

SPEEDTRADE is a next-generation online trading product that brings

the power of your broker’s terminal to your PC. It is ideal for active
traders who transact frequently during day’s trading session capitalize
on intra-day price movements. SPEEDTRADE is an internet-based
application available on a CD, which provides everything a trader
needs on one screen, thereby, reducing the required to execute a trade.
SPEEDTRADE has all the above-mentioned features with the power
to trade in cash and derivatives from a single screen.

[40]
 PROFILE OF THE COMPANY:

Name of the company : SHAREKHAN LTD.

Year of Establishment 1925

Headquarter : SHAREKHAN LTD.SSKI

A-206, Phoenix House,

Phoenix Mills Compound,

Lower Parel, Mumbai –Maharastra

Nature of the business : Service Provider

Services : Depositor services, online services

and Technical Research

Number of Employees : Over 3500

Website : www.sharekhan.com

Slogan : Your Guide to The Financial Jungle

[41]
 MANAGEMENT TEAM

I. Mr. Dinesh Murikya – Owner of the Company

The Sharekhan Group of companies was brought to life by Mr. Dinesh Murikya. He
ventured into stock trading with an intension to raised capital for his own independent
enterprise.However the recognized the opportunities offered by the stock market to serve
individual investors. Thus India’s first retail-stock broking house was established in
1925. Under this leaderships,Sharekhan became the first broking house to embrace new
technology for faster and effective services to retail investors.

II. Mr. Tarun Shah – Chief Executive officer (CEO)

A science graduate from St. Xaviers College Mumbai, Mr. Tarun Shah started his
professional life in sales and marketing a chemical company. His hands on approach and
rigorous experience in sales led him to higher challenges that the capital markets
provided.

III. Mr. Shankar Vailaya – Director of the Company

Mr. Shankar heads the operation, finances and legal functions. He is responsible for
settlements, depository operations, risk and compliances and regulatory &other legal
commitments and treasury. Shankar has managed broking operation through the most
turbulent times of the post securities scam period in 1992 and has managed to steer clear
of a flurry of bad papers in the market during 1994-95.

IV. Pathik Gandotra – Head of Research

V. Rishi Kohli – Vice President of Equity Derivatives

VI. Nikhil Vora – Vice President Of Research

[42]
VISION:

To be the best retail brokering Brand in the retail business of stock market.

MISSION:

To educate and empower the individual investors to make better investments decisions
through quality advice and superior services.

ACHIEVMENTS OF SHAREKHAN LTD.:

I. Rated among the top rated 20 wired companies along with the RELIANCE,
HUJI, INFOSYS etc.by “BUSINESS TODAY” January 2004 edition.

II. Awarded “Top Domestic Brokerage House” 4 times by Euro money and Asia
money.

III. Winners of “Best Financial Website” award.

IV. India’s most preferred brokers within 5 years ”Awaaz Customers Award 2005,
2008 ”

[43]
 CHAPTER – II

RESEARCH METHODOLOGY

2.1 MEANING:

Research Methodology is a description of all the methods used by the researcher

during the course of the research. This chapter gives a detailed account of the
methodology used for the purpose of this research work. The discussion includes
two main aspects: 1. The methods concerned with the collection of the data and
The statistical techniques used for establishing relationship between the variables.

Research may be very broadly defined as systematic gathering of data and information
and its analysis for advancement of knowledge in any subject. Research attempts to find
answer intellectual and practical questions through application of systematic methods.
Webster’s Collegiate Dictionary defines research as "studious inquiry or examination;
esp. investigation or experimentation aimed at the discovery and interpretation of facts,
revision of accepted theories or laws in the light of new facts, or practical application of
such new or revised theories or laws". Some people consider research as a movement, a
movement from the known to the unknown.

2.2 OBJECTIVES OF THE PROJECT:

Based on the review of literature, the following areas were identified for study in
this research work. The review of literature is dealt separately in the proceeding
chapter. The research objectives for the current study are:

[44]
1: To study the social structure of stock market.

2: To find the pattern of social stratification in the stock markets.

3: To examine socio economic profile of the actors within the stock market.
4: To study the Brokers as an interest group.

5: To identify the importance of social referencing in investment decisions.

6: To find out the influence of gender on aspects like risk bearing ability,
investment, participation and performance.
7: To examine the patterns of trading over different time periods and also to
analyze the influence of social factors on them.
8: To know the mechanism in the DEMAT.

9: To study the process of DEMAT.

10: To know the services provides by the depository participants.

2.3 SCOPE OF THE STUDY:

I. It provides a complete knowledge of various fundamentals concepts of

share market and online trading.

II. It will help in analyzing the behavior of consumer and help in knowing
the parameters of investments on which they would like to invest.

The scope of the study is confined to the process of dematerialization of securities and its
advantages.

The scope of the project is limited to the depository participant services through depositors.

[45]
2.4 HYPOTHESIS OF THE STUDY:
Hypothesis act a guiding light to be focus and provide a direction in the pursuit of
a research into the known or unexplored domain. This research work seeks to test
the following hypothesis. These hypothesis were formulated based on the above
mentioned objectives. The following are the hypothesis tested in the study.

