SUMMER TRAINING PROJECT REPORT

SMC GLOBAL SECURITIES LIMITED

SSSSSSSS

ONLINE TRADING

SESSION 2007-2010

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 PREFACE

Indian stock market have been role during the past five years,genrating an annual
return of 28%(on the nifty index).Still general public prefers putting it money in
bank,rather than putting it in stock. Within Indian economy doing so well, return from
stock market have been far higher than return from any other investment.Avenue
rupees 1, 00,000 invested in the nifty in April would have been worth a little over
rupees 3, 00,000 by April, 2008.But the top value creatures have been delivered far
superior returns the same lakh invested in unitech would have been worth rupees
1.52cr if it had been invested in aban aban offshare.

Most of people are reluctant to put their money in shares,because of uncertainty of the
return.At times stock market is so volatile that it becomes very difficult for investors
to decide whether to purchase some more stocks or sell them,whether to enter the
market or book profit. with so much uncertainty prevailing, the case of investing in
stock market is totally different from the case of investing in some other places.

Lack of awareness is also holding people back to a great extent,until and unless one
understands the degree of risk involved in investing in shares,the kind of return one
can get from there and history of such returns and how to go about it,one will not go
ahead.so making aware the public about things happing in stock market is something
that should be done at war level.

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 TABLE OF CONTENTS

CONTENTS PAGE NO.

CHAPTER – 1 : INTRODUCTION
1.1 Overview of Industry as a whole 1
1.2 Profile of the organization 8
1.3 Problems of the organization 12
1.4 Competition Information 13
1.5 S.W.O.T. Analysis of the Organization 17

CHAPTER – 2 : OBJECTIVES AND METHODOLOGY

2.1 Significance of the study 20
2.2 Managerial usefulness of the study 20
2.3 Objectives of the study 21
2.4 Scope of the study 21
2.5 Methodology 23

CHAPTER – 3 : CONCEPTUAL DISCUSSION 30

CHAPTER – 4 : DATA ANALYSIS 52

CHAPTER – 5 : FINDINGS AND RECOMMENDATIONS 63

ANNEXURE

* Questionnaire

BIBLIOGRAPHY

1.1 OVERVIEW OF INDUSTRY PROFILE

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Mobilization of savings from surplus savers to deficit savers is most efficiently
carried out by the securities market through a range of complex products called
"securities". The definition of securities as per the SCRA, 1956 includes shares,
bonds, scrips, stocks or other marketable securities of like nature in or of any
incorporate company or body corporate, government securities, derivatives of
securities, units of collective investment scheme, interest and rights in securities,
security receipt or any other instruments so declared by the central government.
This process of mobilization of resources is carried out under the supervision and
overview of the regulators.

Market Participants in Securities Market

Market Participants
2007 2008
Securities Appellate Tribunal 1 1
Regulators* 4 4
Depositories 2 2
Stock Exchanges
With Equities Trading 21 19
With Debt Market Segment 1 1
With Derivative Trading 2 2
Brokers 9,443 9,487
Corporate Brokers 4,110 4,190
Sub-brokers 27,541 44,074
FIIs 996 1319
Portfolio Managers 158 205
Custodians 15 15
Share Transfer Agents 82 76
Merchant Bankers 152 155
Bankers to an Issue 47 50
Debenture Trustees 30 28
Underwriters 45 35
Venture Capital Funds 90 106
Foreign Venture Capital Investors 78 97
Mutual Funds 40 40
Collective Investment Schemes 0 0
(Source: SEBI Bulletin.)

MARKET SEGMENT

The securities market has two interdependent segments: the primary and the

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secondary market. The primary market is the channel for creation of new securities.
These securities are issued by public limited companies or by government agencies.
In the primary market the resources are mobilized either through the public issue or
through private placement route. It is a public issue if anybody and everybody
can subscribe for it, whereas if the issue is made available to a selected group
of persons it is termed as private placement. There are two major types of issuers
of securities, the corporate entities who issue mainly debt and equity instruments and
the government (central as well as state) who issue debt securities.

These new securities issued in the primary market are traded in the secondary market.

The secondary market enables participants who hold securities to adjust their holdings
in response to changes in their assessment of risks and returns. The secondary market
operates through two mediums, namely, the over-the-counter (OTC) market

and the exchange-traded market. OTC markets are informal markets

where trades are negotiated. Most of the trades in the government securities are in
the OTC market. All the spot trades where securities are traded for immediate deliver
y and payment take place in the OTC market. The other option is to trade using the
infrastructure provided by the stock exchanges.

There are 23 exchanges in India and all of them follow a systematic settlement period.
All the trades taking place over a trading cycle (day=T) are settled together after a
certain time (T+2 day).

The trades executed on the National Stock Exchange (NSE) are cleared and settled by
a clearing corporation. The clearing corporation acts as a counterparty and guarantees
settlement.

Nearly 100% of the trades in capital market segment are settled through demat
delivery. NSE also provides a formal trading platform for trading of a wide range of
debt securities, including government securities. A variant of the secondary market is
the forward market, where securities are traded for future delivery and payment. A
variant of the forward market is Futures and options market. Presently only two

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exchanges viz., NSE and Stock Exchange, Mumbai (BSE) provides trading in the
derivatives of securities.

Dependence on Securities Market

• Corporate Sector
• Government
• Households
The above mentioned sectors are dependent on the Capital Market for their
financial needs. The following table shows their percentage share respectively.

Dependence on Securities Market

Share (%) of Securities Market in

External Finance of Fiscal Deficit of Fiscal Deficit of Financial Savings

Corporate Central Govt. State Govt Number of Households

1990-91 19.35 17.9 13.6 14.4

1991-92 19.17 20.7 17.5 22.9
1992-93 33.38 9.2 16.8 17.2
1993-94 53.23 48.0 17.6 14.0
1994-95 44.99 35.2 14.7 12.1
1995-96 21.67 54.9 18.7 7.7
1996-97 22.12 30.0 17.5 6.9
1997-98 28.16 36.5 16.5 4.5
1998-99 27.05 60.9 14.1 4.2
1999-00 33.58 67.1 13.9 7.3
2000-01 31.39 61.4 13.8 4.3
2001-02 20.60 69.4 15.2 8.0
2002-03 (17.98) 77.6 19.9 5.9
2003-04 N . A. 64.9 32.1 N . A.
2004 -05 24.86 26.73 18.69 6.6
2005-06 22.65 34.75 8.63 7.5
2006-07 38.78 52.75 23.98 7.8
Source: CMIE & RBI.

INTERNATIONAL SCENARIO

Following the implementation of reforms in the securities industry during the last
decade, Indian stock markets have graduated to a better position vis-à-vis the
securities market in developed and emerging markets. As may be seen from Table 1-

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2, India has a turnover ratio, which is comparable to the other developed market,
and also one of the highest in the emerging markets. At the end of 2003, Standard
and Poor’s (S&P) ranked India 17th in terms of market capitalization (19th in 2002),
16th in terms of total value traded in stock exchanges (17th in 2002) and 6th in terms
of turnover ratio (7th in 2002). India has the number one ranking in terms of
listed securities on the Exchanges followed by the USA. These data, though
quite impressive, do not reflect the full Indian market, as S&P (even other
international publications) does not cover the whole market. For example, India has
more than 9000 listed companies at the end of March 2004, while S&P
considers only 5,644 companies.

If whole market were taken into consideration, India’s position vis-à-vis other
countries would be much better.

International Comparison: end December 2007

Particulars USA UK Japan Germany Singapore HongkongIndia
No. of listed Companies 5,295 2,311 China
3,116 684 475 1,029 1,296 6268
Market Capitalisation ($ Bn.) 14,266 2,412 3,041 1,079 145 715 681 999
Market Capitalisation Ratio139.8 159.7 70.3 57.5 168.4 426.4 55.2 109.5
(%)
Turnover ($ Mn.) 15,547 2,151 2,273 1,147 88 332 477 508
Turnover Ratio (%) 122.8 100.6 88.0 130.0 71.1 56.3 83.3 162.5

Source: S& P Emerging Stock Market Factbook,2007

A comparative study of concentration of market indices and indices stocks in different
world markets is presented in the table below. It is seen that the index stocks’
share of total market capitalization in India is 75.0% whereas US index
accounted for 93.8%. The ten largest index stocks share of total market capitalization
is 36.5% in India and 16.4% in case of US.

