Professional Documents
Culture Documents
BY: xxxxxxxxxxxxxx
AUG, 2010
Certificate of Approval
The following Summer Project Report titled "A Comparative Study on Services Provided by Different Broking Firms" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Master of Business Administration for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.
Certificate
Jitendra Virahy as
JVIRAHYAS@GMAIL.COM
Acknowledgement
I avail this opportunity to acknowledge my deep sense of gratitude and indebtedness to Mr. Jitendra Virahyas and Mr. Nitesh Jain (Sales Manager- Religare Securities Ltd), who rendered me their invaluable help, suggestions and encouragement with monumental patience and constant guidance & other staff members of Religare for their kindness and valuable guidance and assistance, which helped me in the completion of my vocational training. I would also like to thank my project guide Prof. Jitendra Virahyas, whose valuable suggestions, throughout the training session, helped me a lot to understand the real meaning of such internship.
CONTENTS
1. Overview of the Indian Retail Brokerage Industry Industry Definition and Segmentation.10 Timeline: Evolution of the Retail Brokerage Market Pre 1990 .12 Fast forward to 1990s .13 Post 2000 14 Stock Exchanges and Stock brokers .15 Recent Developments Online trading .. 19 T+2 rolling settlement 23 Growing derivative market ...25 Fall in brokerage rates ..26 Advanced Technology ..27 Market Size: Growth of brokerage market .28 2. Porter's Five Forces Analysis Buyer Power ..30 Supplier Power ..30 Intensity of Competition ...31 Threat of New Entrants 32 Threat of Substitutes 33
3. Comparative Assessment Company Profiles ...34 Strengths and Weaknesses of Religare 50 4. METHODOLOGY & TECHNIQUES Methodology For Sampling.. ..52 Methodology For Acquiring Customers . 52 Sources of Data 53 Process of Dematerialization ...53 Working Model of Depository System...55 5. Findings and Observations ..59 6. Conclusion ...63 7. Recmmendations ..65 8. References 9. Appendices Questionnaire..67 ..66
List of Figures
Pay-In and Pay-Out of Funds and Shares Derivatives Growth in Past Years Average Daily Turnover Preference of Investments Awareness of online trading Awareness of Religare Awareness of Religares facilities Competitors Awareness Satisfaction with current broker Frequency of Trading Invested Earnings in share Trading
25 26 30 60 61 61 61 62 62 63 63
ABSTRACT
To maintain and cope up with the growing competition from the various online trading providers, Religare needs to find potential customer and also target the new investors. The project is being done to train the people about the whole procedure essential to open an online trading account couple with demat account. The project will help in exploring the area where there is the feasibility of acquiring more new investors. It would also help in knowing the various competitors of the industry and exploring the areas through which competitive advantage could be obtained. The report is divided into various sections.
2. Company Profiles:
This part describes the company profile. This part recognizes the achievements and rewards the company has achieved, it also gives little insights into what company offers to the Corporate and the Consumers. This section also describes the kind of technology used.
Security Market
Which is the most televised structure in India? A study has revealed that it is not the Rastrapati Bhawan or Parliament House; it is not the Taj Mahal; it is not even the abode of Lord Tirupati; it is the Pheroze Jeejeebhoy Towers which houses the oldest securities market participant in India, i.e. The Stock Exchange, Mumbai. This indicates our intimate relationship with the securities market. In todays rational world, it really means the immense contribution of the securities market to our life and economy. Which is the most reformed sector / segment / market in the Indian economy? Which sector / segment / market of the economy has witnessed as much as nine special legislative interventions during the last decade? Which market / segment / sector acquired the first ever autonomous regulator (which in course time became the model regulator) in India? Which sector / segment / market of the economy consumes 3/4th space of the pink newspapers everyday? Which sector / segment / market of the economy most promptly reflects the feel good factor? The answer to all these questions is the securities market. It expresses the significance of the securities market in our life. Two years down the line, there are few questions to ask-Which is the securities market first to set up demutualised stock exchanges in the World? Which is the securities market first to use satellite communication technology for securities transactions? Which is the securities market first to introduce the straight through processing in securities transactions? Which major securities market has implemented T+2 rolling settlement? Which is the largest market for stock futures? Which securities market started real time on line position monitoring of brokers? Which is the securities market where trading terminals go off automatically when the margins are exhausted? Probably answer to all of these is the Indian securities market. This has earned a place of respect amongst the comity of securities markets in the World. 10
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Dalal Street after their name. They organized an informal association on or about 9th July 1875 for protecting their interests. On 3rd December 1887, they established a stock exchange called Native Share and Stock Brokers Association. This laid the foundation of the oldest stock exchange in India. The word native indicated that only natives of India could be brokers of the Exchange. In 1880s a number textile mills came up in Ahmedabad. This created a need for trading of shares of these mills. In 1894, the brokers of Ahmedabad formed "The Ahmedabad Share and Stock Brokers' Association". The 1870s saw a boom in jute prices, 1880s and 1890s saw boom in tea prices, then followed coal boom. When the booms ended, there were endless differences and disputes among brokers in eastern India which was home to production of jute, tea and coal. This provoked the establishment of "The Calcutta Stock Exchange Association" on June 15, 1908. Then followed the proliferation of exchanges, many of them even do not exist today. The rest is history.
Legal Developments :
Control of capital issues was introduced through the Defence of India Rules in 1943 under the Defence of India Act, 1939 to channel resources to support the war effort. The control was retained after the war with some modifications as a means of controlling the raising of capital by companies and to ensure that national resources were channeled to serve the goals and priorities of the government, and to protect the interests of investors. The relevant provisions in the Defence of India Rules were replaced by the Capital Issues (Continuance of Control) Act in April 1947.
