PROJECT REPORT ON “CONSUMER BEHAVIOUR TOWARDS ONLINE TRADING.” IN PARTIAL FULFILMENT OF MASTERS IN MANAGEMENT STUDIES SUBMITTED BY: ANJANI KUMAR PATHAK
ROLL NO: 108 SPECIALIZATION:FINANCE
GUIDED BY PROF.NEELIMA SINHA
PILLAI‟S INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, NEW PANVEL UNIVERSITY OF MUMBAI 2009-2011
1
Acknowledgement
It gives me great pleasure to acknowledge my sincere thanks to Mr.K.V.Kamath for providing me the opportunity to conduct the research
at their well esteemed organization.
I would also like to take this opportunity to thank my Branch Manager of Dombivli Mr. A.K.Bhattacharya who helped me and guided me through the research work.
I am extremely thankful to Pillai‟s Institute of Management Studies and Research for giving me an opportunity to work on this project because
of this project I could understand the perception and behavior of consumers towards online trading.
I would also like to thank Prof.Neelima Sinha who helped me a lot with the summer project. Without her co-operation and support this project would not have been a success.She helped me immensely by keeping me motivated throughout the course of the project.
At last but not the least the staff members of Canara Bank are equally credited for their enduring efforts to assist me all the time for the successful completion of the project.
Thank You. .
2
Acknowledgement
It gives me great pleasure to acknowledge my sincere thanks to Mr.K.V.Kamath for providing me the opportunity to conduct the research
at their well esteemed organization.
I would also like to take this opportunity to thank my Branch Manager of Dombivli Mr. A.K.Bhattacharya who helped me and guided me through the research work.
I am extremely thankful to Pillai‟s Institute of Management Studies and Research for giving me an opportunity to work on this project because
of this project I could understand the perception and behavior of consumers towards online trading.
I would also like to thank Prof.Neelima Sinha who helped me a lot with the summer project. Without her co-operation and support this project would not have been a success.She helped me immensely by keeping me motivated throughout the course of the project.
At last but not the least the staff members of Canara Bank are equally credited for their enduring efforts to assist me all the time for the successful completion of the project.
Thank You. .
2
Certificate
CERTIFICATE OF SUMMER INTERNSHIP
This is to certify that Mr. Anjani Kumar Pathak of Pillai's Institute of Management Studies and Research has successfully completed his / her summer internship with us from May 2010 to June 2010.
During the summer internship Mr. Anjani Kumar Pathak was found to be punctual, positive and performance oriented.
Mr. Anjani Kumar Pathak has completed his project on “CONSUMER BEHAVIOUR TOWARDS ONLINE TRADING” TRADING ”successfully.We wish him
luck in his career.
3
Declaration Pathak, student of Pillai’s Institute of Management I, Anjani Kumar Pathak, nd
Studies & Research, New Panvel studying in MMS-2
year hereby declare
that I have successfully completed this Project Report entitled “CONSUMER BEHAVIOUR TOWARDS ONLINE TRADING TRADING” ” in the academic year
2009-10.
The information provided in this project is true and original to the best of my knowledge.
DATE:
SIGNATURE OF THE STUDENT (Anjani KumarPathak)
PLACE: New Panvel
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Index
Chapter
Particulars
Page
No.
1
2
No. Executive Summary
6
I
Introduction
7
II
Objective of the study
20
III
Need of the project
21
IV
Scope of the project
21
V
Limitations of the project
21
VI
Research Methodology
22
I
Company Profile
23-24
II
Organization Chart
25-26
III
Benefits
given
by
the
27-32
company
3
I
Theoretical background
33-44
II
Analysis
45-53
&
Interpretation
4
I
Findings
54
II
Conclusions
54
III
Recommendations Recommendations
55
Bibliography
56
5
EXECUTIVE SUMMARY
This is a project report on “Consumer behavior towards online trading .” which is made on the basis of summer internship done at Canara Bank Securities Ltd.The project encapsulates all my efforts to market and sell the online trading a/c of Canara Bank Securities Ltd.
The project focuses more on providing insights towards the perception of customer towards online trading. It focuses on clarifying various doubts that arise in the mind of customers and providing satisfactory answers. The project further tries to study the effect of location and demographic elements on online trading.To study the effect of location on sales of online trading the project includes a comparative analysis of sales at two different location done by the same person using same marketing techniques.Also,the project investigates the behavior of offline investors towards online trading.Further the project tries to find out the age group and occupation of the majority of online trading a/c holders to tap the unharnessed potential customers.
Although the project report is made with inbuilt limitation of the study which was only focused on Canara Bank customers,yet it provided some interesting insight towards the customers behavior towards online trading.
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Chapter 1 Introduction:
“Money is better then poverty, if only for financial reason” – Woody Allen
India is a developing economy. It‟s prospering in all spheres. Share Market is a compelling determination of the economy and the financial situation of a country.
Share market is an area which fascinates each and every individual who is craving for more money. This is a good start to start education on investing – putting your money where it can gain greater returns then just earning interest in a high-interest account. Investments in shares or stock can be daunting as there is vast and various amounts of information on investments and everyone is ready and willing to take your money.
Trading:
Trading is defined as buying and selling shares in stock exchange. There are two types of trading i.e. online trading (via internet) and Offline trading (via broker or call).
Online Trading:
Online trading refers to trading via the internet .The onset of online trading changed the traditional value proposition of trading, allowing online brokers to supply investors with rich, interactive information in real time including market updates, investment research and robust analytics. The result is an integrated trading experience that combines execution with interactive analysis shown by the growth of the online customer community from a mere
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23000 average trades on NSE per day in a year 2000 to over 52000 average trades in 2002.
