06KXCM6002- Basavaraj Bagewadi

“A STUDY ON ONLINE TRADING OF SHARES”.

“A STUDY ON ONLINE TRADING OF SHARES”Dissertation submitted in partial fulfillment of the requirements for the

Award of the Degree of

MASTERS IN BUSINESS ADMINISTRATION

As prescribed by

BANGALORE UNIVERSITY

By

BASAVARAJ BAGEWADI

Register Number: 06KXCM6002

Under the guidance ofDr.SUDHA B S

SURANA PG CENTREBANGALORE-60

2007-08

Surana PG Centre, Bangalore. - 1 -


DECLARATION

I hear by declare that this dissertation titled “A Study on Online

trading of Shares” submitted by me, under the supervision of

Dr. Sudha.B.S. towards partial fulfillment of the Master of Business

Administration, department of management, Bangalore University.

I also declare that this project report has not been submitted to any

other university or any institution for the award/diploma/certificate

published any time before.

Date:

Place: Basavaraj Bagewadi

(06KXCM6002)



ACKNOWLEDGEMENT

The successful accomplishment of any task is incomplete without

acknowledging the contributing personalities who both assisted and

inspired and lead us to way of success.

It is my pleasure to thank Department of MBA, Bangalore

University, for having provided me with such an opportunity to undergo

the Project Work.

I thank the Almighty God for his grace bestowed on us throughout

this project. My special thanks to my project Guide Dr.Sudha B S, who

guided me with the timely advice and expertise and has helped

remarkably to complete the project.

Last, but not the least, I express my deep sense of gratitude to my

beloved Parents & Sister for their constant inspiration throughout my

study and I thanks to all my Friends and I thank all who helped me

directly or indirectly during my study.

Date

Place: Bangalore Basavaraj Bagewadi. (06KXCM6002)



CONTENTS

Sl.No.

Particulars Page No

1.EXECUTIVE SUMMARYINTRODUCTION

- Definitions of Online Trading- Online Trading Patterns- Sources of Marketing- Background of Study- Online Trading of Stock Exchange- Types of Stock Exchange- Function of Stock Exchange- Online Trading of Shares- Advantages- Disadvantages- Effectiveness- Why Online Share Trading

1-14

2. RESEARCH DESIGN- Introduction- Title of the Project- Statement of the Problem- Review of The Literature- Objectives of the Study- Scope of the Study- Sources of Data- Sample Design- Sample Procedure- Conceptual Definitions of the Study- Respondent Profile- Limitations of the Study

15-23

3. PROFILE OF NSE/BSE- History of Online Trading- Technology and NSE/BSE- Online Trading Potential- Securities Exchange Board of India (SEBI)

PROCESS AND REQUIREMENTS OF ONLINE TRADING OF SHARES

- Online Trading Process - Benefits of Online Trading- Basic Risks Involved in Trading the Stock Exchange- Investors Rights and Obligation- General Conditions of NSE/BSE

24-36

4. ANALYSIS AND INTERPRETATION OF THE DATA 37-765. SUMMARY OF FINDINGS, SUGGESSION AND

CONCLUSIONS BIBILIOGRAPHY ANNEXURES

77-92



LIST OF TABLE

Sl. NO

Particulars Page No.

1 GENDER WISE DISTRUBUTION OF INVESTORS 37

2 AGE GROUP DISTRUBUTION OF INVESTORS 38

3 QUALIFICATION OF RESPONDENTS 39

4 OCCUPATION OF INVESTORS 40

5 ANALYSIS OF THE INVESTMENT 41

6 DURATION INVESTMENT OF INVESTORS 42

7 SOURCES OF INFORMATION FOR INVESTORS 44

8 OBSERVATION OF BSE / NSE SENTIVE INDEXES 46

9 FACTORS CONDUCTED BY INVESTORS 47

10 FACTORS INFLUENCING ON INVESTMENT 51

11 CONSIDERSTION OF RISK FACTORS WHILE INVESTING 55

12 IMPORTANT FACTORS WHILE SELECTING A COMPANYTO INVESTMENT

57

13 STAGES OF LIFE CYCLE WHILE INVESTING 59

14 STAGES OF THE LIFE CYCLE OF THE INDUSTRYPREFERED TO INVEST

61

15 INCOME FROM INVESTMENT 63

16 ANNUAL SAVINGS OF INVESTORS 65

17 ANALYSIS OF PREFERED MARKET STRUCTURE 67

18 IMPORTANCE OF THE SHARE PRICE MOVEMENT BSE /NSE INDEXES ON THE INVESTMENTS

69

19 ANALYSIS OF THE TERMS OF PATTERN 71

20 ANALYSIS OF AVERAGE HOLDING PERIOD FORINVESTORS

73

21 ANALYSIS OF THE FAMILIARITY OF ONLINE TRADINGSERVICES AMONG INVESTORS

75



GRAPH LIST

Sl.No. Headings Page No.

1 COMPOSITION OF MALE AND FEMALE 372 AGE GROUP OF INVESTORS 383 QUALIFICATION OF INVESTORS 394 OCCUPATION OF INVESTORS 405 ANALYSIS OF INVESTMENTS 416 THE DURATION OF INVESTMENT 427 SOURCES OF INFORMATION FOR INVESTORS 448 FOLLOW THE CHARTPATTERN OF BSE/NSE SENSITIVE

INDEXES BEFORE INVESTMENT46

9 FACTORS CONDUCTED BY INVESTORS9.1 MOST IMPORTANT 489.2 VERY IMPORTANT 489.3 IMPORTANT 499.4 UN IMPORTANT 499.5 NOT AT ALL IMPORTANT 5010 FACTORS INFLUENCING ON INVESTMENT10.1 MOST IMPORTANT 5110.2 VERY IMPORTANT 5210.3 IMPORTANT 5210.4 UNIMPORTANT 5310.5 NOT AT ALL IMPORTANT 5311 CONSIDERATION OF RISKS FACTORS BEFORE

INVESTMENT55

12 IMPORTANCE OF FACTORS BEFORE INVESTING IN A COMPANY

57

13 STAGES LIFE CYCLE INDUSTRYBEFORE INVESTMENT 5914 STAGE LIFE CYCLE OF THE INDUSTRY PREFFERED TO

INVEST61

15 INCOME FROM INVESTMENT 6316 ANNUAL SAVINGS OF INVESTORS 6517 TYPE OF MARKET STRUCTURE PREFERED 6718 IMPORTANCE OF MOVEMENT OF SHARE PRICES IN

THE BSE/NSE INDEXES69

19 SHORT TERM OR LONG TERM INVESTORS 7120 AVERAGE HOLDING PERIOD OF INVESTORS 7321 FAMILIARITY OF ONLINE TRADING SERVICE 75



EXECUTIVE SUMMARY

Stock exchange is an organized market place where securities are traded.

The Government, semi- Government bodies, public sector undertakings

and companies for borrowing funds raising resources issue these

securities. Securities are defined as any monetary claims and include

stock, shares, debentures, bonds etc. Under the securities Contract

Regulation Act 1956, the Central Government regulates securities trading

and such trading can take place only in stock exchanges recognized by

Government under this Act. As referred to earlier there are at present 23

such recognized stock exchanges in India. Of these, major stock

Exchanges, like Mumbai, Delhi, Calcutta, Chennai, Hyderabad,

Bangalore etc.

A project entitled “A Study on Online Trading of Shares.” deals with

the priorities of the investors in investing their resources.

The study considers the preferences of the investors in Bangalore, taking

into consideration their age group, income earning capacity and their

educational qualification. The data for the study was collected using a

structured questionnaire.

The main limitation of the study is that, the survey was conducted on

investors only in Bangalore, due to lack of time.



CHAPTER - I

INTRODUCTION

E-business describes the use of electronic means and platforms to conduct

business. By this means the company has reduced all kinds of the paper

work and all information are flowing through the computer screen only.

E-commerce is more specific than e-business. It means that in addition to

provide information to visitors about the company, its history, policies,

and job opportunities the company or the site offer to transact or facilitate

the selling of the products and services online. E-commerce has given rise

in turn to e-purchasing and e-marketing. E-purchasing means companies

decide to purchase the goods and information or services from various

online suppliers. Smart e-purchasing has already saved company’s

million of rupees.

E marketing describes company’s effort to inform, communicate,

promote and sell its products and services over the Internet. E-business

and e-commerce take place over four Internet domains

B 2 B – business to business:

Online business selling to other businesses. Example

eSteel.com is a steel industry exchange that creates an

electronic market for steel producers and users.

At first B2B e-commerce primarily involved inter-business

exchanges, but a number of other B2B business models have

developed, including e-distributors, B2B service provider’s

matchmakers, and infomediaries that are widening the use of

B2B e-commerce.



B 2 C – business to consumer:

Online business selling to individual consumers.

Example amazon.com is a general merchandiser that sells

consumer products to retail consumer. Grown exponentially

since 1995, and is the type of e-commerce that most

consumers are likely to encounter.

C 2 C – consumer to consumer e-commerce:

Consumer selling to other consumers. Example

eBay.com creates a market space where consumers can

auction or sell goods directly to other consumers.

P 2 P Peer-to-Peer e-commerce:

E-commerce provides a way for consumers to sell to each

other, with the help of an online market such as auction site

eBay.

