A

PROJECT

ON

ONLINE TRADING AND DE-MATERLISATION

CONDUCTED AT

ITI FINANCIAL SERVICES LTD

BY

DOKIPARTHI SANTHOSH KUMAR

ROLL.NO: 09JE1E0046

Submitted in partial fulfillment of award of Degree of

MASTER OF BUSINESS ADMINISTRATION

ESWAR COLLEGE OF ENGINEERING,

KESANUPALLI (V), NARSARAOPET (M),

GUNTUR (DT)

1

CERTIFICATE

This is to certify that the project entitled “INVESTMENT IN EQUITIES WITH

REFERENCE TO ITI FINANCIAL SERVICES LTD” submitted to the JNTU

KAKINADA UNVERSITY in partial fulfillment for the award of degree of Master of

Business Administration has been carried out by Mr. BADIRI SAI BABU Hall-Ticket

Number 09KP1E0005, who is a bonafide student of NRI INSTITUTE OF TECHNOLOGY

(NRIIT), VISADALA ROAD, GUNTUR for the academic year 2009-11.

HEAD PRINCIPAL

2

CERTIFICATE

This is to certify that the project report titled “INVESTMENT IN EQUITIES WITH

REFERENCE TO ITI FINANCIAL SERVICES LTD” submitted in partial fulfillment for

the award of MBA Programme of Department of Business Management, JNTU KAKINADA

UNVERSITY, KAKINADA, was carried out by Mr. BADIRI SAI BABU, under my

guidance. This has not been submitted to any other university or institution for the award of

any degree / diploma / certificate.

Name and Address of the Guide Signature of the Guide

3

DECLARATION

I hereby declare that this project report titled “INVESTMENT IN EQUITIES

WITH REFERENCE TO NRI INSTITUTE OF TECHNOLOGIES”

submitted by me to the Department of Business Management, JNTU

KAKINADA UNVERSITY, KAKINADA, is a bonafide work undertaken by

me and it is not submitted to any other university or institution for the award of

any degree / diploma / certificate or published any time before.

Place:

Date:

(BADIRI SAI BABU)

4

ACKNOWLEDGEMENT

I express my gratitude to Mr. Shiva Kumar for giving me this opportunity to carry

out the project work on “INVESTMENT IN EQUITIES” in Ventura Securities.

I also express my sincere thanks to the Staff Of ITI FINANCIAL SERVICES LTD

who were of ready help in answering my various quires related to the project work.

It is with great pleasure that I Express my gratitude to Mr.DEEPU, under whose

inspiring guidance and advice this study has been carried out.

(BADIRI SAI BABU)

5

TABLE OF CONTENTS

TOPIC

INTRODUCTION TO THE STUDY

NEED FOR THE STUDY

LITERATURE REVIEW

COMPANY PROFILE

DATA ANALYSIS

SUMMARY

FINDINGS

SUGGESTIONS

CONCLUSIONS

BIBILIOGRAPHY

6

INTRODUCTION

Online trading symbolizes the perfect synergy between technology and

the mind numbering intricacies of stock markets in bringing about a paradigm shift in the

way financial markets operate in recent times. It facilitates faster and efficient transaction

of stocks and share through the internet, while keeping the basic principles of share

trading intact. In addition to replication the traditional stock trading business on the net,

online trading has led to the mushrooming of a plethora of peripheral business units in the

form of e-broking firms, web-advisors, e-consultants, etc.

Across the globe, bulk of the trading is being done through the net, provding

online trading to be an instant success among the investors and intermediaries. It also

renders a harmonic integration of investors, e-broking firms, banks, stock exchanges and

the depositories with the possibility of a ‘single window system’, in the near future. Such

a system will enable the execution of trade at‘t+o’, rather then the existing ‘T+2’ time

cycle. The emergence of high-tech mechanisms like straight. Through processing (STP),

Continuous Linking System (CLS) and Direct Access Trading (DAT) platform is sure to

make the dream of an investor, getting his orders executed with the click of a mouse in

20-30 seconds, a reality.

In the last decade, online trading has spread far and wide across the globe, with

varying degrees of adoption in terms of percentage of trade carried out online, economic

giants like the US and Japan where online trading had its origin, are yet to completely

transform the stock business through the net, while, India and china, despise their inherent

infrastructural limitations are fast progressing towards a scenario where a big chunk of

the transactions would be online, though online trading has made cross border trading

much easier, the tendency of the investors to trade in their own currencies and

securities, limits the spread and success of it.

7

However, European investors are best placed in cross border online trading given

their historical and geographical associations with other nations, and also due to the single

trading currency, the euro.

The emergence and spiraling growth of online trading have thrown up a lot of

challenges and opportunities for all major elements, viz, investors, brokers and internet

portals, of the trading mechanism. In the current scenario, online trading portals are

slowly replacing the physical presence of traditional brokers and sub brokers. The role of

these brokers, henceforth, could be restricted to online counseling and web-advising to

the investors. The online portals or the e-broking firms, as they are know, are connected

to the stock exchanges 24 hours a day to execute the orders placed by the investors. They

also provide the vital market information technical analysis and various other innovative

services to the investors. It is learnt that, at present, the market of e-broking is little over-

crowded and hence over-brokered, making it hugely difficult for the new entrants to

negotiate the entry barriers. However, when the markets move in upward trends and trade

volume increases, it is expected that these firms will get enough to share.

The presence of a wide array of e-broking firms has drastically cut down the

brokerage cost for the investors. The cost effectiveness and the fascination of online

trading are enticing millions of retail traders to the stock markets. These investors, armed

with the variety of market information and intelligence provided by online portals and

consultancies, directly involve in the trade just by sitting in any corner of the world. The

introduction of futures and options trading in the recent past has made online trading

more attractive. But this situation could be a double edged sword. All these market

information and the easy trading opportunities have created an illusionary

knowledge and over confidence among the investors, leaving them like a bunch of sitting

ducks on the highway of market fluctuations and uncertainties.

8

Online trading has also given way to a new breed of investors known as ‘Day

Traders’ who gamble in the market, trying to make money out of the minute-by-minute

fluctuations in share prices. To their dismay most of them end up bankrupt and simply

disappear. These day traders are also responsible for most of the day to day price

variations that are beyond the rational expectations prevailing in the market. Another

important worrying factor of online trading is the safety and regulation issues of stock

business. It is very difficult to have a foolproof system of trading, considering that the

entire business is done on a seamless and a very fluid platform. It needs the evolution of a

blend of well-tested technology and trading mechanism to make online trading universal

and complete. All said and done, investors and people involved in stock trading should

keep in mind that the stock market is not a Mexican casino to gamble, but a means of

capital mobilization and equitable distribution in achieving the ends of economic growth.

TRADING PROCEDURE BEFORE ON-LINE

THE TRADING RING:

Trading on stock exchanges is officially done in the ring for a few hours from 11.00

A.M to 2.30P.M. Trading before or after official hour is called KERB TRADING. In the

trading ring space is provided for specified and non-specified sections. The members of their

authorized assistants have to wear a badge or carries with them identify cards given by the

exchange to enter the trading ring. The carry a Sauda block book or confirmation memos duly

authorized by exchange and carry a pen with them. The stock exchanges operations at floor

level are highly technical in nature. Non-members are not permitted to enter into stock

market. Hence, various stages have to be completed in executing a transaction at a stock

exchange. The steps involved in the methods of trading have been given below:

9

CHOICE OF BROKER:

The prospective investor who wants to buy shares or the investor who wants to sell

his shares cannot enter into hall of the exchange and transact business. They have to act

through only member brokers. They can also appoint their bankers for this purpose. Since,

bankers can become members of stock exchange as per the present regulations.

