A A
Summer Internship Project Report Summer Internship Project Report
On On
Awareness of online trading Awareness of online trading
In Ahmedabad. In Ahmedabad.
In Partial Fulfillment of the requirements for the
In Partial Fulfillment of the requirements for the fulltime two years MBA program underfulltime two years MBA program under Gujarat Technological University
Gujarat Technological University
Submitted by: Submitted by: Bhavik thakkar Bhavik thakkar Submitted To : Submitted To : Prof. gurmeet sir Prof. gurmeet sir
===================================================================== =====================================================================
N.R.INSTITUTE OF BUSINESS MANAGEMENT (GLS-MBA), AHMEDABAD. N.R.INSTITUTE OF BUSINESS MANAGEMENT (GLS-MBA), AHMEDABAD.
DECLARATION DECLARATION
I, bhavik thakkar student of N.R. INSTITUTE OF BUISENESS MANAGEMENT, I, bhavik thakkar student of N.R. INSTITUTE OF BUISENESS MANAGEMENT, AHMEDABAD, hereby declare that this project report is a result of culmination of my sincere AHMEDABAD, hereby declare that this project report is a result of culmination of my sincere efforts.
efforts.
I declare that this submitted work is done by me and to the best of my knowledge; no such work I declare that this submitted work is done by me and to the best of my knowledge; no such work has been submitted by any other person for the award of degree or diploma.
has been submitted by any other person for the award of degree or diploma.
I also declare that all the information collected from various secondary and primary sources have I also declare that all the information collected from various secondary and primary sources have been duly acknowledged in this project report.
been duly acknowledged in this project report.
(bhavik thakkar) (bhavik thakkar)
DECLARATION DECLARATION
I, bhavik thakkar student of N.R. INSTITUTE OF BUISENESS MANAGEMENT, I, bhavik thakkar student of N.R. INSTITUTE OF BUISENESS MANAGEMENT, AHMEDABAD, hereby declare that this project report is a result of culmination of my sincere AHMEDABAD, hereby declare that this project report is a result of culmination of my sincere efforts.
efforts.
I declare that this submitted work is done by me and to the best of my knowledge; no such work I declare that this submitted work is done by me and to the best of my knowledge; no such work has been submitted by any other person for the award of degree or diploma.
has been submitted by any other person for the award of degree or diploma.
I also declare that all the information collected from various secondary and primary sources have I also declare that all the information collected from various secondary and primary sources have been duly acknowledged in this project report.
been duly acknowledged in this project report.
(bhavik thakkar) (bhavik thakkar)
PREFACE PREFACE
Today‟s modern world is progressing by leaps and bounds. In this fast changing world, Today‟s modern world is progressing by leaps and bounds. In this fast changing world, managemen
management of business t of business is very important phase.is very important phase.
The course of MB
The course of MBA gives great knowledgA gives great knowledge to the students. Summer Ine to the students. Summer Internship Project ternship Project is also ais also a part of the MBA course. That enables the student to understand how they can apply their theoretical part of the MBA course. That enables the student to understand how they can apply their theoretical knowledge in practical world. It helps me to develop my leadership skills, communication skills, and knowledge in practical world. It helps me to develop my leadership skills, communication skills, and analytical skills and so on. it presents a unified picture of what management is and how it
analytical skills and so on. it presents a unified picture of what management is and how it is applied tois applied to various forms of
various forms of human endeavor.human endeavor.
I got the opportunity to make Summer Internship Project on online share trading in secondary I got the opportunity to make Summer Internship Project on online share trading in secondary market.
market. This project repoThis project report gives details rt gives details about online about online share trading in share trading in India and India and its scopeits scope particularly in Ahmadabad It also describe the primary analysis about customer satisfaction particularly in Ahmadabad It also describe the primary analysis about customer satisfaction towards online share trading. An overall view of
towards online share trading. An overall view of online share trading presented in the online share trading presented in the report givesreport gives better idea about different options available to customers.
ACKNOWLEDGEMENT ACKNOWLEDGEMENT
Every successful Endeavour has its share of problems and hurdles, but at the same time Every successful Endeavour has its share of problems and hurdles, but at the same time there are people who help to overcome these difficulties and thus I want to express my heartfelt there are people who help to overcome these difficulties and thus I want to express my heartfelt gratitude towards the people who have been of great help to me in achieving the purpose. gratitude towards the people who have been of great help to me in achieving the purpose. Hence, my project bears the imprints of many people.
Hence, my project bears the imprints of many people.
I wish to express my deep sense of gratitude towards Mr. shailesh Sharma and Ms. Sangeeta I wish to express my deep sense of gratitude towards Mr. shailesh Sharma and Ms. Sangeeta jain
jain at at motilal motilal oswal oswal securities securities ltd. ltd. for for their their immense immense help help and and valuable valuable guidance in guidance in conductingconducting this summer industrial project from its
this summer industrial project from its conception to its completion.conception to its completion.
I am obliged to N.R.Institute of Business Management. The institute has given us an I am obliged to N.R.Institute of Business Management. The institute has given us an opportunity to get practical knowledge in the field of management and also for helping us to opportunity to get practical knowledge in the field of management and also for helping us to undergo this inspiring project. The learning during this project has been a great experience. undergo this inspiring project. The learning during this project has been a great experience.
Most importantly I would like to thank Gurmeet sir for supporting in the Most importantly I would like to thank Gurmeet sir for supporting in the preparation of project and providing the guidance during the summer training. Finally, I would preparation of project and providing the guidance during the summer training. Finally, I would like to thank all those who directly and indirectly contributed to this project. This project was an like to thank all those who directly and indirectly contributed to this project. This project was an excellent opportunity for me to relate my classroom course to the real
excellent opportunity for me to relate my classroom course to the real business.business.
Last, but not the least I would like to thank all the employees of motilal oswal securities ltd, Last, but not the least I would like to thank all the employees of motilal oswal securities ltd, Who had directly or indirectly helped us in preparing this project report and gave their valuable Who had directly or indirectly helped us in preparing this project report and gave their valuable time to help us.
