Santosh Maurya

A THESIS ON A STUDY TO GUIDE INVESTORS IN ONLINE & OFFLINE TRADING IN EQUITY MARKET

BY Santosh kumar maurya MBA

A THESIS ON A STUDY TO GUIDE INVESTORS IN ONLINE & OFFLINE TRADING IN EQUITY MARKET

BY SANTOSH KUMAR MBA

A report submitted in partial fulfillment of the requirements of THE MBA PROGRAM (The Class of 2010)

TABLE OF CONTENTS

Acknowledgement Industry profile Research design/methodology Results and analysis Findings:Limitations Conclusion Questionnaire References

Acknowledgement I am thankful to Mr. Saurabh Agarwal who helps me in preparing this management thesis and gave me proper guidelines to me to complete this management thesis which cover the preference of the investor in online or offline share trading in equity market.

I am also thankful to all those respondents whose gave me response to me in completion of this management thesis. That data is used to calculate the result. Result is measured through attitude measurement, chi-square test.

I am also thankful to all those persons who help me in making of this management thesis successfully.

INDUSTRY PROFILE

General introduction about financial sector The financial sector is in a process of rapid transformation. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. The role of an integrated financial infrastructure is to stimulate and sustain economic growth. The US$ 28 billion Indian financial sector has grown at around 15 per cent and has displayed stability for the last several years, even when other markets in the Asian region were facing a crisis. This stability was ensured through the resilience that has been built into the system over time. The financial sector has kept pace with the growing needs of corporate and other borrowers. Banks, capital market participants and insurers have developed a wide range of products and services to suit varied customer requirements. The Reserve Bank of India (RBI) has successfully introduced a regime where interest rates are more in line with market forces. Financial institutions have combated the reduction in interest rates and pressure on their margins by constantly innovating and targeting attractive consumer segments. Banks and trade financiers have also played an important role in promoting foreign trade of the country.

Capital Market The Indian capital markets have witnessed a transformation over the last decade. India is now placed among the mature markets of the world. Key progressive initiatives in recent years include: • The depository and share dematerialization systems that have enhanced the efficiency of the transaction cycle • Replacing the flexible, but often exploited, forward trading mechanism with rolling settlement, to bring about transparency

• The InfoTech-driven National Stock Exchange (NSE) with a national presence (for the benefit of investors across locations) and other initiatives to enhance the quality of financial disclosures. • Corporatization of stock exchanges. • The Securities and Exchange Board of India (SEBI) has effectively been functioning as an independent regulator with statutory powers. • Indian capital markets have rewarded Foreign Institutional Investors (FIIs) with attractive valuations and increasing returns. • The Mumbai Stock Exchange continues to be the premier exchange in the country with an increase in market capitalization from US$ 40 billion in 1990-1991 to US$ 203 billion in 19992000. The stock exchange has about 6,000 listed companies and an average daily volume of about a billion dollars • Many new instruments have been introduced in the markets, including index futures, index options, derivatives and options and futures in select stocks.

Origin and Development of the industry The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE’s trading platform. Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the integration of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India. Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world. In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor’s. In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as ‘Best IT Usage Award’ by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999). The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. Since the early 1950s till the early 1990s, Indian policy makers had been nourishing the goal of Socialist pattern of society. They had been following the development planning strategy of the former Soviet Russia in a mixed economic framework. From July 1991, in the face of an unprecedented foreign exchange crisis, Indian economy started experiencing an IMF-World Bank dictated regime of liberalization.