Trading online is the paperless method of trading stocks and shares interactively through brokers who work at Internet platforms and trade shares for their customers. Online trading is fast paced and more visible to the buyer than offline trading of shares and stocks. Trading is done at all hours of the day on a global scale. OLT is totally a technology driven product which suits all types of clients including tech-savvy younger generation clients, high net worth individuals who are active in capital market. OLT is totally hassle-free in as much as clients trading in stock market can buy or sell securities without having to visit either the Bank or their DP.
Online Trading: Indian scenario
In the Indian context, online trading can be rightly called as a recent phenomenon, which took root with the change of century i.e. April 2000, and
8
even till day online trading is not much popular among investors for which a list of factors can be blamed.
This fact is more clear from the information available that where number of stocks exchanges in India has grown from 7 exchanges in 1946 to total 23 exchanges till 2005, only 2 stock exchanges are providing online share trading .Indian stock exchanges have started adopting technology because it provides the necessary impetus for the organization to retain its competitive edge and ensure timeliness and satisfaction in customer service.
Online trading has gained momentum from just 0.5% of total traded volumes 5Yrs back, which now account for 5% of total trading volume of approximately Rs 14000 Cr. On Once-Over the past two years ,the value of all trades executed through internet on NSE has grown from less than Rs 100 Cr in June 2003 to over Rs 700 Cr in June 2005.Online trading is growing by 150 % per annum.Now NSE has 108 registered brokers and 1.053 million internet trading subscribers. However mainly 5 companies control 90 % of the market in Internet trading.ICICIdirect.com has around 50 % market share ,whereas India Bulls hold 26% share ,other dominant players are Kotak securities and Share Khan.
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Instructions
Step 1 Install a good Internet-enabled PC. A broadband Internet connection gives fast and easy access. With the many identity thieves on the prowl, it is important that you have firewalls, anti-virus. anti-spy and registry-cleaning software in place. Brokers will link their online trading terminals to your account. If your details are open to view, it is easy for Internet hackers to steal your identity and use your account. Step 2 Choose a broker to trade online on your behalf. Go through the terms, conditions and disclaimers posted on the website by the broker. Look for a broker who charges affordable fees and gives all the services that you require (see Resources below). Step 3 Install additional software on your PC according to the instructions of your broker. The broker will give you a trading account through a bank or financial institution to which the platform of the broker will be linked. This is to pay and receive money in an instant on your instructions. You can have your own trading account without reference to the broker, and the broker will link the platform to the account specified by you. Step 4 Keep a calm, detached attitude towards the market, which is an unstable and volatile financial entity. Examine all the facts and options before buying and selling, and stay within your trading budget. You should expect the 10
unexpected and stick to your trading plan to mitigate the inherent risks that are part of online trading.
Step 5 Access the website of your online stockbroker and place orders through your PC after paying the fees charged by your broker.
Brief Introduction - Online Stock Market Trading
Stock Exchange.
Stocks (Shares, equity) are traded in stock exchange. India has two big stock exchanges (Bombay Stock Exchange - BSE and National Stock Exchange NSE) and few small exchanges like Jaipur Stock Exchange etc. Investor can trade stocks in any of the stock exchange in India.
1. Stock Broker
Investor requires a Stock Broker to buy and sell shares in stock exchanges (BSE, NSE etc.). Stock Broker are registered member of stock exchange. A stock broker can register to one or more stock exchanges. Only stock brokers can directly buy and sell shares in Stock Market. An investor must contact a stock broker to trade stocks. Broker charge commissions (brokerages) for their service. Brokerage is usually a percent of total amount of trade and varies from broker to broker. Primary Market: -
When you have participated in the IPO of a company going to be listed on
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stock exchanges.
Secondary Market: -
When you have to buy shares via a stock exchange. When you trade in equity through a stock exchange, you have to make use of the services of a brokerage firm, which acts as your agent whenever you buy or sell.
Equity is considered a high risk-high return investment avenue. This is because there is scope for considerable appreciation or loss of the capital that you invest, depending on various factors such as the performance of the company that you have invested in, general market conditions, the state of the economy, etc. However, it forms an integral part of any well-balanced portfolio, since it is at one end of the risk-return spectrum.
Online Trading - Issues and Solutions
Investors who are trading over the Internet or online need to know how they can protect themselves against unexpected losses (especially in fast-moving markets) and what additional steps to take in order to guard themselves against the typical problems of online trading. Online trading may be quick and easy but it still requires time and efforts. You can buy or sell stocks from a great number of online brokers with just a click of your mouse. However, do not forget that making wise investment decisions takes time. Do your homework first and know why you are selling or buying no matter how fast you can execute the actual trade.
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Online trading may be seamless and quick but it is not always instantaneous. A number of technological problems can actually slow or prevent your orders from reaching your online firm. Some of them include: a slow modem, computer, or Internet Service Provider at the investor's end, heavy Internet traffic that is slowing down overall usage, inadequate hardware at the broker-dealer's end, etc. No regulations require that a trade should be executed within a certain time. If you are unable to access your account online you should know what other options for placing a trade you have. Your online trading firm may allow touch-tone telephone trades, ordering by calling your broker, or faxing your order. Have in mind that sometimes turning to one of these options may increase your costs, and other times you may still experience delays when using them. Whether you have placed an order or cancelled one, don't make assumptions, and make sure that everything has worked the way you wanted. Sometimes investors place an order, mistakenly assume that it hasn't been executed, and place another order again. Thus, they end up either selling stocks they do not own, or owning twice as much they wanted. If you are unsure whether your original order was executed, don't rush into placing it again. Talk to your firm and clarify how to handle such situations. In other cases, investors don't make sure that the transaction hasn't been executed when they cancel an order. You should know that you may receive an electronic receipt for the cancellation but your trade may still not have been canceled. Talk
13
to your firm and ask them how you can check to see if a cancellation has really worked.
