COMPARATIVE ANALYSIS OF BROKERAGE FIRMS

Submitted on completion of Summer Internship Programme At Kotak Securites Limited, Netaji Subhash Place, Pitampura, New Delhi.

Submitted To: Mr. Varun Aggarwal Unit Manager Kotak Securities

Submitted by: Gurleen Kaur

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES (Aff. to Guru Gobind Singh Indraprastha University)

Undertaking
The project Comparative Analysis Of Brokerage Firms is submitted to Mr. Varun Aggarwal as a Summer Training Project for MBA, 2005-2007. Company Name: Kotak Securities Limited Unit Manager: Mr. Varun Aggarwal

CERTIFICATE

This is to certify that Gurleen Kaur, a student of Master of business administration (MBA),Rukmini Devi Institute of Advanced Studies (affiliated to G.G.S. Indraprastha University) (bearing enrollment no.1071593906), has undertaken the summer internship training at KOTAK SECURITIES ( PITAMPURA BRANCH), during________________________. She has worked under my guidance for the project title COMPARATIVE ANALYSIS OF ONLINE BROKING FIRMS. Mr. Varun Aggarwal (Unit Manager- Kotak Securities, Pitampura branch) and Mr.Saurav Singhai (Relationship Manager) have also guided her. This project report is prepared in partial fulfillment of master of business administration (MBA) to be awarded by Rukmini Devi Institute of advanced studies, affiliated to G.G.S. Indraprastha University, Delhi. To the best of my knowledge, this piece of work is original and no part of this report has been submitted by the student to any other institute/university earlier.

Miss Shikha Garg Finance Lecturer Rukmini Devi institute of advanced studies

Acknowledgement
Any work in this world would be practically impossible without a proper and constant guidance. Efforts alone do not get you success, rather it is the right effort in right direction that helps you attain your objectives. It gives me great pleasure acknowledging the invaluable assistance to me by various personalities in the successful completition of the project. At the very outset, I would like to convey my heartful gratitude to Mr. Varun Aggarwal, the Unit Manager of branch. I am indebted to my guide Mr. Saurav Singhai for his useful insights and valuable suggestions that he gave me during preparation of the project. My acknowledgement would be incomplete if I do not thank Mr. Saurab Gupta, team leader of the branch. Their unremitting inspiration and encouragement helped this report to take final shape. Gurleen Kaur

Table of Contents
Serial Number Section A Section B Section C Section D Section E Section F Section G Section H Topic Executive Summary Introduction of Indian Stock Market Research methodology and literature review Profile of Kotak Securities Profile Of competitors Comparative Analysis Situational Analysis Summary and Recommendations Annexure and Bibliography

Table of Charts
Figure 1..............................................................................................................................12
5

Figure 2..............................................................................................................................13 Figure 3..............................................................................................................................13 Figure 4..............................................................................................................................14 Figure 5..............................................................................................................................15 Figure 6..............................................................................................................................67 Figure 7..............................................................................................................................68 Figure 8..............................................................................................................................74 Figure 9..............................................................................................................................75 Figure 10............................................................................................................................76 Figure 11............................................................................................................................77 Figure 12............................................................................................................................78 Figure 13............................................................................................................................79 Figure 14............................................................................................................................80 Figure 15............................................................................................................................81 Figure 16............................................................................................................................83

Executive Summary

The project aims at projecting a comparative study of different brokerage firms on different basis. The project aims to find the best options available for different consumers according to their tastes and needs. The project has been divided in various sections. The first section gives an introduction about Indian Capital Market, the recent changes that have taken place in Indian Capital Market and reasons for choosing India as an investment hub. The second section talks about the research methodology followed in making comparison and the literature sources used for collecting the data. The third section gives detailed profile of Kotak Securities, covering its products, services and fee structure. The fourth section gives profile of its 6 competitors namely India Bulls, Reliance Money, Share khan, ICICI Direct, HDFC Securities and Angle Broking. The fifth section gives comparative study of 7 brokerage firms chosen specifying their strengths and weakness. The sixth section provides the interpretation of the questionnaire. It also covers the situational analysis specifying best available options for the investors under different situations. The last section provides the summary of the project and recommendations thereon.

Section A

INTRODUCTION MARKET
Introduction of financial market. Introduction of Capital Markets Concept of stock exchange

OF INDIAN STOCK

Changing phase of Indian Stock Market Major developments in Equity Brokerage Industry Why invest in Indian Capital Markets

a)

Introduction about Financial Markets

Financial market is a mechanism that allows people to easily buy and sell the financial securities, commodities and other fungible items of value at low transaction costs and at prices that reflect efficient markets. Markets work by placing many interested sellers in one place, thus making them easier to find for prospective buyers. Financial markets facilitate: Raising of capital (in capital market) Transfer of risk (derivative markets) International trade (currency markets)

There are different types of financial markets:

Financial markets Financial markets

Capital markets Capital markets

Commodity Commodity

Derivatives Derivatives

Foreign exchange Foreign exchange

Stock Stock

Bonds Bonds

b)

Introduction about Indian Capital Markets

Indian stock market is one of the oldest in Asia. It dates back to 200 years ago. It has passed through different phases.

East India Company used Indian Stock Market to transact its business in loan securities towards close of 18th century.

By 1830 business on corporate stocks and shares in Bank and Cotton took place in Bombay.

In 1850 rapid development of commercial enterprise and brokerage business took place.

In 1860 end of American War brought about disastrous slump in stock market.

In 1887 Native Share and Stock Brokers association was formed in Bombay. In 1899 finally Bombay Stock Exchange was inaugurated. In 1874 Dalal Street was discovered by the brokers thrown out during war so as to start transacting freely

hhhhh In 1887 Native Share and Stock Brokers association was formed in Bombay. In 1899 finally Bombay Stock Exchange was inaugurated. 10

c) Concept of Stock Exchange

Stock Exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks .

Indian Stock Exchange

There are about 22 stock exchanges in India but the two most important of them are:

Bombay Stock Exchange: BSE is the oldest stock exchange in Asia. It is located in the Dalal Street in Mumbai. This stock exchange was set up in year 1875. Today it has around 3500 companies listed with the exchange and has the highest trading volume. It is one of the biggest stock exchanges in the world. It was recognized by GOI in year 1956 under Securities and Exchange Board of India.

National Stock Exchange: NSE is the leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen- based trading system with national reach on its recognition as a stock exchange under Securities Contracts (Regulation) Act, 1*956 IN April 1993. NSE commenced its operations in 1994.

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d) Changing Phase of Indian Stock Market

In tune with the global stock markets that began to recover from the second half of 2003; Indian stock markets too witnessed rapid growth. Indias two leading indices, the most popular BSE Sensex, and the one most used by the markets the National Stock Exchanges S&P CNX Nifty rose to record levels. Both primary and secondary market activity experienced sharp surge. Much progress has been made in further strengthening and streamlining risk management, market regulation and supervision. A few aspects of the major developments in the Indias stock markets are described below:

Market structure: Indian Securities Market is fairly large as compared to several other emerging markets. There has been a significant improvement in number of stock exchanges, brokers, sub-brokers, FIIs.

12000 10000 8000 6000 4000 2000 0 1946 1961 1971 1975 1980 1985 1991 1995 num ber of stock iss ued by listed com panies listed com panies

Figure 1

12

bombay

calcutta

12000 10000 8000 6000 4000 2000 0 banglore ahmedabad

brokers delhi national se sub-brokers

Figure 2

Market capitalization: There has been steep rise in market capitalization of both BSE and NSE which can be shown as under:
40000 30000 20000 10000 0 97 99 2002 2004 2006 NSE BSE

Figure 3

Equity Issusance: There has been changing trend of issusance of the equity in the form of public issues, rights issues, IPOs.