So, the first task in transacting business on stock exchanges is to choose a broker of repute or

banker. Such people’s can ensure prompt and quick execution of a transaction at the possible

price.

At present there are 4500 authorized brokers in ISE.

PLACEMENT OF ORDER:

The next step in planning of order for the purchase or sale of Securities with the

broker. The order is usually by telegram, telephone, letter, fax etc., or in person. To avoid

delay it is placed generally over the phone. The orders may take any one of the forms such as

at best order, limit order, immediate or cancel order, discretionary order, limited discretionary

order, open order and stop loss order.

PLACING ORDER WITH THE BROKER:

The next step is placing an order for the purchase/sale of securities with the broker.

The order is usually placed over telephone, fax. It can also take the form of telegram or letter

or in person. The order placed may be any of the following varieties (largely classified on the

basis of price limits that it imposes.).

10

INTRODUCTION TO ONLINE TRADING

Gone are the days of trading on the floor. Technology has changed the landscape of

the stock markets. The look of the stock exchanges has undergone metamorphic changes in

the recent years. Prior to online trading, regional stock exchange was playing a very

important role in capital markets, as they were local investors. Regional SE, which was

unable to interact with other SE’s started developing this own screen based trading and

connecting to other scrip’s which were not available with them. This also helped in accessing

the quotes and other market information from other stock exchange, which proved vital in the

functioning of the system as a whole.

The trading network is depicted in given below NSE has main computer which is

connected through Very Small Aperture Terminal (VSAT) installed at its office. The main

computer runs on a fault tolerant STRATUS mainframe computer at the Exchange. Brokers

have terminals (identified as the PCs in the given picture) installed at their premises, which

are connected through VSATs/ leased lines/modems. An investor informs a broker to place

an order on his behalf. The broker enters the order through his PC, which runs under

Windows NT and sends signal to the satellite via VSAT/leased line/modem. The signal is

directed to mainframe computer at NSE via VSAT at NSE’s office. A message relating to the

order activity is broadcast to the respective member. The order confirmation message is

immediately displayed on the PC of the broker. This order matches with the existing passive

order (S) otherwise it waits for the active orders to enter the system. On order matching, a

message is broadcast to the respective member.

11

TRADING NETWORK

HUB

ANTENNA

SATELITE

NSE MAINFRAME BROKERS PREMISES

12

OBJECTIVES

To study the conceptual framework of online trading and de-materlisation.

To study about online trading procedure followed in ITI Financial Services Limited.

To study the advantages of online trading system over manual system.

To study how online trading system helps in improving market transperancy .

To study how online trading system helps in smooth market operaton while retaining

the flexibility of conventional trading practices.

To compare the transaction changes of similar firms. To study the entire mechanism

of trading online and dematerialization.

To study various benefits of depositories.

To study the concept of dematerialization of shares that is procedure, Demat a/c, transfer

of securities and trading and settlement of Demat securities.

To study the services provided by NSDL and CSDL.

To study the procedure of online trading of Demat securities.

13

NEED OF THE STUDY

In outcry the broker has to buy or sell securities for which he has received the

orders .for this, the broker or his authorized representatives goes to the stock exchange.

Basically the broker shouts while buying or selling the securities. The floor of the stock

exchange is divided in to a number of market also ‘post pit’ or wing based on particular

securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or

bid price. For making the necessary bargain, he codes his purchase or sales price, also

known as offer or bid price. The dealer, to whom the price is quoted, quotes his own price

quotation of the dealer suits the broker, he may lose the bargain. If he is not satisfied with

the quote price he may turn to some other dealer .On the close of the bargain, the dealer

sell as well as the broker makes a brief notes of the particulars of the deal. Such notes are

made on some pad and on it the number of shares, the price agreed upon, the name of the

party, what membership number etc., are noted.

The disadvantages of outcry system are it lack transparency, the scope of

manipulation, Inaudibility and also speculation and malpractice is more, in order to

overcome the above problems, online trading came in to existence. Hence the need to

study the advantages of online trading system and its importance in making the market

operations and smooth while retaining the flexibility of conventional trading practices.

14

Scope of the study

The scope of the project is to study and know about Online Trading and Clearing &

Settlements dealt in ITI FINANCIAL SERVICES LTD. By studying the Online Trading and

Clearing & Settlements, a clear option of dealing in stock exchange is been understood.

Unlike olden days the concept of trading manually is been replaced for fast interaction of

shares of shareholder. By this we can access anywhere and know the present dealings in

shares.

The scope of the study is limited to ON-LINE trading mechanism of stock broking firm

in particular ITI Financial Services Limited, Secundrabad.

15

IMPORTANCE OF THE STUDY

Stock exchange is an integral part of capital market it is the most perfect

type market for securities wether govt or semi govt bodies or other public bodies also for

shares and debentures issued by joint stock enterprises.

Stock exchange provides liquidity to the listed company they give quotations

to listed companies and help in trading and raising funds from the market. Stock

exchange provides ready marketability and unequalled of ownership of stocks, shares and

securities.

Stock market in India is more than a centuary old and has been functioning

effectively through the medium of recognized stock exchange the stock market which is

an integral part of the capital market has been major impact on the functioning of the

economy. In turn, the agriculture industries growth and performance of corporate sector

in particular , reflecting the fundamentals in the economy would be influenced the tone of

capital and stock markets, and since the capital market is playing major role in Indian

economy from the past several years. There is need to study the capital market in India.

The present scenario to complete and survive the regional stock exchange

would require sound infrastructure and trading system as per international standards,

due to the following reasons.

With the introduction of online trading liquidity will improve considerably

which is very much essential for attracting small companies to the exchange. Before the

introduction of the online trading, Outcry prevalent. Here the member or the broker

Would stand at specifies spot in trading hall. He is required to shut out the

name of the company, number of shares he has and the price of the shares ultimately the

deal would be made between the buyer and seller and transfer of the shares take place.

With the use of the online trading surveillance be came easy as there is very less scope for

speculation. The invester is provided with best offer. Also transparency is observed in

transactions

16

RESEARCH AND METHODOLOGY

Data source: -

The data source utilized to under taker the project is both primary and secondary data.

Primary data: -

The data is collected by personal interaction with autherised members of ITI Financial

Services Limited.

Secondary data: -

The secondary data is collected from various sources like the brochures and material

provided by ITI Finaicial Services Limited.

17

LIMITATIONS OF THE STUDY

The study is confined to online trading procedure only.

Problems of listing are not covered due to limited time and to keep the study in

manageable limits

The data is collected from the primary and secondary sources and thus is subject to

slight variation than what the study includes in reality

The study was restricted in Hyderabad.

The observations drawn are of past and present years only.

Detailed study on the topic was not possible due to limited size of the project.

There was a constraint with regard to time allocation for the research study i.e. for a

period of two months.

Data collection was strictly confined to secondary source of data. No primary data is

associated with the project.

18

REVIEW OF LITERATURE

Online trading marks a watershed in the application of technology in conducting

trading business in stock markets. This book is divided into four sections. The first

section deals with fundamentals and framework, the second section focuses on the

implication of online trading the third section describes the implications for online

investors. The fourth section is about the technology advancements in online trading. The

first section on fundamentals and Framework deals with the evolution of online trading,

basic concepts, background and trading mechanisms involved. The opening article, “share

trading: Moving to the Net”, by Dr. T R Rajarajan traces the evolution of securities

trading from traditional system to trading through the internet. It discusses the trading

mechanism through the major components of online trading, viz, banking, depositories,

technology and other infrastructure.

