A PROJECT REPORT ON

“Online Vs Offline Trading”

A report in partial fulfilment of the requirement for the degree in B.Com course

(2016-2019)

Amity University Jharkhand

Submitted to: Submitted by:

PROF. Shovona Choudhury

(Assistance Professor) Ashutosh Singh

Amity University Jharkhand A35904616016

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 DECLARATION BY THE STUDENT

This is to declare that this report has been written by me, no part of the report is
plagiarized from other sources. All information included from other sources have
been duly acknowledge. I aver that if any part of the report is found to be
plagiarized, I shall take full responsibility for it.

Signature of author

Name: ASHUTOSH SINGH

Endrollment No: A35904616016

Place: Ranchi, Jharkhand

Date:

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 BONAFIDE CERTIFICATE

This is to certify that this project report entitled “Online Vs Offline Trading” submitted to Amity
University Jharkhand, is Bonafide record of work done by “Ashutosh Singh” under my supervision
from 25.03.19 to 10.05.19.

Signature of the supervisor

Prof Shovona Choudhury

(Assistant Professor)

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 ACKNOWLEDGEMENT

I would like to thank my mentor Prof. Shovona Choudhury for his constant support, timely advice
and guidance during the whole process of making my project. It was a great pleasure to complete
this project with the support of his rich experience and help. Without my parents, it would have
been impossible to complete all my studies and be where I am today. I am so thankful for their
support, both financially and morally. I am thankful for the support in my work and career and for
providing related information to complete my project.

Ashutosh Singh

Bcom 6th Semester

Endrollment No: A35904616016

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 INDEX
Serial No: Topic Page No:

1. Study on Online Vs Offline Trading 6-9

I. Dematerialization
II. Online trading
III. Need of study
IV. Objectives of study
V. Research methodology of study
VI. Scope of study
VII. Limitations of study
2. Industry Introduction Financial System 10-16
i) Indian financial system
ii) Financial Market

3. Stock Market Overview 17-26

I. Indian capital market at glance

II. Various stock exchanges in India
III. History
IV. SENSEX calculation
4. Online and Offline market 27-56
I. Theoretical background
II. ONLINE-TRADING
III. Concept
IV. Facilities of the online trading in India:
V. Products and services of the online trading in India
VI. Companies provide Online Trading in India
VII. Features of online trading
VIII. Benefits of online broking
IX. Problems of online broking
X. Procedures of online trading
XI. The mechanics of online trading
XII. The benefits of investor due to Online Investing
5. Research Report: “ONLINE Vs OFFLINE 57-68
TRADING”

6. Conclusion 69

7. BIBLIOGRAPHY 70

8. ANNEXURES 71-73

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 INTRODUCTION

“Study on Online Vs Offline Trading”.

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DEMATERIALIZATION:
Dematerialization is the process of converting the physical form of shares into
electronic form. Prior to dematerialization the Indian stock markets have faced
several problems like delay in the transfer of certificates, forgery of certificates etc.
Dematerialization helps to overcome these problems as well as reduces the
transaction time as compared to the physical segment. The article discusses the
procedures, advantages and problems of dematerialization.

The Indian Stock markets have seen a major change with the introduction of
depository system and scrip less trading mechanism. There were various problems
like inordinate delays in the transfer of share certificates, delay in receipt of securities
and inadequate infrastructure in banking and postal segments to handle a large
volume of application and storage of share certificates to overcome these problems
physical dealing in securities should be eliminated. The Indian stock market
introduced the system of dematerialization recognizing the need for scrip less
trading.

According to the Depositories Act, 1996, an investor has the option to hold shares
either in physical or electronic form. The process of converting the physical form of
shares into electronic form is called dematerialization or in short demats. The
converted electronic data is stored with the depository from where they can be
traded. It is similar to a bank where an investor opens an account with any of the
depository participants. Depository participant is a representative of the depository.
The DP maintains the investors securities account balances and intimates him about
the status of holdings.

ONLINE TRADING:
Online Trading is an easy way to buy and sell shares from the comfort of one’s place
instead of trading through individual stockbroker and broking firms, the customer can
transact with the help of mouse click and his visits to the neighborhood broker will
become a thing of the past. Even the older generation is adapting the online trading
route.

Find the right depository to provide with an online trading account can be difficult, but
many banks and companies offer excellent services for online trading. Our needs will
determine which online broker is best for us. Online trading brings in total
transparency between broker an investor in case of secondary market operation.

Whether we are buying a mutual fund, investing in commodities market or any other
transaction can be performed with minimal fuss. In India presently online trading can
take place through order routing system, which will route client orders to exchanges
trading system for execution of trade on stock exchange (NSE and BSE).

One of the measure attractions of online trading is the wealth of free commentary
and analysis about stock market and global economy. Any investor with an ounce of
market savviness can extract all the data needed to make trading decisions and
complete the trades. An important catalyst behind the emergence of thriving online

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brokerage system has been the buoyant stock market. One can trade online with e-
brokerage such as ICICI Direct, HDFC Securities, India Bulls, Kotakstreet and India
Info line’s 5paisa.com.

NEED OF STUDY:
With the emergence of the internet in everyday business, the significance of the
online stock market trading broker has gone up.

 It can be done from home at any desired fixed hours of the investor.
 The processing of the order is executed at proper timings as the servers of
the online trading portal are linked to the selected banks and stock exchanges
though out twenty-four hours.
 The investments made are safe and secured and profit is earned at proper
time without any dispute.
 Online trading updates are also provided to the investors and also about the
present grade of their orders either through the interface or e-mail.
 The investors increase shares and make development to the company.

OBJECTIVES OF STUDY:
 To Study & understood the concept of Online trading.
 To know the time information & importance & the role played by the stock
exchanges in the process of online trading.
 To know the reasons for the introduction of online trading and their Benefits.
 To review the changes that Online trading brought when compared with the
previous systems.

RESEARCH METHODOLOGY OF THE STUDY:

DATA COLLECTION METHODS

The data collection methods include both the primary and secondary collection
methods

 Primary collection methods: This method includes the data collection from
questionnaire.

 Secondary collection methods: The secondary collection methods includes the

available research work on internet. Also the data collected from the news,
magazines, books.

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SCOPE OF STUDY:
The study is limited to “Demat and Online Trading” and since the year 2000, a big
boom has been witnessed in the Indian stock Market when the market showed the
coming up of Online Trading System. Many Online stock trading companies came
but initially due to lack of Online Trading some Companies Vanished and some
survived. The Companies which are survived are getting the handsome returns also
attracting the foreign Investment Companies. Now a day’s this sector is facing cut-
throat Competition. And also provides huge growth prospects.

LIMITATIONS OF STUDY:

A good report tells us the results of the study. But every project has its own
Limitations. These Limitations can be in terms of:

 There is lack awareness among people about investing in stock market. So

people who are aware of such things were found in specific areas for survey
purposes.
 Most people are comfortable with traditional system in small towns and like to
trade from their respective brokers, hence not providing their true opinions.
 Most of people are not using technology and Internet is growing still it is not at
the required level.
 Some of the respondents who did not do Online trading were able to respond
only to some questions.
 Limitations towards Demat and online trading confined to keep the study in
manageable limits.

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INDUSTRY INTRODUCTION
FINANCIAL SYSTEM

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Indian Financial System
The economic development of a nation is reflected by the progress of the various
economic units, broadly classified into corporate sector, government and household
sector. While performing their activities these units will be placed in a
surplus/deficit/balanced budgetary situations.

There are areas or people with surplus funds and there are those with a deficit. A
financial system or financial sector functions as an intermediary and facilitates the
flow of funds from the areas of surplus to the areas of deficit. A Financial System is
a composition of various institutions, markets, regulations and laws, practices,
money manager, analysts, transactions and claims and liabilities.