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Though the stock exchanges were in operation, there was no legislation for their regulation till the Bombay Securities Contracts Control Act was enacted in 1925. This was, however, deficient in many respects. Under the constitution which came into force on January 26, 1950, stock exchanges and forward markets came under the exclusive authority of the central government. Following the recommendations of the A. D. Gorwala Committee in 1951, the Securities Contracts (Regulation) Act, 1956 was enacted to provide for direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges and to prevent undesirable transactions in securities.
3. Post 2000
Gone are the days when you left orders with your broker, received conformations on the price and quality of the shares at the end of the day and the payment made upfront or received after delays. Your securities settlement took days to reflect in your account. Internet has changed the way you do trading. The entire process is speedy with limited to zero paper work. NSE launched internet trading in early February 2000. It is the first stock exchange in the country to provide a web-based access to investors to trade directly on the exchange. The process : Log on to the brokers site of your choice where you get real time quotes, place a buy or sell order on the spot, and direct the site to debit the requisite amount. In some time you get confirmation and after the trade settlement your bank and depository account will reflect the changes which you can view anywhere, anytime. Online trading has become seamless. All that you need is a PC, a modem, subscription to an Internet Service Provider (ISP), a saving and a depository account with any bank providing online trading facility. Along with stocks one can trade in mutual funds and investment instruments. The advantage with online trading that you can operate in both BSE and NSE depending on the broking firm. NSE introduced for the first time in India a fully automated screen based trading. It uses a modern fully computerized trading system designed to offer investor across the length and breadth of country a safe and easy way to invest. The NSE trading system called National Exchange for Automated Trading (NEAT) is a fully automated screen-based trading system which adopts the principle of an order driven market.
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Coverage: The equity shares of 200 selected companies from the specified
and non-specified lists of this Exchange have been considered for inclusion in the sample for `BSE-200'. The selection of companies has primarily been done on the basis of current market capitalization of the listed scrips on the exchange. Besides market capitalization, the market activity of the companies as reflected by the volumes of turnover and certain fundamental factors were considered for the final selection of the 200 companies.
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Choice of Base Year: The financial year 1989-90 has been chosen as the
base year for the price stability exhibited during that year and due to its proximity to the current period.
The 18-year-old National Stock Exchange (NSE) has outshined the 135 years old Bombay Stock Exchange (BSE) in terms of turnover and volumes. The BSE has lost its market share in these segments from 36 per cent to 31 percent in last three years. The turnover in BSE stood at around Rs 98,082 crore as on Dec 2009 while the turnover in NSE was Rs 1,44,638 crore. The volumes (numbers of shares traded) of NSE at 2.94 crore was also much higher than the volumes of BSE. The NSE has rewritten a number of rules and upset many traditions. As the derivatives segment has immense effect on the cash market, the movement in this segment mostly determines the trend in the market. Against nearly 1800 companies listed on the NSE, the BSE has nearly 7,831 listed companies. Despite such a huge number of listed companies, the total market capitalization of BSE is around Rs 40,12,307 crore while on the other hand NSE has a total market capitalization of Rs 47,01,923 crore. The most tracked index on NSE, CNX Nifty also has more number of stocks than the BSE Sensex. Nifty represents 50 stocks while the Sensex represents only 30 stocks. The presence of more stocks on Nifty gives a better valuation than Sensex.
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STOCK BROKERS
A stockbroker is a person who buys and sells stocks on behalf of another person (or company). Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or decline in price. In such cases the term broker makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves dealers, stock traders or simply traders. In the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker informs the client and charges the client a markup or markdown from the prevailing market price. In the UK: When acting as an agent, the stockbroker charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker is obliged to inform the client and no commission is charged Roles similar to that of a stock broker include investment advisor, financial advisor, and probably many others. A stockbroker may or may not be also an investment advisor. Similarly, investment advisor may or may not be a stockbroker.
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The Certified Financial Planner designation initially offered by the American College in Pennsylvania is considered by many to be the next educational step a stock broker can take in order to be consider a legitimate and ethical financial consultant. The stock market will have either one or a number of stock exchanges. In India, the most famous are the Bombay Stock Exchange and the National Stock Exchange. Then there are regional exchanges like the Ahmedabad Stock Exchange, Calcutta Stock Exchange and the Cochin Stock Exchange. The two most prominent ones are the BSE and NSE. Together, they account for most of the stock trades in the country. This means that if they catch a cold, exchanges all over the country will sneeze People like you and me just cannot go to a stock exchange and buy and sell shares. If we want to do so, we have to get in touch with someone who is a member of the stock exchange. This means we need to talk to a stockbroker. Stockbrokers buy and sell shares for themselves to make a profit. They also buy and sell shares on behalf of people like you and me and take a commission for doing so (more on this on another day). Every stockbroker has to be registered with the Securities and Exchange Board of India, which is the stock market regulator. SEBI's main function is to make sure those who invest in the stock market follow the rules and no scams take place. It is supposed to act as a watchdog on behalf of the investors. Readers from Mumbai may have seen the imposing stock exchange building called Jeejeebhoy Towers. That's the home of the BSE. But you would be disappointed if you think you can step inside the building and watch the market excitement firsthand as brokers frenziedly trade stocks. That's because all stock markets in India are now electronic. Brokers have BSE computer terminals in their offices, from which they trade. They also have BSE terminals in other cities and don't have to be physically present in Mumbai to trade on the BSE. This means that even if you stay outside Mumbai, you can contact a BSE broker and buy or sell stocks on the BSE. Years ago, the BSE was a place where brokers physically bought and sold stocks and shares through a system known as 'open outcry'. As a result, the market then resembled a fish or vegetable market. If you watch CNBC, you'll find that the New York Stock Exchange still follows that system, with traders rushing around on the trading floor, scribbling trades on little slips of paper. Actually, the improvements in the BSE came about when the government promoted the NSE. The NSE was an electronic exchange from the beginning and it started competing with the BSE, which in turn forced the BSE to tone up its act.