13

1500 1000 500 0 93-94 95-96 98-99 00-01 20022003 20052006 equity issusance

Figure 4

Trading volumes: Secondary market operations gained greater momentum in the last decade. In the last 10 years the value of both NSE and BSE rose 6 times making the Indian Stock markets the leading markets in Asian region and also remarkable as compared to growth in world equity market.

14

16000 14000 12000 10000 8000 6000 4000 2000 0 98-99 00-01 2002-2003 2005-2006

nse bse

Figure 5

e) Major developments in the Equity brokerage industry:

Corporate Membership: There is a growing surge of corporate memberships and the scope of functioning of the brokerage firms has transformed from that 15

of being a family run business to that of professional organized function that lays greater emphasis on observance of market principles and best practices.

Wider Product offerings: The product offerings of brokerage firms today go much beyond the traditional trading of equities. A typical brokerage firm today offers trading in equities and derivatives, most probably commodities futures, exchange traded funds, distributes mutual funds and insurance and also offers personal loans for housing, consumptions and other related loans, offers portfolio management services, and some even go to the extent of creating niche services such as a brokerage firm offering art advisory services.

Greater reliance on research: Client advising in India has graduated from personal insights, market tips to becoming extensively research oriented and governed by fundamentals and technical factors. Vast progress has been made in developing company research and refining methods in technical and fundamental analysis.

Online broking: Several brokers are extending benefits of online trading through creation of separate windows. Some others have dedicated online broking portals. Emergence of online broking enabled reduction in transaction costs and costs of trading.

Foreign collaborations and joint ventures: The way the brokerage industry is run and the manner in which several of them pursued growth and development attracted foreign financial institutions and investment banks to buy stakes in domestic brokerage firms, paving the way for stronger brokerage entities and possible scope for consolidation in the future.

f) Why invest in Indian Capital Market? India is one of the fastest growing economy in the world. Investment in Indian market is prefered because:

16

Business Week says that of 100 emerging market firms which are rapidly globalising 21 are Indian Firms. Economists project India to become the third largest economy in the world by 2040. Indian Capital Market regulator has acquired international credibility in the leadt possible time. Disclosure and investor protection guidance are available. Indias accounting standards are close to international standards. India will become regional hub for bond trading once a free financial zones are set up. Mutual funds are permitted to invest overseas upto $3 billion. SEBI has made corporate governance guidelines mandatory for listed companies. Clearing Houses and corporations with novation in place.

Section B
RESEARCH METHODOLOGY

17

Research methods Hypothesis Formulation Sample Design Collecting data Analysis of data.

Research Methodology

The project Comparative Analysis of Brokerage Firms has evolved a descriptive as well as analytical study.

18

1) It involves descriptive research in the sense as it involves stating the functioning of the different units. It involves surveys and fact finding enquires of different kinds. 2) The project has also used analytical approach to derive solutions. The data collected has been used to derive strengths and weakness which is thereupon used to evolve answers to situational problems.

Hypothesis Formulation: The null hypothesis drawn is that the investor is indifferent between the brokerage firms. The alternate hypothesis is that investor differentiates between brokerage firms and makes the best choice.

Research Design: Since the project majorily involves descriptve study so the research design chosen is rigid which involves specific guidelines to reach thr results. The data collected is on specific parameters.

Sample Design: The population in this case is all the brokerage firms playing in India. The sampling design chosen here is a combination of Judgemental and conveinance design. For this 7 prominent brokerage firms have been chosen namely Reliance Money, Kotak Securities, India Bulls, Share Khan, ICICI Direct, HDFC Securities and Angel Broking.

Collecting the Data: Data was collected both from Primary as well as Secondary Sources.

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1) Primary Sources: The Primary Sources includes data collected from

the employees of the firm through direct personal as well as telephonic interviews . For filling the questionnarie the data was collected from the present as well as the prospective clients of Kotak Securities Limited.

2) Secondary Sources: A large amount of information was obtaines

through ths brouchers and pamphlets provided by respondents. Vast information was also available on the web sites of companies.

Analysis of Data: The data collected is coded, edited and tabulated to draw meanongful results. The refined data is then converted into barcharts , tables and diagrams to draw meaningful results.

Section C

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COMPANY PROFILE KOTAK SECURITIES

Introduction Products and variants available Services provided Fees and Opening formalities.

21

KOTAK SECURITIES

Company Profile

a) Introduction :
Kotak Securities is one of Indias leading stock broking houses providing a platform for investments in shares, commodities, IPOs, Mutual Funds, and Future & Options etc. Kotak Securities Limited (KSL) is a strategic joint venture between Kotak Mahindra Bank and goldman Sachs (One of Worlds leading In vestment Banks and brokerage firms, holding 25% stake in the company) is Indias leading stock broking house with a market share of close to 9%. The company was set up in 1994 and is a corporate member of both BSE and NSE. Its distribution includes both stock broking and distribution of financial products including private and secondary placement of debt and equity and mutual funds. KSL is a depository participant with NSDL and CDSL providing dual benefit services wherein the investors can use the brokerage service of company for executing the transaction and depository services for settling them. Kotaksecurities.com is the online division of Kotak Securities Limited that makes the trading of financial instruments easy and fast.

22

b) Products and Variants Available: KSL provides its customer the facility of
trading in various financial instruments like equity (both delivery and intraday), futures and options, commodities. It provides both on-line as well as off-line. The various variants of equity available are:

Auto Invest: It is a product based on Systematic Investment Planning that gives the investors the opportunity to gradually build a diversified portfolio while averaging the cost of their investments. It is Indias first SIP in Direct Equity and Mutual Fund together. The concept not only provides diversification but also gives compounding effects to investments. This account is ideal for those Indian investors who do not often have a lump sum amount to invest and wish to enjoy the benefits of both equity and mutual funds. It is unique from general SIP in a way that it assesses the risk profile and investment objectives of the investors, the practice that mutual funds fail to practice. The investor need to invest minimum of Rs.5000p.m. to trade through this product. BROKERAGE CHARGED: 2% per transaction.

Kotak Super Saver: It is a product beneficial for small traders that want to trade in equity market at a flat brokerage rate irrespective of their turnover. Here a flat rate is charged on sale purchase transactions of delivery, intraday and future-options. Minimum Margin required for starting the account is Rs.25000.

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BROKERAGE CHARGED: Transaction Delivery Intra-Day Futures Brokerage Charged .45% .05% .06%

Advance brokerage of Rs.2000 as upfront brokerage is charged.

Kotak Gateway: it is the product available to the investors

starting the account with an initial margin of anywhere between Rs.0500000. Here the brokerage is charged according to the turnover generated during a month. BROKERAGE CHARGED: 1) Delivery: Turnover <100000 100000-500000 500000-1000000 Brokerage (%) .59% .55% .45%

2) Intra-Day: Turnover <2500000 Brokerage (%) .06

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3) Futures: Turnover Brokerage (%) Intraday <2 cr. .07 settlement .09

4) Options: Turnover Brokerage (%) Intraday Upto 4 lac. 4-11 lac 2.5 2.25 settlement 2.5 2.5

EXPOSURE GIVEN: The exposure is given in the gateway products ranging from 4 times (on A category), to 3 times (on B category), to 2 times (on C category).1

Kotak Value: It is a product that investors can avail by starting with an initial investment of 5-10 Lacs. Here the brokerage is charged according to the turnover generated in a month. The brokerage is charged as under: BROKERAGE CHARGED:

1) Delivery:2 Turnover 1000000-2000000 2000000-6000000 6000000-2cr. Brokerage (%) .36 .27 .23

1 2

The categories of stock divided are based on fundamental and reputation of the company. The brokerage is charged on every transaction according to volume. The total transactions amount is calculated at the end of month. The brokerage rate for that month is then decided and balance is debited and credited according to the case.

