6 ON-LINE SHARE TRADINGreport.doc

8/13/2019 6 ON-LINE SHARE TRADINGreport.doc

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WHAT IS A SHARE?

Share or Equity represents part of an ownership of a business.So as a shareholder you own a piece of the action that happens in thatbusiness. Why would you want a piece of the action? For the rewards ofcourse. As a shareholder you have a right over the profits generated byyour business. our co!pany !ight pay out the profits generated everyyear as dividends or it !ay retain the profits to further grow the!.

"here#s another way you as a shareholder can !a$e !oney. %f yourco!pany does well& then its shares listed on the stoc$ !ar$et beco!e!ore valuable and the stoc$ price appreciates. 'n the other hand& theco!pany !ight perfor! badly. "hen not only do you not get dividends but

the stoc$ price also declines. (ence investing in shares is a ris$yproposition.

When you invest in shares& you can e)pect certain returns basedon the funda!entals of a business. (owever you have no control over it.What you have control over is !anaging ris$s associated with it.

Imagine a business is set up with initial investment of say 10 billion. The promoter, the person who starts this venture has say 40 billion and needs another60 billion.

So he may opt for getting this amount from public in a country. So he willget the government permission for the same e plaining the authorities the need.

This investors along with the promoter is called share holders, whichdirectly mean that they are pro rata share holders in the new company and theywill be eligible for the profit share or any other benefit that may company get infuture.

!ote that, this also means that they will be eligible for the losses too. "ut,one point to note is that the loss will be only up to the level of their investment.That means a person will not be as#ed again to give money to fill up the losses.

This 100 billion is split into $ stoc#s of face value y , where $ y % 100 billions.

S.K.Patel Institute of Management and Computer Studies 1


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How TO INVEST IN AN IPO?If a brand new company or a company already in e istence, but with

no shares listed on the stoc# e change, decides to invite the public to buy shares,it is called an Initial &ublic 'ffering (I&').

It is the first time that it is approaching the public for money. That is whythe company is also referred to as *going public*.

If a company that is already listed (has its shares for buying and selling onthe stoc# e change) is coming out with a fresh tranche of shares, it is called the

new issueThen, there are the disinvestments ++ where the government sells its sta#es

in public sector companies in the mar#et. lthough these are not technically newissues, they too create a bu-- in the mar#et.

~ EVERY COMPANY NEEDS MONEY

company needs money to grow and e pand ++ to purchase newmachinery, land or even repay its loans.

To do that, one of the options it has is to as# the public for money.

It comes out with a public or new issue. The company offers shares andthe public buys those shares. These shares are listed on the Stoc# change.

&eople who invest in the company get rewarded (as dividends) by thecompany, or sell the shares as the share price rises.



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CHAPTER 1

INDIAN SECURITIES MARKET

1.1 INTRODUCTION:Securities mar#et has essentially three categories of participants, namely

the issuer of securities, investors in securities and the intermediaries and twocategories of products, namely the services of the intermediaries, the securitiesincluding derivatives.

The securities mar#et has two interdependent and inseparable segments,the new issues (primary mar#et) and the stoc# (secondary mar#et). The primarymar#et provides the channel for sale of new securities while the secondary mar#etdeals in securities previously issued.

1.2 Histor :1/ 0 Shares of ban#s and securities of ast India 2ompany

traded in 3umbai under a sprawling banyan tree in front of Town all, which isnow in the orniman 2ircle &ar#.

1/5 "ro#ers organi-ed an association #nown as the !ativeShare "ro#ers ssociation, and the country s first stoc# e change the "ombayStoc# change ("S ), set up in 3umbai with 71/ members. The membershipfee gradually increased from 8e 1 in 1//5 to 8s 1,000 in 1/96, and 8s 4/,000 in19:0.

19 6 Securities 2ontract 8egulation ct passed

19 5 The "S and eight other stoc# e changes registered underthe Securities Trading 2ontract ct.