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Recent Developments
Online Trading
Online Trading is a service offered on the internet for purchase and sale of shares. In the real world, you place orders with your stockbroker either verbally (personally or telephonically) or in a written form (fax). In Online Trading, you will access stockbroker's website through your internet-enabled PC and place orders through the broker's internet-based trading engine. These orders are routed to the Stock Exchange without manual intervention and executed thereon in a matter of a few seconds. . There are 2 types of online trading service: discount brokers and full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don't. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the Option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher.5Paisa.com, ICICIDirect.com, IndiaBulls.com, Religare.in,Geojitsecurities.com, HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in India. The various transactions involved in online trading can be shown from the point of view of the Client Broker Stock Exchange
The client places an order via the net by logging on to his brokers site. The broker accepts and executes the order, and places it with the exchanges. The exchange accepts the order after checking the share limit for the day. The brokers makes the payment either directly via the clients bank account or pays through his own account and recovers it later from the client. The exchange receives money and completes the settlement. The client is intimated about the settlement either through the demat account or via E-mail.
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far back as 1996 and net investments by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last two years account for the two bouts of medium-term buoyancy that the Sensex recently displayed. Given the presence of foreign institutional investors in Sensex companies and their active trading behaviour, their role in determining share price movements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, although there are more than 4700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.
3. Rampant Speculation
The Indian stock markets are perhaps the only place in the world where you can buy shares without having to put money on the table and sell shares you do not own. This extraordinary situation has facilitated rampant speculation by all sorts of operators the indigenous variety, FIIs and even our own native financial institutions (FIs) as the massive UTI scandal of recent years has demonstrated. So, when the stock markets were made to collapse by a record 800-plus points on May 17 under the pretext that the Left is opposed to divestment, the profits reaped by short sellers were astronomical and incalculable. Could this situation have been avoided? As aforesaid, the answer is yes. The electronic monitoring system in both the Bombay Stock Exchange and the bigger National Stock Exchange automatically stopped trading for half-an-hour when the two markets respectively collapsed by 10 percentage points. Thereafter when trading resumed and the markets fell further to another stipulated lower level, the electronic system automatically stopped all trading again for another two hours. A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist attacks in New York City. At the end of the day the stock exchange authorities of both the New York Stock Exchange and the heavily-weighted software exchange called NASDAQ suspended all trading for the remainder three working days during that fateful week to safeguard investor interests.
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DAY T
ACTIVITY Trading on BOLT and daily downloading of statements showing details of transactions and margins t t h e e n d o f e Downloading of provisional securities and a funds obligation statements by memberc brokers. h tr a d i n g d a y . 6A/7A* entry by the member-brokers/ confirmation by
the custodians.
T+1
Confirmation of Custodians u
6A/7A
data
by
the
T+2
Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 1:30 p.m. The member-brokers are
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director, Benchmark AMC. There is also need for a roll-market that simplifies the rollover process, feels C.K. Narayan, vicepresident, ICICI Securities. Further, most of the trading happens in the near-month series (contracts that expire in the same month as the day of trade), stock options are very illiquid, and Indias ranking is relatively low among world exchanges in value terms, even though the volumes are high. But the high volumes neednt necessarily mean that the markets are mature. Much of the volume comes from arbitrage, where traders merely exploit risk-less spreads. Only 20 per cent of the trades take a directional view on the market estimates Narayan. Near-month contracts are more liquid than the rest, the world over. But in Indias case, the disparity is rather extreme. On a typical trading day in the middle of the month, about 98 per cent of the turnover comes from near-month contracts, while less than 0.5 per cent comes from the far-month series. Of the 124 symbols available for futures trading, far-month contracts of only about 10 per cent are traded. The concentration of volumes in the near-month series means that this is a speculators market, points out Susan Thomas, assistant professor, Indira Gandhi Institute of Development Research (IGIDR). (She had earlier worked on the project that led to the construction of NSEs Nifty index.) In 2005, noninstitutional trade accounted for over 93 per cent of total trade in the derivatives segment, much higher than their 83 per cent share in the cash market. Despite its strong growth in the last six years, NSE has lagged behind global peers in value terms. The Korea Stock Exchange the countrys financial reforms began in the early 1990s along with Indias is 32 times the size of NSE (across all segments). NSE ranks No. 1 in the world in the stock futures segment, but thats only because the top exchanges do not trade that product. In index futures, NSE ranked 15th with a turnover of $38.7 billion in September. But this is less than 1 per cent of Chicago Mercantile Exchanges (CME) turnover of $4,431 billion. The futures market accounting for 87 per cent has been the main growth driver of the Indian derivatives market. But stock options are pathetically illiquid, accounting for just 3 per cent of total turnover. On the positive side, the share of index derivatives has steadily increased to 44 per cent from about 11 per cent four years ago. Thats close to global norms of about 60 per cent, implying that some amount of hedging, not mere speculation, is being done.
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This is an illustrative list of services available. The system of charging a fee for the services extended to an investor is in two-layers. The Depository charges the DPs and DPs in turn collect fee/charges from the investor. Each DP uses different norms to classify charges depending on the extent of services rendered. NSDL has a provision for collecting a one-time fee of 0.05 percent of market capitalization of the company, as custody fees for life. For these companies, no custody charge is supposed to be charged from the investors for life. However, it is not clear whether DPs are passing this benefit to investors. Since 2-3 years with changing trends of industry and increased competition, broking houses reduce brokerage rates to very much extent.