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2) Intraday: Turnover 2 cr.- 5 cr. 2500000-2cr. Brokerage (%) .04 .05

3) Futures : Turnover Brokerage (%) Intraday 5.5 cr.- 10cr. 2 cr. 5.5 cr. .036 .045 settlement .046 .073

4) Options:
Turnover Brokerage (%) Intraday 11-20 lac 1.8 settlement 2.3

EXPOSURE GIVEN: The exposure given varies from 5 times (on A category stocks), 4 times (on B category stock), 3 times (on C category stocks).

Kotak Privilege: It is the product for clients having an initial investment of more than 10 lacs. Here also the brokerage is charged on the basis of turnover. BROKERAGE CHARGED: 1) Delivery: Turnover > 2 cr. Brokerage (%) .18

26

2) Intraday:

Turnover > 5cr.

Brokerage (%) .03

3) Futures: Brokerage Turnover 10 cr.-25 cr. >25 cr. Intraday .027 .023 settlement .046 .032

4) Options: Brokerage Turnover 20-50 lacs >50 lacs Intraday 1.35 1.15 settlement 2.3 1.6

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EXPOSURE GIVEN: The exposure varies from 6 times (on A category), 5 times (on B category), 4 times (on C category), 3 times (on D Category).

Kotak Portfolio Management Services: KSL is one of the oldest in the field of Portfolio Management Services. In this product the Financial Planner controls the portfolio of investors. The financial planners thoroughly discuss and understand the desires of each client, their financial goals, risk appetite, time constraints and accordingly tailor make their portfolios and manage it. PMS combines competent fund manager, dedicated research and technology to ensure rewarding experience for clients. The minimum initial margin required to start the account is Rs.5 Lacs. The BROKERAGE is charged @1% per transaction.

Kotak Assistance: it is a privileged broking service that is designed to assist client in making the right decision at the right time. The experts of Assist Investment Team constantly evaluates the market conditions and let the client know when and where to invest. Minimum margin required would be 5 lacs. In the case margin is between 5-10 lacs then entire margin need to be in cash but if the margin amount is more than 10 lacs then a minimum of 5 lacs or 25% would be in cash.

BROKERAGE CHARGED: 28

Margin Amount Rs.2 cr.+ Rs. 1-1.99 cr. Rs. 50-99.99 lacs Rs. 25-49.99 lacs Rs. 10-24.99 lacs Rs. 5-99.99 lacs 5 lacs margin Delivery .50% .60% .7 .8 .8 1.25 1.25

Brokerage Square off .07% .07% .07 .07 .07 .07 .07

Derivatives .07% .07% .07 .07 .07 .07 .07

SERVICES PROVIDED Kotak securities is a brokerage firms providing investors the opportunity to trade in equity, mutual funds, commodities, IPOs, Futures and Options. It provides numerous services which make it a leading name in stock market. The services provided are as under:

2-way trading: KSL provides its clients the facility to trade on-line as well as off-line. In case of on-line all the trading is done through a terminal provided by the company. In case of off-line orders can be booked, rates can be asked on telephone.

KEAT Software: The Company provides to its client a software called KEAT (a java enabled software). It is user friendly software that makes the trading and research easier for the client. The clients get the desktop version that helps to prepare a watch list containing 25

29

scrips. The privileged clients get the Premium Version that helps to view scrips of n companies as well as the technical aspects.

Service Providers: KSL attaches with its client two different personalities Relationship Manager (RM) and the Advisor. The RM remains in contact with client, opens his account, carries the documentation work. The Advisor looks into the needs of clients, advises him on the portfolio management. He even provides the delivery and intra-day tips on daily basis.

Research Centre: KSL has its research centre at Mumbai where daily research of the stock market is done and the research reports are delivered to the clients. Research Team has good experience of 10-12 Years. The research reports include daily morning briefs, market update, weekly technical analysis, sector reports, and monthly research reports.

SMS facility: Clients can get daily trading tips via SMS on payment of a minimal charge. BNST-G facility: KSL provides to its clients the facility of Buy Now Sell Tomorrow Guaranteed, under which clients can sell 75% of their stock even before getting delivery of it in its demat account. This is possible because Kotak has its own Mutual Fund house to provide surplus stocks. The payment for BNST-G is to be made within T+5 days from the day of buying the stock.

Wide retail distribution: KSL has around 835 outlets in 295 cities. It has around 7000 agents and about 20 franchises. Such wide retail distribution helps in ensuring wide coverage.

Intraday Exposure: KSL provides the facility of 15 times exposure on the intraday transactions to the heavy traders. But the payment has to be made the same day by 3:10 p.m. otherwise the shares are squared-off.

Mutual Fund Funding: KSL is the only company that provides funding for buying the stock against the mutual funds in the demat account. Exposure provided is 5 times which is to be returned after T+5 days.

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Commodities Trading: The commodity trading is performed off-line. The minimum margin required for agricultural goods is Rs.50000 and for industrial goods is Rs.1 lac.

FEES AND OPENING FORMALITIES:

a) Opening Formalities: Some documents are required to open the account. These are PAN card copy, address proof, photographs and cheque. KSL has bank linkages with 5 banks- ICICI, HDFC, Kotak Mahindra, UTI, and CITY. In case client does not has linkages with the above mentioned bank then a zero balance account can be opened with Kotak Mahindra It takes about 7-8 working days for the account to get activated.

b) Opening Fees:

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Account Name Gateway (margin up to 5000) Gateway (margin from 50000-5 lacs) Kotak value Kotak Privilege Kotak Supersaver

Charge 1200 750 750 750 500

Refund months 300 250 750 750 -

after

3 Net 900 500 0 0 500

c) Other Charges: Apart from the brokerage on transactions KSL also charges: Monthly Demat Charges of Rs.30 Service Tax of 12.36% on brokerage. Securities Transaction Tax is charged @ .125% of turnover in delivery transactions, .025% of turnover in intraday transactions and .017% of turnover in derivative transactions. Interest on non payment of exposure amount varies from 15-20%p.a. The interest is charged from the day stock are delivered in the demat account of client.

SMS facility charges are Rs.100 per month. Keat Premium can be availed by clients on the payment of Rs.500 p.m.

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SECTION D

COMPANY

PROFILE

OF

COMPETITORS

OF

KOTAK SECURITIES LIMITED

Profile of India Bulls Profile of Reliance Money Profile of Share Khan Profile of ICICI Direct Profile of HDFC Securities

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Profile of Angle Broking

INDIA BULLS

Company Profile
A) Introduction

India Bulls is Indias leading financial services and real estate company having large number of branches and serving the needs of large number of customers with its wide range of financial services and products from securities, derivatives trading, depositary services, research and advisory

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services, consumer secured and unsecured credit, loan against shares and mortgage and housing finance. India Bulls Financial Services Ltd. is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. Business of the company has grown in leaps and bounds since its inception. Revenue of the company grew at a CAGR of 159% from FY03-FY07. During the same period profits of the company grew at a CAGR of 184%.

b) Phases of growth

India Bulls has emerged as one of the leading and fastest growing financial company in less than 2 years, since its Initial Public Offering in September 2004. It has a market capitalization of around 2350 million (25 April 2007) and consolidated net worth of group is around USD 510 million. 2000-2001 India Bulls Financial Services Ltd. Established Indias one of the first trading platforms with the development of an In-house Team. 2001-2003 India Bulls expands its service offerings to include Equity, F&O, wholesale debt, mutual funds, IPO distribution and equity research.

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2003-2004 India Bulls ventured into insurance distribution and commodities trading. Company focused on brand building franchise model.