Market Concentration in the World Index as on End 2007

Index Stocks Share of 10 largest Index (In Percent)
Share Market Total Mkt Cap Share of Total Mk tCap
Japan 99.2 20.4
Singapore 91.2 57.9
France 89.5 42.2

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 Germany 83.6 44.6
Italy 95.5 55.9
United Kingdom 94.3 43.6
United States 93.8 16.4
India 75.0 36.5

The stock markets worldwide have grown in size as well as depth over last one
decade. The turnover on all markets taken together has grown from US $ 5.5 trillion
in 1990 to $ 38 trillion in 2002 when it reached a peak. Thereafter, it has witnessed a
decline and stood at US $ 34.6 trillion in 2006. It is significant to note that US alone
accounted for about 47.4% of worldwide turnover in 2006. Despite having a large
number of companies listed on its stock exchanges, India accounted for a meager
2.96% in total world turnover in 2006. The market capitalization of all listed
companies taken together on all markets stood at US $ 34.6 trillion in 2006 ($ 23
trillion in 2005). The share of US in worldwide market capitalization decreased from
47.24% as at end-2005 to 44.66% in end-2006, while Indian listed companies
accounted for 1.87% of total market capitalization in 2006.

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Market Capitalization and Turnover for Major Markets (US $
million)
Country/Region Market Capitalization Turnover
(End of period)
2003 2004 2005 2006 2007 2008
Developed Markets 25,242,989 20,957,836 28,290,981 39,676,01 36,098,73 26,743,153
Australia 374,269 380,969 8
585,475 240,667 1
294,658 369,845
Japan 2,251,814 2,126,075 3,040,66 1,826,230 1,573,279 2,272,989
UK 2,217,324 1,864,134 5
2,412,43 1,871,894 2,721,342 2,150,753
USA 13,810,42 11,052,403 4
14,266,2 29,040,739 25,371,27 15,547,431
9 66 0
All Emerging Markets 2,556,979 2,439,080 3,656,722 2,404,321 2,499,768 2,896,144
China 523,952 463,080 681,204 448,928 333,369 476,813
India 110,396 131,011 279,093 249,298 197,118 284,802
Indonesia 23,006 29,991 54,659 9,667 13,042 14,774
Korea 220,046 249,639 329,616 711,192 826,620 682,706
Malaysia 120,007 123,872 168,376 20,772 27,623 50,135
Philippines 41,523 39,021 23,565 3,148 3,103 2,635

Taiwan 292,621 261,474 379,023 544,808 631,931 592,012

World Total 27,79 23,396,91 31,947,70 42,080,33 38,598,49 29,639,297
US as % of World 9,968
49.68 647.24 344.66 969.01 865.73 52.46
India as % of World 0.40 0.56 0.87 0.59 0.51 0.96
Source: S& P Emerging Stock Market Factbook,2007

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INTERNATIONAL AND INDIAN SCENARIO IN ONLINE
BROKING

In US markets, online brokerage has significantly changed the dynamics of the market
place, resulting in one of the biggest shifts in the individual investor's relationship
with their brokers. Investors access a wealth of financial information on the same time
as do market and financial professionals including breaking news, developments and
market data. Online brokerage provides investors the tools to analyse the information
such as research reports.

In the US, 82 per cent of the deals are done on line. The European on line broking
market is expected to be of $8 billions and has risen to about $50 billion today.

Net trading shall initially faced some problems relating to infrastructure and
understanding of the concept. Presently, the legal frame work is right in place and
there are organizations like SEBI, RBI etc. which provide investor guidelines to the
investors for protection of their right. Also, investor grievance handling and redressal
system is fast and efficient. Lack of investor education and resistance from stock
brokers though has always posed some problems.

With Internet trading, investment in the stock market is just a click away, in the
comfort of office or a home. It makes it easy for anyone to access net brokers and
trade in stock. Even the smallest retail investor can access information that was till
now restricted to big traders. Net trading provides investors with seamless, real time
online access to stock markets.

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1.2 PROFILE OF THE ORGANIZATION

SMC Global is one of the largest and most reputed

Investment Solutions Company that provides a wide
range of services to its substantial and diversified client base. Founded in 1990, by
Mr. Subhash Chand Aggarwal and Mr. Mahesh Chand Gupta, SMC, is a full financial
services firm catering to all classes of investors. The company is having its corporate
office in New Delhi with regional offices in Mumbai, Kolkata, Chennai, Ahemdabad,
Cochin, Hyderabad, Jaipur plus a growing network of more than 1250 offices across
over 350 cities/towns in India and overseas office in Dubai.
• Enabling shorter settlement cycles and book entry settlements systems, and
meeting the current international standards of securities market.

HISTORY OF SMC
SMC acquired membership of the Delhi Stock Exchange in 1990 and later in 1995
became a trading member of NSE. In 2000 the company became a member of BSE
and a depository participant of CDSL India Ltd. In the same year, the company
acquired the Trading & Clearing Membership of NSE Derivatives and the
memberships of leading commodity exchanges i.e. NCDEX and MCX in subsequent
years. In 2006, SMC expanded globally and acquired the Trading & Clearing
Membership of Dubai Gold and Commodity Exchange (DGCX). In the same year, the
company also started its Insurance Broking division, IPO & Mutual Fund Distribution
Division and its Merchant Banking division.

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Mission
• Establishing a nation-wide trading facility for equities, debt instruments and
hybrids,
• Ensuring equal access to investors all over the country through an appropriate
communication network,
• Providing a fair, efficient and transparent securities market to investors using
electronic trading systems,
• Enabling shorter settlement cycles and book entry settlements systems, and
meeting the current international standards of securities market.

Vision
• Their vision is to be the most respected company in the financial services
space.

PRODUCT AND SERVICES OF SMC

Equity & Derivative Trading

SMC Trading Platform offers online equity & derivative trading facilities for
investors who are looking for the ease and convenience and hassle free trading
experience. We provide ODIN Application, which is a high -end, integrated trading
application for fast, efficient and reliable execution of trades. You can now trade in
the NSE and BSE simultaneously from any destination at your convenience. You can
access a multitude of resources like live quotes, charts, research, advice, and online
assistance helps you to take informed decisions. You can also trade through our
branch network by registering with us as our client. You can also trade through us on
phone by calling our designated representatives in the branches where you are
registered as a client.

Clearing Services

Being a clearing member in NSE (derivative) segment we are clearing massive

volumes of trades of our trading members in this segment.

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Commodity Trading

SMC is a member of two major national level commodity exchanges, i.e National
Commodity and Derivative Exchange and Multi Commodity Exchange and offers you
trading platform of NCDEX and MCX. You can get Real-Time streaming quotes,
place orders and watch the confirmation, all on a single screen. We use technology
using ODIN application to provide you with live Trading Terminals. In this segment,
we have spread our wings globally by acquiring Membership of Dubai Gold and
Commodities Exchange. We provide trading platform to trade in DGCX and also
clear trades of trading members being a clearing member.

Distribution of Mutual Funds & IPOs

SMC offers distribution and collection services of various schemes of all Major Fund
houses and IPOs through its mammoth network of branches across India . We are
registered with AMFI as an approved distributor of Mutual Funds. We assure you a
hassle free and pleasant transaction experience when you invest in mutual funds and
IPOs through us. We are registered with all major Fund Houses including Fidelity,
Franklyn Templeton etc. We have a distinction of being leading distributors of
IPOs.Shortly we will be providing the facility of online investment in Mutual Funds
and IPOs

Online back office support

To provide robust back office support backed by excellent accounting standards to our
branches we have ensured connectivity through FTP and Dotnet based Application.
To ensure easy accessibility to back office accounting reports to our clients

MC Depository

They are ISO 9001:2000 certified DP for shares and commodities. We are one of the
leading DP and enjoy the trust of more than 40,000 investors. We offer a quick,
secure and hassle free alternative to holding the securities and commodities in

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physical form. They are one of the few Depository Participants offering depository
facilities for commodities. We are empanelled with both NCDEX & MCX.

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SMC Research Based Advisory Services

Their massive R&D facility caters to the need of Investors, who are continuously in
need of opportunities for striking rich rewards on their investment. We have one of
the most advanced, hitech inhouse R&D wing with some of the best people, process
and technology resources providing complete research solutions on Equity,
Commodities, IPOs and Mutual Funds. We offer proactive and timely world class
research based advice and guidance to our clients so that they can take informed
decisions. Click on Research to unveil the treasure.

SMC Investor Awareness Forum

Their dedicated team of professionals is conducting investor meet/seminars across

India. We believe that a well-informed investor is an empowered investor. We also
seek your feedback on our services in these Investor meets.

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1.3 PROBLEMS OF THE ORGANIZATION
• Lack of Techno Savvy people and poor Internet penetration: -
Since most of the people are quite experienced and also they are not techno
savy. Also Internet penetration is poor in India.
• Some respondents are unwilling to talk: -- Some respondents either
do not have time or willing does not respond, as they are quite annoyed with
the phone call.

• Lack of Career Opportunities

• Limitations of online trading

• Competition

• Technical Problem

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1.4. COMPETITION INFORMATION

ICICIDIRECT.COM

Products and Services

A product for every need: ICICIdirect.com is the most comprehensive website,

which allows you to invest in Shares, Mutual funds, Derivatives (Futures and
Options) and other financial products. Simply put we offer you a product for
every investment need of yours.

ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an Affiliate

of ICICI Bank Limited and the Website is owned by ICICI Bank
Limited

Product & Services:

Trading in shares: ICICIdirect.com offers you various options while trading in
shares.
Cash Trading: This is a delivery based trading system, which is generally done with
the intention of taking delivery of shares or monies.
Margin Trading: You can also do an intra-settlement trading up to 3 to 4 times your
available funds, wherein you take long buy/ short sell positions in stocks with the
intention of squaring off the position within the same day settlement cycle. (ONLY
for intraday)

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INDIA BULLS

India bulls Group is one of the top business houses in the country with business
interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex and
Power sectors. India bulls Group companies are listed in Indian and overseas markets
and have a market capitalization of over USD 7 billion. The Net worth of the Group
exceeds USD 2.5 billion. India bulls Group companies enjoy highest ratings from
CRISIL, a subsidiary of Standard and Poor’s. India bulls has been conferred the status
of a “Business Super brand” by The Brand Council, Super brands India.
India bulls Financial Services is an integrated financial services powerhouse
providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,
Asset Management and Advisory services. India bulls Financial Services Ltd is
amongst 68 companies constituting MSCI - Morgan Stanley India Index. India bulls
Financial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. India
bulls Financial Services signed a joint venture agreement with Sogecap, the insurance
arm of Societé Generale (SocGen) for its upcoming life insurance venture. India bulls
Financial Services in partnership with MMTC Limited, the largest commodity trading
company in India, is setting up India’s 4th Multi-Commodities Exchange.

ABHIPRA

Beginning as a Broking House, we grew into Business House. We broadened our

horizons and stepped into the field of Depository, Stock Broking, Full-Fledged
Money Changing Services, Category I Registrar & Transfer Agent, Commodity
Trading, Online Trading (Equity, F&O & Commodity), e-Return Intermediary.
Abhipra today commands the status of being one of the leading Depository
Participants of Northern India in Private Sector. Moreover, Abhipra has Trading

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Terminal Outlets for NSE & BSE spread to almost every nook & corner of Northern
India.
Abhipra Capital Limited is also empanelled as a Depository Participant with one of
the premier Commodity bourse, National Commodities and Derivatives Exchange
Limited (NCDEX). So a client now can open Commodity Demat Account with us
At Abhipra, we offer our clients far more than merely a comprehensive range of
financial services. We offer them ideas, innovations, and solutions with extra-ordinary
results. We feel that quality is an essential ingredient in building successful
businesses. Not only do products and services need to be of high quality, but potential
customers also need to have assurance that the products will be of high quality. This is
evidenced from the fact that Abhipra is a ISO 9001 (Quality Assurance Systems)
Registered Company.

KOTAK SECURITIES:-

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking
and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's
leading financial institutions, offering complete financial solutions that encompass
every sphere of life. From commercial banking, to stock broking, to mutual funds, to
life insurance, to investment banking, the group caters to the financial needs of
individuals and corporate.

Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both
The Bombay Stock Exchange and the National Stock Exchange of India Limited.

The company has four main areas of business:

• Institutional Equities,
• Retail (equities and other financial products),
• Portfolio Management and
• Depository Services.

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MOTILAL OSWAL:-

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with
just two people running the show. It has established itself as the Best Local Brokerage
House in India (Asia Money Brokers’ Poll 2005). Their Institutional Equity Division
combines the efforts of the Research and Sales & Trading departments to best serve
clients' needs. Consistent delivery of high quality advice on individual stocks, sector
trends and investment strategy has established them as a reliable research unit
amongst leading Indian as well as international investors.

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1.5 S. W. O. T ANALYSIS OF THE ORGANIZATION

Strengths

• The `do-it-yourself' framework of online share trading offers retail investors the
three benefits of transparency, access and efficiency. Paperwork diminishes
significantly, and no more painful trips to your broker to check if everything's in
order. Online trading has made it possible to universalize access to retail investors.
This was earlier very difficult, as the cost of servicing often-outweighed
transaction volumes. Online brokerage ranges between 0.05-0.20 per cent of the
value of transactions for non-delivery-based trades, and between 0.25-0.95 per
cent for delivery-based trades. Once major investments in online infrastructure are
over and done with - and with the economies of scale coming into play - it is
expected that brokerage rates would head further downwards.
• Access to online trading and latest financial happenings, apart from quotes and
unbiased investment analyses, all consolidate into a value-added product mix in
tandem with evolving markets that are freer and fairer. The Net result: An
inquisitive, informed and demanding investor. Today's investor is more involved
in managing his or her assets and analyzing a vast array of investment options.
Technology and today's enabled investor have, in turn, driven competition,
resulting in reduced costs of trading, transparency in dealings, and pricing info
that is accurate and real-time. More and more investors now want to know how
their trades are executed, and whether they have received the best possible price.
Critical components of execution quality include the prices at which orders were
executed as well as the speed of execution. The quality of execution, in turn,
hinges on efficient order routing. We owe this to our investor fraternity.

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Weakness

• Every thing in the world has a flip side to it - Transaction velocity is crucial. And
more often than not, connections are lousy. There's also a degree of investor
skepticism about online payment and settlement mechanisms in spite of all the
encryption and fire walling brought into play. Time and technology will soon
assuage these concerns, which hark back to the `physical' days.

“The three main technology obstacles which have prevented Internet broking from
taking off are:

• Lack of Internet penetration

• Bandwidth infrastructure
• Poor quality of ISP infrastructure.”

Opportunities

• You have some money to dabble with. Trading shares on BSE/NSE has
always been your dream. When will you ever find the time? And besides, the
hassle of finding a broker is not easy. This is your main opportunity.
• Realizing there is untapped market of investors who want to be able to
execute their own trades when it suits them, brokers have taken their trading
rooms to the Internet. Known as online brokers, they allow you to buy and sell
shares via Internet.
• There are 2 types of online trading service: discount brokers and full service
online broker. Discount online brokers allow you to trade via Internet at
reduced rates. Some provide quality research, other don’t. Full service online
brokerage is linked to existing brokerages. These brokers allow their clients to
place online orders with the option of talking/ chatting to brokers if advice is
needed. Brokerage rates here are higher. 5Paisa.com, ICICIDirect.com,
IndiaBulls.com, Sharekhan.com, Geojit securities.com, HDFCsec.com,
Tatatdw.com, Kotakstreet.com are some of the online broking sites in India.
• And daily trading turnover is estimated in the vicinity of 0.75 per cent of the
combined BSE and NSE daily turnover of about RS 11,000 crore!!! The point

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 is, there's tremendous scope for growth. Especially when you consider the US,
where trading over the Net accounts for about 55 per cent of the total
volumes. And, I believe, in some Asian markets the figures as high as 70 per
cent.

Threats

• On to some threat perception - Domestic funds, foreign institutional investors and

operators comprise the three main market constituents. And all three include term
investors as well as opportunists in their pecking order. Some, for instance, hitch
their fate with what the FIIs are up to. All this spells spurting volumes. But
nobody gives a damn about the resultant volatility.

• And some, not all, offer free investment advice over the Net to lure rookie
investors with misleading information. Prices of scripts can also be influenced to
the advantage of vested interests, courtesy the Net. Unlike in the US, stockbrokers
out here willingly (or under the force of circumstance) assume the role of
`advisors', sans the neutral, non-vested stance.

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 OBJECTIVES AND METHODOLOGY

2.1 SIGNIFICANCE

This project will accomplish to understand the problem faced by the new client
with respect to online share trading and find ways to solve their queries at
microscopic level. The study also aims to highlight the possible hurdles that a
prospective client faces who are interested to investing insecurities but is unaware of
the system of online share trading. It also aims at finding out the brand image of the
organization amongst the general investors and give information to the management
about the new developments in the market adopted by the competitors and the areas
where the company needs to improve. The project is to study the effectiveness of the
stock exchange as this is one of the best way of investment.

2.2. MANAGERIAL USEFULNESS OF THE STUDY

A thorough research and a detailed study of market are very important for the
management to take the right strategy suiting the market condition. The study gives
information regarding the market competition, innovative products offered by
competitors, present demand of the product in the marketed.

1. The study will help the management to understand the customer mind set and
also estimating the present future market demand of the product.
2. It will help to estimate the level of awareness established in the market and in
deciding the extent of promotion required.
3. Help in finding the areas in which SMC will concentrate to increase its market
share.
4. It will help in finding out the customer expectation about the product and also
help to know the customer physiology.
5. Helps in knowing the class in which max new SMC must concentrate.

This study helps in finding the area in which SMC is strong and the area in which
it lags behind others. Which class of customer mostly approaches SMC policies?

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2, 3. OBJECTIVES

Before starting any project, we should keep in mind the clear objectives of the project
because in the absence of the objectives one cannot reach the conclusion or end result
of the project.

So, the objective of my project is to:

• To analyze the market share & services of existing players to

judge the future prospects of online trading for SMC
INVESTMENT SOLUTIONS.