Advanced technology:
The growth in technology and communications has impacted every aspect of business in some or the other form. These effects are enduring and have changed the very way in which business is carried out. The stock market is one such institution whose very existence has been challenged by the growth in information technology. IT has turned the very idea of a stock market on its head. Technology has impacted the working of stock markets in every sense. However, a useful starting point for this study would be the study of dematerialization, or demat as it is popularly known as. This is simply because demat has changed the way stocks are held and traded and therefore has effect on every other function of the market.
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Dematerialization in simple terms means the conversion of shares from physical to electronic form. Demat, enabled by the use of technology is probably is single most important factor which has repercussions on every aspect of the stock markets. Demat in India started with the creation of NSDL (National stock depository limited) in 1996. UTI, was one of the first institutions to use demat when it decided to dematerialize 50% of its holdings in 1997. SEBI gave a boost to demat, with compulsory trading on shares in demat form in specified scrips by institutional investors from Jan 15, 1998.
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Growth in cash market(online): Month/Yea r Mar 2007 April 2006 2005-06 2004-05 2003-04 2002-03 No Of Companie s 1084 944 929 839 787 788 No of Turnover(R Trades(lakh s cr) ) 710 167,954 567 6,088 4,510 3,780 2,398 177,372 1,569,556 1,140,071 1,099,535 617,989 Avg daily turnover(R s cr) 7,998 9,854 6,253 4,056 4,328 2,462
12,000 10,000 8,000 6,000 4,000 2,000 0 2002- 2003- 2004- 2005- 6-Apr 03 04 05 06 Years/Month Mar07
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Earlier retail investors often lack the knowledge and expertise in the financial sector that called them to approach the broking houses. But nowadays TV channels like CNBC and financial magazines, newspapers are giving a brief knowledge and updates of financial sector to retail investors, also they provide investors tips to invest their money in stock market. Hence it increases the power of buyer and reduces his dependence.
Supplier Power
Increased Dependence on IPOs
There is a growing dependence of corporate on broking houses with the rising number of IPO's coming to the market. We see traction when initial public offers (IPOs) are announced. People find the online platform a very convenient way to enter the market. In 2004-05, Rs 25,526 crore was raised in the markets, almost 450 per cent more than the amount raised in 2002-03. For instance, in the month that the Maruti IPO was announced, 300,000 demat accounts were opened. In an average month, the figure is about 100,000. Since 2002, the number of demat accounts has doubled to 7.1 million, many of them belonging to new investors applying for IPOs.
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Threat of Competitors
Move towards consolidation
The bigger trend in the industry is consolidation, just like it happened in the US and South Korea, where 90 per cent of online trades are with the top 10 players. Says Banga: "As the industry grows, people prefer going to solid brands that have strong balance sheets. The big guys can invest in infrastructure, technology and risk management systems." As a result, several sub-brokers have been pushed by client demand to take up franchises of the bigger brokers. The consolidation in the broking industry should see more and more businesses shifting from small, hole-in-the-wall brokerages to big players. Lot of brokerage companies is moving towards consolidation with the smaller ones becoming either franchisees for the larger brokers or closing operations.
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Threat of Substitutes
Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. The most important alternative investment form is Mutual Fund investment in which gain is as higher as in share investment but risk is too low.
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Introduction
Religare is driven by ethical and dynamic process for wealth creation. Based on this, the company started its endeavor in the financial market. Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Broking Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, it provides various financial services, which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot more to come your way. Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 3000 highly skilled professionals who subscribe to Religare philosophy and are spread across its countrywide branches. Today, it has a growing network of more than 300 branches and more than 580 business partners spread across more than 400 cities/towns in India and a fully operational international office at London. Unlike a traditional broking firm, Religare group works on the philosophy of partnering for wealth creation. We not only execute trades for our clients but also provide them critical and timely investment advice. The growing list of financial institutions with which Religare is empanelled as an approved broker is a reflection of the high-level service standard maintained by the company.
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GROUP COMPANIES
Religare Enterprises Limited group comprises of Religare Securities Limited, Religare Commodities Limited, Religare Finvest Limited and Religare Insurance Broking Limited which deal in equity, commodity and financial services business.
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RSL is one of the leading broking houses of India and are dealing into Equity Broking, Depository Services, Portfolio Management Services, Internet Trading, Institutional Equity Brokerage & Research, Investment Banking, Merchant Banking and Corporate Finance. To facilitate free and fare trading process Religare is a member of major financial institutions like, National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and a SEBI approved Portfolio Manager. RSL serves a platform to all segments of investors to avail the opportunities offered by investing in Indian equities either on their own or through managed funds in Portfolio Management
3. Religare Finvest
Religare Finvest Limited (RFL), a Non Banking Finance Company (NBFC) is aggressively making a name in the financial services arena in India. In a fast paced, constantly changing dynamic business environment, RFL has delivered the most competitive products and services. RFL is primarily engaged in the business of providing finance against securities in the secondary market. It also provides finance for application in Initial Public Offers to non-retail clients in the primary market . RFL is also planning to initiate personal loan portfolio as fund based activity and mutual fund distribution as fee based activities.
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Along with this, the company also undertakes non-fund based advisory operations in the field of Corporate Financing in the nature of Credit Syndication which includes inter alias, bills discounting, inter corporate deposit, working capital loan syndication, placement of private equity and other structured products.
Vision
Providing integrated financial care driven by the relationship of trust and confidence.