One aspect of this is financial liberalization. There is a move towards privatization of nationalized banks – these banks are selling their shares in the stock market. Transnational banks are encouraged to operate in the Indian banking sector. Attempts are made to attract foreign direct investment in different sectors. There is an increasing entry of foreign portfolio capital due to stock market liberalization. People are encouraged to invest in stocks through income tax benefits and abolition of capital gains tax. There is a move to develop a national pension fund which will be invested in different stocks to get returns out of which pension will be provided to retired people. It is expected that boosting up of stock market will accelerate the process of capital accumulation and growth. Stock market development has been an important part of financial liberalization in the less developed countries (LDCs). In the pro-liberalization circle, stock market is assigned to play an important role in the capitalist development of LDCs. There are many studies supporting the positive link between stock market development and growth. Let us mention some of the recent studies. One important study was undertaken by Levine and Zervos (1998). Their cross-country study found that the Development of banks and stock markets has a positive effect on growth. In another study Levine (2003) argued that although theory provides ambiguous relationship between stock market liquidity and economic growth, the cross-country data for 49 countries over the period 1976-93 suggest a strong and positive relationship (see also Levine, 2001). Henry (2000) studied a sample of 11 LDCs and observed that stock market liberalizations lead to private investment boom. Recently, Bekaert et al (2005) analysed data of a large number of countries and observed that the stock market liberalization ‘leads to an approximate 1 % increase in annual real per capita GDP growth’. There are some economists who are skeptical. Long time back Keynes (1936) compared the stock market with casino and commented: ‘when the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done’. Referring to the study of World Bank (1993), Singh (1997) pointed out that stock markets have played little role in the post-war industrialization of Japan, Korea and Taiwan. He argued that the recent move towards stock market liberalization is ‘unlikely to help in achieving quicker industrialization and faster long-term economic growth’ in most of the LDCs.

In this perspective this study examines the nature of relationship between stock market and growth through capital accumulation in India.

Growth and Present Status of the industry The ever-growing and fast-maturing 'India Market' is a lucrative business destination for developed countries. With 7-8% of GDP growth, huge analytical, young and English speaking work force the ‘pull’ for opportunities is luring. The bandwidth of 'India Market' is enviably wide and very deep. 'Markets in India' are well protected by legal guidelines and efficient administrators. With a liberal and proactive government at the center the road ahead for 'Markets of India' is very rosy. 'Market India' has witnessed exponential growth over past one and half decade. Foreseeing sure and substantial returns on investments (ROI) companies are pro- actively listing on the stock market indexes. Government agencies once much hated for red tape and bribes has shed its image. Professionalism is their new mantra. Public Enterprises like IOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC, Hindustan Antibiotics Limited, Air India etc. to name a few, are giving Private Indian companies a good run for their money. Private giants like Reliance Industries Limited, Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, and ICICI are breaking their own records every financial year. Indian Equity Market at present is a lucrative field for the investors and investing in Indian stocks are profitable for not only the long and medium-term investors, but also the position traders, short-term swing traders and also very short term intra-day traders. In terms of market capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries Limited at the top. There are about 22 stock exchanges in India which regulates the market trends of different stocks. Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or the Over the Counter Exchange of India, which lists the medium and small sized companies. There is the SEBI or the Securities and Exchange Board of India which supervises the functioning of the stock markets in India. Thus, the growing financial capital markets of India being encouraged by domestic and foreign investments is becoming a profitable business more with each day. If all the economic

parameters are unchanged Indian Equity Market will be conducive for the growth of private equities and this will lead to an overall improvement in the Indian economy. Indian Stock Market including both NSE-National Stock Exchange and the BSE-Bombay Stock Exchange has certainly taken a tremendous beating in the past few weeks. We are sure most of us here knew that the correction in the trading curve was round the corner which would be healthy, and the markets would bounce back with the help of mutual fund investments & buying of Indian stocks again. However the anticipation went wrong, and the US recession story along with global and Indian commodity prices have added fuel to the global equity market turmoil on a whole.

Future of the industry The stock market is booming in spite of the low agriculture output. The monsoon is good in an overall sense but still the question remains who take the credit? The answer is the karma of the people. I appreciate the Indian politicians and the industrialists who being pawns of destiny are doing things positive and productive. India, as a country is running a very good period and the position of planets in the transit are giving wonderful results. Less than one percent of population owns stocks and less than 1000 individuals control the market, the majority being the FIIs, the promoters of the company. The credit should go to media for making stock market headlines. In any case if you are long terms players then step-in and buy now and forget for another 10 years. You will make a killing in the Indian markets. Most of the tech companies and the main index will do well but slightly in the lower side of expectations.