Stock market of India is now been one of the fascinating market worldwide. Indian is
among the top ten destination of the world to which global player want to invest.

Research comprises defining and redefining problems, formulating hypothesis or

suggested solutions; collecting, organizing and evaluating data; making deductions
and reaching conclusions; and at last carefully testing the conclusions to determine
whether they fit the formulating hypothesis.

In short, the search for knowledge through Objective and Systematic method of
finding solutions to a problem is Research.

2.4 SCOPE OF THE STUDY

Since better broadband connectivity across the country and wider awareness of equity
as an asset class will push the online trade volumes to over 50% of total Trade
therefore it is relevant to the future prospects emerging in the stock market.

In order to compete with the online trading market leader like ICICI the company has
to work a lot on Online Trading in order to get the competency with other players.

25
Since the online trading is accepted by major players in the Indian Stock Market, the
importance of Online Trading has increased over the past decade therefore it is very
important to consider the Online Trading as a future of the Indian Stock Market.

This project would also tell us about the working of the Indian Stock Market and the
forces acting in the Online Trading.

“SMC” a software used by SMC Investment Solutions & SERVICES is an edge for
gaining competitive advantage; therefore it is relevant to know the working of this
software which would be enlightened in our company.

Online Trading Account and Demat Account

After the introduction of the online trading systems it is very easy to do online trading
with just a PC and an internet connection. All you need to do is just open a Demat
account and a trading account with a depository participant or DP. DP is connecting
Depository to investors. Depository is the people who stores shares in electronics
form. In India there are two depositories, NSDL and CDSL.

Most of the banks and brokerage houses provide trading account and Demat account.
To open a Demat account you need many things like PAN card, address proof, bank
account etc. To know more about Demat account Opening a Demat Account

PROBLEM FORMULATION
The research focuses on the future prospects of online trading along with SMC
investment solutions. The research will basically present the current scenario of online
trading in India, the market players involved and the trading strategies followed in the
market.

The research will cover the Indian trading market and try to understand its various
dimensions, so as to know how is the environment in Indian trading market? We will
also analyze the competitive strategies of SMC investment solutions

26
Therefore this research will help in understanding Indian trading market and also try
to find future prospects of online trading with SMC Investment Solutions.

2.5 METHODOLOGY

Marketing Research
Is the systematic design collection, and analysis and reporting of Data
and findings relevant to specific marketing situation facing the company.

Research Design

Types of Research: - Descriptive research

Descriptive research includes Surveys and fact-finding enquiries of

different kinds. The major
purpose of descriptive research is description of the state of affairs, as it
exists as the present. The main characteristic of this method is that the
researcher has no control over the variables; he can only report what has
happened or what is happening.

27
Marketing Research Process

1.Define the Problem and

Research Objectives

2. Develop the Research

Plan

3. Collect the Information

4. Analyze the
Information

5. Present the Findings

28
1. Define the Research Problem and Objective

Objective

TO ANALYSE THE MARKET SHARE & SERVICES OF EXISTING

PLAYERS
 TO JUDGE THE FUTURE PROSPECTS OF ONLINE TRADING

FOR SMC INVESTMENT SOLUTIONS.

The respondents are stratified into offline share trading respondents and
online share trading respondents.

Hence the sub objective are:

 To understand satisfaction, perception & awareness of offline

trading customers.

 To understand satisfaction, perception & awareness of online

trading customers.

2. Develop the Research Plan

The second stage of Research calls for developing the most efficient plan
for gathering information.

Designing a research plan calls for decision on the data sources, research
approaches, research instruments, sampling plan & contact methods.

Data Sources
There are two types of data.

29
Primary data: The data that is collected first hand by someone
specifically for the purpose of facilitating the study is known as primary
data. So in this research the data is collected from respondents through
questionnaire.

Secondary data: For the company information I had used secondary data
like brochures, websites of the company etc.

Survey Approach

Survey Research: - survey research is used to learn about need,

perception and awareness level of the customers for online share trading.

The method used by me is Survey Method as the research done is

Descriptive Research.

Research Instruments

Selected instrument for Data Collection for survey is Questionnaire.

Questionnaires: - A questionnaire consists of set of questions presented

to respondent for their answers. It can be Closed Ended or Open
Ended.

Open Ended: - Allows respondents to answer in their own words & are
difficult to Interpret and Tabulate.

Close Ended: - Pre-specify all the possible answers & are easy to
Interpret and Tabulate.

30
Types Of Question Included:

Dichotomous Questions
Which has only two answers “Yes” or “No”?

Multiple Choice Questions

Where the respondent is offered more than two choices.

Rating Scale
A scale that rates some attributes from “excellent” to “very poor”
and “very inefficient” to “Very efficient”.

Sampling Plan

After deciding on the research approach and instrument, the marketing

researcher must
Design a Sampling Plan. This includes:

Sampling Unit: - Who is to be surveyed? The marketing researcher must

define the target population that will be sampled.

The sample Unit taken by me;

General individual customer those who trade in share market.

Sample Size/ Population Size: - How many people should be surveyed?

I have cover entire Delhi city for the survey. My sample size is 200.

Sampling Procedure: - How should the respondent be chosen?

31
 In the Project, sampling done is on basis of area sampling for the Delhi
city.
In which convenient sampling was done.

Contact Methods
Once the sampling plan had been determine, the marketing researcher
must device how the subject should be contacted: Mail, Telephone,
Personal or On-line Interviews.

In my project I went for personal Interviewing, as it’s necessary to go

meet the individual respondents at their place so I can collect the right
information.

3. Collect The Information

The Data collection phase of marketing research is generally the most

expensive and the most prone to error.

I had visited all the respondents individually in the Delhi city and
collected information via questionnaire.

I used to talk with them and in that talk I asked them the relevant question
of the questionnaire so I could get correct information from them for the
objective purpose. For some questions I have to explain them about
company, like different plans of the company etc.

Generally most of the respondents had filled questionnaire themselves but

some avoid filling up so at that time myself filled according to their
answer.

32
 The sample of questionnaires 1 used is in Annexure.

4. Analysis of the Information or Data Collected

After the data have been collected, the researcher turns to the task of
analysis then. The analysis of data requires a number of closely related
operations such as establishment of categories, then application of these
categories to raw data though coding, tabulation and statistical inferences.
The unwieldy data should necessarily be condensed into a manageable
groups and tables for further analysis.

The researcher can analyze the collected data with the help of various
statistical measures.
After collecting the data I used hand tabulation method for analysis.

Interpretation of survey:

Based on collected information the analysis is done.

33
 CONCEPTUAL DISCUSSION

INVESTOR PERCEPTION

SEBI in association with National Council of Applied Economic Research (NCAER)

conducted a Survey of Indian Investors in 1998-99 and then followed it up in 2000-
01. The survey of 2000-01 was based on a sample of 288,081 geographically
dispersed rural and urban areas. The findings of this survey were released in
September 2003. The survey estimated that a total of 13.1 million or 7.4 per cent of
all Indian households totaling 21 million individuals directly invested in equity
shares or debentures or both during 2000-01. The other findings are as listed below:

1. The number of debenture owning households and individual debenture holders

far exceeds household and individual equity investors. Of the total 13.1 million
investor households, 9.6 million households owned bonds or debentures,
whereas only 6.5 million investor households owned equity shares.

2. The percentage of households investing in equity or debentures is more in urban

areas than in rural areas. This divergence is more in case of equities compared
to debentures. Of the 51 million urban households, 7.8 million households
representing more than 12 million urban individual investors owned equity
shares or debentures or both. Whereas, of the 125 million rural households, only
5.3 million households representing more than 8 million individual investors
shows a definite migration of investors from equity market to bond market
during the period between the two surveys.

3. The survey results also clearly reveal that number of non-investor

households have increased from about 156 million in 1998-99 to nearly 164
million in 2001-02 constituting nearly 92.6 per cent of all households.

4. It was also observed that the investor population and town size are directly
proportional. The largest city with more than 50 lakh population accounted for
about 17 per cent of investor households and the next higher segment, more
than 31 per cent investor households were in towns with population between
10 and 50 lakh.

34
Primary Market

An aggregate of Rs. 2,676,600 million were raised by the government and corporate
sector during 2005-06 as against Rs. 2,572,201 million during the preceding year.
Government raised about two third of the total resources, with central government
alone raising nearly Rs. 1,476,360 million.

Corporate Securities

The average annual capital mobilization from the primary market has grown manifold
since the last two-three decades. It received a further boost during the first half
of 1990s with the capital raised by non-government public companies rising sharply
from Rs. 43,120 million in 1990-91 to Rs. 264,170 million in 1994-95. Thereafter,
there has been a decline due to conditions prevailing in the secondary market.
However, the year 2005-06 took a turnaround in its performance as compared to the
previous year by mobilizing Rs. 32,100 million. The capital raised, which used to be
less than 1% of gross domestic saving (GDS) in the 1970s increased to about 13% in
1992-93 but thereafter witnessed declines. Though there has been a considerable
increase in the amount mobilized in 2005-06, when seen as a percentage of GDS, it is
1.20% (Table 1-8). Data in Table 1-9 shows that there is a high preference for
raising resources in the primary market through private placement route. Private
placements accounted for 89% of total resources mobilized through domestic issues
by corporate sector during 2005-06.