Financial System:

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The word "system", in the term "financial system", implies a set of complex and
closely connected or interlined institutions, agents, practices, markets, transactions,
claims, and liabilities in the economy. The financial system is concerned about
money, credit and finance-the three terms are intimately related yet are somewhat
different from each other. Indian financial system consists of financial market,
financial instruments and financial intermediation. These are briefly discussed below;

FINANCIAL MARKETS:
A Financial Market can be defined as the market in which financial assets are
created or transferred. As against a real transaction that involves exchange of
money for real goods or services, a financial transaction involves creation or transfer
of a financial asset. Financial Assets or Financial Instruments represents a claim to
the payment of a sum of money sometime in the future and /or periodic payment in
the form of interest or dividend.

Money Market- The money market ifs a wholesale debt market for low-risk, highly-
liquid, short-term instrument. Funds are available in this market for periods ranging
from a single day up to a year. This market is dominated mostly by government,
banks and financial institutions.

Capital Market - The capital market is designed to finance the long-term

investments. The transactions taking place in this market will be for periods over a
year.

Forex Market - The Forex market deals with the multicurrency requirements, which
are met by the exchange of currencies. Depending on the exchange rate that is
applicable, the transfer of funds takes place in this market. This is one of the most
developed and integrated market across the globe.

Credit Market- Credit market is a place where banks, FIs and NBFCs purvey short,
medium and long-term loans to corporate and individuals.

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1. Mutual Funds:
A Mutual Fund is a body corporate registered with SEBI that pools money from a
number of individuals/corporate investors and is used by the fund manager to invests
in a variety of different financial instruments or securities such as equity shares,
Government securities, Bonds, debentures etc according to the objective of the
scheme. By this method, you can achieve a much wider spread of investments than
if you were investing directly in the underlying investments. It is widely accepted that
by spreading your investment you are spreading your risk, therefore investing in
mutual funds is considered to be of lower risk than direct investment.

When you invest in mutual funds, you do not own the underlying investments but
have a claim to a number of units in the fund representing the size of your
investment. The value of each unit of the mutual fund scheme, calculated based on
the market value of the underlying investments after deducting expenses and
liabilities, is referred to as the ’Net Asset Value’. The working of a mutual fund can be
understood from the chart.

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2. Insurance:-
Insurance in its basic form is defined as “ A contract between two parties whereby
one party called insurer undertakes in exchange for a fixed sum called premiums, to
pay the other party called insured a fixed amount of money on the happening of a
certain event."

In simple terms it is a contract between the person who buys insurance and an
Insurance company who sold the Policy. By entering into contract the Insurance
Company agrees to pay the Policy holder or his family members a predetermined
sum of money in case of any unfortunate event for a predetermined fixed sum
payable which is in normal term called Insurance Premiums.

Insurance is basically a protection against a financial loss which can arise on the
happening of an unexpected event. Insurance companies collect premiums to
provide for this protection. By paying a very small sum of money a person can
safeguard himself and his family financially from an unfortunate event.

3. Stock Market:-

History of Stock Market:-

The origin of the stock market in India goes back to the end of the eighteenth century
when long-term negotiable securities were first issued. However, for all practical
purposes, the real beginning occurred in the middle of the nineteenth century after
the enactment of the companies Act in 1850, which introduced the features of limited
liability and generated investor interest in corporate securities.

Calcutta (1908), and Madras (1937). In addition, a large number of ephemeral

exchanges emerged An important early event in the development of the stock
market in India was the formation of the native share and stock brokers 'Association
at Bombay in 1875, the precursor of the present day Bombay Stock Exchange. This
was followed by the formation of associations/exchanges in Ahmedabad (1894),

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mainly in buoyant periods to recede into oblivion during depressing times
subsequently.

Stock exchanges are intricacy inter-woven in the fabric of a nation's economic life.
Without a stock exchange, the saving of the community- the sinews of economic
progress and productive efficiency- would remain underutilized. The task of
mobilization and allocation of savings could be attempted in the old days by a much
less specialized institution than the stock exchanges. But as business and industry
expanded and the economy assumed more complex nature, the need for
'permanent finance' arose. Entrepreneurs needed money for long term whereas
investors demanded liquidity – the facility to convert their investment into cash at any
given time. The answer was a ready market for investments and this was how the
stock exchange came into being.

4. Real Estate:-

Characteristics of the Real Estate Market in India:-

1. Growing Market Demand:-

 Realization of large commercial projects

 IPOs by developers
 Gradual organization of the markets in the Tier I cities

2. Greater availability of information:-

 Emergence of transparency and liquidity
 Entry of international real estate consultancies
 Governing legal framework relaxed
 Competitive pricing

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5. Fixed Deposit:-

They cover the fixed deposits of varied tenors offered by the commercial banks and
other non-banking financial institutions. These are generally a low risk prepositions,
as the commercial banks are believed to return the amount due without default.
Mostly these Fixed Deposits are the preferred choice of risk-averse Indian investors
who rate safety of capital & ease of investment above all parameters. Largely, these
investments earn a marginal rate of return of 6-8% per annum.

6. Bonds:-
Bonds refer to debt instruments bearing interest on maturity. In simple terms,
organizations may borrow funds by issuing debt securities named bonds, having a
fixed maturity period (more than one year) and pay a specified rate of interest on the
principal amount to the holders. A bond is generally a promise to repay the principal
along with a fixed rate of interest on a specified date. The central or state
government, corporations and similar institution issue bonds. Few of the government
bonds are national saving certificates, Kisan Vikas Patra, Post Office Deposits,
Provident Funds, etc. These schemes are risk free, as the government does not
default in payments. However, the interest rates offered by them are in the range of
7% -9%.

7. Commodities:-
A commodity is a basic good representing a monetary value. Commodities are
mostly used as inputs in the production of other goods or services. With the advent
of new online exchange, commodities can now be traded in futures markets. The
following are some of the commodities that are traded in the commodity market.
Precious Metals : Gold and Silver
Base Metals : Copper, Zinc, Steel and Aluminum
Energy : Crude Oil, Brent Crude and Natural Gas
Pulses : Chana, Urad and Tur
Spices : Black Pepper, Jeera, Turmeric and Red Chili
Others : Guar Complex, Soya Complex, Wheat and Sugar.

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STOCK MARKET
OVERVIEW

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There are two majour stock exchanges in India.

1. NSC
2. BSC

The Stock exchange provides exposure to investors into two types of Markets:

1. Capital market.

2. Money market.

Capital market Refers to all the facilities and Institutional arrangements for
borrowing and lending of term funds. It does not deal in capital goods but is
concerned with the raising of money capital. It consists of term lending institutions
and investing Institutions which mainly provide long term funds.

Securities Market has been further divided into two markets they are:

A. Primary Market.
B. Secondary Market.

Primary Market refers to the raising of new capital in the form of shares and
debentures, while Secondary Market deals with securities already issued by
companies. Both the markets are important, but the new issues market is much more
important from the point of view of economic growth.

Secondary Market: The market where securities are traded after they are initially
offered in the primary market. Most trading is done in the secondary market. To explain
further, it is trading in previously issued financial instruments. An organized market for
used securities. Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond
markets, over-the-counter markets, residential mortgage loans, governmental
guaranteed loans etc.

Secondary Market refers to a market where securities are traded after being initially
offered to the public in the primary market and/or listed on the Stock Exchange.
Majority of the trading is done in the secondary market. Secondary market comprises
of equity markets and the debt markets. For the general investor, the secondary
market provides an efficient platform for trading of his securities. For the management
of the company, Secondary equity markets serve as a monitoring and control
conduit—by facilitating value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via price
discovery) that guides management decisions.

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Money market: Money Market is a market for short-term funds, which can be used
for overnights to one-year duration. It also deals with the financial assets that
constitute near money which means that the assets can be converted into cash
quickly with minimum transaction cost and without a loss in value. It consists of
commercial banks, co-operative banks and other agencies which supply only short
term funds. It consists of:

 Organized Money Markets. And Un Organized money markets

 The Call Money Market, Treasury Bill Market, Collateral Money market,
Commercial paper and Certificate of deposits.