19/: The "S classifies scripts into ;roup for carry forward,and ;roup " for cash transactions.



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19/6 The "S 70+share Sensitivity Inde (a.#.a. the Sense )compiled< updated every two minutes.

19/5 Stoc# olding 2orporation of India set up.

199: 'rdinance promulgated for granting statutory powers to theS "I. The 'ver+The+2ounter change 'f India begins operations. The !ationalStoc# change incorporated. The new 9,000+s=. ft ring in the rotunda of the newanne e to >ee?eebhoy Towers inaugurated.

1994 The !S s debt segment begins operations on >une 70< and

the capital mar#et segment begins on+line script less trading on !ovember 7.

199 The "S computeri-es its trading operations, signaling theend of 1:0 years of floor+trading with open out+cry system of share+trading andthe beginning of screen+based trading on the "S .

1996 !S 0 inde launched pril ::. !S@A set up as the firstdepository in India, and the !S commences trading in demateriali-ed securitieson @ecember :6.

:000 The S "I approves the report on !et trading brought out by the S "I committee on !et based trading and services. &ursuant to thecircular, stoc# e changes are re=uired to give permission to members to start !et+

based trading after ensuring fulfillment of the minimum conditions. The !S isthe first e change to grant provisional permission to 2ochin+based ;eo?itSecurities to commence !et+based trading.



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How +#$ P&rso$ D, wit" t"& D&)ositor 'ir&+t, ?

Cou cannot deal with the @epository directly. owever, if person have

any unresolved grievances against your @&, person can ma#e a complaint to the@epository at the below mentioned address.

("#t #r& t"& o-,i%#tio$s o # D&)ositor ?

The @epository is obligated to maintain the 2lient oldings, enable dematand remat of eligible securities, disbursement of corporate benefits, effectsettlement of securities traded on the e changes as well as 'ff+mar#et tradesthrough boo# entry transfers, provide for &ledging ypothecation of eligiblesecurities.

("#t is NSD/?

!ational Securities @epositories Aimited is a @epository promoted byFTI, I@"I, S"I J !S who hold the securities in electronic form on behalf of the

beneficiary holder.

A-o0t t"& I$s0r#$+& Po,i+ - NSD/

Shares in the electronic segment are 100 percent secure. The agreement between person and the @& indemnifies person against misuse of yourelectronic holdings by any party, in any manner whatsoever. &erson may legally

invo#e such indemnity and be 100 percent compensated. comprehensiveInsurance &olicy has been ta#en by !S@A which covers your @& account so as to protect person against any losses, breach of security etc.

("#t is CDS/?

2entral @epositories Securities Aimited is a @epository promoted by "S .

How 'o&s t"& D&)ositor +0rt#i, or%&ri&s #3&s i$ D0),i+#t&Disti$+ti4& N0*-&rs?

&hysical share certificates with duplicate distinctive numbers areessentially forged certificates. The 8JT would identify and re?ect the certificates.The concerned Stoc# changes are informed of the details.



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2.2 DEPOSITORY PARTICIPANT

("o is # D&)ositor P#rti+i)#$t?

@epository &articipant (@&) is an /rgani-ation that acts as an gent of the@epository and interacts with the investor. @& is responsible for maintainingyour securities account and operating it only under your written instructions. The@epositories cts mandates that investors can use @epository facilities onlythrough @& s. The distribution channel and geographical spread of the @& soffices allows person to access the @epository at a low cost.

("#t is # DP ID No?

It is an identification number given to a @& similar to a client I@.

2.! DEMATERIA/ISATION

("#t is *$t - D&*#t&ri#,is#tio$?

@ematerialisation is a process in which person can convert physical sharecertificates into electronic shares. Shares should have been transferred in yourname ?oint names before sending it for @ematerialisation.

(" s"o0,' P&rso$ -0 s"#r&s i$ t"& '&*#t or*?