NULL HYPOTHESIS:

1. There would be no significant relationship between online trader’s knowledge

level and their age groups.
2. There would be no significant relationship between general awareness and
education level of respondent.
3. There would be no significant relationship between respondent knowledge level
for the online trading laws and education groups.
4. There would be no significant relationship between respondent knowledge level
for the online traders’ rights and education groups.
5. There would be no significant relationship between respondent knowledge level
for the online traders’ responsibility and education groups.

ALTERNATIVE HYPOTHESIS:

1. There would be significant relationship between online trader’s knowledge level

and their age groups.
2. There would be significant relationship between general awareness and
education level of respondent.
3. There would be significant relationship between respondent knowledge level for
the online trading laws and education groups.
4. There would be significant relationship between respondent knowledge level for
the online traders’ rights and education groups.

5. There would be significant relationship between respondent knowledge level for

the online traders’ responsibility and education groups.

[46]
2.5 LIMITATIONS OF THE STUDY:

The embeddedness of individuals within the larger context of a social setting like the
stock market creates special challenges for research. This is because social network
analysis is neither a study of individuals nor a study of groups, organizations and
institutions. It is all of this combined. In such an study, research about an individuals has
implications for all the persons he or she is connected with. Network information can
expose individuals who did not answer a network questionnaire in a survey and also has
implications for any organizations that persons is connected with. Likewise, data on
particular organizations like the BGSE has implications for the individuals networked to
it.

Social network data have one troublesome and distinctive attribute his collections of
names about who relates to whom is not confined to the names of the respondents within
the study. For they may give names of others who have no idea that they are being named
(Borgatti & Molina, Ethical and strategic issues in organizational network analysis,2003)

Apart from the social network related limitations since the study concerns a sensitives
areas regarding investors investors and brokerage firms trading which causes suspicions,
some vital information may be concealed due to lack of trusts.

2.6 DATA COLLECTION:

From the preparation of any project report the collections of relevant data is very much
essentials there are basically two broad methods for collecting the data. The required data
is collected both from primary as well as secondary sources.

PRIMARY SOURCES:

Primary data is collection by meeting the concerned people through consultation a

personal observation as well as structured unbiased questionnaire and personal interviews
of investors.

[47]
SECONDARY SOURCES:

Secondary Data is the data which is collected and complained for different purposes
which are used in research for this study. They are the data that are sourced from
someplace that has originally collected it. This means that this kind of data has already
been collected by some researchers or investigators in the past and is available either in
published or unpublished form. This information is impure as statistical operations may
have been performed on them already. For example, an information available on the
government of India, Department of Finance's website or in other repositories, books,
journals, etc.

2.7 RESEARCH DESIGN:

The methodology used for the purpose of this research work incorporates the
triangulation method. This is a culmination of three different methodologies for procuring
data. The evolution of the methods of data collection passes through the different phases
beginning with observation where the data that is needed can be collected by observing
the facts that are evident to the plain sight.
The research design involves the use of survey method along with social network
methods for the purpose of data collection. The use of social network analysis methods is
appropriate because by using the concept of the social network it becomes possible to
analyze informal social relationships in a way which admits both the various channels of
recruitment of an individual into the market, the participation levels and performance
levels while not being affect much by potentially transitory character of the social
networks.
The need for the use of multiple methods arises out of the structure and the functioning of
the stock markets, which has a set of social actors whose integrations are taking place at a
virtual level. The use of non-human or technical element is very high in this setting. The
role of money, is primary and the procurement of which seen as the driving force being
these actions. Hence a sociological study is required to understand the multiple facets of
these transactions by making use of the different perspectives and approaches available in
the sociological repertoire. Along with the secondary data, primary data has been
collected and statistical methods are used on these for gaining insights about the social
dynamics of the stock markets.
The use of social network analysis methods is appropriate because by using the concept
of the social network it becomes possible to analyze informal social relationships in a
way which admits both the various channels of recruitment of an individual into the
market, the participation levels and performance levels while not being affect much by
potentially transitory character of the social networks.

[48]
2.8 THE STUDY UNIVERSE:

The universe of this study comprises of the participants of the stock market in general
and the members of Bangalore Stock Exchange in particular. Bangalore Stock Exchange
is one of the regional stock exchanges of India. The Indian stock market transaction
happens through both national and regional stock exchanges. One significant feature of
the Indian financial markets is that it has 22 regional stock exchanges. This is supposed to
be the highest number of regional exchanges in a country. The Regional exchanges
provide investors and companies easy access to the stock markets.
The use of the terms stock exchange and stock market necessitates the explanation of the
differences between the two. The difference between stock market and stock exchange is
that the Stock Exchanges are an organized marketplace. They can be either corporation or
mutual organization, where members of the organization gather to trade company stocks
or other securities. The members may act either as agents for their customers, or as
principals for their own accounts. Stock exchanges are also facilitators for the issue and
redemption of securities and other financial instruments including the payment of income
and dividends.
Stock Market on the other hand, is a market where the trading of company stock, both
listed securities and unlisted takes place. It is different from stock exchange because it
includes all the national stock exchanges of the country. The stock exchange is only a
part of the larger stock market.

