Analysis of online trading and Dematerialization
INDUSTRIAL TRAINING REPORT An Organizational Study of Standard Chartered Wealth Managers & Study of the Investment pattern of individuals with special focus on online trading and Demat account This Industrial Training Report is being submitted in partial fulfillment of the requirements For the award of the Degree of MASTER OF BUSINESS ADMINISTRATION of BANGALORE UNIVERSITY The training has been undertaken by
GURURAJ B H Reg. No. 08VWCM6023 Under the guidance of Prof. Ruchi Alliance Business Academy
Ms. Tanushree Barua City Manager, Standard Chartered Wealth Managers Bangalore
ALLIANCE BUSINESS ACADEMY Batch - 2008 - 2010
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DECLARATION
I, Gururaj B H, studying at Alliance Business Academy, hereby state that this industrial training report titled ―Study of the investment pattern of individuals with special focus on online trading and Demat account‖ was carried at Standard Chartered Wealth Managers is submitted in partial fulfillment of the requirement of the MBA Program of Bangalore University is an original work carried out by me under the guidance and supervision of Prof. Ruchi, faculty guide & Ms. Tanushree Barua, Industry guide and that the project or any part thereof has not been previously submitted for a degree/diploma of any University/ Institution elsewhere.
Date: 15/08/2009 Place: Bangalore
Gururaj B H Register No. 08VWCM6023
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TABLE OF CONTENTS
Chapter No
Title Executive summary
1
Page No 6
Industry Profile: Banking Industry
1.1
Introduction to Banking
8
1.2
Global Banking Industry
9
1.3
Indian Banking Scenario
9
1.4
PEST Analysis of Banking Industry
12
1.5
New Business Opportunities in Banking
15
1.6
Investment Scenario in India
15
1.7
Recent Developments
17
1.8
Major players in financial services industry
19
2
Company Profile
2.1
Overview
23
2.2
Company History
24
2.3
Current Position of the company
27
2.4
Recent Alliances and strategic acquisitions
28
2.5
Standard Chartered, India
29
2.6
Mission Statement
31
2.7
Core Values
31
2.8
Organizational Structure
35
2.9
Financial Key Performance Indicators
37
2.10
Products and Services offered by SCWM
41
2.11
SWOT Analysis of the company
48
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3
Introduction
3.1
Stock Exchanges
49
3.2
Securities and Exchange Board of India
50
3.3
National Stock Exchange
53
3.4
Online Trading
56
3.5
Recent Developments
62
3.6
Indian Stock Market Review
65
3.7
Depository system in India
66
3.8
Dematerialization and Rematerialization
70
4
Research Design
4.1
Introduction
75
4.2
Problem Statement
75
4.3
Title of the project
75
4.4
Objectives of the study
75
4.5
Scope of the study
76
4.6
Research Methodology
76
4.7
Limitations of the study
77
5 5.1
6
Data Analysis and Interpretation Data Analysis and Interpretation
78
Findings, Recommendations and Conclusion
6.1
Findings
96
6.2
Recommendations / Suggestions
97
6.3
Conclusion
98
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Gururaj B H
Bibliography
100
Annexure
101
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EXECUTIVE SUMMARY The commencement of E-Trading and Demat has transformed the capital market in India. With the help of Demat and Trading account, buying and selling of shares has become a much faster and even process than trading with the assistance of a physical broker. It provides for the assimilation of bank, broker, stock exchange and depository participants. This helps to get rid of the painstaking procedure of investing in stock exchange. Today, if one wants to invest in stock market, he has to contact a broker on phone or meet him personally to place order. A broker generally gives such importance and additional service only to high net worth customers. But the introduction of Internet trading, even a common or a small investor gets an opportunity to avail the service at an affordable price which is much lesser than what is charged by a physical broker over the phone. Online trading has given customer a real time access to account information, stock quotes elaborated market research and interactive trading. The prerequisites of Internet trading are a computer, a modem and a telephone connection, registration with broker, a bank a/c and depository account. The introduction of depository service are considered as the ‗Beginning of the trading of Stocks @ click ‗. This means that you can arrange delivery of scrips sold anytime, anywhere to anyone by click of a mouse. Dematerialization facilitates to keep the securities in electronic form instead of paper form. It offers more advantageous than the physical certificate form. Despite the advantages of Dematerialization, the awareness levels among the investors relating to Demat account is not adequate because of numerous reasons. The investors are not sufficiently responsive of the concept of Demat account and the various financial institutions providing such services. This study involves understanding the various concepts of Demat and analyzing the investment pattern of individuals in India and a study on ―Analysis of awareness among investors regarding On Line Trading and Dematerialization‖ has been submitted to Bangalore University as a part of curriculum for the partial completion of ―MBA‖.
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INDUSTRY ANALYSIS: 1.1. Introduction to Banking: A modern industrial society cannot be run by self financing of entrepreneurs. Some institutional assistance is necessary to mobilize the savings of the community and to make it available to the entrepreneurs. The people a large majority of whom save in small odd lots also want an institution which can ensure safety of their funds together with liquidity. Banks assure this with a further that the funds can be drawn back in case of a need.
From a broader social angle, banks act as a bridge between the users of capital and those who save but cannot use the funds themselves. The idle resources of the community are thus activated and brought to productive use.
The banking system has capacity to add to the total supply of money by means of credit creation. It is because of their ability to manipulate credit that banks are used extensively as a tool of monetary policy. They, through channeling of funds into one or the other direction on a priority basis or extending it to one or the other on concessional terms and conditions, influence the flow of funds and thereby the nature of economic development. Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.
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1.1.1 Functions of a bank:
The functions of a bank can be summarized as follows:
a. Receipt of Deposits: A bank receives deposits from Individuals, firms and other institutions. Deposits constitute the main resources of a bank. Such deposits may be of different types. Deposits which are withdrawable on demand are called demand or current deposits and others are called as time deposits. Savings deposits are those from which withdrawals are restricted as regards the amount and the period. Deposits withdrawable after the expiry of an agreed period are known as fixed deposits. Interest paid by banks is different for each kind of deposit; highest for the fixed deposits and lowest or even nil for current deposits.
b. Lending of money: Banks lend money mainly for industrial and commercial purposes. This lending take the form of cash credits, overdrafts, loans and advances, or discounting of bills of exchange. Interest charged by banks on such lending varies according to the amount and period involved, social priority nature of security offered, the standing of the borrower etc.
c. Agency services: A bank renders various services to consumers such as collection of bills, promissory notes and cheques, collection of dividends, interests, premiums etc., purchase and sale of securities, acting as trustees or executor when nominated and making regular payments such as insurance premiums.
d. General Services: A modern bank performs many services of general nature to the public. Eg: Issue of letters of credit, travelers cheque, bank drafts, circular notes, etc., safekeeping of valuables in safe deposit vaults, supplying trade information and statistics, conducting economic surveys and Gururaj B H
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preparation of feasibility studies, project reports etc. Banks in foreign countries also undertake the issue of shares and make loans for long term purposes.
1.2 Global Banking Industry: The worldwide assets of the largest 1,000 banks grew at 16.3% in 2008 / 2009 to reach a record $74.2 trillion. This follows a 5.4% increase in the previous year. European Union banks held the largest share, 53%, up from 43% a decade earlier. The growth in Europe‘s share was mostly at the expense of Japanese banks, whose share more than halved during this period from 21% to 10%. The share of US banks remained relatively stable at around 14%. Most of the remainder was from other Asian and European countries.
The United States has by far the most banks in the world, both in terms of institutions (7,540 at the end of 2005) and branches (75,000). This is an indicator of the geography and regulatory structure of the USA, resulting in a large number of small to medium-sized institutions in its banking system. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches—more than double the 15,000 branches in the UK.
1.3 Indian Banking Scenario: Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980.
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Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively
The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then have achieved tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting all higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‗high revenue‘ niche retail segments. The Indian banking has finally worked up to the competitive dynamics of the ‗new‘ Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be ‗futuristic‘ and proactive players capable of meeting the multifarious requirements of the large customer‘s base. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The Indian banking has come from a long way from being a quiet business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units Gururaj B H
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contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian banking can be broadly categorized into nationalized banks, private banks and specialized banking institutions. The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operations here.
The liberalization policy of Government of India permitted entry to private sector in the banking, the industry has witnessed the entry of nine new generation private banks.
The major
differentiating parameter that distinguishes these banks from all the other banks in the Indian banking is the level of service that is offered to the customer. Their focus has always been centered on the customer – understanding his needs, preempting him and consequently delighting him with various configurations of benefits and a wide portfolio of products and services. These banks have generally been established by promoters of repute or by ‗high value‘ domestic financial institutions.
The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks corner almost four per cent share of the total share of deposits. Most of the banks in this category are concentrated in the high-growth urban areas in metros (that account for approximately 70% of the total banking business). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz. Management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills. This is the strategy that has allowed these banks to concentrate on few reliable high net worth companies and individuals rather than cater to the mass market. These Gururaj B H
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well-chalked out integrates strategy plans have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.
1.4 PEST Analysis of Banking Industry: Political / Legal Environment:
The policies of the Government and Reserve Bank of India influence the banking sector. At times, considering the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer‘s votes. By doing so, the entire banking system in the country gets affected. Various banks in the cooperative sector are open and are affected by the decisions of politicians. They exploit these banks for their benefits. The government also possesses the right to appoint the key personnel in the bank like chairman etc.
Various policies are framed by the RBI analyzing the present situation of the country like policies on cash reserve ratio, regulation of interest rates, licensing, statutory liquidity ratio, prime lending rates, bank rate, selective credit control measures, open market operations etc for better control over the banks.
Economic Environment:
India had a well knit banking system before Independence. But most of the banks neglected the priority sectors (like agriculture, small industries, exports etc.) and mostly financed the industrial units. In order to have social control on banks, they were nationalized in 1969 and 1980 so as to ensure proper flow of funds in the economy. After nationalization, the banks have spread their wings all over the country. They cater to the needs of all agriculture, industry and commerce. Gururaj B H
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However they still have a long way to go in terms of removing inter regional, inter-sectoral imbalances.
Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in the Budget savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels.
Socio Cultural Environment:
Before nationalization of the banks, their control was in the hands of the private parties and only big business houses and the effluent sections of the society were getting benefits of banking in India. In 1969 government nationalized 14 banks. To adopt the social development in the banking sector it was necessary for speedy economic progress, consistent with social justice, in democratic political system, which is free from domination of law, and in which opportunities are open to all. Accordingly, keeping in mind both the national and social objectives, bankers were given direction to help economically weaker section of the society and also provide needbased finance to all the sectors of the economy with flexible and liberal attitude. Now the banks provide various types of loans to farmers, working women, professionals, and traders. They also provide education loan to the students and housing loans, consumer loans, etc.
Banks having big clients or big companies have to provide services like personalized banking to their clients because these customers do not believe in running about and waiting in queues for getting their work done. The bankers also have to provide these customers with special provisions and at times with benefits like food and parties. But the banks do not mind incurring these costs because of the kind of business these clients bring for the bank.
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Banks have changed the culture of human life in India and have made life much easier for the people.
Technological Environment: Technology plays a very important role in bank‘s internal control mechanisms as well as services offered by them. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and services.
The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. The use of ATM and Internet banking has allowed ‗anytime, anywhere, banking‘ facilities. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged. Credit card facility has encouraged an era of cashless society. Today MasterCard and Visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. Through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of losing the post. Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from our mobile. The messages are then recognized by the bank to provide you with the required information.
All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach.
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1.5 New Business Opportunities in banking: With the interest income coming under pressure, banks are urgently looking for expanding feebased income activities. Banks are increasingly getting attracted towards activities such as marketing mutual funds and insurance policies, offering credit cards to suit different categories of customers and services such as wealth management and equity trading. These are indeed proving to be more profitable for banks than plain vanilla lending and borrowing.
Graph No. showing the investment opportunities available to banking sector in India:
Investment Opportunities (%) 13%
27%
8%
Selling of Mutual Funds Bancassurance Forex Management
25% 27%
Wealth Management Derivatives Trading
source: www.wikipedia.com
1.6 Investment Scenario in India: Investments, unlike works of art, cannot afford the luxury of experimenting. Investing is not guesswork. It takes more than just a ‗tip‘; it needs training to plan, instinct to pick and sheer intellect to make it work for the investor. Human nature is capricious, his wants keep changing. Many individuals find investments to be fascinating because they can participate in the decision Gururaj B H
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making process and see the results of their choices. Not all investments will be profitable, as investor wills not always make the correct investment decisions over the period of years; however, you should earn a positive return on a diversified portfolio. In addition, there is a thrill from the major success, along with the agony associated with the stock that dramatically rose after you sold or did not buy.