The single biggest reason over buying shares in the physical form is thatdemat shares credited to your account within : to 7 days after the end of thesettlement. This is unli#e the average 70 to 40 days ta#en in receiving bac#

physical shares from the 8JT gent and sometimes with ob?ections. Kurther, possibility of loss or theft of the certificates is eliminated. This is in addition tothe 0. 0H stamp duty savings, which wor#s out to 8s. 0 for transfer of sharesworth of 8s.10, 000

How 'o&s P&rso$ -&$& it - s&,,i$% '&*#t s"#r&s?

"ro#ers have no fear of bad delivery while selling demat shares. @ue tothis, they offer lower bro#erage to you. s bad deliveries are eliminated sharesare not returned due to ob?ections, resulting in saving of costs and follow up.

("#t is *$t - Co*)#$i&s i$ +o*)0,sor D&*#t?



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'nly share certificates in these companies can be demateriali-ed by theinvestor. Shares must be registered in your name to allow for @ematerialisation.Shares delivered by your "ro#er on &urchase (#nown as street name deliveries)

cannot be demateriali-ed.

("#t i P&rso$ "o,' s"#r&s o Co*)#$i&s $ot i$ D&*#t?

Cou may approach the company and re=uest them to sign up with !S@ALigorously follow up as @emat is in your favor.

Is it tr0& t"#t D&*#t is $ot +o*)0,sor ?

Ces. &erson has the option to hold shares either in the physical '8 in thedemateriali-ed form. This is as per the @epositories ct, 1996. owever, when

person buy shares person may receive delivery in the demat form as per theoption of the seller.

C#$ )" si+#, AND D&*#t s"#r&s -& "&,' or # +o*)#$ ?

Ces. &erson may demateriali-e only a part of your holdings.

I$ D&*#t 'o&s P&rso$ $&&' # Tr#$s &r D&&'?

!o, there is no need for a Transfer deed in order to get your sharecertificates demateriali-ed.

How 'o&s P&rso$ '&*#t "is "&r S"#r&s?

In order to demat your shares certificates, person has to fill in a@ematerialisation 8e=uest Korm in triplicate along with the relevant details andsubmit the same to your @& along with the certificates to be demateriali-ed. Thecombination of names in the shares must be same as that in the account.

("#t is # DR ?

In order to get your shares converted from the physical to the electronic

form, person has to submit your certificates along with a re=uest form as#ing forthe conversion. This re=uest form is called a @8K or a @emat 8e=uest Korm.

("#t is D& #+i$% o S"#r&s?



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Dhen the certificates are surrendered for demat they are to be canceled atthe face of the certificate by putting a stamp ESurrendered for @ematE so that thecertificate cannot be traded. This process of affi ing the ESurrendered for @ematE

stamp on the shares is #nown as defacing of shares.

How ,o$% wo0,' it t#3& P&rso$5s #++o0$t to -& +r&'it&' w"&$ "& s"&s0-*it s"#r&s or D&*#t&ri#,is#tio$?

Cour account will be credited typically in 1 days.

Ar& t"&r& Disti$+ti4& N0*-&rs 6 C&rti i+#t& Nos. i$ D&*#t S"#r&s?

!o. @emateriali-ed shares do not have any distinctive or certificatenumbers. The shares are in KF!;I"A M 100 shares of a company are the same

as any other 100 in that company.

(" '&*#t&ri#,i7i$%8 +#$ # so,& "o,'&r #'' # 9oi$t Ho,'&r?

!o. t this point, ownership cannot be transferred from an individualname to a ?oint name. To do this, person should first open a @epository ccountas the sole holder and demateriali-e the shares. Cou should open another@epository ccount in the ?oint names ( ").!ow ma#e an off+mar#et transactionfrom account to account ". The @& will charge a nominal amount for thistransaction. s an alternate, the certificate can be sent for transfer in the ?ointnames " and then surrendered for demat with the @&.

("#t #r& t"& 4#rio0s rso$s or R& &+tio$s i$ D&*#t?

Ka#e 2ertificate, Signature difference, Third &arty 2laim, 2ourt 2ases arethe reasons as to why a demat re=uest is re?ected by 8JT gent.