Structure, Processes and Governance of the industry Under this, various processes involved in the industry will be discussed. Other than this, the bodies governing the industry will also be brief upon and an endeavour will be made to understand the whole structure of the industry. Dematerialized Trading

Indian investor community has undergone see changes in the past few years. India now has a very large investor population and ever increasing volumes of trades. However, this continuous growth in activities has also increased problems associated with stock trading. Most of these problems arise due to the intrinsic nature of paper based trading and settlement, like theft or loss of share certificates. This system requires handling of huge volumes of paper leading to increased costs and inefficiencies. Risk exposure of the investor due to this trading in paper. Some of these risks are: 1. Delay in transfer of shares. 2. Possibility of forgery on various documents leading to bad deliveries, legal disputes etc. 3. Possibility of theft of share certificates in the market. 4. Multiplication or loss of share certificates in transit. 5. Prevalence of fake certificates in the market. The physical form of holding and trading in securities also acts as a bottleneck for broking community in capital market operations. The introduction of NSE and BOLT has increased the reach of capital market manifolds. The increase in number of investors participating in the capital market has increased the possibility of being hit by a bad delivery. The cost and time spent by the brokers for rectification of these bad deliveries tends to be higher with the geographical spread of the clients. The increase in trade volumes lead to exponential rise in the back office operations thus limiting the growth potential of the broking members. The inconvenience faced by investors (in areas that are far flung and away from the main metros) in settlement of trade also limits the opportunity for such investors, especially in participating in auction trading. This has made the investors as well as broker wary of Indian capital market. In this scenario, dematerialized trading is certainly a welcome move. What is Dematerialization? Dematerialization or “Demat” is a process whereby your securities like shares, debentures etc, are converted into electronic data and stored in computers by a Depository. Securities registered in your name are surrendered to depository participant (DP) and these are sent to the respective companies who will cancel them after “Dematerialization” and credit your depository account with the DP.

The securities on Dematerialization appear as balances in your depository account. These balances are transferable like physical shares. If at a later date, you wish to have these “Demat” securities converted back into paper certificates; the Depository helps you to do this. Dematerialization is the process of converting the securities held in physical form (certificates) to an equivalent number of securities in electronic form and crediting the same to the investor’s Demat account. Dematerialized securities do not have any certificate numbers or distinctive numbers and are dealt only in quantity i.e.; the securities are fungible. Dematerialization of your holdings is not mandatory. You can hold your secure Demat form or in physical form. You can also keep part of your holdings (in the same script) in Demat form & part in physical form. However, securities specified by SEBI can be delivered only in Demat form in the stock exchanges connected to NSDL and / or CDSL. The Process 1. Surrendering of certificate to Depository Participants for dematerialization. 2. NSDL is informed by the DP through electronic connectivity. 3. Original share certificates are submitted to the registrar by the DP. 4. The request for dematerialization from NSDL to the register. 5. The registrar credits an equivalent number of shares in the account and informs NSDL. 6. The NSDL updates its own account and the depository participants are informed. 7. The depository agent credits it in the account of the investor and the same is informed to the investor. Rematerialisation Sometimes the investor may like to convert his electronic holdings back into physical share certificate. The process undertaken for this purpose is called rematerialisation. The investor has to make a request to the depository participant for rematerialisation. The depository participant puts forward the request to NSDL after verifying whether the investor in having necessary security balances. NSDL in turn will intimate the registrar who prints the certificate and dispatch the same to the investor. The certificate has a new range of certificate numbers and new folio number. The Process

1. Investor requests the DP for rematerialization. 2. The depository participant informs it to the NSDL. 3. NSDL intimates the Registrar. 4. The Registrar of the company prints certificates with new number and informs NSDL. 5. NSDL adjusts its account and passes on the details to the DP. 6. The certificates are dispatched to the investor. What is Depository? Depository functions like a securities bank, where the dematerialized physical securities are traded and held in custody. This facilitates faster, risk free and low cost settlement. Depository is much like a bank and performs many activities that are similar to a bank. Following table compares the two. Bank

Depository

Holds funds in accounts

Holds securities in account

Transfers funds between accounts

Transfers securities between accounts

Transfers without handling money

Transfers without handling securities

Safekeeping of money

Safekeeping of securities

NSDL and CDSL At present there are two depositories in India, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). NSDL is the first Indian depository; it was inaugurated in November 1996. NSDL was set up with an initial capital of US$28mn, promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and National Stock Exchange of India Ltd. (NSEIL). Later, State Bank of India (SBI) also became a shareholder. The other depository is Central Depository Services Limited (CDSL). It is still in the process of linking with the stock exchanges. It has registered around 20 DPs and has signed up with 40 companies. It had received a certificate of commencement of business from SEBI on February 8, 1999.