2004-2005
India Bulls came out with an IPO in September 2004. India Bulls started its customer finance business. India Bulls entered the real estate business market & became the first company to become company to bring FDI in real estate. 2005-2006 India Bulls has acquired over 115 acres of land in Sonepat for residential home site development. Merrill Lynch and Goldman sac, one of the renowned investment banks in the world has increased their shareholdings in India Bulls. India Bulls is a market leader in securities brokerage industry. Farallon Capital and its affiliates, the worlds largest hedge fund committed Rs.2000 million for India Bulls subsidiaries viz. India Bulls Credit Services Ltd. And India Bulls Housing Finance Ltd. 2006-2007 India Bulls ventured into commodity brokerage business. India Bulls Financial Services resolves India Products Available And Ltd. BoardIndia Bullsto amalgateLtd. Bulls Credit Services Ltd. demerge Securities

Products
a) Securities

(Equity Research, Commodities, Internet Trade, Online IPO, Future & options) b) Consumer Finance

(Personal Loans, Auto Loans, Commercial Loans, Vehicle Loans)

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c) Mortgage

(Home Loans, Loan against Property) d) Real Estate Development

(Commercial Development, Residential Development, SEZs)

D) Services Provided:

1) Securities Operation:

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India Bulls provide both on-line as well as off-line facilities in case of securities. In case of online it provides two types of terminals.

Using web site as terminal helps to display just 30 scrips and requires separate screen for F&O

Using Software Power India helps to view 100 scrips and shows 4-5 screens together.

India Bulls provide BNST-G facility i.e. Buy Now Sell Tomorrow in which 100% stock can be sold before taking the delivery of stock. The clients are attended by two personalities- dealer who just places order on behalf of client AND relationship manager who opens the accounts of interested customers, advices them on different investment options and manages their portfolio. Cash Exposure given on Delivery is 4 Times and on Intraday is 8 Times. Stock Exposure of 4 times is also provided on the stock present in the Demat Account.

2) Commodities Operation:
The commodities operation is performed off-line. It involves trading in both agricultural goods as well as metals.

E) Opening Formalities and Fee Structure:

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1) Opening Charges:
Documents required for opening the account are: PAN card, Address Proof, photographs, cheque of the linked banks. Bank linkages withICICI, IDBI, HDFC. Account Opening Charges: Rs.900, refundable at time of closure of account. 5 working days are required for activation.

2) Brokerage Rates:
Delivery Varies from 50p to 10p Intraday - 10p Futures - 10p Options - 2.5% or Rs.100 whichever is higher

3) Other Payments:
Payment of Rs.750 for using Software- Power India Bulls. Payment of exposure amount on delivery and intraday is to be made within 7 days of buying and the interest @18-20% is charged from the day of sale. Payment of Rs.750 to be made for getting the margin account operated. There are no account maintenance charges. The service tax of12.36% is charged on the brokerage. The Security Transaction Tax is charged @.125% of turnover in the delivery transactions, @.025% of turnover in the intraday transactions, @.017% of turnover in the derivative market.

The stamp duty charged is Re.1 on Rs.10000 for delivery and futures. No stamp duty is charged for intraday

F) Miscellaneous:

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1) There are about 4000 relationship managers in the India Bulls branches. 2) The target for the relationship managers is in the form of brokerage they have to achieve as a percentage over their salaries. 3) India Bulls has about 640 branches all over India. (Initially there were 750 branches). There are no franchises or sub-brokers. 4) The service that makes India Bulls distinct from other brokerage firms is provision of margin account. Apart from normal cash account they provide the facility of margin account which provides 2 times exposure on the amount maintained in the account. The amount traded can be repaid within 1 year. (The exposure provided in cash basis is to be repaid within 7days). In case the stock is sold before the provided time period of 1 year then net amount after deducting the amount of exposure is transferred to the trading account. Interest has to be paid @ 18-20%.

Reliance Money
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a) Introduction: Reliance Money is part of the Reliance Anil Dhirubai Ambani Group and is promoted by Reliance Capital, the fastest growing private sector financial services company in India, ranked amongst the top 3 private sector financial companies in terms of net worth. Reliance Money is the flagship of Reliance ADA Group for its foray into Equity Commodity and forex broking in India. Through its state of art of online trading platform Reliance Money is making its active foray into equity, commodity and forex broking. For the first time in India R trade will provide the Indian investors the facility of trading in equity, commodity and forex, derivatives, mutual funds, IPOs, insurance, credit cards on a single platform. Travelmate Services India Pvt. Limited was taken over by Reliance Money and is now into the business of full fledged money change business and money transfer business. Reliance Money is a single window for all financial transaction needs. It is a comprehensive electronic transaction platform offering a wide range of asset classes. Its endeavor is to change the way India transacts in financial services.

b) Products Available:

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Equity, Derivatives, Mutual Funds: It provides both online as well as offline facilities for trading in equity, derivatives (Futures, Options, Warrants, and Swaps).

IPO: It has made possible to apply in IPOs without going through the hassles of filling any application form Commodities: It provides a base for trading in commodities. The trading in commodities has not been started on a full fledge scale. Forex: It provides facility of money remittance (one side facility). It has agreement with Western Union in this regard. Insurance:

Insurance

General Insurance

Life Insurance

G.I.: It provides wide range of insurance products that covers most risks including property, marine, casualty and liability. It has link ups with IFCO for this. L.I.: It provides comprehensive financial solutions which it has links with Tata/ HDFC in this regard. besides offering financial security provide opportunity for saving, tax planning etc.

c) Services Provided:
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1) Securities Operation:
Reliance money provides both on-line as well off-line facilities for trading in equity, derivatives, and mutual funds. The software called Insta-Trade allows monitoring of n scrips at a moment. It provides the facility of ATST (Acquire Today Sell Tomorrow). In this 100% stock can be sold before getting the delivery. There is no exposure in delivery transactions. Exposure of 5 times is provided in case of intraday.

2) Service Provider:

Direct Executives: The clients can be made directly by the sales force of the company and can be handled by the operations department.

Franchises: Franchises both big established houses and small firms act as a sub-broker for Reliance Money. In some cases because of insufficient funds the advisory services are provided by the broker but if the franchisee has ample funds then it can itself handle the advisory job.

Agents: Reliance Money also has agents which are individuals working to get clients for the company in return of commission. The work of agents is only restricted to getting clients for the company. After services are handled by the company itself.

c) Opening Formalities and fee structure:

1) Opening Charges

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The documents required are 3 photographs, pan card copy, bank statement, and address proof. Reliance Money has linkages with UTI, HDFC, and IDBI. It requires 7 working days for the account to get activated. There is Rs.750 account opening charges that are one time charge and non-refundable.

2) Other charges:
A flat fee as a brokerage is charged irrespective of the turnover. This fee is valid for specified months or specified transaction value. A detailed chart is given as

Accesss Fee

Validity (whichever is earlier) Time validity Turnover

Turnover Limits Non-delivery Delivery Turnover Rs. 10 lac Rs. 30 Lac. Rs. 60 lac.

500 1350 2500

Validity Turnover 2 months Rs. 1 cr. Rs. 90 lac 6 months Rs. 3 cr. Rs. 2.7 cr. 12 months Rs. 6 cr. Rs.504 cr. (The brokerage is inclusive of Service Tax)

An annual charge of Rs.50 is taken towards the demat maintenance.

Time Period 1 Month 2 Months

Charges (Rs.) 125 300

6 Months

600

The Security Transaction Tax and Stamp Duty is charged Daily tips through SMS are given. The SMS charges are:

3) Miscellaneous:

44

There is no special advisory base. Most of the advisory need to be managed by the sub-brokers. There are about 240 branches and about 1440 franchisees.

