A Thesis on Study on the attitude of investors towards online trading.

By CHINMAYA H P IUD NO 0801214200 A report submitted in partial fulfillment of The requirements of THE MBA PROGRAM (The Class of 2010) 1|Page

CERTIFICATE This is to certify that the Management Thesis titled ___________________________ ________ ______________________________________________________________________s ubmitte d during Semester _________________ of the MBA Program (The Class of 201 0) embodies original work done by me. Signature of the Student Name (in Capitals) Enroll Number Campus :______________ ________________________________________ : _____________________________________ _________________ : ______________________________________________________ Signature of the Faculty Supervisor Name (in Capitals) Designation Campus : : : 2|Page

ACKNOWLEDGEMENT First, I would like to thank The Almighty for his perpetual blessings and guidan ce through out this thesis work. I express my deep sense of gratitude to our Cam pus head and the faculty guide for this thesis work MR.: Ramachandra gunari, ICF AI national college shimoga, for providing me an opportunity and continuous enco uragement for doing this thesis. His suggestions benefited immensely. Further, h e also provided me with valuable inputs and guidance in writing this live projec t. I thank Mr. Nagaraj, Comtrade accounts officer in Karvy The finapolis, for his v aluable guidance, co-operation and support, which has been a major contributing factor in the completion of this thesis. I also like to remember and thank all the respondents who cooperated and answere d all my questions with patience. Last but not the least, I thank my family and well wishers for their encouragement and support who have stood by me during thi s project. CHINMAYA.H.P 3|Page

Contents TABLE OF CONTENTS page no.

i. Title page.1 ii. Certificate 1. Introduction.... 6-10 1.1 Definition and Overview..7 1.2 BSE and NSE online trading sy 2. Literature review... 11-28 2.1 literature review...............................12 2.2 Research

3. Industry profile...... 29-47 2.1 Industry Overview.............................30 2.2 Investment 4|Page

4. Data analysis and interpretation... 48-62 4.1 Data Analysis49 5. Discussions and implications. 63-67 5.1 Discussions & Implications.64

6. Conclusions and recommendations..68-71 6.1 Conclusions.69 6.2 Recommendations 7. References72-73 7.1 reference sources.73 8. Annexure74-77 8.1 Questionnaire..75 5|Page

CHAPTER - I Introduction 1.1 Definition and Overview 1.2 BSE and NSE online trading system 6|Page

1.1 INTRODUCTION: In olden days there was credence that, investments are for sec uring the future and that was the only genuine objective of the people. Investme nts were also happening only on government security instruments. But the trend h ave changed and people like to invest on different type of government as well as semi government and private securities not only to secure the upcoming but also to have the benefit of present by making the large profit by their investments. A Share market is the place where buying and selling of shares takes place. Now adays due to internet and advanced technology buying and selling of shares takes place anywhere in India and also from foreign country, there is no need to be p hysical present in exchanges like NSE and BSE. When the people start accepting t he changes, even the surrounding environment also facilitates for the changes. T he same when the people stated thinking about a mixture of investments to make t he profit, the existing market also stared facilitating the investor. From these changes, the different type of investment market came into existence. When the market gets the importance as never seen before, many studies will go on happeni ng on the highlighted investment market. Similarly this study puts the light on the different type of markets and the instruments which are available for the in vestors to devote their money for their requirements furthermore, the study try to come across the grounds, why people like to transact with stock brokers or wi th any other support instead of doing the transactions independently. 7|Page

As mentioned, the main objective of the study is to know about the various reaso ns why investors like to have support from the any means instead of doing the sa me independently even though they have experience and knowledge in investing and getting the adequate profit. Along with the main idea of the study, there are s ome other objectives are also integrated with the study like, what is trading on line, the procedure included in trading online, materialized shares trading, and what all the unidentified facts involved. The study completely involves in deta iling about the online trading system. Here the different types of online tradin g system serviced by different stock exchanges are given. 1. BSE online trading system[BOLT] BSE On-Line Trading System, popularly known a s the BOLT System took its genesis in the year 1994, as part of the four-phase c omputerization program to create an automated trading environment. BOLT system aimed at converting the Open Outcry System of trading t o a Screen-based trading system (SBT). BSE had the requisite knowledge base and virtue of more than 115 year track record in the capital markets; BSE embarked o n the specified project in 1991 and seamlessly completed the fourth phase in Mar ch 1995. 8|Page

BOLT is supported on the hardware front by the Tandem NonStop Himalaya System wh ich is specifically designed to cater to the requirements of the On Line Transac tion Processing (OLTP) environment. BOLT System works on the Tandem S88016 * 2 p latform running on 32 CPUs. The existing set-up, a fault tolerant system with sc alable architecture can handle a maximum of 2.5 million trades a day against a d aily average of 75000 trades a day when BOLT was started. Further, the average t ime of execution is 200 orders per second with a peaking speed of 250 orders per second. The system comprises of a Tandem Himalaya S88016 machines acting as bac kend to more than 17000 Trader Work Stations (TWS) networked on Ethernet, VSAT a nd LAN network. 2. National exchange for automated trading[NEAT] The NEAT is an online trading s ystem which is similar to the BOLT online system of BSE. But the difference is l ike the interface of operating and design of the system and software. The other trading methodology is similar in both the systems. 9|Page

The NEAT online trading system operates on the basis of four type of market cond itions like, a. Normal market. b. Odd lot market. c. Auction market. d. RTDEBT m arket. The details will be discussed in analytical parts. The study goes in deta il about why investor takes the help of intermediary to carry out with the stock market instruments when they have direct access to the market through internet and other services and even there are few software to transact in the market ind ependently and also the help through online is also available. Even investor can obtain the paid help services for the healthier investments suggestions. The literature review briefs the main theme of the report and tells ensures the significance of conducting survey, and tells about the reliability and validity of the things. Research design and analysis provides the sufficient data regardi ng the findings and gives enough supports for the recorded proofs of the informa tion. Methodology enlightens the way of doing the work, and as a final point res ults, analysis, conclusion and recommendations puts the ultimate outcome into pi cture. 10 | P a g e

CHAPTER - II Literature review 2.1 literature review 2.2 Research design method 2.3 Objective of the study 2.4 data collection techniques 2.5 Scope of the study 11 | P a g e