Information technology has replaced the age-old share trading method with the

faster and more accurate online stock trading. The second article. “Online trading:

Trading @ the speed of light,” By Mayura jaiswal, deeepad vashist and Abhay Kumar,

traces the growth of online trading from the year 2000 using statistics on volume of

online trading from the year 2000 using statistics on volume of online trading, number of

e-broking firms, brokerages and demographic patterns. Online trading has dramatically

changed the way stock business has been conducted over the years. In the next article,

“online trading: Issues and concerns”, by Anup Bagchi, the author suggests that online

trading should balance a technology centric approach to transactions with the human

factor for a successful transition from traditional to online trading. In his interview, jade

smith (HSBC treasury and capital markets) discusses various aspects of online trading:

the types of transactions conducted online, different value propositions in the online

marketing and the future trends in e-trading.

19

The process of payment and settlement is an issue of importance in online stock

trading. The sixth article, “ payments in India: The journey so far and the road ahead”, by

Vinod Madhavan looks at how the multiple payment systems have developed in India and

considers the need for technology and a legal framework to ensure that an electronically

linked payments and clearing system, including cheque truncation, can be implemented in

future. In the next article, ‘clearing & settlement system at NSDL’, the structure of a

clearing account is described along with the process of settling trade in markets.

EVOLUTION OF ONLINE TRADING:

Online trading had its origin in the US where the first E-trading of stocks began in

1983. Primarily used in the form of e-commerce to place and receive orders for

commodities; slowly it entered the financial markets as an alternative to the traditional

system. By the late 1990’s, most of the stock exchanges had been automated, and the

“open outcry” method of trading had been slowly done away with. Most stock exchanges

began to use computers to replace the market makers or the floor traders who execute the

trade on the floor.

With the emergence and growth of the internet, the floor trader’s started taking

computer orders from brokers and executed the trade. Subsequently, when the stock

exchanges used software technology to interconnect brokers, depositories and banks, the

internet order place by clients were firs route through the stock brokers’ computer

systems where the matching of orders took place and the trade was executed. This gradual

up scaling of technology has led to the rise in popularity and acceptance of online broking

as a major way of stock trading.

With the book in software technology, the online trading platform became faster

and faster with a lot of sophistication and increased security. Now the thrust is on making

the entire trading process completely seamless and risk free.

20

TRADING MECHANISM:

The mechanism in online trading Is the replication of trading of physical securities

through the internet in a much faster and convenient way. Basic principles and logic of

stock trading remain the same as before; only, the investors feel more empowered and are

served with plenty of information. The diagram 1 and 2 depict both selling and buying of

securities online.

There are primarily 5 components in any online trading mechanism.

1. Investor

2. broker/ E-broking firm

3. DP Accounts

4. Bank Account

5. The Exchange

The process of online trading is driven by a front-end software which the stock

exchange employs through satellite (like V-SAT) connections. This software technology

provides the necessary interface between the brokers, depositories and the banks. The

investor is required to trade through any of the approved brokers, and brokers of trading

members can only trade with the exchange.

The investor places the order with the broker and the broker gets the order executed

from the exchange. Each broker, who has to be a trading member, is connected to the

exchange through sophisticated software. In the same way, each investor has to trade only

through the broker and needs to have a demat account and a broker’s account. Each

investor will be given a login account and a password in the broker’s site. Investors can

log in and lace orders anytime that will be sent to exchange and will be compared with all

the orders and executed as per the prices.

21

In this linear chain of investor-broker-exchange channel, there are two more

important players, viz, depositories and banks. Depositories (DP) handle the holding and

selling of demat securities. All brokers are embers and account holders of DPs. The

depositories function in liaison with the stock exchange and act as an online store for

shares and stocks. The transaction of cash is taken care of by banks. The investor’s

money is transferred to the account with the broker and used for transactions, and

similarly, the credits for the investor can be directly to the investor’s bank account.

The whole mechanism is interconnected and the speed of transaction depends on how

well all these components operate in harmony with each other. The technology used for

interlinking these components and the security issues play a major role in the speed of

transactions. When these issues are addressed, the transactions can be executed in real-

time (T+0), instead of the present T+2 days time period.

22

BUY TRANSACTION (TABLE-1)

23

Broker buys 100 xyz @ market rate

Yes, hold

Funds transferred

Share transferred

Hold Rs.30, 000

NSE

Bank server

Order accepted and goes to exchange

DP server

Trade done

CUSTOMER APPROACH THROUGH PHONE/INTERNET KIOSK

SELL TRANSACTION (TABLE-2)

24

Trades done

Orders accepted and goes to exchange

Yes, Hold

Bank Server

Funds Transferred

BROKER SELLS 100 XYZ @ Rs.300/-

DP server

Hold100 xyz shares

Share transferredNSE

CUSTOMER APPROACH THROUGH PHONE/INTERNET KIOSK

SETTLEMENT SYSTEM

The schedule of setting the trade Is governed by the stock exchange rules. The

following details are available in the depository software of the DP.

The pay in time decided by the stock exchanges for each settlement is

the NSDL deadline time. The significance of NSDL time is that securities can be moved

from the client account to the clearing account (client to clearing member), or from

clearing account to the stock exchange (clearing member to stock exchange) or from one

settlement to another (inter-settlement) only till the NSDL deadline of the relevant

settlement. Securities cannot be transferred to a settlement after the NSDL deadline for

that settlement is over.

No.of

day

Transactions day Party with

Obligation

Activity

Day 1 T (if, Monday) Customer Trading

Day 2 T+1 (Tuesday) Customer Securities pay in to member

broker

Day 2 T+1 (Tuesday Customer Funds pay in to member broker

Day 3 T+2(Wednesday) Member

broker

Securities pay in to the stock

exchange

Day 3 T+2(Wednesday) Member

broker

Funds pay in to the stock

exchange

25

Day 3 T+2(Wednesday) Stock

exchange

Payout of securities to member

broker

Day 3 T+2(Wednesday) Stock

exchange

Payout of monies to member

broker

Day 4 T+3 (Thursday) Member

broker

Securities deposited into demat

account of customer

Day 4 T+3 (Thursday) Member

broker

Funds transferred into client’s

bank account.

26

MAJOR ADVANTAGES OF ONLINE TRADING

With the February 2003 announcement of Gilts trading available online, capital

market reforms in India have outpaced all other sectors in the post-liberalization era. The

options available for investments today are many. The mutual funds industry is doing

well, IPO market is received and derivatives trading are catching on in India. If these

investments can be made by the click of the mouse then the investment process will be

the easiest. Investors can save time and make money. Online trading, which is the way the

developed world is investing, is now the mantra of investment markets in India. To

combine the speed of the internet and the intricacy of the trade and provide an interactive

and integrated trading environment for all investments is the ultimate goal.

Online trading started in India in February 2000:

Online trading is of 2 categories: Discount online brokers and the other one is the

full service online broker. Discount online brokers allow one to trade via the internet

through the broker at reduced (less than offline brokerage charges) rates. Full service

online brokerage is linked to existing brokerage directly through the internet. These

brokers allow their clients to place online orders with the option of chatting to brokers if

advice is needed.