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INDIAN CAPITAL MARKET AT GLANCE
18th Century

1800 Trading of shares of east India company in Kolkata And

Mumbai

1850 Joint stock company came into existence

1860 Speculation and feverish dealing in securities

1875 Formulation of stock exchange of Mumbai

1894 Formulation of Ahmadabad stock exchange

19th Century

1908 Formulation of Calcutta stock exchange

1939 Formulation of Lahore and madras stock exchange

1940 Formulation of U.P and Delhi stock exchange

1956 Securities contract and regulation act enacted

1957 Scam of Haridas Mundhra

1988 Securities and exchange board of India set up

1991 Scam of MS Shoes

1992 SEBI given power Under SEBI act,1992

1993 Formation of National stock exchange

1995 HARSHAD MEHTA Scam

1995 SESA GOA Scam

1997 CRB scam

1998 BPL And Videocon Scam

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20th Century

2000 Depositories came into existence (electronic form of shares)

2001 Ketan Parekh scam

2002 Start of rolling settlement and banning of Badla trading

2002 Introduction of T+3 settlement in April

2003 Introduction of T+2 settlement in April

2005 BSE Sensex touches all time high 6954 in January

2006 BSE Sensex touches all time high 12500,the highest intraday fall of
1100

2007 BSE reaches the level of

2008 BSE touches all time high in January 2008

2008 Sensex saw its highest ever loss of 1,408 points at the end of
the session.

2008 Sensex saw its 15 month low, from its all time high

2009 Sensex saw its down trend & highest ever loss because of
Satyam case.

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VARIOUS STOCK EXCHANGES IN INDIA:
List of Stock Exchanges in India
» Bombay Stock Exchange
» National Stock Exchange
» Regional Stock Exchanges

» Ahmedabad
» Bangalore
» Bhubaneshwar
» Calcutta
» Cochin
» Coimbatore
» Delhi
» Guwahati
» Hyderabad
» Jaipur
» Ludhiana
» Madhya Pradesh
» Madras
» Magadh
» Mangalore
» Meerut
» OTC Exchange Of India
» Pune
» Saurashtra Kutch
» UttarPradesh
» Vadodara

AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY

ARE:

1) NSE
2) BSE

NATIONAL STOCK EXCHANGE

The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and
most advanced exchange with 1016 companies listed and 726 trading members.
Capital market reforms in India and the launch of the Securities and Exchange Board
of India (SEBI) accelerated the incorporation of the second Indian stock exchange
called the National Stock Exchange (NSE) in 1992. After a few years of operations,
the NSE has become the largest stock exchange in India.

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Three segments of the NSE trading platform were established one after another. The
Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital
Market (CM) segment was opened at the end of 1994. Finally, the Futures and
Options segment began operating in 2000. Today the NSE takes the 14th position in
the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX
Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified
index of 50 stocks from 25 different economy sectors. The Indices are owned and
managed by India Index Services and Products Ltd (IISL) that has a consulting and
licensing agreement with Standard & Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first
exchange in India that started trading stock on the Internet in 2000. The NSE has
also proved its leadership in the Indian financial market by gaining many awards
such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and
CHIP Web Award by CHIP magazine (1999).

The NSE is owned by the group of leading financial institutions such as Indian Bank
or Life Insurance Corporation of India. However, in the totally de-mutualized
Exchange, the ownership as well as the management does not have a right to trade
on the Exchange. Only qualified traders can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a
single platform, which is divided into three segments: Wholesale Debt Market
(WDM), Capital Market (CM), and Futures & Options (F&O) Market.

The main objectives of NSE are as follows

1) To establish a nation-wide trading facility for equities, debt and hybrid instruments
2) To ensure equal access investors all over the country through appropriate
communication network.
3) To provide a fair, efficient and transparent securities market to investors using
an electronic communication network.
4) To enable shorter settlement cycle and book entry settlement system.
5) To meet current international standards of securities market.

Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,
Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India,
Punjab National Bank, Infrastructure Leasing and Financial Services, Stock Holding
Corporation for India and SBE capital market are the promoters of NSE.

NSE Nifty:

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The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for
large companies on the National Stock Exchange of India. S&P CNX Nifty is a well
diversified 50 stock index accounting for 22 sectors of the economy. It is used for a
variety of purposes such as benchmarking fund portfolios, index based derivatives
and index funds.

Nifty was developed by the economists Ajay Shah and Susan Thomas, then at
IGIDR. Later on, it came to be owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's
first specialized company focused upon the index as a core product. IISL have a
consulting and licensing agreement with Standard & Poor's (S&P), who are world
leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to
reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for
CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix
belongs to the US-based Standard & Poor's Financial Information Services.

NSE other indices:

 S&P CNX Nifty

 CNX Nifty Junior
 CNX 100
 S&P CNX 500
 CNX Midcap
 S&P CNX Defty
 CNX Midcap 200

BOMBAY STOCK EXCHANGE:

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;
popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange
in Asia. It is located at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 5,600 Indian
companies listed with the stock exchange, and has a significant trading volume. As
of October2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US
$ 730 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a
widely used market index in India and Asia. As of 2005, it is among the 5 biggest
stock exchanges in the world in terms of transactions volume.

History
An informal group of 22 stockbrokers began trading under a banyan tree opposite
the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as the
Bombay Stock Exchange (BSE). In January 1899, the stock exchange moved into
the Brokers’ Hall after it was inaugurated by James M MacLean. After the First World
War, the BSE was shifted to an old building near the Town Hall. In 1956, the

24
Government of India recognized the Bombay Stock Exchange as the first stock
exchange in the country under the Securities Contracts (Regulation) Act.1995, when
it was replaced by an electronic (eTrading) system named BOLT, or the BSE Online
Trading system. In 2005, the status of the exchange changed from an Association of
Persons (AoP) to a full-fledged corporation under the BSE (Corporatization and
Demutualization) scheme, 2005 (and its name was changed to The Bombay Stock
Exchange Limited).

BSE Sensex:

The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed
of 30 scrips, with the base April 1979 = 100. The set of companies which make up
the index has been changed only a few times in the last 20 years. These companies
account for around one-fifth of the market capitalization of the BSE.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-

Weighted" methodology of 30 component stocks representing a sample of large,
well-established and financially sound companies. The base year of SENSEX is
1978-79. The index is widely reported in both domestic and international markets
through print as well as electronic media. SENSEX is not only scientifically designed
but also based on globally accepted construction and review methodology. From
September 2003, the SENSEX is calculated on a free-float market capitalization
methodology. The "free-float Market Capitalization-Weighted" methodology is a
widely followed index construction methodology on which majority of global equity
benchmarks are based.

The growth of equity markets in India has been phenomenal in the decade gone by.
Right from early nineties the stock market witnessed heightened activity in terms of
various bull and bear runs. More recently, the bourses in India witnessed a similar
frenzy in the 'TMT' sectors. The SENSEX captured all these happenings in the most
judicial manner. One can identify the booms and bust of the Indian equity market
through SENSEX.

The values of all BSE indices are updated every 15 seconds during the market hours
and displayed through the BOLT system, BSE website and news wire agencies.

SENSEX calculation:

SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this methodology, the level of index at any point of time reflects the total
market value of 30 component stocks relative to a base period. (The market
capitalization of a company is determined by multiplying the price of its stock by the
number of shares issued by the company). An index of a set of combined variables
(such as price and number of shares) is commonly referred as a 'Composite Index'
by statisticians. A single indexed number is used to represent the results of this

25
calculation in order to make the value easier to work with and track over time. It is
much easier to graph a chart based on indexed values than one based on actual
values.

BSE - other Indices:

Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses
other stock indices as well:

 BSE 500
 BSE PSU
 BSE MIDCAP
 BSE SMLCAP
 BSE BANK

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 ONLINE
AND
OFFLINE TRADING

27
THEORITICAL BACKGROUND

Definition of share trading

Share Market is nothing but you are investing the money on which company you
trusted that there is a growth of this company in future. If you choose the right
company you will earn or else you will loss. There is also fluctuation in the market
due to the Currency value against dollar

 1 year ago

 Share-marketing is a type of gambling - respected gambling. It is better

that you do not know about it. It will be better if you do not try to know
about it. Earn clean money, by hard work. Do not go for lotteries,
share-markting, etc. They will give you more tension than money.

OFF-LINE TRADING
Doing share trading with the help of broker or through phone is called Offline trading.
In other words trading will be done by another person on your behalf based on the
instructions given by you, and then the other person can be a broker.