Mission
To be India's first Multinational providing complete financial services solution across the globe.
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2. Research & Advisory Regular news and updates on market Research service over SMS to keep you abreast Daily and weekly technical reports A complete information report on results and performance individual companies. Complete reports on various economic sectors and their performance along with analysis of few major companies in that sector Trading calls in Futures & Options Daily capsule of Market indices and index movement, national and international corporate news, and their performance along with forth coming IPO tracker.
3. Add-Ons Access to all your accounts through your Customer Relationship Number (CRN) Access your ledger balances and account information over internet, branch and call center
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R-ACE (Religare Advanced Client Engine) is a group of highly sophisticated trading platforms meant for tech-savvy individuals. Various platforms of R-ACE have been designed to suit the varying needs of different investors. It is fully automated platform, wherein the client may do all his investments through Internet.
R-ACE clients also have the option to trade on following types of product. A. R-ACE B. R-ACE Lite C. R-ACE pro
R-ACE
Account Activation Charges Rs.299/Minimum margin of Rs.5000/- required No software installation required, easily accessible on browser NSE cash segment, NSE F&O and BSE on single platform Trade online and over phone Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Earn interest on cash margin deposited with us 247 Customer support center
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R-ACE lite
Account Activation Charges Rs.499/Minimum margin of Rs.5000/- required No software installation reqqired, easily accessible on browser NSE cash segment, NSE F&O and BSE on single platform Real- time streaming quotes Alerts Hot key functions Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Earn interest on cash margin deposited with us 247 Customer support center
R-ACE pro
Account Activation charges Rs. 999/Minimum margin of Rs.10000/- required Traders terminal on your desktop NSE cash segment,NSE F&O and BSE on single platform Real- time streaming quotes Advanced alerts Technical charting (intra- day and EOD) Multiple watch lists Advanced hot- key function Derivative chains Futures & Option calculator Access your ledger balances and account information over Internet, SMS and phone. Integrated DP, back- office and trading account Online transfer of funds through multiple banks Lifetime free DP account (No annual maintenance charges) Trade online and over phone Earn interest on cash margin deposited with us 247 Customer support center
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RELIGAREs ALLY also known as R-ALLY is a perfect partner for savvy investors. It has been designed to provide world-class experience and expertise to investors. Clients opting for this service would be provided services managed by a team of dedicated relationship managers and experienced trade dealers. They would not only assist the client in information dissemination but would also take care of all post trade requirements
R-ALLY clients also have the option to trade on following types of product. A. R-ALLY B. R-ALLY Lite C. R-ALLY pro
R-ALLY
R-ALLY clients have no option to trade on their own through our online platforms. No subscription fees No Enrolment Deposit Brokerage : Jobbing : 0.10% each side + All Taxes Delivery : 0.50% each side + All Taxes (Negotiable based on volume)
R-ALLY lite
Account Activation charges Rs. 500/Browser based platform, easily accessible over internet explorer from anywhere Minimum margin to be maintained Rs.10000
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No software installation required NSE cash segment, NSE F&O and BSE on single platform Real- time streaming quotes Multiple watch lists Hot key function Online transfer of funds through multiple banks Trade Online and Over phone at Branch Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes (Negotiable based on volume)
R-ALLY pro
Application based platform Account Activation charges Rs. 1800 (refundable subscription fees ) Traders terminal on your desktop NSE cash segment, NSE F&O and BSE on single platform Real time streaming quotes Multiple watch lists Alerts and triggers Advanced Hot key functions Online transfer of funds through multiple banks Trade Online and Over phone at Branch Make and save your own workspace View charts Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes (Negotiable based on volume)
STRATEGIC
7 00,000 + retail customers being serviced through centralized call centre / web solution. 400branches/semi-branches servicing affluent/aggressive traders through highly skilled financial advisors. 1800 independent investment managers/franchisees servicing 50000 highly valued clients. 42
Strong advisory role through Fundamental & technical research. New initiatives - Portfolio Management Services & Commodities trading.
Depository Services
Religare is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Religare performs clearing services for all securities transactions through its accounts. We offer depository services to create a seamless transaction platform execute trades through Religare Securities and settle these transactions through the Religare Depository Services. Religare Depository Services is part of our value added services for our clients that create multiple interfaces with the client and provide for a solution that takes care of all your needs. Dematerialization and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository. Religare Depository Services offers dematerialization services to individual and corporate investors. We have a team of professionals and the latest technological expertise dedicated exclusively to our demat department, apart from a national network of franchisee, making our services quick, convenient and efficient.
Problems of Religare
Religare has failed to evolve into a widespread Internet broking firm because of its un-focused promotional strategies (advertisements in electronic media, newspapers, etc) across the length and breadth of India. Although it is a wellknown broking house in some states like Maharashtra, Gujarat, etc.It still lacks considerable awareness in the northern parts of India where its competitors have been building their reputation very rapidly. The other problem faced by Religare is that they give more attention to HNIs (high networth individuals) as compared to retail investors or individuals; this is why volumes of trading at Religare are less as compared to its competitors.
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5paisa.com
Company Background
Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-broking was started under the brand name of 5 paisa.com. Apart from offering online trading in stock market the company offers mutual funds online. It also acts as a distributor of various financial services i.e. GOI securities, Company Fixed Deposits, Insurance. It has a limited ground network, present in 20 Cities.
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Problems Of 5 Paisa
Downtime
Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency downtime between 3 3:30 p.m due to server load (as their T.T is feature heavy compared to Speedtrade charting)
Manual Accounting
The 5 paisa accounting system is manual, Online fund transfer through bank is not credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit released for shares sold under BTST is manual Delay in receiving pay-out of clear funds from trading to Bank Account. Min Account Balance Concept of Min Rs1,000 is to be maintained in form of cash / securities to keep account active. This can be withdrawn only on closure of account.