2.1 LITERATURE REVIEW: In a broadest intelligence, investment is a sacrifice of the current money or any other resources for the future benefits. Numerous inves tment opportunities are available in the market these days. Investor can simply deposit his/her money in the bank to be risk free or they can invest their funds on the different source of the investments like government secured investments or on the equity market or any other type of investments if at all ready to bear risk factors. The two factors of investments are time and risk factors. When it comes to the government investment instruments, time element dominates but in t he same time, risk elements dominates if the investments are like share market i nstruments. This factor mostly decides the investment alternatives and it change s the investors attitude towards the investments. There are various factors to be considered while studying about the investments and particularly about share market investments. Here the study goes towards the searching of the factors which influences the investor to go towards the share market investments and why investors likely to have an additional support for th eir investments, but why they do not go autonomously as an alternative. Investor s have several alternatives for their funds to be invested with. Like that they have several people to support for the investments decisions like, stock brokers who keep on updating the investors knowledge if they had put the investments thr ough the stock brokers. The main factors why the people like to 12 | P a g e

go with the stock broker are the market unpredictability and the risk factor. Ge neral investor always can not keep on thinking about their investment variations so they may take the external support. Mainly the Indian market conditions are always unsecured and it will be varying all the time according to the main few s tocks changeability in the stock market. Doing the investments online with stock market independently is possible with the support of the software which is provi ded for the transactions at the same time few venture investors do the transactio ns independently but most of the investors go with the stock brokers because of the lack of additional knowledge and lack of confidence to go with the risk fact ors. Here the main objective of the literature review is to detail the facts reg arding the study and to see an overview of the literatures which supports the st udy. Basically a survey of the different investors in must for this type of stud y because these studies are highly depended upon primary data. An interaction wi th people makes the study better and comprehensible. Still many books and other sources help the study to make more realistic. For the further reference on the study, I studied the literatures of K Sreepathi from his book, The Dynamics of Indian financial markets, Investment analysis and portfolio management written by Prasanna Chandra, financial management written by B V Ragunandan. 13 | P a g e

From the study of the above literatures, book written by Prasanna Chandra, The Dy namics of Indian financial markets contributed to a great extent. The literature penned the main points regarding the approaches of the investments also gave the principal reasons regarding the various investment alternatives and the percept ion of the investor regarding the stock market returns. The author has answered many questioned like, what is the relationship between risk and return. What is the importance of diversified investments and how risks can be shared within the diversification, how successful are the various strategies followed by investme nt practitioners. As he says in the portfolio management process, investment has five attributes like, rate of return, risk factor, marketability, tax shelter, and convenience. Further he says, portfolio management process has steps like, 1 . Specification of investment objectives and constraints. 2. Choice of the asset mix. 3. Formulation of portfolio strategy. 4. Selection of securities. 5. Portf olio execution, revision and evaluation. These are the main process involved in selecting the best alternative for the investments and to select an intermediary for the investment suggestions. When it comes to the process of port folio stra tegy and choice of asset mix and securities, every investor feel to have an exte rnal help or support instead going for independent investment decisions. So why most of the investments happens 14 | P a g e

through stock brokers and other intermediaries. Even every investor need to comp lete some formalities which can not be done independently. Like creating a demat account is mandatory for the investment on shares. Maintaining the accounts and time to time portfolio evaluation. Each and every person who invests cant keep o n checking the port folio because he may have other tasks too and even selection of securities needs much knowledge than having experience so it needs good qual ified suggestions. On the other hand, one more author BV Ragunandan who says in his book as, usually shares are bought through a stock broker, who is a licensed member of a recognized stock exchange. So while buying shares, one need to loca te a registered stock broker. Further he says, there are many participants in th e market like, A. Regulators who are the key agencies that have a significant re gulatory influence over the securities market. B. Stock exchanges, brokers who a re the institution where securities are bought and sold and brokers who are the agents of the stock exchanges respectively. C. Other participants are, depositor s who maintains the demat accounts which are mandatory for the transactions. Mer chant bankers, primary dealers, registrars, underwriters, bankers, these are all the people come in stock market transactions. When it comes to the trading with the stock market instruments that means, investing on stocks, we have two type of trading. Those are, 15 | P a g e

1. Open outcry system[offline trading] 2. Screen based trading[offline trading] 3. Internet trading[online trading] As the literature of the different books and other sources reviles that, under the open outcry system, trader need to be on the floor where trading happens. Usually in stock exchanges where trader, means buyer have to bid their price and seller have to offer his shares and finally cl oses with a mutually agreed prices. When it comes to screen based trading the trading, the trading happens through c omputer screen and here distant participants can trade with each other through t he computer by having the internet connections. Screen based trading system enha nces the efficiency of the market. Speed of the transactions, establishes transp arency in the transactions and documentations. Till 1994, trading on the stock m arket in India was based on the open outcry system and trading was not demateria lized at that time. But after establishing national stock exchange and SEBI, in 1994 the screen based system entered to India and in a short span of time India could able establish the transparency like no other countries did like that till now. Internet trading or online trading was introduced in the year 2000.current ly, ICICI Web trade, Sherekhan, kotakstreet, geogit securities, investsmart, and others are offering the internet trading. To do internet trading, 16 | P a g e

investor has to register himself as a client with the internet stock broker apar t from having a computer, a modem, and a telephone connection. Investor has to k eep a minimum balance with his bank account with the stock broker so that broker can directly debit or credit. Further, Dates of beginning of electronic trading by top leading exchange in 120 nations is provided in a Journal of Finance arti cle published in 2005 Financial market design and the equity premium: Electronic vs. floor trading. Leading academic research in this field is carried out by Prof essor Ian Domowitz and Professor Pankaj Jain. The same report states that, there are broadly two type of trading in financial markets like, Business-to-business (B2B) trading. It conducted frequently on exchanges, where large investment ban ks and brokers trade directly with one another, transacting huge amounts of secu rities. Business-to-client (B2C) trading. Where retail (e.g. individuals transac ting literally small amounts of stocks and shares) and institutional clients (e. g. hedge funds, fund managers or insurance companies, trading far larger amounts of securities) buy and sell from brokers or "dealers", who act as middle-men be tween the clients and the B2B markets. Many of the existing analysis and findings by the reports have already given wha t all the impacts of the electronic trading system, we shall have a look on it. Reduced cost of transactions- from the automation, many of the works can be done possibly in a short time so the cost can be decreased. 17 | P a g e

Better liquidity- electronic systems make it easier to let many companies to tra de with one another, no matter where they are located. This leads to greater liq uidity for the security instruments. Greater competition- there will be a greate r competition when there are many companies existing in the market to provide th e e trading system. So the investor can catch out better service and he is deser ved for that. Enhanced transparency level- E trading made the markets less opaqu e and the market has given a greater transparency in transacting the instruments and other securities. There will be direct access to the customer for his trans actions. Moreover, some of the findings of several existing thesis reports said these poi nts about online trading system; The central computer located at the Exchange is connected to the workstations of the Brokers through satellite using Very Small Aperture Terminals (VSATs). Orders placed at the Brokers workstations reach the central computer and are matched by the computer based on price and time priori ty. The given information is like; both the exchanges have switched over from the op en outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE on Line Trading) and NEAT (National Exchange 18 | P a g e

Automated Trading) System. It facilitates more efficient processing, automatic o rder matching, faster execution of trades and transparency. The scrips traded on the BSE have been classified into A, B1, B2, C, F and Z groups. The A group shares represent those, which are in the carry fo rward system (Badla). The F group represents the debt market (fixed income sec urities) segment. The Z group scrips are the blacklisted companies. The C gr oup covers the odd lot securities in A, B1 & B2 groups and Rights renuncia tions. Key regulator governing Stock Exchanges, Brokers, Depositories, Depositor y participants, Mutual Funds, FIIs and other participants in Indian secondary an d primary market is the Securities and Exchange Board of India (SEBI) Ltd. DIFFE RENCE BETWEEN ONLINE AND OFFLINE TRADING: With all the ease of online trading, t here are still investors who favor the old fashion way of offline trading. Offli ne trading has lot its recognition but it is still the core form of investing. O ffline trading offers many benefits as well. 1. The one benefit that an investor be grateful for the most is that they are not alone when making investment deci sions. 2. There are experienced and professional brokerage companies that handle their investments for them. 19 | P a g e

