A Study

On
0nline trading in india
Submitted In Partial Fulfillment for the Award of the Degree of
Master of Business Administration, Osmania University, Hyderabad

By

kawanjeet kaur
160610672041

Under the Guidance of

Mr. S Vijay Kumar

DEPARTMENT OF BUSINESS MANAGEMENT

STANLEY COLLEGE OF ENGINEERING & TECHNOLOGY FOR WOMEN
(Approved by AICTE and affiliated to Osmania University)
Abids, Hyderabad 500001

CONTENTS

Page Numbers
 ABSTRACT

1. INTRODUCTION 01

2. RESEARCH OBJECTIVES 04

3. RESEARCH METHODOLOGY

3.1 SCOPE OF STUDY 15

3.2 SIGNIFICANCE OF STUDY

19

4. RESEARCH DESIGN 23

5. SAMPLING METHODOLOGY

6.REVIEW OF LITERATURE

Abstract
 Introduction

Online trading was initiated by NSE in India and soon after the other exchanges also
followed it. There was a major boom in yr. 2000 when lots of online trading companies
came with a bang but only few were survived because of lack of computer knowledge
and low internet penetration. There are two types of online trading companies one is the
banking online trading companies and the other is non-banking trading. A few examples
of banking online trading companies are HDFC securities, ICICI direct.com, UTI
securities etc. On the other hand non banking trading companies are sharekhan.com,
Angel Broking, Reliance Money etc. Today online trading contributes are about 8-10%.
It is continuously growing and has a huge market potential.

A study was undertaken to determine the growth of various online trading companies in
India in terms of trade done by them through online and services provided by them.
Major findings indicates that out of a survey of 100 respondents it was seen that 77
investors prefer online trading because of few major factors such as time saving
convenience, protection through Freudian brokers etc.

although during my research project I’ve seen that most of the respondents feel online
trading, a secure way of investing into stock market still a few of them feel it unsafe and
a bit complicated but they posses information about online trading. Today the online
trading companies having cut-throat competition in our offering whose brokerage
discounts lower margin money and zero balance accounts. Due to the rising education
awareness and use of internet there is a huge potential for online trading in future and
companies must come up with innovative offerings to capture the untapped market

The trading on stock exchange in INDIA used to take place through open outcry method
without use of information technology for immediate matching or recording of trades.
This was time consuming and inefficient. This imposed limits on trading volumes and
efficiency. In order to provide efficiency, liquidity, and transparency NSE and BSE
introduced nation wide online fully automated “SCREEN BASED TRADING
SYSTEM”SCREEN BASED TRADING NSE’s screen based trading is known as NEAT-
National exchange for automated trading. BSE’S screen based trading is known as
BOLT- Bombay online trading.

Online trading definition is a basic understanding of online trading processes. Since the
invention of Internet people have beena able to do practically everything virtually. Due to
the Internet online trading has become one of the most popular ways to trade as far as
stock trading turned out to be as available to independent investors as possible. Online
trading gives both beginners who've just had a single day trading course and advanced
traders an opportunity to trade stocks, options, forex and futures all over the world
without physical presence of a broker and with much lower commissions, because
everything is done online.

Research objectives

The objectives of my research project has been-

1.To determine the growth and development of online trading in India.
2.To understand the customer perception of online trading.
3.To see the type of technology used by stock exchanges and by the Indian customer in
online
trading.
4.To determine what type of products the customers deal while doing the online trading.
5.To understand the presence of major online traders in the Indian market and looking
about
the features provided by them
 Research Methodology

TITLE: To determine the “ ONLINE TRADING IN INDIA”

JUSTIFICATION :
The above title is self explanatory. This study mainly deals with growth of online trading
in India since its inception in the year 2000.The trading volumes of stock exchange has
increased since then and the services offered by the online stock traders has facilitated the
Indian Customer. The level of Indian stock trading through online has been increasing
and provides a vast scope for the future.

SCOPE OF THE STUDY

Since the year 2000 a big boom has been witnessed in the Indian Stock Market when the
market showed the coming up of Online Trading System. Many online stock trading
companies came but initially due to lack of online trading some companies vanished and
some survived. The companies which survived are getting the handsome returns also
attracting the foreign Investment Companies. Nowadays this sector is facing cut-throat
competition and also provides huge growth prospects. The study then goes to evaluate
and analyze the findings so as to present a clear picture of the trends in the online trading
sector.

SIGNIFICANCE OF THE STUDY

The 100 people have been interviewed through various sources and their responses have
been analyzed. This data can be explorated to take in the trends all Indian Online Stock
Trading Industry. The significance for the Industry lies in studying the growth trends that
emerge from the study. It is one of the fastest growing and evolving sectors.
RESEARCH DESIGN
NON-PROBABILITY
The non –probability respondents have been researched by selecting the persons who
does the stock trading. Those persons who do not trade in stocks have not been
interviewed.