27

FOR THE INVESTORS:

Online trading has created a new wave of changes among the investors because of

its convenience and the sense of empowerment attached with executing the trade on their

own If has also thrown in plenty of options to the investors in the form of various online

broking firms which provide a whole lot of advisory and counseling services. The biggest

advantages of online trading is the equitable treatment of investors, irrespective of small

or big, In terms of offering the service, making the information available and the benefits

of the stock trading were highly concentrated with a particular group of investors who

could afford the technical and advisory services. The stock market used to be a black box,

now it is open to all those who are willing and capable of investing because of the simple

and user friendly ways of online trading. In a nutshell,

The internet made the stock market operations transparent.

Cost of execution of trade for small quantities can be done in proportionate fractions

as that of big transactions.

Data and information are their for everyone and available everywhere.

Investors are empowered.

28

FOR THE BROKERS:

Brokers can gain on two accounts.

Surge in the volume of transactions will increase the profit even though the cost per

transaction is less in case of online trading.

Marketing the investor accounts and transaction of demat securities has manifold

conveniences compared to the traditional method of transactions in physical securities.

ONLINE TRADING BENEFITS

Advent of online trading can shift the trading power from stock brokers to

individual investors. The e-trading concept ensures that the investor, howsoever small,

could be a more active participant in the decision rather than leaving his portfolio at the

sole discretion of his broker. Online trading provides.

BEST PRICE FOR INVESTORS:

Online trade offers the best price for the buying and selling transactions of the

investors, by ensuring proper matching of their orders within the communications

network itself. Also due to the high level of transparency with regard to display of

information the investors are able to get the best quote for the shares.

BROKERAGE IS THE LOWEST:

As the process of online trade is thoroughly automated the transaction costs are low,

also with competition among the online service providers the brokerage charges are at

their lowest in India.

29

LIQUIDITY TO THE INVESTORS:

When online trade and online banking are available, liquidity of the investments are

very high as it is only a click away to disinvest and release the funds. Conversely, if the

investor spots some opportunity to invest, he could immediately allocate money from his

savings account and make his transactions.

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 were subject to inspection, thus bringing in transparency into

the system.

HASSLE FREE TRADING:

Online trading integrates the bank, the brokerage firm and the stock accounts (demat

account) which lead to easy and paperless trading for the client.

QUICK TRADING:

The investor is able to execute the entire trading transaction, right from logging on

the broker’s site, to the execution and settlement of his bank account, in a very short

period of time.

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 no

short sale is possible, i.e., the seller will not be able to sell the securities unless he has

their actual possession. This reduces the settlement risk for the buyer. Who is assured of

the delivery of the securities.

30

OUTCRY SYSTEM:

The broker has to buy or sell securities for which he has received the orders. For this,

the broker or his authorized representatives goes to the stock exchange. This method is

called the open outcry system. Basically the brokers shout while buying or selling the

securities. The floor of the stock exchange is divided into a number of markets also

known as ‘post pit’ or wing based on particular securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or bid

price. For making the necessary bargain, he quotes his purchase or sale price, also known

as offer or bid price. The dealer, to whom the price is quoted, quotes his own price when

the quotation of the dealer suits the broker, he may loose the bargain. If he is not satisfied

with the quote price, he may turn to some other dealer. On the close of the bargain, the

dealer as well as the broker makes a brief note of the particulars of the deal. Such notes

are made on some pad and on it the number of shares, the price agreed upon, the name of

the party, what membership number etc., are noted.

31

DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.

The scope of manipulation, speculation and mal practice is more.

Signal were more important in the outcry system any member who could not interpret

the buy/sell signal correctly often landed himself in disaster situation.

In audibility was another disadvantage of the outcry system.

Due to the above disadvantages of the outcry system the ITI Financial Servicees

Limited has shifted from outcry system to online trading.

MANUAL TRADING

Trading procedure before introduction of online trading

Trading on stock exchanges is officially done in the trading ring. In the trading

ring the space is provided for specified and non-specified sections, the members and their

authorized assistants have to wear a badge or carry with them an identity card given by

the exchange to enter the trading ring. They carry a sauda book or confirmation memos,

duly authorized by the exchange and carry a pen with them. The stock exchanges

operations are floor level are technical in nature .Non-members are not permitted to enter

in to stock market. Hence various stages have to be completed in executing a transaction

at a stock exchange .The steps involved in this method of trading have given below:

32

Choice of broker:

The prospective investor who wants to buy shares or the investors, who wants to sell

shares and transact business, have to act through member brokers only. They can also

appoint their bankers for this purpose as per the present regulations.

Placement of order:

The next step is the placing order for the purchase or sale of securities with a broker.

The order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid

delay, it is placed generally over the phone. The orders may take any one of the forms

such as At Best Orders, Limit Order, Immediate or Cancel Order, Limited Discretionary

Order, and Open Order, Stop Loss Order.

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30

P.M on all working days Monday to Friday, and a special one-hour session on Saturday.

The members or the authorized assistants have to wear a badge given by the exchange to

enter into the trading ring. They carry a sauda Block Book or conformation memos,

which are duly authorized by the exchange when the deal is struck; both broker and

jobber make a note in their sauda block books. From the sauda book, the contract notes

are drawn up and posted to the client. A contract note is written agreement between the

broker and his clients for the transaction executed.

Drawing Up and Bills:

Both sale and purchase bills are prepared along with the contract note and it is posted

on the same day or the next day. This in a purchase transaction, once the shares are

delivered to the client effects payment for the purchases and pays the stamp fees for

transfer, a bill is made out giving the total cost of purchase, including other expenses

incurred by the broker in the price itself. With this, the process ends.

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DEMATERLIZATION:

Dematerialization is the process by which physical certificates of an investor

are converted to an equipment number of securities in electronic from and credited in the

investor account with his DP. In order to dematerialize the certificates, an investor has to

first open an account with a DP and then request for the Dematerialization Request Form,

which is DP and submit the same along with the share certificates. The investor has to

ensure that he marks “Submitted for Dematerialization” on the certificates before the

shares are handed over to the DP for demat. Dematerialization can only be done to those

certificates, which are already registered in your name and belong to the list of securities

admitted for Dematerialization at NSDL.

Most of the active scrip’s in the market including all the scrip’s of S&P CNX

NIFTY and BSE SENSEX have already joined NSDL. This list is steadily increasing.

Briefly, the process is as follows: after completion of transfer, the investor gets the option

to dematerialize such shares. Investor’s willing to exercise this option sends a Demat

request along with the option letter sent by the company to his DP. The company or its

R&T agent would confirm the Demat request on its receipt from the DP to reduce risk of

loss in transit.

Dematerialized shares do not have any distinctive or certificate numbers. These

shares are fungible-which means that 100 shares of a security are the same as any other

100 shares of the security. Odd lot shares certificates can also be dematerialized.

Dematerialization normally takes about fifteen to thirty days. To get back dematerialized

securities in the physical form, request DP for Rematerialization of the same is made.

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Benefits of Demat:

It reduces the risk of bad deliveries, in turn saving the cost and wastage of time

associated with follow up for rectification. This has lead to reduction in brokerage to the

extent of 0.5% by quite a few brokerage firms.

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid

the cost of courier / notarization.

You can receive your bonuses and rights issues into your DA as a direct credit,

this eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat shares

as compared to loans against physical shares.

There is no lost in transit, thus the overheads of getting a duplicate copy in such

circumstances is reduced.

RBI has also reduced the minimum margin to 25% for loans against

dematerialized securities as against 50% for loans against physical securities.

