Major final (2) - online trading in sharekhan ltd PDF

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CHAPTER-1 INTRODUCTION

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Online Trading Online trading involves investment activity which takes place over the Internet and it does not require physical inclusion of the broker. An investor has to register with an online trading portal like ICICIdirect.com, motilaloswal.com and sharekhan.com and many companies like that and investor gets into an agreement with the firm to trade in different securities according to the terms and conditions given on the agreement. As the servers of the online trading portal are connected all the time to the stock exchanges and designated banks the order processing is done in real time and investors can also have updates on the trading. They can also check the status of their orders either through e-mail or through the interface that it cannot be accessed by a third party.Some options are usually given to users such as to link their bank account, Demat accounts and brokerage accounts into a single interface. A single window is also there for all exchanges and a single screen is there for the complete order routing mechanism. The reason why online trading has developed over conventional offline brokerage firms is that this conventional method struggled with unfavorable economies. Staff cost is just one example of it. As the markets opens for 330 minutes a day one dealer can at best execute 500 trades in a day while online company like ICICI direct executes 150,000-200,000 trades a day on the National Stock Exchange alone accounting for 3-4% of NSE trades of 5 million a day. It would require a large amount of dealers to service this demand. Besides the salary costs it would also demand huge expenses in real estate and support systems. The offline model has got a downfall in the form of lower bandwidth and IT costs and the cost of bandwidth has fallen to one-eighth of what it was in 2000 giving online broking an advantage especially in the case of lower-volume retail investors. Today 30% of volumes on the NSE comes from this and it may go up to 50% in three-four years providing explosive growth for online broking in India. To be a successful trading portal it will definitely depend on bouquet of services provided by it for an end-user. Most of the portals charge a small registration fee and brokerage based on various conditions but it's important for the organization to keep focussed on customercentric

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THE EMERGENCE OF E-BROKING IN INDIA The Indian trader is being fancied by the democratized world of online trading or also known as e-broking. The regular and attractive advertisements in the print media and electronic media have added to this fancy world. But as we compare to the Western countries, in India online trading has not still grasped the market , but has done a very important amount of progress in the past years and the future of online trading is bright. That is why many new companies are coming into this form of business structure and the existing companies are changing to this new format besides offline and other traditional forms of business. With only a mere share of 10% online trading a combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and NSE together there is a much greater scope for online trading. At present some of the dominant players in the online trading market of share market are – 1.Sharekhan.com 2.Icicidirect.com 3.Karvy 4.Anandrathi 5.Indiabulls 6.KotakSecurities 7.MotilalOswal 8. Geojit Securities Earlier the share market was not safe enough to invest but some of the changes in the past ten years in the Indian share market have created the interest of trading in the shares by the people. Broadly we can classify three important factors which have contributed to the development of online trading in IndiaFirstly the major step was taken by the National Stock Exchange (NSE) in the year 1994 which allowed the electronic trading and seeing to this various other stock exchanges in India followed soon. This helped in making the fast .accurate and transparent transactions saving a lot of time then the traditional method of trading. The investors were also saved by the 3

clutches of the fraud brokers at the times when the clients were not aware of the true prices of the shares. Secondly, in the year 1996 the dematerialization of the shares came (also known as DEMAT) which avoided the online presence of shares in an electronic form avoiding them from theft, pilferage or from other losses like counterfeiting and frauds regarding share transfer The third reason was the rapid growth of computer education and learning of internet by the people. With the evolving of internet the online trading became a hit and the investors became confident in investing just with a click of a mouse.

Today the online trading companies having cut-throat competition in our offering whose brokerage discounts lower margin money and zero balance accounts. Due to the rising education awareness and use of internet there is a huge potential for online trading in future and companies must come up with innovative offerings to capture the untapped market

Customer satisfaction

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Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty. Customer satisfaction data are among the most frequently collected indicators of market perceptions. Organizations need to retain existing customers while targeting noncustomers. Measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is measured at the individual level, but it is almost always reported at an aggregate level. It can be, and often is, measured along various dimensions. A hotel, for example, might ask customers to rate their experience with its front desk and check-in service, with the room, with the amenities in the room, with the restaurants, and so on. Additionally, in a holistic sense, the hotel might ask about overall satisfaction with your stay. Recent research shows that in most commercial applications, such as firms conducting customer surveys, a single-item overall satisfaction scale performs just as well as a multi-item scale. Especially in larger scale studies where a researcher needs to gather data from a large number of customers, a single-item scale may be preferred because it can reduce total survey error. Customer satisfaction research is that area of marketing research which focuses on customers' perceptions with their shopping or purchase experience. Many firms are interested in understanding what their customers thought about their shopping or purchase experience, because finding new customers is generally more costly and difficult than servicing existing or repeat customers. An effective customer satisfaction survey has 510 questions that relate to the service delivery, customer experience and overall satisfaction. The purpose of this type of survey is to gauge how satisfied your customers are. A happy customer is extremely valuable to your company. Ways of measuring customer satisfaction include: 1.

Survey customers.

2.

Understand expectations.

3.

Find out where you are failing.

4.