[49]
 2.9 LIST OF REGIONAL STOCK EXCHANGES IN INDIA

WITH PERMANENT MEMBERSHIP WITH SEBI

S Name of the Exchange Membership Validity

.No
1 Ahmedabad Stock Exchange Ltd. Permanent

2 Bombay Stock Exchange Ltd. Permanent

3 Calcutta Stock Exchange Ltd. Permanent

4 Delhi Stock Exchange Ltd., Permanent

5 Madhya Pradesh Stock Exchange Ltd Permanent

6 Madras Stock Exchange Ltd. Permanent

The above table shows that of the 22 registered stock exchanges, only 6 have
permanent affiliation. The Bangalore stock exchange is one of the regional stock
exchanges in India which has permanent membership with SEBI. Moreover,
Bangalore city has a population representative of the larger national population of
India. It has a population of educated and computer
These factors were seen to be appropriate to test the research objectives and hypothesis
of the current study. Hence, investors and brokers from Bangalore stock exchange,
located in Bangalore, Karnataka was selected as the universe of the study.

[50]
 CHAPTER – III

REVIEW OF LITERATURE

MEANING

A literature review or narrative review is a type of review article. A literature review is a

scholarly paper, which includes the current knowledge including substantive findings, as
well as theoretical and methodological contributions to a particular topic.
Literature reviews are secondary sources, and do not report new or original
experimental work. Most often associated with academic-oriented literature, such
reviews are found in academic journals, and are not to be confused with book reviews
that may also appear in the same publication. Literature reviews are a basis for
research in nearly every academic field. A narrow-scope literature review may be
included as part of a peer-reviewed journal article presenting new research, serving to
situate the current study within the body of the relevant literature and to provide
context for the reader. In such a case, the review usually precedes the methodology
and results sections of the work.
Review of related literature serves as the base for any researcher to understand his or
her research problem clearly and to design the methodology by which the study is to
be conducted. Various studies conducted earlier on the topics related to the current
research problem are included in the literature. It gives an idea for the researcher to
determine the research problem and to frame the objectives. It also enables the
researcher for the smooth conduct of the present study. The literature includes books,
journals, magazines, Ph.D. theses, reports, etc.
Producing a literature review may also be part of graduate and post-graduate student
work, including in the preparation of a thesis, dissertation, or a journal article.
Literature reviews are also common in a research proposal or prospectus (the
document that is approved before a student formally begins a dissertation or thesis).

Rao (1995) in his paper “Depository System: A boon for India capital markets” holds the
view that the introduction of depositories would improve the market efficiency. It is also
expected to arrest the prolonged depression in the stock market. The paper analysis shows
the manner in which the depository would help to revive the stock market. To sum up, he
states that the eligibility criteria will require companies to improve their internal systems.

[51]
He is hopeful that depository system will bring a sea change in corporate democracy,
particularly in corporate management, price discovery in market place & proxy exercise
etc.

Sahoo (1995) in his article “The depositories ordinance, 1995 explained” has explained
the provisions of Depositories Ordinance 1995, which provides a legal basis for the
establishment of depositories in securities with a view to ensure free & expeditious
transfer of securities.

George (1996) in his article “Towards a paperless settlement system” explains about the
role of the NSDL in revolutionizing the paperless stock settlement system in the country.
He has examined steps taken by the depository to ensure that the scripless trading system
is a success. He has also stressed the importance of the role of regulatory body in making
the depository system successful.

Chikodikar (2000) studies undertaking dematerialization and the objectives framed was
Demat process and have detailed discussion on Demat system-its meaning advantages,
Demat charges (price) depository and depository participants. He found that the
electronic trading and trading of securities is a step in the right direction, paperless
trading will prove to be boon to the stock market in the years to come

Barber and Odean (2002) found that young men are more likely to use the Internet for
investing, and that online investors tend to increase turnover and decrease their
performance after switching to online trading.

[52]
Ravi Shah (2002)26 highlighted that NSDL and CDSL have changed the face of the
Indian capital market. The move from an account period settlement in ‘paper form only’
to a T+3 settlement in pure electronic form has been achieved in a record span of few
years, whereas it took anywhere between 10-20 years in most of the developed countries

Javaid (2003) in his thesis A study of operations of stock exchanges with the special
reference to Delhi Stock Exchange” discussed that Indian stock market has emerged as a
major source of finance for the corporate sector. It is an institution evolved in the
industrial developed capitalistic economies with free market mechanism. Stock exchange
was termed as institutional allocator of resources par excellence.

Jeyanthi (2007) in his research work “A study on National Stock Exchange of India
Limited” has highlighted that the NSE has created a niche for itself not only in the
national arena but also in the international market with the adaptation of required
structural changes. Therefore there is no doubt that NSE will be an attractive destination
for the national & international investors to park their funds in the years to come.

Nishanth and Mitra (2007) highlighted the trends in the growth of dematerialization in
the Indian capital market. They analyzed the total turnover and demat segment turnover
volume-wise and stated that dematerialization of securities is one of the major step aimed
at improving and modernizing the levels of investor’s protection measures.