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DEMAT ACCOUNT

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed

by the Government of India in 1992 with its head office at Mumbai. Its one of the function is

helping the business in stock exchanges and any other securities markets. Demat (short form

of Dematerialization) is the process by which an investor can get stocks (also called as

physical certificates) converted into electronic form maintained in an account with the

Depository Participant (DP).

DP could be organizations involved in the business of providing financial services

like banks, brokers, financial institutions etc. DP’s are like agents of Depository.

Depository is an organization responsible to maintain investor's securities (securities

can be stocks or any other form of investments) in the electronic form. In India there are two

such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central

Depository Services India Ltd.)

Investor’s wishing to open Demat account has to go DP and open the account.

Opening the Demat account is as simple as opening the bank account with any bank. As we

need bank account to save our money, make cheque payments etc, likewise we need to open a

demat account if we want to buy or sell stocks. All stocks what we possess will show in our

demat account. So we don't have to possess any physical certificates. They are all held

electronically in our demat account. As we buy and sell the stocks, accordingly our stocks

will get adjusted in our account.

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Is a demat account must?

The market regulator, the Securities and Exchange Board of India (SEBI), has made it

compulsory to open the demat account if you want to buy and sell stocks.

So a demat account is a must for trading and investing.

How to start to open a Demat account?

We have to approach a DP to open a Demat account. Most banks are DP participants

so we may approach them.

A broker and a DP are two different people. A broker is a member of the stock

exchange, who buys and sells stocks on his behalf and also on behalf of his customers.

Following are the documents required to open Demat account.

When we approach any DP, we will be guided through the formalities of opening an

account. The DP will ask to provide some documents as proof of our identity and address.

Below is a list but we may not require all of them.

PAN card, Voter's ID, Passport, Ration card, Driver’s license, Photo credit card

Employee ID card, IT returns, Electricity/ Landline phone bill etc.

Do we need any stocks to open a Demat account?

No. We need not need any stocks to open a demat account. A demat account can be

opened with no balance of stocks. And there is no minimum balance to be maintained either.

You can have a zero balance in your account.

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How much it cost to open a Demat account?

The charges for account opening, annual account maintenance fees and transaction

charges vary between various DP’s.

Finally – After successfully opening the demat account, the DP will allot “Beneficial Owner

Identification” Number, which will be needed to mention for all our future transactions.

If we want to sell our stocks, we need to place an order with our broker and give a

'Delivery Instruction' to your DP. The DP will debit our account with the number of stocks

sold. We will receive the payment from our broker.

If we want to buy stocks, inform our broker about our Depository Account Number,

so that the stocks bought are credited into our account.

Points to remember while opening online account

a) Make multiple enquiries and try getting low brokerage trading and dematting account.

b) Also discuss about the margin they provide for day trading.

c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer

from our bank account to trading account and visa versa. Some online share trading account

has integrated savings account which makes easy for us to transfer funds from our saving

account to trading account.

d) Very important is about service they provide, the research calls, intraday or daily trading

tips.

e) Also enquire about their services charges and any other hidden charges if any.

f) And also see how reliable and easy is to contact them in case if any emergency.

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INDUSTRY PROFILE

Following diagram gives the structure of Indian Financial System:

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FINANCIAL MARKET

Financial markets are helpful to provide liquidity in the system and for smooth

functioning of the system. These markets are the centers that provide facilities for buying

and selling of financial claims and services. The financial markets match the demands of

investment with the supply of capital from various sources.

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 classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized

institutions, bank and government (SEBI) registered/controlled activities and

intermediaries. The unorganized market is composed of indigenous bankers,

moneylenders, individual professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

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CAPITAL MARKET :

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.

P RIMARY MARKET:

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up gradation.

Primary market is also referred to as New Issue Market. Primary market operations

include new issues of shares by new and existing companies, further and right issues to

existing shareholders, public offers, and issue of debt instruments such as debentures,

bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI

a government regulated authority).

Function:

The main services of the primary market are origination, underwriting, and

distribution. Origination deals with the origin of the new issue. Underwriting contract

make the shares predictable and remove the element of uncertainty in the subscription.

Distribution refers to the sale of securities to the investors.

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The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent

3. Underwriter/broker to the issue

4. Adviser to the issue

5. Banker to the issue

6. Depository

7. Depository participant.

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected.

The term investor protection has a wider meaning in the primary market. The principal

ingredients of investors’ protection are:

Provision of all the relevant information

Provision of accurate information and

Transparent allotment procedures without any bias.

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities are

traded in the secondary market, which is commonly known as stock market or stock

exchange. “The secondary market is a market where scrip’s are traded”. It is a

market place which provides liquidity to the scrip’s issued in the primary market. Thus,

the growth of secondary market depends on the primary market. More the number of

companies entering the primary market, the greater are the volume of trade at the

secondary market. Trading activities in the secondary market are done through the

recognized stock exchanges which are 23 in number including Over The Counter

Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock

Exchange of India.

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Secondary market operations involve buying and selling of securities on the stock

exchange through its members. The companies hitting the primary market are mandatory

to list their shares on one or more stock exchanges in India. Listing of scrip’s provides

liquidity and offers an opportunity to the investors to buy or sell the scrip’s.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange – buyers broker and sellers broker

2. Portfolio Manager

3. Investment advisor

4. Share transfer agent

5. Depository

6. Depository participants.

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government

and semi-govt bodies or other public bodies as also for shares and debentures issued by

the joint-stock companies. In the stock market, purchases and sales of shares are affected

in conditions of free competition. Government securities are traded outside the trading

ring in the form of over the counter sales or purchase. The bargains that are struck in the

trading ring by the members of the stock exchanges are at the fairest prices determined by

the basic laws of supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not, constituted

for the purpose of assisting, regulating or controlling the business of buying, selling or

dealing in securities.” The securities include:

Shares of public company.

Government securities,Bonds

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History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai

setup in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non-

profit-marking associations of brokers to regulate and protect their interests. Before the

control on securities under the constitution in 1950, it was a state subject and the Bombay

securities contracts (control) act of 1925 used to regulate trading in securities. Under this

act, the Mumbai stock exchange was recognized in 1927 and Ahmedabad in 1937. During

the war boom, a number of stock exchanges were organized. Soon after it became a

central subject, central legislation was proposed and a committee headed by A.D.Gorwala

went into the bill for securities regulation. On the basis of the committee’s

recommendations and public discussion, the securities contract (regulation) act became

law in 1956.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to

the listed companies, they help trading and raise funds from the market. Over the hundred

and twenty years during which the stock exchanges have existed in this country and

through their medium, the central and state government have raised crores of rupees by

floating public loans. Municipal corporations, trust and local bodies have obtained from

the public their financial requirements, and industry, trade and commerce- the backbone

of the country’s economy-have secured capital of crores or rupees through the issue of

stocks, shares and debentures for financing their day-to-day activities, organizing new

ventures and completing projects of expansion, diversification and modernization. By

obtaining the listing and trading facilities, public investment is increased and companies

were able to raise more funds. The quoted companies with wide public interest

have enjoyed some benefits and assets valuation has become easier for tax and other

purposes.

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Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts

(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

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Out of these major stock exchanges were:

NSE(NATIONAL STOCK EXCHANGE):

The National Stock Exchange of India Limited has genesis in the report of the High

Powered Study Group on Establishment of New Stock Exchanges, which recommended

promotion of a National Stock Exchange by financial institutions (FI’s) to provide access

to investors from all across the country on an equal footing. Based on the

recommendations, NSE was promoted by leading Financial Institutions at the behest of

the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchanges in the country. On its recognition as a stock

exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE

commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The

Capital Market (Equities) segment commenced operations in November 1994 and

operations in Derivatives segment commenced in June 2000 NSE's mission is setting the

agenda for change in the securities markets in India. The NSE was set-up with the main

objectives of:

Establishing a nation-wide trading facility for equities and debt instruments.