EXECUTIVE SUMMARY
Being Management students, we need to understand how industry analysis is done. Therefore, we are required to identify the industry of our interest to conduct a thorough analysis of the selected Industry. This helps us as the students to develop a sense of awareness around us to keep the details of the industry. Such an analysis helps to understand the industry and is highly useful for career development
This project report is the testimonial of awareness of online trading in equity markets. It gives brief about stock, stock market, history of stock market and current scenario of Indian stock market. The project report defines primary and secondary markets, the processes of materialization and dematerialization. The report explains depositary system and explains the roles of depository exchange and their participants.
There is a questionnaire that justifies that even in the contemporary IT favorite times offline trading in Indian stock markets is more popular than online trading along with its reasons.
TABLE OF CONTENT
CH.
NO
TOPIC
RESEARCH METHODOLOGY
1
INTRODUCTION TO THE CAPITAL MARKET
1.1 Capital Market
1.2 Capital market Segment – Primary And Secondary 1.3 The Stock Exchanges and its Functions
1.3.1 The BSE and Sensex 1.3.2 The NSE
2
CONCEPT OF SHARE TRADING
2.1 Introduction
2.2 Trading and settlement 2.3 Trading System
2.3.1 Off line Trading System 2.3.2 On line trading System
3
ONLINE TRADING
3.1 History
3.1.1 History of online share trading In Global Scenario 3.1.2 History of e trading in Indian context
3.2 Process Of Online Trading 3.3 Clearing Process
3.4 Settlement Cycle 3.5 Auction Process
4
INDUSTRY ANALYSIS
4.1 PESTEL Analysis of Indian Capital Market 4.2 SWOT Analysis of Stock Market
5
INTRODUCTION TO THE COMPANY
5.1 company profile
5.2 Products And Services
5.3 Motilal oswal online software
6
ANALYSIS OF SURVEY
7
FINDINGS AND RECOMMANDATIONS
8
CONCLUSIONS
GLOSSARY
BIBLIOGRAPHY
RESEARCH METHODOLOGY
1.
Objective: The purpose of research is to discover answers to questions through the application of scientific procedures.
To identify the broking services used by the respondents and their preferences towards it.
To study overall scenario of e-Broking..
To identify the factors influencing preference for online trading.
To identify the factors influencing offline trading.
To measure the satisfaction level in online and offline trading.
2.
Research design:Descriptive research
3.
Research methodology:DATA SOURCE:
Primary data source – Questionnaire, Observations and formal Interaction with customers.
Secondary data source – From magazines and Websites.
DATA ACQUISITION TOOL:
Informal Tool:- Observations and Informal talks Formal Tool:- Structured Schedule
DATA ANALYSIS:
Various tables, graphs, pie charts and statistical tools used t o analyze the data.
DATA COLLECTION:
Data collection is an integral part of the research. It calls for developing the most efficient research plan for gathering the needed information. Information which is generated the first time and is fresh is called “primary data” and it is generated by four main methods viz. observation, experimentation, interviewing and estimation. The primary data can be collected
through telephone, interviews, group interviews, mail surveys and self administered questionnaire.
Secondary data is that which has previously already being gathered and is available. It can be generated by internal sources (within the firm) or by external sources (like books, periodicals, published reports, data services, computer data bank etc.).
The study is carried out based on both primary and secondary data. Primary data is collected through collecting information from the employees and customer. The secondary data is collected by the use of internet, company browser and different reference books.
SURVEY PROCESS:
The researcher visited all departments where the work was being executed. Met the staff members and asked questions which are short and specific and easily understandable.
Steps in Market Research: 1. Planning and Research.
a) Defining the problem b) Sampling the plan. c) Preparing questionnaire. d) Deciding the area of research
2. Field Work.
a) Asking question to sample selected. b) Data collection.
3. Planning Report.
a) Analyzing the data collected. b) Report preparation.
4.
Sample:Sample Universe Ahmedabad city
Type of Sampling Non Probability
Convenience based Sampling
Sample size 300 respondents
Research Instrument A structured formatted questionnaire
Literature review:
1. There is seminar on awareness of trading in india and recent rand in Indian stock industry y. Under that they explain the current industry mechanism and factor which is dconsider while investing in shremarket. By tamilnadu government.
2. Previous years project report on preference of online & offline trading.made by harshit shah& Rinav Shah
CHAPTER 1
INTRODUCTION TO
THE
1] INTRODUCTION TO THE CAPITALMARKET
1.1CAPITAL MARKET
:-The capital market is the market for securities, where companies and the government can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded.
Since projects require long term finance, but on the other hand, the investor may not like to relinquish control over their savings for a long time. A liquid stock market ensures a quick exit without incurring heavy losses or costs. Thus development of efficient market system is necessary for creating conductive climate for investment and economic growth. The primary function of the system is to provide a link between savings and investment for the creation of new wealth and to permit portfolio adjustment in the composition of the existing wealth.
The progress of savings, finance and investment involves financial institutions, markets instruments, and services. Above all, supervision control and regulation are equally significant. Thus financial management is in integer part of the financial system.
Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the economic development of the country. As a result the investors are not constrained by their individual abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the country, liquidity of capital market is an i mportant factor affecting growth.
1.2 CAPITAL MARKET SEGMENT – PRIMARY AND SECONDARY
Broadly, the Capital Market comprises of two segments – the new issue market which is commonly known as PRIMARY MARKET and the stock market where the issues shares are traded is known as SECONDARY MARKET.
PRIMARY MARKET
Primary market is the market for new securities issues. In the primary market the security is purchased directly from the issuer. Government and Corporate can create and issue fresh Securities in exchange for funds. In Primary market the investors have the first opportunity to buy a newly issued security. After the first purchases, subsequent trading is said to occur in the secondary market.
Chart showing the transaction in the primary market :
The securities Act 1933 governs the issuance of securities. This act requires that a registration statement must be filled with the SEC (security exchange commission) by the issuer of a security. The registration statement includes the information regarding the nature of business, key features of security, the nature of risk associated with the security, and background of management. Financial statement must be included in the registration statement and they must be certified by an independent public accountant
INITIAL PUBLIC OFFERING - IPO
Corporation's first offering of stock to the public. An initial public offering (IPO) is the process through which a privately held company issues shares of stock to the public for the first time. Also known as "going public," an IPO transforms a small business from a privately owned and operated entity into one that is owned by public stockholders. An IPO is a significant stage in the growth of many small businesses, as it provides them with access to the public capital market and also increases their credibility and exposure. The primary advantage a small business stands to gain through an initial public stock offering is access to capital. Becoming a public entity involves significant changes for a small business, though, including a loss of flexibility and control for management. In many cases, however, an IPO may be the only means left of financing growth and expansion. The decision to go public is sometimes influenced by venture capitalists or founders who wish to cash in on their early investment.