Indian market is getting integrated with the global market, though in a limited way
through Euro Issues. Since they were permitted access in 1992, Indian companies
have raised about Rs. 30,980 million through American Depository Receipts
(ADRs)/Global Depository Receipts (GDRs).

FIIs have invested heavily in Indian market in 2005-06. They had net cumulative
investments of US$ 38.75 billion as at end of March 2006. There were 745 FIIs
registered with SEBI as of end March 2006.

It appears that more and more people prefer mutual funds (MFs) as their investment
vehicle. This change in investor behavior is induced by the evolution of a regulatory
framework for MFs, tax concessions offered by Government and preference of

35
investors for passive investing. Starting with an asset base of Rs. 250 million in
1964, the total assets under management at the end of March 2006 have risen to Rs.
1,396,160 million. During the last one decade, the resources mobilized by the MFs are
increased from Rs. 112,440 million in 1993-94 to Rs. 476,840 million in 2005-06.

Secondary Market

Corporate Securities

There are 23 exchanges in the country, which offer screen based trading system. The
trading system is connected using the VSAT technology from over 357 cities. There
were 9,368 trading members registered with SEBI as at end March 2006 (Table 1-10).

The market capitalization has grown over the period indicating more companies using
the trading platform of the stock exchange. The all India market capitalization is
estimated at Rs. 13,187,953 million at the end of March 2006. The market
capitalization ratio defined as the value of listed stocks divided by GDP is used
as a measure of stock market size. It is of economic significance since market is
positively correlated with the ability to mobilize capital and diversify risk. It increased
sharply to 52.3% in 2005-06 against 28.5% in the previous year. The trading volumes
on exchanges have been witnessing phenomenal growth over the past decade. The
trading volume which peaked at Rs. 28,809,900 million in 2000-01, fell substantially
to Rs. 9,689,093 million in 2004-05. However, the year 2005-06 saw a turnaround in
the total trading volumes on the exchanges. It registered a volume of Rs. 16,204,977
million. The turnover ratio, which reflects the volume of trading in relation to the size
of the market, has been increasing by leaps and bounds after the advent of screen
based trading system by the NSE. The turnover ratio for the year 2005-06 accounted
at 122.9%.

The relative importance of various stock exchanges in the market has undergone
dramatic change during this decade. The increase in turnover took place mostly at the
big exchanges. The NSE yet again registered as the market leader with more 85% of
total turnover (volumes on all segments) in 2005-06. Top 5 stock exchanges
accounted for 99.88% of turnover, while the rest 18 exchange for less than 0.12%
during 2005-06 (Table 1-11). About ten exchanges reported nil trading volume during

36
the year.

S&P CNX Nifty is the most widely used indicator of the market, .The index
movement have been responding to changes in the government’s economic policies
, the increase in FIIs inflows , etc. However, the year 2005-06 witnessed a
favorable movement in the Nifty, wherein it registered its all time high in
January. The movement of the S&P CNX Nifty, the most widely used indicator
of the market, is presented in Chart 1-1. The index movement have been responding
to changes in the government’s economic policies , the increase in FIIs inflows ,
etc. However, the year 2005-06 witnessed a favorable movement in the Nifty,
wherein it registered a high in January 2006 of 2014.65. The point-to-point
return of Nifty was 80.14% for 2005-06.

Resources mobilized through public Issues

(Amount in Rs. Million)

Year Resources raised by % of GDS % of Mobilisation

non-government disbursement By MF
companies by Fis

1991-92 43,120 3.32 33.66 750,800

1992-93 61,930 4.38 38.08 112,530
1993-94 198,030 12.76 85.54 130,210
1994-95 193,300 9.98 74.85 112,430
1995-96 264,170 10.48 78.69 112,750
1996-97 160,750 5.34 41.59 –583,30
1997-98 104,100 3.28 24.40 –203,70
1998-99 31,380 0.84 5.85 40,640
1999-00 50,130 1.27 8.59 36,110
2000-01 51,530 1.11 7.51 199,532
2001-02 49,490 1.01 6.89 111,350
2002-04 56,924 1.17 10.18 71,370
2003-05 18,777 0.74 18.37 45,830
2004-06 32,100 1.20 15.08 476,840

Government Securities

The primary issues of the Central Government have increased manifold during the
decade of 1990s from Rs. 89,890 million in 1990-91 to Rs. 1,476,360 million in 2005-
06 (Table 1-9). The issues by state governments have also increased over this
period from Rs. 25,690 million to Rs. 505,210 million. The Central Government

37
mobilized Rs. 1,215,000 million through issue of dated securities and Rs. 261,360
million through issue of T-bills. After meeting repayment liabilities of Rs. 326,930
million for dated securities, and redemption of T-bills of Rs. 261,260 million, net
market borrowing of Central Government amounted to Rs. 888,160 million for the
year 2005-06. The State Governments collectively raised Rs. 505,210 million during
2005-06 as against Rs. 308,530 million in the preceding year. The net borrowings of
State Governments in 2005-06 amounted to Rs. 463,760 million. The trading in
government securities exceeded the combined trading in equity segments of all the
exchanges in the country during 2005-06. The aggregate trading in central and state
government dated securities, including treasury bills, increased by manifold over a
period of time. During 2005-06 it reached a level of Rs. 26,792,090 million. The share
of WDM segment of NSE in total turnover for government securities decreased
marginally from 52% in 2004-05 to 47.6% in 2005-06. However, the share of WDM
segment of NSE in the total of Non-repo government securities increased
marginally from 74.01% in 2004-05 to 74.89% in 2005-06.

Along with growth of the market, the investor base has also widened. In addition to
banks and insurance companies, corporate and individual investors are also investing
in government securities. Due to the soft interest rate policy pursued by the RBI, the
coupon rates offered on government borrowings have fallen sharply. The weighted
average costs of its borrowing have declined to 5.71% in 2005-06. The maturity
structure of government debt is also changing. About 77% of primary issues were
raised through securities with maturities above 5 years and up to 10 years. As a result
the weighted average maturity of dated securities increased to 14.94 years in 2005-06.

Derivative Market
The number of instruments available in derivatives has been expanded. To begin with,
SEBI only approved trading in index futures contracts based on S&P CNX Nifty
Index and BSE-30 (Sensex) Index. This was followed by approval for trading in
options based on these two indices and options on individual securities and also
futures on interest rates derivative instruments (91-day Notional T-Bills and 10-
year Notional 6% coupon bearing as well as zero coupon bonds). Now, there are

38
futures and options based on benchmark index S&P CNX Nifty and CNX IT Index as
well as options and futures on single stocks.

The total exchange traded derivatives witnessed a value of Rs. 21,422,690 million
during 2005-06 as against Rs. 4,423,333 million during the preceding year. While
NSE accounted for about 99.5% of total turnover, BSE accounted for less than 1% in
2005-06. NSE has created a niche for itself in terms of derivatives trading in the
global market.

Risk Management System

The risk management system ensures the minimization of inherent known risks with
appropriate tools and timely speedy flow of information. An effective risk
management system further ensures certain alerts by which unknown risks can be
predicted & informed in due course of time.

In stock market operation, the risk is too high to imagine and one can find instant
impact of every bit of information in terms of monetary gain or loss. So one has to be
very careful & particular to the alerts provided time to time by RMS for containing
the risks.

Further, RMS can’t ensure a complete elimination of risks. It can reduce the risk &
level of reduction of risk depends upon our own efforts. So it is advised that one
should follow set norms & put proper attentions on various alerts send by the RMS
during the day /at the end of day for controlling the risks.

To start with day to day processes which are implemented on daily basis to eliminate
Risk as much as one can with the stipulated tools and techniques. One should apply
these tools and techniques according to the requirement of their Management and the
Market conditions.

Rationale behind Study

As result of reforms in financial and real sector new investment alternatives have
emerged. There was a time when few individuals possessed majority of the wealth in

39
the society. With the efforts of government our economy witnessed significant
growth, which led to uniform distribution of income in society. As a result income of
masses started rising and they started looking for suitable investment avenues, to
achieve their financial goals. From savings accounts, fixed deposits, post office
savings schemes, several other investment alternatives have emerged such as capital
markets, mutual funds, commodities market, insurance derivatives etc. There has been
a major shift towards risky investments in order to earn higher returns. There were
also scams like US-64, Harshad Mehta’s scam, which forced investors to make
changes in their portfolio. But after government efforts investors’ confidence is
restored in equity markets, which led to growth in financial services sector. After this
period in today's market scenario we find Indian economy still struggling while the
world is facing massive recession. Indian economy is in such position because it is
still in its developing stage and so there is so much more to explore and develop.
Recently market has faced downtrend but still holding on and offering new
investment avenues to investors and still offers lucrative benefits to investors.