These depositories have appointed different Depository Participants (DP) for them. An investor can open an account with any of the depositories DP. But transfers arising out of trades on the stock exchanges can take place only amongst account-holders with NSDL’s DPs. This is because only NSDL is linked to the stock exchanges (nine of them including the main ones-National Stock Exchange and Bombay Stock Exchange). In order to facilitate transfers between investors having accounts in the two existing depositories in the country the Securities and Exchange Board of India has asked all stock exchanges to link up with the depositories. SEBI has also directed the companies’ registrar and transfer agents to effect change of registered ownership in its books within two hours of receiving a transfer request from the depositories. Once connected to both the depositories the stock exchanges have also to ensure that inter-depository transfers take place smoothly. It also involves the two depositories connecting with each other. The NSDL and CDSL have signed an agreement for inter-depository connectivity. What is a DP? A depository is like a bank where securities are held in electronic(dematerialized) form. In India, there are two Depositories – National securities Depositories Limited (NSDL) and Central Depository Services Limited (CSDL). Under the Depositories Act, investors can avail of the services of the Depositories through Depository Participants (DP) such as ICICI bank. DP’s are like bank branches wherein shares in physical form need to be deposited for converting the same to electronic (Demat) form. NSDL carries out its activities through various functionaries called business partners who include Depository Participants (DPs), issuing corporate and their Registrars and Transfer Agents, Clearing corporations/Clearing Houses etc. NSDL is electronically linked to each of these business partners via a satellite link through Very Small Aperture Terminals (VSATs). The entire integrated system (including the VSAT linkups and the software at NSDL and each business partner’s end) has been named as the “NEST” [National Electronic Settlement & Transfer] system. The investor interacts with the depository through a depository participant of NSDL. A DP can be a bank, financial institution, a custodian or a broker.

Just as one opens a bank account in order to avail of the services of a bank, an investor opens a depository account with a depository participant in order to avail of depository facilities. How to open a bank account with a DP Opening a depository account is as simple as opening a bank account. You can open a depository account with any DP convenient to you.

To open an account you have to: 1. Fill up the account opening form, which is available with the DP. 2. Sign the DP-client agreement, which defines the rights and duties of the DP and the person wishing to open the account. 3. Receive your client account number (client ID). 4. This client ID along with your DP ID gives you a unique identification in the Depository system There is no restriction on the number of depository accounts a person can open. However, if your existing physical shares are in joint names, you have to open the account in the same order of names before you submit your share certificates for demat. A sole holder of the share certificates cannot add more names as joint holders at the time of dematerializing his share certificates. However, if the investor wants to transfer the ownership from his individual name to a joint name, he should first open an account as the sole holder (account A) and dematerialize the share certificates. He should then open another depository account (account B) in which he is the first holder and the other person is the second holder and make an off market transfer of the shares from the account A to account B. The investor will incur a charge on this transaction. Alternatively, the certificates can be transferred to the joint ownership and then sent for Dematerialization. Right now, as per the Companies Act, there is no nomination facility for shares (whether in the physical or in the electronic form). The nomination facility for shares can be availed of only when the relevant provisions in the Companies Act are amended. NSDL captures the details of

the nominee when the account is opened so as to offer the facility as soon as the relevant amendments are effected in the Law. A client can choose to open more than one account with same DP. In addition to this, he has a choice of opening accounts with more than one DP. However a Broker can open just one Clearing Member account per card/ stock exchange for clearing purpose, but he can still open multiple beneficiary accounts Beneficiary is the personal account wherein brokers can keep their personal holdings. A broker has only one Clearing Member-pool-account. One Clearing Member pool account is opened per card/ stock exchange to settle trades in the dematerialized form. The Clearing Corporation/ House just deals with one designated account for pay-in and payout and the broker's clients know to which account they have to deliver and receive securities from. A clearing member cannot hold his personal holdings in his clearing member account. A broker may deal in the depository system as a clearing member only through a special account, known as the Clearing Member account. This account can be used only for clearing purposes and not for holding his own securities in it. As this is a transitory account, the securities held in this account are not eligible for corporate actions. Therefore, the broker will have to open a separate beneficiary owner account to hold his investments. There is no compulsion for the client to open his account with the same DP as that of his broker. Even if he has an account with another DP, he can carry out normal business with his broker. There is no loss in operational efficiency. But it is possible that opening account with his broker's DP may work out to his advantage, as some DPs may offer special charge structure if the broker and his clients are dealing through him. Trading Trading in dematerialized securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/ receipt of securities in the physical form, it is done through account transfer. An investor cannot trade in dematerialized securities through his DP. Trading at the stock exchanges can be done only through a registered trading member (broker) of the stock exchange