The broker will do buying and selling of shares on your behalf depending on the
instructions given by you. If you want to do offline share trading then you need to
open the Demat account.

1. In off-line transfer of share buyer’s intervention is required.

2. The seller is required to issue a signed delivery instruction slip to his

depository.

3. It requires lot of paperwork.

4. The rolling settlement in off-line is T+5.

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ONLINE-TRADING
Doing share trading with help of computer, Internet connection and with
trading/Demat account is called Online Share Trading. If you would like to do online
share trading then you should have a computer, Internet connection and online
trading account.

STOCK EXCHANGE

BROKER BROKER

CUSTOMER CUSTOMER CUSTOMER CUSTOMER

1. In online transfer of share buyer’s intervention is not required.

2. Sighing of delivery instruction slips to his depository is not required.

3. Instant and fast transfer of share.

4. The rolling settlement is on-line is T+2.

5. Paperless transactions – your share certificates get deposited in

Electronic form (DMAT) in your web trade account.

6. Orders can be also placed offline during non-market hours.

7. For NRIs this is the easiest option to invest in Indian markets.

8. Record of all transactions is available at your fingertips.

29
CONCEPT

1) DEMAT
It is nothing but an electronic form of share.

2) DEMATERIALISATIONS: -
Physical form converted into electronic form.

3) STOCK BROKER: -

Stockbrokers are the intermediaries who are allowed to trade in securities on the
exchange of which they are members, they buy and sell on behalf of their clients.

4) MUTUAL FUNDS: -
Mutual funds are financial intermediaries who collect the saving of small investors
and invest them in a diversified portfolio of securities to minimize risk and maximize
returns for their participation.

5) PRIVATE PLACEMENT: -

Many companies choose to raise capital for their operation by taking through various
intermediaries by taking what in marketing terms would be known as wholesale
route. The retail route of approaching the public is expensive as well as time
consuming. This is called in financial Market as private placement.

6) INTERNET BROKERING: -

With the Internet becoming ubiquitous institution have set up securities trading
agencies that provide online trading facilities to their clients from their homes.

30
7) SPEED-e-: -

In order to extend the benefits of technological progress to investors NSDL has

launched SPEED-e services, SPEED-e is internal based facility for all depository
participant that enables the account to submit instruction to their depositories
through SPEED-e website on internet.

8) IDEAS:-

NSDL offers a secured based service for a clearing member of stock exchange and
to account holders. This service called Ideas enable clearing member and beneficial
account holder to view details of their accounts directly on the Internet.
Share Market Trading includes buying and selling of company shares either through
Stock Exchange or Over-the-Counter (OTC). It is also called the equity trading.
Shares are a certificate, which represents ownership rights of the holder in the
company.

Share Market is the market for securities where organized issuance and trading of
shares takes place either through exchanges or over-the-counter in electronic or
physical form. It plays an important role in channelizing capital from the investors to
the business houses, which consequently leads to the availability of funds for
business expansion.

31
Shares in the Share Market are either traded through:

(a) Stock Exchange: -

These are organized market places where stocks, bonds are other equivalents are
traded between the buyers and sellers where exchange acts as a counter-party to
both the participants in case of any default. The contracts are standardized and not
customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.

(b) Over-the -Counter (OTC): -

These are not centralized exchanges. Here, the trade takes place through a network
of dealers. Generally, the OTC contracts are bilateral customized contracts and not
standardized ones.

The shares traded are Common Stocks.

(C) Common Stocks: -

Gives an ownership right to the holders of the stock and hence the shareholders are
entitled to the earnings of the company according to their stake. Holders also get
dividends on those stocks as and when given by the company. Liquidity of common
stocks are very high and can be bought and sold at any time of the market hours.

32
Important Participants of Share Market Trading are:

1) Buyer: -

An investor who buys a script in the belief that the market will rise. If his hinge
becomes right then he makes profit otherwise he suffers loss.

2) Seller: -

Seller of a stock sells in the hope that the stock price will go down.

3) Stock Broker: -

Brokers are persons or firms who execute buy/sell order on behalf of the investors
and charge a commission for rendering the service.

Share Trading are done in three ways:-

(a) Offline Share Trading:-

In this form of trading the customer either goes to the share broker's place and sits
before the share trading terminal and asks the dealer to place orders in his account.
Or rings the share broker, ask the share quotes and other relevant information’s, and
accordingly places orders over the phone.

33
(b) Online Share Trading: -

The client could avail the share market and could place his order on his own from
any place he wants, provided he has a computer with an Internet connection.

(C) Open Outcry Trading: -

Here, the investors put their orders through the brokers and these share brokers in
turn place and execute orders on behalf of them on the floor of the exchange. These
brokers gather in a particular place on the trading floor known as Trading Post.
There is a person called as the Specialist present in the trading post who does the
matching of the buy and sell orders. This type of auction method is called Open
Outcry Method.

Important terms in share market and in share trading:-

 Open –The first price at which the stock opens when market opens in the
morning.

 High - The stock price reached at the highest level in a day.

 Low - The stock price reached the lowest level in a day.

 Close - The stock price at which it remains after the end of market timings or
the final price of the stock when the market closes for a day.

 Volume - Volume is nothing but quantity.

 Bid - The Buying price is called as Bid price.

 Offer - The selling price is called offer price.

34
 Bid Quantity - The total number of shares available for buying is called Bid
Quantity.

 Offers Quantity - The total number of shares available for selling is called
Offer Quantity.

 Buying and selling of shares - Buying is also called as demand or bid and
selling is also called as supply or offer. First selling and then buying (this only
happens in day trading)
is called as shorting of shares or short sell.

 Share Trading - Buying and selling of shares is called share trading.

 Transaction - One complete cycle of buying and selling of shares is called

One Transaction.

 Squaring off - This term is used to complete one transaction. Means if you
buy then have to sell (means square off) and if you sell then you have to buy
(means square off).

 Limit Order - In limit order the buying or selling price has to be mentioned
and when the share price comes to that price then you will execute your order
with the mentioned price.

 Market Order - When you put buy or sell price at market rate then the price
get executes at the current rate of market. The market order gets immediately
executed at the current available price.

 Stop Loss Orders - Stop loss orders ("stops") are limits set by traders at
which they will automatically enter or exit trades - an order to buy or sell is
placed in the market if price reaches a specified limit. A stop loss order is set
to limit a trader's potential loss. The stop loss is placed below the current price

35
 (to protect a long position) or above the current price (to protect a short
position).

Facilities of the online trading in India:

The investor has to register with an online trading portal and get into an agreement
with the firm to trade in different securities following the terms and conditions listed
down on the agreement. The order processing is done in correct timings as the
servers of the online trading portal are connected to the stock exchanges and
designated banks all round the clock. They can also get updates on the trading and
check the current status of their orders either through e-mail or through the interface.
Brokerage also provides research content on their websites, such that the clients can
take their own decisions on stocks before investing.

Products and services of the online trading in India:

Varieties of financial products and services of the online trading are available in India
such as:

 Life insurance
 Equities
 Portfolio management
 Mutual funds
 Loans
 General insurance
 Share trading
 Commodities trading
 Financial planning.

National stock exchange and Bombay stock exchange

In spite of many private stock houses at present involved in online trading in India,
the NSE and BSE are among the largest exchanges. They handle huge daily trading
volumes, supporting large amounts of data traffic, and possessing a countrywide
network. The automated online systems used for trading by the national stock
exchange and the Bombay stock exchange are the NIBIS or NSE's Internet Based
Information System and NEAT for the national stock exchange and the BSE Online
Trading system or BOLT for the Bombay stock exchange.

 Online trading is termed as selling products or good services through Internet.

 Customers willing to purchase the product should provide the credit card
details and personal contact information online and once the payment is being
made the product is shipped to the address of the customer as provided
earlier generally after two business days.
36
  The product is shipped to the customer from the retailer only.

 Online trading is treated as the most effective process to make money with
the help of Internet by sitting at home only.

 But is not easy and simple as it requires constant supervision and once
people attains the appropriate skill can gain profit in huge amount.