Ensuring equal access to investors all over the country through an appropriate

communication network.

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems.

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have become

industry benchmarks and are being emulated by other market participants. NSE is more

than a mere market facilitator. It's that force which is guiding the industry towards new

horizons and greater opportunities.

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BSE(BOMBAY STOCK EXCHANGE):

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875

as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,

even older than the Tokyo Stock Exchange, which was established in 1878. It is a

voluntary non-profit making Association of Persons (AOP) and is currently engaged in

the process of converting itself into demutualised and corporate entity. It has evolved over

the years into its present status as the premier Stock Exchange in the country. It is the first

Stock Exchange in the Country to have obtained permanent recognition in 1956 from the

Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while

providing an efficient and transparent market for trading in securities, debt and

derivatives upholds the interests of the investors and ensures redresses of their grievances

whether against the companies or its own member-brokers. It also strives to educate and

enlighten the investors by conducting investor education programmers and making

available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies

and regulates the affairs of the Exchange. The Governing Board consists of 9 elected

directors, who are from the broking community (one third of them retire ever year by

rotation), three SEBI nominees, six public representatives and an Executive Director &

Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-

day administration of the Exchange and the Chief Operating Officer and other Heads of

Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to

constitution of the Executive Committee of the Exchange. Accordingly, an Executive

Committee, consisting of three elected directors, three SEBI nominees or public

representatives, Executive Director & CEO and Chief Operating Officer has been

constituted. The Committee considers judicial & quasi matters in which the Governing

Board has powers as an Appellate Authority, matters regarding annulment of transactions,

admission, continuance and suspension of member-brokers, declaration of a member-

broker as defaulter, norms, procedures and other matters relating to arbitration, fees,

deposits, margins and other monies payable by the member-brokers to the Exchange, etc.

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Regulatory Frame Work Of Stock Exchange

A comprehensive legal framework was provided by the “Securities

Contract Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three

tier regulatory structure comprising

Ministry of finance

The Securities And Exchange Board of India

Governing bond

Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation

for the admission of members in the stock exchanges. The qualifications for becoming a

member of a recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years.

He should be an Indian citizen.

He should be neither a bankrupt nor compound with the creditors.

He should not be convicted for fraud or dishonesty.

He should not be engaged in any other business connected with a company.

He should not be a defaulter of any other stock exchange.

The minimum required education is a pass in 12th standard examination.

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STOCK EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a resolution

of government of India. It was later made statutory body by the SEBI act 1992.according

to this act, the SEBI shall constitute of a chairman and four other members appointed by

the central government.

With the coming into effect of the securities and exchange board of India act, 1992

some of the powers and functions exercised by the central government, in respect of the

regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities.

Regulating the business in stock exchanges and any other securities market.

Registering and regulating the working of intermediaries associated with securities market as well as working of mutual funds.

Promoting and regulating self-regulatory organizations.

Prohibiting insider trading in securities.

Regulating substantial acquisition of shares and take over of companies.

Performing such functions and exercising such powers under the provisions of

capital issues (control) act, 1947and the securities to it by the central government.

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SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK

EXCHANGES):

Board of Directors of Stock Exchange has to be reconstituted so as to include non-

members, public representatives and government representatives to the extent of 50% of

total number of members.

Capital adequacy norms have been laid down for the members of various stock

exchanges depending upon their turnover of trade and other factors.

All recognized stock exchanges will have to inform about transactions within 24 hrs.

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TYPES OF ORDERS:

Buy and sell orders placed with members of the stock exchange by the investors. The

orders are of different types.

Limit orders:

Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at Rs.50.’Here, the

order has clearly indicated the price at which it has to be bought and the investor is not

willing to give more than Rs.50.

Best rate order:

Here, the buyer or seller gives the freedom to the broker to execute the order at the

best possible rate quoted on the particular date for buying. It may be lowest rate for

buying and highest rate for selling.

Discretionary order:

The investor gives the range of price for purchase and sale. The broker can use his

discretion to buy within the specified limit. Generally the approximation price is fixed.

The order stands as this “buy BRC 100 shares around Rs.40”.

Stop loss order:

The orders are given to limit the loss due to unfavorable price movement in the

market. A particular limit is given for waiting. If the price falls below the limit, the broker

is authorized to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop

loss at Rs.22.

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Buying and selling shares:

To buy and sell the shares the investor has to locate register broker or sub broker who

render prompt and efficient service to him. The order to buy or sell specifying the number

of shares of the company of investors’ choice is placed with the broker. The order may be

of any type. After receiving the order the broker tries to execute the order in his computer

terminal. Once matching order is found, the order is executed. The broker then delivers

the contract note to the investor. It gives the details regarding the name of the company,

number of shares bought, price, brokerage, and the date of delivery of share. In this

physical trading form, once the broker gets the share certificate through the clearing

houses he delivers the share certificate along with transfer deed to the investor. The

investor has to fill the transfer deed and stamp it. The stamp duty is one of the percentage

considerations, the investor should lodge the share certificate and transfer deed to the

register or transfer agent of the company. If it is bought in the DEMAT form, the broker

has to give a matching instruction to his depository participant to transfer shares bought to

the investors account. The investor should be account holder in any of the depository

participant. In the case of sale of shares on receiving payment from the purchasing broker,

the broker effects the payment to the investor.

Share groups:

The scrips traded on the BSE have been classified into ‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’

groups. The ‘A’ group represents those, which are in the carry forward system. The ‘F’

group represents the debt market segment (fixed income securities). The Z group scrips

are of the blacklisted companies. The ‘C’ group covers the odd lot securities in ‘A’,

‘B1’&’B2’ groups.

ROLLING SETTLEMENT SYSTEM:

Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3

or 5days) after the trading day. The shares bought and sold are paid in for n days after the

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trading day of the particular transaction. Share settlement is likely to be completed much

sooner after the transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days after

the trading day. A rolling period which offers a large number of days negates the

advantages of the system. Generally longer settlement periods are shortened gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the

criteria that they were in compulsory demat list and had daily turnover of about Rs.1 crore

or more. Then it was extended to “A” stocks in Modified Carry Forward Scheme,

Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending

Securities Scheme (BELSS) with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and

subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling

settlement experience it was further reduced to T+2 to reduce the risk in the market and to

protect the interest of the investors from 1st April 2003.

Activities on T+1:

Conformation of the institutional trades by the custodian is sent to the stock exchange

by 11.00 am. A provision of an exception window would be available for late

confirmation. The time limit and the additional changes for the exception window are

dedicated by the exchange.

The exchanges/clearing house/ clearing corporation would process and download the

obligation files to the broker’s terminals late by 1.30 p.m on T+1. Depository participants

accept the instructions for pay in securities by investors in physical form upto 4 p.m and

in electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same

day processing.

Activities on T+2:

The depository permits the download of the paying in files of securities and funds till

10.30 am on T+2 from the brokers’ pool accounts. The depository processes the pay in

requests and transfers the consolidated pay in files to clearing House/clearing Corporation

by 11.00am/on T+2. The exchange/clearing house/clearing corporation executes the pay-

out of securities and funds latest by 1.30 p.m on T+2 to the depositories and clearing

53

banks. In the demat mode net basis settlement is allowed. The buy and sale positions in

the same scrip can be settled and net quantity has to be settled.