irrespective of whether the securities are held in physical or dematerialized form. DPs role will only be to facilitate settlement of trade in the dematerialized form, by transferring securities from and to the account of the investor, for selling and buying respectively. Trading in dematerialized securities is presently available at NSE, BSE, CSE, DSE,LSE, MSE, ISE & OTCEI. These exchanges have a segment exclusive for trading in dematerialized securities and a segment where trades could be settled either in the physical or in the dematerialized form as per the choice of the delivering client. In unified (erstwhile - physical) segment securities can be delivered either in the physical form or in the dematerialized form at the choice of the delivering party. However, securities that have to be mandatorily settled in demat form (both by institutional investors & all category of investors) cannot be settled in physical form. Also for securities that have to be mandatorily settled in demat form by all categories of investors the concept of market lot is eliminated i.e. the tradable lot is one share from the date they become compulsory. Settlement The settlement of trades in the stock exchanges is undertaken by the clearing corporation (CC)/ clearing house (CH) of the corresponding stock exchanges. While the settlement of dematerialized securities is effected through depository, the funds settlement is effected through the clearing banks. The clearing members directly with the CC/ CH settle the physical securities. Exclusive Demat segment follows rolling settlement (T+5) cycle and the unified (erstwhile physical) segment follows account period settlement cycle. In case of rolling settlement cycle, the account period is reduced to one day. •

In case of settlement of trades done in exclusive Demat segments, the pay-in and pay out of funds and securities are effected on the same day afternoon and evening (same day) thus reducing the blockage of funds and limiting exposure to the clearing corporation.

•

Settlement of funds is effected through the clearing banks and depository plays no role in this.

•

Settlement of securities is effected through NSDL depository system.

•

Clearing and settlement of the regular market trades is affected through the clearing members of the clearinghouses of respective stock exchanges. All trading members of stock exchanges

are clearing members of clearing houses. In addition, for settlement of institutional trades, custodians are also allowed to act as clearing members. •

Clearing members of clearinghouse, dealing in dematerialized securities are expected to open a clearing account with any DP for the purpose of settling trades in dematerialized securities. As, in the mixed (unified) segment, there is a possibility for all clearing members to receive dematerialized securities, they are expected to open clearing accounts.

•

If there is any short delivery at the time of pay-in of securities, these short positions are auctioned in the Demat segment as done in the Unified (erstwhile-physical) segment.

For trades executed on Wednesday (TD 1): •

Final/ Net obligation statement download - Friday (T+2nd working day)

•

Settlement day (SD 1) i.e. pay in and pay out of funds and securities - next Wednesday (T+5th working day)

•

Auction trade day (ATD 1) - next Thursday (T+6th working day)

•

Auction settlement day (ASD 1) - Monday (2nd working day from auction trade day i.e. T+8th working day)

Similarly, for trades executed on Thursday (TD 2): •

Final/ Net obligation statement download - Monday (T+2nd working day)

•

Settlement day (SD 2) - next Thursday (T+5th working day)

•

Auction trade day (ATD 2) - next Friday (T+6th working day)

Auction settlement day (ASD 2) - Tuesday (2nd working day from auction trade day i.e. T+8th working day)

Online and Offline you have always known people who made good money from your locality in the stock markets. Like them, you too had wanted to dabble in the stock markets. But were not sure about how to go about it. Not anymore. Because your task has been made easier by the network of brokers, sub-brokers and their affiliates that have proliferated throughout India.