Limit your possible losses by setting limit orders on fast-moving stocks. By placing a regular market order, you don't have control over the price at which the order will be filled. You hardly want to buy or sell stocks at a price that is higher or lower than the one you have in mind so you better place a limit order. A buy limit order will be executed only at a price that is not higher than your preliminarily set limit price. A sell limit order on the other hand will be executed at the limit price or higher. If you have a complaint, act promptly . By law, the time you have to take legal action is limited. If you have a complaint, first talk to your online firm and ask for an explanation. Remember to take notes of the answers they give you. If you are dissatisfied with the response write to the compliance department at your firm's main office by clearly explaining the problem and telling them how you want it resolved. Require a response in writing within 30 days To be a successful investor you need two main things - the knowledge and the right trading platform.
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Advantages of Online Stock Trading
1 Time: Customers can trade online with a real time basis and buying and selling of shares happens with a press of a button.
2Flexibility: Customers can modify the placing orders according to the market movements.
3 Standardized Procedure: When the order is accepted by the exchange ,it will give pay-in and pay-out dates and customer can easily expect the cash or shares to be credited to his account.
4 One stop shop: Bank statements and transaction statements can be viewed at the click of a button.
5 Informed Research: Service providers carry stock analysis like intraday and EOD(End of day) technical charting which helps the customer to make right choices
6 Flexibility of timing Customers can place orders before start of a trading session.
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Disadvantages of Online Stock Market Trading
Online stock trading has become more and more prevalent as people manage their own investment portfolios. Online trading companies advertise low fees and easy interfaces to make the task of investing your money simple. While there are some advantages in using online brokerage companies, several things may put users of these services at a disadvantage.
Forgetting You Are Using Real Money
In recent decades, people have become very accustomed to doing both work and play in front of a computer monitor. When you're so immersed in an online task, it's possible to become detached. This can cause users of online investing firms to forget that they are using real money as they trade on the brokerage's website. Investors may make mistakes because they make trading decisions too quickly and get caught up in the ease of using the technology.
Lack of a Broker/Investor Relationship
When you invest with a traditional brokerage firm, there is a relationship with the broker, who can become an investing mentor. The broker provides advice and guidance to the investor. This is beneficial relationship to both parties, as the investor gets the broker's financial expertise and the brokerage firm gets extra fees from clients if its portfolio grows in size.
With an online trading firm, all portfolios are self-directed, which means users
16
need to have at least a working knowledge of the financial markets to make informed decisions. Many investors simply don't have enough time to follow the financial markets, especially on a daily basis. This can cause them to make inappropriate investments due to a lack of complete information.
No Time to Learn Online Programs
Online brokerage firms claim their software is easy, but this isn't always the case. Often, the software is complicated, with several different options and calculators, and no instructions on how to actually use them. People who don't learn software quickly may not master all the ins and outs of the program. Without complete knowledge of the program, investors may not make the right decisions because they won't know what all of their options are. Also, taking the time to learn the technology means spending money, which is often too high of a cost for many people. As a result, they will use only the sections of the site they feel comfortable with, is another limit ations.
Disadvantages of Internet trade mechanism:
Computer Expertise Requirement: One disadvantage of internet trade is that the initiator of this business must ensure some expertise in the computer medium to properly run this business. Although a business can hire professionals to control the internet trade mechanism but unless and until the business owner himself won't develop the necessary skills in internet trade then he could never truly analyze the performance of the business and properly run it. This is major disadvantage as most business owners that do not have a computer related background find it relatively difficult to run internet trade.
17
Security and confidentiality issues: Security issues are also a disadvantage in internet trade. Although computer security have increased in the recent years with new programming and encryption protocol design to safeguard internet trade but internet is an open medium which still imposes threat to online cash transactions. Some business are unwilling to run internet trade because they fear the leak of confidential matter during the internet trade and are also reluctant to facilitate heavy cash transaction on the internet. The confidentiality matter and leak of secret information also greatly concern the business initiators.
Copyright issues: This is also a disadvantage of the internet trade mechanism. The internet law does not and cannot impose copyrights rule as firmly as the administrators do in landmark business. The major reason is that internet is a huge medium and is distributed in several countries of the world. Keeping copyright laws intact is very difficult and therefore it‟s very easy for one business to entirely copy the business and trade mechanism of some other business association on the internet. Therefore business owners are reluctant to initiate internet trade as they fear that their business ideas would be copied by other internet business easily.
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The copyright issues till now have not been resolved and there is little chance of having any major achievement in this regard.
Internet trade exploitation: Since internet is an open medium therefore in most cases the business is advertise to those people that the trade industry does not want to do business with. Commencing the internet trade with the right target market is a relatively difficult task and at times can be very frustrating for the business owner especially if it's a small business with limited finance to support internet trade.
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OBJECTIVES OF THE STUDY
The main objectives of the study are:
To study investor‟s perception on online trading like safety regarding
Online frauds ,transaction errors and speed/connectivity problems.