3. Investors are not faced with the challenge of making these vital investment d ecisions; especially, if they do not have the experience necessary to make the a ppropriate investments. 4. Also, there is someone there to answer any questions that may cause concerns. Not to mention, with offline trading mistakes are less likely to take place. No one wants to throw their money away or stand by and wat ch someone else throw their money away. It may be wise to hire a professional to assist you in making the correct investment decisions if you feel you lack the knowledge necessary. DIFFERENCE BETWEEN ONLINE TRADING AND OFFLINE TRADING SYSTE M ARE: 1. Online trading is very expensive as compare to manual trading or offli ne trading. 2. Online trading consumes less time as compare to manual trading. 3. Online trading has very helpful to finding the records easily but offline tra ding takes more time to finding the records. 4. In the help of online trading, there is no chance of any errors while doing t he trading. In offline trading there are some errors exist like barriers of comm unication. 5. With the help of online trading, we know the international market rate of share very easily. 20 | P a g e

INTERNET BASED TRADING THROUGH ORDER ROUTING SYSTEMS: Internet based trading on conventional exchanges, uses the Internet as a medium for communicating client o rders to the exchange, through broker web sites. Brokers web sites may serve a va riety of functions. These may include; Allowing the clients to trade directly th rough investors; promote the broker dealers services to potential investors; Offe r market information and investment tools similar to those offered by informatio n vendor or SRO web sites; Offer real-time or delayed quote information, continu ously update quotes while the user visits other sites, or allow investors to cre ate a personal stock ticker; Provide market summaries and commentaries, analyst reports and trading strategies and market data on currencies, mutual funds, opti ons, market indices and news; and Offer investors access to portfolio management tools and analytic programs; Information on commission and fees; and Account in formation and research reports. In an Order Routing system, a broker offering Internet trading facility provides an electronic template for the customer to enter the name of the security, what ever it is to be bought or sold, the quantity and whatever the order is a market or limit order. Once the brokers system receives this information. 21 | P a g e

NET WORTH REQUIREMENT The broker must have a minimum net worth of Rs. 50 lacs if the broker is providing the Internet based facility on his own. However, if som e brokers collectively approach a service provider for providing the interest tr ading facility, net worth, criteria as stipulated by the stock exchange will app ly. The net worth will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16, 1998. The Bombay stock exchange as well as national stock exchan ge has given the highlighted points as the main features they are providing for the investors through online trading system. These are given by the stock exchan ges in its websites; 1. Freedom of information. 2. Control and security of inves tors money. 3. Access to the market directly. 4. Ensures the best price for the i nvestors. 5. Offers enhanced transparency. 6. Enables irritation free trading. 7 . Allows instant trading execution. 8. Reduces settlement risk. 22 | P a g e

9. Integrated depositary accounts with bank accounts. Further more, the famous w riter of the book Intelligent stock market investing Mr. N J Yasaswy, and the book financial markets and services by Mr. Y Chandra sekhar written in their book rega rding the benefits of the online trading as, 1. It is less costly. 2. Peace of m ind. It means, one can never have complete peace of mind but online investing do es away with the hassles of filling up instruction slips, visits to the broker f or handing over these slips and consequent costs. 3. Keeping records properly an d access to information and investment tools trough direct internet access. 4. I t reduces the settlement risk and offers superior transparency. The books which are mentioned above are very much useful to give suggestions on the findings bec ause the authors have explained the topic thoroughly and given the good suggesti ons to overcome the problems regarding the investment decisions and trading deci sions. Investors expectations are very high most of the times and very rarely the y have come down with the changing realities like softening of inflation, intere st rates, excess capacity in the industry, reduction of the import duties etc. th ere is a strong need for a shift in the investors mental programming of high retu rn on equity investments opines the author. 23 | P a g e

So from the above reviews of the literatures we can give further as, under the e xisting legal and regulatory framework of SEBI registered brokers can offer trad ing on Internet through order is routing systems. This would reduce the risk fac tors which are in offline trading system and also increases the transparency. St ill there are few problems are there in trading online like problem of hacking t he data, online crimes, phishing the banking information and passwords, problem of taking the decision independently, breakdown of the computers, servers and in ternet connection etc. still we need to adapt the changes and further technology so its better to en cash the opportunity of changes. 24 | P a g e

2.2 RESEARCH DESIGN AND METHODOLOGY: Problem definition: A research problem, in general, refers to some difficulty wh ich a researcher experiences in the context of either a theoretical or practical situation and wants to obtain a solution for the same. A problem clearly stated is a problem half solved. Thus, defining a research problem properly is a prerequisite for any study and is a step of highest import ance. It is only on careful detailing the research problem that we can work out the research design and can smoothly carry on all the consequential steps involv ed while doing the research. The investments are subjected to risk. What ever may the type of investment the investor like to make but it has its risk factors. There are several type of inv estments available in the market but here the topic is only concentrated on shar e market transactions hence, we are going to discuss upon the various factor inf luences the investor to go for these investments and investors are like to have a good intermediary for their transactions. 25 | P a g e

In the light of the above background, we can illustrate the main problem definit ion for the study as, what are the different type of investments are available f or the investor in the stock market, through what all the way an investor can tr ansact and why most of the investors desire to have assistance from an adviser o f the investments though he can transact independently through online. 2.3 OBJECTIVES OF THE STUDY: 1. To make out what stock market investments is and what is online trading system. 2. To know the peoples awareness regarding online stock market transactions. 3. To study the investors opinion towards independent trading and de materialized share trading. 4. Revealing what all the unknown th ings involved in the stock trading. 26 | P a g e

2.4 METHODOLOGY OF RESEARCH: Effective research need to take up the following st eps so these are the steps taken largely for the study. 1) Defining the problem and research objectives. 2) Developing the research plan . 3) Collecting the information. 4) Analyzing the information. 5) Presenting the findings. 2.5 DATA COLLECTION: The required data for the study collected from the primary source of data as well as secondary source of the data. Time required to obtain the primary data is higher compared to that required for collecting secondary da ta. Primary data collection is directly from respondents. The respondents are th e people who are already invested on shares and other type of investments and pe ople who are interested to invest and people who have information regarding the independent online trading. Primary data collection is through structured questi onnaire as well as personal meetings. Secondary data is collected through differ ent books, magazines, E books and from various web sites. The details regarding the secondary data source is given in the bibliography at the end of the report. 27 | P a g e

2.6 SCOPE OF THE STUDY: The scope of the study is mainly to bring out the total and true facts regarding the share market and the trading system through online transactions. The research was focused on various reasons for the investments an d the ways of investments the investor goes to make hence the findings are fair reflection of the respondents. 2.7 LIMITATIONS OF THE STUDY: Every study will have its own limitation and limit ation for further study of the topic. Like that this study also has its own limi tation. The very few limitations are given below: 1. Enough investors for the sample size. Finding out the investor who trade onli ne is a bit difficult task. 2. Availability of information is limited regarding online trading system. 3. Truthfulness of the information provided by the invest ors. Each and every information may not be the fact. 28 | P a g e

CHAPTER - III Industry Profile 2.1 Industry Overview 2.2 Investment 2.3 Capital Market and Depository 2.4 Tradi ng online and its requirements 29 | P a g e