SHAREKHAN

a) Introduction

45

Sharekahan is one of Indias leading brokerage firms. It is the retail arm of SSKI. It has been in this business since over 8 decades. Sharekahan was created when SSKI Investor Services Pvt. Limited, a company in the securities and equities segment decided to harness the power of Internet and offer services to the customer through an online stock broking portal. The company offers its services through a combination of online and offline channels. The online model comprises a portal, chat facilities and speed trade terminals. And the off-line model uses a combination of an IVR infrastructure and a team of customer agents to receive orders over the telephone. Sharekhan offers trade execution facilities which are also core service for cash as well as derivatives such as equity and derivative trading on BSE&NSE, depository services, online trading, IPO services, commodities trading on MCX& NCDEX and Portfolio management services. Sharekhans added services like research, stock ideas, demat, online trading for customers so as to make investment experience of customers rewarding. At the heart of company are the trading platform and the risk management services.

b) Products Available:

46

47

c) Services Provided:

48

1) Securities Operation: It provides both on-line as well as offline facilities for trading inequity shares, mutual funds, future, and options. The software is free of cost and can show 50 scrips at a time. The commodities are traded off-line and the margin required for starting the trading is Rs.10000. PMS Pro-Prime: Sharekhan provides the service of managing the portfolio, risk and profit of client using multi pronged analysis approach.

PMS Pro-Tech: Sharekhan has introduced this service for managing the portfolio of clients with high risk profile using the tenants of technical analysis.

Sharekhan Valueline: It provides the monthly investment report based on fundamental research with stock ideas, stock updates and earning guidelines.

It provides the BNST-G facility in which 100% stock can be sold before taking the delivery. It provides the exposure of 4-6 times on both delivery as well as intraday transactions. It also provides both delivery and intraday tips through SMS.

2) Service Providers:
The clients are handled by the Relationship Managers that make clients, advice them and effectively handle their portfolios. The advisory has an experience of 3-4 years.

The services are also provided by the 500 franchisees of Share khan. The services are also provided through various share shops (640 in number). These have friendly customer service staff.

d) Charges:

49

1) Opening Formalities and Fees: The documents required are PAN card copy, address proof, photographs, cheque as margin money. The opening fee is Rs.750 which is a one time nonrefundable charge. It has links with HDFC, ICICI, UTI, Oriental Bank of Commerce, IDBI, CITY, YES Bank, Union Bank of India, Bank of India, and Centurion Bank. It takes 7-8 working days for the account to get activated.

2) Other Charges: Account Maintenance Charges are Rs.300 per year. AMC for PRO Prime is 2.5% while foe PRO Tech is nil. Brokerage: Delivery0.50, Intraday---0.10, F&O0.10. Brokerage in case of PRO Prime and PRO Tech is .5%. Service Tax and Securities Transaction Tax are applicable. SMS facility can be availed @ Rs.100p.m. The interest is charged on the exposure granted from the day of availing exposure @14%p.a.

e) Miscellaneous: There are about 500 branches of Share khan all over India.

50

ICICI DIRECT
A) Introduction: ICICI Direct is a stock trading company of ICICI Bank. Along with stock trading and trading in derivatives in BSE and NSE, it also provides the facility to invest in IPOs, mutual funds and bonds. It has occupied a high place in the minds of investors due to its linkages with ICICI Bank. It provides both on-line as well as off-line facilities for trading with financial instruments. The online model comprises a portal, chat facilities and speed trade terminals. And the off-line model uses a combination of a team of customer and agents to receive orders over the telephone. Business of the company has grown in leaps and bounds since its inception. The main advantage of trading through ICICI Direct is its 3-in-1 account that integrates bank, trading and demat account. Moreover its link with both NSE and BSE provides valuable support to clients.

b) Products and services offered:

51

Mutual Funds: The Company provides the online facility while investing in mutual funds. One can invest in 19 MFs through it. It provides various options in MF i.e. buy, redeem, switch, systematic investment plan, systematic withdrawl plan.

Equity, IPO, Futures & Options: The company provides the option of investing in shares, mutual funds, IPOs GOI Savings and Government Tax savings bond: one can invest bonds online without going through the hassles of visiting office. Personal Finance Section: The personal Finance section can be used to plan investments, retirements benefit. Customer Service Feature: All customer queries can be handled online.

c) Other Services Offered:

It provides the BTST facility i.e. the freedom to sell 100% stock before getting the delivery in T+2 days. No interest is charged in event of non-payment as the default amount is blocked in the savings account. It provides an online terminal with a web based link free of cost. There is a continuous requirement to refresh the account every time to watch the live rates. It provides daily tips to its client through the terminal. It provides the facility of Spot Trading.3 Service Providers: The Relationship Manager is the main person who makes clients, handles their portfolio and advice them. Direct tips from the advisors are provided by the HNI clients.4 The advisory base has around 7 years of experience.

Exposure: The company provides 4 times exposure on delivery and 20 Times exposure on intraday.

c) Fees and other opening formalities:

3 4

Spot Trade is a type of trading that involves cash sales for immediate delivery. HNI clients mean High Net worth Individual.

52

It requires opening of three account namely-ICICI Demat, trading and savings account. The documents required are address proof, PAN card, photographs. One time non-refundable fees of Rs.750 is to be paid for opening the account. The bank account linkages are with ICICI Bank only and account activation takes 7 days. In case of trading in commodity a person not having an account with ICICI needs to give a cheque of Rs.1250. for opening a 4 in 1 account5 but in case person has account with ICICI then Rs.500 would be debited from his account. For opening just a commodities account Rs.250 would be charged.

d) Brokerage Charged: Delivery

Total turnover
Above 5 cr. 2-5 cr. 1-2 cr. 50 lacs-1 cr. 25 lacs- 50 lacs 10 lacs- 25 lacs Less than 10 lacs

Brokerage
.25% .30% .35% .45% .55% .70% .75%

(The brokerages are inclusive of demat transaction charges)

Intra-day:

Total turnover
Above 20 cr. 10-20 cr. 5-10 cr.
5

Brokerage
.03% .035% .04%

4 in 1 account includes demat, trading, bank and commodity account.

53

Less than 5 cr.

.05%

Futures and Options:

Total turnover

Brokerage

Effective brokerage on setoff

Above 20 cr. 10-20 cr. 5-10 cr. Less than 5 cr. e) Other Charges:

.03% .035% .04% .05%

.015% .0175% .02% .025%

Service Tax and Security Transaction Tax are charged. No account maintenance charges and stamp duty are levied.

f) Miscellaneous Information:

The company has 300 branches with 39 in Delhi. (It would go up to 90 by December.) There are around 1500-2000 RMs in various branches. It has customer base of around 12 lac. Customers.

HDFC Securities
A) Introduction: HDFC Securities, a trusted financial service provider promoted by HDFC Bank and JP Morgan Partners and their associates is a leading stock broking company

54

in the country, serving a diverse customer base of institutional and retail investors. HDFCsec.com provides investors a robust platform to trade in equities in NSE and BSE and derivatives in NSE. It provides its customer with the highest standard of service, convenience and hassle free trade tools. The research team tracks the economy, industries and companies to provide the latest information and analysis. The content offers financial information, analysis, invests guidance, views and news and is designed to meet the requirements of everyone from a beginner to a savvy to a well informed trader. The website of the company hdfcsec.com provides the benefit of speed, convenience, transparency, expertise and timely and relevant information.

b) Products offered: It provides the facility of investment both on-line as well as offline in various instruments like equity shares, IPOs and derivatives.

c) Services Provided: It provides a number of services like: It provides the on-line as well as off-line facilities of trading in financial market. It provides a web-based link to trade in stock market. But there is no facility to get live rates. 55

It provides 4 times exposure on both delivery and intra-day transactions. It provides free tips through SMS to its HNI clients. Service Providers: The Relationship Managers basically handles the clients portfolio, providing them advice on daily as well as delivery transaction. The Advisors directly provide advisory services to the HNI clients. Advisors have more than 5 years of experience.