 In order to make a business successful a plan need to be prepared first then

multiple sources of income policy should be opened so that the plan at later
time should be incorporated in to the business.

Companies provide Online Trading in India

:: India Stock :: BSEIndia

:: A1 Technology Online Trading :: JV Financial Online

:: Best online trading :: Kotak Securities Online Trading

:: Bonanza Online Trading :: Mansukh Securities Online Trading

:: BullishIndian.com Online Trading :: Quote.com Online Trading

:: Express Computer Online Trading :: SHCL Online Trading

:: Geojit Securities Online :: STC Online Trading

:: ICICI Online Trading :: Technical Analysis Trading

:: Indiabulls Online :: Union Bank of India Online Trading

:: India Insurance :: Best Online Trading

37
FEATURES OF ONLINE TRADING
The Online Trading is having many features which make it most suitable for the
investors to go for. Some of these features are as follows:

Features of information.
The Internet can provide a new sense of control over your financial future. The
amount of investment information available online is truly astounding. It's one of the
best aspects of being a wired investor. For the first time in history, any individual with
an Internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and
the global economy
 Conduct extensive financial research on any company

Control of your money:

One of the great appeals of using an online trading account is the fact that the
account belongs to you, and is under your direct control. When you want to buy or
sell stock, you no longer need to call your broker on the phone; hope that he is in the
office to place your order; possibly argue with the broker about the order; and hope
that the transaction is executed instantly.

Access to Market:

At the most basic level, an online trading account gives you more agility in buying
and selling stocks. This is through sophisticated information streams, dedicated
trading platforms and sophisticated tools for accessing the markets.

Ensures the best price for Investor:

38
Every broker house aims at providing the investor with the best price available. Also
due to the high level of transparency with regard to display of information relating to
the specific stocks

and company profiles, you will be able to get the best quote for your orders.

Offers grater transparency:

Online trading offers you greater transparency by providing you with an audit trail.
This involves a complete integrated electronic chain starting from order placement,
to clearing and settlement and finally ending with a credit into your depository
account. All these stages are subject to inspection, thus bringing in transparency into
the system.

Enables hassle free trading:

Online trading integrates your bank account, your trading account and your demat
accounts, which leads to easy and paperless trading for you.

Allow instance trade execution

You as an Investment online customer will be able to execute the entire trading
transaction, right from logging on to our site, to the execution and settlement of your
bank account, in a very short period of time.

Provides a level playing field

Trading on the net, gives even the smallest retail investor access to information that
earlier was available only to the big traders. This provides a level playing field for all
investors in the securities market.

Reduces the settlement risk

This method of trading reduces the settlement risk for the investor, as in this case all
short sell orders are squared off at the specified cut-off time and not allowed to be
carried forward.

39
In the case of a demat account your demat account is checked by us before executing
your sell transaction. This reduces the settlement risk for the buyer, who is assured of
the delivery of the securities and for you as a seller of the securities

Instant order trade confirmations

Every trade is confirmed immediately and you will receive an on-screen confirmation
following every trade with full details for your records. This avoids costly errors that
would have been discovered when it is too late.

Integrated Accounts

Your Bank, Depository and online account are integrated for your convenience.
Various broking houses provide access to many of the popular banks.

Provides a level playing field

Broking houses work hard to keep our account and personal information secure. From
updated security technology to advanced fraud prevention measures, they have the
people and tools in place to provide a strong defense against electronic scams and
fraud.

40
BENEFITS OF ONLINE BROKING
1) Less Costly:

The most significant advantage of the Online broking is the cost reduction in the
brokerage. Due to the power of the Internet one has the privilege of becoming the
clients of really large brokerages with the benefits of enjoying the low charges hithelio
before enjoyed only by the big players. As the DP account has got linked to the trading
account most players do not charge a minimum transaction cost thus truly allowing
one to buy a single share and achieve meaningful rupee price averaging whatever be
your buying power.

2) Peace of Mind:

One can never have complete peace of mind but online investing does away with the
hassles of filling up instruction slips, visits to the broker for handing over these slips
and consequent costs.

3) Keeping Records:

The site one trades on keeps a record of all transactions down to unexecuted orders
and cancelled orders thus keeping one abreast of all your transactions 24 hours a day.
No paperwork means more time at one’s disposal for research and analysis.

4) Access to Information and investment Tools:

Most online investing sites have a wealth of information for their registered members.
This includes research reports, results, analysis and even gossip and the buzz in the
market.

5.) Unparalleled Liquidity:

The. bank account linked with the trading account invariably has an A TM free. Most
partner banks offer Internet banking as well. This results in one’s money becoming
available to him whenever he like from his trading account. Conversely in case he spot
an opportunity in the market he can immediately allocate money from his savings
account to his trading account and make profits.

41
6.) Unparalleled Safety:

Most sites are secure using 128-bit algorithms -highest available commercially
anywhere in the world. Moreover even if somebody broke in and tampered with one’s
account the money from the stocks he sold or the stock bought from the money in his
account is in his account only.

7.) Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as in this case no
Short sale is possible i.e. the seller will not be able to sell the securities unless he has
their actual possession. In the case of a demat account (required for an online
transaction), when a seller wants to sell the securities, his demat account is checked
by the Depository Participant before executing the sale transaction. This reduces the
settlement risk for the buyer, who is assured of the delivery of the securities.

8.) Offers greater transparency:

Online trading gives greater transparency to the investors by providing them an audit
trail. This involves a complete integrated electronic chain starting from order
placement, to clearing and settlement and finally ending with a credit to the depository
account of the investor. All these stages are subject to inspection, thus bringing in
transparency into the system.

9.) Ease of trade:

It is the ease of doing the trade through net, with a click of mouse, one can buy or sell
any share that is dematerialized.

Other than the above-mentioned advantages, Internet trading provides some

additional advantages to the investors, brokers and also helps the nation to channelize
the resources. Net trading would increase competition in the market hence increase
in the bargaining power of the investors. The entire communication between the
investor, broker and exchange would take place within milliseconds.

42
PROBLEMS OF ONLINE BROKING
There is a flip side to everything and online trading is no exception.

Chart

More Costly Lack of Knowledge Loyalty of Traditional Broker Lack of Trust Slow Speed Other

Source:- www.lse.co.in

27% Loyality is of traditional broker

23% people says that online trading is more costly than manual trading.

21% people not prefer online trading because of lack of knowledge.

So, the main problems of online trading are as follows:

1.) "Server not found":

This may appear on one’s screens when he is desperately trying to get out of an
unprofitable position. Some of the online sites are providing a telephone number for
use in case their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

Recently ICICI Direct had a connectivity problem with the NSE for two and half hours
during trading hours. This problem is rare but be alive to its possibility.

43
3.) Cyber attack:

In the event of a malicious attack on the systems of one’s broker he is protected only
if the company is taking proper precautions against such attacks and if proper backup
is regularly been taken. He may like to choose a brokerage that has a stated security
policy and contingency plan in place.

4.) Non-availability of a seamless interface:

As a client one will access the NSE through a server of the online brokerage and this
may involve queuing delays. If a number of client access the server the server takes
its own time sending the orders to the NSE server. He must check out the
seamlessness of this interface before selecting an online brokerage. The faster the
orders are processed the more seamless is the interface.

5.) Non- availability of personalized advice:

If one like to ask his broker "Aaj kya achcha lag raha hai" he may not be able to do so.
If he want advice on a particular stock in his portfolio he may not even be able to get
that.

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are trading on
margin. That is where the brokerage firm lends you money by leveraging his account,
allowing him to buy a large amount of securities by putting up only a small amount of
money. He may have forgotten what he read in the small print of his agreement, but
the brokerage firm has the right to change the maintenance margin requirements
without any warning or notice to him. In fact, the firm has the right to liquidate his
securities holdings (and it can pick and choose which ones) without any notice to one
if he fail to meet the margin call. And there he was leveraged to the hilt, hoping to hit
a home run when he discovered that he is required to make a large deposit that he
cannot make. The next thing one know, the firm is selling off his securities at a point
in time that is not the best for him. These are the perils of trading on margin.