Use of peer-to-peer technology, which enables internet

users to share files and computer resources directly without

having to go through a central web server, in e-commerce.

Examples Gnutella is a soft ware application that permits

consumers to share music with one another directly, without

intervention of a market maker as in C2C e-commerce.



Definition of Online Trading on the web:

As per the web the sale of goods or services over the

Internet. Customers must enter and submit their credit card

details online; the sale will often proceed without the retailer

and customer ever having personal contact.

Online Trading Patterns:

Online Trading should be screen-based system only.

T+ 2 settlement (T means trading day).

It is a Stock wise and Financial wise.

Shares or security should be in D-Mat only.

Penalty clauses should be applied

Notionally any trade will be done by buying / selling took

place by NSE.

It is only cheque system but no cash system.

This is no intermediaries from 1-10-2004.

It is agreement between stockbrokers and investors.

It not even through authorized person.

It is transaction is franchisee (hand post) or directly should

register with SEBI (Securities Exchange Board of India)

through respective brokers.



Sources of the online marketing:

In the online marketing the most important is to know the

customer, and in order to know the customers the company must collect

information and store it in the customer’s database and do the database

marketing. A customer database is the organized collection of

comprehensive information about individual customers or prospects that

are current, accessible and actionable for such marketing purpose as lead

generation led qualification.

Database marketing is the process of building, maintain and using

customer’s databases and other databases for the purpose of contacting,

transacting, and building relationship.

Customer mailing list is totally different from customer database.

A customer mailing list is simply a set of names, address and telephone

numbers. A customer database contains much more information.

Companies accumulate this information through customer transactions,

registrations, and telephone queries. A customer database would ideally,

contain the customer past purchase, demographic, psychographics and

other useful information.



BACKGROUND OF THE STUDY

Online community is defined as a gathering of individuals in a

computer mediated environment who are united by a common purpose

and governed by self-determined policies.

Online community has five characteristics they are Purpose, Boundary,

Mutuality Rules, and Self-organization.

Why do people join online trading?

Internet has changed the pace of all activities in all over the world.

The share trading has also been affected with the winds of the changes.

Now the complicated procedure of share trading in share market has

become very easy because of the usage of the Internet in this type of

trading. The customers are getting the trading accounts through which

they can trade in the market. And for paying the money also they have no

need to go any where, the money will be debited or credited to customer’s

account automatically. So in the online trading the customers can by

sitting in the home only, trade in the share market.

Online trading will probably be one of the biggest drivers of

penetration as well as successes on the net. Even in India, however far

fetched the idea might be seen, right now. The reasons for this are

A lot more than shares will be traded on the net.

The savings on customer’s brokerage expenses on online trading

will be one of the most satisfying wages to gate.

The transparency, anonymity and certainty it offers are surefire

ways to enhance loyalty.



Online Trading on Stock Exchanges:

Stock exchange is an organized market place where

securities are traded. The Government, semi- Government bodies,

public sector undertakings and companies for borrowing funds raising

resources issue these securities. Securities are defined as any monetary

claims and include stock, shares, debentures, bonds etc.

Under the securities Contract Regulation Act 1956, the Central

Government regulates securities trading and such trading can take

place only in stock exchanges recognized by Government under this

Act. As referred to earlier there are at present 23 such recognized

stock exchanges in India. Of these, major stock Exchanges, like

Mumbai, Delhi, Calcutta, Chennai, Hyderabad, Bangalore etc.

Function of Stock Exchange:

The function of stock exchange can be set out as follows:

Provides quotation for shares/stocks for facilitating trading and

market ability.

Extends liquidity to such stock, as they are easily marketable

and traded.

Promotes savings and investment in the economy by attracting

funds for investment in corporate shares and securities.



Leading Stock Exchanges:

a) National Stock Exchange

b) Bombay Stock Exchange

NSE:

NSE in the world 6th best stock exchange it is introduced first

online trading later on regional stock exchange

BSE:

BSE is one of the regional stock exchanges it is private oldest stock

exchange in India, 26 regional stock exchanges in India.



Online trading of shares:

A share is a unit or part of the share capital of the company

having a special value of amount

Sec 2(46) of the company Act of 1956 defines a Share as a “a

share in the share capital of the Co. and includes stock and share is

expressed or implied.

Advantages of online trading:

Investment benefits

Liquidity is very high

Transparency trade is available

To easy for transferability

Storage stocks are not needed

Pledge and hypothecation is easy.

Quality control is not needed.

Any loss or gain enjoyed by investors directly.

We can buy / Sell the share quickly or directly anywhere in the

world.

Which company shares we want, it can be opted at a faster

phase.



Disadvantages of online trading:

Assessment of the company performance is not proper

means suffering from financial losses.

The process of Online Trading of Shares is very difficult

to understand for common people.

Facing problems in Internet like Hackings and Hangings.

EFFECTIVENESS:

Rates are changing at every second

We can find easily true value

We can do technical analysis and charts

Total number of companies volume is very high compare

to manual trading

Why online share trading?

Safety

Security of money and demoting the shares

Easy

Economic

Independence

Updated and latest price

Two way access

Competitive brokerage



Internet safety:

The safety of transaction on the Internet depends on the encryption

system used. The better this transaction system, the more difficult for any

person to back the site.

Secondly, customers can too ensure the safety of the transaction

online. They normally gets a secured user ID and pass word, the secrecy

of which is to be maintained by customers only.

Thirdly, if the transaction system requires no manual intervention,

customers further improve the safety of the transactions. This enables the

elimination of the possibility of any manual intervention. This means

orders are directly send to the exchanges, ensuring that the customers get

the best right price.

Security of money:

In systems where the broking, banking and demat accounting are

completely integrated, customer’s money remain in his own bank

account, and does not get transferred to the broker’s pool.

Easy:

The experience of trading through Internet depends a great deal on

the type of product offered by the site. Say, for example one of the issues

bothering customers may be tiered of the paper work after every trading

in writing cheques or TIFDs. Customer would then seek a system that

eliminates these processes. In online trading sites, the greater the back-

end integration of the system, the greater the amount of work do the site



for the customers. Therefore, the greater convenience is available for

them.

For example, in case of ICICIDirect.com broking account, bank

account, and demat account are linked electronically. So when customers

punch in a buy or sell order, the system checks the funds/shares

availability and automatically credits/debits the accounts once the order

been executed by the exchange.

Economical:

Contrary to common perception, trading through Internet does not

require either any expertise in working on computer, or any special

financial skills. Customers could try the demo (demonstration) of the

online trading sites like ICICIDirect.com to find that customers can, with

little or no knowledge about the Internet or finance, have switched on to

online trading. Or they can attend the demonstration sessions held by

such websites in their city. The convenience provided by online trading is

even then worth the cost involved. And online trading sites are not that

costly. For example, a trader can trade shares on margin at rate as low as

0.10% on ICICIDirect.com and if one wishes to trade in cash, then rates

applicable as low as 0.4%. However it is important to compare various

online trading sites on brokerage rates, inclusive of all sub changes.

Independence:

Many of those customers, who have chosen to trade shares online

today, had at one point of time been trading through offline brokers. They

took a change to go online trading and trade shares. After realizing the



advantages of trading shares online, they have shifted to online trading

now. In fact there are more than one lakh customers already opened an

account with ICICIDirect.com.

Updated Prices:

The tickers available at online trading sites provide instantaneous

updates. Also, some websites con offer to transact in those shares

instantaneously and with convenience. The solution to this problem could

be provided in different ways in different online trading sites.

At ICICIDirect.com, for any trade order, customer is asked to click

“Proceed” after he has the opportunity to completely check the order

verification form.

Moreover the customers have the option to modify or canceling the

order till the moment the order is executed at the exchange.

Finally the online trade confirmation reaches customer’s within 4

minutes. While contract notes are dispatched at the end of the day and

reach within 24 to 36 hours, with ICICIDirect.com customer can decide

what they want to buy and buy the share at price they want to and

therefore they are in total control of their trade.

Two Way Access:

Brokers too gain. In physical setup, they generally refrain from

taking and retain clients, as the cost of service as percentage of the

volume of their transactions tends to be at higher side. With a Net trading

platform, however, the number of profile of clients has little bearing a

broker’s operational efficiency.



Competitive Brokerage:

Net trading has turned out to be a cost effective proposition.

Brokerage is similar to that under the physical setup – 0.25% to 0.35% up

to the transaction value for delivery-based trades and 0.05% to 0.15% for

speculative trades. The only additional cost for investors opting for the

Net trading route is that of the computer, modem and Internet connection.

Other Services:

Internet has brought to retail investors, what was till some times

ago the sole prerogative of large brokerage houses, high net worth

individuals. For example, at ICICIDirect.com one can access multitude of

resources to arrive his stock picks.

Reliable research with an enviable track record is available for

customers. An investor can now access ICICIDirect.com and do his

technical analysis to know what other leading brokers think about a

company, whether it is a buy or a sell.

An investor can access live news from international news agencies

such as Rulers, CNBC, read abut what the leading CEOs think about the

state of economy and capital market.



CHAPTER - II

RESEARCH DESIGN OF THE STUDY

Introduction:

Research methods are all those methods/techniques that are used

for conducting to the researcher’s use in performing research. Here more

emphasis is made on collection of the data directly through the customers

with directly interacting with them.