2.; REMATERIA/ISATION



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("#t is *$t - r&*#t&ri#,is#tio$?

8ematerialisation is a process in which person can convert your electronic

holding into physical share certificates

Do&s t"& NSD/ iss0& r&s" +&rti i+#t&s i$ R&*#t?

In the rematerialisation process, a re=uest goes from the @& to the 8JTgent through the !S@A for the remat. The 8JT gent will process the re=uest,

print and then dispatch the new share certificates directly to you. Thus, the !S@Adoes not issue or handle share certificates.

("#t #r& t"& r0,&s or O'' ,ot R&*#t&ri#,is#tio$?

There is no concept, any longer, of a mar#et lot in the electronic segment.Thus, person may remat your odd lot shares at any time. This would be done ine actly the manner as person would remat mar#et lot shares.

("#t #r& t"& r0,&s or st#*) '0t i$ R&*#t?

The @epository is the registered holder in the 2ompany s records. In aremat, transfer from the @epository to person will !'T be liable to a levy ofStamp @uty. This is as per the @epositories ct. owever, the @epository willcharge nominal charges for this process.

How to r&*#t )&rso$5s s&+0riti&s?

Kor 8emat of Securities, person have to submit a 8emat 8e=uest Korm(88K)to the @& mentioning the relevant details for the rematerialisation processto ta#e place.

CHAPTER !



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TRADIN< SYSTEMS

!.1 ON/INE TRADIN< = A NE( DIMENSION O TRADINava+based charts, analysis and other professional services. +Trade has presencein around 119 countries, as one of the renowned players in the internationalmar#et.

+Trade Securities Inc was floated in 199: to offer online investingservices through merica 'nline and 2ompuServe and launchedwww.etrade.com in 1996. 8ecently, it announced strategic alliances with DitSound Lies, the online ban#ing subsidiary of Dit 2apital ;roup Inc, to capitali-eon the complementary core strengths of the two groups. T@ Daterhouse, thesecond largest global bro#erage, has over :.9 million customer accountsworldwide and more than P1 0 billion in customers* assets under administration.In addition to securities trading services, it also provides ban#ing, mutual fundsand other financial products services to its customers.

!.1.2 HISTORY O E TRADIN< IN INDIAN CONTE T !et trading begins in India....

'n >an 71 st :000, the Securities change "oard of India (S "I) formally

notified all the stoc# e changes, giving them a green signal for !et 'nlinetrading. The various players of the securities mar#et, which includes !S , "S ,other regional stoc# e changes and the bro#ers, had been waiting long for the go+ahead sign. Trading via the net is e pected to generate greater volumes than ever

before and this has attracted a large number of players. 'ne day after S "Iannounced its regulations for net trading, Qerala based R;eo?it Securities too# thelead and started online trading in 3umbai. The Qerala State Industrial@evelopment 2orporation (QSI@2) decided to ?oin ;eo?it Securities in 1994. Ithas a :4H sta#e in the e=uity, the balance belonging to ;eo?it Securities itself.This is the only venture in India where a state owned development institution is

participating in the e=uity of a stoc# bro#ing company. The first net transaction

was a trade for 100 shares of 8eliance e ecuted by @8 3etha, 2hairman, andS "I for the 2hairman of ;eo?it Securities. Today there are many other big bro#erage firms li#e 3otilal 'swal, Qarvy Stoc# "ro#ing Atd., Qota# Securities,SSQI and I2I2I @irect running successfully.



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!.2 (HY ON/INE SHARE TRADIN


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>0t I #* $ot +o* ort#-,& wit" I$t&r$&t8 or wit" i$#$+&8 "ow +#$o$,i$& tr#'i$% -& s or *&?

2ontrary to common perceptions, trading through Internet does not re=uireeither any e pertise in wor#ing on the computer, or any special financial s#ills.