44
7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to investors
looking for an insight into the market. Many would not like to rely on research reports,
which are there for all. So, net investors will have to do their own research and take
their own decision, whether wild or wise.

8.) Increased charges:

Some of the brokers are of the view that they would have to provide advisory services
to the customers. But with increased volumes, they will have to follow the international
practice of charging a little more than the normal charges from a customer looking for
personal advice.

45
WHY PEOPLE ARE BENDING TOWARDS ONLINE
TRADING
Several broking houses now offer online trading facilities. You can trade online with e-
brokerages such as ICICI Direct, Kotakstreet, India bulls, India info line’s 5paisa.com
and HDFC securities.

If you are already comfortable trading with your regular broker, here are few reasons
why you may consider switching to trading online, or at least another avenue of trading.
an obvious advantage of online trading is that your transaction would be virtually
paperless. Your trading account would be linked to your demat and bank account,
ensuring a smooth transaction process. This is especially helpful in the extent T+2
settlement system, where you have just two days to settle your transaction.

The normal process of issuing of delivery note, in case of a sale, or arranging for a
payment in case of purchaser of shares, is all taken care of the minute your order is
executed online. The absence of manual intervention ensures that you are completely
in control of all transaction.

There is also little room for error, as your order is always confirmed before it is
executed. You can also make better decision as you have a clear record of all your
previous transaction. When you trade offline, a demat statement is normally sent to
you only on a quarterly basis .keeping track of your portfolio can be a hassle in such
a case. The inter net can provide a new sense of control over your financial future.
The amount of investment information available online is truly astounding. Its one of
the best aspect of being a wired investor for the first time in history, any individual with
an internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and
globe economy.
 Conduct extensive financial research on any company
 Talk with other investors around the world

46
At investsmart you can get real-time stock quotes, daily roundups of the stock market,
experts commentary, and a deep community of fellow investors.

Convenience is probably the greatest advantage online trading offers investors. if don’t
have time to trade during market hours, perhaps you are at work, you can log on the
web-trading site and place your order offline, during off market hours. Your order would
join the queue and be expected the next day. You would need to enjoy a good
relationship with your broker, for you to be able to reach him in the late hours. For non-
resident Indians (NRI), trading online is perhaps their easiest option to invest in the
Indian stock markets.

What is more, the time difference, in some cases, can work to their advantage. Antony,
an NRI-based in New York, places his order in the evening after work, when it is day
time India and the markets are open. We also have access to considerable information
online. By just logging on to ICICI direct online, for instance, we can get the latest
news, market information and company research.

Moreover, if our connection is maddeningly slow and we want to get your order
executed immediately, most e-brokerages also provide a facility to trade offline by
placing our order via the phone.

47
PROCEDURE FOR ON-LINE TRADING:
An Investor interesting in trading through Internet shall such as filling the account
opening form of -broker, copies of identity proof have to, firstly register himself with an
Internet brokerage firm. Some formalities, copy of residence proof are made to register
himself with the e-trader. Secondly, the investor would be required to open a bank
account with a scheduled bank and sufficient balance should be kept in the account.
Thirdly he would be required to open account with a depository participant because
only dematerialized shares can be traded on Internet.

The client places order via the net by logging on to his

Broker’s site.

The broker accepts and executes the order and places it with
the exchange

The exchange accepts the order after checking the share limit for the day.

The broker makes the payment either directly via the client bank account
or pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement.

The client is intimated about the settlement either through

the demat or via e-mail.

So, generally following steps are followed while doing the trading through the Internet:

Step-I:

Those investors interested in doing the trading over Internet system, that is,NEAT -
ISX (NSE), should approach the brokers and register with the Stock Broker.

Step-2:
48
After registration, the broker will provide to them a login name, password and a
personal identification number (PIN).

Step-3:

Actual placement of an order, Using the place order window as under can then place
an order:

(a) First by entering the symbol and series of stock and other parameters such as
quantity and price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

Step-4:

It is the process of review. Thus, the investor has to review the order placed by clicking
the review option. He may also re-set to clear the values.

Step-5:

After the review has been satisfactory; the order has to be sent by clicking on the send
option.

Step-6:

The investor will receive an "Order Confirmation" 'message along with the order
number and the value of the order.

Step- 7:In case the order is rejected by the Broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the bottom
of the screen. At present, a time lag of about ten seconds is there in executing the
trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some brokers
will take some advance payment from the, investors and will fix their trading limits.
When the trade is executed, the broker will ask the investor for transfer of funds by the
investor to his account.

49
When was online trading introduced in INDIA?
Online trading started in India in February 2000 when a couple of brokers started
offering an online trading platform for their customers.

THE MECHANICS OF ONLINE TRADING

CLIENT BROKER STOCK EXCHANGE

Places an order on the
net on the broker’s
website through the
distinctive I.D. code
Accepts the order, Accepts the order after
Checks the client’s checking the scrip limit
Identity and places of the broker for the
the order with the day
stock exchange

The settlement of the

deal (buy/sell order)
gets reflected in his
Pays the
Demat account.
Exchange

though his owns Receives the

The client is intimated
account and money and
about the execution of
receives it from completes the
the deal by e-mail.
the client account. settlement
Pays the broker
pending physical

50
The benefits of investor due to Online Investing:

 Independence and freedom due to enjoyed by an individual access to

the markets: This is conceivably the greatest advantage of online
brokerages. A novice investor with an Internet connection can know there
all time stock quotes, historical stock price trends, have a handle on market
events, access vast amounts of economic and market analysis, do research
on firms, and interact with other investors via forums or chat rooms. This, in
combination with time, can transform even the most novice investor with an
active interest in investments into a knowledgeable and powerful investor.

 Elimination of the “middle man”:

Investing online gives the investor a sense of control over their wealth. Buying
and selling of stock no longer requires another individual to carry it out. It
saves the investor the added worries that come with busy phone lines; broker
not being in, etc. when wanting to do an important trade. It can be done
whenever and wherever by the Investor themselves.

 Elimination of Losses on account of Brokers: Most brokers live on

commissions, hence the tactics used by them are in the favor of the broker
first, the brokerage house next and finally the client. Online brokerages pay
financial advisors a fixed salary, thus eliminating the chance for an investor
doing unnecessary trades for the benefit of the brokerage firm and the broker.

 Inexpensive and affordable commission charges: Commissions per trade

online are much lower than when compared to that charged by traditional
brokerage houses like Merrill Lynch, etc. This is the fulcrum on which online
brokerages leverage. Cheap transaction costs along with the immense
amount accessible online are the biggest reasons for the clients to move
online. Traditional brokerage houses.

 Internet as an Information Super highway: Information related to stocks,

company fundamentals, etc., which were once only available to licensed
brokers, are now at the finger tips of anyone and everyone. Online brokerages
are inconstant endeavor to bridge the gap between the investor and the
market.

 Diverse range of investment products and choices: Online brokerages are

offering more products to the consumer, so as to give the consumer a wider
choice and also to accommodate consumers that have niche tastes. Investors
can invest in stocks, bonds, mutual funds, mortgages.

 Speed of trade execution: Keeping time in mind, online trading is much

quicker-as far as accessibility and availability to investment information and
execution of trades are concerned. Online have decreased the time for total
completion of a trade from the regular T+3 days to a matter of minutes.

51
The costs borne by an Individual Investor from Online
Investing
a) Technical Reliability: The greatest disadvantage of online trading is the
inability of a network to be fail-safe. Computers in spite of the technological
advances are by no means perfect. There are various things that could go
wrong like failure to log on to the network, network blackout due to failure
power, server crash resulting in site failure, traffic overload thus causing site
freeze. Site freeze can happen on extremely demanding days with large
amounts of orders going over the networks.

b) The investor is alone: Another disadvantage may be the penalty of a bad

investment. The do it yourself attitude that empowers the investor over his
own money, can give a sense of autonomy previously not experienced when
dealing with traditional brokerages. But it can also spell investment failure.