Title of the study:

“A Study on Online Trading of Shares” A special reference to

investors.

Statement Of The Problem:

As online trading of securities has been introduced very recently in

India, so as to help the common people from all over the country to invest

in the share market. To make the share market truly democratic in nature,

it is considered as a vital step.

We are unaware of the market condition. This study is totally

concerned about the expectations and behavior of the online-traders. We

are totally unaware of the investor’s choice of portfolios, their mode of

selecting and investing on securities in net trading and their method of

collection of information about the securities. And it is an effort to know

the online trading of securities and the investors in online trading in a

better way.



Review Of The Literature:

Review of the literature is nothing but the subs seeing fact or

retiring or viewing back of the literature, which is available of the same

time. To the best of the knowledge and believe of the researcher, online

trading is new to the market. So review of the literature is not available

and as per as the study concerned, it is immaterial to review of the

literature.

Objectives Of The Study:

The importance objectives of the study are as follows

1. To study the investors preferences towards the portfolios.

2. To study the various methods available to the investors for

investing as per as the portfolios.

3. To study various sources of information for traders/investors.

4. To knows awareness of customers about the online trading.

5. To understand the various online trading patterns utililsing by the

investors.

6. To study the customers opinion towards online trading.

7. To give suggestions and recommendations to the investors.



Scope Of The Study:

The study mainly covers the whole Bangalore City. And

respondents are from all age group and all type of profession.

This study finds out the customer’s choice towards the share

trading and their opinion about their investment. This study gives the

information about the performance of online traders, brokers and the

online sites available as a whole.

Sources Of Data:

Two types of data is collected in this study

1. Primary Data

2. Secondary Data

1. Primary Data:

It involves collection of data from sources from which the

researcher directly collect data that have not been previously

collected. In this study, primary data are collected by the use of two

types of methods:

i. Questionnaire

ii. Interviews

In this study questionnaires are used to collect the data from the

respondents, since where the questionnaires are not adequate,

researcher has used personal interview method for collecting data to

draw the effective conclusion.



2. Secondary Data

These are the data collected from various sources, used in addition

to the primary data in the research. The various sources are the

government publications, research organizations, journals, newspapers,

websites etc.

The website under are.

www.nseindia.com

www.bseindia.com

www.investmentz.com

www.sharekhan.com

www.icicidirect.com

Data Collection Instruments:

1) The research instrument in the study is questionnaire method.

2) Personal interview was conducted along with it.

3) The set of questionnaires were used for all respondents.

Research has mainly one instrument for collecting the primary data,

i.e. questionnaire. Here the questionnaire has been made much easy to

understand and answer, and hence clearly it takes lesser time to respond.

Sampling Design:

Sampling methods or technique may be classified into two generic

types.

a. Probability or random sampling and

b. Non-probability of non-random sampling


http://www.icicidirect.com/

http://www.sharekhan.com/

http://www.investmentz.com/

http://www.bseindia.com/

http://www.nseindia.com/


a. Probability or random sampling:

It is based on theory of probability. It provides known zero change

for selection of each population element. Under this sampling design

every item of the universe has an equal chance of inclusion in the sample.

It is so to say a lottery method in which individual units are picked up

from the whole group, not deliberately but by some mechanical process.

b. Non-probability or non-random sampli ng

It is not based on the theory of probability. This simply does not

provide change of selection of each population element. The only

merits of this type of sampling are simplicity convenience and low

cost.

Non-probability sampling is classified into.

1) Convenience or accidental sampling

2) Judgment sampling

Sample Unit:

In this study the respondents are from whole Bangalore City.

Sample Size:

Sample size has taken 50 respondents.

Sampling Procedure:

In this study non-probability sampling and particularly the

Convenience sampling has been used.



Conceptual Definition Of The Study:

Shares:

Share is a share in the Share Capital of the Company. Shares are

the tools, which are giving the ownership rights to its holders.

Bonus shares:

Bonus shares are shares issued by a company out of its accumulated

profits to the existing equity shareholders either as fully paid shares or as

partly paid shares free of cost.

Demat:

Demat is the abbreviation for the dematerialization. In this the

shares are kept in the electronic form. In other words Demat means

dematerialization it means from physically form converted into

electronically form.

Demat shares introduced in 1998 earlier days is transaction only

physically like bonds.

Remat:

Remat is the abbreviation for rematerialization. In this electronic

shares are transferred in to the physical form.

Cash Trading:

This is delivery based trading system. This is generally done with

the intention of taking delivery of shares on monies.



Margin Trading:

Customers can also do an intra-trading up o four times their

available funds. Where in they take in long buy/short sell position in

stokes with the intension of squaring of the position within the same

settlement cycle.

Spot Trading:

When customers are looking at an immediate liquidity option,

‘cash on spot’ may work best for them. On selling shares through ‘cash

on spot’, money is credited to their bank account the same evening and

not on the exchange payout date.

T + 2 settlements:

T (Trading day) + 2 settlement means the settlement of transaction

will be taken place after 3 days from day of transaction. Government of

India under SEBI (Securities Exchange Board of India) controls it.

BTST:

Buy Today Sell Tomorrow (BTST) is a facility that allows

customers to sell shares even on day after the buy order date. Without

this, they have to wait for the receipt of shares into their demat account.

CallNTrade:

CallNTrade allows customers to call on a local number in their city

and trade on the Telephone through customer Service Executives.



Call in Advance:

The amount received from the shareholders before a call is made is

known as calls paid in advance or calls in advance.

Calls in Arrears:

When a call is not paid by the members within the date specified in

the call notice, the amount of call unpaid on the shares is called calls in

arrears.

Surrender of shares:

Surrender of shares means the return (i.e. giving back) of shares by

a shareholder to the company voluntarily for cancellation. It is a shortcut

to the long and cumbersome procedure of forfeiture of shares.

Market Order:

Customers can trade by placing market orders during market hours

that allow them to trade at the best obtainable price in the market at the

time of execution of the order.

Limit Order:

This allows customer to place a buy/sell order at a price defined by

them. The execution can happen at a price more favorable than the price,

which is defined by them. They can place limit orders during holidays

and non-marketing hours too.



Respondent Profile:

The numbers of respondents are 50. The respondents belong to the

Bangalore.

The respondents were from various age groups.

The respondent’s behavior towards the researcher is friendly and

helping attitude.

The respondents were eager to give suggestions.

Limitations Of The Study:

1. Questionnaire contained a few number of the questions to

facilitate the respondent.

2. Area under the study was limited.

3. I had limited time to get the detailed information about

Online trading of Shares.



CHAPTER - III

PROFILE OF NSE/BSE

History Of Online Trading in India:

In the mid-nineties screen based trading changed the face of

transactions on Indian business. Net came as a helping hand, which

also enhanced the comfort factor of the investors. Now, it is Internet

based trading. Buying and selling shares via Net that is promising to

take the investing experiences to another plane.

BSE and NSE are the two leading stock exchanges in India. BSE

was established in 1875 and is the oldest in Asia. The NSE was

established as a corporate body in 1993, with the primary objectives of

ensuring nation wide electronic trading, high level of transparency and

faster settlement circle.

The NSE has been playing a catalytic role and has significantly

contributed to the reforming of the secondary market in India in terms

of micro-structure; market practices, trading volumes and use of state

of the art technology. The use of satellite communication technology

for trading, using Very Small Aperture Terminals (VSATs), enabled

NSE to rapidly expand across the length and breadth of the country.

Subsequently, after the BSE was granted the required site permissions,

it expanded its trading facilities to the remote corners of the land.



Technology in NSE and BSE:

NSE:

TATA Consultancy Services, a division of Tata Sons Ltd. was

selected as the prime contractor and system integrator by the NSE to

provide a total turnkey solution for the money markets and capital

markets floor less trading system.

The aim was to enable NSE to provide nation wide electronic

trading with highest transparency in the market place. Using the client

server architecture, fault-to-learn computing and in-memory database,

Tata Consultancy Services, solution gave NSE high visibility and impact.

For the year 2006-07, the National Security Clearing and

Settlement System (NSCS) processed settlements for over 172 million

trades with a turnover of around Rs 5, 08,121 crores. In the year 2006-07

nearly 2 million contracts were traded on NSE Future and Option system,

with a national turnover of Rs. 1, 01,925 crores. Here approximately 818

companies listed in NSE.

NSE has the option for trading of securities in both Cash Trading

and Future trading. Hence, while dealing with securities an investor can

negotiate with the price listed in the NSE index.

BSE:

The stock Exchange Mumbai, popularly known as the Bombay

stock Exchange limited is the oldest stock exchange in Asia with a rich

heritage. It was established as “The Native Shares & Stock Brokers

Association” in July 1875 with 22 share brokers. It is the first stock

exchange in the country to obtain permanent recognition in 1956 from the

Government of India under the securities contracts (Regulation) Act

1956.



BOLT, i.e. BSE’s online trading system is designed and developed

by CMC Ltd., now a Tata Group company. This screen based trading

system manual entry method of trading in the ring, and went line on

March 1995. This enabled BSE to provide floor-less and fully automated

screen based trading facilities in capital market instruments, with equal

access to investors all over the country.