Sandeep Srivastava, Surendra S Yadav and P K Jain (2008) on “Derivative Trading

in Indian Stock Market: Broker’s Perception” found that high net worth individuals and
proprietary traders contribute to the major proportion of trading volumes in the derivative
segment. The survey also revealed investors are using these securities for risk
management,
[53]
profit enhancement, speculation and arbitrage. It also emphasized to popularize option
instruments because they may prove to be a useful medium for enhancing retail
participation

Singh & Goyal (2011) in their paper entitled “Analysis of factors affecting the Decision

Making of the Investors in Depository System” holds the view that most of the investors
think that the shorter settlement period safety of securities with the depositories, attitude
of the staff available with the DPs, timely services provided by the DPs to the investors,
reduction in transaction costs , rapatriation of sales proceeds of shares / debentures are
some of the factors which affects the decision making of the investors in depository
system. Opening DEMAT account with DP is easy but they charge for providing this
service. The education of the investors plays an important role in decision making where
the difference in the opinions of the investors is found significant in most of the cases
followed by other factors such as occupation, age etc.

Chaudhary & Malik (2011) in their paper “Depository system in India: An appraisal”
states that majority of the participants are resided with NSDL with stake of 55 percent.
Thus, it acts as the primary organization with the majority of participants in the system.
Further the paper analysis concludes that the respondents have no clear & crisp idea
regarding the services offered by the DPs to their clients. In order to overcome
geographical & time barriers formal & informal communication need to be developed.
The majority of respondents were comfortable with the prevailing fee structure of
depository which shows the existing fee structure followed by NSDL is benevolent.

Bhatt & Bhatt (2012) in their paper entitled “Financial Performance Evaluation of
depositories in India (A comparative study of NSDL & CDSL)” explores the fact that the
trend of automation especially, Dematerialization, has enabled the Indian capital market
to
[54]
take the world center stage & scale to unprecedented heights. Securities market in India
has grown exponentially. The analysis of the progress of NSDL & CDSL in economic
terms clearly reveals that both the depositories have shown a remarkable progress in
terms of DEMAT accounts, DEMAT value &quantity, Settlement value and quantity and
the number of depository participants. Their study reveals that both the depositories have
been working financially smoothly over a period of last six financial years.

Kaur (2013) in her paper “Investors preference between DEMAT & REMAT and
awareness regarding depository & its various laws” explains the depository system in
India, focussing on the reasons for investors preference between REMAT & DEMAT. To
sum up she concludes that the growth rates of DEMAT account holder is increasing over
years. The Indian system of capital market is two tier system- Indian government allows
holding securities in any form i.e. either in physical securities or in electronic (DEMAT)
form. The respondents feel that the dematerialization provides enough services & it is
convenient to use. Majority of people are shifting towards dematerialization as compared
to the past

Olekar & Talwar (2013) in their paper “Online trading & DEMAT account in India –
Some issues” observed that the banks normally levy a lower service charges compared to
other depository participants. He also found that when the numbers of users are more
online, the speed of transactions is affected.

[55]
 CHAPTER – IV

DATA ANALYSIS, INTERPRETAION

AND PRESENTATION

HISTROCIAL BACKGROUND OF DEMATERIALISATION:

Earliest records of securities trading in India are available from the end of the
eighteenth century. Before 1850, there was business conducted in Mumbai in shares
of banks and the securities of the East India Company, which were considered as
Securities for buying, selling and exchange. The shares of the commercial Bank,
Mercantile Bank and Bank of Bombay were some of the prominent shares traded. The
business was conducted under a sprawling banyan tree in front of the Town Hall,
which is now in the Horniman Circle Park
In 1850, the Companies Act was passed and that heralded the commencement of the
joint stock companies in India, it was the American civil was that helped Indians to
establish broking business. The leading broker, Shri Premchand Roychand designed
and developed the procedure to be followed while dealing in shares.
In 1874, the Dalai Street became the prominent place for meeting of the brokers to
conduct their business. The brokers organized an association on 9 th July 1875 known as
"Native Share and Stock Brokers Association" to protect the character, status and interest
of the native brokers. That was the foundation of The Stock Exchange, Mumbai. The
Exchange was established with 318 members.
The Stock Exchange, Mumbai did not have to look back as it started riding high in the
ladder of growth. The Stock Exchange is a market place, like any other centralized
market, where buyers and sellers can transact business in securities at a given point of
time in a convenient and competitive manner at the fairest possible price. In January 1899,
Mr. James
M. MacLean, M.P., inaugurated the Brokers' Hall.
After the First World War, the Stock Exchange was housed property at an old building
near the Town Hall. In 1928, the present premises were acquired surrounded by Dalai
Street, Bombay Samachar Marg and Hamam Street. A new building, the present
[56]
location, was

[57]
constructed and was occupied on 1st December 1930.