Staging an IPO is also a very time-consuming and expensive process. A small business interested in going public must apply to the Securities and Exchange Commission (SEC) for permission to sell stock to the public. The SEC registration process is quite complex and requires the company to disclose a variety of information to potential investors. The IPO process can take as little as six months or as long as two years, during which time management's attention is distracted away from day-to-day operations.
Overall, going public is a complex decision that requires careful consideration and planning. Experts recommend that small business owners consider all the alternatives first (such as securing venture capital, forming a limited partnership or joint venture, or selling shares through private placement, self-underwriting, or a direct public offering), examine their current and future capital needs, and be aware of how an IPO will affect the availability of future financing.
SECONDARY MARKET
It is the market where investors can buy and sell those shares at current prices as determined by other investors in the market. The key distinction between a primary market and secondary market is that in secondary market the issuer of the asset does not receive funds from the buyer rather the existing issues changes hands in the secondary market and funds flow from buyer of the asset to the seller.
Function of secondary market
1. Secondary market provides to an issuer of securities, whether the issuer is a corporation or a governmental unit, regular information about the value of the security. The periodic trading of the asset reveals to the issuer the consensus price that, the asset commands in an open market. Thus, firm can discover what value investors attach to their stocks, and firm & non corporate issuers can observe the prices of their bonds and the implied interest rates investors expect & demand for them. Such information helps issuers assess how well they are using the funds acquired from earlier primary market activities, and it also indicates how receptive investors would be to new offering.
2. Investors in financial assets receive several benefits from a secondary market like dividends, bonus shares etc. Such a market obviously offers them liquidity for their assets as well as information about the assets fair or consensus values.
3. Secondary market brings together many interested parties and so can reduce the cost of searching for likely buyers and sellers of assets.
4. Moreover, by accommodating many traders. Secondary markets keep the cost of transactions low. By keeping the costs of both searching and transacting low, secondary market encourage investors to purchase financial assets.
Many Secondary markets are continuous markets, which mean that prices are determined continuously throughout the trading day as buyers and sellers submit orders. For examples, Given the order flow at 10 A.M., the market clearing price of a stock on some organized stock exchange may be Rs.70; and at 11 a.m. of the same trading day, the market clearing price of the same stock, but with different order flows, may be Rs.70.75.Thus, in a continuous market, prices may vary with the patterns of orders reaching the market and not because of any change in the basic situation of supply and demand.
A contrasting market structure is the call market, in which orders are batched or grouped together for simultaneous execution at the same price. That is, at certain times in the trading day (or possibly more then once in a day), a market maker holds an auction for a stock. The auction may be oral or written.
1.3 BRIEF ABOUT THE STOCK EXCHANGES
Stock Exchange is a market like any other centralized market where both buyers and sellers come and conduct their business of purchase and sale of shares & securities. In other words, it is a market place for shares and securities where trading takes place in a controlled and protected environment.
MEANING OF STOCK EXCHANGE
A stock exchange, share market or bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors which, as in all free markets, affect the price of stocks. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.
FUNCTIONS OF STOCK EXCHANGE
Stock exchange is established into the main purpose of providing a market place for the members to deal in securities under well laid down regulations and to protect the interest of the investors. The main functions of stock exchange are;
1. It brings the companies and investors together so that the investors can put risk capital into companies and thus, companies can use the capital.
2. It provides an orderly regulated market for securities.
3. It provides continuous, ready and open market for selling and buying securities.
4. It promotes savings and investment in the economy by attracting funds from the investors. 5. It facilitates takeover by means of acquiring majority of shares traded on t he stock market. 6. It acts as a clearing house of business information.
7. It motivates the managers of well reputed companies, to retain their shares in „A‟ group, to improve performance.
8. It induces the managers to improve performance for converting non-specified shares into specified shares in the exchange.
9. It enables the investors to evaluate the net worth of their holdings. 10. It also allows the companies to float their shares in the market.
1.3.1THE BOMBAY STOCK EXCHANGE (BSE)
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India.
Bombay Stock Exchange was established in 1875. There are around 3,500 Indian companies listed with the stock exchange, and has a significant trading volume. As of April 2010, the market capitalization of the BSE was about Rs. 62.4L Cr. The BSE SENSEX (SENSitive indEX), also called the BSE 30, is a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of tr ansactions volume.
An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid-1850s, each investing a (then) princely amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai.
In 1875, Brokers organized an association known as the Native share Brokers Association, and the country‟s first stock exchange the Bombay Stock Exchange (BSE), set up in Mumbai with 318 members. The membership fee gradually increased from Re. 1 in 1887 to Rs. 1000 in 1896 and Rs. 48,000 in 1920.
In 1986, The BSE came out with 30-share Sensitivity Index (a.k.a. the Sensex) that subsequently became the „barometer‟ of the Indian stock market which is updated every two minutes.
In 1995, BSE has launched an electronic (e-Trading) system named BOLT, the BSE Online Trading system.
In 2005, the status of the exchange changed from an Association of Persons (AOP) to a full-fledged corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and its name was changed to The Bombay Stock Exchange Limited).
HOW BSE WORKS?
The scripts traded on BSE have been classified into the following; A - Large capitalization, profitable, reliable, high-liquid companies B1- Mid-capitalization, reliable, high-liquid companies
B2- Mid- capitalization, moderate liquid companies
T - Trade to trade companies (compulsory delivery of trade within a day), low liquid companies
S - Not reliable, low liquid companies Z - Blacklist companies
Jobbers play an important role on the BSE. A jobber or a broker who trades on his own account and hence offers a two-way quote or a bid-ask quote. The bid price reflects the price at which the jobber is willing to buy and the ask price represents the price at which the jobber is willing to sell.
Investors have to transact via jobber/ broker. The jobber / broker feed his buy/sell quotes in his terminal, which is linked to the main server at the BSE. Since both jobbers and brokers feed their orders, the NSE has adopted a „quote-driven system and an order driven‟ system.
BSE SENSEX
The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scripts. The base year of SENSEX is 1978-79 and the base value is 100.