2.1 INDUSTRY OVERVIEW: Globalization of the financial market has led to a manifold increase in investme nt. New markets have been opened; new instruments have been developed and new se rvices have been launched. India has a well established capital market mechanism where in effective and efficient transfer of money capital or financial resourc es from the investing class to the entrepreneur class in the private and public sector of the economy occurs. Indian capital market has a long history of organi zed trading which started with the transaction in loan stocks of the East India Company from that time it has undergone drastic changes to meet the requirements of the globalization. The Indian Capital Market had been dormant in the 70s an d 80s has witnessed unprecedented boom during the recent years. There has been a shift of household savings from physical assets to financial assets, particula rly the risk bearing securities such as shares and debentures. Capital markets s tructure has also undergone sea changes with number of financial services and ba nking companies, private limited companies coming in to the scene which made the competition in the market stiffer. The Companies Act 1850, introduced the conce pt of limited liability to India, served to stimulate the activity in the stock market. From then number of acts are passed to boost the revolutionary change. T he global capital market registered spectacular growth in the decade of 1990s w hich had an effect on the growth of Indian market. The world market capitalizati on grew at an average annual rate of 16% during the decade, it grew from about U S $ 9.3 trillion in 1990 to about US $ 36 trillion in 2000 but fell to about US $ 28 trillion by 2001. The 30 | P a g e

turnover on all markets taken together has grown nearly 19 times from US $ 5.5 t rillion in 1990 to US $ 48 trillion in 2000 before depleting to about US $ 42 tr illion in 2001. The turnover in developed markets has, however, grown more sharp ly than that in emerging markets. The US alone accounted for about 70% of world wide turnover in 2001. Despite having a large number of companies listed in its stock exchanges, India accounted for a merger of 59% in 2001 down from 1.06% in 2000. The stock markets world wide has grown in size as well as depth over last one decade. During the decade 1990-2000, the world market capitalization/GDP ratio more than doubled from 51% to 120%. Value traded GDP ro se from 29% to 103% and turn over ratio shot up from 48% to 89%. The combined ma rket capitalization of a select 22 emerging economies increased from US $ 339 bi llion in 1990 to US $ 2.2 trillion in 2000. The average market capitalization in creased from 3.6% to 7%, annual value of shares traded increased from $ 180 bill ion to $ 2.2 trillion and GDP increased from 16.7% to 45.5%. For India the total capitalization grew from $ 38,567 million at the end of 1990 to $ 110,396 milli on at the end of 2001. Turn-over of stocks Increased from $ 21,198 million in 19 90 to $ 249,298 million in 2001. Market capitalization as a percentage of GDP gr ew from 12.2% in 1999 to 32.4% in 2001 while turnover ratio went up from 65.9% i n 1999 to 191.4% in 2000. The number of listed companies in India was 5,975 as a t end of 2001. There are very few countries, which have higher turnover ratio th an India. Standard and Poor (SP) ranked India, 25th in terms of market capitaliz ation, 15th in terms of total value traded in stock-exchanges and 6th in terms o f turn-over ratio. 31 | P a g e

2.2 Investment: Investment means buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as gold as an investment, real estate, or collectibles. Valuation is the method for assessing whether a potential investment is worth its price. Types of financ ial investments include shares or other equity investment, and bonds (including bonds denominated in foreign currencies). These investments assets are then expe cted to provide income or positive future cash flows, but may increase or decrea se in value giving the investor capital gains or losses Characteristics of Investment: (i) Interest (return) When we borrow money, we are expected to pay for using it this is known as Inter est. Interest is an amount charged to the borrower for the privilege of using th e lenders money. Interest is usually calculated as a percentage of the principal balance (the amount of money borrowed). The percentage rate may be fixed for the life of the loan or it may be variable, depending on the terms of the loan. 32 | P a g e

What factors determine interest rates? The factors which govern these interest rates are mostly economy related and are commonly referred to as macroeconomic factors. Some of these factors are: Deman d for money Level of Government borrowings Supply of money Inflation rate (ii) Risk Risk may relate to loss of capital, delay in repayment of capital nonpayment of interest, or variability of return. While some investment such as government sec urities and bank deposits are almost without risk, others are more risky. The ri sk of an investment is determined by the investments maturity period, repayment c apacity, nature of return commitment, and so on. (iii) Safety Every investor expects to get back the initial capacity on maturity without loss and without delay. Investment safety is gauged through the reputation establish ed by the borrower of the fund. A highly reputed and successful corporate entity assures investors of their initial capital. 33 | P a g e

(iv) Liquidity An investment which is easily saleable or marketable without loss of money and w ithout loss of time is said to be possess the characteristic of liquidity. Some investments such as deposit in unknown corporate entities, bank deposit, post of fice deposit, national saving certificate, and so on are not marketable. An inve stor tends to be prefer maximization of expected return, minimization of risk, s afety of fund, and liquidity of investment The three golden rules for all investors are: Invest early Invest regularly Invest for long term and not short term One needs to invest for Earn return on your idle resources Generate a specified sum of money for a speci fic goal in life Make a provision for an uncertain future To meet the cost of in flation 34 | P a g e

Sources of study for investors: A look out for new investment opportunities helps investors to beat the market. There are many sources from which investors can gather the required information. Such as; (i) Financial institutions Corporate house, government bodies and mutual funds a re the main source of investment information. Many of these enterprises have the ir own website and post investment related information on their websites. (ii) Financial market Stock exchange and regulated bodies also provide useful in formation to investor to make there investment decisions. With respect to second ary market, the Securities and Exchange Board of India uses various modes to pro mote investors education and takes great effort to achieve an investor friendly secondary market in India. The Reserve Bank of India also provide useful informa tion relating to the prevent interest rates and non-banking financial intermedia ries that mobiles money through deposit schemes. 35 | P a g e

(iii) Financial service intermediaries These are intermediaries who promote secu rities among the public. Many of these intermediaries are the agencies of specif ic instruments especially tax saving instruments. These intermediaries offer to share their commission from there concerned organization with the individual inv estor thus investor get additional advantages while investing through intermedia ries. (iv) Media Press sources such as financial news papers, financial magazine, busi ness news channel, websites etc. provide information related to investment to th e public. Besides information on securities, these sources also provide analysis of information and in certain instance suggest suitable investment decisions to be made by investor 2.3 Capital Markets and Depository: About Capital Market: The function of the financial market is to facilitate the transfer of funds from surplus sectors (lenders) to deficit sectors (borrowers). A financial market co nsists of investors or buyers of securities, borrowers or sellers of securities, intermediaries and regulatory bodies. Indian financial system consists of money market and capital market. 36 | P a g e