The Limitations of Online Investing to an individual

investor
Besides advantages and disadvantages, there exists the possibility of limitations of
what online brokerages can do for an individual investor. Though the Internet has
allowed more players into the investment playing field, some investors like the
institutional investors still have an advantage over the individual investors in spite of
the Internet and all its advantages. It can be assertively said, “Size does matter”.

Firstly, because of the sheer size of resources and contacts, institutional investors
almost always get exclusive access to the hottest Initial Public Offering (IPO) deals
before it goes into the markets. Individual investors usually gain access to these
stocks after the initial price gain is already lost. Online brokerages do offer IPO deals
–provided the trading account has between $100,000 to $500,000.

Client Broker Relationship

Know Your Client:

52
The stock Exchange must ensure that brokers have sufficient, verifiable information
about clients, which would facilitate risk evaluation of clients.

Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and
rights. This agreement should also inter alia, the minimum service standards to be
maintained by the broker for such service specified by SEBI/Exchange for the internet
based trading from time to time. Exchange will prepare a model agreement for this
purpose. The broker agreement with clients should not have any clause that is less
stringent/contrary to the conditions stipulated is the model agreement.

Investor Information:

The broker web site providing the internet based trading facility should contain
information meant for investor protection such as rules and regulations affecting client
broker relationship arbitration rules, investor protection rules etc. The broker web site
providing the Internet based trading facility should also provide and display
prominently, hyper link to the web site/page on the web site of the relevant stock
exchange (s) displaying rules/ regulations/ circulars. Ticker/quote/order book
displayed on the web-site of the broker should display the time stamp as well as source
of such information against the given information.

Order/Trade Confirmation:

Order/Trade confirmation should also be sent to the investor through email at client’s
discretion at the time specified by the client in addition to the other made of display of
such confirmation of real time basis on the broker web site. The investor should be
allowed to specify the time interval on the web site itself within which he would like to
receive this information through email. Facility for reconfirmation of orders which are
larger than that specified by the member's risk management system should be
provided on the internet based system.

Handling Complaints by Investors:

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Exchanges should monitor complaints from investors regarding service provided by
brokers to ensure a minimum level of service. Exchange should have separate cell
specifically to handle Internet trading related complaints. It is desirable that exchanges
should also have facility for on-line registration of complaints on their web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the trading limits
of clients, and exposures taken by clients. Brokers must set predefined limits on the
exposure and turnover of each client. The broker systems should be capable of
assessing the risk of the client as soon as the order comes in. The client should be
informed of acceptance/rejection of the order within a reasonable period. In case
system based control rejects an order because of client having exceeded limits etc.,
the broker system may have a review and release facility to allow the order to pass
through.

Contract Notes:

Contract notes must be issued to clients as per existing regulations, within 24 hours
of the trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as III the
case of existing system, brokers using Internet based systems for routing client orders
will also not be allowed to cross trades of their clients with each other. All orders must
be offered to the market for matching.

It is emphasized that in addition to the requirements mentioned above, all existing

obligations of the broker as per current regulation will continue without changes.
Exchanges may also like to specify more stringent standards as they may deem fit for
allowing Internet based trading facilities to their brokers.

Enforcement: A separate working group has been set to look into the surveillance
and enforcement related issues arising due to Internet based securities trading.
However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices
Regulations, 1995) would apply to all transactions involving securities or financial
services, regardless of the medium.

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55
STOCK MARKET TRADING ON INTERNET
The major events that will take place in the Indian Capital Market are introduction of
index-based futures trading on internet. Trading on internet means that the investor’s
will actually buy and sell the stocks on-line through the net. A committee was setup by
SEBI to develop regulatory parameters for use internet trading. SEBI approved the
report on the committee. SEBI decided that internet trading could take place in India
within the existing legal framework through use of order routing system, which will
route order from client to brokers, for trade execution on registered stock exchanges.
The broad also took note of the recommended minimum technical standards for
ensuring safety and security of transaction between clients and brokers, which will be
forced by the respective stock exchanges.

Easier transaction processing

Profit in time: Investor can make profits by selling shares when the going is good.
They do not have to instruct their brokers on the cut off price to sell shares.

Ease and transparency: Since the broking, bank and demat account are all
electronically connected, all transaction get updated, demat account shows the latest
stockholding statement while the bank account shows the balance amount after buying
or selling of shares.

Precaution: Check for hidden costs of broker’s age. Beware of net seamstress. Never
double click the mouse during execution of trade avoids cyber cafes and change
password regularly.

Less fees: shares traded online require no human intervention to match buys and
sells. This means that commission costs are cut dramatically for the frequent investor.

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Market timings:
Trading on the derivatives segment takes place on all days of the week (except
Saturdays and Sundays and holidays declared by the Exchange in advance). The
market timings of the derivatives segment are:

Normal Market / Exercise Market Open time : 09:55 hours

Normal market close : 15:30 hours
Set up cut of time for Position limit/Collateral value : till 15:30 hours
Trade modification end time / Exercise Market : 16:15 hours

Internet Based Trading through Order Routing Systems

Internet based trading on conventional exchanges, uses the Internet as a medium for
communicating client orders to the exchange, through broker web sites. Broker’s web
sites may serve a variety of functions. These may include;

 Allowing the clients to directly trade through investors;

 Advertise the broker dealers’ services to potential investors;
 Offer market information and investment tools similar to those offered by
information vendor or SRO web sites;
 Offer real-time or delayed quote information, continuously update quotes
while the user visits other sites, or allow investors to create a personal stock
ticker;
 Provide market summaries and commentaries, analyst reports and trading
strategies and market data on currencies, mutual funds, options, market
indices and news; and
 Offer investors access to portfolio management tools and analytic
programs;
 Information on commission and fees; and
 Account information and research reports.
In an Order Routing system, a broker offering Internet trading facility provides an
electronic template for the customer to enter the name of the security, whatever it is
to be bought or sold, the quantity and whatever the order is a market or limit order.
Once the broker’s system receives this information.

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 Research Report: “ONLINE Vs OFFLINE TRADING”

INTRODUCTION

One reason why many people are never seriously interested in share trading apart
from the risk is that although they are curious, they know it is a hassle to go some
place to trade and handle all those paper certificates. Also, many don't have the time
for all this.

Online trading eliminates both these hassles. First by making your transaction virtually
paperless and second by enabling you to buy and sell shares anytime anywhere where
there is Internet access. In fact, you can even place a sell or buy order by specifying
your order value during non-market hours. Which broker can you talk to place a buy
order in the middle of the night? With online trading, this is easily possible.

It can be your home, office or Internet café; you are ready to go to your account to buy
or sell shares or to just watch how your portfolio is performing. There is absolutely no
paper involved whatsoever except for the initial application you sign and give for the
purpose of taking a web trade account.

Only thing you would need to do is send your money to the bank account so that you
have the money in the account to be able to buy your favorite stocks. Your share
trading system will be linked to your bank account and once you have the money in
the account it can be made immediately available for purchase of shares.

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IMPORTANCE OF THE TOPIC

The security and exchange board of India has permitted such trading on January-31-
2000. After that many players have offered these services to the investors. Is trading
through Internet safe? What if someone steal my investments or, does anyone else
have access to my accounts? If these are the questions that stop you from online
share trading then the solutions are here. Which decade you are living in? Internet
trading today is one of the largest mediums of investments and nothing can compete
with it. Its security and reliability can be proved by, the increasing number of users
every month. More than 5,000 people are registered every month for online
Investments. Apart from being totally secured, easy access and speedy moves makes
it more popular among day traders and other stock investors.

OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVE:
 To study the sift of investors in trading pattern from traditional manual/offline
method to online/etrading method.

SECONDAY OBJECTIVE:
 To study the importance of IT in investment.
 To know the Frequency of Trading.
 To know the investors psychology toward online investment.

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Data Collection Methodology:
In order to collect necessary data the following methodology was adopted.

PRIMARY DATA:
The data are collected through questionnaire.

SECONDARY DATA:
Study on online and offline investment.

LIMITATIONS OF THE STUDY

Many constraints were involved in doing this study. Some of them are as follows.

 The most significant limitation has been the individuals involved in this
study were very busy and did not spare much time in discussion.
 The sample size selected for the survey was too small as compared to
large population.
 Indian stock market is a market where sentiments play a major role in
price; hence 100% accurate predictions cannot be made about its future
path.

