A study on

Online Trading
With reference to

Kotak Securities Ltd

A Synopsis of the Project Report submitted to Andhra University, Visakhapatnam In Partial fulfillment for the Award of the Degree of MASTER OF BUSINESS ADMINISTARATION By

A.Sai Babu
Regd. No. 110228802070 Under the Esteemed guidance of Ms.P.V.S.Jyothi

Asst. Professor

Department of Management Studies Dr. LANKAPALLI BULLAYYA POST GRADUATE COLLEGE Andhra University Visakhapatnam-530003 (2010 - 2012)

DECLARATION
I hereby declare that this synopsis of the project work entitled A Study on ONLINE TRADING with reference to Kotak Securities Ltd, is a bonafide work done by me for the award of the degree of Master of Business Administration (MBA), from Andhra University, done under the guidance of Ms. P.V.S.Jyothi, Assistant Professor, Department of Management Studies, during the academic years 2010 2012 and has not been submitted to any other University or Institution for the award of any Degree or Diploma.

P.V.S.Jyothi (Faculty Guide)

A.SaiBabu Regd.No: 110228802070

INTRODUCTION The project is mainly to study the activities and prospects of stock markets. The past decade has been a golden age for stock exchange in India. It is poised to dominate the future of corporate finance in India, thanks to reforms in stock market. Earlier in the initial days of secondary market, trading on Stock Exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. With the advent of technology, the trading in securities is done online with the help of VSAT terminals. Since 1995, trading in securities is screen based (on-line) trading which eliminated the need for trading floor. Since 2000, internet-based trading has also made an appearance in India. The secondary market consists of 23 stock exchanges including the National Stock Exchange and the over-the-counter Exchange of India (OTCEI) and inters Connected Stock Exchange of India Ltd. The secondary market provides a trading place for the securities already issued to be bought and sold. It also provides liquidity to the initial buyers in the primary market to re-offer the securities to any interested buyer at any price, if mutually accepted. An active secondary market actually promotes the growth of the primary market and capital formation because investors in the primary market are assured of a continuous market and they can liquidate their investments in the stock exchange. With the emergence of on-line trading in India stock Exchanges, the volume of the securities traded, the market capitalization, the size of market and the market turnover has increased. The scope of study in on-line trading is very vast. It is important to ensure a smooth working of this market, as it is the arena where the players in the economic growth of a country interact. Various laws have been passed from time to time to meet this objective. The financial market in India was highly segmented until the initiation of reforms in 1992-93 on account of a variety of regulations and administered prices including barriers to entry. The reform process was initiated with the establishment of Securities and Exchange Board of India (SEBI).

Kotak Securities is incorporated on February 1995 as Member of National Stock Exchange of India Limited and a member of Bombay Stock Exchange. It functions according to the Rules and Regulations of Securities and Exchange Board of India (SEBI). SCSL covers in 4 States in India. Its regional office is in Visakhapatnam. It has 60 VSATs and 20 Branches. What is online trading? Both NSE and BSE have switched over to computerized Online Trading system from open outcry trading system. BSE has BOLT (BSE Online Trading) and NSE has NEAT (National Exchange Automated Trading). With these highly efficient online trading systems, efficiency and transparency of BSE and NSE are increased dramatically.

What is Online Trading Account and Demat Account? After the introduction of the online trading systems it is very easy to do online trading with just a PC and an internet connection. All you need to do is just open a Demat account and a trading account with a depository participant or DP. DP is connecting Depository to investors. Depository is the people who stores shares in electronics form. In India there are two depositories, NSDL and CDSL. Most of the banks and brokerage houses provides trading account and demat account. To open a demat account you need many things like PAN card, address proof, bank account etc.

Process of Buying/Selling a Share? Once the account is active you can buy shares from BSE or NSE. For every buy or sell transaction you will have to pay a brokerage to the broker normally ranges between 0.4% to 0.8%. Suppose you buy 100 shares with price 100. So total amount is Rs 10000. For a .5% brokerage firm you will have to pay 0.5% of 10,000 ie Rs50. Same amount you have to pay when you sell it. So totally Rs. 100 will be reduced from your total profit. Apart from this brokerage you will have to pay many other charges like Service tax on the brokerage i.e. 12.25% for about transaction it is 12.25% of Rs 50 i.e. 6.125 for buy and another 6.125 for sell. Then there are other charges like Securities Turnover Tax (.125%), Stamp duty, Education cess, minimum buy/sell commission etc. These amounts vary from broker to broker. Internet Based Trading The Securities & Exchange Board of India (SEBI) approved the report on Internet Trading brought out by the SEBI Committee on Internet Based Trading and Services In January 2000. Internet trading can take place through order routing systems, which will route client orders to exchange trading systems for execution. Thus a client sitting in any part of the country would be able to trade using the Internet as a medium through brokers' Internet trading systems. SEBI-registered brokers can introduce Internet based trading after obtaining permission from respective Stock Exchanges. SEBI has stipulated the minimum conditions to be fulfilled by trading members to start Internet based trading and services, vide their circular no.SMDRP/POLICY/CIR06/2000 dated January 31, 2000.