Investing is not a game but a serious subject that can have a major impact on investor's future well being. Virtually everyone makes investments. Even if the individual does not select specific assets such as stock, investments are still made through participation in pension plan, and employee saving program or through purchase of life insurance or a home. Each of this investment has common characteristics such as potential return and the risk you must bear. The future is uncertain, and you must determine how much risk you are willing to bear since higher return is associated with accepting more risk.
The individual should start by specifying investment goals. Once these goals are established, the individual should be aware of the mechanics of investing and the environment in which investment decisions are made. These include the process by which securities are issued and subsequently bought and sold, the regulations and tax laws that have been enacted by various levels of government, and the sources of information concerning investment that are available to the individual.
An understanding of this financial background leads to three important general financial concepts that apply to investing. Today the field of investment is even more dynamic than it was only a decade ago. World event rapidly-events that alter the values of specific assets the individual has so many assets to choose from, and the amount of information available to the investors is staggering and continually growing. An investment can be described as perfect if it satisfies all the needs of all investors. So, the starting point in searching for the perfect investment would be to examine investor needs. If all those needs are met by the investment, then that investment can be termed the perfect investment.
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Most investors and advisors spend a great deal of time understanding the merits of the thousands of investments available in India. Little time, however, is spent understanding the needs of the investor and ensuring that the most appropriate investments are selected for him.
1.7 RECENT DEVELOPMENTS IN THE INDUSTRY:
A. Statutory Pre - emptions: In the pre-reforms phase, the Indian banking system operated with a high level of statutory pre - emptions, in the form of both the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR), reflecting the high level of the country‘s fiscal deficit and its high degree of monetization. Efforts in the recent period have been focused on lowering both the CRR and SLR. The statutory minimum of 25 per cent for the SLR was reached as early as 1997, and while the Reserve Bank continues to pursue its mediumterm objective of reducing the CRR to the statutory minimum level of 3.0 per cent, the CRR of the Scheduled Commercial Banks (SCBs) is currently placed at 5.0 per cent of NDTL (net demand and time liabilities). The legislative changes proposed by the Government in the Union Budget, 2005-06 to remove the limits on the SLR and CRR have provided freedom to the Reserve Bank in the conduct of monetary policy and also lend further flexibility to the banking system in the deployment of resources.
B. Interest Rate Structure: Deregulation of interest rates has been one of the key features of financial sector reforms. In recent years, it has improved the competitiveness of the financial environment and strengthened the transmission mechanism of monetary policy. Sequencing of interest rate deregulation has also enabled better price discovery and imparted greater efficiency to the resource allocation process. After the interest rate deregulation, banks became free to determine their own lending interest rates. As advised by the Indian Banks‘ Association (a self-regulatory organization for banks), commercial banks determine their respective BPLRs (benchmark prime lending rates) taking into consideration:
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(i) actual cost of funds; (ii) operating expenses; and (iii) a minimum margin to cover regulatory requirements of provisioning and capital charge and profit margin.
C. Prudential Regulation: Prudential norms related to risk-weighted capital adequacy requirements, accounting, income recognition, provisioning and exposure were introduced in 1992 and gradually these norms have been brought up to international standards. Other initiatives in the area of strengthening prudential norms include measures to strengthen risk management through recognition of different components of risk, assignment of risk-weights to various asset classes, norms on connected lending and risk concentration, application of the mark-to-market principle for investment portfolios and limits on deployment of funds in sensitive activities.
D. Exposure Norms: The Reserve Bank has prescribed regulatory limits on banks‘ exposure to individual and group borrowers to avoid concentration of credit, and has advised banks to fix limits on their exposure to specific industries or sectors (real estate) to ensure better risk management. In addition, banks are also required to observe certain statutory and regulatory limits in respect of their exposures to capital markets.
E. Asset Liability Management: In view of the growing need for banks to be able to identify, measure, monitor and control risks, appropriate risk management guidelines have been issued from time to time by the Reserve Bank, including guidelines on Asset-Liability Management (ALM). These guidelines are intended to serve as a benchmark for banks to establish an integrated risk management system.
F. NPL Management: Banks have been provided with a menu of options for disposal/recovery of NPLs (nonperforming loans). Banks resolve/recover their NPLs through compromise/one time Gururaj B H
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settlement, filing of suits, Debt Recovery Tribunals, the Lok Adalat forum, Corporate Debt Restructuring (CDR), sale to securitization / reconstruction companies and other banks or to non-banking finance companies (NBFCs). The promulgation of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and its subsequent amendment have strengthened the position of creditors.
1.8 KEY PLAYERS IN FINANCIAL SERVICES INDUSTRY:
1) ICICI Securities Ltd.
ICICI Securities Limited (i-SEC) is a wholly owned investment-banking subsidiary of ICICI Limited. ICICI is the only non-Japanese Asian financial institution to be listed on the New York Stock Exchange (NYSE). ICICI Securities was formed on 22nd Feb. 1993, when ICICI's Merchant Banking Division was spun off into a new company; ICICI Securities today is India's leading Investment Bank and one of the most significant players in the Indian capital markets.
ICICI Brokerage Services Limited (IBSL) set up in March 1995; IBSL is a 100% subsidiary of i-SEC. It commenced its securities brokerage activities in February 1996 and is registered with the National Stock Exchange of India Limited and The Stock Exchange, Mumbai.
ICICI has started a website ICICIdirect.com which is the most comprehensive website, which allows you to invest in Shares, Mutual funds, Derivatives (Futures and Options) and other financial products.
ICICI has a large network of branches all over India.
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Merchant Banking
Demat Service
Stock Broking
2) HDFC Ltd:
Housing Development Finance Corporation Limited is the leading financial company in India. IT has large network of branches all over India. HDFC Securities which is fully subsidiary of HDFC provides Demat service.
HDFC and its subsidiary provides following services.
Demat Service
Life Insurance
Banking Service
Housing Finance
Vehicle Finance
Education Loan
Personal Loan
Mutual Fund
3) Kotak Securities Ltd:
Kotak Securities needs no introduction as one of the largest stock broking houses in the country and a leading distributor of primary market offerings. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs, the international investment banking and brokerage firm.
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Kotak Securities is a corporate member of both the BSE and the NSE. It is also a depository participant with the National Securities Depository Limited (NSDL) for trading and settlement of dematerialized shares.
Services offered:
Stock Broking
Financial Product Distribution
Demat Services
Investment Advisory Services
4) Motilal Oswal Securities Ltd.
Motilal Oswal Securities Ltd (MOSL) is one of the leading equity research and broking houses of India. MOSL has a 20-member research team, which is engaged round the clock in analyzing the Indian economy and corporate sectors to identify equity investment ideas. Asia Money Broker's Poll 2002 has rated MOSL as one of the best Indian broking house, for research, for the second time since 2000.
Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of branches. It has 158 branches all over India.
Services Offered:
Demat Services
Stock Broking
Investment Advisory Service
Financial Product Distribution
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5) Sharekhan: Sharekhan is online stock trading company of SSKI Group, provider of India-based investment banking and corporate finance service. ShareKhan is one of the largest stock broking houses in the country. S.S. Kantilal Ishwarlal Securities Limited (SSKI) has been among India‘s leading broking houses for more than a century.
Sharekhan's equity related services include trade execution on BSE, NSE, Derivatives, commodities, depository services, online trading and investment advice. Trading is available in BSE and NSE. Along with Sharekhan.com website, ShareKhan has around 510 offices (share shops) in 170 cities around the country.
Services Offered:
Demat Services
Stock Broking
Investment Advisory Service
6) Indiabulls: Indiabulls Group is one of India‘s top Business houses with businesses spread over Real Estate, Infrastructure, Financial Services, Securities, Retail, Multiplex and Power sectors. The group companies are listed on important Indian and Overseas markets. Indiabulls group includes Indiabulls Financial Services, Indiabulls Real Estate Ltd and Indiabulls Securities Ltd.
Indiabulls Financial Services is an integrated financial services powerhouse providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance, Asset Management and Advisory services.
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COMPANY PROFILE 2.1 OVERVIEW: The Standard Chartered Group was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa. The Chartered Bank:
Founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853.
Chartered opened its first branches in Mumbai (Bombay), Calcutta and Shanghai in 1858, followed by Hong Kong and Singapore in 1859.
Traditional business was in cotton from Mumbai (Bombay), indigo and tea from Calcutta, rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and silk from Yokohama.
Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871.
In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank's Cyprus Branches. This established a presence in the Gulf.
The Standard Bank
Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced business in Port Elizabeth, South Africa, in January 1863.
Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885.
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Expanded in Southern, Central and Eastern Africa and by 1953 had 600 offices.

In 1965, it merged with the Bank of West Africa expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
Standard Chartered Bank is a British bank headquartered in London with operations in more than seventy countries. It operates a network of over 1,700 branches and outlets (including subsidiaries, associates and joint ventures) and employs 73,000 people. Despite its British base, it has few customers in the United Kingdom and 90% of its profits come from Asia, Africa, and the Middle East. Because the bank's history is entwined with the development of the British Empire its operations lie predominantly in former British colonies, though over the past two decades it has expanded into countries that have historically had little British influence. It aims to provide a safe regulatory bridge between these developing economies. It now focuses on consumer, corporate, and institutional banking, and on the provision of treasury services—areas in which the Group had particular strength and expertise. Standard Chartered is listed on the London Stock Exchange and the Hong Kong Stock Exchange and is a constituent of the FTSE 100 Index. Its largest shareholder is Temasek Holdings
2.2 COMPANY HISTORY: In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. All was going well until 1986, when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom. When the bid was defeated, Standard Chartered entered a period of change. Provisions had to be made against third world debt exposure and loans to corporations and entrepreneurs who could not meet their commitments. Standard Chartered began a series of divestments notably in the United States and South Africa, and also entered into a number of asset sales. From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, the Middle East and Africa using its operations in the United Kingdom and North America to provide customers with a bridge between these markets. Secondly, it would focus on Gururaj B H
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consumer, corporate and institutional banking and on the provision of treasury services - areas in which the Group had particular strength and expertise. At Standard Chartered, success is built on teamwork, partnership and the diversity of our people. At the heart of their values lie diversity and inclusion. They are a fundamental part of their culture, and constitute a long-term priority in them to become the world's best international bank. Today they employ 73,000 people, representing 115 nationalities, and you'll find 61 nationalities among our 500 most senior leaders. We believe this diversity helps to fuel creativity and innovation, supporting the development of exciting new products and services for our customers worldwide. Standard Chartered PLC is listed on both the London Stock Exchange and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies, by market capitalization. Following the acquisition of Korea First Bank, Standard Chartered now employs 38,000 people in 950 locations in more than 50 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas. It serves both Consumer and Wholesale Banking customers. Consumer Banking provides credit cards, personal loans, mortgages, deposit taking and wealth management services to individuals and small to medium sized enterprises. Wholesale Banking provides corporate and institutional clients with services in trade finance, cash management, lending, securities services, foreign exchange, debt capital markets and corporate finance. Standard Chartered is well established in growth markets and aims to be the right partner for its customers. The Bank combines deep local knowledge with global capability. The Bank is trusted across its network for its standard of governance and its commitment to making a difference in the communities in which it operates.
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Table No showing prominent information regarding Standard Chartered:
Type Founded Headquarters Key people
Public 1853 London, England, UK John Peace, Chairman, Peter Sands, Chief Executive
Industry
Banking
Products
Financial Services
Revenue
$16,378 million (2008)
Operating income
$4,568 million (2008)
Net income
$3,511 million (2008)
Employees
73,000 (2008)
Website
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2.3 CURRENT POSITION: Today, the bank is a leading player throughout the developing world. Standard Chartered Bank is one of the three banks issuing banknotes for Hong Kong (Standard Chartered Bank (Hong Kong) Limited became a note-issuing bank from 2004), the other two being the Bank of China (Hong Kong) and The Hongkong and Shanghai Banking Corporation. The bank supports marathons in many cities, including London (The City Run), Jersey, Singapore, Dubai, Lahore, Mumbai, Hong Kong, and Nairobi. Picture No showing global presence of Standard Chartered:
Standard chartered bank has its global presence in all over America, Asia, Africa, Middle East, and Europe. In its unique position as an international bank with strong franchise, Standard Chartered combines an in-depth knowledge of local markets with global product expertise to offer effective financial solutions. The bank capitalizes on its onshore presence across Asia, Africa and the Middle East to offer customers convenient and reliable access to the widest range of currency markets, to date local market information, country-specific global risk management strategies, and customized capital raising and liquidity management solutions.