The capital market consists of primary and secondary markets. The primary market deals with the issue of new instruments by the corporate sector such as equity shares, preference shares and debt instruments. The secondary market or stock ex change is a market for trading and settlement of securities that have already be en issued. The investors will holding securities or sell securities through regi stered brokers/sub-brokers of the stock exchange. The introduction of NSE & BSE has increased the reach of capital market manifold which in turn increased the n umber of investors participating in the capital market and thus creates the poss ibility of a bad delivery. The cost & time spend by the brokers for rectificatio n of this bad delivery tends to be higher with the geographical spread of the cl ients. The increase in trade volumes leads to exponential rise in the back offic e operation. The inconvenience faced by the investors (in area that are far long & away from the main metros) in the settlement of the trade also limits the opp ortunity for such investors in participating in auction trading. This has made t he investors as well as brokers wary of Indian capital market. The erstwhile set tlement system on Indian stock exchanges was inefficient and increased risk, due to the time that elapsed before trades was settled. The transfer was by physica l movement of papers. There had to be a physical delivery of securities - a proc ess fraught with delays and resultant risks. The second aspect of the settlement related to transfer of shares in favor of the purchaser by the company. The sys tem of transfer of ownership was grossly inefficient as every transfer involves physical movement of paper securities to the 37 | P a g e

issuer for registration, with the change of ownership being evidenced by an endo rsement on the security certificate. In many cases the process of transfer would take much longer than the two months stipulated in the Companies Act and a sign ificant proportion of transactions would end up as bad delivery due to faulty co mpliance of paper work. Theft, forgery, mutilation of certificates and other irr egularities were rampant. In addition, the issuer had the right to refuse the tr ansfer of a security. All this added to costs and delays in settlement, restrict ed liquidity and made investor grievance redress time consuming and, at times, i ntractable. To obviate these problems, the Depositories Act, 1996 was passed. It provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and securit y. 2 Depository: Depository is an organization where the securities of a shareholder are held in the electronic form at the request of the shareholder through a medium of a Depo sitory Participant (DP). The principal function of a Depository is to dematerial ize securities and enables their transaction in book-entry form electronically. Depository functions like a security bank, where the dematerialized securities a re traded and held in custody. This facilitates faster, risk-free and low cost s ettlement similar to bank. 38 | P a g e

Following tables compares the two; BANK Hold funds in account Transfer funds bet ween accounts DEPOSITORY Hold securities in accounts Transfer securities between accounts Transfer without physically handling Transfer without physically handling money Safekeeping of money securities Safekeeping of securities In India the Depository Act defines a Depository to mean, a company formed and r egistered under the Companies Act, 1956 and which has been granted a certificate of registration under sub-section (1A) of section 12 of the Securities and Exch ange Board of India Act, 1992 Depositories in India There are two depositories in India, which provide dematerialization of securiti es. National Securities Depository Limited (NSDL) Central Depository Services Li mited (CDSL) 39 | P a g e

Benefits of participation in a depository

Immediate transfer of securities No stamp duty on transfer of securities Elimina tion of risks associated with physical certificates such as bad delivery, fake s ecurities, etc. Reduction in paperwork involved in transfer of securities Reduct ion in transaction cost Ease of nomination facility Depository Participant The Depository provides its services to investors through its agents called Depo sitory Participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categori es of entities, i.e. Banks, Financial Institutions and SEBI registered trading m embers can become DPs. The depository has not prescribed any minimum balance. Cu stomer can have zero balance in his account. ISIN ISIN (International Securities Identification Number) is a unique identification number for a security. 40 | P a g e

Custodian A Custodian is basically an organization, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also ke eps track of corporate actions on behalf of its clients: Maintaining a clients securities account ng to the client in respect of securities Collecting the benefits or rights accrui

Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. Dematerialization of securities In order to dematerialize physical securities, one has to fill a Demat Request F orm (DRF) which is available with the DP and submit the same along with physical certificates. Separate DRF has to be filled for each ISIN number. Odd lot share certificates can also be dematerialized. Dematerialized shares do not have any distinctive numbers. These shares are fungible, which means that all the holding s of a particular security will be identical and interchangeable. One can demate rialize his debt instruments, mutual fund units, government securities in his si ngle demat account. 41 | P a g e

Re-materialization If one wishes to get back his securities in the physical form means, he has to f ill in the Remat Request Form (RRF) and request his DP for rematerialisation of the balances in his securities account. Legal framework: The Depositories Act 1956 provides the regulation of depositories in securities. SEBI formulated the Depositories and participants Regulation Act, 1996 to overs ee the matter regarding admission and working of Depositories and its participan t. The Depositories Act passed by parliament received the Presidents assents on A ugust 10, 1996. The Act enables the setting up of multiple depositories in the c ountry. Only a company registered under the companies Act (1956) and sponsored b y the specified categories of institution can setup depository in India. The Dep ository offers services relating to holding of securities and facility processin g of transaction in such securities in book entry form. The transaction handled by depositories includes settlement of market trades, settlement of off-market t rades, securities lending and borrowing, pledge & hypothecations. 42 | P a g e

Function of Depository Participant: Dematerialization: One of the primary functions of depository is to eliminate or minimize the movement of physical securities in the market. This is done throug h converting securities held in physical form in to holdings in to back entry fo rm. Account Transfer: The depository gives effects to all transfer resulting fro m the settlement of trade and other transaction between various beneficial owner s by recording entries in the accounts of such beneficial owners. Transfer & Reg istration: A transfer is a legal change of ownership of a security in the record s of the insurer. Transfer of securities under demat occur merely by passing boo kentries in the records of the depositories, on the instruction of beneficial ow ners. Pledge and hypothecation: Depositories allow the securities with them to b e used as collateral to secure loans and other credits. The securities pledged a re transferred to a segregated or collateral account through book-entries in the records of the depository. Linkage with clearing system: The clearing system pe rforms the function of ascertainment in the pay in (sell) or payout (buy) of bro kers who leave traded on the stock exchange. Actually delivery of securities fro m the clearing system is from the selling brokers and delivery of securities fro m the clearing system to the buying broker 43 | P a g e

is done by depository. To achieve this depositories and the clearing system are linked electronically. To handle the securities in electronic form as per the De positories Act 1996 two depositories are registered with SEBI. They are 1) NSDL -- National securities depository limited. 2) CDSL -- Central depository service (India) limited. NSDL India had a vibrant capital market, which is more than a century old, the paperbased settlement of trades caused substantial problems like bad delivery and del ayed transfer of title till recently. The enactment of Depositories Act in Augus t 1996 paved the way for establishment of NSDL, the first depository in India. N SDL promoted by institutions of national stature responsible for economic develo pment of the country has since established a national infrastructure of internat ional standard that handles most of the trading and settlement in dematerialized form. Using an innovative and flexible technology system, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at en suring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency and minimizing risk and cost. In the deposito ry system, securities are held in depository accounts, which is more or less sim ilar to holding funds in bank accounts. Transfer of ownership of securities is d one through simple account transfers. 44 | P a g e

This method does away with all the risks and hassles normally associated with pa perwork. Consequently, the cost of transacting in a depository environment is co nsiderably lower as compared to transacting in certificates. CDSL CDSL was set up with the objective of providing convenient, dependable and secur e depository services at affordable cost to all market participants. CDSL receiv ed the certificate of commencement of business from SEBI in February 1999. Depos itory facilitates holding of securities in the electronic form and enables secur ities transactions to be processed by book-entry by a Depository Participant (DP ), who as an agent of the depository, offers depository services to investors. A ccording to SEBI guidelines, financial institutions, banks, custodians, stockbro kers, etc. are eligible to act as DPs. The investor who is known as beneficial o wner (BO) has to open a demat account through any DP for dematerialization of hi s holdings and transferring securities. The balances in the investors account re corded and maintained with CDSL can be obtained through the DP. The DP is requir ed to provide the investor, at regular intervals, a statement of account, which gives the details of the securities holdings and transactions. The depository sy stem has effectively eliminated paper-based certificates, which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities. 45 | P a g e