Internet Trading at NSE NSE became the first exchange to grant approval to its members for providing Internet based trading services. In line with SEBI directives, NSE has issued circulars detailing the requirements and procedures to be complied with by members desirous of providing Internet based trading and services. Members may please refer to circular no. NSE/CMO/0014/2000 dated May 12, 2000 and NSE/CMO/0016/2000 dated July 21, 2000. Members can procure the Internet trading software from software vendors who are or they may develop the software through their own inhouse development team or may procure the software from other nonempanelled vendors. Members can also avail of services provided by (which may inter-alia include providing / maintaining software / hardware / other infrastructure etc.) for providing Internet based trading services subject to the Application Service Provider (ASP) being empanelled with the Exchange for providing such services. The Exchange has issued circular no. NSE/CMO/0028/2000 dated December 18, 2000 (Download No.) detailing the formalities / requirements for members desirous of using ASPs for providing Internet based trading services as well as formalities / requirements for ASPs desirous of being empanelled with the Exchange for providing such services to trading members of NSE.

Market Timings Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and declared by the Exchange in advance). The market timings of the equities segment are: Normal Normal Market Market Open Close : : 09:00 15:30 hours hours

The Closing Session is held between 15.50 hours and 16.00 hours Limited Physical Market Open : 09:00 hours Limited Physical Market Close : 15:30 hours

FINANCIAL MARKETS MEANING AND FUNCTIONS Finance is the integral part of modern business. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types, such as currency, cheques, bank deposit bills, bill of exchange etc. The main functions of the financial markets are: To facilitate creation and allocation of credit and liquidity To serve as intermediaries for mobilization of savings To provide financial convenience and To cater to the various credits needs of the business houses.

TYPES OF FINANCIAL MARKETS On the basis of credit requirements for short term and long term purposes, financial markets are divided into two categories. Money market Capital market MONEY MARKET: Money market provides short term funds and facilitated borrowing and lending of short term funds. It deals with bills of exchange, bankers acceptances, bonds etc., called Near Money. CAPITAL MARKET: A good capital market is an essential pre-requisite for industrial and commercial development of a country. Credit is generally, required and supplied on short term and long term basis. The money market caters to the short term needs only. The long term capital needs are met by the capital market. Capital market is a central coordinating and directing mechanism for free and balanced flow of financial resources into the economic system operating in a country. The development of a good capital market in a country is dependent upon the availability of savings, proper organization of its constituent units and the entrepreneurship qualities of its people. Since independence, the capital market of India has substantially changed and is improving. The term capital market refers to the institutional arrangements for facilitation the borrowing and lending of long term funds. In the widest National Stock Exchange it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities.

FUNCTIONS OF CAPITAL MARKET: The Major functions performed by a capital market are: Mobilization of financial resources on a nation-wide scale. Securing the foreign capital and know how to fill up deficit in the required resources for economic growth at a faster rate. Effective allocation of the mobilized financial resources, by directing the same to project yielding highest yield or to the project needed to promote balances economic development. MARKETS FOR CORPORATE SECURITIES: The corporate securities, viz; bonds or debentures, preferred stock commonly called preference shares and common stock or equity shares are traded in carefully regulated money markets. The markets for the three types of corporate securities include: The primary or new issue markets. The secondary market. Over-the counter market. On-line scrip less trading market. COMPONENTS OF CAPITAL MARKET: The following are the three main components of a capital market. They are: New issue market Stock market financial Institutions

NEW ISSUE MARKET: The issue market represents the primary market where new securities, i.e., shares or bonds that have never been previously issued are offered. Both the new companies and the existing ones can raise capital on the new issue market. Its prime function is to facilitate the transfer of funds from the willing investors to the entrepreneurs setting up new corporate enterprises or going in for expansion, diversification, growth or modernist ion. Besides helping corporate enterprises in securing their funds, the new issue markets canalize the saving of individual and others into investment. STOCK MARKET: Stock market represents the secondary market where existing securities (shares &debentures) are traded. Stock exchanges provide an organized mechanism for purchase and sale of existing securities. The investors want liquidity for their investments. The securities which they hold should easily be sold when they need cash and some who want to invest in new securities and stock exchanges facilitates both the above functions. Stock exchange is a body of persons, whether incorporated of not facilitating buying and selling of securities. Stock exchanges are organized and regulated markets for various securities issued by corporate sector and other institutions.