Most prominent brokerage houses now even help you buy or sell shares online. You just need to have a reliable internet connection; download or install their trading software and you are all set to trade in the stock markets. Of course, for those who prefer people-to-people interface or like to place their buy/sell orders on phone can get registered with offline brokers. Competition in the brokerage business in the last decade has become so intense that most brokerage houses offer their customers online as well as offline brokerage services. Online brokers Prominent brokerage houses like ICICI Securities, HDFC Securities, India Infoline, Motilal Oswal, IL&FS Investsmart and SSKI offer online brokerage services. These are just a few brokerage houses that offer online trading in India. You can always talk to your friend or elders or anybody who dabbles in stocks to find more about such online brokerages in India. What you need to do is logon to their websites and fill in an online account opening form. What these websites need to register you as a client is your name, address, personal details, telephone numbers and contact details. Want an online stock broker? Once you are registered with them they will send their customer service executive to your house or at a place of your convenience to complete other account opening formalities that cannot be done online. One such thing would be your signature that you will have to make on the broker-client agreement. Make sure that your pore through the entire agreement before putting your signature anywhere. Apart from this you will also have to open a demat account with the broker, who also acts as a depository participant. These are modern times and every aspect of your online trading is made paperless. You can buy or sell shares at the click of the mouse. If you buy shares they will get credited to your demat account. On selling, the quantity sold will be debited from your demat account. Make sure that you have enough money in your bank account (which is also linked to your trading account) while buying shares and enough shares in your demat account while selling shares. Otherwise the online orders will not go through. One advantage of opening an online trading account with a brokerage house owned by a bank is the seamless convenience that it offers to its customers in terms of transfer of shares and transfer of money in and out of your trading account. Ask the company executive to explain all the clauses in the agreement as well as a demo on how to trade online to you in detail.

Offline brokers They either operate through their own branch network or through a franchisee of sub-brokers. While it is not possible for brokerage houses to open a branch in the tiniest of towns in India they can always appoint their franchisees in these towns. How expensive is an online stock broker? The stock market regulator, the Securities and Exchange Board of India, SEBI, has become very stringent with brokers and sub-brokers. Action is taken immediately against those violating the prudential norms laid down by the regulator. This is an ongoing exercise to protect the ever-increasing tribe of Indian investors who avail of the services of this broker, sub-broker chain. Brokers who register clients for offline brokerage services prefer clients referred to them by their existing clientele. It is a common practice encouraged by brokers. Suppose your friend is trading with brokerage house X for the past two years. He has developed a good relationship with her/him over the period. Now when you want to open an account with this broker and if your friend refers your name, the broker won't spend extra time checking your credentials. Of course, he will make you sign all those documents that are a part of 'Know Your Client' (KYC) programme started by the market regulator. Once the referral is done you will have to pay money for opening and maintaining a client account and a demat account. Once every thing falls into place you get a client code from your broker and the next time you want to buy or sell shares you will have to quote this client code. Stock market terms you must know Every client has a unique client code number. Your KYC details (with the online and offline broker) are then sent to the stock exchanges of which your broker is a member. This helps the exchange keep a track of your trades. In India most brokers are members of either the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) or in many cases both the exchanges. Though the latter is a 132-year old stock exchange, it is the former that has a pan-India presence. While the BSE has registered membership of 874 brokers spread across 380 Indian cities, NSE has 933 registered members across 1490 cities and towns in India.

Research design/methodology

The study is based on a survey of 50 respondents through a questionnaire covering different groups of investors in equity market complete questionnaire from investors were taken as an effective sample. The data obtained from the study were analyzed by using CHI SQUARE Analysis for identification of the key features preferred by the respondents in an investment product. Through CHI SQUARE a decision has to be taken whether these difference are significant enough to warrant setting hypothesis and testing it or whether they are due to change. The CHI SQUARE technique allows us to test whether the difference or not. The CHI SQUARE test is also employed to determine whether the two attributes according to which a population is categorized are independent of each other or not and it also serves as a test for distributional goodness of fit.

Setting up the hypothesis: if the proportion of the total population of investor in each of the rank are denoted by R1, R2, R3, R4 and R5, then the null and the alternative hypothesis will be set up follows: H0:

R4>R5>R3>R2>R1 (Null Hypothesis: when the table value will high than the calculated value)

H1:

R4
Sampling Design A sample design is a finite plan for obtaining a sample from a given population. Simple random sampling is used for this study. Sample Size Number of the sampling units selected from the population is called the size of the sample. Sample of 45 respondents were obtained from the population. Methods of Data Collection The data’s were collected through Primary sources.