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2.4 RECENT ALLIANCES AND STRATEGIC ACQUISITIONS: In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank, increasing its presence in private banking and further expanding its operations in India and Pakistan. Standard Chartered retained Grindlays' private banking operations in London and Luxembourg and the subsidiary in Jersey, all of which it integrated into its own private bank. This now serves high net worth customers in Hong Kong, Dubai, and Johannesburg under the name Standard Chartered Grindlays Offshore Financial Services. In India, Standard Chartered integrated most of Grindlays' operations, making Standard Chartered the largest foreign bank in the country, despite Standard Chartered having cut some branches and having reduced the staff from 5500 to 3500 people. On 15th April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since then the bank has rebranded the branches as SC First Bank. Standard Chartered completed the integration of its Bangkok branch and Standard Chartered Nakornthon Bank in October, renaming the new entity Standard Chartered Bank (Thailand). Standard Chartered also formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East, and acquired stakes in ACB Vietnam, Travelex, American Express Bank in Bangladesh and Bohai Bank in China. On 9th August 2006 Standard Chartered announced that it had acquired an 81% shareholding in the Union Bank of Pakistan in a deal ultimately worth $511 million. This deal represented the first acquisition by a foreign firm of a Pakistani bank and the merged bank, Standard Chartered Bank (Pakistan), is now Pakistan's sixth largest bank. On 22 October, 2006 Standard Chartered announced that it has received tenders for more than 51 per cent of the issued share capital of Hsinchu International Bank. On completion of the offer, Standard Chartered will have majority ownership of Hsinchu, Taiwan‘s seventh largest private sector bank by loans and deposits as at 30 June, 2006. In 2006, Standard Chartered, in Bangladesh, announced an alliance with Dutch Bangla Bank Ltd to share their respective ATM operations.
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On 23 August, 2007 Standard Chartered entered into an agreement to buy a 49 percent of an Indian brokerage firm (UTI Securities) for $36 million in cash from Securities Trading Corporation of India Ltd., with the option to raise its stake to 75 percent in 2008 and, if both partners agree, to 100 percent by 2010. UTI Securities offers broking, wealth management and investment banking services across 60 Indian cities. On 29th February 2008, Standard Chartered PLC announced it has received all the required approvals leading to the completion of its acquisition of American Express Bank Ltd (AEB) from the American Express Company (AXP). The total cash consideration for the acquisition is US$ 823 million The acquisition of AEB provides Standard Chartered with an opportunity to add capability, scale and momentum in the strategically important Financial Institutions and Private Banking businesses. It will add 19 more markets to the Standard Chartered footprint, while deepening presence in some core markets and providing access to several new growth markets.
2.5 STANDARD CHARTERED, INDIA: The chartered bank opened its first overseas branch in India at Calcutta on the 12 April 1858. Eight years later the Calcutta agent described the bank‘s credit locally as splendid and its business as flourishing, particularly the substantial turnover in rice bills with the leading Arab firms. When the Chartered bank first established itself in India, Calcutta was the most important commercial city and was the center of the jute and the indigo trades. With the growth of the cotton trade and the opening Suez canal in 1869. Bombay took over from Calcutta remaining an important trading and banking center. Now Standard Chartered is the largest international banking group in India combined balance sheet (as at March 31 2007) Rs 94515.9 cr. having a combined customer base of 2.4 million in retail banking and over 1200 corporate customers. Key business include consumer banking – primarily credit card mortgages personal loans and wealth management trade finance treasury and the custody services. Currently, in its 150th year, the bank continues its passion and commitment in bringing innovative banking solutions for the corporate and the retail customer. The group in India is Gururaj B H
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credited with several industries first and the product innovations. These include issuance of the first global credit card in India and the first photo card. Since the bank was the first to issue a picture card and credit card it was awarded the ISO 9002 certification. Standard Chartered group has 78 branched in India. Standard Chartered Bank is the largest international banking Group in India with 78 branches in 30 cities. The Bank is having a combined customer base of 2.5 million in retail banking and over 1200 corporate customers. The key businesses of Standard Chartered Bank in India include consumer banking - primarily credit cards, mortgages, personal loans and wealth management and - wholesale banking, where the Bank specializes in the provision of cash management, trade, finance, treasury and custody services. Some other product innovations of Standard Chartered Bank in India include the 'Sapnay' credit card, the international debit card that provides free access to over 1500 Visa ATM's, a first in the banking industry, Mileage, an overdraft facility against the security of a car and Smart Credit. The name is derived from Standard & Chartered. Standard Bank of British South Africa merged with Chartered Bank of India, Australia and China in 1969. STANDARD CHARTERED - STCI CAPITAL MARKETS LTD. It is a leading broking company with a pan-India presence and provides a wide range of financial services, including investment banking, Institutional equity & derivative Broking, fixed income, research, retail equity & derivative broking (offline and online), portfolio management, distribution of financial products and depository services. STANDARD CHARTERED WEALTH MANAGERS: Standard Chartered Wealth Managers is the retail division of Standard Chartered – STCI Capital Markets Limited. The unit provides services such as broking, wealth management, MF distribution etc. On 11th January 2008 Standard Chartered Bank (Mauritius) Limited acquired 49% stake of erstwhile UTI Securities Limited from Securities Trading Corporation of India (STCI). Accordingly, the name of the Company was changed from ‗UTI Securities Limited‘ to ‗Standard Chartered – STCI Capital Markets Limited‘ with effect from Jeanery 17th, 2008. Gururaj B H
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Subsequently, on December 12, 2008, SCBM acquired further 25.9 % stake in Standard Chartered – STCI Capital Markets Limited to increase its total stake in Standard Chartered – STCI Capital Markets Limited from 49.0 % to 74.9 %. 2.6 MISSION STATEMENT: ―To emerge as one of the leading providers of stock brokerage, investment banking & related services at par with the best in the world.‖ 2.7 CORE VALUES: The spirit of their identity includes the values that drive each and every one of them. They believe these are the values you desire of your financial partner. The bank‘s values guide the way they work with colleagues, customers, suppliers and other stakeholders. The values – responsive, trustworthy, creative, international and courageous- show them how they can build the culture, which will help them to achieve their business goals, and make Standard chartered a great place to work. The values reflect extensive internal, customer and market research and show how they can all be lead by example to be the right partner.
Responsive: They are unparalleled on their word. They are accessible whenever and whenever the customers need them. Not only do they strive to deliver solutions, they also aim to exceed the expectations.
Trustworthy: They respect the customer‘s time and their life. By understanding the customer‘s needs and tailoring the right financial solutions for them and thereby earn the trust.
Creative: Creative thinkers are not limited by convention. They allow their minds to soar beyond predictable solutions. That‘s how they approach each challenge posed to them, which is why they base their products and services on ideas that are innovative, perspective and instinctive.
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International: They understand the balance between global and the local. The customer trusts them to be established and internationally - networked, while at the same time sensitive to their individual needs. Their strong network across cultures helps them build stronger relationships based on ideas not formulate.
Courageous: The bank represents a commitment to be there for the customers in good times and bad times. They help them achieve their aspirations by guiding them towards the right choice not just the easy one.
The customers: How the bank treats its customers, where they choose to operate, who they provide financial support to and how they respond to customers financial needs all have an impact on their reputation and ultimately their financial success. Understanding and responding to their customer‘s needs is their basic to the way they do business. As social, ethical and environmental issues gain prominence, it is increasingly important that they understand how their customers meet these challenges is to uphold consistent standards of conduct across the world, while still respecting the cultures , local requirements and varying business customs of the individual countries where they operate. Code of conduct: The principles that govern the behavior of their businesses and employees are reflected in a ‗Group Code of Conduct‘. The Group code of conduct is a practical working document that guides employees through the many difficult issues they may run up against in their daily working lives. Complying with each element of the code will not always be easy. But they recognize that they will be judged both on their own Code and on how it is reflected in the day- to -day behavior of everyone who works within the bank. Gururaj B H
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Below there are certain instances of how the Code of Conduct affects the way the bank deals with their customers. The Code of Conduct also affects the way the employees behave and the customer can find out more about the standards SC expect them to meet. Their employees must adhere to the following to the key principles:
Customer Identification: The identity of every customer must be established from reliable identifying documents.
Know Your Customer: Their staff must know enough about details about their customers that can be identified at the time of the transactions are made and documents are submitted so that no inconsistency of the details while verifying is made.
Reporting of suspicions: Suspicions transactions must be reported immediately by the employees without hesitation.
Fair treatment of customers: Financial products and services are increasing sophisticated tools. Selling them calls for knowledge, skills and judgment. For the employees, the basic rules are:
Do not sell an unsuitable product to a customer: That is, a product that does not meet customer‘s needs.
Know enough about the standard chartered products and about the customer (risk, appetite, objectives, finances and personal circumstances) to judge the effect, which the products will have, and whether they will meet his or her needs.
Make every effort to ensure that the customer understands more complex products and their risks, properly.
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Explain product features clearly both face to face and in any marketing literature and software.
Quality of Service: The bank‘s business will only succeed if they offer the highest standards of services to their customers, retaining the loyalty and confidence of existing customers and winning the support of new ones. The bank has set the task of improving all aspects of customers services through our ‗Out serve programmed‘ which was introduced in key markets in 2004 and will be extended to all other markets in 2005. The bank expects excellent customer service to be something they are renowned for. The Out serve programmed includes a range of systems that will allow measuring their performance and target areas for improvement. It will also allow them to respond in a systematic way to independent benchmarking information they used to measure us against their competitors. Corporate Responsibilities: At the Standard Chartered they recognize that their operations have an impact on the economies, communities and on the environment and a responsibility to address this impact. They also recognize that through the business activities they can contribute to substantial development. Standard Chartered’s Approach: The group wants to be ‘the world’s best international bank’ – leading the way in Asia, Africa and the Middle East. They see the corporate responsibility as an opportunity to make the brands stand out. The bank puts an effort making sure that in pursuing our business goals, it identify and address the impacts it has on the stakeholders, look after the people it works with and help the communities it operates in. Over the past year, the bank has revisited these key issues and continued to develop systems and structures to manage them. The group has a strong commitment from the board and in December 2004 established a corporate responsibility committee, drawing on external advisors, executives and the non-executives leaderships to ensure that progress is made towards our Corporate Gururaj B H
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Responsibility aspirations. Communicating with the stakeholders has helped the bank shape its thinking and check thinking and check that it is on the right track. In 2005 the group aimed to have published their first Corporate Responsibility Report.
2.8 ORGANISATION STRUCTURE:
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2.9 FINANCIAL KEY PERFORMANCE INDICATORS: 1. Total Business per employee: Total business is the aggregate of advances and deposits per employee. Table No: Showing Total Business per employee of Standard Chartered, India: Year
Total Business per employee
Percentage change in Total
(Rs in 000’)
Business per employee
2005
81,446
-
2006
85,987
5.54%
2007
82,666
3.86%
2008
92,420
11.17%
Chart No: 2 Bar chart indicating Operating Income of the company over the years:
Total Business per employee (Rs in 000) 94000 92000 90000 88000 86000 84000
Total Business per employee
82000 80000 78000 76000 74000 2005
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2008
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2. Operating Profit: Operating profit is calculated as the sum of the net interest income, net commission income, net trading income, and other operating income, less relevant operating expenses.
Table No: Showing operating profit of Standard Chartered, India: Year
Operating Profit (Rs In
Percentage change in
Millions)
Operating profit
2005
17.2
-
2006
20.9
21.5%
2007
28.4
35.8%
2008
38.9
36.9%
Chart No: 2 Bar chart indicating Operating Income of the company over the years:
Operating Income (Rs in millions) 45 40 35 30 25
Operating Income (Rs in millions)
20 15 10 5 0 2005
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2007
2008
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3. Profit after Tax: Table No: Showing Profit after Tax of Standard Chartered, India: Year
Profit after Tax (Rs In
Percentage change in Profit
millions)
after Tax
2005
11.07
-
2006
14.33
29.44%
2007
13.60
- 5.09%
2008
17.06
25.44%
Chart No: 3 Bar chart indicating Profit after Tax of the company over the years:
Profit after tax (Rs in millions) 18 16 14 12 10
Profit after tax (Rs in millions)
8 6 4 2 0 2005
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2007
2008
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4. Profit per employee: Table No: Showing Profit per employee of Standard Chartered, India: Year
Profit per employee (Rs In
Percentage change in Profit
000)
per employee
2005
1797
-
2006
1879
4.56%
2007
1962
4.42%
2008
2022
3.06%
Chart No: 4 Bar chart indicating Profit per employee of the company over the years:
Profit per employee (Rs in 000') 2050 2000 1950 1900 1850
Profit per employee (Rs in 000')
1800 1750 1700 1650 2005
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2007
2008
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2.10 PRODUCTS & SERVICES OFFERED BY STANDARD CHARTERED WEALTH MANAGERS: The Product offered is broadly divided into two categories: A. Retail Products B. Wholesale Products
A. Retail Products: It is further divided into three categories which are as follows:
1. Online Products: The Company deliver state-of-the-art tools, excellent customer care, affordable pricing and innovative technology, so the customers can follow their own path. The branch‘s products are mainly need based.