It provides the BTST facility in which 100% stock can be sold before delivery. The clients are allowed to trade up to the amount in their saving account.

d) Opening Fees and other formalities: The documents required for opening trading account are address proof, PAN card copy, photographs.(Only trading account is opened by HDFC securities. The demat and bank account are handled by the HDFC Bank.) It has linked with HDFC Bank. It requires all the three accounts to be with HDFC. It requires 7 working days for activation. The account opening charges are Rs.799. this is a one time and nonrefundable amount. No account maintenance charges are there.

e) Brokerage: Delivery

Turnover
Above 5 cr. 2-5 cr. 1-2 cr. 50 lacs-1 cr.

Brokerage
.50% .50% .50% .50%

Refund
.25% .20% .15% .05%

Effective Brokerage
.25% .30% .35% .45%

56

Less than 50 lacs

.50%

.50%

Intraday:

Turnover
Above Rs.20 cr. 10-20 cr. 5-10 cr. Less than 5 cr.

Brokerage
.05% .05% .05% .05%

Refund
.02% .015% .01% 0

Effective Brokerage
.03% .035% .04% .05%

Futures:

Turnover
Above Rs.20 cr. 10-20 cr. 5-10 cr. Less than 5 cr.

Brokerage
.05% .05% .05% .05%

Refund
.02% .015% .01% 0

Effective Brokerage
.03% .035% .04% .05%

Options: Higher of 1% premium amount or Rs.100 Flat Brokerage: Delivery - .5 paisa, Intraday - .05 paisa, paisa Apart from brokerage Service Tax, STT and stamp duty are charged. Futures - .05

f) Miscellaneous: The company has around 12 branches.

57

Angel Broking
a) Introduction:
Mr. Dinesh Thakkar began his career in Broking in 1987 and later, went on to set up Angel Broking, a premium Indian stock broking and wealth management house. It focuses on retail business with proven leadership and commitment to give Real Value for Money to its clients. Angel is a member of the Bombay Stock Exchange and its group companies are members of the National Stock Exchange and also the countrys two

58

leading Commodity Exchanges the NCDEX and MCX. Angel is also registered as a Depository Participant with CDSL. Angel Group has emerged as one of the top 5 retail stock broking houses in India. It is the only 100% stock broking house of offering a gamut of retail centric services like research, investment advisory and wealth management services, e-broking and commodities to individual investor. Angel has a dedicated investment advisory and state-of-theart centralized helpdesks to answer investor queries and complaints. This facility is available 24x7, with a Web-enabled, value-added back office, accompanied by a brilliant team of experts for quality assurance.

b) Products Offered: The broking firm offers a number of products like equity, IPOs, commodities and Futures and Options. Both on-line as well as off-line facilities are provided for trading.

c) Services Provided:

It provides an on-line terminal for trading along with three types of software

a) Angel Diet software which is a VM Java enabled

software. One can view 100-150 scrips at a time through this software.

b) Angel Anywhere software that provides technical details

and analysis of the reports.

c) Dot net is a facility available only to investors.

It provides the Position Pix facility instead of BTST facility. In this customers are required to book profits within 3-5 days of buying. 59

Service Providers: advisors themselves.

Relationship manager is attached to each

client. Special advisory services are provided to the HNI client by the They provide the facility of both on-line and off-line trading in commodities. No margin is required to start the account. It provides exposure of 6 times on delivery and for 6 times on intraday (for 2 days only). Tips through free SMS are provided to HNI clients.

d) Opening Fees and other formalities: The account opening requires address proof, PAN card and photographs. The account opening fees is Rs.660. it is non-refundable. It has linkages with UTI, PNB, ICICI, HDFC, Yes Bank. It requires 3 working days for the account to get activated.

e) Brokerage:

Delivery: .50 paisa Intraday:.05 paisa Futures and Options:.05

f) Other charges:
Account maintenance charges are Rs.300p.a. Commodities trading Rs.100 per exchange

g) Miscellaneous:
It has 72 branches, 1000 outlets and 2300 sub-brokers It has more than 1800 employees.

60

SECTION E

COMPARITIVE ANALYSIS OF BROKERAGE FIRMS Comparative Sheet Weakness and Strengths of different brokerage firms.

61

Comparative Sheet

a) On basis of products and services:

62

63

Basis

India bulls

Reliance Money

Share Khan

ICICI Direct

HDFC Securitie

Angle Broking

Kotak Securities

Products available

E, c, IPO, E, c, IPO, E, d, c, MF MF, r finance, mortgage , real ----50 scrips n estate Yes, 30 ---scrips Power India scrips Insta trade/ Forex, Consume insurance

s E, d, c, E, IPO, d,
Govt. bonds, personal finance , MF Yes -----. Need for refreshin g screen Yes ------

E, IPO, c, E, d, MF, d, MF IPO, C

Web-linked terminal Software

-----Angel diet, angel , dotnet Position Pix RM, Advisor

-----Keat (Kotak e-trading access scrips BNST-G, 75% RM, Advisor

bulls/ 100 scrips

anywhere terminal)/25 BTST, 100% RM, Advisor

BTST-G/ any facility Service providers

BNST-G

ATST, 100% Executive , franchise s, agents

BTST,100 % RM, advisors, shareshop s 4-6

BTST, 100% RM, Advisor

other (100%) Dealers, RM

Exposure delivery Exposure

4-6

5 Yes

4-6 Yes

20

4 No

6 Yes Free SMS

15 ----Funding on Mutual Funds

intraday Franchisee, --sub-broker Distinct service Provision account

Facility of Quality research report

of Spot trading

Free SMS

of margin kiosks

64

b) On basis of Opening formalities and fee structure: Basis

bank linkages

India bulls
ICICI, IDBI,

Reliance Share Money

UTI, HDFC,

ICICI
ICICI

HDFC
HDFC

Angle
UTI, PNB,

Kotak
HDFC, ICICI, CITY,

Khan
HDFC, ICICI,

Direct Securities Broking Securities

65

HDFC

IDBI

UTI, OBI, IDBI, CITY, YES BANK, UNION, BOI 750

ICICI, HDFC, YES

UTI, KOTAK MAHINDRA.

Account opening Days activation Software cost Interest

900, fully 750 refundabl e for 5 750 on 1850 p.a. Yes 125 p.m. Off-line 7 ----

750

799

660

750,

250

refundable 7-8 -----14%p.a 7 --------7 -------------No Free to HNI On-line 3 ---------300p.a. No Free HNI On-line 7-10 ----15-20% 30 p.m. No to 100 p.m. Off-line

non-payment 20%p.a. Account ---maintenance Stamp duty Yes

. 300 p.a. ---Yes 100 p.m. Off-line No Free to HNI On-line

SMS Charge 100p.m. Commodities Off-line trade

c) On basis of Brokerage Structure: Basis India bulls

Delivery 50-10 paisa Intraday 10 Futures paisa 10

Reliance Money
months or 1 cr. turnover

Share Khan
10

ICICI Direct
75 Paisa .05

HDFC Securities
50 paisa .05 paisa .05 paisa

Angle Broking
50 paisa .05 paisa .05 paisa

Kotak Securities
45 paisa .05 paisa .06 paisa

Rs. 500 for 2 50paisa

paisa paisa 10 paisa .05

66

paisa

paisa

d) On basis of spread out (number of branches):

500

1000

branches 0 hdfc icici ib reliance angel broking share khan kotak securities

Figure 6

e) On the basis of customer base:

67

india bulls

sharekhan

hdfc

india bulls hdfc

reliance money angel

sharekhan kotak securities

Figure 7

68

kotak securities icici direct

1200000 1000000 800000 600000 400000 200000 0

Analysis of Strengths and Weakness of Brokerage Firms

Based on the response of the interviewers following conclusions about the strengths and weakness of brokerage firms have been drawn out :

a) Kotak Securities
Strengths
It has its own Mutual Funds section that helps in meeting the needs of clients taking the advantage of BNSTG facility. It is the only brokerage firm to give funding against mutual funds. It provides 5 times exposure against mutual funds. Clients get the service of two different personalities i.e. Relationship Manager and the advisor. The linkages with Kotak Mahindra Bank make the transactions easy.