Cou could try the demo (demonstration) of the online trading sites li#eShare#han.com to find out why others li#e you, with little or no #nowledge aboutthe Internet or finance, have switched on to online trading. 'r you could attendthe demonstrations sessions held by such websites in your city.

Is tr#'i$% t"ro0%" t"& I$t&r$&t # +ost, # #ir?

The convenience provided by online trading is even then worth the costs

involved.

nd online trading sites are not that costly. Kor e ample, a trader can tradeshares on margin at rates as low as 0.10Hon Share#han.com and if one wishes totrade in cash, then the rates applicable are as low as 0. H.

owever, it is important to compare various online trading sites on bro#erage rates, inclusive of all sub+charges.

I #* )r&tt s#tis i&' wit" * )r&s&$t -ro3&r w"o s&r4&s *& o ,i$&.(" s"o0,' I +"oos& to %o o$,i$& to tr#'& s"#r&s?

3any of those customers who have chosen to trade shares online today,had at one point of time been trading through offline bro#ers, ?ust li#e you aretoday. They too# a chance to go online and trade shares. fter realising theadvantages of trading shares online, they have shifted to online trading now. Infact, there are many customers who have already opened an account withshare#han.com. >ust try trading shares after opening an account with any onlinetrading site. owever, before choosing an online trading site, please compare allsuch websites and then ma#e a decision.

How r& 0&$t, is t"& )ri+&s 0)'#t&' #t #,, t"&s& o$,i$& tr#'i$% sit&s?

The tic#ers available at online trading sites provide instantaneous updates.lso, some websites can offer to transact in those shares instantaneously and withconvenience.



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How +#$ I -& s0r& t"#t I s"#,, -& tr#'i$% #t # )ri+& I w#$t to or #t #)ri+& #))ri$% i$ t"& w&-sit&?

The solution to your problem could be provided in different ways bydifferent online share trading sites. t share#han.com, for any trade order, thecustomer is as#ed to clic# E&roceedE after he has the opportunity to completelychec# the order verification form.

3oreover, you have the option of modifying or canceling the order till themoment the order is e ecuted at the e change.

Kinally, online trade confirmations reach reaches our customers within 4minutes, while contract notes are dispatched at the end of the day and reachwithin :4+76 hours.

Dith Share#han, 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.

("#t ot"&r s&r4i+&s +#$ I %&t - tr#'i$% s"#r&s o$,i$&?

Internet has brought to the retail investores what was till sometime ago thesole prerogative of large bro#erage houses and high net worth individuals. Kore ample at Share#han.com one can access multitude of resources to arrive at hisstoc# pic#s. 8eliable research with an enviable trac# record is available free ofcost.

n investor can now access share#han.com and do his technical analysis,#now what other leading bro#ers thin# about a company and whether it is a buy ora sell, (3ulte ;lobal estimates), access live news from international newsagencies such as 8euters, 2!"2, read about what the leading 2 's thin# aboutthe state of the economy and the capital mar#et.

!.2.2 (ORKIN< O E=TRADIN< How it wor3s?

Trading has two aspects of wor#ing one is technical and second 'ne is procedural. De will see both aspect and how it is wor#ingB

Pro+&'0r&:

Sitting in ones own home or office or even from your car, as long as youcan access the net, you can trade on the mar#et. There are three basic thingsneeded for e+tradingG



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ban# account,

@emat account and

bro#erage account.The steps in e+trading replicate the real life situation and are fairly

simple to follow. 'nce these three accounts are opened, the money and shares aretransferred to your ban# and @emat account automatically, electronically andwithout any paper wor#.

The first step is of course to open an account. 'ne can openmultiple accounts with himself or herself as the first name in the account. Then itis necessary to determine the type of account that you want and how you want to

pay for the trades you ma#e. >oint accounts are allowed but for that you will needto have certain information about those people. ccounts can be Individual, >oint,

Sole &roprietorship, 2orporate, or &artnership etc.The form filling re=uires simple personal details li#e full legal

name, 2iti-enship status, 8esidency status, employer*s name and address,your passport & ! number, @ate of birth etc.* 'ne can download the forms orre=uest for them by post or even re=uest for a representative of the firm to comeover to help you with the form. &ost+submitting, you are allotted a FS 8I@ and& SSD'8@ while giving details for registration. Then an ccount reference

!umber is generated and displayed to you. These three things are uni=ue to anindividual and ensure security of transactions. The acceptance of the application iscommunicated by email.