Equity: In Standard Chartered Wealth Managers, the customers can place online trades for most of the stocks listed on NSE & BSE. The unit offers powerful ways to place stock orders. The offers also include Delivery based trading where in the customers can place delivery based orders for all stocks listed on NSE & BSE. Intra-day Trading: Execute Margin Orders up to 3 to 4 times your available funds. The same is available for select group of stocks listed on NSE & BSE. Acquire Now Sell Tomorrow (ANST): The customers can sell shares before they receive the same in their Demat account. They can avail of this facility 1st and 2nd day after the buy order date.
Derivatives: Through the trading account, the customers can pursue a wide range of Futures & Options trading strategies with speed and ease. The unit delivers the support,
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information and structure that quickly help them spot potential opportunities and act on them fast.
Mutual Funds: At Standard Chartered Wealth Managers, the customers are offered access to more than 1000 mutual fund schemes from leading fund families. These funds provide broad diversification and cover a range of investment objectives, philosophies, asset classes and risk exposures. Trades may be placed via the Internet, Interactive Voice Response (IVR) phone system or with a broker.
IPO: Initial Public Offer presents excellent opportunities for gaining high returns on the customer‘s investments in a relatively short period of time. The branch has made investing in IPOs hassle free. All that is required by an investor is ―Buying Power‖ and rest is at the click of a button. No paperwork or no queues are involved in the service. The customers can get information on IPO news, forthcoming IPOs and a lot more on the official website of the unit StandardCharteredWealthManagers.com.
Bonds: Fixed income securities can help reduce your risk within an investment portfolio while providing a steady stream of income over time. Currently the branch allows the customers to choose to invest online in GOI Bonds. If the customers are looking to diversify your portfolio, possibly improve your tax efficiency and/or reducing your risk exposure, they may want to consider making fixed income securities part of their personal investment strategy.
2. Distribution: Investors in India were known to have a fairly low risk appetite with majority of the savings, in traditional products such as FDs, PPF, and Postal Saving Schemes. The Gururaj B H
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opening of the financial sector has given way to a host of Asset Management Companies (AMC) to offer world-class products to the Indian consumer. The financial products that are being offered in the markets today provide an opportunity to the investor to participate in the stock markets even with minimal funds.
The Company offers the following products:
IPO: The Company has been an active player in the IPO market helping retail and HNI segment. The company was ranked among the top 10 distributors for IPOs in retail category for the year 2007- 08. It has a wide network of Business Associates spread across the length and breadth of country. A strong and trained talent pool of relationship managers has made the company one of the strongest players in retail segment. (Source: Prime Data base)
Mutual Funds: Mutual funds in the recent years have been very popular with investors, as it provides an opportunity to invest in the stock markets even with minimal funds. Mutual funds have generated above average returns, which makes them an attractive investment proposition. The company is a leading player in the Mutual fund distribution with Tie-ups with all major AMCs.
Fixed Income products: Fixed income products such as GOI (RBI) Bonds, Infrastructure Bonds, NABARD Bonds, and Capital Gain Bonds etc are also a part of our product mix.
3. Three - in - One Account: This is the multi-product offered by the company. The investor by applying for this account not only let‘s to invest in stock market, but also let you open saving account in Standard Chartered Bank It basically comprises of three accounts which are as follows: Gururaj B H
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Trading Account: In this account the investor has to transfer the funds from saving account to this account. The funds transferred in this account are used for buying the securities from the stock market. The investor can instantly transfer the funds online through there User ID.
Demat Account: It is the account in which shares purchased are maintained in digital format. Generally after buying the securities it takes three working days (Transaction day + two working days) for share to appear in the Demat account. Once the delivery has been done the securities purchased will be shown in the Demat account.
Savings Account: The investor gets lifetime zero balance savings accounts by taking this useful 3-in 1 account. This account is opened in standard chartered bank .It provides cheque book, internet banking, debit card etc and other advanced services. This saving account is linked to the trading account.
The documents that are required to open Three-in-one account are: a. Four self–attested copies of PAN card b. Three Photographs of Account holder c. A cheque of Rs. 499 issued against ―Standard Chartered-STCI Capital Markets Ltd.‖ d. Account Holder has to do thirty five signature in opening form of 3-1 account e. Four Copy of address proof which can be passport, voter id, BSNL landline bill, ration card or bank statement.
4. Value Pac: It is beneficial service to investors provided by Standard Chartered –STCI Capital Markets Ltd. By availing the Value Pac service the investors can reduce their Gururaj B H
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brokerage charges. The Investor has option of reducing his brokerage rate by paying advance brokerage to company to avail this service. These advance brokerage option is available in denomination of Rs. 500, 2500, 5000 and 10,000. It depends upon the customer‘s volume of transaction he does. Below is the schedule of upfront fees deposit and Brokerage charges at different denominations. The chart below is the Value Pac chart which shows amount to be paid for advance brokerage and the brokerage charges of different products.
Scheme Details Upfront Fees / Deposit (Rs) Validity Period Amount Reversible A/c opening charges (Rs) Delivery brokerage (%) Intraday Brokerage each side Derivatives / Futures each side Options / Brokerage each leg
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Standard Product
Value Pac 500
Value Pac 2500
Value Pac 5000
Value Pac 10000
0
500
2500
5000
10000
Not applicable
6 months
6 months
6 months
6 months
0
500
2500
5000
10000
499
0
0
0
0
0.5
0.4
0.35
0.25
0.15
0.05
0.04
0.035
0.025
0.015
0.05
0.04
0.035
0.025
0.015
1% of the premium or Rs 100/whichever higher
0.90% of the premium or Rs 90/whichever higher
0.70% of the premium or Rs 70/whichever higher
0.60% of the premium or Rs 60/whichever higher
0.50% of the premium or Rs 50/whichever higher
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Advantages of Value Pac to a customer:
The brokerage rate tends to get reduced.
By paying a brokerage equal to the denomination, the funds are refunded back to customer account.
Disadvantages of Value Pac to a customer:
If the investor is not able to generate brokerage equal to the Value Pac amount, investor will not be refunded the advance brokerage amount after 6 months.
The refunded amount cannot be further used for the advance brokerage.
Customer service and other value added services: a. Online query resolution: With the service of "Quick Mail" tool the investors can resolve all their problems online. b. Digital contract notes and summary of transaction: The customers can view their Digital Contract Note, summary of their transactions using Online "Bills & Accounts" c. My Inbox: This option maintains records of all important notifications related to the customer‘s account. d. Interactive Demo: This is a step-by-step guide to enable the investor to navigate through the process of Investing Online on company website.
Online Trading Platform: The online trading platform offers transactional convenience through linkage of Trading, Demat account and Bank account.
1. Equity Trading - National Stock Exchange and Bombay Stock Exchange: a. Delivery Trading: Gururaj B H
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Includes those transactions where purchase and sale actions result in delivery.
b. Margin Trading: It refers to intraday trading where in the customers take long buy / sell short position in stocks with compulsory square up of the position on the same day.
c. ANST: Acquire Now Sell Tomorrow, is a facility that allows the customers to sell shares against previous purchase made by them, however not yet delivered in their Demat account.
d. The customers can place market as well as limit order.
2. Derivatives Trading: a. Futures: The customers can trade in Index and stock futures on the National Stock Exchange (NSE).
b. Options: Under this, the customers can take up Buy / sell position on index / stock options.
The unit also provides value added services to customers such as: a. Arrangement to take orders for all products after market hours. b. Call and trade on the telephone through the unit‘s customer service executive. c. An access to latest portfolio tracker.
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2.11 SWOT ANALYSIS: Strengths: 1. Strong presence in India, since 150 years. 2. Provides the convenience of online transactions to access information about various accounts and also transfer money. 3. Providing excellent quality advance services at reasonable price. 4. Strong and long sales force. 5. Strong brand name with worldwide presence. 6. Vast variety of services provided.
Weaknesses: 1. Services not catering to the masses. 2. Delay in operations. 3. Unaggressive advertising strategy with modest promotional efforts and expenditure. 4. Very low visibility or brand recall by investors. 5. Less coverage of branch network compared to competitors.
Opportunities: 1. Potential market for products and services in India. 2. Expand the operations by opening branches in small cities and establish its brand name.
Threats: 1. Lack of awareness among investors about the products and services. 2. Existence of strong competitors, especially Indian Private Banks in the industry. 3. Dominance of nationalized banks in India.
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CHAPTER 3: INTRODUCTION 3.1 STOCK EXCHANGES:
The investor wants liquidity for their investments. The securities, which they hold should easily be sold when they need cash. Similarly, there are others who want to invest in new securities. There should be a place where the securities need to be sold and purchased. Stock Exchanges provide a place where securities of different companies can be purchased and sold.
Stock Exchange is a body of persons, whether incorporated or not formed, with a view to help, regulate and control the business of buying and selling securities.
Stock Exchanges are organized and regulated markets for various securities issued by corporate sector and other institutions. The stock Exchanges enable flexible purchase and sale of securities as commodity exchanges allow trading in commodities.
Stock Exchanges are an integral part of nation's economic life. They operate by holding the responsibility of mobilizing savings of small and big investors and allocating them to the business firms and for the entrepreneurs, towards productive investment. The following definitions explain the meaning and scope of Stock exchanges.
Definition: According to the securities contract act, 1956 ―Stock Exchange means any, body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling in securities"
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3.2 SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):
Recommendations of Narasimham committee as well as of other committees and groups pointed out a number of shortcomings in the functioning of stock markets in India, such as long delays, lack of transparency in procedures, vulnerability to price rigging and inside trading. To counter these shortcomings, Securities and Exchange Board of India (SEBI) was initially established as a non-statutory body in April 1988 for 1. Dealing with all matters relating to the development and regulation. 2. Providing investor protection. 3. Advising the government on all these matters.
SEBI was given statutory status by an Act of Parliament on April 4, 1992. SEBI was authorized 1. To regulate all merchant banks on issue activity 2. To lay guidelines, and supervise and regulate the working of mutual funds and 3. To oversee the working of Stock Exchanges in India.
Functions of SEBI:
Under the SEBI Act, SEBI has been assigned the following main functions; 1. Regulating the business in Stock Exchanges and other securities markets. 2. Registering and regulating the working of stock-brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deals, registrars to an issue, merchant bankers, underwriters, portfolio managers, and other intermediaries associated with the securities markets. 3. Registering and regulating of collective investment schemes including mutual funds. 4. Promoting and regulating the working of self-regulatory organizations. 5. Prohibiting fraudulent and unfair trade practices relating to securities market. 6. Promoting investors education and training of intermediaries of Securities market 7. Prohibiting insiders trading in securities 8. Regulating substantial acquisition of shares and takeover of companies. Gururaj B H
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Recent developments in Secondary Market and role of SEBI in regulating the markets:
The century-old Indian capital market is two steps forward and one step back, or vice-versa, but whatever may be the phrase, according to some surveys made recently, it is found that though Indian capital market is firmly on the road to renewed growth, the investor's confidence is totally shattered and the SEBI's reformist's will did not find much favor to investors, in restoring their faith in the capital market. Since 1995-96, SEBI has been showing its reformist will in more than one way. Several measures in conjunction with the stock exchanges were introduced by SEBI, for safeguarding the investor's interests by ensuring better transparency and efficiency of markets. Some notes worthy reforms in the capital market introduced by SEBI are as follows: Electronic trading Demat trading Stock trading Stock watch surveillance system Fast clearance of investigation Levy of heavy penalty of defaulting brokers Buy back of shares by the corporate Compulsory rolling settlement Swadeshi EDGAR (Electronic Data Gathering, Analysis and Retrieval) etc The constitution of SEBI has heralded a new era in the Indian Capital market with its heavy agenda To protect the interest of investors To promote and regulate the securities market by regulating the business in stock exchanges To regulate the working of stock brokers, merchant bankers and other intermediaries To regulate the working of depositories and participants To regulate the working of venture capital funds and mutual funds To prohibit the fraudulent and unfair trade practices To promote invests education and to train intermediaries To prohibit insider trading in securities Gururaj B H
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ďƒ˜ To regulate substantial acquisition of shares and take-over of companies etc.
3.3 NATIONAL STOCK EXCHANGE:
The National Stock Exchange was set up by IDBI and other financial institutions in Bombay in 1993. It was recognized by the Government in the same year and the exchange started wholesale debt market in June 1994 and equity trading in November 1994. The wholesale debt market or the money market segments would cater to banks, FII's etc. to encourage high value transactions in PSU bonds, Units, treasury bills, Govt. securities and call money. There is no trading floor of the exchange. Trading is done on computer with the help of PC terminals in broker's offices. The capital market segment is also similarly on computer based trading. The settlement was earlier on T+5 bases but is changed to T+3 bases from 1st April.
Benefits accrue to both issuers and investors. As this is screen based trading with national network, transparency and cost effectiveness is ensured. Besides, the investment counters can be spread wide in the country under the NSE electronic network.