BSE has only the option for trading of securities in Cash Trading.

Hence, while dealing with securities an investor can not negotiate with

the price listed in the BSE index.

Approximately 5639 companies listed in BSE & around 9400

brokers are trading in BSE & NSE along with 29 foreign brokers

participating in Online Trading.

One big advantage of web trading is that, market lot ceases to

matter. A registered user, just need to log in the corresponding site and

place order confirmation, which may be followed by physical slip.

With Net trading it make little different, where the investor is,; e-

broker gives him real time quotes and a chance to react immediately.

Still to catch on:

Online trading has not yet been taken off for various reasons:

I. The concept is very new.

II. Security concerns (Hacking and Connectivity)

III. Potential investors in India are yet to trust their e-brokers.

Hacking is a problem even with e-banking or e-commerce, and

potential users may well fear to live with this. Connectivity is another

major problem. Right in the middle of hectic trading one may go offline,

or the web may jam during heavy trading.



SECURITIES EXCHANGE BOARD OF INDIA (SEBI)

SEBI, which was a earlier established as an administrative

body in April 1988, was given a statutory status January 1992. Controller

of Capital Issue (CCI) was abolished with a view to have SEBI as a single

agency to look after control over capital market.

SEBI Act mainly deals with formation, management,

staffing, accounts, reports, and audit of SEBI etc. It is the supervisory and

regulatory authority for the stock and capital markets.

SEBI functions :

The SEBI can take following measures to fulfill its objectives:-

Regulate business in stock exchanges and other securities market.

Control and Regulation of the stock Exchanges and stock brokers.

Development of stock and capital markets in the right direction.

Registering and regulating self-regulatory organizations (like stock

Exchanges).

Promoting investors education and training of intermediaries.

Prohibiting fraudulent and unfair trade practices relating to

Securities Market.

Prohibiting insider trading in securities.

To ensure investor protection.



SEBI Guidelines:

Highlights of the guidelines issued by SEBI are summarized below.

At least 60% of each kind of securities issued by company must

offer to public subscription.

Offer must be made through a prospectus in news papers for a

period not less than three days,

Minimum capital for listing on stock exchanges – It should be

noted that minimum equity capital requirement for listing on

Bombay Stock Exchange is Rs. 10 crores.

Fresh issue must be de-materialized – All fresh issue of capital

will have compulsorily get their securities admitted with all

depositories for de-materialization.

Company shall promptly forward to Stock Exchange copies of

Annual reports, notice, circulars sent to Share Holders.



PROCESS AND REQUIREMENTS OF ONLINE

TRADING OF SHARES:

Online Trading is one the true revolutions brought about by the

internet. Few things have changed as much as trading stocks and other

securities, especially for the average person. Where any can come to take

part in the amazing opportunities of the stock market.

But this kind of access also has dangers. While the average person

can now buy stock, participate in the forex market, buy bonds, and

purchase shares in mutual funds, the average person is certainly not

guaranteed success in those investments. The information is provided

here is designed to help familiarize the beginning investor with of the

most basic concepts of the stock market and stock market trading. Stock

market trading system or form of analysis for your investing strategy.

Online Trading is the mechanism of buying /selling securities via

the Internet.



Online Trading Process:

The client places an order via net by logging

on to his broker’s site

The broker accepts and executes the order. And

places it with the exchanges

The broker makes the payment either directly

via the client’s bank account or pays through

his own account and recovers it later from the

client

The exchange receives money and completes

the settlement

The client is intimated about the settlement

either through the De-Mat account or via e-

mail


The exchange accepts the order after

checking the share limit for the day


The various transaction involved in the online trading can be

shown from the point of view of the

Client

Broker

Stock Exchange

Client:

Client is a person and he receiving some benefits from brokers

or institutions and is an ultimate consumer.

Broker:

An individual or firm who acts as an intermediary between a

buyer and seller, usually charging a commission. For securities and

most other products, a license is required.

Stock Exchange:

Stock Exchange is an organized market place where securities are traded.

The Government, semi- Government Bodies, public sector undertakings

and companies for borrowing funds and rising resources issue these

securities



Benefits of Online Trading:

This mode of trading has shifted the trading power from stockbrokers to

individual investors. The advantages are that it:

Ensures the best price for the investors:

This technique offers the best price for the buying and selling

transactions of the investors, by ensuring proper matching of their

orders within the communication network itself.

Offers liquidity to the investors:

Online trading offers 24-hour trading facilities for longer

hours when compared to the traditional stock exchanges. This

provides added liquidity to the investors.

Offers greater transparency:

Online trading gives transparency to the investors by providing

them an audit trail.

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.

Allows 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 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.

Reduces the settlement risk:

This method of trading reduces the settlement risk for the

investor, as in this case no short sale is possible I.e. the seller will not

be able to sell the securities unless he has their actual possession.

Basic Risks Involved in Trading on the Stock Exchanges:

In considering whether to trade or authorize someone to trade for

you, you should be aware of or must get acquainted with the

following:

Risk of higher volatility:

Volatility refers to the dynamic changes is price that securities

undergo when trading activity continues on the stock exchange.

Generally, higher the volatility of a security /contract, greater is its

price swings.

Risk of lower liquidity:



Liquidity refers to the ability of market participants to buy and

/or sell securities / contracts expeditiously at a competitive price and

with minimal price difference. Generally, it is assumed that more the

numbers of orders available in a market, greater are the liquidity.

Risk of wider spreads:

Spreads refer to the difference in best buy and best sell price. it

represents the differential between the piece of buying a security and

immediately selling it or vice versa.

Risk reducing orders:

Most exchanges have a facility for investors to place “limit

orders”, “stop loss orders”, etc.

A “market” order will be executed promptly, subject to

availability of orders on opposite side.

A “limit” order will be executed only at the “limit” price

specified for the order or a better price.

A stop loss order is generally placed “away” from

the current price of stock/contract, and such order gets

activated if and when the stock/ contract reaches, or trades

through, the stop price.

Risk of News Announcements:

Issuers make news announcements that may impact

the price of the securities/ contract.



Investors Rights and Obligations:

You should familiarize your self with the protection accorded to the

money or other property you may deposit with your member, particularly

in the event of a default in the stock market or the broking firm’s

insolvency.

Before you begin to trade, you should obtain a clear idea from your

member of all brokerage, commission, fees and other charges, which will

be levied on you for trading.

In case where a member surrenders his membership, NSE/BSE gives a

public notice inviting claims, if any, from investors.

In case where a member is expelled form trading membership,

NSE/BSE gives a public notice inviting claims, if any, from investors.



General Conditions Applicable to Deal in Cash /Derivative

Segments of NSE/BSE:

(These conditions shall be apply on and effective from the date of this

agreement)

Definition:

Meaning of the phrases used in the agreement unless otherwise

specified or unless the context otherwise requires, the meaning of the

following words and phrases used in this agreement shall be under

“He” means she and “she” means he

Singular means plural and plural means singular

SEBI means Securities Exchange Board of India

CLIENT means any person, natural or legal with

whom this agreement is entered into.

Exchange/s means National Exchange of India

Limited and Stock Exchange Mumbai.

Sub broker means any person appointed as sub broker

and holding valid certificate of registration issued

bySEBI

Shares means and include all kinds of securities

permitted by Exchange/s permitted for trading or

dealing by the Exchange/s.



CHAPTER - IV

ANALYSIS AND INTERPRETAION OF DATA

Based on the primary data collected the analysis has been made the

following data.

TABLE – 1

THE TABLE SHOWING SEX WISE DISTRIBUTION OF RESPONDENTS

PARTICULARS NO OF RESPONDENTS

PERCENTAGE

Male 40 80 %

Female 10 20 %

Total 50 100 %

CHART NO-1

40

10

0

10

20

30

40

NO OF RESPONDENTS

CHARTS SHOWING SEXWISE DISTRIBUTION OF RESPONDENTS

Male

Female



ANALYSIS

From the above table among 50 respondents the majority of

respondents are from a male group whose count was 40 (80%) The

female group makes a share of 10 (20%) total sample respondents.

INTERPRETATION

The above data clearly specifies that male respondents are more then

female respondents

TABLE – 2

THE TABLE SHOWING AGE GROUP DISTRIBUTION

OF THE RESPONDENTS


PERCENTAGE

Less Than 25 Years 7 14 %25 – 35 Years 10 20 %35 – 45 Years 15 30 %45 – 55 Years 10 20 %55 & above 8 16 %

Total 50 100 %CHART NO- 2

7

10

15

108

0

5

10

15

NO OF RESPONDENTS

CHART SHOWING AGE GROUP DISTRIBUTION OF RESPONDENTS

Less Than 25 Years 25 – 35 Years 35 – 45 Years 45 – 55 Years 55 & above



ANALYSIS

From the above table shows among the 50 respondents 7 (14%)

respondents are below 25 years of age, 10 (20%) respondents are 25 –35

years of age, 15(30%) of respondents are comes under 35 – 45 age

groups , 10 (20%) respondents are comes under 45-55 years and only 8

(16%) respondents are above 55 years.

INTERPRETATION

The majority of investors are 35- 45 age group who trades on line.