SMC GLOBAL AND SECURITY plays a very important role along with other
players in the market in current scenario by offering its financial services. Investors
today are going in for saving their money instead of investing it in the market due to
current market situation. Government of India is making constant efforts to support
the economy by decreasing interest rate on loans of all types. This showed a positive
growth in the market by investors turning back to the market. Also constant efforts
have made auto industry to lower down the rates of automotives and private banks
also lowered their interest rates on loans to help Indian investors to come forward and
step in the market.

Thus, this study helps in understanding current market volatility and solutions to deal
with it, so as to find future prospects for \SMC GLOBAL AND SECURITY and
answer questions like, how to deal with recession evils? How to protect investors
interest? How to sustain market position and market share?

To understand it and deal with it one always has to go to the basics that is the
investors and the reason investor invests is his motive.

40
Motives for investment may vary from person to person, but there are some common
desires. Everybody expects some return out of investment. Investors are also
concerned about the safety of investment. And, in case of an emergency, people want
their money back, quickly. Hence, there are three criteria’s to evaluate every
investment avenue:
1. Safety
2. Liquidity
3. Returns

Products & Services

SMC customers have the advantage of trading in all the market segments together in
the same window, as they understand the need of transactions to be executed with
high speed and reduced time. At the same time they have the advantage of having all
kind of Insurance & Investment Advisory Services for Life Insurance, General
Insurance, Mutual Funds, and IPO’s also.

SMC is a customer focused financial services organization providing a range of

investment solutions to their customers. They work with clients to meet their overall
investment objectives and achieve their financial goals. Their clients have the
opportunity to get personalized services depending on their investment profiles. Their
personalized approach enables clients to achieve their Total Investment Objectives.

Their key product offerings are as follows:

o Equity Trading
o Commodity Trading
o Depositary Services
o Portfolio Tracker
o Life Insurance
o General Insurance
o Mutual Fund

COMPANY FINANCIALS

Revenue
Month (in Lakhs)
Sep ‘07 29.05
Oct ‘07 60.27
Nov ‘07 79.61 41
Dec ‘07 107.94
Jan’08 104.37
Feb’08 140.43
Mar’08 128.89
The above shown graph depicts the revenue generated by SMC in 6 months starting
from September, 2007 to March’2008. This graph shows an upward sloping trend
line. If we look at the numbers, we see a 343% growth in the revenues from 29.05
lakhs in Sept’07 to 128.89 lakhs in March’08.

Though, there have been a few slips in January and March but over all its presents
financials of a growth company.

ONLINE Vs OFFLINE TRADING

Internet trading is expected to:

• Increase transparency in the markets.

• Enhance market quality through improved liquidity, by increasing quote
continuity and market depth.
• Reduce settlement risks due to open trades, by elimination of mismatches.
• Provide management information system (MIS).
• Introduce flexibility in system, to handle growing volumes easily and to
support nationwide expansion of market activity.
• Besides, through Internet trading three fundamental objectives of securities
regulation can be easily achieved, these are: Investor protection, creation of a
fair and efficient market and, reduction of the systematic risks.

42
 The investors would be able to track the fluctuations in a particular stock and the
market as a whole, while deciding to execute the order and also while the order is
being executed. The confirmation of the order would also be real time. The order
routing system on which net trading will be done is compatible with screen-based
trading terminals used today.

Internet trading brings in total transparency between a broker and an investor in case
of secondary market operations. When the open outcry system was prevalent, only the
broker knew the actually transacted price. This practice diminished significantly when
it was taken over by screen-based trading. With on-line trading, investors can now see
for themselves the price at which the deal takes place.

It will also reduce transaction costs, increase liquidity in the market and ensure total
transparency. It allows quick and easy access to valuable research and information to
an investor and enables him execute transactions faster and more efficiently on a real
time basis. The volume of trade has also increased and has provided depth to the
market. Thus, in a nut shell, we can summarize the difference between online and
offline trading as follows:

ONLINE OFFLINE

1. In online trading mechanism the In offline the investor has no control.

customer has full control on his Demat
and trading a/c.
2. Investor in online trading can easily The investor needs to deposit and withdraw
transfer it funds. fund each time of trading.
3. Broking houses providing online trading No live terminal is provided.
also provides live terminals to their
clients.

4. The broker provides investor at online
trading with advisory facility.
5. Online investor can directly invest into
IPO’s and Mutual funds also.
6. Investor can place order even after the
Offline investors are deprived of advices.
Offline trader needs to open separate
account.
Investor cannot place After Market Order

43
 market closes.
7. The client can globally access the
account and can trade anywhere in the
world where Internet facility
available.
8. No documents are required for trading.
9. Any Demat/DP account can be attached
with any company’s trading account.
10. Online trading is time effective
11. No pool account is maintained at online
process
(AMO).
Trader cannot trade away for the place
where he/she has opened its account.
is DI slips are required for trading.
The Demat account cannot be linked with
any trading account.
It is time consuming process.
In offline pool account are maintained.

SEBI Guidelines for online Trading

According to SEBI guidelines on Internet trading, brokers providing e-trading must

have a minimum net worth of Rs. 50 lakhs, besides obtaining specific permission of
the stock exchange concerned. Stock exchanges should ensure that the systems used
by the broker provide for security, reliability and confidentiality of data through use
of the encryption technology. For signatures, participants should use authentication
technologies and certification agencies as and when notified later.

Stock exchanges should also ensure that brokers maintain adequate back-up systems
and data storage capacity. Brokers should have adequate system capacity for handling
data transfer and arrange for alternate means of communication in case of Internet
failure. The following security features are mandatory for all Internet-related trading
systems:

 User ID.
 First level password.
 Automatic expiry of password at the end of reasonable duration.
 All transaction logs with proper audit facilities to be maintained in the system.
 Secured socket level security server for access through Internet.
 Suitable firewalls between trading set up directly connected to an exchange
trading system and the internet trading set up.

44
Internet Trading
At the end of March 2007, 78 trading members on the CM segment provided internet
based trading facility to investors. The members of the exchange in turn had
registered 849,696 clients for web based access as on March 31, 2007. In the CM
segment about 499 lakh trades for Rs. 81,034 crores, constituting 7.11% of total
trading volume, were routed and executed through internet. The following table gives
the growth of internet trading.

Year Enabled Registered

Members* Clients*

2001-02 3 -
2002-03 61 123578
2003-04 82 231899
2004-05 80 346420
2005-06 70 463560
2006-07 78 849696

900000
800000
700000
2001-02
600000
2002-03
500000
2003-04
400000
2004-05
300000
2005-06
200000
2006-07
100000
0
Clients

Year Trading Volume % of total

(Rs. Crore) trading
volume

2000-01 - -
2001-02 7287.81 0.54
2002-03 8138.81 1.59
2003-04 15360.76 2.48
2004-05 37945.08 3.45
2005-06 81033.81 7.11 45
 90000
80000
70000 2000-01
60000
2001-02
50000
2002-03
40000
2003-04
30000
2004-05
20000
10000 2005-06

0
Volum e

(Source: - www.nseindia.com)

By the end of Dec. 2006 the number of clients doing the online trading has increased
to 13lacs.

Liquidity
The liquidity in the CM segment, as measured by the turnover ratio, has witnessed a
steady increase and reached nearly 10.13% during March 2007. More than 98.02% of
securities available for trading are being traded every month and 95.6% of the
securities were traded for at least 100 days during 2005-06, as indicated below:

Distribution of Turnover
The concentration of trading among top ‘N’ securities/brokers. It is observed that the
top ‘5’ and ‘100’ securities account for about 25.88% and 84.26% of total turnover in
the CM segment in 2005-06. The details of ‘50’ most active securities during 2005-
06, which accounted for 78.40% of turnover Broker-wise distribution of turnover
increasing diffusion of trades among a large number of trading members over the
years. During 2005-06, top ‘5’ brokers accounted for only 13.52% of turnover, while
top ‘100’ brokers accounted for 65.09% of total turnover. The following shows the
turnover of the trade done through internet.
Trade Date Settlement No. No. of Trades Turnover (Rs.cr)
5-May-2007 2007082 649071 1182.21
4-May-2007 2007081 655428 1234.84
3-May-2007 2007080 680710 1260.11
2-May-2007 2007079 669625 1216.86
29-Apr-2007 2007300 308508 735.79
28-Apr-2007 2007078 652819 1326.26

46
27-Apr-2007 2007077 677594 1597.00
26-Apr-2007 2007076 565581 1353.48
25-Apr-2007 2007075 613816 1263.89
24-Apr-2007 2007074 614635 1356.16
21-Apr-2007 N2007073 681553 1375.54
20-Apr-2007 N2007072 585334 1143.46
19-Apr-2007 N2007071 607168 1200.28
18-Apr-2007 N2007070 568237 1052.51
17-Apr-2007 N2007069 501438 922.51
13-Apr-2007 N2007068 686576 1315.20
12-Apr-2007 N2007067 681800 1284.18
10-Apr-2007 N2007066 570339 1143.94
7-Apr-2007 N2007065 758906 1655.68
5-Apr-2007 N2007064 633591 1306.19
4-Apr-2007 N2007063 635877 1238.40
3-Apr-2007 N2007062 591383 1180.07

MARKET CAPITALIZATION
The total market capitalization of securities available for trading on the CM segment
increased from Rs. 363,350 crore as at end March 1995 to Rs. 1,585,585 crore as at
end March 2007. Top 50 companies account for 69.21% of total market capitalization
as at end March 2007.