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KOTAK SECURITIES
Company Background
Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs.
Pricing of KOTAK
Account Opening: Rs 500 Demat: Rs 22.5 p.m Initial Margin: Rs 5000(Compulsory) Min Margin Retainable: Rs 1000 Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers (on 0.25% & 0.40%) have been moved to the slab wise structure.
Problems of Kotakstreet
Rigid Account Opening Terms No Flexibility of A/c opening charges (Rs 500) + Compulsory margin Rs 5000/- Account opening free with Rs 10,000 Margin OR Competitor Contract Note. No Flexibility in Leverage Dependent on Type of Account ( 4 to 6 times only) No flexibility in Brokerage, driven by slab structure. No Customization of commercial Terms. Restricted Access to Terminal like product KEAT Desktop restricted distribution on payment of Rs 500, Non refundable Rs 22.5 p.m towards DP AMC charges DP incoming charges extra, 0.02%
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Rs 1,000 as retainable Margin to keep account active Rs 25 per call after 20 calls for the month
Indiabulls
Company Background
India Bulls is a retail financial services company present in 70 locations covering 62 cities. It offers a full range of financial services and products ranging from Equities to Insurance. 450 + Relationship Managers who act as personal financial advisors
Pricing of IB Accounts
Signature Account Account Opening: Rs 250 Demat: Rs 200 if POA is signed, No AMC for this DP Initial Margin: NIL Brokerage: Negotiable Power IndiaBulls Account Opening: Rs 750 Demat: Rs 200 if POA is signed, No AMC for this DP Initial Margin: NIL Brokerage: Negotiable
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Problems Of IndiaBulls
POA for Clients DMAT
Charges are levied to move shares from IB pool Account to client DP account All shares held by client trading with IB are moved to IB Pool Account and the same is shown as a reflection in client DP account.
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ICICI DIRECT
Company Background
ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an affiliate of ICICI Bank Limited and the Website is owned by ICICI BankLimited.
Account Types
ICICI Direct e-invest Account: Premium trading interface of ICICIDirect Link is given to DBC partners and HNIs Plain Vanilla Account with focus on 3 in 1 advantage. Differentiated in services within the account. 1. Cash on spot 2. MarginPlus
Account Opening: Rs. 950 Schemes: For short periods Rs 950 is refundable against brokerage generated in a qtr. These schemes are introduced 3-4 times a year. Demat: NIL, 1st year charges included in Account Opening Plus a facility to open additional 4 DPs without 1st yr AMC. Initial Margin: Nil Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes. Slab wise brokerage ranges from 0.75% to 0.25% depending on volume.
Problems Of ICICIDirect
Poor online Interface Slow website interface with no real-time quotes creates dissatisfaction among high frequency traders Margin trading restriction
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The margin trading system is available up to 2:45 p.m, with outstanding net positions under margin segment automatically squared off at any time between 2:45 3:30 p.m. Thus no control of square off price. Morning Trades Issue Being one of the websites with largest no of after hour orders which are pushed 1st thing in the morning, creates a choking of orders to the exchange, causes delay of confirmations for new order placed during the early morning trades. Restriction of BTST The sale of shares purchased is restricted to T+1 day and is not permitted on T+2 Day. No leverage for Delivery trades Delivery is restricted to the total money allocated into the trading account. No flexibility on leverage on Intra-day trades The leverage of 4 times is available for intra- day trades. Restriction of Bank Account The choice of bank is restricted to ICICI Bank. Higher Brokerage rates with slabs The delivery brokerage is pegged at 0.75% and trading at 0.10% each side, this makes is very unviable for customers dealing in large volumes. Although progressively the delivery and trading brokerage reduce as volumes go up.
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Strengths
1. It is a pioneer in online trading with a turn over of Rs.400 crores and more than 4300 peoples working in the organization. 2. Religare is A Ranbaxy promoter Group Company. 3. Religare provides multi-channel access to all its customers through a strong online presence with www.religare.in, 580 share shops in 300 cities and a call-center based Dial-n-Trade facility 4. Religare has dedicated research teams for fundamental and technical research, Which constantly track the pulse of the market and provide timely investment advice free of cost to its clients which has a strike rate of 70-80%.
Weakness
1. Localized presence due to insufficient investments for countrywide expansion. 2. Lack of awareness among customers because of non-aggressive promotional strategies (print media, newspapers, etc). 3. Lesser emphasis on customer retention. 4. Focuses more on HNIs than retail investors which results in meager market-share as compared to close competitors.
Opportunities
1. With the booming capital market it can successfully launch new services and raise its clients base. 2. It can easily tap the retail investors with small saving through promotional channels like print media, electronic media, etc. 3. As interest on fixed deposits with post office and banks are all time low, more and more small investors are entering into stock market. 52
4. Abolition of long-term capital gain tax on shares and reduction in short term capital gain is making stock market as hot destination for investment among small investors. 5. Increasing usage of Internet through broadband connectivity may boost a whole new breed of investors for trading in securities.
Threats
1. Aggressive promotional strategies by close competitors may hamper Religares acceptance by new clients. 2. Lack of sufficient branch-offices for speedy delivery of services. 3. More and more players are venturing into this domain, which can further reduce the earnings of Religare.