More than 3000 companies are already listed on NSE. Trading in them is continuing simultaneously with those in the principal and regional stock exchanges. NSE became the first exchange to grant approval to its members for providing internet based trading services. Internet trading is possible on both the Equities as well as the Derivatives segments of NSE.
Characteristics: The characteristics of national market system are as follows: 1) Completely automated system in terms of both trading and settlement procedures to be provided through the Securities Facilities Support Corporation. 2) Compulsory market makers to provide liquidity and ready market. 3) The members would be as large as 1000 and corporate and institutional members would also be there, drawn from various parts of the country and to represent the professionals on all India basis. Gururaj B H
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4) Only medium sized companies and PSUs are expected to be listed on this exchange and it will complement the existing exchanges. 5) The NSE would have a separate trading facility and time allotted for debt instruments in order to have beneficial effect of creating on active secondary market in debt instruments. 6) National clearing and settlement system for making settlement on national basis. 7) The central depository trusts to keep physical custody of shares and to usher in scrip less trading system. 8) The securities facilities support corporation for providing supporting infrastructure facilities
Objectives: The objectives of the NMS are as follows: 1. To help the privatization of public sector units through listing of their shares on this exchanges. 2. To spread the investment habit and cult the savers in the rural and semi-urban areas as well. 3. To professionalize the members with a view to improve the investor services. 4. To create more employment opportunities in the service sector within the orbit of capital market.
NSE set-up:
The National Stock Exchange has set up facilities, which serve as a model for the securities industry in terms of trading systems, practice4s and procedures. NSE is different from most stock exchanges in India where membership on a exchange also meant ownership of the exchange. The ownership and the management of the Exchange is completely separated from the right to trade. The Exchange is managed by a Board of Directors. The Board to an Executive Committee, which includes representatives from the Trading Members, the public and the management, delegates decisions relating to market operations. Besides, the Exchange operates various committees to advise it on areas such as good market practices, settlement procedures, risk containment systems etc. Industry professionals, Trading Members and Exchange staff, man Gururaj B H
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these committees. The day-to-day management of the Exchange is delegated to the managing director who is supported by a team of professional staff.
Trading system on NSE:
The NSE provides a facility for screen based trading with order matching facility. The members are connected from their respective officers at dispersed location to the main system at the NSE premises through a high efficient satellite telecommunication network.
The trading system is an order driven, automated order matching system, which does not reveal that identity of parties to an order or a trade. This helps orders whether large or small to be placed without the members being disadvantaged by disclosure of their identity. The computer keeping the system transparent, objective and fair matches orders automatically. Where an order does not find a match it reminds in the system is displayed to the whole market, till a fresh order, which matches, comes in or the earlier order is cancelled or modifies.
The trading system provides tremendous flexibility to the users in terms of the type of order that can be placed on the system. Several time related, price related or volume related conditions could easily be placed an order. That trading system also provides complete online market information through various inquiry facilities.
The process of buying or selling: As the client comes for the NSE information, he can see the various quotations of the scrip‘s of various companies on the computer screen. If the interested company is not in the screen then, a click is given on the snap quote option then it will ask for code of the security, if the code is entered then it will be displayed on the screen. A part from this the client can know the opening of share market, the intraday high and low of the market. If we want to buy a security an order or a trade helps him.
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Order entry mechanism enables the trading member to place order in the market. The system will request reconfirmation of order so that the user is cautioned before the order is finally released into the market. Order once placed on the system can be modified or cancelled till they are matched. Once orders are matched they cannot be modified or cancelled.
There is a facility to generate online order confirmation slips as soon as an order is placed or a trading is done. The order confirmation slip contain among other things, order member, security name, price, quantity, order condition or disclosed or minimum fill quantity etc. the trade confirmation slip contains the order and trade number, date, trade time, price and quantity traded, amount etc. Orders and trades are identified and linked by unique numbers so that the investors can check his order and trade details.
Clearing and Settlement:
Transaction Cycle
Picture No showing the transaction cycle at NSE: Placing Order
Trade Execution
Clearing of Trades
Transaction Cycle
Decision to Trade
Funds/
Settlement of
Securities
Trades
From 1st April 2002 the settlement period has changed from T+5 to T+3 that is if the shares are traded on Monday the settlement will be after 3 working day generally if there is no holiday the settlement will be on Thursday evening. A broker has to deliver all his pay in and pay out on Thursday evening. The broker has to pay only the difference of amount that if he makes the Gururaj B H
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purchases of worth 1 crore of rupee and sales 1 .5 crore rupee. He is entitled to receive Rs.50 lakh from the exchange. And he will be getting them within the 48 hr after the settlement.
National securities clearing corporation limited (NSCCL), A wholly owned subsidiary of NSE, was incorporated in August 1995 and commenced clearing operation in April 1996. It has been set up with a philosophy to sustain confidence in clearing and settlement of security; promoting and maintaining, short and consistent settlement cycle, to provide counter party risk guarantee, and to operate a tight risk containment system. If assumes the counter party risk of each member and guarantees financial settlement. It has successfully brought about an up gradation of clearing and settlement procedure and has brought Indian financial market in line with international market.
NSCCL carries out the clearing and settlement of the date executed in the equities and derivatives segments and operates Subsidiary General Ledger (SGL) for settlement of trades in Government securities. It also undertakes settlement of transaction on other stock exchanges like, the Over the Counter Exchange of India.
NSCCL assumes that the counter party risk of each member and guarantees settlement through a fine tuned risk management system and an innovative method of online position monitoring. It operates a well-defined settlement cycle and there are no deviations or postponement from this cycle. It aggregates trade over a trading period, nets the position to determine liability of members and ensures movement of funds and securities to meet respective liability. It provides a facility for multiple settlement mechanism including, account period settlement, for dealing in physical securities and dematerialized security, rolling settlement (T+3 bases) in dematerialized segment etc.
NSCCL has empanelled 9 clearing bank to provide banking service to trading members and has established connectivity with both the depository for electronic Settlement of securities.
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3.4 ONLINE TRADING:
The National Stock Market system provides single, nation wide securities. It enables LAN investors in one part of the country to trade at the best quotes with an investor located in any other part of the country through the members of the stock exchange and subsequently clears and settle the trade in an efficient and cost effective manner. The primary objective of the Stock Market is to provide clear opportunity to the investors throughout the country to trade any security irrespective of the size of the order or the broker through whom the order is routed. This provides the facility to execute the buy order at the lowest price in the stock market located anywhere in the country without any extra cost to the investors.
There will be no trading floor in the exchange. Instead, each trading member will have a computer at his own office anywhere in India which will be connected to the central computer system at the NSE through leased line or VSATs (very small aperture terminals), for an interim transition period of 6 months & subsequently by satellite link. VSATs are relatively smaller dishes similar to dish antenna for cable TV & have the benefit of not being very expensive. A satellite network makes it possible to connect almost all the parts of the nation quickly as it is easy to install, as against the ground lines such as dial up modems leased lines, which are prone to disruptions, satellite links, on the other hands ensure high speed, availability and quality of the connection. This mode of trading is known as "Online Trading"
Objectives of Present Trading System:
Reduce and eliminate operational inefficiencies inherent in manual systems
Increased trading capacity in Stock Market
Improve market transparency, eliminate unmatched trades and delayed reporting
Provide for on-line and off-line monitoring, control and surveillance of the market.
Promote fairness and speedy matching
Smooth market operations using technology while retaining the flexibility of conventional treading practices
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Set up various limits, rules and controls centrally
Consolidate the trades data on electronic media to interface will the broker‘s back office system
Provide public information on scrip prices, indices for all users of the system
Provide analytical data for use of Stock Market.
Mechanism:
The broker of stock trading gets the membership at the stock exchange after fulfilling a set of conditions. The broker is connected online with the stock exchange. On the system he constantly gets the real quotes in the market, their position, the demand and supply rates, number of buyers and sellers at various rates.
The customer drops in the office of the broker or gives him a call regarding sale or purchase of particular number shares. The broker takes his order and inputs that in his online system. If a proper match regarding that price is available in that market i.e. if both the buy and sale rates match, then it implies that the deal in stuck. If the suitable match is not found, the order gets stacked in the system till a suitable counter order emerges and the transaction is closed at the point of time. The members can easily exercise the various options available to them on a trading floor and when entering the order can place limit on either the number or the higher order and accordingly the order would be matched at the best price available. The member would also have the facility of canceling all outstanding orders in one stroke if deemed necessary or he may choose the entire order to be carried out as one deal or in smaller lots. The identity of the trading members entering orders in the system will be protected and will have direct participation by the large player also without the fear of their order influencing the state of the market.
There will be a book entry transfer system for securities, which will operate just like passbook system in a bank. Accounts will be maintained against each member, detailing the securities held in trading member's name. At the end of each trading day the exchange computer will generate a report of matched trades on each trading member, which in turn would be received by each Gururaj B H
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trading member and the money refundable /deliverable to the clearing agency. In order to expedite the settlement process, a depository is being established where securities, as and when sold and delivered to the clearing system, would be transferred. Whenever the investor wishes to take the physical possession of the security for some reason, physical withdrawal of the security from the depository will be permitted. Thus, through this system the trade transaction have shown a tremendous increase both in value and volume. The investors get the desired and the best rates, as the markets are more transparent and convenient to trade.
Procedure for dealing at Stock Exchanges: Trading on a Stock Exchange is officially done in the trading ring for a few hours from 9.30 am to 3.30 PM Trading before or after official hour is called curb trading. In trading ring space is provided for specified and non-specified sections the members of their authorized assistants have to wear a badge or carry with them identity cards given by the Exchange to enter the Trading ring. They carry a Souda block book or confirmation memos duly authorized by the Exchange and carry a pen will them. The stock exchange 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:
The buying and selling at stock exchange is not allowed to outsiders. They have to approach brokers who are members of the exchange and the dealings can only be through them. The following procedure is followed for dealings at exchanges:
A. Election of Broker: The first thing to be done is to select a broker through whom the purchase or sale is to be made. The intending investor or seller may approach his bank for the purchase. The banks can appoint their own brokers at exchanges and they contact for dealings on behalf of their customers. On a recommendation from eh bank the broker opens the client's account. The bank assures about the financial condition of the client.
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B. Placing an order: After selecting the broker the client places an order for purchase or sale of securities. The broker also guides the client about the type of securities to be purchased and the proper time for it. If a client is to sell the securities then the broker tells him about the favorable time for sale. The broker is told to purchase shares, their number and price to be paid. Sometimes a definite price is given on which the purchase is to be made, sometimes the tentative price is told, sometimes the minimum price to be paid, is told etc, the broker will try to make purchase as far as possible to the nearest price offered by the client. The broker is giving some choice of bargaining. The same type of choice is given to the broker for selling the securities.
C. Making the contact: The trading floor of the stock exchange is divided into different parts known as trading posts. Different posts deal in different types of securities. The authorized clerk of the broker goes to the concerned post and expresses his intention to buy and sell the securities. A deal is struck when the other party also agrees. The bargain struck by outcry mentioning the price and number of securities contracted by both the clerks. Both the parities in their notebooks note the bargain. The slop giving brief details of the bargain is put in a box for making announcement in the official price list for publicity.
D. Contract note: The buying and selling brokers prepare notes after their mutual consent next day. The seller is sent the selling note and the buyer is sent the buying note. The details of securities traded are given, mentioning their number, price, etc.
E. Settlement: The settlement is made and means of delivering the share certificate along with the transfer deed. The transferor duly signs the transfer deed i.e. in the seller. It bears the stamp of the selling broker. The buyer then fills up the particulars in the transfer deed. The spot dealing are settled there is full. The selling broker hands over the transfer form an share certificate to Gururaj B H
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the buying broker after receiving the price. The settlement for ready delivery and forward contracts is done with a different procedure.
Settlement of ready delivery contracts: The settlement in different stock exchanges is done between 3 to 7 days of the transaction. If giving actual delivery of securities on receiving the price does the settlement it is called liquidation in full. In another method the dealings are squared by the adjusting price difference only.
Settlement of forward delivery contracts: The forward delivery contracts are done for speculative purposes. Only the active and broad market securities are traded in forward contracts. The settlement of forward contracts can be done in any of the three ways:
a. Liquidation in full: The securities are delivered and payment is received or vice-versa after crossing all intermediate purchases and sales.
b. Liquidation by payment of differences: The purchases and sales are offset at the ruling price by paying or receiving the difference amount. The securities are not delivered but only the difference of prices contracted and current prices are received or paid as the case may be.
c. Carry over to the next settlement: When the buyer does not want to settle the contract but wants to carry it to a future data then it is called carry over. The buyer will have to pay certain amount to the seller for this concession and the amount paid is known as Badla or Contango charge.
Different methods of settlement: At present, any one of the following methods can make the settlement: Gururaj B H
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
Spot settlement: Under this method, the delivery of securities and payment for them are affected on the date of the contract itself or on the next working day.
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Weekly settlement: Under this method, the delivery of securities and payments for them are settled within a time span of 7-14 days.