SECTORAL DISTRIBUTION

The share of top '50' companies, classified according to different sectors, in terms of
trading volume and market capitalization. A drastic change in the importance of
different sectors is observed since NSE commenced trading. The share of
manufacturing companies in trading volume of top '50' companies, which was more
than 23% in 1998-99, had witnessed a decline in the years 2001-02 and 2002-03, but a
turnaround was noticed in the year 2003-04 (it accounted for 37.66%) which was also
maintained till 2006-07 with the share of manufacturing companies rising to 41.81%.
As compared to this, the share of information technology (IT) companies in trading
volume, which had been quite high in the year 2000-01, witnessed a considerable
decline and stood at only 19.56% in 2005-06. A mixed trend has been noticed in these
sectors in terms of market capitalization. Sectors like manufacturing, which used to
dominate in terms of market capitalization in the year 1999-00 witnessed a dip in
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2002-03, however this sector has witnessed a rebound and accounted for 31.13% and
23.35% in 2005-06 and 2006-07 respectively. The IT sector has also shown a
turnaround this year with 22.54% in the top ‘50’-market capitalization in 2006-07.

ONLINE TRADING WITH SMC

SMC launched online trading in June, 2006 in addition to the traditional offline
mode of trading on NEATXSV4. Since then SMC has managed to a fair
share of client base which is very much visible from the company
financials.
SMC is doing a good job in the offline industry as it has established a good
brand name for itself in a short span of time.

But looking at the competition, the company decided to launch its online
trading portal in June, 2006.
Besides, being up in the line of competition, Online trading also helps the
company to cut recurring costs as it happens in offline trading.

Though, setting up online trading infrastructure requires one time set up cost
like the cost of software, bandwidth charges, skilled manpower etc. which is
quite high. But the benefits are recurring as the online trading is about volumes.
Larger the client base, higher the revenues.

This is screenshot of SMC, which is the online trading software of SMC.

Features of SMC

A browser based trading software that enables clients to access their accounts from
anywhere using internet by a unique ID and password. This facility is available to all
the online clients the moment they get registered with SMC INVESTMENT

SOLUTIONS & SERVICES

The product has a lot of features which provides various benefits to clients:

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1) The screen gives live streaming quotes from respective exchanges. The client has
an option of having “live” Multiple Windows for different exchanges and his personal
window where he can add the scrips of his choice and save it.

2) It provides a Common window for display of market watch and order execution
where the client can click + (plus) for Buy and – (minus ) for Sell or Click on the
scrip and Press F1 to Buy and F2 to sell which provides an easy trading facility to the
client. It also provides an Offline order placement facility.

3) Before Buying or Selling, the client can watch the Market Depth, which tells about
Best Buy/Sell rates and Quantities etc of that security & also enables the clients to use
the Stop-loss Feature to minimize their losses.

4) A very useful feature of the product is FIRE THE TRIGGER,

TRIGGER, which lets the
client set an “Alert” for itself to indicate a certain price of the scrip. The user can set a
different color or an audio alarm.
5) It enables clients to transfer funds online from their bank account
to SMC trading account. SMC has banking integration with PNB, HDFC,AXIS
Bank.
6) It also enables the clients to view the transactions (Buy or Sell) done during the
day. Beside the rate, quantity, type of account etc, the client can also view the order
number, time of transaction & can also get the details of entire fortnight.

7) The client can see the Bids/Offers that are not yet executed by the Exchange and
has the options to “Modify” and “Cancel” the Order.
8) Greater exposure for trading on the available margin & DP MARGIN STOCK with
very competitive commission.
9) It also provides Real time updating of exposure and portfolio while trading &
Online Integration of trading a/c with two common depositories to help move clients
shares to and fro with ease.

They also have the authority to square of the positions of the clients who don’t pay
their margin money.

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IT shares the responsibility of supporting the entire system so that it runs smoothly.

How to do trading with our SMC Swift Model:-

Step 1
Install the Software provided by us and register urself on the software

Step 2: Check the Current Status of the account

Step 3: Check the limit assigned

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Step 4 Account Valuation

Step 5 To Buy

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 To Sell

ORDER BOOK

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 TRADE BOOK

Default Limit and Exposure to the Clients:-

1. For Liquidated Value greater than or equal to 2 LAC, default limits

will be opened in Intraday ten times and Delivery Three times (Only
on a Cat) on Cash market and one time on FNO market of Net Margin.

2. For Liquidated Value less than 2 LAC, default limits will be

opened in Intraday five times and Delivery Three times (Only on a
Cat) on Cash market and one time on FNO market of Net Margin .
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Square Up:

It is a margin status when percentage of coverage is less then 25% when

comparing funding stock (A cat stock) with gross margin. It is a last alert
that the position of client may be squared up at any time if the Percentage
of coverage goes below 25%. It is a last alert that something must be
done either by reducing the position or enhancing the margin .It is a point
where the position of the client is squared up.

NORMAL SQUARE OFF (LESS THEN 25%) –

This activity has been done on daily basis with the help of software
driven Batch file (provided by the IT department). Codes which have
been not uploaded in the Batch file due to any exceptions are any
commitment from Branch end are done manually if commitment fails.
Sauda of a client BELOW 25% will be compulsory squared off next
morning, in case no proper reply received from the concerned
RM/Branch.

Proper Reply here shall mean:

- Amount is being transferred to top up the margins only through a

transfer Cheque or Demand draft subject to the condition that the
transfer Cheque or Demand draft is reflected in the bank as having
been deposited before 2:00 P.M.

- The reply should Specify what positions shall be squared off before
that 10.30 a.m. , in case the same is not done to the extent of bringing
the clients margin above the required 50% margin levels , the RMS
shall block the client and square off the balance position so as to bring
the client above the required margin levels.

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Margin Call square off process:-
1. Preparation of square off cases report.
2. Preparation of Batch File for Automated Square off.
3. Reconciliation of Batch File after and before it has been executed.
4. Consolidation of square off replies of margins from Branch end and
make it considered.
5. Preparation of Exceptions client List.
6. Making note of commitments from Branch and Regional Heads
against square off codes and make follow up accordingly.
7. Preparation clients Cheque deposit details.

Before: - We have to make sure that the batch file has been created
according to square off policy of RMS. All exceptions and necessary
details has been taken into consideration or not.

After: - After execution of the batch file we have to check that every
order of the file is properly executed or not and if there is any rejection
then immediate action to be taken (Rejection to be squared manually)

SQUARE OFF 5TH DAY LEDGER DEBIT CLIENTS (NON LAS):-

This activity is done on the Manual basis only. The process of square off
5th day ledger debit is same as Normal Square off; only difference is that
it is done manually. To square off we have to prepare NON LAS
LEDGER DEBIT REPORT.

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 DATA ANALYSIS

Q 1. Do you know about investment options available?

KNOWLEDGE %AGE
Yes 80%
No 20%
TOTAL 100

Interpretation

Only 80% people knows the exact meaning of investment. Because of remaining 20%
take his/her residential property as an investment. According to law purpose this is not
an investment because of it is not create any profit for the owner.

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Q 2. Most important things you take into your mind while making investments?
FACTOR %AGE
Risk 8%
Returns 17%
Both 75%
TOTAL 100

Interpretation

75% people are considered the both factors risk as well as returns but, only 25%
considered the risk or returns factor.

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Q 3. Awareness related to security markets
KNOWLEDGE PERCENTAGE
Complete 8%
Partial 75%
Nil 17%
TOTAL 100

Interpretation

On that basis, we conclude that 17% people know nothing about the securities
investments and 75% people have partial knowledge about it, so, some promotional
activities are required for increasing the awareness about security market.

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Q 4. What is the basic purpose of your investment?
INVESTMENT PURPOSE PERCENTAGE
Liquidity 30%

Returns 25%
Capital appreciation 10%
Tax benefits 20%
Risk covering 5%
Others 10%
TOTAL 100

Interpretation

75% people are interested in liquidity, returns and tax benefits. And remaining 25%
are interested in capital appreciations, risk covering, and others.

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Q 5: Since how long have you been investing in capital market?