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METHODOLOGY
Methodology For Sampling
The team divided the entire city into zones and drew out samples out of each zone. The size of samples drawn from each zone depended on the prospective ness of the particular area. For e.g., if a particular research area consisted of Offices then the sample size would obviously be higher than an area like Shopping mall or PVR. This is because Office employees constitute the service sectors who are the active investors of today. Also, the office areas consist of people from the business class who have always been in the hunt for quick money, not to forget that smart and timely investment in the share market can yield to enormous returns. After dividing the city into zones, the Target audience was probed using Interviews and questionnaires. These were later analyzed to draw out conclusive results.
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Data Source
Data used for the research work was primary and secondary in nature. Secondary data is the data that was collected from another purpose and already exists somewhere. Primary data is gathered for a specific purpose and is collected by the researcher from mapping or cold calls methods. The data used in this project is primary data collected from the various categories of investors from different areas. Secondary data was collected using various journals and publications like: NSEs module on Capital Market, October 03 Business Today, Feb05 edition Report on internet based securities trading and services by a committee chaired by Shri O P Gahrotra, Sr. Exec Director, SEBI. Share investors list of broking houses
Sample Size:
Sample size for the questionnaire prepared for Investors was 50.
The depository enters into an agreement with the participants who are the agents of the depository and co-functionaries in the process of dematerialization of securities. Any person can then enter into an agreement, through the participant, with the depository for availing the services provided by the depository. Upon the entering into such agreement with the depository, the person has to surrender the certificate pertaining to the securities sought to be dematerialized to the issuer. This surrender is affected in the following manner: The person (beneficial owner) who has entered into an agreement with the participant for dematerialization of the securities has to inform the participant about the details of the certificate of such securities. The beneficial owner has to then surrender the said certificate to the participant. The participant informs the depository about the particulars of the securities to be dematerialized and the agreement entered into between him and the beneficial owner. The participant then transfers the certificate pertaining to the said securities to the issuer along with the details and particulars of the securities. These certificates are mutilated upon receipt by the issuer and substituted in the records against the name of the depository, who is the registered owner of the said securities. A certificate to this effect is sent to the depository and all stock exchanges where the security is listed. Subsequent to this, the depository enters the name of the person who has surrendered the certificate of security as the beneficial owner of the dematerialized securities. The depository also enters the name of the participant through whom the process has been carried out and sends an intimation of the same to the said participant.
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the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the securities are not good for delivery and the investor would also stand to loose his corporate entitlements. No stamp duty: For transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds. Faster settlement cycle: The exclusive demat segments follow rolling settlement cycle of T+2 i.e. the settlement of trades will be on the 2nd working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor. Faster disbursement of non cash corporate benefits like rights, bonus, etc. NSDL provides direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit. Reduction in brokerage by many brokers for trading in dematerialized Securities: Brokers provide this benefit to investors as dealing in dematerialized securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker. Reduction in handling of huge volumes of paper Periodic status reports to investors on their holdings and transactions, leading to better controls Elimination of problems related to change of address of investor, transmission, etc In case of change of address or transmission of demat shares, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their DP with all relevant documents and the required changes are effected in the database of all the companies, where the investor is a registered holder of securities. Elimination of problems related to selling securities on behalf of a minor: A natural guardian is not required to take court approval for selling demat securities on behalf of a minor. Ease in portfolio monitoring: Since statement of account gives a consolidated position of investments in all instruments.
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Disadvantages of Dematerialization
The disadvantages of dematerialization of securities can be summarized as follows: Trading in securities may become uncontrolled in case of dematerialized securities. It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors. The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market. Multiple regulatory frameworks have to be confirmed to, including the Depositories Act, Regulations and the various Bye Laws of various depositories. Additionally, agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity in terms of transactions in dematerialized securities. However, the advantages of dematerialization outweigh its disadvantages and the changes ushered in by SEBI and the Central Government in terms of compulsory dematerialization of securities is important for developing the securities market to a degree of advancement. Freely traded securities are an essential component of such an advanced market and dematerialization addresses such issues and is a step towards the advancement of the market.
Features:
Holdings in only those securities that are admitted for dematerialization by National Securities Depository Ltd (NSDL) can be dematerialized. Structure of holding in the securities should match with the account structure of the depository account. Now shares in different order of names can also be demat-ted.
Example:
If the shares are in the name of X and Y, the same cannot be dematerialized into the account of either X or Y alone. However if the shares are in the name of X
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first and Y second, and the account is in the name of Y first and X second, then these shares can be dematerialized in this account. Only those holdings that are registered in the name of the account holder can be dematerialized. Physical shares which have not been transferred and are still there with a transfer deed cannot be dematted. Only a few companies have been given the permission to offer Transfer-cum-Demat. The list of these companies can be viewed here.
Rematerialization:
Rematerialization is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account along with a Remat request form. The physical shares will be posted by the company directly to the clients.
Trades
For all sales made by clients, the shares will have to be given to the broker, so that the Pay In can be made by the broker to the stock exchange concerned. For that it's essential that the shares be transferred to the account of the broker well before the deadline date. You must confirm with your broker the settlement date and settlement number and then submit your instructions to your DP. Also it's important to give the instructions to your DP as early as possible.
Pledge
Pledge enables you to obtain loans against your dematerialised shares. So you get liquidity without having to sell your shares. A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue to be reflected in the DP account of the clients (pledgor) but the concerned securities are "blocked" and cannot be used for any transactions. As and when the pledge is to be removed, based on confirmations received from both the pledgor and the pledgee, the blocked securities will be released to "Free Balance" of the account holder.
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Interpretation: This shows that most of the investors prefer long term
investment (Delivery basis). Sort term high return investment indicates those investors who believes that high risk provides high return.
Perception of Investors about Investment In Stock Market
34% 60% 6%
Interpretation This shows that 60 % investors assume investment volatile, 30 % assume risky, and 6 % assume safe in stock market. It means that mostly, investors see investment in stock market volatile.