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RESEARCH METHODOLOGY
Survey method to collect primary data.

Sample: I have chosen 50 people as our respondents for our

survey that represents the population.
Research objectives are clearly stated before designing the
questionnaire.
Information was collected from the sample size of 50 respondents,
which included both males and females.
No response received from sample, 11 people.

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Findings of the survey:

Table No: 1

For how long you have been trading with on line-trading?

Frequencies

No: of years with online trading

Year Frequency Percentage

1 12 30.8

2 9 23.1

3 12 30.8

4 and above 6 15.4

Years of Investment

15.4
30.8

30.8
23.1

1 Years 2 Years 3 Years 4 or more years

Interpretation
The above table shows the time frame from which persons are investing by the means
of online trading platform. In resent year ie. people having investment in last 1 year is
30.8% signifies that the internet and online market is making a major role in pulling
money from small investors by different different products.

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Table No: 2

How will you describe your experience with on-line trading till date?

Experience with online trading

Parameter Frequency Percentage

Very easy to operate 33 84.6

Very difficult to 0 0
operate

Not Secure 6 15.4

Experience with online trading

0
15.4

84.6

Very easy to operate Very difficult to operate Not Secure

Interpretation:
The above table shows what a investor feels about the online trading. The thing to
notice here is that no one said that online investing is difficult to operate. This
signifies the technology is very much user friendly and just need a little bit of
knowledge to use internet and any one can easily start investment as 84.6% of the
people agrees that it is easy to operate. It is a new concept and a new technology
and hence will need time to get perfect and yes it’s a little bit unsecure but it is
improving each and every day.

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Table No: 3

What amount of money you invest normally? (Monthly)

Average Monthly Investment

Investment Frequency Percentage

= > 50,000 9 23.1

50,000 – 1,00,000 18 46.16

1,00,000 - 1,50,000 6 15.38

1,50,000 - 2,00,000 6 15.38

Average Monthly Investment

15.38
23.1

15.38

46.16

> 50,000 50,000 - 1,00,000 1,00,000 - 1,50,000 1,50,000 - 2,00,000

Interpretation:
From the above table as the majority of people try’s to invest between 50,000 –
1,00,000 through online platform making people still don’t have full trust in online
ways which is quite obvious as it is easy to crake password and keeping all your
money behind combination of letters is very risky. There is daily increase in
cybercrimes so, company in this market needs to keep a close eye and develop a
secure way to protect their customer money.

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Table No: 4

How often do you trade?

Buy and Sell pattern

Parameter Frequency Percentage

Daily 3 7.7

Weekly 6 15.4

Monthly 15 38.5

More than 1 month 15 38.5

Buy and Sell pattern

8.2

38.5 15.4

38.5

Daily Weekly Monthly More than 1 month

Interpretation:
The above table shows that a majority of people use to deal in monthly investment
this can be seen as they are generally mutual fund investors investing through SIP
and the persons having investment in daily and weekly they are traders and aim for
short term goals. Hence there is a large market participant in long term investment.
This be due to user friendly interface of online trading people with avg income are
getting more attracted toward investment.

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Table No: 5

Which trading platform do you prefer?

Platform

Parameter Frequency Percentage

Online 24 61.5

Offline 3 7.7

Both 12 30.8

Platform

30.8

61.5
7.7

Online Offline Both

Interpretation:
From the above table it is clear that people are preferring more to online ways of
investment a total of 61.5% people said they only prefer online investment. Whereas
still 7.7% people say they still do investment with offline mode such as visiting
personally and doing investment through offline mode this may be due to lack of
knowledge or lack of self-belief over the whole system.

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Table No: 6

Whether online trading settled in Indian investor psyche?

Overall psyche of Indian investors

Parameter Frequency Percentage

Yes 21 53.8

NO 18 46.2

Overall psyche of Indian investors

46.2

53.8

Yes NO

Interpretation:
From the above the overall a majority of people think that country is absorbing online
way of investing with full efficiency and hence a majority thinks positive for online
investment. Among all this we there is still a long way to go and online market needs
more changes and reforms to be perfect and so there is a lot of thing to make overall
system more perfect and attract more investors India being the second largest
populated country and first having largest young population hence there is a long
path still need to be covered.

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Table No: 7

What shortcomings do you feel in Indian On-Line trading ?

Overall psyche of Indian investors

Parameter Frequency Percentage

Lack of awareness 18 46.2

Shortage of domestic 9 23.1

technical expertise

Shortage of infra 12 30.8

structure

Shortcoming

30.8
46.2

23.1

Lack of awareness Shortage of domestic technical expertise Shortage of infra-structure

Interpretation:
It is obviously clear that due to high illiteracy India is suffering in many ways and this
is affecting all in every sector. Online investment is easy but requires a very much
knowledge about investment as in this there is no one to suggest thus all risk
management depends upon investor himself. Thus lack of awareness plays a very
significant role in drawback of overall online financial market.

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Table No: 8

Which media would you prefer the most for investment?

Overall psyche of Indian investors

Parameter Frequency Percentage

T.V / Internet 21 53.8

Newspaper 12 30.8

Magazines 0 15.4

Journals 6 0

Media
0

15.4

30.8 53.8

T.V / Internet Newspaper Magazines Journals

Interpretation:
This chart is very important not just for marketing point of view but it also shows the
demographic transition of people relying on technology for various usage as in this
table we can see 53.8% of total sample rely on television or internet for information
regarding their investment and hence we can say internet is opening new doors in
the financial market.

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Conclusion
The concept of Online Trading is a unique concept with providing quality service to
people with affordable price. As the competition is common in all sectors, a majourity
of companies have came into existence Aditya Birla Finance & Capital, Kotak
Mahindra, ICICI, Reliance Money, Share Khan, and Religare and other than these it
faces competition from unorganized Trader, all promising of high quality services and
thus this sector is growing day by day.

Keeping all the above in mind creating awareness will make more people to come into
market. As per the survey of 39 samples size of the respondent shows all positive
signals for the online trading. The respondents are much aware about the Trading and
Stock Market, so they are willing to purchase the products in it.

Online and Internet purchase is new but it is very easy same as buying a cloth from
any Ecommerce platform but needs a very careful selection because it will reward us
with monetary returns. Internet is now shaping the whole country and the way of
doing business and thus it is also shaping the investment ie. a new era of
investment.
Online investment is easy, save’s money (brokerage fee) and other fees and thus
this it has a very high potential.

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BIBLIOGRAPHY

BOOKS
 C. R. Kothri, Research Methodology, Vishwa Prakshan

MAGAZINES
 Business World
 India Today

INTERNET SITES
 www.nseindia.com
 www.bseindia.com
 www.on-linetrading.com
 www.sebi.gov.in
 www.lse.co.in

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ANNEXURES

72
Questionnaire
Dear Reader, I am Ashutosh Singh from Amity University Jharkhand and I am in my final semester.
Your answers will help me to do my project "Online Trading". All your answers and information will
be kept securely and will only be utilized for academic purpose.

Email address:
Name:

1. For how long you have been trading with on line-trading?

i) 1 years
ii) 2 years
iii) 3 years
iv) 4 years

2. How will you describe your experience with on-line trading till date?
i) very easy to operate
ii) very difficult to operate
iii) not secure
iv) others

3. What amount of money you invest normally ?

i) => 50,000
ii) 1,00,000 - 1,50,000
iii) 1,50,000 - 2,00,000
iv) Others

4. How often do you trade?

i) Daily
ii) Weekly
iii) Monthly
iv) More than one month

5. Which trading you prefer?

i) Online
ii) Manual
iii) Both

6. Whether online trading settled in Indian investor psyche ?

i) Yes
ii) No

7. What shortcomings do you feel in Indian On-Line trading ?

i) Lack of awareness the investors about on-line trading
ii) Shortage of domestic technical expertise
iii) Shortage of Infra structure
iv) Others

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8. Which media would you prefer the most for investment?
i) T.V / Internet
ii) Newspaper
iii) Magazines
iv) Journals

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