SENSEX is not only scientifically designed but also globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The set of companies which make up the index has been changed only a few times in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE. The index is widely reported in both domestic and international market through print as well as electronic media.
The Index was initially calculated based on the “Full Market Capitalization” methodology but was shifted to the Free float methodology with effect from September 1, 2003. The “Free Float Market Capitalization” methodology of index construction is regarded as an industry best practice globally. Due to its wide acceptance amongst the Indian investors, SENSEX is regarded to be the pulse of the Indian stock market.
1.3.2NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE)
National Stock Exchange (NSE), established in the mid 1990s as a demutualised electronic exchange by leading Indian financial institutions, offers trading, clearing and settlement services in a range of products covering equity, debt and equity derivatives. It is India's largest exchange and ranks third globally by number of trades in the equities market. NSE provides a modern, fully automated screen-based trading system, named NEAT (National Exchange Automated Trading system) with nearly 40,000 trading terminals giving it extensive reach. Its flagship index, the NIFTY 50, is used extensively by investors in India and around the world to take exposure to the Indian equities market.
In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The National Stock Exchange of India (NSE) is the largest and most advanced exchange with 1016 companies listed and 726 trading members.
NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enable up to 6 million trades to be operated daily on the NSE trading platform.
In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999).
HOW NSE WORKS?
The NSE has opted for an order-driven system. When an order is placed by a trading member, an order confirmation slip is generated.
When a trade takes place, a trading confirmation slip is printed at the trading member‟s workstation. It gives details like quantity, price, code number of counterparty, and so on.
The identity of the trading member is not revealed to other when he places an order or when his pending orders are displayed. Hence, large orders can be placed on the NSE.
On the eighth day of trading, each member gets a statement showing his net position, the amount which he has to transfer to the clearing bank, and the security he has to deliver to the clearing house.
Members are required to deliver securities and cash by the thirteenth and fourteenth day respectively. The fifteenth day is the payout day.
All trades on NSE are guaranteed by the National Securities Clearing Corporation (NSCC). This means that when A buys from B, NSCC becomes the counterparty to both the legs of the transaction. In effect, NSCC becomes the seller to a and the buyer from B. This eliminates counterparty risk.
CHAPTER 2
CONCEPT OF
SHARE
CONCEPT OF SHARE TRADING CONCEPT OF SHARE TRADING
2.1 INTRODUCTION 2.1 INTRODUCTION
The concept of share broking emerged after the establishment of the joint stock companies. The concept of share broking emerged after the establishment of the joint stock companies. The ownership of the companies was divided into
The ownership of the companies was divided into small parts and that small parts and that every part was called share.every part was called share. So, the term “Share” denominates some part in the
So, the term “Share” denominates some part in the ownership of the company. The shares areownership of the company. The shares are freely transferable subject to the some certain restrictions. When the need was felt to sell the freely transferable subject to the some certain restrictions. When the need was felt to sell the shares by the owner of the shares, it was difficult to find out the buyers of the shares who want to shares by the owner of the shares, it was difficult to find out the buyers of the shares who want to buy the shares at the price the seller want to sell. At that time a need was felt to bring the buyers buy the shares at the price the seller want to sell. At that time a need was felt to bring the buyers and sellers on a common platform. To solve this problem, a group of persons came into picture, and sellers on a common platform. To solve this problem, a group of persons came into picture, which used to bring the buyers and sellers together for the trade of the shares. These persons are which used to bring the buyers and sellers together for the trade of the shares. These persons are called the share Brokers who find the persons who wish to buy or sell their securities. The whole called the share Brokers who find the persons who wish to buy or sell their securities. The whole process of finding the buyers and sellers of the securities by the brokers is called the Share process of finding the buyers and sellers of the securities by the brokers is called the Share Broking. The origination of the Indian securities market may be traced back to 1975, when 22 Broking. The origination of the Indian securities market may be traced back to 1975, when 22 enterprise brokers under a Banyan tree established the Bombay Stock Exchange (BSE). Over the enterprise brokers under a Banyan tree established the Bombay Stock Exchange (BSE). Over the last 130 years, the Indian securities market has evolved continuously to become one of the most last 130 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern international standards both in terms of structure and in terms of operating dynamic, modern international standards both in terms of structure and in terms of operating efficiency.
efficiency.
2.2 TRADING AND
2.2 TRADING AND SETTLEMENTSETTLEMENT
India‟s stock exchanges are fully computerised
India‟s stock exchanges are fully computerised order driven or order-cum-quote drivenorder driven or order-cum-quote driven systems. The country has made rapid strides towards a dematerialised trading environment on the systems. The country has made rapid strides towards a dematerialised trading environment on the basis of a competing depositories model. Investors have the choice of holding their stocks in basis of a competing depositories model. Investors have the choice of holding their stocks in physical or dematerialised form, but trading in the exchanges is in mandatory dematerialised physical or dematerialised form, but trading in the exchanges is in mandatory dematerialised mode in most important stocks. As of October 2000, about 98per cent of the trading in the stock mode in most important stocks. As of October 2000, about 98per cent of the trading in the stock exchanges is in dematerialised mode.
exchanges is in dematerialised mode.
India has put in place a regulatory regime for internet trading of stocks. A large number of India has put in place a regulatory regime for internet trading of stocks. A large number of online brokers have started operations. More brokers are expected to follow when the exchanges online brokers have started operations. More brokers are expected to follow when the exchanges put in place an ASP (Application Service Provider) model for online trading software. However, put in place an ASP (Application Service Provider) model for online trading software. However, currently, the level of penetration of online trading is extremely small.
The stock exchanges currently run two parallel settlement systems. Practically all the trading The stock exchanges currently run two parallel settlement systems. Practically all the trading takes place in the account period settlement system in which all trades during a weekly account takes place in the account period settlement system in which all trades during a weekly account period are netted off and the net obligations are settled five business days after the end of the period are netted off and the net obligations are settled five business days after the end of the period. The other unpopular system is that of rolling settlements where trades of each day are period. The other unpopular system is that of rolling settlements where trades of each day are settled on a T+5 basis. SEBI is currently working on mandatorily shifting all stocks in a phased settled on a T+5 basis. SEBI is currently working on mandatorily shifting all stocks in a phased manner to the rolling settlement system. Further improvements in the settlement system to T+3 or manner to the rolling settlement system. Further improvements in the settlement system to T+3 or beyond would have to wait for improvements in the payment system.
beyond would have to wait for improvements in the payment system.