TABLE NO-3

TABLE SHOWING QUALIFICATION OF RESPONDENT


PERCENTAGE

Under Graduate 12 26 %Graduate 18 36 %

Post Graduate 20 40 %Others 0 0Total 50 100 %

CHART NO- 3

12

1820

0

0

5

10

15

20

NO OF RESPONDENTS

CHART SHOWING THE QUALIFICATION OF RESPONDENTS

Under Graduate

Graduate

Post Graduate

Others



ANALYSIS

The above table shows among the 50 respondents 12 (24%) respondents

are graduate, 18 (36%) respondents are graduate, 20 (40%) respondents

are comes under post graduate.

INTREPRETATION

With reference to qualification of members trading on line post graduates

contribute 40%.

TABLE NO – 4THE TABLE SHOWS THE OCCUPATION OF THE

INVESTORS

PARTICUALARS NO OF RESPONDENTS

PERCENTAGE

Business men 20 40 %Salaried Employee 10 20 %Retired Employee 6 12 %

Professional 10 20 %Student 4 8 %Others 0 0Total 50 100 %

CHART NO-4

CHART SHOWING THE OCCUPATION OF INVESTORS

20

10

6

10

4

00

5

10

15

20

25

NO OF RESPONDENTS

Business men

Salaried Employee

Retired Employee

Professional

Student

Others



ANALYSIS

From the above table out of 50 respondents, 20 (40%) are business men,

10 (20%) respondents are salaried employees, 6 (12%) are Retired

employees and Professional are 10 (20%) and only 4 (8%) respondents

are Students.

INTERPRETATION

With reference to occupation businesses men majorly use on line trading

contributing 40%.

TABLE NO – 5ANALYSIS OF THE INVESTMENTS

SECTORS FREQUENCY PERCENTAGEBanking 8 16 %Insurance 13 26 %Manufacturing 3 6 %Infrastructure 10 20 %I T 11 22 %Others 5 10 %

TOTAL 50 100 %

CHART NO-5

8

13

3

1011

5

0

2

4

6

8

10

12

14

FREQUENCY

CHART SHOWING THE INVESTMNETS ACCORDING TO DIFFERENT SECTORS

Banking

Insurance

Manufacturing

Infrastructure

I T

Others



ANALYSISAmong the 50 respondents, 16 % of them have invested in

“Banking”, 26 % in “Insurance”, and 6 % in “Manufacturing”, 20 % in

“Infrastructure”, 22 % in “I T” and 10% in “others”.

By the above table we can consider that 26% insurance, and 20% in

infrastructure, 22%in I T it has are the major investments sectors in

online trading of shares.

INTERPRETATION

Major investment is done by investors through insurance sectors i.e 13%.

TABLE NO – 6

ANALYSIS OF DURATION OF INVESTMENT OF INVESTORS


PERCENTAGE

Less then 1 year 21 42 %1 to 2 year 7 14 %2 to 4 year 12 24 %4 to 6 year 5 10 %

More than 6 Year 5 10 %TOTAL 50 100 %

CHART NO - 6

21

7

12

5 5

0

5

10

15

20

25

NO OF RESPONDENTS

CHART SHOWING THE DURATION OF INVESTOR'S INVESTMENT

Less then 1 year

1 to 2 year

2 to 4 year

4 to 6 year

More than 6 Year



ANALYSIS:Among 50 respondents, only 21 people are investing in Online

Trading of Shares for less then 1 year, 7 for1-2 years, 12 for2- 4 years, 5

for 4-6 years and 5 for more than 6 years. It means that 42 % people are

investing for less then 1 year, 14% for 1-2 years, 24 % for 2-4 years, and

10 % each for 4-6 years and more than 6 years.

INTERPRETATION

The numbers of investors in Online Trading of Shares are

increasing due to increased awareness and prospects of this form of

investment. A gradual increase in the participation in “Online Trading of

shares” can be easily seen in the above table and following graph.

The proper mix of moderate risks and high returns are attracting the

investors to Online Trading of Shares.



TABLE NO –7

ANALYSIS OF SOURCES OF INFORMATION FOR INVESTORS


PERCENTAGE

News Papers 14 28 %

Journals 4 8 %

T.V News 9 18 %

Internet 10 20 %

Family & Friend 2 4 %

Brokers 11 22 %TOTAL 50 100 %

CHART NO-7

14

4

910

2

11

0

2

4

6

8

10

12

14

NO OF RESPONDENTS

CHART SHOWING THE SOURCES OF INFORMATON TO INVESTORS

News Papers

Journals

T.V News

Internet

Family & Friend

Brokers

ANALYSIS In Bangalore are among 50 respondents, 28 % get the required

information from “News Paper”, followed by 22 % from “Broker”, 20

% from “Internet”, 18 % from “T.V. News’, 4 % from “Family &

Friends”, and remaining 8 % from “Journals” respectively for their

requirement.



INTERPRETATION

Online traders in Bangalore still depend upon the “News Papers”

for their required information in the Online Trading. Being the cheapest

and readily available means of information, the news papers are more

favorite among them. The second favorite source of information is the

brokers themselves. The brokers give all the necessary information to the

online traders with the periodic updated information of those, followed by

T.V News, Family and Friends and Journal

In the century of Electronic Media, the Printed Media is still a

reliable and favorite source of information for online traders.



TABLE NO –8

OBSERVATION OF THE BSE/NSE SENSITIVE INDEXES ON THE INVESTMENT

PARTICULARS Yes No TOTAL

NO OF RESPONDENTS

41 9 50

PERCENTAGE 82 % 18 % 100 %

CHART NO-8

41

9

0

10

20

30

40

50

NO OF RESPONDENTS

CHART SHOWING THE SESITIVITY INDEX OF NSE/BSE

YES

NO

ANALYSIS Among 50 respondents, 41 people analyze the chart pattern of

BSE/NSE sensitive indexes before they go for investing in any security,

while 9 do not. That is 82 % of the investors go for the analysis of chart

pattern and remaining 18 % does not.



INTERPRETATION

Analysis of chart pattern of sensitive indexes is concerned with

“Technical Analysis”. Since the technical analysis deals with the supply

and demand of securities as reflected in the behavior of the market, the

investors go for it. They are more concerned about the demand and

supply position of securities, as they influence the price of the securities.

Online traders thus do not distinguish between current income and capital

gains.

TABLE NO – 9

FACTORS CONDUCTED BY INVESTORS FOR MAKING INVEVESTMENT

FACTORS Most Important

Very Important

Important Un Important

Not at all Important

TOTAL

Time 14 14 19 0 50

Liquidity 13 19 13 4 1 50

Returns 19 10 13 8 0 50

Safety 16 19 8 5 2 50

Risk 19 10 21 0 0 50

Past Performance 7 16 19 4 4

50

Marketability 9 7 18 16 6 50

Capital Appreciation

11 16 14 4 5 50



CHART N0-9.1

14 13

1916

19

79

11

0

5

10

15

20

Most Important

CHART SHOWING THR DIFFERENT FACTORS MOST IMPORTANT FOR ON LINE TRADING

Time

Liquidity

Returns

Safety

Risk

Past Performance

Marketability


CHART N0-9.2

14

19

10

19

10

16

7

16

0

5

10

15

20

Very Important

CHART SHOWING THE FACTOR WHICH IS VERY IMPORTANT FOR ON LINE TRADING

Time

Time

Liquidity

Returns

Safety

Risk

Past Performance

Past Performance

Marketability





CHART N0 - 9.3

19

13 13

8

2119 18

14

0

5

10

15

20

25

Important

CHART SHOWING THE FACTOR WHICH IS IMPORTANT FOR ON LINE TRADING

Time

Time

Liquidity

Returns

Safety

Risk

Past Performance

Past Performance

Marketability



CHART N0 - 9.4

4

8

5

0

4

16

4

0

2

4

6

8

10

12

14

16

Un Important

CHART SHOWING THE FACTORS WHICH IS UNIMPORTANT FOR ON LINE TRADING

Time

Time

Liquidity

Returns

Safety

Risk

Past Performance

Past Performance

Marketability





CHART N0 - 9.5

0

1

0

2

0

4

6

5

0

1

2

3

4

5

6


CHART SHOWING THE FACTOR WHICH IS NOT AT ALL IMPORTANT FOR ON LINE TRADING

Time

Time

Liquidity

Returns

Safety

Risk

Past Performance

Past Performance

Marketability



ANALYSIS

The 18 % investors has preferred to analyze “Return” at first as the

“Most Important” factor followed by, 17 % called “Safety” as the “Very

Important” factor, 18 % called “Risk” as “Important” factor, 36 % called

“Marketability” as the “Un Important” factor, and 42 % called “Capital

Appreciation” as the “Not at all Important” factor, before investing in

Online Trading of any Security. This can be clearly understood by the

following graphs.

INTERPRETATION

The investors of “Online Trading of Security, are very sensitive

towards the return they expect from their investments. Along with this

fact, they are seeking safety in their investments with avoiding risk as

much as possible. These investors do not consider difference between the

capital appreciation of their fund and the growth of their capital invested.