COMPANY PROFILE

ABOUT THE ORGANISATION

ITIFSL is emerging as one of the top most wealth management companies in India

with a daily turnover of over 200 crores and 116 branches spread all over the country.

ITIFSL, originally promoted by the Investment Trust of India, is now a part of the Sharyans

and Inga Group. The Sharyans Group has an impressive portfolio of businesses under its

fold which mainly fall under the real estate and financial services categories. The prominent

subsidiaries of this Group are Prebone Yamane (Country’s largest debt broking company),

Intime Spectrum (India’s largest Registry & Transfer Agents), and Collin Stewarts India

Private Limited (Portfolio Management Services & Research along with institutional

broking operations for Collin Stewarts which is the largest wealth management company in

the UK). Under the guidance of the Sharyans and Inga Group, ITIFSL will soon touch the

pinnacles of success in the financial services industry by being a dominant force in the

broking as well as the distribution arena. With an unblemished and reputed track record,

ITIFSL is all set become an imposing wealth management firm in the country by giving the

best to its clients as well as stakeholders.

ITI FSL has been set up to engage in

Stock Broking

Institutional Broking

Derivatives

Depository Services

Distribution of Investment Products

Distribution of Insurance

Commodities Broking

Headquartered in Chennai, ITI FSL has a growing network of offices across several

54

states to ensure easy accessibility to our clients wherever they are. ITIFSL has over 116

Branch Offices spread across the country to offer better reach and service to the investor.

The

company currently marks its presence in the following regions:

Andhra Pradesh

Delhi

Karnataka

Maharashtra

Madhya Pradesh

Tamil Nadu

West Bengal

Mission:

ITI FSL's mission is to deliver value with commitment. Emerging as one of the

front-line Brokerage Houses and a dominant force in the Distribution arena, we are

continuously engaged in the assessment of market conditions to balance risk and reward

so as to optimize returns to our investors.

Vision:

"To be the most Preferred Financial Advisor, Creator, Wealth Manager and to deliver

the Highest Standards of Service to customers and be Prominent in the horde of Finance

Companies offering similar services".

55

Why ITIFSL?

• ITIFSL’s services are offered under total confidentiality and integrity with the sole

purpose of maximizing returns for their clients.

• Equity Broking - Corporate Member of The Stock Exchange, Mumbai (BSE) and

National Stock Exchange of India Ltd. (NSE).

• Pan India reach - 380 terminals spread across 75 different locations, in semi urban,

urban and metropolitan areas.

• More than 100,000 retail clients serviced from the above locations.

• ITIFSL have heavily invested in technology (customized and ready to use software)

involving front and back end operations offering seamless process and flawless

execution and raising our service levels.

• ITIFSL operate on an alert and well-defined system in risk management and

settlement mechanism.

56

OFFERINGS

57

ADVANTAGES TO INVESTERS

Why you need a Financial Planner?

The financial planner is someone who can help you invest across investment

avenues based on your risk profile and investment objectives. Post-investment, he

monitors your investments and ensures that you are on course to achieve your

investment objectives. If necessary, he suggests changes to your financial plan so that

you are able to achieve your investment objectives as planned.Given the critical inputs

provided by the financial planner in helping you achieve your financial goals, it is

important that you select the right financial planner. Here are the reasons why ITI is the

right planner for you…

Certification/Membership

More than anything else, this is a pre-requisite from the compliance point of view.

Your financial planner should be certified and registered as a broker or mutual fund

agent with NSE, BSE, AMFI etc. ITI FSL has Trading and Clearing Memberships with

major Stock Exchanges in India to offer broking services across market segments at all

of the National-level Exchanges. ITI FSL is a Depository Participant with CDSL. We

also have memberships with commodity exchanges. We have AMFI certified

professionals to advice you on mutual funds.

Competence

Gone are the days when financial planning simply required delivering application

forms. The traditional "one-size fits all" approach is passé.

With the increasing list of investment avenues on offer, selecting the one that suits

you the best is becoming a challenge. To that end, competence and skill set are the basic

criteria that investors should look for in an investment planner.

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With ITI fine staff of professionals, you can be sure that you will get the best advice

and service to achieve your financial goals. Furthermore, the recommendations offered

by ITI are backed by solid research.

Value-add services

In addition to financial planning, ITI provides related, value-add services that can

assist you in the investment process. On-line tools and calculators are some of our more

popular value-add services. These tools can help you keep track of your investments.

These value-add services form an integral part of our offering.

One-stop shop

Every individual has different needs and the same undergo a change over a period of

time. The financial planner should be capable enough to understand these needs and

offer suitable products to fulfill them. For this purpose, ITI provides you with the entire

range of investment products from stocks, mutual funds, bonds to fixed deposits. In other

words, we offer a "one-stop" solution for all your investment needs.

Accessibility

One of the common complaints from investors is that their financial planner is

unavailable/inaccessible and therefore unable to provide adequate/prompt service. This

is particularly common in a one-man setup where the financial planner's services begin

and end with him, with little or no backup.

If the financial planner is preoccupied with some important clients or if he re-

locates, it leaves you in a soup because your financial plan is in limbo. It is best to go

with a financial planning initiative that is run by teams (as opposed to one-man setups)

to ensure continuity of your financial plan. ITI has a team of professionals who are ever

ready to serve you at any point of time. We are spread across the country so that you can

have access to us always.

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PRODUCTS AND SERVICES

We are a one-stop financial services shop, most respected for quality of its advice,

personalized service and cutting-edge technology.

Equities

ITIFSL provided the prospect of researched investing to its clients, which was

hitherto restricted only to the institutions. Research for the retail investor did not exist

prior to ITIFSL. ITI leveraged technology to bring the convenience of trading to the

investor’s location of preference (residence or office) through computerized access.

ITIFSL made it possible for clients to view transaction costs and ledger updates in real

time.

PMS

Our Portfolio Management Service is a product wherein an equity investment

portfolio is created to suit the investment objectives of a client. We at ITI FSL invest

your resources into stocks from different sectors, depending on your risk-return profile.

This service is particularly advisable for investors who cannot afford to give time or don't

have that expertise for day-to-day management of their equity portfolio.

Research

Sound investment decisions depend upon reliable fundamental data and stock

selection techniques. ITIFSL Equity Research is proud of its reputation for, and we want

you to find the facts that you need. Equity investment professionals routinely use our

research and models as integral tools in their work. They choose Ford Equity Research

when they can clear your doubts.

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Commodities

ITIFSL’s extension into commodities trading reconciles its strategic intent to

emerge as a one-stop solutions financial intermediary. Its experience in securities broking

has empowered it with requisite skills and technologies. The Company’s commodities

business provides a contra-cyclical alternative to equities broking. The company was

among the first to offer the facility of commodities trading in India’s young commodities

market (the MCX commenced operations only in 2003). Average monthly turnover on the

commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities

market has several products with different and non-correlated cycles. On the whole, the

business is fairly insulated against cyclical gyrations in the business.

Invest Online

ITIFSL has made investing in Mutual funds and primary market so effortless. All

you have to do is register with us and that’s all. No paperwork no queues and No

registration charges.

INVEST IN Mutual Fund

ITIFSL offers you a host of mutual fund choices under one roof, backed by

in-depth research and advice from research house and tools configured as investor

friendly.

APPLY IN IPOs

You could also invest in Initial Public Offers (IPO’s) online without going through

the hassles of filling ANY application form/ paperwork

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Stay connected to the market:

The trader of today, you are constantly on the move. But how do you stay

connected to the market while on the move? Simple, subscribe to ITIFSL Stock

Messaging Service and get Market on your Mobile!