However, account period settlement does not give rise to significant systemic risks in India However, account period settlement does not give rise to significant systemic risks in India because of stringent end of day and intra-day margining systems. Put simply, the weekly because of stringent end of day and intra-day margining systems. Put simply, the weekly settlement is regarded as akin to a one-week futures contract, and the systemic risk is taken care settlement is regarded as akin to a one-week futures contract, and the systemic risk is taken care of by using futures style margining. The exchange imposes daily mark to market and initial of by using futures style margining. The exchange imposes daily mark to market and initial margins on the brokers to eliminate settlement risk. Exchanges also have clearing houses to margins on the brokers to eliminate settlement risk. Exchanges also have clearing houses to guarantee settlements on the exchange. As a result, there have been no settlement failures in the guarantee settlements on the exchange. As a result, there have been no settlement failures in the principal stock exchanges during the last five years.
principal stock exchanges during the last five years.
TABLE 3 TABLE 3
SETTLEMENT CYCLE SCHEDULE SETTLEMENT CYCLE SCHEDULE
SR.
SR. NO. NO. DAY DAY DESCRIPTION DESCRIPTION OF OF ACTIVITYACTIVITY TRADE
TRADE
1
1 T T Trading Trading DayDay
2
2 T+2 T+2 PAY PAY IN IN BY BY 10.30 10.30 am.am. 3
3 T+2 T+2 PAYPAY – – OUT BY 2 pm.OUT BY 2 pm. 4
4
T+3
T+3 Auction of Auction of shortage shortage in in deliveriesdeliveries
5 T+5
5 T+5 Auction pay-in by 10.30 (1 am/ pay Out by 2Auction pay-in by 10.30 (1 am/ pay Out by 2 pm.)
2.3 TRADING SYSTEM 2.3 TRADING SYSTEM
Off line trading System Off line trading System On line trading System On line trading System
2.3.1 OFF LINE TRADING SYSTEM 2.3.1 OFF LINE TRADING SYSTEM
As the internet has taken over the physical trade, the same is the situation in trading in shares. As the internet has taken over the physical trade, the same is the situation in trading in shares. Even the internet has not spared trading in shares and still the conventional system of offline Even the internet has not spared trading in shares and still the conventional system of offline trading continues in today‟s world.
trading continues in today‟s world. Explanation of off-line trading Explanation of off-line trading
system:-In offline trading system, two parties i.e. an individual and a broker come into contact with In offline trading system, two parties i.e. an individual and a broker come into contact with each other and the transaction takes place. The investor goes to the broker for the purpose of each other and the transaction takes place. The investor goes to the broker for the purpose of buying or selling of securities and for that
buying or selling of securities and for that he has to make a payment to settle he has to make a payment to settle the transaction.the transaction.
Here both the parties would be facing some risk. Brokers would be facing the risk of default. Here both the parties would be facing some risk. Brokers would be facing the risk of default. In a typical situation, a customer would be allowed to trade on margin, either by way of In a typical situation, a customer would be allowed to trade on margin, either by way of transferring it to trade account with the broker or giving the broker authority to keep a hold on his transferring it to trade account with the broker or giving the broker authority to keep a hold on his bank or depository account till the time of settlement.
bank or depository account till the time of settlement.
If the margin goes below the specified limit, the website of the broker would give warning to If the margin goes below the specified limit, the website of the broker would give warning to the investor to replenish the same. Brokers can either ask for blanket permission/power of the investor to replenish the same. Brokers can either ask for blanket permission/power of attorney from the customer to replenish the same or take risk on that, in which case they may also attorney from the customer to replenish the same or take risk on that, in which case they may also square off the contract.
square off the contract.
3 WAYS OF SETTLEMENT ; 3 WAYS OF SETTLEMENT ;
1. They would require full funding before the pay in day. 1. They would require full funding before the pay in day.
2. They
2. They may debit the may debit the customer's acccustomer's account with the maount with the margin money rgin money and keep and keep hold on bhold on balancealance amount. On pay-in day, the balance amount will be transferred to broker's trade.
amount. On pay-in day, the balance amount will be transferred to broker's trade.
3. The broker would debit only the margin amount and would wail to the customer to pay on 3. The broker would debit only the margin amount and would wail to the customer to pay on the pay-in day.
the pay-in day.
As a matter of prudence, the broker would have checked the balance in the customer's As a matter of prudence, the broker would have checked the balance in the customer's account, but the balance may go down between trade day
account, but the balance may go down between trade day and the pay-in dand the pay-in day. Here, brokers woulday. Here, brokers would have to decide the extent of risk if at all they are ready to take. In periods of volatility, especially have to decide the extent of risk if at all they are ready to take. In periods of volatility, especially when markets are failing, decision-making of the broker as to the extent of risk he is willing to when markets are failing, decision-making of the broker as to the extent of risk he is willing to take would be very important.
Customers would face the risk of leakage of personal information. Customers would face the risk of leakage of personal information. ADVANTAGES OF OFFLINE TRADING SYSTEM
ADVANTAGES OF OFFLINE TRADING SYSTEM
:-
Low BrokerageLow Brokerage
In case of offline trading, brokerage charged by the broker is quite low because of some In case of offline trading, brokerage charged by the broker is quite low because of some personal relations, low cost of installation as
personal relations, low cost of installation as compared to online trading.compared to online trading.
Less MarginLess Margin
Generally, company charges 25% margin while the brokers charge nearly 10%margin from Generally, company charges 25% margin while the brokers charge nearly 10%margin from the investors in case of trading in equity. Sometimes broker charges negligible amount and he the investors in case of trading in equity. Sometimes broker charges negligible amount and he allows trading up to his limit. This shifts the investors from trading online to the trading with the allows trading up to his limit. This shifts the investors from trading online to the trading with the brokers. Foe example: Local Brokers like Motilal Oswal, Ratnakar, Pravin Ratilal etc. allow brokers. Foe example: Local Brokers like Motilal Oswal, Ratnakar, Pravin Ratilal etc. allow trading in shares with less
trading in shares with less margin and low brokerage.margin and low brokerage.