TABLE NO-10

ANALYSIS OF FACTORS INFLUENCING ON INVESTMENTS

PARTICULARS Most Important

Very Important Important

Un Important

Not At All Important

TOTAL

Economic Growth 18 10 16 6 0

50

Monsoon and Agriculture

9 13 16 11 1 50

Inflation 7 18 20 4 1 50

Interest Rates 11 14 20 4 1 50

Foreign Exchange Reserve

9 15 14 8 4

50

Tax Rates 11 14 14 11 0 50

Political Situation 11 11 15 10 3

50

International Changes in Capital Market

10 11 11 14 4

50

CHART NO –10.1

18

97

119

11 11 10

0

5

10

15

20

Most Important

CHART SHOWING THE MOST IMPORTANT FACTORWHICH INFLUENCE THE INVESTMENT

Economic Growth Monsoon and Agriculture

Inflation Interest Rates

Foreign Exchange Reserve Tax Rates

Political Situation International Changes in Capital Market



CHART NO – 10.2

1013

1814 15 14

11 11

0

10

20

Very Important

CHART SHOWING THE VERY IMPORTANT FACTOR WHICH INFLUENCE THE INVESTMENT

Economic Growth Monsoon and AgricultureMonsoon and Agriculture InflationInterest Rates Foreign Exchange ReserveForeign Exchange Reserve Tax RatesPolitical Situation International Changes in Capital MarketInternational Changes in Capital Market

CHART NO – 10.3

16 16

20 20

14 14 15

11

0

5

10

15

20

Important

CHART SHOWING THE IMPORTANT FACTOR WHICH INFLUENCE THE INVESTMENT




CHART NO – 10.4

6

11

4 4

8

1110

14

0

2

4

6

8

10

12

14

Un Important

CHART SHOWING THE UNIMPORTANT FACTORS INFLUENCING THE INVESTMENT


CHART NO – 10.5

0

1

2

3

4


CHART SHOWING THE FACTORS WHICH IS NOT AT ALL IMPORTANT FOR INVESTMENT

Economic Growth

Monsoon and Agriculture Monsoon and Agriculture

Inflation Interest Rates

Foreign Exchange Reserve Foreign Exchange Reserve

Tax Rates Political Situation

International Changes in Capital Market International Changes in Capital Market



ANALYSIS The 21 % investors has preferred to analyze “Economic Growth” at

first as the “Most Important” factor followed by, 18 % called “Inflation”

as the “Very Important” factor, 16 % called “Interest Rates” as

“Important” factor, 20 % called “International in Capital Market” and

”Tax Rates” as the “Un Important” factor, and 29 % called “Foreign

Exchange Reserve” as the “Not at all Important” factor, before

investing in Online Trading of any Security. This can be clearly

understood by the following graphs.

INTERPRETATION

The Stock market does not operate in vacuum. It is an integrated

part of the whole economy of the country. The growth rate of the

Economy increases the participation in the “Online Trading of

Securities”. As inflation erodes the purchasing power of the investors,

they prefer to have a close watch on inflation rates before investing. A

low rate of interest is preferred by investors, since when cost of money is

high one cannot compete effectively.

The effect of monsoon is seemed to be less on the online traders. And the

foreign exchange reserve gets the lowest concern from investors, since

our country has enough of it, i.e., second highest in the world.



TABLE NO–11

CONSIDERATION OF RISK FACTORS WHILE INVESTING

TYPE OF RISKS

Rank 1

Rank 2

Rank 3

Rank 4

Rank 5

Rank 6 TOTAL

Market Risk 8 11 10 5 7 9 50

Interest-rate Risk 4 14 9 16 4 3 50

Purchasing Power Risk 11 4 14 7 6 8

50

Business Risk 9 15 5 10 5 6 50

Financial Risk 14 2 4 4 12 14 50

Default/Insolvency Risk 5 3 9 8 15 10

50

CHART NO-11

CHART SHOWING THE VARIOUS RISK FACTORS

11

14

4

15

23

109

14

54

9

5

16

7

10

4

87

4

65

12

15

9

3

8

6

14

10

0

2

4

6

8

10

12

14

16

18

Rank 1 8 4 11 9 14 5

MarketRisk

Interest-rate Risk

Purchasing PowerRisk

BusinessRisk

FinancialRisk

Default/InsolvencyRisk

Rank 2 Rank 3 Rank 4 Rank 5 Rank 6



ANALYSIS Among the risks, 27.5 % investors ranked “Financial Risk” the

first, followed by 30 % ranked “Business Risk” as the second, 28. %

ranked “Purchasing Power Risk” as third, 32. % Ranked “Interest-rate

Risk” as fourth, 30 % ranked “Default/Insolvency Risk” as fifth, and

remaining 17.5 % ranked “Market Risk” as they prefer to cover for their

investments.

INTERPRETATION

The investors want to withdraw their funds as and when required

by them, to make specific payments at specific time periods. They thus

like to have a close watch on the debt financing of the firm they want to

invest. They don not want to invest on those firms which have uncertain

income sources. The purchasing power of the income from a given

investment is also having a great importance on their decision of

investment on a given firm. Uncertainty of future income due to

fluctuation in general level of interest-rate also concerns the investors.



TABLE NO – 12

IMPORTANT FACTORS WHILE SELECTING A COMPANY TO INVEST

PARTICULAR Most Important

Very Important



TOTAL

Promoters 23 11 9 6 050

Management 9 23 7 11 050

Technology 11 16 18 5 050

Product Range 10 9 21 10 0

50

Marketing 15 16 9 10 0 50

CHART NO -12

CHART SHOWING THE FACTORS TO CONSIDER BEFORE INVESTING

23

911

10

15

11

23

16

9

16

97

18

21

9

6

11

5

10 10

0 0 0 0 00

5

10

15

20

25

Prom

oter

s

Man

agem

ent

Techn

olog

y

Produ

ct Ran

ge

Mar

ketin

g

Most Important

Very Important

Important

Un Important




ANALYSIS

Before investing in a given company, 23 online traders out of 50,

rank “Promoters” as the “Most Important” factor, followed by 23 online

traders who think “Management” of the company is “Very Important”

factor to analyze. Out of 50 investors 21 take “Product Range” of the

company as “Important” factor to analyze, and 10 think, as “Marketing”

is a “Un- Important” factor. None of the traders selected any of the above

factors as “Not At All Important” factor.

INTERPRETATION

The investors are well aware of any company before investing in it.

They know who are the promoters, the efficiency of the management of

the company, the types of technology it is adopting, its product range, its

marketing policies and practices, etc. Online traders give much

importance to the promoters of the company before investing into it. As it

can be seen in above table. Management of the company is also

considered as a very vital factor; as people like to invest in a company

with an efficient management. A company with a number of products in

its hand is also considered as a good one to invest in.

People less often go for evaluating the marketing strategies of the

company before investing into it, as well satisfied with other factors like

“Management”, “Promoters”, “Product Range” etc., they find it

unnecessary.



TABLE NO – 13

CONSIDERATING OF STAGES OF LIFE CYCLE WHILE INVESTING


PERCENTAGE

Yes 36 72 %

No 14 28 %

TOTAL 50 100 %

CHART NO – 13

YES, 36

NO, 14

0

10

20

30

40

NO OF RESPONDENTS

CHART SHOWING DIFFERENT LIFE CYCLE OF INVESTING

YES

NO



ANALYSIS

Among 50 respondents, 36 people use to analyze the life-cycle of

the particular industry before investing into it, and 14 people do not. Thus

72 % of them go for the study of industry life cycle before investing into

it, and 28 % not.

INTERPRETATION

The purpose of industry analysis is to identify those industries with

potential to earn profit for itself and for the investors. Every industry

undergoes a life-cycle. An industry doing well today may be faced with

stagnation and decline in future.

Investors like to study the phases of life-cycle of industries before

investing into a particular industry. Since Industrial Analysis is one of the

major parts of Fundamental Analysis, knowingly or unknowingly they are

conducting Fundamental Analysis within their limits.



TABLE NO – 14

STAGE OF LIFE CYCLE OF THE INDUSTRY PREFERRED TO INVEST

PARTICULARS Pioneering Stage

Expansion Stage

Stagnation Stage

Declining Stage

TOTAL

NO OF RESPONDENTS 11 14 9 2 36

PERCENTAGE 31 % 38 % 24 % 7 % 100 %

CHART NO – 14

CHART SHOWING THE LIFECYCLE OF INDUSTRY TO INVEST

11

14

9

2

0 5 10 15

Pioneering Stage

Expansion Stage

Stagnation Stage

Declining Stage

NO OF RESPONDENTS



ANALYSIS

Among 36 respondents who study the life-cycle of the industries

before investing in a particular industry, 11 like to invest in” Pioneering

Stage”, 14 like to invest in “Expansion Stage” , 9 like to invest in

“Stagnation Stage”, and remaining 2 in “Declining Stage”.

INTERPRETATION

The online traders prefer to stay as secured as possible by investing

in an industry which is growing or which has grown to its maturity. Thus

they seek benefit by investing in these two stages of life-cycle. A large

percentage of investors also like to invest in industries at “Pioneering

Stage”, showing their ability to take more risk in anticipation of more

return. A very small percentage of investors, 7 % goes for investing in

“Declining Stage”, in expect of unknown benefit they can extract with

sudden boom in the industry.