To help the company in building a strategy for their online services.
To analyze the demographic determinants influencing online trading.
To understand the attitude of the off-line share traders towards online trading.
To study the effect of location on sales of online trading account.
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NEED OF THE PROJECT
To clarify the doubts and fears raised by the customers regarding online trading a/c.
To provide the firm with insights towards perception of customers towards online trading.
To create awareness regarding the firms product .
LIMITATIONS TO THE PROJECT
Getting appropriate response from the respondents.
The respondents were limited to Canara Bank customers.
The study is limited to the curriculum.
21
Sample size is limited to 100.
RESEARCH METHODOLOGY
The research work undertaken in my project work is Primary Research. Online trading a/c forms formed the data for Primary research. The following topics are covered by me under Primary Research:
Analysis of number of Male & Female members who are involved in
online trading.
Analysis of income of the members who deal in Online trading.
Analysis of age group of the members in Online trading.
Analysis of educational qualification of the members who deal in Online
trading.
Analysis of occupation of the members who deal in Online Trading.
Analysis of number of Offline Traders interested in online trading.
Along with primary research the data is Quantitative in nature. Hence the research work undertaken in this project work also includes Quantitative Research. Quantitative Research is that research where the data available can be quantified in numerical terms. The following data have been interpreted by me in Quantitative terms:
Number of Male & Female members who are involved in online trading.
Income of the members who deal in Online trading.
Age group of the members in Online trading
Educational qualification of the members who deal in Online trading.
Occupation of the members who deal in Online Trading.
Number of Offline Traders interested in online trading.
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In this project I have also included an article written by Nidhi Walia and Ravinder Kumar regarding investor‟s preference for Online Trading & Traditional Trading. Hence my research work is also a part of Secondary Research.
Chapter 2 PROMOTERS/ACTIVITY
The Company, a Subsidiary of Canara Bank was incorporated and accredited as a Primary Dealer (PD) in 1996 in the name of „Gilt Securities Trading Corporation Limited. (GSTCL) with a paid-up capital of Rs.100 Crores.
The Primary Dealer activity of the company was taken over by the parent Bank in February, 2007 and the company is focusing on capital market related activities mainly into equity broking and distribution of Financial Products.
The name of the Company has been changed as „Canara Bank Securities Ltd. (CBSL)‟ in 2009.
The On Line Trading (OLT) in Equity and FNO is a product added by CBSL to Financial Super Market of Canara Bank. This facilitates seamless trading in stock market by investor clients of the Bank at their comfort and convenience.
23
PRINCIPAL OBJECTIVES
To provide a viable and efficient institutional platform for competitive
trading in equities.
To develop a Retail Equity market with broader investor base by offering
enhanced trading facility to the equity instruments and hassle-free & speedy service using state of the art technology in the market.
To create an active secondary market for Equities, assure prompt
settlement, Liquidity to the instrument and transparency in dealing.
To provide Trading Convenience by way of:-
Efficient and Speedy On-Line Service
Prompt Settlement
Transparency in operation
ORGANISATIONAL SETUP
As per SEBI guidelines the Company has functional separation for.
Trading (Front Office)
Settlement accounting and Reconciliation(Back Office and
Accounting)and
Monitoring and Control (Middle Office)
24
Similarly, there is a separation of transactions relating to Proprietary trads, Institutional accounts and Constituents‟ accounts.
The Company is Board managed. Day to day affairs are overseen by the Managing Director, assisted by the executives heading the departments and supported by competent and experienced staff, who are on deputation from Canara Bank.
BOARD OF DIRECTORS
Shri A C Mahajan
Chairman (Chairman and Managing Director of Canara Bank)
Shri H S Upendra Kamath
Vice Chairman (Executive Director of Canara Bank)
Shri D S Anandamurthy
Director (General Manager of Canara Bank)
Shri D S R Murthy
Director (Chartered Accountant-with vast experience in Capital Market)
Shri K Krishna Rai
Director (Retd Executive Director of Allahabad Bank)
Shri K R Rao
Managing Director (Deputy General Manager of Canara Bank)
BANKERS TO THE COMPANY Canara Bank
AUDITORS TO THE COMPANY
M/S Pramod & Associates
25
M/s A J Shah & Co.
Mumbai (Internal Auditors)
PRINCIPAL EXECUTIVES
Shri K R Rao
Managing Director
Shri N S Rao
General Manager
Shri K Ganesh Kamath
General Manager COMPANY SECRETARY
Shri S Mutthu
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BENEFITS OFFERED BY CANARA BANK SECURITIES LIMITED CANARA BANK TRADING MODULE
Canara Bank Securities Trading platform comprises of 3 modules viz. CANBASIC,
CANLOYAL
&
CANROYAL.
While
CANBASIC
&
CANLOYAL modules are offered to all clients; CANROYAL module is offered to the HNIs and Active Traders. CANBASIC:
A powerful browser based trading system for those who are relatively new to online investing. A unique integrated account, linking your banking, broking, and demat accounts. Our cutting-edge trading interface gives you the power to research stock trends, find the latest stock quotes and make fast trades right from the computer you already have. You no longer have to depend on someone else to handle your trades - the power to make your mark on the stock market is in your hands. Canbasic simplifies the online trading process and gives you unlimited access to your trading history to see where you started, where you are now and where you have room to grow. And with our research and stock watch tools, you can be ready to trade stock at a moment's notice. Benefits:
Trading on NSE & BSE
World class resources
Integrated Bank, Demat and Trading Accounts
27
Get Current & Historical Order Status
Monitor your orders
Updated buying power
Anywhere access
Access to all back end reports and data
Online Research & Exchange Calls
Payment and DP Gateway with Canara Bank.