Primary Sources The primary sources are discussion with investors, data’s collected through questionnaire. Questionnaire A well defined questionnaire that is used effectively can gather information on both overall performance of the test system as well as information on specific components of the system. A defeated questionnaire was carefully prepared and specially numbered. The questions were arranged in proper order, in accordance with the relevance. Nature of Questions Asked The questionnaire consists of open ended, dichotomous, rating and ranking questions. Presentation of Data The data are presented through charts and tables. Tools and Techniques for Analysis CHI SQUARE Analysis is used to test the hypothesis and draw inferences.

Results and analysis This study helps the investors to chose the option online & offline share trading in equity market. In this study I found that 8% investor are student, 28% investor are salaried person, 48% investor are businessman, 6% investor are professionals.

Occupation

Students Salaried person Business man Professionals Others

No. of Investor (%)

18 28 48 6 0

•

I found that 32% investor these age group is 25years to 35 years, 36% investor these age group is 36 years to 45 years, 20% investor these age group is 46years to 55 years, 12% investor these age group is greater than 55 years. Age 25yrs- 35 yrs 36 yrs - 45yrs 46 – 55 yrs above 55 yrs

No. of Investor (%) 32 36 20 12

•

I found that 64% investor invest through online share trading and 36% investor invest through offline share trading in equity market.

• Mode of trading Online trading Offline trading

No. of Investor (%) 64 36

•

I found that 28% investor invest through Reliance money, 24% investor invest through Angel Broking, 22% investor invest through Indiabulls, 16% investor invest through Religare, 10% investor invest through other companies.

Demat account in company

No. of Investor (%)

Reliance money

28

Angel Broking

24

Indiabulls

22

Religare

16

Others

10

CALCULATION OF TABLES VALUE

Checking of significant level on the 5%, chi square calculated value from table-1.2 is 40.57and degree of freedom value from table-1.1 is 28 we see the distribution table

value on the degree of freedom value 28 on the area in right trail on 0.05 we see the calculated value 40.57 is less then the table value which is 41.337 it this is the null hypothesis.

Table 1.1

S.n o.

Questions

1

Do you think that offline share trading is more time consuming rather than online share trading.

2

Do you think that offline share trading is more expensive rather than online share trading.

3

Do you agree that online trading is more accurate than the offline trading.

4

1 2 3 4 5 37

10

50

33

13

50

2

35

13

50

Do you think that online share trading is more effectively in comparison of performance.

5

38

7

50

5

Do you think that online share trading is more appropriate than offline share trading.

8

28

14

50

6

In online trading investor can use the up and down of the market with the tool bid.

32

17

50

7

Do you think that online share trading is more complicated than offline share trading.

10

28

11

50

8

No location restriction in online share trading.

4

27

19

50

39

25 8

10 4

40 0

TOTAL

TABLE 1.2

3 1

7

0

1 1

2

1

Row 1 1 1

Column 1 2 3

fo 0 3 0

Fe 0.25 4.875 0.125

fo-fe -0.25 -1.875 -0.125

(fo-fe)2 0.06 3.52 0.02

(fo-fe)2/fe 0.25 0.72 0.13

1

4

37

32.25

4.75

22.56

0.70

1

5

10

13

-3

9.00

0.69

2

1

1

0.25

0.75

0.56

2.25

2

2

7

4.875

2.125

4.52

0.93

2

3

0

0.125

-0.125

0.02

0.13

2

4

33

32.25

0.75

0.56

0.02

2

5

13

13

0

0.00

0.00

3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6 6 6 6 6 7 7 7 7 7 8 8 8 8 8

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

0 2 0 35 13 0 5 0 38 7 0 8 0 28 14 0 0 1 32 17 1 10 0 28 11 0 4 0 27 19

0.25 4.875 0.125 32.25 13 0.25 4.875 0.125 32.25 13 0.25 4.875 0.125 32.25 13 0.25 4.875 0.125 32.25 13 0.25 4.875 0.125 32.25 13 0.25 4.875 0.125 32.25 13