TABLE NO – 15

INCOME FROM INVESTMENTS OF ON LINE

TRADING SHARES

Particulars NO OF RESPONDETS

Percentage

No Income 10 20 %Below Rs.1, 00,000 30 60 %

Rs.1, 00,000 to Rs.2, 00,000 6 12 % Rs.2, 00,000 to Rs.3, 00,000 4 8 %Rs.3, 00,000 to Rs.4, 00,000 0 0

Rs.4, 00,000 & Above 0 0 Total 50 100 %

CHART NO-15



ANALYSIS

Among the 50 respondents, 10 have no income, 30 are getting below

1,00,000., 6 are getting 100,000 – 2,00,000., 4 are getting 200,000. -

3,00,000., and no one is getting 3,00,000 – 4,00,000, and above.

INTERPRETAION

Majority of respondents are getting income in online trading of shares in

the range of below 1, 00,000 (60%). 20% of respondents are getting

negatives income because of their neglected or improper information

about shares. Who are not satisfied in getting the online shares, so

increasing the awareness about Online Trading of Shares?



TABLE NO – 16

ANALYSIS OF ANNUAL SAVINGS OF INVESTORS

Particulars NO OF RESPONDENTS

Percentage

Below Rs.10,000 30 75 %

Rs.10,000 to Rs.20,000 6 15 %Rs.20,000 to Rs.30,000 4 10 %Rs.30,000 to Rs.40,000 0 0

Rs.40,000 & Above 0 0Total 40 100 %

CHART NO – 16

CHART SHOWING THE ANNUAL SAVINGS OF NVESTORS

30

64

0 00

5

10

15

20

25

30

35

NO OF RESPONDENTS

Below Rs.10,000

Rs.10,000 to Rs.20,000

Rs.20,000 to Rs.30,000

Rs.30,000 to Rs.40,000

Rs.40,000 & Above



ANANLYSIS

Among the 40 respondents 75% were saving below 10,000., 15% are

Rs.10,000 to 20,000., 10% are Rs. 20,000 to 30,000., and No one is

saving are saving are Rs.30,000 to 40,000 and Rs.40,000 & above.

INTERPRETATION

Maximum respondents are savings (30) in this scale of below 10,000

which majorly contributes 75%.



TABLE NO – 17

ANALYSIS OF PREFERRED MARKET STRUCTURE

PARTICULARS Absolute Monopoly

Perfect Competition

Imperfect Competition

TOTAL

FREQUENCY 24 17 9 50

PERCENTAGE 48 34 18 100

CHART NO-17

CHART SHOWING THE MARKET STRUCTURE

0

5

10

15

20

25

30

FREQUENCY

Absolute Monopoly

Perfect Competition

Imperfect Competition



ANALYSIS Among 50 respondents, 48 %age of online trader prefer “Absolute

Monopoly”, followed by 34 % of them preferring “Perfect

Competition” and remaining 18 %age go for “Imperfect Competition”.

INTERPRETATION

Online traders prefer to invest in a company which is market

dominant by nature. As these companies dominate the market because of

their core competence like technology or patent rights etc. thus allowing

the investors to milk their investment. 35 % investors, who prefer to

invest in an industry where no single company is dominating, follow

them, thus they go for moderate risk involved investments with limited

growth of their money.

Still a percentage of investors, that is, 18 % of them, like to invest in

an industry with “Imperfect Competition”, since it lies between “Absolute

Monopoly” and “Perfect Competition”, thus enjoying benefits of both the

form of markets.



TABLE NO – 18

IMPORTANCE OF THE SHARE PRICE MOVEMENT BSE/NSE INDEXES ON THE INVESTMENTS

PARTICULARS Most important

Very Important



Total

FREQUENCY14 18 11 7 0 50

PERCENTAGE28 36 22 14 0 100

CHART NO-18

CHART SHOWING THE BSE/NSE SENSEX SHARE PRICE MOVEMENTS

14

18

11

7

0

0 5 10 15 20

Most important

Very Important

Important

Un Important


FREQUENCY

FREQUENCY



ANALYSIS Among 50 respondents when asked about the importance of the

share price movements in BSE/NSE indexes on their decision of

investing in a particular security, 28 % says its “Most Important”, 36 %

says its “Very Important”, 22 % says its “Important”, 14 % says its “Un

Important”, and none says its “Not At All Important”.

INTERPRETATION

Online traders prefer technical analysis of the chart pattern. Most

of them take care of the movements of the share prices in the BSE/NSE

indexes. Only a few of them, that is, 15 % of them take it as un-important

factor, it shows their inability to analyze the chart patterns. Though this

group has not rejected the importance of the movement of share prices in

these indexes on their investments



TABLE NO – 19

ANALYSIS OF THE TERMS OF PATTERN

PARTICULARS NO OF RESPONDENTS PERCENTAGE

Short term 30 60

Long term 20 40

Total 50 100

CHART NO-19

CHART SHOWING THE ANALYSIS OF TERMS

30

20

0

5

10

15

20

25

30

35

NO OF RESPONDENTS

Short term

Long term



ANALYSIS

Among the 50 respondents 30 respondents are investing in Short term and

20 respondents in Long term investments.

INTERPRETATION

There fore Short term investors is popular because it has 60% of the

investment in Online Trading of Shares. Short term investments yields

probably the higher returns.



TABLE NO – 20

ANALYSIS OF AVERAGE HOLDING PERIOD FOR INVESTORS

PARTICULARS 1 Week1 Month to 3 Months

Within 6 Months

Within 1 Year

More than 1 Year

TOTAL

NO OF RESPONDENTS

9 14 17 8 250

PERCENTAGE18 % 28 % 34 % 16 % 4 % 100 %

CHART NO-20



ANALYSIS

Among 50 respondents, the average holding period for 9 is “1

Week”, 14 is “1 Month to 3 Month”, 17 is “Within 6 Month”, 8 is

“Within 1 Year”, and 2 is “More than I Year”. Their respective

percentages are 18 %, 28 %, 34 %, 16 %, and 4 % respectively.

INTERPRETATION

Investors of online trading of securities like to hold their securities

for a minimum period. It can be seen by the fact that 80 (18+28+34) % of

the investors hold their securities for 6 or less than 6 months. But they

like to watch the movements of the market for a while before going for

selling their assets, as only 18 % of them hold their securities for 1 week

or less than 1 week.

But still investors are there who would like to hold the securities for

almost one year, and a negligible of them for more than one year. The fast

moving prices of securities and the updated information helps the online

traders to take quick and effective decision at right time.



TABLE NO – 21

FAMILIARITY OF ONLINE TRADING SERVICES


PERCENTAGE

ICICI 1836 %

HDFC 1224 %

Peninsular capital market Ltd 1020 %

Motilal Oswal 48 %

Kotak 612 %

Tata td Waterhouse 00

TOTAL 50 100 %

CHART NO-21

18

1210

46

0

0

5

10

15

20

NO OF RESPONDENTS

CHART SHOWING THE FAMILIARITY OF ON LINE SERVICES

ICICI HDFC Peninsular capital market Ltd Motilal Oswal Kotak Tata td Waterhouse



ANALYSIS

Among the 50 respondents, 36 % are familiar with “ICICI”, 26 %

with “HDFC”, 20 % with “Peninsular capital market Ltd”, 8 % with

“Karvy”, 12 % with “Kotak”, and none with “Tata td Waterhouse”.

INTERPRETATION

In Bangalore, the online traders are aware of ICICI, HDFC and

Peninsular capital market Ltd. As they count for 84 (36+24+20) %. An

excellent service and awareness helps them to win the confidence of

investors.



CHAPTER - V

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

A) FINDINGS:

1. The Male investors 80 % are highly interested in online trading of

shares and Female investors are not so much interested.

2. In the age group of 35 – 45 years (30%) are more interested

investment in Online Trading of Shares and at the age of 25 – 35

years (20%) and 45 – 55 years (20%) are equally interested, only

16% are interested above 55 years.

3. The majority of investors are post graduates (40%) because they

are highly interested in share market. The next majority is Graduate

(36%), and under graduates are only 24%.

4. The Business men 40% are more interested in investments of

shares because of them are having very good knowledge about

share market and its dealings Salaried employee (20%) and

Professional 20% are not having much knowledge about share

market and retired employees and Students 24% are least interested

in investment in online trading of shares.

5. In the insurance sectors 26% are majority invested because it is

more beneficial to the investors and following the next majority IT



22% and Infrastructure 20% are also benefit to the investors and

32% are much selected from other sectors.

6. The majority of investors 42% are investing lessthan one year

because in recent times share market is very popular to invest and

have high returns and 4 – 6 years and above 6 years investors are

only 20%.

7. The majority collected information through the newspapers (28%)

because it is cheaper than any other sources of information and

have a detailed data and following the next brokers 22% and

internet 20%.

8. From the analysis of data collected we can know that 82% of

investors follow the BSE/NSE sensex chart pattern. 18% investors

are not following chart pattern.

9. Risk (18%) and Return (18%) are both considered most important

factors while investing in shares because they are more effective

factors and capital appreciation are not at all important.

10.The growth rate of the economy 21% increases the participation in

the “Online Trading of Shares”. As inflation 18% erodes the

purchasing power of the investors, they prefer to have a close

watch on inflation rates before investing. A low rate of interest is

preferred by investors, since when cost of money is high one can

not compete effectively.

11.The effect of monsoon is seemed to be less on the online traders.