CANLOYAL:
Customers can also trade on Canloyal, where they have access to live streaming quotes, which enables them to keep track of real-time price movement. Multiple market watch, message window and trading window, all in one screen, to help customers track individual stocks and make timely trades when investing online.
Canloyal is a Applet-based system designed especially for Active Traders. Customers can also trade on Canloyal where they have access to live streaming quotes, which enables them to keep track of real-time price movement. Multiple market watch, message window and trading window, all in one screen, to help customers track individual stocks and make timely trades when investing online. Fast & capable trading application to power your online account.
Benefits:
Streaming quotes
Market Depth Window
Trading on NSE & BSE
Anywhere access
Create Multiple Watch lists
Equity and Derivatives orders in single window 28
Hot Key Navigation
Access to all back end reports and data
Instant Loading & Streaming quotes
Single screen interface for cash, derivatives
Personalised Market watch
Payment and DP gateway with Canara Bank.
CANROYAL
Built exclusively for active traders, launches right from the trader's desktop and offers advanced charting capabilities, technical analysis and shows traders every bid and offer for every market participant, allowing them to execute a quick & better trading decision.
Trade alongside professional stock brokers from the comfort of your own home or office. Canroyal is an advanced, customizable online trading platform built exclusively for active traders. Canroyal launches right from your desktop and offers professional, complimentary tools that can help give you an advantage in the marketplace. Canroyal makes the most of state-of the-art technology to deliver power, speed and reliability. Benefits:
Personalized Stock Quote Lists
Fully Customizable display
Streaming Intraday, Daily and Weekly Charts
QuickQuote
Instant Loading & Streaming quotes
Single screen interface for cash, derivatives
Market depth window
Banking gateway and DP gateway with Canara Bank
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Derivatives Chain
Technical tool such as EOD and intraday charts
Top Gainers/Losers, Top Volumes/Top Quantity
Personalised & multiple market watch
Sophisticated Alert capabilities
Track your orders real time
Real time position updates
Dynamic buying power
Pre Requisite for availing ONLINE TRADING facility
A client should have an operative Bank account (CASA) wit h one of our CBS branches, a depository (demat) account with our Bank and a Trading Account with our broking subsidiary viz., M/s CBSL, Mumbai. For this purpose, three-in-one application form comprising of account opening forms for opening the above said three accounts has been devised and made available to clients by M/s CBSL through designated CBS branches of our Bank. Products Offered by M/S CBSL
Cash & Carry
Intra Day Trading
Buy in Today Sell Out Tomorrow (BITSOT)
Online Trading in Futures & Options
Online subscription to IPOs
Online investment in Mutual Funds
Online trading in Currency Futures
Salient Features of OLT
The state-of-the-art-technology integrates Trading Account with Depository Account and Bank Account to ensure hassle free trading. OLT clients can -
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Log on to "canmoney.in" from “ANYWHERE” at “ANY TIME” to trade
After "buy" order is executed, Bank Account is debited online
Sale proceeds credited to Bank account online.
Online credit and debit of securities to depository account
No need to write cheque; nor tender delivery instructions
Why OLT account with M/s CBSL
M/S CBSL is a wholly owned broking subsidiary of our Bank
Integrated account - Buy/Sell order gets executed seamlessly
Instant Order confirmation
Instant liquidity by prompt settlement
Transparent dealing
Safe and secure trading through user id and pass word
Competitive tariff
Access to Research Reports, Market Analysis etc
Online monitoring value of portfolio
Online viewing of digital contract note and summary of all transactions
Online monitoring of the status of orders
Access to reports and data
Online trading in Futures & Options
Online trading in Currency derivatives
Online subscription to IPOs
Online investment in Mutual Funds
For opening a Trading Account with M/s CBSL Documents required with Trading a/c application form:
1. Pass port size photo, duly signed across
31
2. Copy of PAN Card (Original to be produced for verification & return) 3. Copy of Bank Pass Book / Pass Sheet containing latest address and cust-id 4. Copy of client master sheet of demat account with Canara Bank 5. Furnishing of e-mail id is compulsorily required for sending digitally signedcontract notes, which is compulsory as per Stock Exchange regulations
For opening a Demat account with Canara Bank DP:
Documents required with Demat a/c application form: 1. Pass port size photo of self and of nominee 2. Proof of identity :- PAN Card(Mandatory)- original required for verification 3. Proof
of
address
:
(copy
of
any
one
of
the
following)
- Bank Pass Book / Ration Card / Pass Port / Voter ID card / Driving Licence (original required for verification) 4. Cancelled cheque leaf (proof of Bank Account details) 5. ECS debit mandate for recovery of DP charges where client has Bank a/c with other Banks 6. Letter of authorization for recovery of DP charges where client has Bank a/c with one of our CBS branches 7. Duly filled in LOT-286 which is obtained at the time of opening Bank A/c
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Chapter 3 Theoretical Background
LITERATURE REVIEW
“Online stock trading in India: An empirical investigation”
In 2007,Nidhi walia and Ravinder kumar‟s research report examined the investor‟s preference for traditional trading and online trading, investor‟s perception on online trading and comparing current usage of online trading and offline trading. This study reveals that out of every 100 investors only 28 trade online, which points out a question as why investors were not able to realize the importance of technology in stock trading.