Flexibility in credit periodFlexibility in credit period
Local Brokers allow their customers to trade in shares with longer credit periods which Local Brokers allow their customers to trade in shares with longer credit periods which facilitate the payments for the investors. Whereas in Online trading a customer is required to facilitate the payments for the investors. Whereas in Online trading a customer is required to make the payment in less than 2 days which is not the case in offline trading. The conventional make the payment in less than 2 days which is not the case in offline trading. The conventional system also allows making delay in settlement of
system also allows making delay in settlement of payment if the relation with the broker is payment if the relation with the broker is good.good.
Customized AdviceCustomized Advice
Normally, investors would like to take to the broker before taking an investment decision. Normally, investors would like to take to the broker before taking an investment decision. Internet trading would lack this personal touch. As far as customization of data using data mining Internet trading would lack this personal touch. As far as customization of data using data mining is concerned, that would not attract customers looking for something different. Some of the is concerned, that would not attract customers looking for something different. Some of the brokers are of the view that they would have to provide advisory services to the customers. But, brokers are of the view that they would have to provide advisory services to the customers. But, with increased volumes they will have to balance their preferences and needs of the customers. with increased volumes they will have to balance their preferences and needs of the customers. DEMERITS OF OFFLINE TRADING
DEMERITS OF OFFLINE TRADING
SYSTEM:-
Problems in getting in touch with the BrokerProblems in getting in touch with the Broker
Problem of Attention from the Broker due to loadProblem of Attention from the Broker due to load
Reliance on the Broker's informationReliance on the Broker's information
Customer has to believe what the broker saysCustomer has to believe what the broker says
Reconciliation of accounts and cash settlements
Paperwork
Geographical Restriction
1.3.2ONLINE – TRADING :- A NEW DIMENSION OF TRADING
Online-trading is the mechanism of buying/selling securities via the Internet. Online-trading is considered as a logical extension of e-commerce.
EXPLANATION OF ON-LINE TRADING
SYSTEM:-To put it simply, e-commerce is buying and selling through electronic medium. There could be not be a better place than the stock market, where tremendous volumes are traded, to exploit the opportunities of e-commerce. But, there are certain inherent characteristics of this market, which make it more vulnerable to risks associated with e-commerce. The market requires knowledge, information, ability to analyze and quick decision-making. This requires utmost care while trading on the net. A single click can make or destroy investor's wealth.
Online-trading is a service offered on the Internet for purchase and sale of shares. In the real world, person place orders on personal stockbroker verbally (personally or telephonically).
In Online Trading, a customer can access a stockbroker's website through his internet-enabled PC and place orders through the broker's internet-based order routing and trading engine. These orders are routed to the Stock Exchange without manual intervention and executed thereon. The order routing to the exchange will happen in a matter of seconds. The order execution once it reaches the exchange system is similar to that of an offline transaction.
BENEFITS OF ONLINE SHARE TRADING:- Seamless Trading
E-broking integrates Bank, Demat account and Brokerage account. Transfer of money and shares from and to Bank account and Demat account is done automatically.
No Geographical Restriction
Customers have access to site from anywhere in world. So even if customer is out of station, customer can take the advantage of market condition.
No Time Restriction
Customer can trade not only during market hours but also when market is closed. He is required to give limit as to at what price he wants to buy or sell the shares. When market will open, the shares will be purchased or sold automatically at that particular price or best favorable price.
Online Brokers Make Investing Cheaper
By charging drastically lowered commissions; online brokers offer cheaper access to financial markets, consequently encouraging more investing, as is evident by the increasing number of day-traders. The latter are individuals who have tried to make a career out of buying and selling stocks very quickly, often making and closing dozens of trades in a single day.
The Online Investor Is Self-Reliant
Because online trading greatly diminishes the role of brokers. Investors have more freedom when making investment decisions and come to rely on themselves when developing strategies. The online investor is responsible for researching, making decisions, entering an order and using a computer. All this makes online investors the masters of their domain and leaves them with no one to blame. Thus, online trading promotes self-empowerment.
Offers Greater Transparency
Online trading gives greater transparency to the investors by providing them an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit to the depository account of the investor. Each of the above mentioned stages are subject to inspection, thus bringing in transparency into the system. Greater transparency helps in reducing the systematic risk for the investor. This is possible as the market related information affecting the stocks gets communicated to the investor on a regular basis. Due to this increased exposure, the investor can take necessary steps, which would reduce his overall market risk.
Enables Hassle Free Trading
Online trading integrates the bank, the brokerage firm and the demat accounts which leads to easy and paperless trading for the client.
Quick Trading
The investor will be able to execute the entire trading transaction, right from logging on to the broker's site, to the execution and settlement of his bank account, in a very short period of time.
Provides A Level Playing Field
Trading on the net, gives even the smallest retail investor access to information that earlier was available only to the big traders. This provides a level playing field for all investors in the securities market.
Reduces The Settlement Risk
This method of trading reduces the settlement risk for the investor, as i n this case no short sale is possible i.e. the seller will not be able to sell the securities unless he has actual possession of them. In the case of a demat account (which is required for an online transaction), when a seller wants to sell the securities, his demat account is checked by the Depository Participant before executing the sale transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities.
DEMERITS IN ONLINE SHARE
TRADING:- Lack Of Speed
If customers in large number access the site at the same time, server gets overloaded, so it results into delay in process.
Security Aspect
There may be chances of hacking of password if customer is not alert. This may cause a major loss to the investor.
Lack Of Flexibility
If the customer is not alert about his position on last trading day and if he is not able to square off his position, he has to take delivery compulsory or if he doesn't have enough liquidity, the site will automatically square off his position. This action may or may not be in benefit of customer. Whereas in conventional broking, broker will inform the customer time to time or will take the decision himself in favor of the customer.
Network Crash
There will be problems and delays due to a large influx of traffic and rapid online trading criteria as it happened on 17th May, 2004 which is referred to as ‘ Black Monday’.
Computer illiteracy
Literacy of Computers is mandatory for traders using this online trading service. So for those who are computer illiterate, using websites serves as a handicap for them.
CHAPTER 3
ONLINE TRADING
3.1HISTORY
3.1.1 HISTORY OF ONLINE SHARE TRADING IN GLOBAL SCENARIO
The history of e-trading began in 1983, when a doctor in Michigan placed the first online trade using E*TRADE technology. What began with a single click over 16 years ago has now taken the world by storm.. This led him to wonder why, as an individual investor, he had to pay a broker hundreds of dollars for stock transactions.