Pinpoint specifics.

5.

Assess the competition.

6.

Try to measure the emotional aspect.

7.

Loyalty measurement.

8.

A series of attribute satisfaction measurement. 5

FINANCIAL MARKET A financial market is a market in which people trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural products. In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them. The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (like the NYSE, BSE, LSE, JSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges. According to functional basis financial markets are classified into two types. They are: 

Money markets (short-term)



Capital markets (long term)

According to institutional basis again it is classified into two types. They are 

Organized financial market



Non organized financial market

The organized market comprises of official market represented by recognized institutions, bank and govt (SEBI) registered /controlled activities and intermediaries. The unorganized market is composed of indigenous bankers,money lenders, individual professional and non professionals.

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MONEY MARKET: As money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in money markets is done over the counter and is wholesale. There are several money market instruments, including treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities.[1] The instruments bear differing maturities, currencies, credit risks, and structure and thus may be used to distribute exposure.[2] Money markets, which provide liquidity for the global financial system, and capital markets make up the financial market.

CAPITAL MARKET: A capital

market is

a financial

market in

which

long-term debt or equity-

backed securities are bought and sold. Capital markets are defined as markets in which money is provided for periods longer than a year.[1] Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.[a] Financial regulators, such as the Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties. Again the capital market is classified into two types and they are 

Primary market



Secondary market

Egs: Shares,Debentures, and Loans, etc.

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PRIMARY MARKET The primary market is the part of the capital market that deals with issuing of new securities. Primary markets create long term instruments through which corporate entities raise funds from the capital market. In a primary market, companies, governments or public sector institutions can raise funds through bond issues and corporations can raise capital through the sale of new stock through an initial public offering (IPO). This is often done through an investment bank or finance syndicate of securities dealers. The process of selling new shares to investors is called underwriting. Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Instead of going through underwriters, corporations can make a primary issue of its debt or stock, which involves the issue by a corporation of its own debt or new stock directly to institutional investors or the public or it can seek additional capital from existing shareholders. Once issued the securities typically trade on a secondary market such as a stock exchange, bond market or derivatives exchange.

FEATURES: The main features of primary markets are: 

This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore, it is also called the new issue market (NIM).



In a primary issue, the securities are issued by the company directly to investors.



The company receives the money and issues new security certificates to the investors.



Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.



The primary market performs the crucial function of facilitating capital formation in the economy.



The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue 8

market may be raising capital for converting private capital into public capital; this is known as "going public." its share can be issue in face value, premium value & par value.

Secondary market: The secondary market, also called the aftermarket, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.[1] Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production). With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market. The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies.

Exchanges

such

as

the New

York

Stock

Exchange, London

Stock

Exchange and Nasdaq provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade “over the counter,” or by phoning the bond desk of one’s broker-dealer. Loans sometimes trade online using a Loan Exchange. FUNCTONS In

the

secondary

market,

securities

are

sold

by

and

transferred

from

one investor or speculator to another. It is therefore important that the secondary market be highly liquid(originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly; this is how stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater the number of investors that participate in a 9

given marketplace, and the greater the centralization of that marketplace, the more liquid the market. Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. Accurate share price allocates scarce capital more efficiently when new projects are financed through a new primary market offering, but accuracy may also matter in the secondary market because: 1) price accuracy can reduce the agency costs of management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers, and 2) accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.

STOCK MARKETS IN INDIA: A stock exchange is an exchange (or bourse)[note

1]

where stock brokers and traders can buy

and sell shares of stock, bonds, and other securities. Stock exchanges may also provide facilities for issue and redemption of securities and other financial instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets with buyers and sellers consummating transactions at a central location such as the floor of the exchange.[6] To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets use electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is restricted to brokers who are members of the exchange. In recent years, various other trading venues, such as electronic communication networks, alternative trading systems and "dark pools" have taken much of the trading activity away from traditional stock exchanges.

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Functions of Stock exchange The stock market is one of the most important ways for companies to raise money, along with debt markets which are generally more imposing but do not trade publicly. [39] This allows businesses to be publicly traded, and raise additional financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange affords the investors enables their holders to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as property and other immoveable assets. Some companies actively increase liquidity by trading in their own shares .

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Industry Profile MAJOR STOCK EXCHANGE 1. NSE (National stock exchange)

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai. The NSE was established in 1992 as the first demutualized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facility to the investors spread across the length and breadth of the country.Mr Vikram Limaye is Managing Director & Chief Executive Officer (MD & CEO) of NSE. National Stock Exchange has a total market capitalization of more than US$1.41 trillion, making it the world’s 12th-largest stock exchange as of March 2016.[1] NSE's flagship index, the NIFTY 50, the 51 stock index (50 companies with 51 securities inclusive of DVR), is used extensively by investors in India and around the world as a barometer of the Indian capital markets. However, only about 4% of the Indian economy / GDP is actually derived from the stock exchanges in India.[2] NSE was set up by a group of leading Indian financial institutions at the behest of the government of India to bring transparency to the Indian capital market. Based on the recommendations laid out by the government committee, NSE has been established w...