In 1950 the regulation of business in securities and stock exchanges became an

exclusively Central government subject following adoption of the Constitution of India.
In Securities Contracts (Regulation) Act was passed by the Parliament of India, to
regulate the securities market, SEBI was initially established on October 12, 1988 as an
interim board under control of the Ministry of Finance, government of India. In 1992, the
SEBI Act was passed through which the SEBI came into existence.
Hence SEBI acquired statutory status on 30th January 1992 by passing an ordinance,
which was subsequently converted into an Act passed by the Parliament on April 4, 1992.
The main objectives of SEBI are to protect the interest of the investors, regulate and
promote the capital market by creating an environment, which would facilitate
mobilization of resources through efficient allocation, and to generate confidence among
the investors. As such, SEBI is responsible for regulating stock exchanges and other
intermediaries who may be associated with the capital market and the process of public
companies raising capital by issuing instruments that will be traded on the capital market.
SEBI has been empowered by the Central Government to develop and regulate capital
markets in India and thereby protect the interest of the investors.

In 1992, Over the Counter Exchange of India (OTCE) came into existence where equities
of small companies are listed. In 1994, National Stock Exchange (NSE) came into
existence, which brought an end to the open cut-cry system of trading securities which
was in vogue for 150 years, and introduced Screen Based Trading (SBT) system. BSE's
On Line Trading System was launched on March 14, 1995. Now the trading in securities
is done using screen based trading method through duly authorized members of the
exchange.

In SBT, investors place buy and sale orders with their brokers who enter the orders in the
automated trading system. When buy and sale orders match, a trade is generated and
trade details are given to the respective brokers. After a trade has taken place, the buyer
has to pay money and the seller has to deliver securities.
On the stock exchange(s), hundreds and thousands of trades take place every day. Buyers
and sellers are spread over a large geographical; area. Due to these problems completing
a trade by paying cash to seller and securities to buyer immediately in execution of

[58]
trades on an

[59]
individual basis in virtually impossible. So the stock exchanges allow trading to take
place for a specified period, which is called as a 'Trading Cycle'.

A unique settlement number identifies each trading cycle. Once the trading period is
over, buyer broker pays money and seller broker delivers securities to the CC/CH on a
predefined day. This process is called as Pay-in. After pay-in, securities are given to the
buyer brokers and the CC/CH gives money to the seller broker. This process is called as
Payout. This process of pay-in and payout is called settlement.
Initially the trading cycle was of one fortnight, which was reduced to one week. The
transactions entered during this period, of a fortnight or one-week, were used to be settled
either by payment for purchase or by delivery of share certificates sold on notified days
one fortnight or one week after the expiry of the trading. The settlement schedules are
made known to the members of the exchange in advance.

The weekly settlement period was replaced by daily settlements, popularly known as
rolling settlements, in which each day is separate trading day. With effect from December
2001, T+5 rolling settlement cycles was introduced for all equities where 'T' is the
'Trading Day' and pay-in and Payout for the settlement was done on 5th business day after
trade day. For example, if T was Monday, the pay-in and payout were done on next
Monday, as Saturday and Sunday are not counted as business days. T+5 cycles were
further shortened to T+3 settlement cycle w.e.f. April 1, 2002.

CURRENT SCENARIO:

SEBI has since introduced T+2 rolling settlements from April 1, 2003. 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 occurs on second
business day after the trade day excluding Saturdays, Sundays, bank holidays and
exchange holidays.

DAY ACTIVITY
T  Trading and daily downloading of statements showing

[60]
 details of transaction and margins at the end of each trading
day
 6 A/7 A* entry by the member- brokers/confirmation by the
custodians
T+1 Confirmation of 6A/7A data by the custodians up to a specified
deadline time. Downloading of securities and funds obligation
statement by members.

T+2 Pay-in of funds and securities and payout of funds and

securities by Pre-specified deadline times. The members are
required to submit the pay in instructions for funds and
securities
to banks and depositories respectively.
T+3 Auction for shortages in delivery of securities
T+4 Auction pay-in and pay-out of funds and securities.

*6A/7A: A mechanism whereby the obligation of setting the transactions done by a

member broker on behalf of a client is passed on to a custodian based on his
confirmation. The custodian can confirm the trades done by the members on-line.

Trading on the on-line screen based system (BSE's On-Line Trading system, BOLT for
BSE and National Exchange for Automated Trading, NEAT for NSE) is conducted from
Monday to Friday between 9:55 a.m. and 3:30 p.m. The scripts traded on The Stock
Exchange, Mumbai are classified into 'A', 'B1', B2','C', 'F',G', and 'Z’; groups.
A, B1, B2 and C groups represent the equity market segment.
F group represents the debt market (fixed income securities) segment.

BSE has commenced trading in Govt. Securities for retail investors under G group w.e.f.
January 16, 2003.

[61]
Z group covers the companies, which have failed to comply with listing requirements
and/or failed to resolve investor complaints or have not made the required arrangements
for dematerialization of their securities with both the depositories.

PROBLEMS WITH PHYSICAL MODE OF SETTLEMENT:

The capital market was a marginal institution in the financial market for almost three
decades after India's independence. However, until late eighties the common man kept
away from capital markets.

Not many companies accessed the capital market and, thus, the quantum of funds
mobilized through the market was meager. A major problem, however, continued to
plague the market. The Indian markets were literally weighed down by the need to deal
with shares in the paper form.