Weakness
The minimum margin money to start the account is Rs.25000. Thus it is not possible for the small investors to deal with KSL. The brokerage is high as compared to other brokerage firms. Web-interface not very user friendly.

69

b) Strengths

Reliance Money Weakness

Reliance business Money mostly like conducts through its the

It provides a flat brokerage irrespective of the turnover. The feature that sets Reliance Money apart from other brokerage firms is the service of KIOSKS provided at various Reliance Money, Barista outlets and at various shopping malls. These are the computers that allow the customers to trade around. conveniently while moving

intermediaries

sub-brokers,

franchisees and agents. Because of this proper service and advisory is not provided by these middlemen to the clients. It doesnt have separate advisory panel.

It deals in various products under one roof, so it gets the benefit of economies of scale.

c) India Bulls Strengths

The software is very powerful in terms of speed and execution. They have a system of margin account.
6

Weakness

They maintain a 6pool account for meeting the obligations of BNST-G. The disadvantage of this is that in case of scams one cant withdraw the stocks out of pool account.

A pool account is a system in which stocks of all clients are pooled and used to meet the obligations in case of short selling.

70

d) Sharekhan Strengths
Bank linkages with maximum number flexibility. The quality of its Research Report is very high. The strike rate of its call has been 89% according to a report. of banks allowed

Weakness
It is not possible to have a software HTTP port. work with normal

e) ICICI Direct Strengths

ICICI is the best brokerage firm from the safety point of view. A very high exposure on the intraday times). It has its own bank which makes the transactions easy. transactions (20

Weakness
The brokerage is high and not negotiable. The system needs to be refreshed each time to view live rates.

71

f) HDFC Securities: Strengths

The operations with the HDFC bank and opening of a 3-in-1 account easy. make transactions

Weakness
The exposure is very low. The linkage is with just one bank. The live rates cant be watched on the terminal.

g) Angel Broking: Strengths

Different software options are there. Days minimal. for activation are

Weakness
Advisory given only to HNI clients. Exposure not very high.

72

SECTION F

SITUATIONAL ANALYSIS
Questionnaire Situational analysis

73

QUESTIONARRIE
Q1) In which of the financial instruments do you invest? a)EQUITY b) MUTUAL FUNDS e) OTHERS c) BANK

d) POST OFFICE

Response:

EQUITY

MUTUAL FUND

BANK

POST OFFICE

OTHERS

Figure 8

Interpretation: The diagram clearly shows the investment patterns of Indians in the financial markets. Some of the patterns exhibited are: a) A high percentage investment in banking products shows that Indians are still risk-averse. They want safe returns on their investments. b) The Indian stock market is not very safe and transparent for the small investors. c) Low investment in MF indicates lack of knowledge on the part of investors about the product.

74

Q2) Which type of trading do you prefer? a) On-line b) Off-line c) Both

Response:
100

10

1 on-line off-line trading type both

Figure 9

Interpretation: The figure shows more and more investors are opting for on-line trading which has surely increased the volume of trade and profits both for themselves as well as the market. The reason given for their switching over to online is: a) Freedom from paperwork b) instant credit and money transfer. c) Timely advance research reports. d) Information and price alerts. e) Need to increase the volume and profits. f) To reduce the excess cost.

75

Q3) Which broking firms do you prefer? a) Kotak Securities b) Reliance Money c) India Bulls d) Sharekhan e) ICICI Direct f) HDFC Securities g) Angel Broking h) others

Response:

200 100 0 KSL india bulls brokerage firm icici direct angel

Figure 10

Interpretation: The figure shows that ICICI Direct is preferred by maximum number of people followed by sharekhan. The interpretations from this question were as: a) People preferred ICICI Direct due to its linkages with the ICICI Bank. b) Many investors preferred to invest through local brokers and through firms like alankit etc. due to flexible conditions provided by such brokers. c) Reliance money is not very preferable due to new entry in this field.

76

Q4) Which factors help to choose a broking firm? a) Brokerage b) Services c) Exposure on trading d) research e) financial stability f) others

Response:

brokerage research

services financial stability

exposure on trading others

Figure 11

Interpretation: The figure shows that: a) The most important factor that people take into account is the brokerage pattern of the brokerage firm. 5 paisa is one of the leading names in market because of its low brokerage on delivery. b) The next factor people take into account is the services provided. The software provided by India Bulls is very powerful and one of the reasons for selecting it. In ICICI the clients get to deal with leading ICICI Bank. c) Big traders look for the exposure provided so that they can maximize their volumes.

77

d) Investors also look into the financial stability of the firm. The firm initially involved in scams is often avoided.

Q5) Do you like to trade in commodities? a) Yes, very often b) No, never c) Rarely

Response:

yes

no

rarely

Figure 12

Interpretation: The figure shows that there are small numbers of investors investing in commodities market though the number has been growing gradually. The reasons for the low investment are: a) Many brokerage firms dont have enough experienced staff to handle the commodities business.

78

b) Trading in future commodities is risky as these are leveraged. c) Commodities are quite volatile to market changes.

Q6) in which type of trading activity do you generally engage in?

a) Delivery b) Intraday c) Futures and Options

Response:
60 50 40 30 20 10 0 delivery intraday response f&o

Figure 13

Interpretation: The figure shows that people are slowly showing a shift in their behavior from mere delivery transactions to daily trading. It also shows that the knowledge about future and option trading in Indian market is still on the lower side.

79

Q7) what was the reason for your investment in stock market? a) High returns b) Diversified portfolio c) Tax Saving d) Others Response:

60 50 40 30 20 10 0 high returns diversified portfolio tax saving others

reasons

Figure 14

Interpretation: The diagram clearly shows that :

80

a) The main factor for investment in the stock market is the high return provided as a result of rise in price of shares as well as high dividend provided by the companies in case of exceptionally high profits. b) Tax saving also serves as a good reason to invest in mutual funds as shown by the ULIP funds in this category. c) The customers intended to diversify the portfolio can invest a fraction of money in mid caps and small caps. They can even go for blue-chip stocks.

Q8) Are you satisfied with services provided by your broker? a) Yes, I am fully satisfied anyone c) Average Rating Response: b) No, I wont recommend the same to

Yes

No

Average

Figure 15

Interpretation: The diagram clearly shows that: a) Small percentage of investors is satisfied with services offered by their brokerage firms.

81

b) Maximum investors are not satisfied with the services or hidden charges levied by the broker. In that case the investor before choosing a broker should keep following things in mind: The financial stability of the firm should be looked into. The services should be compared with the competitors. The charges should be analyzed in detail to find any hidden charges.

Q9) Which statement best describes the USP of your investment and return? a) Low returns with low risk b) medium return with some risk c) High return with high risk d) none of these

Response:

82

low return

m e dium return

high return

none of these

Figure 16

Interpretation: The diagram clearly shows that the investors ready to take low to medium risk form large part of population. Thus it can be interpreted the investment in small and midcap stock, mutual funds is going to increase in the near future in India.