Today his dream has become a reality. E-trading has become a way of investing in the developed world and is soon catching on in developing countries too. Since that time, online trading has increased dramatically - according to an unprecedented efficiency and control.
1.1.2 HISTORY OF E TRADING IN INDIAN CONTEXT
On Jan 31st 2000, the Securities Exchange Board of India (SEBI) formally notified all the stock exchanges, giving them a green signal for Net/Online trading. The various players of the securities market, which includes NSE, BSE, other regional stock exchanges and the brokers, had been waiting long for the go-ahead sign. Trading via the net is expected to generate greater volumes than ever before and this has attracted a large number of players. One day after SEBI announced its regulations for net trading, Kerala based ‘Geojit Securities’ took the lead and started online trading in Mumbai. The Kerala State Industrial Development Corporation (KSIDC) decided to join Geojit Securities in 1994. It has a 24% stake in the equity, the balance belonging to Geojit Securities itself. This is the only venture in India where a state owned development institution is participating in the equity of a stock broking company. The first net transaction was a trade for 100 shares of Reliance executed by DR Metha, Chairman, and SEBI for the Chairman of Geojit Securities. Today there are many other big brokerage firms like Motilal Oswal, Kotak Securities, SSKI and ICICI Direct running successfully.
WHY ONLINE TRADING ENTERED LATE IN INDIA?
The Indian exchanges and brokering houses have been very sl ow in moving their transactions online and the major reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed User Groups (CUGs). This issue was resolved between the Department of Telecommunications (DoT) and the Finance Ministry around 1998 and after that soon came the online trading portals like Anagram, investsmart, ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity related issue was perhaps the most important technological factor.RBI made regulation that it is mandatory for company to store at least 7 year financial and transactional data.
3.2 PROCESS OF ONLINE-TRADING:
Sitting in ones own home or office or even from personal car, as long as person can access the net he can trade on the market.
There are three basic things needed for online-trading:
A bank account,
A D-Mat account and
A brokerage account.
The steps in online-trading replicate the real life situation and are fairly simple to follow. Once these three accounts are opened, the money and shares are transferred to investor‟s bank and Demat account automatically, electronically and without any paper work.
The first step is of course to open an account. One can open multiple accounts with himself or herself as the first name in the account. Then it is necessary to determine the type of account that person want and how person want to pay for the trades person make. Joint accounts are allowed but for that person will need to have certain information about those people. Accounts can be Individual, Joint, Sole Proprietorship, Corporate, or Partnership etc.
The form filling requires simple personal details like full legal name, Citizenship status, Residency status, employer's name and address, personal passport\PAN number, Date of birth etc.' One can download the forms or request for them by post or even request for a
representative of the firm to come over to help person with the form. Post-submitting, person are allotted a USERID and PASSWORD while giving details for registration. Then an Account reference Number is generated and displayed to person. These three things are unique to an individual and ensure security of transactions. The acceptance of the application is communicated by email.
Once person has got personal USER ID and PASSWORD and person‟s account has been set up, he can access the website and login using the same.
The second step is then to Fund Personal Account. In order to start trading online it is important that person deposit money in personal bank account before placing a buy order. In order to place a sell order person must have shares in personal DEMAT Account. Person can sell his shares anytime as long as shares are there in his DEMAT Account. In order to place a buy order person need to fund person account. Person can do this by depositing money in his bank account or else person can sell some shares existing in his Demat account and use the proceeds of sale to fund his purchase transaction. The amount of money required before placing a buy order would depend on the value of order and the type of e-invest account person have enrolled for - whether cash or margin.
In a Margin account one can use a line of credit to buy marginable securities or for overdraft protection. Such an account is opened after taking into consideration Annual income, Net worth, description of person‟s investment objectives, as it involves lending a line of credit. In a cash account, the amount of securities bought has to be backed by the cash in the account .
NSE has main computer which is connected through Very Small Aperture Terminal (VSAT) installed at its office.
Brokers have terminals installed at their premises which are connected through VSATs/leased lines/modems.
An investor informs a broker to place an order on his behalf. The broker enters the order through his PC, which runs under Windows NT and sends signal to the Satellite via VSAT/leased line/modem. The signal is directed to mainframe
This order matches with the existing passive order(s), otherwise it waits for the active orders to enter the system.
On order matching, a message is broadcast to the respective member.
All orders received on the system are sorted with the best priced order getting the first priority for matching i.e., the best buy orders match with the best s ell order. Similar priced
Orders are sorted on time priority basis, i.e. the one that came in early gets priority over the later one.
Orders are matched automatically by the computer keeping the system transparent, objective and fair.
Where an order does not find a match, it remains in the system and is displayed to the whole market, till a fresh order comes in or the earlier order is cancelled or modified.
3.3 CLEARING PROCESS:
Meaning:-Clearing is the process of determination of obligations, after whish the obligations are discharged by the settlement.
Explanation:-Clearing is necessary for two reasons. 1) what members are due to deliver
2) what members are due to receive on the settlement date NSCCL has two categories of clearing members:
1) Trading clearing members 2) Custodians
Trading members can trade on a proprietary basis or trade for their clients. All proprietary trades become the member‟s obligation for settlement. Where trading members trade on behalf of their clients they could trade for normal clients or for clients who would be settling through their custodians.
Trades which are for settlement by Custodians are indicated with a Custodian Participant (CP) code and the same is subject to confirmation by the respective Custodian. The custodian is required to confirm settlement of these trades on T+1 day by the cut-off time 1.00 p.m. Non-confirmation by custodian devolves the trade obligation on the member who had input the trade for the respective client.
Settlement is a two way process which involves transfer of funds and securities on the settlement date.
3.4 SETTLEMENT CYCLE:
After clearing, settlement of fund or securities is done. The important settlement types are as follows:
1. Normal segment
2. Trade for trade Surveillance 3. Retail Debt Market
4. Limited Physical market 5. Non cleared TT deals 6. Auction normal
In 1st, 2nd, 3rd, and 6th types settlement done in dematerialized mode. In limited physical market settlement is done in physical form. Trades under settlement type Non cleared TT deals are s ettled either in physical or dematerialized mode.
Dematerialized
settlement:- NSCCL follows T+ 2 rolling system.