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Rolling settlement: Each settlement being and conclude on the same day i.e. on daily basis, the trading is Trading day (T) + 5 i.e. Monday is the trading day next Monday Pay-in date. In case of non-delivery the securities will go for auction.
Clearing House: The exchange has set-up a clearing house to collect eh Securities from all the members and distributor to each member, all the Securities that are due to him in respect of every settlement. The whole of the operations of the clearinghouse is now computerized.
Thus, trading o the Stock Exchange was officially done in the trading ring for a few hours from 9.55 am to 3.30 p.m .But now the opening bell will ring an hour earlier for Indian bourses. Trading will start at 9 am instead of the present 9.55 p.m the change in timing has become necessary as the settlement cycle will be further shortened to T+1. This means pay-in of shares and funds will take place the next day after trade. Since the back-office work of the brokering houses and clearing corporation will have to start early, to deal with the early settlement of trades, trading will also have to end earlier. The change I timing is needed to enable the exchanges to calculate the margin of each trading member and collect eh upfront margins on the value-at-risk (Vary) basis.
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3.5 RECENT DEVELOPMENTS:
The current recession in the economy is affecting the stock market which has triggered a slowdown in the opening of new account by the depository participants (DPs). Faced with the sudden dip in the number of new accounts being opened, the DPs are devising ways to attracts customers. On offer is Interactive Voice Response (IVR) for the latest update on Demat accounts and services through the Internet. There is a 42% decline in the number of new account opening. Perhaps the volatility in the market has made investors worry. Analysts said there was booms in Demat account opening as retail customers were riding high on the loans extended to pick up initial public offers. Most of these Demat accounts are now dormant.
Several DPs are planning to launch Interactive Voice Response (IVR) units and Demat services on the Net, Through these IVR units , investor will be able to know the current value of their portfolio, current holdings, transaction list, etc.
Some DPs are providing Demat services on the internet to enable customer to access their account and get the holding and transaction statement on a daily basis. For eg: HDFC Bank.
3.6 INDIAN STOCK MARKET OVERVIEW:
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In addition, there are 24 Regional Stock Exchanges. However, the BSE and NSE Have established themselves as the two leading exchanges and account for about 80 percent of the equity volume traded in India.
The NSE and BSE are almost equal in size in terms of daily traded volume. The average daily turnover at the exchange has increased from Rs 1051 crore in 1999 - 2000 to Rs.3,273 crore in 2005 - 2006 and further to 4000 crore. NSE has around 1600 shares listed with a total market capitalization of around Rs 9,21,500 crore. The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9,68,000 crore. Most key stocks are traded on both the Gururaj B H
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exchanges and hence the investor could buy them on either exchange. Now both the exchange has same settlement cycle, which does not allow investors to shift their positions on the bourses. The primary index of BSE is BSE Sensex comprising 30 stocks.
The BSE Sensex is the older and more widely followed index. Both these indices are calculated on the basis of market capitalization and contain the heavily traded shares from key sectors. The timing of trading hours starts from 9.55 am to 3.30 pm. The markets are closed on Saturdays and Sundays.
The key regulator governing Stock Exchanges, Brokers, Depositories participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board Of India (SEBI) Ltd. The Indian stock market has the potential of becoming one of the most active in the world primarily on account of its retail investor base, listed and traded companies, if the efficient and inexpensive infrastructure is made available. India ranked top 10 countries in term of the market capitalization of its stock market.
If investor decides to operate through an exchange, he has to avail the services of a SEBI registered broker / sub-broker. He has to enter into a broker-client agreement and file a client registration form. Since the contract note is a legally enforceable document, the investor should insist on receiving it. He has the obligation to deliver the shares in case of sale or pay the money in case of purchase within the time prescribed. If the investor has opted for transaction in physical mode, in case of bad delivery of securities by him, he has the responsibility to rectify them or replace them with good ones.
For securities in Physical mode, to affect a transfer in the physical mode the securities should be sent to the company along with a valid, duly executed and stamped transfer deed duly signed by or on behalf of the transferor (seller) and transferee (buyer). It would be a decisive to retain photo-copies of the securities and the transfer deed when they are sent to the company for transfer. It is essential that the investor sends them by registered post with acknowledgement Gururaj B H
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due and watches out for the receipt of the acknowledgement card. If he does not receive the confirmation of receipt within a reasonable period, he should immediately approach the postal authorities for confirmation. Sometimes, for the investor‘s own convenience, he may choose not to transfer the securities immediately. This may facilitate easy and quick selling of the securities. In that case the investor should take care that the transfer deed remains valid. However, in order to avail the corporate benefits like the dividends, bonus or rights from the company, it is essential that the investor gets the securities transferred in his name. On receipt of the investor‘s request for transfer, the company proceeds to transfer the securities as per provisions of the law. In case they cannot affect the transfer, the company returns back the securities giving details of the grounds under which the transfer could not be affected. This is known as ‗Company Objection‘.
When the investor receives a company objection for transfer, he should proceed to get the errors / discrepancies corrected. The investor might have to contact the transferor (the seller) either directly or through your broker for rectification or replacement with good securities. Then he can resubmit the securities and the transfer deed to the company for affecting the transfer. In case the investor is unable to get the errors rectified or get them replaced, he has recourse to the seller and his broker through the stock exchange to get back the refund of money. However, if he has transacted directly with the seller originally, he has to settle the matter with the seller directly. Sometimes, the investor‘s securities in physical form may be lost or misplaced. He should immediately request the company to record a stop transfer of the securities and simultaneously apply for issue of duplicate securities. For effecting stop transfer, the company may require from investor to produce a court order or the copy of the FIR filed by him with the Police. Further, to issue duplicate securities to him, the company may require you to submit indemnity bonds, affidavit, sureties etc. besides issue of a public notice. The investor has to comply with these requirements in order to protect his own interest.
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For securities in Demat mode: For transactions in Demat mode the investor is requested to refer to the trading / settlement in depositories section. There will be occasions when the investor has a grievance against the company in which he is a stake-holder. It may be that if he has opted for shares in physical mode, and if he has not received the share certificates on allotment or on transfer; it may be that he did not receive the dividend / interest warrant or refund order; or perhaps did not receive the annual accounts etc. while he would first approach the concerned company, Mutual Fund or Depository Participant (DP), as the case may be, the investor may or not be satisfied with the company‘s response thereto.
3.7 DEPOSITORY SYSTEM IN INDIA:
The Indian capital market witnessed an explosive growth between mid eighties and mid nineties. The total number of companies listed in the stock exchanges had grown by 72.3% from 2729 in 4702 in 1995. The market capitalization of the companies listed with stock exchanges had gone up from Rs.21, 000 crores in 1985 to more than Rs.4, 50,000 crores in 1995.The secondary market trading activity also gathered momentum. There has been tremendous growth in secondary market trading at BSE and NSE. Other regional exchanges like Calcutta, New Delhi have also become active players in the market. This sudden growth had exposed the limitations of the system. The system used was not able to withstand the strain caused by the tremendous growth in the securities market.
The entire securities market started experiencing a gridlock, posing obstacles in its growth. Moreover, this sudden growth has also magnified the risks that have always been plaguing the Indian system, viz., credit risk and systematic risk. International institutional investors wanting to invest in India had become apprehensive about the reliability of the trade settlement mechanisms used in the country, which did not match international standards.
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or brokers. They suffered due to lost trading days (liquidity), lost scrips improperly paid dividends, mistaken registration, unnecessary financing cost, inappropriate risk like failure of counter party and fraud.
Era of Scripless and Paperless trading: To sort out the above mentioned problems and to restore the investor‘s confidence in the stock market the depository system was set up. It was against this background that the Government of India enacted the Depositories Act in 1996, which ushered an era of scrip less trading and settlement, efficient market infrastructure, investor protection, reduced risks and transparency of transaction in the securities market.‘
Depository Act, 1996: The concept of Depository is known to the world since 1949 when the first depository was set up in Germany. There were 112 depositories in operation by the year 2001. Every depository operates under a country‘s specific law and regulation in order to ensure safety, liquidity, rights and liabilities to the security holders.
Depository: A depository is an organization where the securities of an investor are held in electronic form. A depository can be compared to a bank. To avail of the services of a depository, an investor has to open an account with the depository through a depository participant, just as he opens an account with the bank. Holding shares in the account is a kin to holding money in the bank
Depository participant: A depository participant is an agent appointed by the depository and is authorized to offer depository services to all investors. An investor cannot directly open a Demat account with the depository. An investor has to open his account through a DP only. The DP in turn opens the account with the depository. The DP in turn takes up the responsibility of maintaining the account and updating them as per the instructions given by the investor from time to time. The
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DP generates and provides the holdings statement from time to time as required by the investor. Thus, the DP is basically the interface between the investor and the depository.
The person who holds a Demat account is a beneficiary owner. In case of a joint account, the account holders will be beneficiary holders of that joint account.
The Demat account number of the beneficiary holder(s) is known as the BO Id.
A DP id is the number of the depository participant allotted by the depository.
Depository Participants in India: At present, India has only two depositories-National Securities Depository Ltd. (NSDL) and Central Depository Services Ltd (CDSL).
NSDL is the first depository in the county, which is promoted by three major financial institutions - Unit Trust of India, Industrial development Bank of India and National Stock Exchange of India Limited. The second depository of the country (CSDL) is set up in 1999 by the Mumbai Stock Exchange and Bank of India
However, most of the services offered by both these depositories are similar. Today almost all the companies listed in dematerialized from with NSDL are available with CDSL.
Functions of Depository: In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank account. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates. The depository system also allows distribution of dividends through the RBI‘s ECS system, whenever the participating company has agreed to such services. Other entitlements such as bonuses, split-ups are also directly effected by the depository into the investor‘s account. The following can be held in the depository (electronic) form: Gururaj B H
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Shares (listed or unlisted) Stocks Bonds Debentures RBI Relief Bonds Government Securities (through a primary Dealer) Units of Mutual Funds Commercial Paper Money Market Instruments
Benefits of Depository system: In the depository system, the ownership and transfer of securities takes place by means of electronic book entries, which are facilitated by executing the ‗Demat request slip‘ which is similar to a cheque leaf or through direct instruction system on the internet. The following are some of the benefits of depository system.
Elimination of bad deliveries
Elimination of all risks associated with physical certificates
No stamp duty
Immediate transfer and registration of securities
Faster settlement cycle
Faster disbursement of non-cash corporate benefits like rights, bonus etc.
Reduction in brokerages by many brokers for trading in dematerialized securities.
Reduction in handling of huge volumes of paper.
Periodic status reports.
Elimination of problems related to change of address of investor, transmission etc.
Elimination of problems related to selling securities on behalf of a minor
Ease in portfolio monitoring.
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Opening a Depository Participant account: Individuals, companies, Trusts, Partnership firms, NRIs, HUF, Banks and Institutions are allowed to open a depository account with any depository through a depository participant. The investor would need to execute a standard form giving all his details, bank details, instruction details, nomination details and off-course photograph and signature. Along with this form, the investor would also have sign an agreement with the depository participant which usually forms a standard part of the account opening process. The details on the form have to be matched with a photocopy of the investor‘s passport, driving license etc. to certify the mentioned details. If the investor is an NRI, then the client will have to provide overseas address, provide copy of RBI Approval, if any. The RBI Approval is not mandatory for opening of a DP. Account but is required to receive shares into the account when purchased through the secondary market.
3.8 DEMATERIALIZATION AND REMATERIALIZATION (DEMAT and REMAT):
Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in its account with the DP. Securities held in dematerialized form are fungible, i.e. they do not bear any different features.
An investor who intends to dematerialize his securities must have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialization. If the Issuer or R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL authorizes credits to the relevant client account with the DP.
Features: A. Holdings in only those securities that are admitted for dematerialization by NSDL can be dematerialized. Gururaj B H
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B. Structure of holding in the securities should match with the account structure of the depository account. C. If the same set of joint holders held securities in different sequence of names, these joint holders by using ' Transposition cum Demat facility' can dematerialize the securities in the same account even though share certificates are in different sequence of names. E.g. If there are two share certificates one in the name of X first and Y second and another in the name of Y first and X second, then these shares can be dematerialized in the depository account which is in any name combination of X and Y i.e., either X first and Y second or Y first and X second. Separate accounts need not be opened to demat each share certificate. If shares are in the name combinations of X and Y, it cannot be dematerialized into the account of either X or Y alone.
Only those holdings that are registered in the name of the account holder can be dematerialized. Transfer cum Demat scheme for some companies, which have provided for additional risk containment systems.
Demat requests received from client (registered owner) with name not matching exactly with the name appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, can be processed, provided the signature of the client on the Dematerialization Request Form (DRF) tallies with the specimen signature available with the Issuers or its R & T agent. A client may, in the normal course, receive Demat confirmation in about 30 days from the date of submission of Demat request to the DP.