Trading online and its requirement. There are many stock broking companies which are providing the account for the c ustomers to trade online and here the investor need to be the member of that com pany and its depository to have an account with the broking company. The company itself provides the software which is to be used to trade directly through onli ne and the customer can not trade with the other companies software unless and u ntil he makes an account with them or trade with them .the investor can take the suggestion from the broking company at any time of the working hour. The major thing which comes under consideration is, the investor who trades independently is needed to maintain a bit high amount in his account. Means nearly the double of the amount which a traders trade offline. Here investor will be in contact to the trade directly and will be in contact with the market. The software on whic h the BSE online system works is given in the next page as a snapshot image. Thi s is the software which is used by the Bombay stock exchange people who trade ov er there but the software which is provided by the stock brokers to the investor s are some what different from the software which is given in the image. 46 | P a g e

47 | P a g e

CHAPTER IV Data Analysis and Interpretation 4.1 Data Analysis Findings & Interpretations. 48 | P a g e

As I have explained in the methodology section that, the study is based on the o pinions of the different authors who wrote books regarding the online trading an d also a large amount of the analysis is based on the opinion of the investors r egarding the online and offline trading. The data which is collected for the ana lysis is through the questionnaires which are given to the customers who trade o ffline and online. Searching for the investors who trade online is a bit difficu lt in the sub urban cities and the people stay over there, they will not be read y to take financial risk. In cities like shimoga, hardly we found people who tra de completely through online. Still I have taken the opinion of those investors which I met. The analysis of the data and findings will be given in the next con tinuing pages. 49 | P a g e

Respondents on the basis of age group age group below 20 20-35 35-50 50 and above respondents 0 10 8 2 Findings: From the above information which is given in the table, we can interpret as, he people who belongs to the age group of 35 to 50 will invest more due to the suff iciency of the earning and the people who belongs to the age group of 20 to 35 w ill invest comparatively less than the latter group because may be the time and fund deficiency and other reasons. Here most of the online traders come in the a ge group of 20 to 35 because of their knowledge and fast thinking and decision m aking as well as interest to do the trade. 50 | P a g e

Table showing the occupation of the investors: Occupation Employed Self employed Retired Not employed students Total Respondent s 9 10 1 0 0 20 Percentage 45 50 5 0 0 100 Findings: From the above information we can say that the people who are self employed, the y show much interest to invest in the equity market and it is comparatively less in the case of employed in different organization. Reason may be the time requi red to do the transaction and the availability of the fund to invest. The data s ays, nearly 55% of the people who trade in stock, they are self employed and the rest 45% of people are employed in different organizations. The people who are in the evening of their life is less in stock trading due to the security reason . 51 | P a g e

Respondents based on the annual income Annual income Below 150000 150000-300000 300000-450000 450000- Above Total Respo ndents 0 6 10 4 20 annual investments[weighted avg] 0 50000 75000 100000 Percent age 0 30 50 20 100 Findings: From the above information we can understand that, the people in the i ncome group below 150000Rs per annum, they do not show much interest in investin g their money on share market. The people belongs to the group in between 300000 RS and 150000RS, they show interest towards share investments. But the large gro up of investors who belong to the higher income group like the group which has i ncome more than 4 lacks and above they shows much significance for share trading . Here we can say that, the income of the investors ought to be taken in to cons ideration whether they are interested in long term or short term and whether the y are concerned in online or offline trading. 52 | P a g e

Based on the terms of the investments Term of investments Long term Short term Both Total respondents 5 12 3 20 Percen tage 25 60 15 100 Findings: From the above information we can interpret the survey as, half of the investor would like invest for the short term gains because as per their mind set they sa y they like to gain more from the short term instead putting money in the long t erm investments. The rest of the people, means the rest 25% of the people would prefer long term due to the increasing and balanced returns and 10% of the peopl e like to deploy their funds in both the investment types. Also we can state tha t, the people who belongs to the income group of 300000 and less, they mostly go for the long term investment because the loosing percentage is less and return will be balanced than loosing more. 53 | P a g e

Analysis based on showing frequent investment: Gap of investments Weekly Monthly Quarterly half yearly Yearly Total respondents 8 5 3 2 2 20 Percentage 40 25 15 10 10 100 Findings: The table says that, most of the investors are time oriented. It means the short term investors who trade online as well as offline, they go for the frequent tr ading like daily trading or few days in a week or once in month like but when it comes to the long term investors, they trade once or twice for months or for qu arterly once. Even many of the long term investors go for the trading jus once i n six months and in a year also. The table says that, weekly traders are high. L ong term investors mostly go for the initial public offers and they go for the b anking shares also most of the time. 54 | P a g e

Analysis on the basis of reason for opting online trading system: Type of trading adopted online trading system offline trading system Both Total respondents 6 14 0 20 percentage 30 70 0 100 Findings: This is the major deciding factor for this thesis work because the whole work is based on the choice of trading system by the investor. Here we can make out tha t people like to for the offline trading more than the online trading system. Re ason may the risk factor or may be lack of information regarding the market and may be lack of experience and decision making power. There might be many more re asons for the right selection of the system to work on with. 70 to 75% of the pe ople still like to go with the offline trading and the rest of the people may op t for the online trading system. The main reason behind the choice is the risk f actor involved in the decision making and lack of knowledge about trading online . 55 | P a g e

Reasons for opting independent trading [online trading]: Reason for opting online trading A freedom of trading B direct access to the mar ket C frequent transactions D less brokerage charges E other reasons total Respo ndents 6 out of 6 6 out of 6 6 out of 6 3 out of 6 4 out of 6 6 Percentage 100 1 00 100 50 65 100 Findings: Here the highlighted reasons for choosing the online trading are freedom of trad ing so the investor can trade independently. Direct access to market so that the investor need not to ask the broker every time for his transactions. Frequent t ransactions can be made by having online trading system and also the other reaso ns are brokerage charges. Brokerage charges are less but the trader may occur ot her charges like installation of computer, telephone charges and other such cost s. There were some other reasons like, no need of going to the brokers for the d ocumentation and no risk of transactions without permission, 100% transparency w ill be there in dealings. 56 | P a g e

Selection of offline trading facilitators: type of offline service providers A. Independent brokers B. brokerage agencies C . banks and IPO D. others Total respondents 2 11 5 2 20 percentage 10 55 25 10 1 00 Findings: The selection of the service providers is depending upon the security for the transactions and even emotions also attached with it. Partially it is ba sed on how the service provider treats the customer and how the customer gets th e respect for the small transactions etc. Here in this most of the investors go for reputed brokerage agencies like Karvy, geojit, way to wealth etc. these inve stors are all short term frequent traders. When it comes to the reason like goin g for banking shares and initial public offers, the percentage is quite less and only up to 25% and 10% of the investors go for the suggestions of independent b rokers and they even trade on the basis of others account also. And 10 of the in vestors go for the other sources. 57 | P a g e