There were problems galore with handling documents -- fake and stolen shares, fake
signatures and signature mismatches, duplication and mutilation of shares, transfer
problems etc. The trading volumes were small due to small investing population.

The following are some of the major problems faced for physical
certificates by the investors:

A]. Inordinate delay in receiving securities after transfer by the companies.

B] Return of share certificates as bad deliveries on account of signature mismatch or

forged signature of transferor or fake certificates.

C] Delay in receipt of securities after allotment by the

companies. D] Non receipt of securities.

E] Procedural delays in getting duplicate shares/debenture certificates.

[62]
F] Storing physical certificates.

Lack of modernization became a hindrance to growth of secondary market and resulted in

creation of cumbersome procedures and paper work. However, the real growth and
change occurred from mid-eighties in the wake of liberalization initiatives of the
Government.
The reforms in the financial sector were envisaged in the banking sector, capital market,
securities market regulation, mutual funds, foreign investments and Government control.

These institutions and stock exchanges experienced that the paper certificates are the
main cause of investor disputers and arbitration cases. Thus, the Government of India
decided to set up a fully automated and high technology based model exchange, which
would offer screen based trading and depositories as the ultimate answer to all such
reforms.
Therefore, the Government of India promulgated the Depositories Ordinance in 1995.
However, both Houses of Parliament passed the Depositories Act in 1996. The
unparalleled success of the introduction of the depository concept in the Indian capital
markets is reflected in the on-going successful reduction in the period between trading
and settlement.

TOTAL D-mat ACCOUNTS (in millions):

YEAR CDSL NSDL TOTAL % IN

GROWTH

2012 7.92 12.04 19.96 -

2013 8.33 12.68 21.01 5.26

2014 8.78 13.05 21.83 3.90

2015 9.61 13.71 23.32 6.83

[63]
 2016 10.79 14.57 25.36 8.75

2017 12.27 15.58 27.85 9.82

2018 14.62 16.99 31.61 13.50

DATA ANALYSIS OF SHAREKHAN LTD.

Sharekhan Limited has its own in-house Research Organization which is known as
Valueline. It comprises a team of experts who constantly keep an eye on the share market
and do research on the various aspects of the share market. Generally the research is
based on the Fundamentals and Technical analysis of different companies and also taking
into account various factors relating to the economy.
Sharekhan Limited’s research on the volatile market has been found accurate most of the
time. Sharekhan's trading calls in the month of November 2007 has given 89% strike rate.
Out of 37 trading calls given by Sharekhan in the month of November 2007, 33 hit the
profit target. These exclusive trading picks come only to Sharekhan Online Trading
Customer and are based on in-depth technical analysis.
Sharekhan has tie up with the following banks:

• HDFC
• Axis Bank
• IDBI
• Citi Bank
• IndusInd Bank
• Union Bank
• ICICI Bank

Customers:

• Business class people (high class)

• High Net Worth Individuals

[64]
 • Service class people
• Government Employees
• Young Adults (19-30 yrs.)
• Adults (35-50 yrs.)
• HUF (Hindu Undivided Family)
• Women (literate and working)

CHARGE STRUCTURE:

Fee structure for General Individual:

Charge Classic Account Speed Trade Account

Account Opening Rs. 750/= Rs. 1000/=
Intra-day – 0.10 % Intra-day - 0.10%
Brokerage
Delivery - 0.50 % Delivery - 0.50%

Depository Charges:

Account Opening Charges Rs. NIL

Rs. NIL first year Rs. 300/= p.a. from second
Annual Maintenance Charges
calendar year onward

BROKERAGE STRUCTURE OF SHAREKHAN

BROKERAGE:

[65]
 INTRADAY DELIVERY
CASH- EQUITIES 0.05% 0.5%
PREPAID SCHEME 0.025% 0.25%

SHAREKHAN BROKERAGE CHARGES 2018:

Customers pays commission(brokerage).When buying or selling stocks through

SHAREKHAN LTD. The brokerage charges for equity. Commodities and currency
derivatives trading for SHAREKHAN LTD. Are explain as follows;

Sharekhan Brokerage Plan – Classic Account

SEGMENT BROKERAGE FEES

FLAT MONTHLY FREE -

EQUITY DELIVERY 0.50%

EQUITY INTRADAY 0.10%

EQUITY FUTURES 0.10%

EQUITY OPTIONS RS 100 PER LOT

CURRENCY FEATURES 0.10%

CURRENCY OPTIONS RS 30 PER LOT

COMMODITY 0.10%

[66]
SHAREKHAN DEMAT ACCOUNT CHARGES 2018:

The Demat account transactions are charged separately from trading commission. Find
Sharekhan Demat Account 2018 .