Procedure: The client will submit a request to the DP in the Dematerialization Request Form for dematerialization, along with the certificates of securities to be dematerialized. Before submission, the client has to deface the certificates by writing "Surrendered for Dematerialization".
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The DP will verify that the form is duly filled in and the number of certificates, number of securities and the security type (equity, debenture etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgement slip duly signed and stamped, to the client. The DP will scrutinize the form and the certificates. This scrutiny involves the following:
Verification of Client's signature on the dematerialization request with the specimen signature (the signature on the account opening form). If the signature differs, the DP should ensure the identity of the client.
Compare the names on DRF and certificates with the client account.
Paid up status.
ISIN (International Securities Identification Number)
Lock - in status.
Distinctive numbers
In case the securities are not in order they are returned to the client and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case:
A single DRF is used to dematerialize securities of more than one company.
The certificates are mutilated, or they are defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof.
Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities.
Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF.
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The DP will verify the nature of the security, its paripassu status with reference to the list of ISIN codes available with it. The allotment of ISIN must be verified at a second level. Wrong allocation may result in avoidable losses to the clients. The ISIN is entered in the space provided for it in the dematerialization request form.
The DRN so generated is entered in the space provided for the purpose in the dematerialization request form. A person other than the person who entered the data is expected to verify details recorded for the DRN. The request is then released by the DP which is forwarded electronically to DM (DM - Depository Module, NSDL's software system) by DPM. The DM forwards the request to the Issuer or R&T agent electronically. The DP will fill the relevant portion viz., the authorization portion of the Demat request form. The DP will punch the certificates on the company name so that it does not destroy any material information on the certificate. The DP will then dispatch the certificates along with the request form and a covering letter to the Issuer or R&T agent. The Issue or R&T agent confirms acceptance of the request for dematerialization in his system DPM (SHR) and the same will be forwarded to the DM, if the request is found in order. The DM will electronically authorize the creation of appropriate credit balances in the client's account. The DPM will credit the client's account automatically. The DP must inform the client of the changes in the client's account following the confirmation of the request.
The issuer or R&T may reject dematerialization request in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialization request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.
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SEBI Guidelines for Dematerialization of shares sent for Transfer by the investors:
Steps for Investors: Investors shall send shares of the company for transferring to their name. If the issuer is offering transfer - cum - Demat facility, Investor will receive an option letter to dematerialize such shares. Investors exercising the option of dematerializing the shares shall submit the following documents to the DP: Dematerialization Request Form (DRF) Original option letter received from the issuer or its registrar and Transfer Agent.
Steps for DP’s:
The words ―as mentioned in the letter have already been‖ shall be inserted in place of the words ―are here by ―on the client portion of the Dematerialization Request Form (DRF) by the DP.
The DP shall add the words ―an option letter in respect of‖ after the words ―we here by acknowledge the receipt of‖ in the acknowledgement portion of the DRF and return the counterfoil of the DRF to the investor duly signed and stamped.
The DP shall add the words ―option letter in respect of‖ after the words ―the application form is verified with the‖ and replace the words ―option letter‖ in place of the word ―certificates‖ on the Participant Authorization portion of the DRF.
The DP shall affix its seal and signature on the original option letter.
The DP shall execute the request for dematerialization in the Depository Participant Module (DPM).
The DP shall maintain records indicating the names of beneficial owners of the securities surrendered, the numbers of securities and other details of the certificate of securities sent for dematerialization.
The DP shall dispatch the DRF along with the original option letter to the issuer or its Registrar and Transfer Agent and keep a copy here of for its records.
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Effect on off-line Trading business: With the emergence of e-broking, which offers many benefits like, level playing filled to all investors, comfort of the house, simplicity, low brokerage and value added services it could be possible for some of the offline trade to shift to online trade. The proportion of online broking business compare to off line broking is miniscule about less than 1%. The offline player would not be affected unless the figure reaches a minimum of 8-10%. More importantly on line broking is said to have brought in a whole new segment of investors. These are the hidden investors who did not have a dedicated broker.
Online trade has not started to eat the volumes of, off line business till now. But at the same time it has created new set of clients for e.g., NRI‘s who were not very active in the market due to lack of transparency and information, have moved to use this facility. Housewives are another new category. Net savvy student‘s and retired persons are the next expected category. But those who get value added services from broker will continue to stay offline and those that are like any other normal retail investors, will have no hesitation to shift to online trading. The fact is that over a few years we would see more non-professionals getting to access to the market. E-broking has eaten the share of offline broking business especially into the sub broking where the same investors used to go and get whatever services he provided at rate since they would no longer be taken for a right, online trading is transparent.
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RESEARCH DESIGN 4.1 INTRODUCTION: The commencement of E-Trading and Demat has transformed the capital market in India. With the help of Demat and Trading account, buying and selling of shares has become a much faster and even process than trading with the assistance of a physical broker. It provides for the assimilation of bank, broker, stock exchange and depository participants. This helps to get rid of the painstaking procedure of investing in stock exchange. Today, if one wants to invest in stock market, he has to contact a broker on phone or meet him personally to place order. Despite the advantages of Dematerialization, the awareness levels among the investors relating to Demat account is not adequate because of numerous reasons. The investors are not sufficiently responsive of the concept of Demat account and the various financial institutions providing such services. 4.2 PROBLEM STATEMENT: This study involves understanding the various concepts of Demat and analyzing the investment pattern of individuals in India and a study on ―Analysis of awareness among investors regarding On Line Trading and Dematerialization 4.3 TITLE OF THE PROJECT: ―Analysis of awareness among investors regarding On Line Trading and Dematerialization‖ 4.4 OBJECTIVES OF THE STUDY:
To study present online share trading.
To find the awareness of Demat account among employed investors.
To find out the point of view of investors regarding the services provided by the DP.
To discover the investment portfolio that the investors are looking forward to devote into.
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To study the progress, performance, grievances and to suggest the remedial measures.
4.5 SCOPE OF THE STUDY:
Analyze the awareness level for online share trading / Demat.
Analyze the investment pattern of individuals.
Examined the peer group companies proving Demat services - Industry analysis
4.6 RESEARCH METHODOLOGY: 1. Sources of data: Primary data: The required data was collected by way of distribution of questionnaires to investors at random and by way of telephonic interviews and online distribution of questionnaire. 2. Research method:
3. Sampling plan: Sampling Technique: The sampling technique used in the study is Non-probability sampling, under which judgment sampling was used. Sample Unit: Sample unit constitutes an investor who is employed and residing in Bangalore. Sample size: A sample size of fifty employed investors has been selected for the study out of the population of all the investors in Bangalore. Sampling interval: The period in which the study was conducted was from July - August, 2009. Gururaj B H
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4. Contact method: Personal interviews, telephonic interviews and online interviews were conducted in order to collect the information. 5. Data Collection method: Questionnaires were distributed physically and online. 4.7 LIMITATIONS OF THE STUDY:
The study is done with time and resource constraints.
The study involves only 50 employed investors chosen at random which may not be the true representative of the population. Hence cannot be generalized.
The data collected pertains to the sample behavior as on July - August, 2009 which may not be consistent with time.
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5.1 DATA ANALYSIS AND INTERPRETATION Table No: 1 Table showing demographic classification of investors: Attributes
No. of Persons
Percentage
Male
29
58
Female
21
42
Chart No: 1 Percentage classification of demographic characteristic of the samples:
42% Male Female 58%
Interpretation: Out of the total sample size of 50 investors, 58% were male and 42% constituted female investors.
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Table No: 2 Table showing demographic classification of investors: Age Group
No of persons
Percentage of number of persons
20 - 25 25 - 30 30 - 35 35 - 40 40 - 45 45 - 50 50 - 55 55 - 60
16 14 4 2 2 4 5 3
32 28 8 4 4 8 10 6
Chart No: 2 Percentage classification of demographic characteristic (age group) of the samples:
Agewise classification of investors 18 16 14 12 10 Agewise classification of investors
8 6 4 2 0 20 - 25 25 - 30 30 - 35 35 - 40 40 - 45 45 - 50 50 - 55 55 - 60
Interpretation: The survey shows that majority of employed professional investors are in between the age group of 20 to 25 and 25 to 30. Gururaj B H
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Table No: 3 Table showing nature of occupation of the investors: Attributes
No. of Persons
Percentage
Salaried
47
94
Self Employed
3
6
Chart No: 3 Percentage classification of nature of occupation
6%
Salaried Self Employed
94%
Interpretation: The study was conducted only on investors who are employed in the light of findings made from analysis made during a promotional event at Lido Mall, Bangalore. The analysis made showed that more than 90% of those who are interested in online trading are employed. Among the employed sample, 94% of the individuals are salaried and the rest (6%) are self employed.
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Table No: 4 Job descriptions of the investors: Attributes Managerial Executive Professional Others
No. of Persons
Percentage
18 4 23 5
36 8 46 10
Chart No: 4 Percentage classification of nature of occupation:
10% 36%
Managerial
Executive Professional Others
46% 8%
Interpretation: The study shows that, out of the sample, 46% are employed in professional occupation, 36% in managerial occupation, 8% at the executive level and the rest fall under ‗others‘ category. Among the salaried class, more investors belong to professional jobs and therefore have a fixed income pattern which shows a good opportunity of investing their savings in online trading.
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Table No: 5 Classification of investors on the basis of income: Attributes
No. of Persons
Percentage
11 24 10 5
22 48 20 10
Rs 1 lakh to Rs 2.5 lakhs p.a Rs 2.5 lakh to Rs 5 lakhs p.a Rs 5 lakhs to Rs 8 lakhs p.a Rs 8 lakhs and above
Chart No: 5 Percentage classification income slabs to which investors belong to:
10% 22% Rs 1 lakh to Rs 2.5 lakhs
20%
Rs 2.5 lakhs to Rs 5 lakhs Rs 5 lakhs to Rs 8 lakhs Rs 8 lakhs and above 48%
Interpretation: Among the sample, 48% are earning between Rs 2.5 lakhs to 5 lakhs, 22% fall under the slab of Rs 1 lakh to Rs 2.5 lakhs. The rest 30% fall under the slab of Rs 5 lakhs or above. This shows that majority of the investors belong to the ―high middle class‖ income group with a considerable amount of savings set aside for investment purposes.
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Table No: 6 Investment portfolios that the investors are interested in: Attributes
No. of Persons
Percentage
0 5 6 19 15 5
0 10 12 38 30 10
Bonds / Debentures Mutual Funds Real Estate Equity shares Life Insurance Policies Precious objects
Chart No: 6 Percentage classification of Investment portfolio that the investors are interested in: 19
20 18
15
16 14 12 10 8
5
6
6
5
Investment Portfolio opted by investors
4 2
0
0 Bonds
Mutual Funds
Real Estate
Equity Life Precious shares Insurance Objects Policy
Interpretation: Majority of investors are looking forward to invest in equity shares constituting 38% of the sample. This is followed by Life Insurance Policy with 30%. 12% opted for real estate and the last 10% chose mutual funds and precious objects. Even though this is a high risk preposition it generally tends to bring high returns. Therefore, as most of the investors wish to invest in equity, there is huge potential of online share trading & Demat a/c.
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Table No: 7 Percentage of annual income reserved for investment by the investors: Attributes Less than 5% 5% - 10% 10% - 15% 15% - 20% 20% - 25% 25% and above
No. of Persons
Percentage
12 14 6 10 5 3
24 28 12 20 10 6
Chart No: 7 Percentage classification of proportion of income invested by investors:
6% 10%
24%
Less than 5% 5% - 10% 10% - 15%
20%
15% - 20% 20% - 25% 28%
25% and above
12%
Interpretation: Majority of the investors (28%) intend to invest 5% to 10% of their income in investment channels with. This is closely followed by those (24%) who intend to invest less than 5% of their income. 20% of the investors intend to invest 15 to 20% of their income. Since majority of the investors are interested in equity shares as inquired above, and they also consider investing upto 20% of their income, it brings out the potentiality amount the investors are ready to spend on online trading and Dematerialization. Gururaj B H
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Table No: 8 Table showing who influences the investor’s investment decision: Attributes Personal choice Broker / Agent Personal Banker Friends / Relatives Parents Others
No. of Persons
Percentage
24 2 3 16 5 0
48 4 6 32 10 0
Chart No: 8 Percentage classification of various sources influencing investment decision: 0% 6% 10%
Personal Choice Broker / Agent 48%
Friends / Relatives Parents Personal Banker
32%
Others 4%
Interpretation: Personal choice influences the most i.e. 48% of investors to make an investment decision, which can be clearly understood from the investors profiles as most of them are salaried, holding professional jobs and residing in Bangalore. Friends and relative influence 32% of the investors. Parents influence only 10% of the investors. Lastly, personal bankers and brokers influence only 6% and 4% of the investors respectively.