EXPLORATORY AND DESCRIPTIVE RESEARCH

The research is primarily both exploratory and descriptive in nature.
1.Theobjective of the exploratory research is to gain insights and ideas.
2.Theobjective of the descriptive research study is typically concerned with determining
the
frequency with which something occurs.
A well structured questionnaire was prepared for the primary research and personal
interviews were conducted to collect the responses of the target population

SAMPLING METHODOLOGY

Sampling Technique:
Initially, a rough draft was prepared a pilot study was done to check to check the
accuracy of the Questionnaire and certain changes were done to prepare the final
questionnaire to make it more judgmental.

Sampling Unit:
The respondents who were asked to fill out the questionnaire in the National Capital
Region are the sampling units. These respondents comprise of the persons dealing in
stock trading. The people have been interviewed in the open market, in front of the
companies, telephonic interviews and through other sources also.

Sample Size:
The sample size was restricted to only 100 respondents.

Sampling Area:
The area of the research was National Capital Region (NCR)

Sources of Information

The data is collected from secondary sources.

Secondary Sources

The data is collected from the secondary sources like. The secondary data has been
taken by referring
to various magazines, newspapers and journals online through the help of the internet to
get
the figures required for the research purposes.

Limitations
The various limitations of the study are:
There is lack of awareness among people about investing in stock market. So the
people who are aware of such things were found in specific areas for survey purposes.
Most people are comfortable with traditional system in small towns and like to trade
from their respective brokers, hence not providing a true opinion of theirs.
Most of the people they are nottechno savvy. Though Internet penetration is growing
still it is not at the required level. Some of the respondents who did not do online
trading were able to respond to only some questions.
The survey was done in the NCR region and may not truly express the opinion of
whole

Review of Literature

The emergence of online exchanges has facilitated faster transactions by providing online
trading portals and brokerage houses ease and flexibility. The Internet has indeed opened
up new opportunities for conducting the business.The worldwide stock exchanges has
made a major shift from the traditional method of trading and now conduct a bulk of its
business online through its brokers and partners. In the developed countries majorly all
the exchange transactions are conducted online. The trend took off slowly in India and
the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) two of the
largest exchanges in India have been conducting online trade successfully for some time.

WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very slow in moving their
transactions online and the major reason has been the lot governmentregulations. The
initial delay was due to laying down the specifications for creating Closed User Groups
(CUGs). This issue was resolved between the Department of Telecommunications (DoT)
and the Finance Ministry around 1998 and after that soon came the online trading portals
like ICICIDirect.com, motilaloswal.com, sharekhan.com and smartjones.com.
Connectivity related issue was perhaps the most important technological factor.
Traditionally the cost of leased lines and VSAT links has been very high and the
reliability of the links was very low.

To commission the links it took a long time as one had to make an application and wait
for a few weeks for the link to be up and running. Many other issues like security, backup
and recovery procedural costs also acted as deterrents in the process. Now with the
resolution of regulatory issues India no longer have any pressing connectivity and
bandwidth issues. The entry of private players into the broadband scenario and the
government opening up the telecom sector these issues have become almost non-existent.
Security solutions and services available in the market have matured and it doesn't cost a
pretty packet anymore to put a simple backup solution in place. Through online trading
everyday large volumes of data is being transacted. At BSE the averagedaily turnover in
2001-2002 (April-March) was Rs 1244.10 crore and the number of average dailytrades
was Rs 5.17 lakh.

To control Online Trading RBI made regulations making it mandatory for companies to
store at least 7 years of transactional and financial data.
1.Design needs to be always-on, secure, redundant, and have adequate backup and
recovery processes.
2.For such high amounts of critical data it's natural to deploy network-based storage like
NAS or SAN.
3.Security is a vital and integral part of the design architecture. The hardware and
software elements should be built around layered security architecture and should be held
in place with a well-documented security policy.
4.Ideally online exchanges should have 'five-nines' availability.
5.It's difficult to deploy out-of-the-box applications at exchanges as each has a unique
architecture based on factors like operations flow, trading volumes, number of
members,number of users, and number of locations.
6.NSE has deployed NIBIS (NSE's Internet Based Information System) for real-
timedissemination of trading information over the Internet and NEAT a client-server-
based application to help its operations.
7.BSE has deployed an OnLine Trading system (BOLT) on a Tandem platform which has
a two-tier architecture. It claims to be able to support up to 2 million trades a day.

ADVANTAGES OF ONLINE TRADING

1. Provides with the Freedom of Information .The Internet provides a new sense of
controlling our financial future as the amount of investment information available online
is truly outstandin.an investor can Know the price of any stock he desires at any point
time on the internet
• An investor can review the price history of any stock in chart format online •
An investor can follow in-depth the events happening in the market
• Helps an investor in receiving a wealth of free commentary and analysis about stock
markets in the global economy • Helps an investor to conduct an extensive financial
research of any company he desires
• He may also consult with other investors online present around the world Some online
stock broking companies provide real-time stock quotes, daily roundups of the stock
market, expert commentary, and a deep community of fellow investors.

2. Provides Control to Investors Money When an investor wants to buy or sell stock he
no longer need to call his broker on the phone thus helping in the execution of the order
instantly on the internet.
3. Provides access to the market Through the sophisticated information streams,
dedicated trading platforms and sophisticated tools the investor can access the markets
which provides more agility in buying and selling stocks.