And the foreign exchange reserve gets the lowest concern from



investors, since our country has enough of it, i.e., second highest in

the world.

12.Financial risks 27.5% is most important while investing and it is

considered by the investors followed by business risks and

investment risks.

13.Online traders give much importance to the promoters (23)of the

company before investing into it. Management (23) of the

company is also considered as a very vital factor; as people like to

invest in a company with an efficient management. A company

with a number of products (21) in its hand is also considered as a

good one to invest in.

14.Investors like to study 72 % the phases of life-cycle of industries

before investing into a particular industry.

15.The online traders prefer to stay as secured as possible by investing

in an industry which is growing 38% or which has grown to its

maturity 24%.

16.The majority investors 60 % are getting income form shares below

Rs. 1, 00,000. And respondents who are earning income above Rs.

100,000 (20%) are only 10.

17.Online traders prefer technical analysis of the chart pattern. Most

of them take care of the movements of the share prices in the

BSE/NSE indexes.



18.The majority of investors 75 % the making saving below Rs.

10,000 and above 10,000 savings is only by 25 %.

19.Short term investors are more than the Long term investors because

they have fear that if they hold shares for long period then will

incur the loss.

20.Investors of online trading of shares like to hold their shares for a

minimum period. The fast moving prices of the shares and the

updated information helps the online traders to take quick and

effective decision at right time.

21.In Bangalore, the online traders are aware of ICICI 36%, HDFC

24% and Peninsular Capital Market Ltd. services 20 %. An

excellent service and awareness helps them to win the confidence

of investors.

22.Online trade the awareness of “Online Trading of Shares” is less in

the traditional investors, showing the need to inform them about it,

and educate them for the investments.



B) SUGGESTIONS

1. The investors should make more investments in “Online Trading of

Shares” as constructing their portfolio. This way they can get more

return from their portfolio.

2. The female investors are less interested in investments so they have

to be encouraged.

3. In the age group of above 55 years are invested very low they have

encourage to invest in online trading shares. Because the age group

includes retired employees.

4. In the shares market retired employee and professionals and

students is less knowledge about share trading they have help to

increases the knowledge about online trading of shares.

5. While constructing the portfolio, the investors should stress more

on capital appreciation, as mere growth of capital without the

growth of purchasing power nullify the growth of capital.

6. Online traders should also take into account the “Monsoon and

Agricultural” factor before investing. Still large part of the earning

of our country come from the agriculture and it ultimately depends



on monsoon. So the economic condition of our country is lot more

dependent on this factor.

7. People should analyze the marketing strategy of a company, before

investing into it. The marketing function brings the revenue and

ultimately profit to the company and its owners.

8. Online traders should make use of Internet more while making

decision on their investments in online Share market. The use of

Internet can help them to get more and more accurate information,

and hence increase their efficiency.

9. The government and concerned authority like SEBI should take

more efforts to educate people about the “Online Trading of

Shares”, and increase the awareness among them.



C) CONCLUSION:

The investors of “Online Trading of Shares” are very sensitive to

the return on their investment. They use to have a close watch on the debt

financing, the promoters, the product range and the management of the

company, where they want to invest. As a part of their “Economic

Analysis”, they prefer to consider inflation and interest rates of the

economy. While selecting a given industry to invest, these investors like

to invest an industry, which is growing, or at its maturing stage.

The preferred market structure of investors to invest is one, which

is dominated by a single company. Online traders analyze the BSE/NSE

sensitive indexes to know the demand and supply situation of shares in

the market. The fast moving prices of the securities and the updated

information helps the online traders to take quick and effective decision

at right time. Online traders do not like to hold their assets for a long

time. Preferably, they dispatch them within six month.

In the century of Electronic Media, the Printed Media is still a

reliable and favorite source of information for online traders. Their

favorite source of information is news papers followed by e-brokers.

The people who have not invested in share market earlier usually

not show interest in “Online Trading of Shares”. They are interested in

the traditional instruments of investments like insurance, Infrastructures,



IT etc. These investors need to make aware of “Online Trading of

Shares”, and educate them to make investments in this instrument. The

proper mix of moderate risks and high returns are attracting the investors

to Online Trading of Shares.

Investor’s investments in Online Trading Shares, the investor in

equity enjoys some unique advantages of safety, liquidity and

marketability. In addition, any investment in shares is wealth of the

investor, which is free from for wealth tax. There is no limit to such

investments, which can be made for wealth tax purposes.

Totally we have concluded that for investors if increase the

awareness on online trading and investment in shares at correctly

defiantly will increase his/her future income.



BIBILIOGRAPHY

1. V.A.Avadhani- Securities Analysis and Portfolio Management-

Himalayan Publication.

2. V.S.Datey- Student guide to Corporate Law-Taxmann Allied

Services Private Ltd.

3. Reddy and Appanniah- Company Law and Secretary Practice-

United Publishers.

WEBSITES

www.nseindia.com

www.bseindia.com

www.google.com

www.sharekhan.com


http://www.sharekhan.com/

http://www.google.com/

http://www.bseindia.com/

http://www.nseindia.com/


A STUDY ON ONLINE TRADING OF SHARES

[With special reference to investors of Bangalore]

I Mr. Basavaraj Bagewadi. pursuing MBA in Surana PG Centre, conducting research on above topic to submit dissertation to fulfill requirements of the award of MBA , Bangalore University .

In this connection, may I request you to help by responding to this questionnaire? I assure you that the information collected will be kept highly confidential and will only be used for the academic purpose.

Signature

IDENTIFICATION DETAILS

1] Name: ………………………………………………………………………..

2] Gender: Male { } Female { }

3] Address and Contact No: ……………………………………………………

……………………………………………………

……………………………………………………

…………………………………………………….

4] Age Group:

a) Less than 25 { } b) 25-35 { }c) 35-45 { } d) 45-55 { }e) 55 and above { }



5] Educational Qualification:

a) Under Graduate { } b) Graduate { }c) Post Graduate { } d) Others { }

6] Occupation:

a) Business { } b) Salaried Employee { }c) Retired Employee { } d) Professionals { }e) Student { } f) Other Specify { }

DATA FOR THE STUDY

1] Have you invested in Shares?

Yes { } No { }

2] In which Sector have you invested?

a) Banking { } b) insurance { }c) Manufacturang { } d) infrastructure { }e) Services { } f) other specify { }

3) How long have you been investing in shares?

a) Less than 1 { } b) 1-2 { }c) 2-4 { } d) 4-6 { }e) 6 and above { }

4) From which source you get your required information? Rank them on their Importance?

a) News Papers { } b) TV News { }c) Family & Friends { } d) Journals { }e) Internet { }

5) Do you follow the Stock Indices before investing?

Yes { } No { }



6) How do you consider these factors before Investing?

Factors Most Important

Very Important



TimeLiquidityReturnsSafetyRiskPast

PerformanceMarketability


Others

7) How do you consider the influences of the following factors on your investment in a particular share?


Very Important



Economic growth

Monsoon & Agricultural

activityInflation

Interest RateForeign

Exchange ReservesTax RatesPolitical Situation

International Changes in

Capital Market



8] Rank the Risks which you want cover accordingly in your investment?

a) Market Risk { } b) Interest Rate Risk { } c) Purchasing Power Risk { } d) Business Risk { } e) Financial Risk { } f) Insolvency Risk { } g) Any Other …….……………

9] How do you feel the importance of the following factors while selecting a particular company to invest?


Very Important



PromotersManagementTechnology

Product Range

MarketingAny Other

10] Do you like to analyze the stage of the life-cycle of the particular industry where you invest?

Yes { } No { }

If Yes in which stage of the life-cycle of the industry you will like to invest?

a) Pioneering Stage { } b) Expansion Stage { }c) Stagnation Stage { } d) Declining Stage { }

11) Annual income of shares

a) Less than 100,000 { } b) 1, 00,000-2, 00,000 { }c) 2, 00,000-3, 00,000 { } d) 3, 00,000-4, 00,000 { }e) 4, 00,000 and Above { }

12) Annual savings

a) Less than 10,000 { } b) 10,000-20,000 { }c) 20,000-30,000 { } d) 30,000-40,000 { }e) 40,000 and Above { }



13) The types of market structure you will prefer while selecting in industry to invest?

a) Absolute monopoly { }b) Perfect competition { }c) Imperfect competition { }

14) The importance of past movement of share price in BSE/NSE on your investment?

a) Most Important { } b) Very Important { }c) Important { } d) Un Important { }e) Not at all important { }

15) Are you a short term or long term investor?

Short term { } Long term { }

16) The average time of holding your shares? a) 1 Week { }

b) 1 Month to 3 Months { }c) With in 6 Months { } d) With in 1 year { }e) More than 1 Year { }

17) Among Online trading Services whom you are familiar with?

a) ICICI { }b) HDFC { }c) KOTAK { }d) Motilaloswal { }e) PENENSULAR CAPITAL MARKET LTD { }

f) Any other ……………………………………………......

18) Are you satisfied with returns from your investment?

Yes { } No { }

If ‘No’Reason ………………………………………………………………………….



19) Please give your awareness of Online Trading?

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

20) What are your suggestions for efficient growth of capital market, with special reference to Online Trading of Shares, in the post budget scenario?

*********************************Thank You


06KXCM6002- Basavaraj Bagewadi

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