Sharekhan Depository Services Charges for Resident Retail Customers,

SERVICES (CDSL) SCHEME A (AMC 400) SCHEME B (AMC 500)

Account opening charges Nil Nil

Annual Maintenance RS 400/- p.a RS 500/- p.a

Charges

Sales-Through Sharekhan Nil Nil

Purchases Nil Nil

Brokerage Minimum brokerage of RS Minimum brokerage of RS

16/- per scrips settlements 16/- per scrips settlements
delivery delivery

Sales- not through 0.03% of the value of 0.03% of the value of

Sharekhan /DT/ Offmarket transact on (Min RS 30) transact on (Min RS 30)
transfer

[67]
Dematerialization charges RS 5/- per certificate RS 5/- per certificate

Rematerialization charges RS 50/- per certificate RS 50/- per certificates

Custody Charges Nil Nil

Pledge Creation 0.03% of the value of 0.03% of the value of

transaction (Min RS.100) transaction (Min RS.100)

Freeze / De-Freeze RS 25/- RS 25/-

Additional Settlements RS 10/- RS 10/-

Holdings/transactions

BALANCESHETT OF SHAREKHAN LTD.AS ON 31 MARCH 2018

(RS. In Cr.)

PARTICULAS (IN Rs.CR) MARCH- MARCH- MARCH- MARCH-

2018 2017 2015 2014

EQUITY CAPITAL 35.50 35.50 35.30 35.30

PREFERNCE CAPITAL 51 51 51 51

RESERVE AND SURPLUS 1219 1122 876 698

NET WORTH 1305 1209 962 785

[68]
 MINORITY INTEREST - - - -

DEBT 335 335 360 424

DEFERRED TAX - 0.60 0.50 0.90

LAIBILITY

TOTAL LIABILITY 1641 1544 1323 1210

FIXED ASSETS 103 75.90 81 92

INTANGIBLE ASSETS - - - -

INVESTMENTS 502 2.50 38 151

DEFERRED TAX 23.80 13.10 15 16.40

ASSETS(NET)

NET WORKING (17) (128) 559 430

CAPITAL

INVENTORIES - - 240 264

INVENTORY DAYS - - - -

SUNDRY DEBTORS 271 317 216 118

DEBTOR DAYS - - - -

OTHER CURRENT DAYS 854 550 793 751

SUNDRY CREDITORS (973) (858) (578) (607)

[69]
 CREDITORS DAYS - - - -

OTHER CURRENT (170) (137) (113) (95)

LIABILITIES

CASH 1028 1581 630 521

TOTAL ASSETS 1641 1544 1323 1210

LAST FIVE YEAR PROFIT AND LOSS A/C OF SHAREKHAN LTD AS UNDER.

(Rs.in Cr.)

MARCH MARCH MARCH MARCH MARCH

PARTICULARS 2018 2017 2015 2014 2013

Income

Operating income 51.10 67.57 70.97 60.09 70.03

Expenses

Material Consumed 26.08 30.31 32.22 25.65 37.15

Manufacturing Expenses 6.99 10.36 9.32 7.06 8.45

Personnel Expenses 8.26 8.50 8.34 7.38 6.44

Administrative Expenses 9.54 4.25 3.96 3.93 3.05

Selling Expenses 0.00 10.43 9.17 7.75 9.28

[70]
 Cost of sales 50.87 63.85 63.01 51.76 64.38

Operating Profit 0 .23 3.72 7.96 8.33 5.64

Other Recurring Income 0.57 0.21 0.17 1.98 1.82

Adjusted PBDIT 0 .80 3.92 8.12 10.31 7.46

Financial Expenses 4.84 4.55 4.16 3.06 2.40

Depreciation 1.53 1.13 1.10 0.99 0.76

Adjusted PBT (5.56) (1.76) 2.86 6.26 4.30

Tax Charges (1.88) (0.18) 1.45 1.65 1.92

Adjusted PAT (3.68) (1.58) 1.41 4.61 2.38

Equity Dividend 0.00 0.00 1.10 1.10 0.00

Reported Net Profit (3.68) (1.23) 1.49 4.48 3.64

NET PROFIT FOR THE FIVE YEAR

YEAR NET PROFIT (RS.IN CR.)

2012-13 3.64
2013-14 4.48
2014-15 1.49
2016-17 (-1.23)
2017-18 (-3.68)

[71]
 6
4.48
3.64 Net
4
Profit
2 1.49

- 2 -1.23

-4
-3.6
2013- 2014- 2015- 2017- 201

As per the graph shown above, the net profit of the company in 2007-08 was
increase to 0.76 cr. from the previous year. But after this period the figure was
continuously decline. In 2010-11, the net profit was -3.68 that shows huge loss in
this year compare to previous year. The data regarding profit reflect the negative
sign for the firm. The firm has to take corrective step as fast as possible. The
reason for the huge loss is financial crises

OPERATING INCOME:

YEAR NET PROFIT (RS.IN CR.)

2012-13 70.03
2013-14 60.09
2014-15 70.97
2016-17 67.57
2017-18 51.10

[72]
 80
70.03 70.97 67.57
70
60 60.09
51.1
50
40
30 Operatin
20
10
0 2015- 2017- 2018-
2013- 2014-

The operating income shows the current earning capability of the firm form
current operations. Hear, the firm’s ability was reduced from the previous year
that reflect the ability was reduced in financial year 2010-11.