Reasons for opting offline trading: Reasons for opting offline trading. Helps in decision making No much risk in han dling transaction Provision of additional limit Others Total Respondents 12 out of 14 14 out of 14 8 out of 14 8 out of 14 14 Percentage 85.7142857 100 57.14285 71 57.1428571 100 Findings: Many reasons may affect the choice of offline trading system because as per the survey we got the expected finding as people like to go with offline trading tha n online trading because of the reasons which are given already in the discussio n. Here we can see the opinions of the sample group of investors which I selecte d for the study. As per the answers given by the investors, all the investors ac cept that, risk involved in handling transaction is less when it compared to the online trading. 85% of the investors states that, doing trading offline helps i n decision making because there the investor will get the suggestions from the t rading people and they will suggest which shares are in good movement and which shares can be bought and sold. 58 | P a g e

When it comes to the reason of availability of the extra limit of the fund for t he transaction, 50% of investors accept this reason and the rest of investors sa ys, additional limit is available only to the investor who transact large amount in trading and who have a good image in the eyes of the stock brokers. Each and every investor can not make out this option without having goodwill and image. 50% of investors add their own reasons for opting the offline system for trading like, time matters because in offline trading the investor can call the broker and say to trade on behalf of the investor and even he can give permission to th e trader up to a limit without asking for the permission. This is because for small amount of trading the investor cant spend his time. The other reasons are like documentation, remainder service and research calls. Bro kers will do all the required documentation for the convenience of the customer and they will be informing the investors about the increasing and decreasing of the share values. Even they inform the status of the trading account and what ar e need to be done and other things. One more thing is the research calls. This c alls will be given from the R&D department of the company about which is the nex t move can be done to trade. Brokers will suggest the investors according to the research call. This helps the investor to feel secured because they think that someone is taking care about their investments. one of the other reason which the investor felt important is lacking in computer knowledge and skills. They feels that they are not capable of doing the compute r work and they do not have enough time to learn the basi computer skills also. Even they feels that maintaining the telephone connections and other things are risky so it is better to go for offline trading. 59 | P a g e

Basis of investments: Basis of investments A. Self analysis B. financial advice from investors C. advi ce from brokers D. friends and relatives advice E. chartered accountants advice F. others G. Total Respondents 1 2 10 3 2 2 20 Percentage 5 10 50 15 10 10 100 Findings: From the above information we can understand that, half of the offline traders w ould like to go for the suggestions of the brokers and a very few people do self analysis for the investments. Fifteen to twenty percent of the people take the suggestions from the family members and friends and rest of the people goes for the suggestions of chartered accountants and other people like tax consultants a nd others. It means that, people prefer to go for the experienced advice than ju st few suggestions. Investor looks over the return and in the same time they exp ect the security also for their investments. 60 | P a g e

Analysis based on grounds to choose various investment alternatives: Grounds to choose alternatives Risk involved Returns on investments Future growt h past performance Others Total Respondents 20 out of 20 20 out of 20 15 out of 20 15 out of 20 10 out of 20 20 percentage 100 100 75 75 50 100 Findings: The above table shows the data of the grounds on which the investor prefer to ch oose one investment instrument amongst the available. All the investors most of the time looks upon the risk involved in the instrument or we can say a share. R eturn on the investment also they take in to consideration like how much return the company is giving on its share and what is the market value of the share etc ... 61 | P a g e

75% and above people look upon the future growth of the share in the market as w ell as the growth of the company too. Even they come across the past performance of the share resembling what was the issue value and what is the market value t he company gained in last few years etc. Many additional causes are there to cho ose the better alternative like, better for long term investment, to gain loans from banks by pledging the shares, to have a part in the ownership value of the company and also to gaining the reputation by holding certain most valued shares . This is the analysis and findings part of the study where we could able to fin d the answer for the defined objectives of the study and we could interpret the investors opinions concerning to the trading system. In this part we searched ou t the major facts regarding why investors prefer to go offline trading more than going towards online trading. We found out many other reasons which affect the investors to go towards the different trading system and also what are the reaso ns behind the choice of different alternative investment instruments. Here our s tudy is only based upon the trading of the shares and not based on the commoditi es market and multi commodities exchange market. That market is entirely differe nt and the investors opinion about that market also different. Though the commodi ties trading also done by the same system and the trading techniques also same. Still we can not consider both markets in to consideration because it is beyond the scope of the project work. In this work, I included the analysis and finding part in the same chapter so that the reader can understand the questions and th e answer from the investors and the reader can make out the findings and what ex actly the investor is telling about his opinion. Instead of putting the findings in the different chapters and making the reader to come again and again to the question and findings section, I combined both the section in to one and added g raphs and charts to understand easily. 62 | P a g e

CHAPTER V Discussions and implications 5.1 Discussions. Implications. 63 | P a g e

5.1 Discussion and implications: Most of the topics, questions answers and opinions of the investors are already discussed in the analysis and findings part. Here we can discuss regarding the f inal results of the study and the points what I mentioned in the part of literat ure review and we need to compare the results with the points which I mentioned in the literature review and need to give justification for the study so we need to look over the points which different authors mentioned, what journals given and points which are given by the different books. Most of the points which are given by the authors regarding the opinions of the investors towards online trad ing are true because the study revealed those particulars and investors behaves same most of the time as told by the authors in their books. As Mr. Prasanna Cha ndra has mentioned three types of trading like open outcry system, screen based system and internet based system. Here in the real market, open outcry system is not in existence but only the next two are in use. Like that many things will c ome to know in this study even many unknown factors regarding the selection of t rading system also will come to know. In the beginning days of online trading th ere was a myth that, comparing to offline trading system online trading is very costly and it requires greater skill so only few people can only handle the trad ing through online but recent days the phenomenon has changed and comparing to t he brokerage charges and time required for offline trading both the online and o ffline costs similar and regarding the knowledge, now a days everybody use compu ters for one or the other purpose so knowledge is not the problem for handling t he trading through online. 64 | P a g e

There is a saying that, it is hard to become good analyst but it is harder to be come good trader. It means what ever may be the trading system but the trade is completely depends upon the knowledge and experience of the investor. How much h e knows about the market trends. Which is the better time to invest and other th ins. An unknown person also can invest on the stock market but very soon he will go out of the market because the active mind is important and also knowledge ma tters much for the investment value variation. Just knowing about the computer i s not at all sufficient for trading in stock market. Beginners often assume that they can make money because they are smart, elegant, and Computer-literate and have a record of victory in business. You are capable of getting a speedy comput er and even buy a back tested system from a vendor, but putting money on it is l ike trying to sit on a three-legged stool with two legs missing. The two other f actors are psychology and money management. Dr. Alexander elder says in his book , Come in to my trading room as People buy and sell on the basis of their knowledg e and the latest price represents everything known about that market. This is a valid observation, from which the efficient market gang draws the curious conclu sion that no one can beat the market. Markets know everything, they say, and tra ding is like playing chess against someone who knows more than you. Dont waste yo ur time and moneysimply index your portfolio and select stocks based on volatilit y. This says what the observation skill needed for the investor and based on the volatility investor must go for investing his/her money. 65 | P a g e