Online trading has gained momentum from just 0.5% of total traded volumes 5 Years back, which now accounts for 5% of the total trading volume of approximately Rs 14000 Cr on NSE. Over the past 2 years, the value of all trades executed through internet on NSE has grown from less than Rs 100 cr in June 2003 to over Rs 700 Cr in June 2005.
The major findings of the study are that Indian investors are more conservative, they do not change easily and Indian traditional traders still
33
choose brokers for trading, whereas net traders are more comfortable with online trading for its transparency and complete control of the terminal.
FREQUENTLY ASKED QUESTIONS (FAQS): During my stint at Canara Bank to market and sell their online trading account following were few of the frequently asked questions: Is trading through the Internet safe?
The safety of transactions on the Internet depends on the encryption system used. The better this transaction system, the more difficult it is for any person to hack the site. Internationally, the best system available today, is the 128-bit encryption, a system, which even the Pentagon uses. Canmoney.in is one of the few online share-trading sites in the country equipped with this 128-bit encryption.
Secondly, you too can ensure the safety of the transactions online.You normally get a secured user id and password, the secrecy of which is to be maintained entirely by you.
Thirdly, if the transaction system requires no manual intervention, you further
34
improve the safety in the transactions. Among Indian sites, Canmoney.in is one of the very few fully integrated online trading sites. This enables the elimination of the possibility of any manual intervention. Which means orders are directly sent to the exchange ensuring that you get the best and right price.
What about security of my money, demat shares and my transaction documents?
In systems where the broking, banking and demat accounts are completely integrated, your money remains in your own bank account, and does not get transferred to the broker's pool account.
Is trading through the Internet a difficult and cumbersome process?
The experience of trading through Internet depends a great deal on the type of product offered by the site. Say, for example, one of the issues bothering you may be tired of the paperwork involved after every trade in writing cheques or TIFDs.
You
would
then
seek
a
system
that
eliminates
these
processes.
In online trading sites, the greater the back-end integration of the system, the greater the amount of work the sites do for you, therefore greater the convenience available to you. For example, in case of canmoney.in, your broking account, bank account and demat account are linked electronically. So when you punch in a buy or sell order, the system checks the funds/ shares availability and automatically credits/debits the accounts once the order is executed by th e exchange. But I am not comfortable with Internet, or with finance, how can online trading be easy for me?
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Contrary to common perceptions, trading through Internet does not require either any expertise in working on the computer, or any special financial skills.
You could try the demo (demonstration) of the online trading sites like Canmoney.into find out why others like you, with little or no knowledge about the Internet or finance, have switched on to online trading. Or you could attend the demonstrations sessions held by such websites in your city.
Is trading through the Internet a costly affair?
The convenience provided by online trading is even then worth the costs involved. And online trading sites are not that costly. For example, a trader can trade shares on margin at rates as low as 0.05% on canmoney.in and if one wishes to trade in cash, then the rates applicable are as low as 0.35%. However, it is important to compare various online trading sites on brokerage rates, inclusive of all sub-charges.
I am pretty satisfied with my present broker who serves me offline. Why should I choose to go online to trade shares?
Many of those customers who have chosen to trade shares online today, had at one point of time been trading through offline brokers, just like you are today. They took a chance to go online and trade shares. After realising the advantages of trading shares online, they have shifted to online trading now. In fact, there are more than lakh customers who have already opened an account with ICICIdirect.com. Just try trading shares after opening an account with any online trading site. However, before choosing an online trading site, please compare all such websites and then make a decision.
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How frequently is the prices updated at all these online trading sites?
The tickers available at online trading sites provide instantaneous updates. Also, some websites can offer to transact in those shares instantaneously and with convenience.
How can I be sure that I shall be trading at a price I want to or at a price appearing in the website?
The solution to your problem could be provided in different ways by different online share trading sites. At canmoney.in , for any trade order, the customer is asked to click "Proceed" after he has the opportunity to completely check the order verification form. Moreover, you have the option of modifying or canceling the order till the moment the order is executed at the exchange. Finally, online trade confirmations reach reaches our customers within 4 minutes, while contract notes are dispatched at the end of the day and reach within 24-36 hours. With canmoney.in you decide what you want to buy and buy the share at the price you want to and therefore you are in total control of your trades.
What other services can I get by trading shares online?
Internet has brought to the retail investores what was till sometime ago the sole prerogative of large brokerage houses and high net worth individuals. For example at Canmoney.inone can access multitude of resources to arrive at his stock picks. Reliable research with an enviable track record is available free of cost. An investor can now access Canmoney.inand do his technical analysis, know what other leading brokers think about a company and whether it is a buy or a 37
sell, (Multex Global estimates), access live news from international news agencies such as Reuters, CNBC, read about what the leading CEOs think about the state of the economy and the capital market.
Why experts say that investing in equityis right for oneself?
Equity forms the part of any well-balanced portfolio. You must hold some portion of your assets in equity because it is the only instrument that has the ability to truly deliver a high return, when held over a long period of time. However, the amount of equity that you hold in your portfolio is a very subjective decision and will depend upon various factors. These include your investment objectives, time horizon and risk appetite. Equity investment requires certain amount of homework to be done:-
objective, risk profile and the stock‟s
fundamentals.
that you believe still have scope for appreciation.
horizon if circumstances lead you to believe that it‟s
necessary.
How Is The Price Of The Stocks Determined?