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Table No: 9 Table showing awareness of Demat account among investors: Attributes
No. of Persons
Percentage
Aware of Demat a/c
29
58
Unaware of Demat a/c
21
42
Chart No: 9 Percentage classification showing the awareness of Demat among investors:
42% Aware of Demat a/c Unaware of Demat a/c 58%
Interpretation: Among the investors, 58% are aware of Demat account and 42% are not aware of Demat account. This clearly shows that investors are not adequately aware of Demat account. 42% of the investors including professional and salaried employees‘ income are not being directed towards online trading because of lack of awareness.
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Table No: 10 Table showing the number of investors with / without Demat a/c: Attributes
No. of Persons
Percentage
Investors with Demat a/c
17
34
Investors without Demat a/c
33
66
Chart No: 10 Percentage classification of number of investors owning a Demat a/c:
34% With Demat a/c Without Demat a/c 66%
Interpretation: Among the sample, only 34% own a Demat account. The rest 66% do not own a Demat account because of being unaware of the concept. This also indicates the low awareness levels among potential investors regarding various institutions providing online trading and Demat services.
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Table No: 11 Table showing the DP in which the investors have their Demat a/c: Attributes
No. of Persons
Percentage
1 4 1 2 1 7
6 25 6 13 6 44
Standard Chartered ICICI Direct Kotak Securities Motilal Oswal Sharekhan Others
Chart No: 11 Percentage classification of the bank in which investors have Demat a/c:
6% Standard Chartered 25%
44%
ICICI Direct Kotak Securities Motilal Oswal Sharekhan
6% 6%
Others
13%
Interpretation: The survey shows that, out of 16 investors who are aware of Demat, 25% own a Demat account at ICICI direct. 13% have their account in Motilal Oswal. Rest of the investors, have their account in Sharekhan, Standard Chartered and Kotak securities with 6% each. Others constitute 44% of the sample. This reveals the brand visibility of Demat services at Bangalore.
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Table No: 12 Table showing the most appealing feature of the DP of the investor: Attributes Quality of service Brokerage services Demo‘s and other assistance Periodic holding statements Others
No. of Persons
Percentage
13 1 1 1 0
82 6 6 6 0
Chart No: 12 Percentage classification of the most appealing feature in the DP among investors: 0% 6%
Quality of service
6% 6%
Brokerage services Demo's and other assistance Periodic holding statements 82%
Others
Interpretation: According to the survey, the investors are mainly (82%) influenced by quality of service provided by the bank / broking agency. Other factors regarding online services do not seem to have much influence on investors. This shows that only those financial institutions that can prove their better quality of service can grab the market share.
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Table No: 13 Table showing where the investors plan to open Demat account: Attributes
No. of Persons
Percentage
3 7 1 3 10 9
9 22 3 9 29 28
Standard Chartered ICICI Direct Kotak Securities Motilal Oswal Sharekhan Others
Chart No: 13 Percentage classification showing where the investors plan to open Demat a/c:
9% 27%
Standard Chartered ICICI Direct
21%
Kotak Securities Motilal Oswal Sharekhan
31%
9%
3%
Others
Interpretation: The survey indicates that those who are aware of Demat account and do not possess Demat account intend to open their Demat account at Sharekhan (31%). 21% of the investors intend to open their Demat account at ICICI Direct. This shows the brand visibility and preference among the investors.
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Table No: 14 Table showing the investor’s perception regarding the best source of information on Demat a/c: Attributes Television Radio Internet Mobile Advertisement Others
No. of Persons
Percentage
28 2 14 2 4
56 4 28 4 8
Chart No: 14 Percentage classification showing the most preferred source of information on Demat a/c among investors:
8% 4% Television Radio Internet
28% 56%
Mobile Advertisement Others
4%
Interpretation: The analysis shows that 56% of the investors consider TV as the most important source of information regarding Demat account. This is followed by Internet with 28%. 4% of the investors preferred Mobile advertisement and Radio as the information media. This shows that TV advertisement and Internet ad‘s provide most of the information regarding Demat services.
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Table No: 15 Table showing the rationale why investors engage in online trading: Attributes Convenience / Ease Time shortage Less brokerage fees Brand name and its better confidentiality services Others
No. of Persons
Percentage
26 12 8 3
52 24 16 6
1
2
Chart No: 15 Percentage classification showing the most preferred source of information on Demat a/c among investors: 2% 6%
Convenience / Ease Time shortage
16%
Less brokerage fee 52% 24%
Brand name and its better confidentiality services Others
Interpretation: From the examination made, 52% of the investors involve in online trading because of convenience factor. 24% of the investors are influenced to indulge in online trading because of time shortage. 16% are influenced because of less brokerage fees. 6%, of the sample are influenced by brand name and the last 2% are influenced by other factors.
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Table No: 16 Table showing the frequency of online share trading by investors: Attributes
No. of Persons
Percentage
0 2 4 10 0
0 12.5 25 62.5 0
Daily Weekly Fortnightly Monthly Not much
Chart No: 16 Percentage classification showing the frequency of trading activities of Investors: 0% 0% 12% Daily Weekly 25%
Fornightly Monthly
63%
Not Much
Interpretation: This indicates that 63% of the investors who own Demat account indulge in online trading on a monthly basis, 25% on fortnight basis and 12% on a weekly basis.
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Table No: 17 Table showing the investor’s opinion on the brokerage paid in terms of online trading and other investment options: Attributes Brokerage paid is higher Brokerage paid is lower Can‘t say
No. of Persons
Percentage
2 16 32
4 32 64
Chart No: 17 Percentage classification showing investors opinion on brokerage charges:
4%
32%
Brokerage paid is higher Brokerage paid is lower Cant say
64%
Interpretation: This shows that 64% are not sure about the brokerage charges involved in online trading. 32% of the investors consider the brokerage fees to be lower compared to other investment options and the last 4% consider it to be higher than other options.
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Table No: 18 Table showing whether the investor is ready to pay a premium charge to open a Demat account: Attributes
No. of Persons
Percentage
Yes
8
16
No
42
84
Chart No: 18 Percentage classification showing investors willingness to pay a premium charge for opening a Demat a/c:
16%
Yes No
84%
Interpretation: The study reveals that 84% of the investors are not ready to pay a premium charge to open a Demat account. Only 16% of the investors are willing to pay a charge to open Demat account.
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FINDINGS, SUGGESTIONS & CONCLUSION 5.1 FINDINGS:
The awareness levels among investors regarding Demat account and related services are moderate.
There is a huge potential for online share trading in Bangalore.
Online trading gives the impression of being a service dominantly used by employed male individuals. Precious objects like gold, jewellery etc are the most preferred investment alternative for female employed individuals.
Despite the economy facing recession and its impact on stock market, equity shares seems to be the most preferred investment alternative among the investors.
Online share trading and Demat services are considered to be a convenience factor.
The investors are mainly influenced to involve in online trading on their personal choice as they are rational, well - informed and decisive.
The brand visibility of financial institutions providing online trading and Demat services is very low.
The investors are not adequately aware of the brokerage amount charged in various investment options.
Television and Internet are the most important sources of information for the investors regarding Demat services.
Quality of service is the most influential aspect of a bank / broking agency that appeals the investor.
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5.2 SUGGESTIONS:
The SEBI must reduce the statutory norms / requirements necessary to open a Demat account in order to make it more accessible, hassle free and understandable.
Introduction of more private players can help to increase the awareness levels regarding Demat and online trading services.
The Demo‘s provided by the banks / brokerage agencies should be increased as the current levels do not educate the customers adequately.
More number of workshops, seminars, awareness programs etc must be conducted regarding Demat services and online trading and their benefits so as to bring up the awareness levels and channelize the potential investment.
Online trading is beneficial to investors but it is very expensive, so, the organizations should provide the depository services with low cost.
Since more and more companies are planning to enter into online trading, quality of service should be continuously updated.
Online professional assistance will be helpful to investors. It will increase the customer base in online because it will be helpful to those who are not very much aware of the market trends.
Target the new hidden customers, for whom the net can bring out convenience and comfort like NRI, women, young executives, professionals etc.
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5.3 CONCLUSION:
From the analysis made, it is evident that online trading and Dematerialization has its demerits and merits. The demerits of online trading are:
Many banks make the process of opening a Demat account a cumbersome one by making numerous enquiries about the customers as the process needs it.
The charges involved in opening a Demat account are soaring. Even the other associated charges like transaction charge, statement charges, pledge charges are very high.
It is also highly influenced by economic factors like recession, slowdown etc which can have a drastic impact on the investors.
The merits of online trading are:
Securities can be held safe in a Demat account. This evades the disadvantage of holding physical share certificates like wear and tear, damage to securities, loss of securities etc.
If the investor uses the trading account regularly, then it can prove to be a fast source of income.
Demat account also helps the investors to purchase the shares in primary market.
Dematerialization eases the process of selling the securities thereby helping the investor to earn decent income.
Considering that the advantages clearly outweigh the disadvantages, it is coherent to say that Dematerialization is a positive process which mobilizes and channelizes the savings of investors into the development of the industry and thereby the entire economy. Therefore the investors must be made aware of these benefits that they will derive on usage of the services and thereby promote the development of online trading by moving in the right direction.
Gururaj B H
Alliance Business Academy
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BIBILIOGRAPHY Books referred:
Investment Analysis & Portfolio Management, 2nd edition by Prasanna Chandra.
Indian Economics, Professional Education (Course I), Board of Studies, The Institute of Chartered Accountants of India.
Websites:
www.demataccount.com
http://www.dnb.co.in
http://www.ibef.org
http://timesofindia.indiatimes.com
www.nsdl.co.in
www.csdl.co.in
www.sebi.gov.in
http://www.rbi.org.in/scripts
http://www.bis.org/publ/bppdf/
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Alliance Business Academy
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Analysis of online trading and Dematerialization
ANNEXURE QUESTIONNAIRE
Name Age Sex Occupation Contact Details (Email id / Ph no / Office address etc.) Date
Questionnaire to judge the awareness of DEMAT Account
Q.1: What is the nature of your occupation? o Salaried o Self Employed
Q.2: Which of these best describes your job?
o Managerial
Gururaj B H
o Others (Specify):
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o Executive o Professional
Q.3: In which income slab you will place yourself? o Rs 1 lakh to Rs 2.5 lakhs p.a o Rs 2.5 lakhs to Rs 5 lakhs p.a o Rs 5 lakhs to Rs 8 lakhs p.a o Rs 8 lakhs or above
Q.4: What type of investment portfolio are you looking for?
o Bonds / Debentures
o Equity shares
o Mutual Funds
o Life Insurance Policies
o Real Estate
o Precious objects
Q.5: What percentage of your annual income do you reserve for investment? o Less than 5%
o 15- 20%
o 5 - 10%
o 20 - 25%
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o 10 - 15%
o More than 25%
Q.6: Who influences your investment pattern? o Personal Choice
o Friends / Relatives
o Broker / Agent
o Parents
o Personal Banker
o Others (Specify):
Q.7: Are you aware of DEMAT a/c? o Yes o No
Q.8: Do you own a DEMAT a/c? o Yes o No (*) If Yes, do not answer Q.11 (*) If No, proceed to Q. 11 Q.9: If yes, then where do you have your DEMAT account? o Standard Chartered
o Motilal Oswal
o ICICI Direct
o Sharekhan
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o Kotak Securities
o Others (Specify):
Q.10: Which feature of the bank / broking agency appeals you the most?
o Quality of service
o Periodic holding statements
o Brokerage charges
o Others (Specify):
o Demo‘s and other assistance
Q.11: If No, then where do you want / plan to open your DEMAT account? o Standard Chartered
o Motilal Oswal
o ICICI Direct
o Sharekhan
o Kotak Securities
o Others (Specify):
Q.12: Which among the below is the best source of information regarding DEMAT Services?
o Television
o Mobile Advertisement
o Radio
o Others (Specify):
o Internet
Gururaj B H
Alliance Business Academy
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Analysis of online trading and Dematerialization
Q 13: What motivates you to go for online share trading?
o Convenience / Ease
o Brand name and its confidentiality services
o Time shortage
o Others (specify):
better
o Less brokerage fees
Q.14: How frequently are you engaged in online share trading? o Daily
o Monthly
o Weekly
o Not much
o Fortnightly
Q.15: Is the brokerage paid in terms of online share trading is higher in comparison to the other investment options? o Yes o No o Can‘t say
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Alliance Business Academy
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Q.16: Are you ready to pay a premium charge to open a DEMAT account? o Yes o No
Affirmation The Securities Exchange Board of India has declared on April 01, 2006 that producing PAN (Permanent Account Number) Card is mandatory to open a DEMAT account. The investor has to approach a DP and fill up an account opening form. He must submit the account opening form which must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. I would like to assure you that your responses shall be kept confidential and will be used for the purpose of this project. Expecting favorable consideration and thanking you in anticipation.
Gururaj B H
Alliance Business Academy
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