COMPONENTS OF CAPITAL MARKET Supply of money capital Individuals Corporations Institutions Banks Government Investors Borrowers Lenders Buyers of Sellers of Money Capital Money Capital New Issue market Stock Exchanges Financial Institutions clearing house for Long-term capital Individuals Corporations Institutions Entrepreneurs Government

(CAPITAL MARKET MECHANISM) FUNCTIONS OF STOCK EXCHANGE: The main functions of stock exchanges are: To ensure liquidity of capital To provide continuous market for securities To facilitate evaluation of securities To mobilize surplus savings etc.

Company Profile Kotak Securities Ltd., a subsidiary of Kotak Mahindra Bank, is one of the oldest and largest stockbrokers in the Industry. Our offerings include stock broking services for through the branch and Internet, Investments in IPO, and. Our Accolades include: 1. Best Broker in India by Finance Asia for 2010 & 2009 2. UTI MF CNBC TV18 Financial Advisor Awards 3. Best Performing Equity Broker (National) for the year 2009 4. Best Brokerage Firm in India by Asia0money in 2009, 2008, 2007 & 2006 5. Best Performing Equity Broker in India CNBC Financial Advisor Awards 2008 6. Avaya Customer Responsiveness Awards (2007 & 2006) in Financial Services Sector 7. The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007 8. Euro money Award (2007 & 2006) - Best Provider of: Equities 9. Euromoney Award (2005)-Best Equities House In India 10.Finance Asia Award (2005)-Best Broker In India Finance Asia Award (2004)- India's best Equity House 11.Prime Ranking Award (2003-04)- Largest Distributor of IPO's

We have been the first in providing many products and services which have now become industry standards. Some of them are:

Facility of Margin Finance to the customers for Investing in IPOs and on the phone SMS alerts before execution of depository transactions Mobile application to track portfolio of your investments in AutoInvest - A systematic investing plan in Equities and Mutual funds Provision of margin against securities automatically against shares in your We have a fullfledged research division involved in Macro Economic studies, Sectoral research and Company Specific Equity Research which publishes in-depth. This combined with a strong and well networked sales force which helps deliver current and up to date market information and news. We are also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can avail our stock broking services for executing the transactions and the depository services for settling them. We process more than 400000 trades a day which is much higher even than some of the renowned international brokers. Our network spans over 455 cities with over 1442 outlets. Kotak Securities Limited has Rs. 1559 crore of Assets Under Management (AUM) as of 31st July, 2011. The portfolio Management Service provides top class service, catering to the high end of the market. from Kotak Securities comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert.

Need For The Study

The need for the study is felt, as many people in India are unaware of trading process in stock market. Difficulties like lack of easy access to the market, inadequacy of the market infrastructure, and problems in locating the right intermediaries, lack of guidance and advice inhibited the investors from investing in the stock market. At least to have the basic knowledge about the various functions of the stock exchanges is very important. After liberalization in 1991, our stock markets experienced drastic changes due to the setting up of SEBI in 1992, integration of markets, new technology in trading, introduction of on-line trading, foreign participation etc. these led to the development of stock market. The actual process of on-line trading through which immediate access on the market watch available to the client in placing orders for buying or selling of shares is to be known.

OBJECTIVES OF THE STUDY To understand the on-line trading process in Kotak, Visakhapatnam. 2. To understand the technology used in online trading. 3. Know how the scrips are traded regularly in the stock market. 4. To understand the process of trading in capital market and derivatives market of NSE 5. To understand other operations like dematerialization process.
1.

METHODOLOGY The methodology implemented for the on-line trading process is logging on to the NEAT screen by filling the User ID, Trading Member ID, Password and New Password. After logging on the Title bar, Ticker Window, Tool Bar, Market Watch, Inquiry Window, Order/Trade Window and Message Window is displayed. Using these windows, the user can buy or sell the shares by placing the orders, quoting the price and the quantity of the shares. For example, Fig.1 represents NEAT Login Screen and the Fig.2 NEAT Market Watch Screen. Primary Data:Primary data was four different scrip were taken from three different sectors and studied the factors that are affecting the scrip movement. The primary data was collected by watching the daily trade. Secondary data:Secondary data are already published data collected for some purposes other than the one confronting the researcher at a given point of time. The secondary data can be gathered from various sources like books, journals, research agencies etc. For this project the secondary information is collected from the various sources like Business Line & Economic Times (newspapers); and the NSE and BSE websites in the internet. The information regarding the online trading is collected from Watching the on-line trading live. Collecting information from the head of each department and from the staff working in those departments. Referring the Capital Market (dealers) module workbook published by National Stock Exchange of India Limited. Interacting with the operators at the computer terminals and the clients trading in Steel City Securities Limited.

 Participating in mock trading conducted by National Stock Exchange (NSE) of India Limited. LIMITATIONS The ease of online trading can give the investor a false sense of capital market. The chat rooms may provide misleading information Active trading is dependent upon a number of software Systems. The failure of these systems create problem in collecting Primary data.