Q10) what is the duration of your investment? a) > Than 2 yrs b) 2-5 yrs c) 5-10 yrs d) 10 yrs above

83

180 160 140 120 100 80 60 40 20 0 Less than 2Yrs 45

160

Series1

30 15

2 - 5 yrs

5- 10 Yrs

10 yrs above

Interpretation In the current market scenario, investors prefer medium term investment rather going for long or short term, as they feel that the market is very volatile. So the percentage is very low for longterm investments, as investing for 5-10 years, the respondent were only 30 & the respondents were only 15 for investing in the above 10 years option. According to the survey, 160 respondents have preferred for going for medium term investments i.e.2-5years, as they feel that security and returns have the best option in that term.

Situational Analysis

84

Different types of investors have different needs ad thus prefer different types of brokerage firms. An analysis of needs and the situation of different investors have brought about the best alternatives in their respective cases which are as under:

a) First investor: Mr. A is new to stock market and wants to start trading. His constraints are: He can invest maximum of Rs.10000. He wants an effective advisory to guide him. He wants to invest in mutual funds and start with delivery trading with an effective on-line portal.

The fee structure should be reasonable.

Options Available
India bulls Share khan Icici direct Reliance money High account opening charges (900), software charges high. Good advisory base high report, brokerage no margin. initial research 3 in 1 account No ensures safety, advisory with advisory quality available, maintenance charges. provided, no customer in hands agents. HDFC Securities Angel Broking Kotak Securities High margin to (minimum Rs.25000) initial

Mutual funds Advisory trading available and of very effective not available only the HNI client

the terminal not

(750), risk negotiable,

The options for such a case would be Sharekhan and ICICI Direct.
b) Second Investor: Mr. B is an investor who has large trade volumes; he carries his own research work. His requirements are: He wants low brokerage. He wants high exposure. 85

He wants high speed software for intraday trading. He wants instant funds transfer from bank to trading and vice-versa. He wants low interest on non-payment of BNST-G amount.

Options Available
India bulls Exposure is powerful software. Powerful Brokerage high Share khan Icici direct Reliance money is Lower on exposure with on on delivery. HDFC Securities Weak terminal, Angel Broking Competitive softwares Kotak Securities high exposure on intraday with transactions, linkages Kotak Mahindra makes fund transfer easy.

high, software, maximum banks, interest is low. non-payment

linkages with delivery.

on intraday exposure is available. no very less. exposure

In such a situation India Bulls, Share khan, Angel Broking and Kotak Securities seem to be viable options.

C) Third investor: Mr. C is interested in Portfolio Management Services. He does not have time to look after his portfolio. So he needs: He wants a proper team to handle his portfolio. He wants regular updates about his account.

86

He wants stead and superior returns. He wants safety of his safety.

Options Available
India bulls PMS service not available. Independent fundamental research, bottom stock selection, experienced team managing portfolio. up PMS Share khan Icici direct Reliance money service PMS available HDFC Securities Angel Broking Kotak Securities Portfolio have 10 around years of

PMS service PMS available. available

not available

service not not

service not managers

experience, dedicated research methodology to prepare and manage clients portfolio.

Thus viable options under this situation are Sharekhan and Kotak Securities.

SECTION G

CONCLUSION AND SUMMARY

87

 Conclusion Summary Annexure

Glossary

Bibliography

Conclusion
Hypothesis Testing: On the basis of analyzed data it can be concluded that Ho is rejected and H1 is accepted.

88

This means that the investors differentiate between different brokerage firms. In other words they prefer one competitor over the other. Result: The analysis shows that Indian Stock Market is booming and as a result the role of brokers is increasing day by day. Every brokerage firm stands out on one parameter or the other. The best brokerage can be chosen keeping in mind the needs and expectations of customer in mind. Thus the best broker will be one that helps to balance consumers needs with its services. This has been concluded as: For small new investors Share khan and ICICI Direct are better options For big traders Share Khan, India Bulls, Angel Broking, Kotak Securities are better options. For client with requirement of PMS, Share Khan and Kotak Securities are good options.

Summary
The project Comparative Analysis of Brokerage Firms covers a detailed analysis of different brokerage firms present in the Indian market.

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It gives a brief overview of Indian Capital Market. Indian Capital Market that is a 200 years old market has passed through different phases of development and gradually attained the current status. There are two prominent exchanges Bombay Stock Exchange and National Stock Exchange. There has been significant growth in the listed companies, number of stock exchanges and the number of stock issued by the listed companies. There has been increase in market capitalization and trading volumes. There has been some major development in equity brokerage firms like in corporate membership, improvement in research and introduction of on-line trading etc. It has also been stated that India is emerging to be an investment hub. A detailed profile of Kotak Securities and its 6 competitors namely India Bulls, Reliance Money, Share Khan, HDFC, ICICI Direct and Angel Broking has been discussed. A comparative sheet showing comparison amongst different brokerage firms on different parameters like products offered, software, services, fees, customer base, number of branches has been drawn. This comparison has brought forward the strengths and weakness of different firms. Data has been collected through questionnaire that has further helped in analyzing the investment behavior of respondents, their preferences for the brokerage firms and the parameters they look into while investing in stock market. Lastly a situational analysis is performed which suggests best viable options of brokerage firms to investors in different situations and having different constraints.

Annexure A) Questionnaire: The following questions were included in the questionnaire:

1) In which of the financial instruments do you invest?

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a) Equity b) mutual fund c) bank d) post office e) others 2) Which type of trading do you prefer? a) On-line b) off-line c) both 3) Which broking firms do you prefer? a) Kotak Securities b) Reliance Money c) India Bulls d) Share Khan e) ICICI Direct f) HDFC Securities g) Angel Broking h) Others 4) Which factors helps to choose a broking firm? a) Brokerage b) Services c) Exposure on Trading d) Research e) Financial Stability f) others 5) Do you like to trade in commodities? a) Yes, very often b) No, never c) Rarely 6) In which type of trading activity do you generally engage in? a) Delivery b) Intraday c) Futures and Options 7) What was the reason for your investment in stock market? a) High Returns b) Diversified Portfolio c) Tax Saving d) others 8) Are you satisfied with the services provided by your broker? a) Yes, I am fully satisfied. b) No, I wont recommend the same to anyone c) Average Rating

9) Which statement best describes the USP of your investment and return? a) Low returns with low risk b) Medium return with some risk c) High returns with high risk d) none of these 10) What is the duration of your investment? 91

a) > than 2 years b) 2-5 years c) 5-10 years d) 10 years and above

Glossary

Capital markets: The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded.

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Commodity Markets: A bulk good such as an agricultural product, food, natural resource or metal that is traded on an exchange in bulk quantities. Derivatives: Instruments, such as options and futures contracts, which derive their value from the value of an underlying security, group of securities or an index.

BSE Sensex: A stock index (one of many) commonly used as an indicator of changes in the general level of the stock market or stock prices in India. In this index, there are 30 diversified stocks thought to be representative of the market in general.

Demat account: An account showing the shares bought or sold in dematerialized form. Trading account: The account where all trading of shares is done. Delivery: The physical exchange of money and securities on the brokerage transaction's settlement date. Intraday: the buy and sell of shares done on the same day. Market Capitalization: Market capitalization represents the aggregate value of a company or stock. IPO: A companys first sale of stock to the public. Mutual funds: A professionally managed investment in a group of stocks and/or bonds those are selected and diversified to meet the stated objective of the fund.

S&P CNX Nifty: The S&P CNX Nifty is the leading index for large companies on the National Stock Exchange of India. It consists of 50 companies representing 24 sectors of the economy,

NSDL: National Securities Limited

Bibliography
a) Magazines and brochures:

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 b) Internet:

Training kit provided by Kotak Securities Brochures provided by Share khan, Reliance Money.

Web sites of the firms kotaksecurities.com, reliancemoney.com, indiabulls.com, sharekhan.com, icicidirect.com, angelbroking.com, hdfcsecurities.com.

www.traderguruji.com www.iflr1000.com www.wikia.com

(an on-line portal)

www.economictimes.com www.ficci.com www.mdtrading.com

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