Prices of a stock depend on two factors, namely:-
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Demand and Supply: When there are more buyers than sellers for a
particular stock its demand rises and so does the price. When supply overtakes demand
(that
is,
sellers
exceed
buyers),
the
stock
loses
value.
Future Growth potential: Buyers are willing to pay a premium for stocks of
companies that have the potential to increase their revenues and net profits. The greater this growth potential, the higher the premium given to the stock.
How Do I Go About Investing In Equity?
For investing in equity, you need to open the following accounts: - A trading /broking account with CBSL.
- A demat account with Canara Bank.
- A bank account with Canara bank for cash payments and receipts
How Canmoney Can Be Useful To Me?
Canmoney can be of immense use to you. It acts as a medium between your dreams of ideal investments in equity and mutual funds. It provides you the investment avenues, craved out by our experienced research team.
It provides you the direct access to NSE & BSE both on real time basis i.e. without any time leg with superior service and best technology available.
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No tax is applicable on the dividend receipts. However, one is required to pay short term capital gains tax on any short-term gains (i.e. gains trough selling the shares held for less than 12 months). The rate of tax payable on such gains is 11.22 per cent (10 per cent tax + 2 per cent education cess + 10 per cent surcharge, if applicable).
There is no tax on long-term capital gains (i.e. Shares held for more than one year).In addition, one has to pay Securities Transaction Tax (STT). The STT rate for delivery-based transactions is 0.125 per cent of the transaction value for both buyers and sellers. For non-delivery based transactions, STT of 0.025 per cent of the transaction value is payable. What Is The Grievance Redressal Facility Available For Equity Investing?
If you have grievances against a listed company/ intermediary registered with SEBI, you should first approach the concerned company/ intermediary against whom you have a grievance. Then, if you are not satisfied with their response you can approach SEBI, who is the regulatory authority for such entities. SEBI takes up grievances related to issue and transfer of securities, nonpayment of dividend, etc. with listed companies. In addition, this market regulator also takes up grievances against various intermediaries that are registered with it.
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DERIVATIVES What Do You Mean By The Term „Derivatives‟?
Derivatives are the newly launched financial instruments, whose values are entirely "derived" from the values of the underlying assets. The underlying assets can be securities, commodities, bullion, currency, livestock etc.
Derivatives can be of several types like forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities.
As per Securities Contracts (Regulations) Act, The term Derivative has been defined as:-
unsecured, risk instrument or contract for
differences or any other form of
security; es its value from the prices, or index of prices, of underlying securities.
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What Do You Mean By The Term „Futures Contract‟?
Future contracts are the organized/standardized contracts in terms of quantity, quality (in case of commodities), delivery time and place for settlement on any date in future. The contract expires on a pre-specified date which is called the expiry date of the contract. On expiry, futures can be settled by delivery of the underlying asset or cash. Cash settlement enables the settlement of obligations arising out of the future/option contract in cash.
What Do You Mean By The Term „Option Contract‟?
An option contract is defined as "a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer. The buyer / holder of the option purchases the right from the seller/writer for a consideration which is called the premium. The seller/writer of an option is obligated to settle the option as per the terms of the contract when the buyer/holder exercises his right. The underlying asset could include securities, an index of prices of securities etc.
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An Option to buy is called Call option and option to sell is called Put option. Further, if an option that is exercisable on or before the expiry date is called American option and one that is exercisable only on expiry date, is called European option. The price at which the option is to be exercised is called Strike price or Exercise price.
Therefore, in the case of American options the buyer has the right to exercise the option at anytime on or before the expiry date. This request for exercise is submitted to the Exchange, which randomly assigns the exercise request to the sellers of the options, who are obligated to settle the terms of the contract within a specified time frame.
As in the case of futures contracts, option contracts can be also be settled by delivery of the underlying asset or cash. However, unlike futures cash settlement in option contract entails paying/receiving the difference between the strike price/exercise price and the price of the underlying asset either at the time of expiry of the contract or at the time of exercise / assignment of the option contract.
What Are Index Futures And Index Option Contracts?
When an Index becomes an underlying asset for a future derivative contract in place of any equity, commodity or currency, it is known as Index future Contracts. For example, futures contract on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index.
Similarly, the options contracts, which are based on some index, are known as
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Index options contract. However, unlike Index Futures, the buyer of Index Option Contracts has only the right but not the obligation to buy / sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised / assigned only on the expiry date.
By its very nature, index cannot be delivered on maturity of the Index futures or Index option contracts therefore, these contracts are essentially cash settled on Expiry.
What are Exchange Traded Funds?
An ETF is a basket of stocks that reflects the composition of an index, like S&P CNX Nifty or BSE Sensex. The ETF's trading value is based on the net asset value of the underlying stocks that it represents.
How is an ETF related to a mutual fund?
ETF‟s are issued as UNITS by mutual funds. They derive their value from the value of the underlying stocks comprising the index. Therefore, their value moves in the same direction as that of the stocks comprised in the index against which the UNITS are benchmarked.
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Data analysis and interpretation
SWOT ANALYSIS OF CANARA BANK SECURITIES LIMITED
STRENGTHS
Brand name of Canara bank. Low annual maintainance charge. No need of maintaining a separate account for demat account. Large data base of canara bank customers.
WEAKNESS
Brokerage charges are a little bit on the higher side. Poor quality of service provided by bank will deter customers from opening online trading account. Late entry in the online trading market. Poor marketing and hence less visibility.