Trade executed on T day, and on the second day NSCCL cumulate all the obligation i.e. T +1 and finally trade are settled on 3rd day i.e. T+ 2 day. On this day, funds and securities are transferred from one account to another.
In case of short deliveries, NSCCL conduct a auction on T+3 day and deliveries are made on T+4 day for the same.
All intervening holidays, bank holidays, Sundays and Saturdays are excluded to arrive at the settlement.
FIGURE 2
SETTLEMENT PROCESS
:-(1)Trade details from Exchange to NSCCL (real-time and end of day trade file). (2) NSCCL notifies the consummated trade details to CMs/custodians who affirm
back. Based on the affirmation, NSCCL applies multilateral netting and determines obligations. (3) Download of obligation and pay-in advice of funds/securities.
(4) Instructions to clearing banks to make funds available by pay-in time. (5) Instructions to depositories to make securities available by pay-in-time. (6) Pay-in of securities (NSCCL advises depository to debit pool account of Custodians/CMs and credit its account and depository does it).
(7) Pay-in of funds (NSCCL advises Clearing Banks to debit account of Custodians/CMs and credit its account and clearing bank does it).
(8) Pay-out of securities (NSCCL advises depository to credit pool account of Custodians/CMs and debit its account and depository does it).
(9) Pay-out of funds (NSCCL advises Clearing Banks to credit account of Custodians/CMs and debit its account and clearing bank does it).
(10) Depository informs custodians/CMs through DPs. (11) Clearing Banks inform custodians/CMs.
LIMITED PHYSICAL MARKET (SMALL
WINDOW):-Not exceeding 500 shares. SEBI has provided the way for small investors to trade in physical form.
Features:- Trading in the name of individual or HUF is only constitute as a good delivery. In the street name, it is considered as bad delivery.
Any trade which bears the last date on or after the introduction of security is known as bad delivery in LP market.
Maximum 500 shares are traded in LP market.
Shortages are closed out at actual traded price + 20% Bad deliveries are closed out at actual traded price+ 10%
Non rectification/replacement for objection cases is closed out at official closing price+20% Buyer must send the securities for transfer within the 3 months from the date of pay out.
These transactions are traded in a same manner as in normal market if transfer is done within the 3 months from the date of pay out.
3.5AUCTION
PROCESS:- Buying-in auction is conducted for the security shortages on t he day after the pay-out day through NSE/BSE trading system i.e. on T+3 day.
An Auction Tender Notice is issued to the Members informing them about the names of the securities short or not delivered, quantity slated for auction and the date and time of the auction session.
On NSE the auction is carried out on T+3 rd day and auction settlement happens on T+5th day.
Auction is carried out in the following two cases :
Short deliveries Bad deliveries
Short Deliveries: If a member is not able to deliver securities on the day of pay-in then it is considered as Short delivery. It happens when a speculator who sells shares that he doesn‟t own (short selling) fails to square up his transaction within a trading cycle.
Bad Delivery: Bad delivery exists only in the case of physical share transfers. It doesn‟t exist in de-mat form of securities. If a physical transfer deed is torn, mutilated, overwritten, defaced, or if there are spelling mistakes in the name of the company or the transfer then it is considered as bad delivery.
Clearing agency identifies members who are fully/partially short of securities delivery on securities pay-in day and debits their account by an amount calculated at the valuation price. (The valuation price is the closing price of the security on the preceding trading day of securities pay-in day.)
Auction is a separate trading mechanism which is different from the normal trading. Then the exchanges conduct auction to get the securities and delivers them to the buyers who have not received the securities. There is separate trading session wherein brokers are allowed to quote offer prices. Unlike normal trading session, where order matching is done continuously, the quotes are captured and placed in ascending order of price and matched at the end of the session.
If the auction price is more than the valuation price the member who defaulted will have to pay differing amount.
Chapter: 4
INDUSTRY ANALYSIS
PESTEL ANALYSIS OF INDIAN CAPITAL MARKET
POLITICAL:
The capital market of India is very vulnerable. India has been politically instable in the past but it is a little politically stable now-a-days. The political instability of the country has a very strong impact on the capital market. The share market of India changes as the political changes took place. The BSE Index, SENSEX goes up and down with any kind of small and big political news, like, if there is news that a particular political party has withdrawn its support from the ruling party, and then the capital market will go down with a bang. Also when it was declared that Congress Party has got majority in the parliament election of 2009, there was a upper circuit in Sensex. The capital market of India is too weak and is based on speculations. The political stability of the country is very important for the stability and growth of capital market in India. The political imbalance or balance of the country is the major factor in deciding the capital market of India. The political factors include:
employment laws tax policy
trade restrictions and tariffs political stability
ECONOMICAL:
The economical measures taken by the government of India has a very strong relationship with the capital market. Whenever the annual budget is announced the capital market goes up and down with the economical policies of the government .If the policies are supportive to the companies then the capital market takes it positively and if there is any other policy that is not supportive and it is not welcomed then the capital market goes down. Like, in the case of allocation of 3-G spectrum, those companies that got the license for 3-G, they witnessed sharp growth in their share values so the economic policies play a major part in the growth and decline of the capital market and again if there is relaxation on any kind of taxes on items of automobile
industry then the share of automobile sector goes up and virtually strengthen the capital market. The economical factors include:
inflation rate economic growth exchange rates interest rates
SOCIAL:
India is a country of unity in diversity .India is socially rich but the capital market is not very attached with the social factors .Yes, there is some relation between the social factors with the capital market. If there is any big social factor then to some extent it affects the capital market but small social factors don‟t impact at all. Like, there was opposition of reliance fresh in many cities and many stores were closed. The share prices of the reliance fresh went down but the impact was on and individual firm there was not much impact on t he capital market on a whole the social factors have not much of impact on the capital market in India. The social factors include:
emphasis on safety career attitudes
population growth rate age distribution
health consciousness
TECHNOLOGICAL:
The technological factors have not that much effect on the capital market. India is technological backward country. Same as social factors, technological factor can have an effect on an individual form but it cannot have a big impact on a whole of capital market. The Bajaj got a patent on its dts-i technology, and launched it in its new bike but it does not effect on capital market. The technological change in India is always on a lower basis and it doesn‟t effect on country as a whole. The technological factors include:
R&D activity
technology incentives