4. Ensures the best price for investors Some companies like Investsmart
(IL&FS)specialize in the techniques which offers the best pricedeals for the buy and sell
orders of the investors and traders providing the high level of transparency by displaying
of information relating to the specific stocks and company profiles which helps in getting
the best quote for the orders.

5. Online trading offers greater transparency Online trading offers the investors with
greater transparency by providing with an audit trail. The process involves a complete
integrated electronic chain starting from order placement, to clearing and settlement and
finally ending with a credit into the depository account of the investor. All these stages
are inspected which brings the transparency into the system.

6. Provides hassle free trading Online trading provides an integration of the bank account,
trading account and demat accounts, which leads to easy and paperless trading for the
client

7. Online trading allows instant trade execution. online transactions helps in the quick
execution of the entire trading transaction right from logging to the traders site and to the
settlement of the bank account in a very short period of time.

8. It provides a level playing field Trading online gives even the smallest retail investor
access to information which was earlieravailable only to the big traders. It has provided
with a level playing field for all investors in thesecurities market.
9. Online trading reduces the settlement risk This method of trading reduces the
settlement risk for the investor as when a short sell order is played the orders are squared
off at the specified cut-off time and are not allowed to be carried forward.
10. Provides live financial news & analysis The online sites also provide live terminals
which provide streaming news to give investor the latest financial information as it
occurs.
11. Online help desk Some companies provide online help desk an investor cancan
contact the Tele Trading Executives from the Tele Trading team during and after market
hours and can clarify questions.
12. Instant order trade confirmations Through online trading every trade is confirmed
immediately and investor receives an on-screen confirmation following every trade with
full details for the investors records which avoids costly errors that would have been
discovered when it is too late.
13. Keeps Information Secure As per the guideline provided by SEBI every effort has to
be made to keep the investors account and personal information secure by use of
encryption technology and updated security technology to advanced fraud prevention
measures.

DISADVANTAGES OF ONLINE TRADING

1. In online terminal, investor can’t get customized expert advice, whereas in offline the
broker gives suggestions according to investors strategy (i.e. short term or long-term)
2. Brokerage is high compared to offline.
3. Privacy is less due to hacking scandals
4 .Transactional errors due to technical problems

GROWTH

According to an article by Krishnamoorthy B in 2005 after inception of online trading in

India in
the year 2000 online trading is gained momentum with trading volumes growing by 150
per cent
per annum in theyears 2003-2005.The volume of all trades executed through the Internet
on the
National Stock Exchange had grown from less than Rs 100 crore (Rs 1 billion) in June
2003 to over
Rs 700 crore (Rs 7 billion) in July 2005 which was a handsome growth.

This also provided a massive rise in the number of Internet traders. At the end of July
2005, there
were 108 registered brokers on the NSE and the number of Internet trading subscribers to
about
1.054 million. And the top three players ICICIdirect.com, Indiabulls and Kotak Securities
had
nearly 85 per cent of the total customer base.

Today the ICICIDirect has nearly 36% market share.In March 2003 ICICIDirect had
about 234,000 customers trading through its portal which rose to over 675,000 customers
in the year 2005.According to Anup Bagchi the MD and CEO of
ICICIdirect.com as their company was the first player to enter the online trading segment,
ICICIdirect has made broking more structured and transparent which further reduced the
operational hassles.

At the same time the number of subscribers trading through the portal of Kotak Securities
had gone
up significantly by 150 per cent and the number of online trading customers had grown
from
30,000 to 75,000. And the company expected to have at least 130,000 customers by the
end of that
fiscal.

Indiabulls which was a late entrant in the game had its online customers growing from
35,000 in June 2003 to over 140,000 in the mid 2005. Out of total customer base of
180,000 majority were online customers. Indiabulls appointed 2,000 relationship
managers to handle online clients. In the recent past years of 2005 ICICIDirect and
Indiabulls recorded an annual volume growth of 100 per cent and IndiaBulls had about 30
per cent of India's online trading volumes. In the year 2005 the online revenues grew
faster for Indiabulls than offline revenues (online revenues increased from 40 per cent to
60 per cent of the total year 2004 andclients wanted abackup while trading online.

ICICI Direct had 7.5 lakh registered users online in the tear 2005 more than five times
what
Indiabulls had. In 2005 number of demat accounts doubled to 7.1 million with the facility
of online
trade since 2002. From the years 2000-2005 the online broking grew to account for a
tenth of the
total trading volumes. If the numbers are considered for only the retail segments, the
growth is
starker. Almost half of the Rs 5,000 crore-6,000 crore daily market volume on the NSE
accounted
for by non-retail

RECOMMENDATIONS
The companies should come up with more and more innovative features in their web
portals.
The customer should be educated regularly regarding the new technologies and
techniqes of trading online and also other relevant information.
The companies should look after to develop more safe and secure ways of transacting
business online.
The companies should make maxium efforts to detect fraud cases and minimise them.