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58%
Interpretation: This pie chart shows that Religare has a reasonable amount of
Brand awareness in terms of a premier Retail stock broking company. The company to increase its market share over its competitors should further leverage this brand image.
Interpretation: Coz Indian stock market is still in progress stage so there are some people they do not have knowledge about share market and how to play in this market.
CONCLUSION
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In spite of these optimistic numbers, online trading in India is at a very nascent stage (about 5-8 percent of total traded volumes) compared to countries like South Korea (60 percent), US (40 percent) and UK (20 percent). Online trading in the year 2000-2001 accounted for only Rs 50,170 crore out of total traded volume of Rs 25,08,445 crore. There are currently close to 70 online brokerages in India with ICICIDirect, KotakStreet, Religare, MotilalOswal, IndiaBulls and 5Paisa being some major players. However, due to limited volumes, no online brokerage is currently making money and a shakeout is imminent in the near future. The going is expected to get tougher with the advent of capital account convertibility. On an average, Rs 40 crore per day (Rs 1,000 crore per month) is likely to be the threshold breakeven for online brokerages. There is scope for multiple players as the entire segment is in a growth stage. While there are many factors that need to be understood to justify this assertion, one simple fact is worthy of note. The average age of the Indian Internet user as cited by a recent IDC survey is 27 years. The average age of the head (and financial decision taker) of the Indian equity-investor household, as revealed by the SEBI-NCAER study of Indian investors in 2000 is 45 years. The older, experienced equity investor is not online today and the fact that older, mature investors are not tech-positive and hence unlikely to move to online trading is a major barrier to the growth of e-broking in India. Here, the numbers of banks with a strong online presence are very few - again, dominated by new private banks and foreign banks. Both have lesser reach owing to a smaller network in the country. The relative inability of large publicsector banks to offer-facilities for Internet banking is a barrier in this regard. Besides, Internet penetration in India is still very low and concerns about security also tend to predominate. In markets like the US, online brokerages are advertised very heavily. Online trading in India has so far not seen similar levels of aggressive advertising, with the exception of ICICI Direct and India bulls. Besides, only scripts that have been compulsorily dematerialized can be traded on the net here.
Brand building, assurances of security, developing multiple delivery channels with anytime telephonic grievance redressed options is some directions, which
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may be of use for the immediate future. Online trading firms can also market themselves aggressively to students who are entering the professional arena, ensuring that their entry into equity happens online. One of the major issues governing trading is the prevailing uncertainty in the market. Hence, not withstanding the current sentiment in the market, potential for online trading is still immense in India. With a more transparent system, increased awareness, and a sustained bullish market we would surely be heading to become the largest online stock trading country by the turn of the next decade.
RECOMMENDATIONS
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We suggest following measures, which Religare could take so as to take on heavy competition from Indiabulls and 5 Paisa.com : 1. To identify regions where promotions are required. Religare lacks visibility in northern region where as it is a well known name in western region. Even then, its promotional campaign focuses on western region where as northern region is still waiting for promotional campaigns. 2. Try to reduce cost, so that benefits can be passed on to customers. Senior managers at Religare keep on telling that it is difficult to reduce cost, because of services we provide. But the fact is, India being a price sensitive market; people at times go for monetary benefits rather than for long-term non- monetary benefits. 3. If charges cant be reduced because of costs involved, make the services customized, so that services are provided to only those customers who are willing to pay the price for services they are getting and let the other customers enjoy costs benefits without getting services. 4. Concept of margin funding should be introduced, as more and more people are asking for it. 5. Religare should contact with their clients regularly for knowing the problems faced by them. This will help Religare in providing best services to customers. This will result in additional customer base by getting further references from satisfied clients. 6. To launch slab wise brokerage structure as Religare has fixed brokerage structure, which cannot be negotiated. But other players in the market offer launch slab wise brokerage structure, which motivate customers to increase their volumes.
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References
Books and Newspapers:
1 The Economic Times, Business Standard, Business line 2 3 4 5 Securities Market (Basic) Module :--NCFM Training Kit Provided by the Religare. Indian financial system by M.Y KHAN NSDL Depository operations module :--NCFM
URLs: 1 www. religare .in 2 www.indiainfoline.com 3 jvirahyas@gmail.com 4 www.economics times.com 5 http://www.investopedia.com/articles/ 6 www. nseindia.com 7 www.bseindia.com 8 www.moneycontrol.com
Jitendra Virahy as
JVIRAHYAS@GMAIL.COM
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Appendices
QUESTIONNAIRE
(THIS QUESTIONNAIRE IS FOR ACADMIC PURPOSE ONLY) NAME AGE DESINATION CONTACT NO..
Q1. Are you saving oriented? a. Yes a. Long term a. Risky a.. New issue b. No b. Short term b. Safe c. High returns c. Volatile d. Any other Q2. In share which type of investment you prefer? Q3. What is your perception regarding dealing in share market? Q4. What mode do you prefer to enter the share market? b. Trading (broker) Q5. How often Do you sell or purchase securities? a. Once in month b. Once in 6 months c. Any others Q6. Are you aware of Demat and Trading a/c? a.Yes a.Yes b. No b. No b. INDIAINFOLINE c. Any other Q7. Do you have any Demat and Trading a/c? Q8. Do you know which bank/ institution provide Demat a/c? a. RELIGARE Q9. What reasons make you to choose? a. Close to house b. Services rendered c. Staff courtesy a.Yes b. No d. Any other Q10. Are you satisfied by the services rendered by the bank or institution ?
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Jitendra Virahy as
JVIRAHYAS@GMAIL.COM
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