Before completing this chapter we need to know that, there are certain important barriers which make some losses for the investors without knowing. Those costs are unstoppable and investor has to bear those losses while trading on stock mar ket. They are, 1. Slippage: Slippage is the difference between the price at the time you placed your order and the price at which that order got filled. Slippag e tends to be a much bigger expense than commissions. Slippage means nothing but , lets take an example. Think that we are buying the shares of reliance when the price reaches to a level of 150Rs. We places an order of buying 100 shares at 11 .45am but the order executes at 11.55 am but at that time the price falls to 148 Rs. So here the investor bears a loss of 2Rs without knowing. He should bear the loss of 2Rs. This is nothing but slippage. 2. Commissions: Commissions may appe ar to be a minuscule expense. Most traders Neglect them, but if you add them up, youre likely to find that your broker ends up with much of your profit. Usually brokers charges 0.05% commission on the traded amount every time whether it may be buying transaction or may be selling but they charge this fixed amount and th ey may charge for the stamp duties of the transactions from investor itself. Bro kers provide discount for the regular investors and for large trading also but t he discounts will be jus 0.02% maximum. 66 | P a g e

3. Expenses: Some expenses are unavoidable. Especially in the beginning investor will have to buy a few books, download or subscribe trading software, sign up w ith a data service, opening several accounts and documentation process and so on . It is important to keep your expenses as low as possible. Brokers and brokerag e agencies sometime facilitates traders tradingrelated expenses, such as computer s, subscriptions, and advisory services, and software in a discounted costs with out taking full money. That helps the investor to lessen their expenses. These a re the few barriers in trade profits which can be avoided and which will incur e very time. 67 | P a g e

CHAPTER VI Conclusion and recommendations 6.1 Conclusions. 6.2 Recommendations 68 | P a g e

CONCLUSIONS: We have examined all the reasons which affect the selection of the trading syste m and we have discussed about the Indian stock market, which all comes under the stock market, who all trades inside the stock market, what all the things will be traded under the stock market and many other facts regarding the stock market and the stock market transactions. In the meanwhile we discussed about the stoc k traders, who all can trade the equities, what all the minimum requirements for the equity trading, Bodies and boards who controls the share market and the sto ck exchanges etc many more thing we discussed in detail in this study so this is the time to give a better conclusion regarding the study what I performed. As in the discussion space we have seen that who ever trades in the market or which e ver may be the system of trading, knowledge is essential for trading and possess ion of the skill is an important task. Attentive mind will succeed in the stock market trading. Still most of the time the trading system puts its effect on tra ding. Main thing is decision making about the shares because people unaware rega rding the stock market variation most of the time so they need a better advisers to understand the situation so preferably they go for the brokers. So we say he re that the offline screen based trading is much popular than online independent trading. 69 | P a g e

Both the system has its own advantages but as per the survey, as per the analysi s, as per the investors opinions we can say that people attitude and perception supports the offline trading much more than online trading. From the study we ca me to know that most of the investors are unaware about the online trading and t hey are not confident that they can also do trading independently. They lack in decision making. One more thing we can state here that, online trading has a bri ght future in the upcoming days because of the technological development and peo ple can get the market information easily from media and also investors becoming more and more time conscious so they like to do other works also along the trad ing in market so online trading is getting importance more and more in India. Fo reign markets are already covered with online trading. In USA people do not go f or the suggestions from the brokerage agencies and they trade independently. The same trend is coming to India also. Recommendations & suggestions: As already we have discussed the advantages of the online trading and even we ha ve discussed about the future development of the online trading system and the o pportunities which are awaiting form the side of online trading so here I would like to suggest few points how the online trading can be well developed and what are the corrections to be done to erase the myths which are stuck in the mind o f the investor. They are, 70 | P a g e

1. Investor awareness should be done to teach the investor regarding the usage o f the internet trading so the investor can trade independently. 2. Investor orie ntation programs can be done by the institutional trader so that they can make t he common man to learn how to invest. 3. The brokerage agencies should provide e nough trading limit to the online traders also. Than only the investors show int erest on investments through online. 4. Brokerage agencies should provide the up dated information to the online investors also and they should provide the infor mation which they get from the research calls of their R&D department. 5. Totall y when the investor gets all the information which he gets from offline, than on ly he will show interest upon the online trading so that should be done to assur e that he is going to get all the information. 6. Service provider of IT should secure the investor against the system breakdown. He must give all the securitie s. 7. Finally, investors goes to the option where the cost is less so when the t otal cost goes down for trading online than offline, automatically investor show s a greater interest and sure they will try to learn the new system which are he lpful for them. 71 | P a g e

PART VII References 7.1 reference sources. 72 | P a g e

6.1. REFERENCE SOURCES. i. N J Yasaswy., Intelligent stock market investing. ii. Y Chandra sekar. Financial markets and services. iii. B V Raghunandan. financial management iv. Prasanna Chan dra, The Dynamics of Indian financial markets v. Professor Ian Domowitz and Profes sor Pankaj Jain., Financial market design and the equity premium: Electronic vs. f loor trading. Journal. 2005. vi. Training material of BOLT, Bombay stock exchange Ltd BSE Training institute [BTI]. vii. National stock exchange. Understanding the NEAT system, Chapter 1. Issued by National stock exchange. viii. Stock market. Arti cle published by Wikipedia the German encyclopedia. Link, file:///D:/SHARE%20MARKET/Stock%20market%20%20Wikipedia,%20the%20free%20encyclopedia.htm. ix. Come in to my trading room. Ale xander elder. 73 | P a g e

PART VIII Annexure. 8.1 Questionnaire. 74 | P a g e

Questionnaire Dear Respondent, As I am a Management Student, undertaking my management thesis with the topic "study on investors attitude towards online trading " I request yo u to spare some time of yours to fill this questionnaire to provide me the infor mation regarding the reasons of using online trading or offline trading [trading through brokers and stock brokerage agencies].Your response will be kept strict ly confidential. Name of investor: ________________________________ 1. Age group : Below 20 20 to 35 35 to 50 50 and above 3. Occupation: Employed: Private Secto r Self-Employed: Business Retired Profession Not Employed Public Sector 75 | P a g e

4. Annual income: Below 150000 300000 to 450000 150000 to 300000 450000 and above 5. Are you a short term investor or long term investor? Short term investment Lo ng term investment Both 6. What is your investment per annum? Below 20000 20000 to 40000 40000 to 80000 80000 and above 7. How frequently do you invest: Weekly Monthly Quarterly Half yearly yearly 8. Do you personally follow the stock market? Yes No Daily Twice a week Weekly Fo

9. If yes, then how frequently do you watch market? rtnightly 10.Do you trade independently? 76 | P a g e Yes No

11.If yes, why do you like to trade independently? Freedom of trading direct acc ess to the market Frequent transactions free of brokerage charges others 12. If you are not trading independently, in which way do you like to trade? Thr ough independent brokers through broking agencies Through banks others Others please specify: __________________ 13. What is the reason to go for the a bove way one which you selected? Help for decision making Provision of additiona l limit option 14.Basis for Investment: Self Analysis Brokers Advice Charted Acc ountant Advice 13. Source of study: Business Channels Business Magazines Busines s Papers Internet No risk of handling transaction Others Financial Advice from investors Friends/Relatives Advice Others 14. How do you choose your various investment alternatives? Risk involve Future growth Return they give Past performance If others, please specify: _____________________________________________________ ________ 77 | P a g e