Insurance

An entry into this segment helped complete the client’s product basket;

concurrently, it graduated the Company into a one-stop retail financial solutions provider.

To ensure maximum reach to customers across India, we have employed a multi pronged

approach and reach out to customers via our Network, Direct and Affiliate channels.

Following the opening of the sector in 1999-2000, a number of private sector insurance

service providers commenced operations aggressively and helped grow the market. The

company’s entry into the insurance sector de-risked the company from a predominant

dependence on broking and equity-linked revenues. The annuity based income generated

from insurance intermediation result in solid core revenues across the tenure of the

policy.

Wealth Management Service

Imagine a financial firm with the heart and soul of a two-person organization. A

world-leading wealth management company that sits down with you to understand your

needs and goals. We offer you a dedicated group for giving you the most personal

attentionat every level.

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Roles and Responcibilities in Organisation:

We will give updates to customers in

Economic Outlook and Updates

Sector & Company Reports

Technical Recommendations

Daily Market Report

Daily Technical Outlook

Reports on New Fund Offerings

Weekly analysis of mutual funds – Fund Focus

Weekly debt report: Debt Dose

Offer daily technical calls through SMS to our clients

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KEY LEARNINGS IN ORGANISATION:

EQUITY

MUTUAL FUNDS

TAX SAVENGS SCHEMES IN MUTUAL FUNDS

ONLINE AND OFFLINE TRADING

IPO (INITIAL PUBLIC OFFER)

DERIVATIVES

FOREX MARKET

COMMODITIES

RISK-RETURN PROFILE IN FUTURES AND OPTIONS-S&P CNX NIFTY

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ANALYSIS OF THE STUDY

Most of the Stock trading companies charge a fixed amount per Rs.100.

ITI Financial Services Ltd

The company charges Rs.0.03% for Intraday and Rs.0.30% for delivery

based transactions.

For Intraday based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.03%) 30

Service Tax (10.2% on brokerage) 3.0

STT (security transaction tax)

0.125% on transaction value 125

---------------

Rs.99842.0

---------------

For Delivery based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.30%) 300

Service Tax (10.2% on brokerage) 30.6

STT (security transaction tax)

0.25% on transaction value 250

---------------

Rs.99419.4

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India Infoline Ltd

The company charges Rs.0.05% for Intraday and Rs.0.40% for delivery

based transactions

For Intraday based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.05%) 50

Service Tax (10.2% on brokerage) 5.1

STT (security transaction tax)

0.125% on transaction value 125

---------------

Rs.99819.9

----------------

For Delivery based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.40%) 400

Service Tax (10.2% on brokerage) 40.8

STT (security transaction tax)

0.25% on transaction value 250

---------------

Rs.99309.2

---------------

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Share Khan Ltd

The company charges Rs.0.6% for Intraday and Rs.0.5% for delivery

based transactions

For Intraday based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.1%) 60

Service Tax (10.2% on brokerage) 6.12

STT (security transaction tax)

0.125% on transaction value 125

---------------

Rs.99808.8

---------------

For Delivery based transactions

Transaction value Rs.100000

Deduct

Brokerage (0.5%) 500

Service Tax (10.2% on brokerage) 51

STT (security transaction tax)

0.25% on transaction value 250

---------------

Rs.99199

----------------

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For Intraday

Particulars

ITIFSL Ltd India nfoline Ltd Share Khan Ltd

Transaction value 100000 100000 100000

Brokerage 30 50 60

Service Tax 3.0 5.1 6.12

STT 125 125 125

Net Amount 99842.0 99819.9 99808.8

Interpretation:

Though the transaction value is same for ITIFSL, India Infoline &

Share Khan, but the net amount benefited to the customer is obtained from

ITIFSL. The reason, the brokerage charges are less. Also it is to be noted

that the service tax is charged on brokerage amount.68

For Delivery

Particulars ITIFSL Ltd India Infoline Ltd Share Khan Ltd

Transaction value 100000 100000 100000

Brokerage 300 400 500

Service Tax 30.6 40.8 51.0

STT 250 250 250

Net Amount 99419.4 99309.2 99199.0

Interpretation:

Though the transaction value is same for ITIFSL, India Infoline &

Share Khan, but the net amount benefited to the customer is obtained from

ITIFSL. The reason, the brokerage charges are less. Also it is to be noted

that the service tax is charged on brokerage amount.

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ONLINE TRADING MECHANISM

F1

Key is used for the buying of shares and to display the order entry table .

For eg:- Bse/Nse

Company code

Symbol

Total quantity

Price

F2

Key is used for selling the shares and to display order entry.

F3

Key is used to display the pending entry

eg:- If we order for shares and it will not be traded by Nse/Bse. Then the shares

are known as in pending.

F4

Key is used for market watch

F5&F6

Key is used for market picture of a particular company if we enter some particular

company name in the market picture. It will show the best five buyers of that particular

and best five seller of that particular company. Always the five buyers /sellers will not be

same they will change with in seconds.

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Buyer Seller

No.of Quantity Price Price Quantity No.of

Orders of shares of shares orders

And we can see .

Opening/yesterday closing price of the shares.

High /low rate of the shares.

% of changes in particular company.

Last traded quantity and rate will be shown.

Shift F7

To know the details of a particular company

Eg:- Reliance:-symbol, company code, dividend details

F8 & F9

This keys are used to show all the executed order.

Eg:-which are already traded in the market picture

F10

Key is used for message log

At what time particular company shares were traded, particular trade, particular time.

F11

To add script to the screens

F12

Key is used for market movement for particular script or share.

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FINDINGS OF THE STUDY

The intraday net amount (99842.0) is highest for ITIFSL when compared to India Infoline

Ltd & Share Khan Ltd.

The net amount for delivery based transactions(99419.4) is highest for ITIFSL followed by

India Infoline Ltd & Share Khan Ltd

It was found that most of the customers are willing to take Demat Account rather than

commodity account.

From the survey it is found that most of the customer’s satisfaction level is good with the

advice given by their marketing executives and the information given in the broachers.

Most of the customers prefer to invest in long term investments.

From the survey it is found that most of the customers are aware of online trading process

of ITI Financial Services Limited.

Most of the customers are interested to take part in the demo sessions of online trading in

ITI Financial Services Limited.

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SUGGESTIONS

The competitors of ITIFinancial Services Limited Viz., India Infoline Ltd and Share

Khan Ltd should decrease the brokerage charges to attract the customers.

Company should increase awareness about the company’s products & service offered by

them in the market.

Company should maintain good relation with the customers and respond quickly to the

queries asked by the customers

The company should give demonstration to customers so that they can get complete

knowledge about online trading.

Company should try to minimize the rejections by taking care while filling the application

form.

The company should increase branch offices in Hyderabad & other areas in A.P.

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CONCLUSION

New ideas are to be implemented to catch the customers. The strategy of giving

more benefits to the high end customers is very useful. All the positive points are used to

get the business for the firm.

But again if any one wants to take risk & earns a lot he can go for shares. Because

stock market is a volatile market. Anything & everything can happen to this market. But

then again if anyone study the market well he can earn a lot.

Again like every coin has its two sides, similarly every financial instrument has its

own features, its advantage & disadvantage. So finally it is the investor himself/herself

has to decide where to invest.

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Bibliography:

www.indianstockmarket.com

www.nseindia.com

www.bseindia.com

www.sebi.com

www.itifsl.co.in

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