-0.25 -2.875 -0.125 2.75 0 -0.25 0.125 -0.125 5.75 -6 -0.25 3.125 -0.125 -4.25 1 -0.25 -4.875 0.875 -0.25 4 0.75 5.125 -0.125 -4.25 -2 -0.25 -0.875 -0.125 -5.25 6

0.06 8.27 0.02 7.56 0.00 0.06 0.02 0.02 33.06 36.00 0.06 9.77 0.02 18.06 1.00 0.06 23.77 0.77 0.06 16.00 0.56 26.27 0.02 18.06 4.00 0.06 0.77 0.02 27.56 36.00

0.25 1.70 0.13 0.23 0.00 0.25 0.00 0.13 1.03 2.77 0.25 2.00 0.13 0.56 0.08 0.25 4.88 6.13 0.00 1.23 2.25 5.39 0.13 0.56 0.31 0.25 0.16 0.13 0.85 2.77

TOTAL

40.57

Findings:1)

Most of respondents are using online share trading and satisfied with the services which are provided by company.

2) Thus my null hypothesis is become true after analyzing the data.

3) This survey will help to choose the better mode for investment.

4)

The preference of the investor to invest the money through online and offline share trading.

5)

With online share trading investor have benefit to invest the money in equity market from anywhere.

6) Online share trading gives the more accuracy than the offline share trading in equity market.

7)

Online share trading is less expensive than the offline share trading in equity market.

Limitations



The sample was taken from only 50 respondents which may not be the true representative of whole customers perception.

 It may be possible that all responses are correct.

 Respondents may not be enjoying all those services which I want to present in this thesis.

 There is also a time constraint as limitation.

Conclusion This thesis on the topic “A STUDY TO GUIDE INVESTORS IN ONLINE & OFFLINE TRADING IN EQUITY MARKET”. In this thesis I find that most of the investors satisfied with the services of online share trading in equity market which are provided by broking house companies. Its service quality is good according to sample which I taken for this research. Thus my null hypothesis is true that most of the investors are satisfied with the services of online share trading.

With the help of this management thesis report I found that why investor choose online or offline share trading in equity market. Some investor choose online share trading for the purpose of no restricted location. But some investor choose offline share for those investor do not know how the online share trading done in equity market.

In completion of this management thesis I learnt more things about the equity market. As which type of services provided broking houses like online share trading & offline share trading. How a policy is important to investor and company also.

QUESTIONNAIRE Personal details1. Name: 2. Age: a) □ 25yrs- 35 yrs

b) □ 36 yrs - 45yrs

c) □ 46 – 55 yrs

d) □ above 55 yrs

3. Gender: a) Male □

b) Female □

5. Occupation: a) House wife □ b) Students □ d) Business man □

c) Salaried person □

e) Professionals □

7. what type of trading do you prefer? a) Online trading□

b) Offline trading □

8. Which type of investment you prefer the most? a) Fixed deposit □

b) mutual funds □

c) Equity market □

d) Others _________ pls. specify

9. In which company do you have an account? a) Reliance money

b) Angel Broking

c) Indiabulls

d) Religare

e) Others _____________ pls. specify

10. How much satisfied are you with the services of the company ? a) Very much

b) Satisfied

c) Average

Investor service questionnaire Please use (/) mark to give your responses for the following questions 1=strongly disagree, 2= disagree, 3= neutral, 4= agree, 5= strongly agree

S.no. 1

Questions Do you think that offline share trading is more time consuming rather than online share trading.

2

Do you think that offline share trading is more expensive rather than online share trading.

3

Do you agree that online trading is more accurate than the offline trading.

4

Do you think that online share trading is more effectively in comparison of performance.

5

Do you think that online share trading is more appropriate than offline share trading.

6

In online trading investor can use the up and down

7

of the market with the tool bid. Do you think that online share trading is more complicated than offline share trading.

8

No location restriction in online share trading.

1 2 3 4 5

References Primary data

Through questionnaire

Personal interview

Secondary data

The book “Quantitative method” of ICFAI University syllabus.

www.pdfcoke.com www.google.com

www.dailytrader.com www.bseindia.com www.nseindia.com www.reliancemoney.com