SWOT ANALYSIS

SCALE GROWING RETAIL NETWORK

-279FRANCHISES + 115 BRANCHES

-1950 SHARP SHOPS

-575 CITIES

TECHNOLOGY REBURST PLATFORM

-PROCESSING 150000 TRANSACTIONS EVERYDAY.

-SCALABLE TO 750000 AT VERY LOW COST / TIME

[73]
 HUMAN CAPITAL -1650 EMPLOYEES AND GROWING LOWER
TURNOVER RATE COMPARED TO INDUSTRY.

-STANDARD PERFORMANCE DRIVEN WORK ETHICS.

BRANDS ONE OF THE MSOT VISIBLE BRANDS SINCE

INCEPTION AMONG THE TOP 3 RETAIL BROKERS IN
INDIA.

Strengths:

• It is a pioneer in online trading with a turnover of Rs.400crores and more than 800
peoples working in the organization.
• SSKI the parent company of Share Khan has more than eight decadesof trust and
credibility in the Indian stock market. In the Asian Money Broker’s poll SSKI
won the “India’s best broking house for 2004” award.

• Share Khan provides multi-channel access to all its customers through a strong
online presence with www.sharekhan.com, 250 share shops in
130 cities and a call-center based Dial-n-Trade facility

• Share Khan 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:

• Localized presence due to insufficient investments for country wide expansion.

• Lack of awareness among customers because of non-aggressive promotional

strategies (print media, newspapers, etc).

• Lesser emphasis on customer retention.

[74]
 • Focuses more on HNIs than retail investors which results in meager market-share
as compared to close competitors.

Opportunities:

• With the booming capital market it can successfully launch new services and raise
its client’s base.
• It can easily tap the retail investors with small saving through promotional
channels like print media, electronic media, etc.
• As interest on fixed deposits with post office and banks are all time low, more and
more small investors are entering into stock market.
• 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.
• Increasing usage of internet through broadband connectivity may boost a whole
new breed of investors for trading in securities.

Threats:

• Aggressive promotional strategies by close competitors may hamper Share

Khan’s acceptance by new clients.

• Lack of sufficient branch-offices for speedy delivery of services.

• Other players are providing margin funds to investors on easy terms where as
there is no such facility in share khan.

• More and more players are venturing into this domain which can further reduce
the earnings of Share Khan.

[75]
 CHAPTER – V

CONCLUSION AND SUGGESTION

CONCLUSION

Dematerialization, has enabled the Indian Capital Market to grow exponentially as

measured in terms of amount raised from the market, number of stock exchanges and
intermediaries, the number of listed stocks, market capitalization, trading volumes,
turnover on stock exchanges and investors population. The enactment of Depository Act,
August 1996 paved the way of establishments of NSDL, the first depository in India.
NSDL ensures the safety and soundness of Indian Market placed by developing
settlements solutions that increase efficiency, minimize risk and reduced costs.

Depository Systems are very common worldwide and have made the security
transactions a lot more efficient and effective. There are various services offered by the
Depository System through Depository participants to its clients, these are account
opening.
Dematerialization, Rematerialization , transmission and nomination, settlements of trade,
stock lending and borrowings , pledging ,freezing of Demat accounts. It has also instilled
confidence in the capital markets worldwide. Though many peoples do not understand
how the NSDL operates, once you go through the systems you will realizes that it is very
simple. For, those that are looking to put a freehold on the security market, it is important
that even though you may not necessarily be a stockholder, you have an idea how the
NSDL operates.

To conclude, it can be said that the research finding clearily reveal the goodwill and
reputation of Depository system among the customers. But there is need to strengthen this
depository system by spreading awareness about the services offered by NSDL, CDSL
and its trading companies through advertisement and by expanding the more branches of
this system all over the country and also by tapping the potential customers to make
peoples fully aware of this system and all of its services. So that people can avail
maximum benefits of this revolutionary systems.
[76]
 SUGGESTIONS:

 Most of the respondents are ready to take either no risk or normal risk while doing
the investments.
 From the test it can be recommended to the Sharekhan Ltd. that it should attract
more businessman and private firm employees, because they are persons
processing IT infrastructure.
 Many peoples do not do this business because of the lack of proper market
knowledge. And hence they should be made aware of the trends of the market.
 People refers Online Trading as a secondary business, because liquidity is high in
the business. Therefore, some steps should be taken to explain this scenario to all
knowledgeable class by proper marketing.
 Trusted brokers can easily get online traders because of timeless and right tips on
trading, therefore Sharekhan Ltd. should make his brand name strong enough to
convince the customers for online trading through more advertisement.

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 BIBLIOGRAPHY

BOOKS:

 Investment Management - Preeti Singh

 Secondary Market and its

Functions - I.M.Pandey

 Referred related articles, references, journals, and certain websites.

WEBSITES:

 https://www.slideshare.net/gandhichintan/project-report-of-share-khan
 http://www.indiainfoline.com/company/sharekhan-ltd-balance-sheet/finacials/28650
 https://g.co/kgs/16V2jv
 www.moneycontrol.com
 https://www.tofler.in/sharekhan-limited/compay /U99999MH1995PLC087498/
financials

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