OPPORTUNITIES
India is a booming and growing economy. Financial literacy is increasing. 45
Growth in the number of internet users. Rising interest of general public in share market.
THREATS
Miniscule share in online trading market. Growing competition among brokers to have their share of pie.
As a part of internship I was selected to market and sell online trading account of Canara Bank Securities Limited. For one month I worked at Canara Bank,Ambarnath branch and the next month I worked at Dombivli branch. I adopted the same marketing strategies and techniques at both the branch .Nevertheless,the results varied tremendously. I could not open even a single trading a/c at Ambarnath branch .On the contrary I had opened 10 a/cs in Dombivli branch.Some of the reasons for such an overwhelming response from residents of Dombivli are:
Affluence: Residents of Dombivli are more affluent and rich as compared to Ambarnath.
FinancialLiteracy: Financial literacy is more in Dombivli .People have more knowledge regarding financial matters and have good financial awareness.
High Risk Appetite: Residents of Dombivli has high risk taking ability. They are ready and have the appetite for high risks.
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Tech Savvy: Residents of Dombivli are more tech savvy as compared to Ambarnath.
Ready To Experiment: Customers are more ready to experiment with new firms providing financial services even if they are customers of some other firm.
Interest in stocks: More interest in stocks among the residents of Dombivli which indicate their religious following of stock markets.
Modern approach towards investment: Customers at Dombivli don‟t follow the conventional approach of investing only in Fixed Deposits.
As a part of my job to market and sell the online trading a/c I Communicated with various customers of the bank, some of whom opened online trading a/c with Canara Bank Securities Limited while others didn‟t. Following are the reasons attributed to successful opening of online trading a/c by customers of Canara Bank:
Perceived good quality of service provided by the bank.
Brand name of Canara Bank.
The freedom of operating from home and performing all the transactions
by oneself.
Sense of optimism towards stock market.
Expectations of higher returns on investment to beat inflation.
Following are the reasons attributed to non opening of online trading a/c with Canara Bank Securities Ltd.:
Perceived poor quality of service provided by the bank.
Sense of pessimism towards stock market due to lack of knowledge
regarding share market.
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Apathy and lack of interest towards share markets.
Customers had already invested and burnt their fingers in share market
and hence the fear of losing money dominates their thoughts
Customers have already opened their a/cs with some other firm and are
satisfied with the
Brokerage
higher
side
as
Gender male female
Percentage 70% 30%
service of the firm. charges are on the compared to market
charges.
Lack of personal touch provided by broker/sub-broker.
Lack of basic amenities required for online trading such as computer and
internet connection.
Analysis of number of Male & Female members who are involved in online trading.
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Gender
female 30% male 70%
INTERPRETATION 70% of online trading a/c holders are male which indicates the dominance of males in online trading.
Analysis of age group of the members in Online trading
Age group 18-25 25-35 35-45
Percentage 0% 30% 50%
49
45-55 >55
10% 10%
Age Group
45-55 10%
18-25 0% >55 10%
25-35 30%
35-45 50%
INTERPRETATION The age group 25-45 forms 80% of the online trading a/c holders indicating online trading is the forte of youngsters.
Analysis of income of the members who deal in Online trading
Income Group 0-1,00,000 1,00,0003,00,000
Percentage 20% 50%
50
3,00,0005,00,000 >5,00,000
30% 0%
Income Group >5,00,000 0% 3,00,0005,00,000 30%
0-1,00,000 20% 1,00,0003,00,000 50%
INTERPRETATION Customers mostly belong to the income group of 1,00,000-5,00,000.
Analysis of educational qualification of the members who deal in Online trading.
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Education
Percentage 10% 10% 60% 20%
INTERPRETATION 80% of online trading a/c holders are graduates and post graduates indicating high educational levels of online trading a/c holders.
Analysis of occupation of the members who deal in Online Trading.
52
Student 0% Housewi 20%
Occupation Business Services Housewife Student Pensioner
Percentage 30% 40% 20% 0% 10%
INTERPRETATION Businessmen and servicemen comprise 70% of online trading a/cs indicating majority of online trading a/c holders .
Analysis of number of Offline Traders interested in online trading.
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Interest of offline traders Interested Not Interested
Percentage 20% 80%
Interest of Offline Traders
Interested 20% Not Interested 80%
INTERPRETATION 80% of offline traders are not interested in online trading
CONCLUSION
Response towards online trading a/c varies from location to location
depending on affluence,financial literacy,risk appetite,tech-savviness,interest in stock market and approach towards investments of the residents.
Offline traders are not much interested in online trading.
Females still are in minority amongst online traders.
The age group 25-45consists of majority of online trading a/c holders.
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Income group of 1,00,000-5,00,000 forms the major players of online
trading.
Customers of online trading are mostly well educated.
Businessmen and service person form the majority of the a/c holder.
RECOMMENDATION
Housewives and pensioners are untapped potential who shy away from
investing in stock markets. Proper guidance and persistence is the key to tap this market.
Offline investors are the most potential customers for online trading but
are not being converted due to the mental block formed due to sticking to conservative ways of trading and not accepting modern methods of trading. 55
Financial literacy programmes could help a lot in boosting the sales of
online trading a/c. Such programmes should also be conducted across the country in various degree colleges and colleges offering professional courses. This will ensure the growth of sales of online trading a/cs.
Lowering the brokerage charge further would also spurt the growth of
sales of online trading a/c.
Bibliography:
www.canmoney.in
www.scribd .in
Research Methodology by C.P.Arora
Research Methodology by J.K.Sachdeva 56