Time Period Frequency %age

Less than 3 yrs 80 39

3-5 yrs 73 37
More than 5 yrs 47 24
Total 200 100

24%

39%

37%

Interpretation
Looking at the figures, we can observe that 39 % of people have been investing for
less than 3 years and so on. We know that the capital markets have picked up in past
4-5 years. Also, there are more stringent norms by SEBI and exchanges. That is the
reason why people have started to pose more trust in capital markets now.

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Q 6 : Do you trade Online?

Frequency Percentage
Yes 141 70.5
No 59 29.5
Total 200 100

141
150

100 59

50

0
Y es No

Interpretation

Out of the people surveyed, 70 % people trade online. This shows a good prospect for
online trading in future.

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Q. 7. COMPLICATED PROCESS

Frequency Percentage
Yes 60 30
No 46 23
No reply 94 47
Total 200 100

30%

47 %

2 3%

Ye s No No re p ly

Interpretation

This table shows the consolidated table of number of people voting for different
factors as to why don’t they prefer to trade online.

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Q. 8 . Why not online?
Factors No. of People
Yes No
LACK OF MARKET
KNOWLEDGE 36 21
NO COMPUTER 20 110
INVESTMENT RISK 100 75
POOR SERVICES 75 72
COMPLICATED PROCESS 60 46

W hy N ot O nline

120
100
#Respondents

80 Y es
60
40 No
20
0 SERVICES
INVESTMENT
KNOWLEDGE

POOR
NO COMPUTER

COMPLICA TED
LA CK OF
MA RKET

PROCESS
RISK

F a c to r s

Interpretation
We asked the people as to why they don’t trade online. Out of the reasons, given, we
observe that maximum people avoid doing online trading as they perceive it to be
more risky. Also, some of them have experienced poor services from their online
brokers. Hence, they avoid doing online trading.

At the same time the companies need to trap those 30% people who are still not aware
of the benefits of online trading and try to shift them towards online trading. The
companies should also try to find and analyze the reasons as to why these customers
are not trading online in spite of so many benefits the online trading offers.

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IF YES
Name of the company you trade with.
Frequency Percentage
Kotak Securities 42 21
ICICI direct 35 17.5
IndiaBulls 60 30
Sharekhan 30 15
SMC Investments Solutions 15 7.5
Others 18 9
TOTAL 200 100

Mkt. share

60
50
40
30
20
10
0
ct
s

ull s

e rs
.
itie

kh a
d ire

nt..
ia B

Oth
cu r

tme
a re
CI
Se

In d

Sh
ICI

ves
t ak

n In
Ko

ic o
Un

Interpretation

India Bulls enjoy maximum market share of 30% followed by Kotak and ICICI direct.
SMC has only 7.5% share at present but is growing

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Q 9: Which factor is most important while choosing a broking house?

F re q ue nc y

80 75

60
45
40 35 34

20 11

0
Low R e g u la r F a s t F ast B ra n d
tra n s a c tioin fo rm a tio Q u e ry tra n s a c tio Im a g e
F re q u e n c y 7 5 35 34 45 11

Interpretation

Out the factors that attract ant investor to online trading are the low transaction cost
followed by fast processing so that their margin is not lost due to time lag. Also,
another factor that is of importance are the regular updates that the organization
provides to its clients.

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Q 10 : Where ELSE do you invest your surplus fund?

Areas Frequency
Direct Equity 75
Mutual fund 65
Insurance 150
Real Estate 35
Banks 150

Other investments

16%

32%

14%

7%

31%

Direct Equity Mutual fund Insurance Real Estate Banks

Interpretation

We also found that besides stock Market, people prefer to invest in Mutual funds.
Thus, it can also serve as a good opportunity to earn revenue for the company.

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 FINDINGS AND RECOMMENDATIONS

As we worked with this project, we came across some good and some not
so good features of this product.

We take this opportunity to suggest some measures in order to make improvements to

the product.

1. SMC needs to be more flexible with account types and brokerage structure so
that it can cater to all types of client segments and hence, increase its client
base.

2. SMC need to focus on HNI and corporate accounts more as they bring in bulk
business.

3. It should also try to collaborate with more banks so that the investor doesn’t
have to go through the turmoil of opening new accounts.

4. Their were some features in SMCPlus that needed to be changed and so were
suggested by us.

 There was no feature of ‘Payment Gateway’ for fund transfer to and

from the client in case of Pay-in and Payout.

 The Margin report and Intra-day report though, contains all the
necessary details, are a little complicated from the client’s end.

 In case the client does some transactions for ‘Intra-day’ purpose but he
gets his orders in different lots. Now, if he wants to change his order type
from ‘Intra-day’ to ‘Delivery’, then he has to go to trade log and change
the ‘order type’ for each of the order lots.

This can be done away with by going to ‘Net Position’ feature and changing it in
one go.

 SMCSwift gives the client a facility to put an alarm if a certain rate of

a particular stock is achieved.

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We suggest that a new feature should be introduced wherein an SMS facility
should be provided to the clients who are on the go most of the time. This feature
will be unique as no other software does it and can become the USP of this
product. This will also benefit the company n terms of revenue.

5. As a whole, if we look in general, we find a lot of frauds happening in this

field. Thus, there should be proper compliance measures taken up by the
company for investor protection like sending reports on the total trades done
on their accounts.

6. Also, looking at the competitive scenario, it is suggested that the company

should aggressively focus more on Sales and promotional activities by
efficiently utilizing the manpower resource it has.

7. The company can also introduce dial and trade facility in case online system
defunct.

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 CONCLUSION
Facts and figure speak in itself that as from the past years analysis of capital market
we could see the bullish trend of the Indian stock market. There has been a
tremendous pressure on the Indian industries to perform well as the expectations of
the investors are rising with bullish market sentiments. The Online trading has grown
tremendously since 2000-01 to 2007 form 7287.18 cr. to 81033.1 cr. respectively. The
client base has also improved form 1,23,578 to 8,49,696. This has raised to 12.70 lacs
till Dec. 2007.

Compared to the Western countries, online trading is still in its infancy in India. With
trading turnover at around Rs. 10 crores per day from online trading compared to a
combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and
NSE together, online trading has a long way to go. With some ten dotcom players,
such as icicidirect.com, investsmart, 5paisa.com, indiabulls, and a host of brokers,
such as kotaksecurities, sharekhan, motilaloswal, Geojit Securities and duttstock,
entering the online ring promises exciting times ahead.

However, the existing online trading system suffers from a major lacunae.
icicidirect.com currently offers online trading services only to investors who have a
bank or a demat account with ICICI. Or, investors can open an online trading account
with SMC only if they open a demat account with it and have a bank account either
with ICICI, HDFC Bank. If investors do not have these accounts, they have to go
through the entire rigmarole of opening up the bank and demat account again for easy
operation. Apart from the hassles involved, there may also be certain extra charges
involved in this exercise that may have to be built into the overall cost of online
trading.

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ANNEXURES

70
 QUESTIONNAIRE

Q 1. Do you know about investment options available?

KNOWLEDGE
Yes
No

Q 2. Most important things you take into your mind while making investments?
FACTOR
Risk
Returns
Both

Q 3. Awareness related to security markets

KNOWLEDGE
Complete
Partial
Nil
TOTAL

Q 4. What is the basic purpose of your investment?

INVESTMENT PURPOSE
Liquidity
Returns
Capital appreciation
Tax benefits
Risk covering
Others

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Q 5: Since how long have you been investing in capital market?

Time
Less than 3 yrs
3-5 yrs
More than 5 yrs
Total

Q 6 : Do you trade Online?

Yes
No

Q. 7. COMPLICATED PROCESS

Yes
No
No reply

Q. 8 . Why not online?

Factors
LACK OF MARKET
KNOWLEDGE
NO COMPUTER
INVESTMENT RISK
POOR SERVICES
COMPLICATED PROCESS

IF YES
Name of the company you trade with.

Kotak Securities
ICICI direct
IndiaBulls
Sharekhan
SMC Investments Solutions
Others

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Q 9: Which factor is most important while choosing a broking house?

Low transaction
Regular information
Fast quarry
Fast transaction
Brand image

Q 10 : Where ELSE do you invest your surplus fund?

Areas
Direct Equity
Mutual fund
Insurance
Real Estate
Banks

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 BIBLIOGRAPHY
BOOKS

• Gupta, C.B., Human resource management

• Kothari, C.R., Research Methodology

• Gupta .S.L ,Research Mythology

Sources of Secondary Data:

1. Magazines and Journals:

 S & P Emerging Stock Market Factbook

 SEBI Bulletin
 The Economic Times
 The Mint
 The Hindustan Times
 The Times of India
 The Wallstreet Journal
 Indian Economy Magazine
 Financial Management (Prasanna Chandra 12th Edition)
 Marketing Research (TN Chabbra 4th Edition)
2. Websites

 www.cmie.com
 www.rbi.org.in
 www.SMCindia.in
 www.nse-india.com
 www.wikipedia.com
 www.ask.com
 www.google.co.in
 www.sebi.gov.in

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