'nce you have got your FS 8 I@ and & SSD'8@ and youraccount has been set up, you can access the website and login using the same. Thesecond step is then to Kund Cour ccount. In order to start trading online it isimportant that you deposit money in your ban# account before placing a buyorder. In order to place a sell order you must have shares in your @ 3 T

ccount. Cou can sell your shares anytime as long as shares are there in your@ 3 T ccount. In order to place a buy order you need to fund your account.Cou can do this by depositing money in your ban# account or else you can sellsome shares e isting in your @emat account and use the proceeds of sale to fundyour purchase transaction. The amount of money re=uired before placing a buyorder would depend on the value of order and the type of e+invest account you

have enrolled for + whether cash or margin.In a 3argin account one can use a line of credit to buy marginable

securities or for overdraft protection. Such an account is opened after ta#ing intoconsideration nnual income, !et worth, description of your investmentob?ectives, as it involves lending a line of credit. In a cash account, the amount ofsecurities bought has to be bac#ed by the cash in the account.



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Then comes placing the orderG

Kor this you enter your Trading password and go to trade.

Krom the Trading tab, select nter 'rder under the Stoc#s heading.Select a transaction typeG "uy, Sell, ShortSell.

t !umber of Shares*, type the number of shares that you want to buy.

t *Stoc# Symbol or !ame(s)*, type the stoc# symbol. If you don*t#now the symbol clic# *Kind Symbol*, type the company name, clic# *Search* andclic# the symbol that you want from the list.

Kor a mar#et order, select *3ar#et*. 'therwise, select *Aimit*. *StopAoss* or *Stop Aimit and enter the price.

*3ar#et 'rder*G you ?ust as# the bro#er to buy or sell your stoc#s at the best price available.

*Aimit 'rder*G you tell the bro#er to trade only when the stoc# hits acertain price or better.

*Stop Aoss*G you tell the bro#er to sell your shares if the stoc# drops below a certain price.

Select either *;ood for @ay* or *;ood Fntil 2anceled*. If you wantto place an * ll+or+!one* order, clic# * ll or !one*. Type your trading passwordand clic# *&review 'rder*.

If you want to change your order, clic# *3odify* and ma#e yourchanges.

To see if your order has been e ecuted and filled as you e pect,chec# your account balance. The * ccount "alances* page shows your accounte=uity (the value of your account) and your buying power. To chec# your account

balance, clic# the * ccounts Services* tab, ma#e sure the correct account numberdisplays at *Select ccount* and clic# *;o*. t Total ccount Lalue*, see youraccount balance.

Kor a new price, select the appropriate option button and then enterthe price (unless you*re changing it to a mar#et order). Cou cannot change thestoc# symbol or the transaction type ("uy. Sell, Sell Short, or "uy to cover). nteryour trading password and clic# *&review 2hange 'rder*. 'r, if you want tocancel your changes, clic# *@o !ot 2hange*.

In order to cancel a stoc# order, from the Trading* tab, select *Liew'pen 'rders* under the *Stoc#s* heading. 3a#e sure you*re currently in the correctaccount. 2lic# *2ancel* beside the order you want to cancel. 8eview theinformation presented to ma#e sure this is the order you want to cancel. 2lic#



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*2ancel 'rder*. nter the symbol or the name of the scrip, press E;'E or therelevant button.

The ccount 'pening 2harge, commission rates and the minimumlimit of transaction vary from site to site. 'ther charges can include nnualServices 2harges, 2ustody charges, @+3at account charges etc. lso most onlinetraders offer a host of other tools to aid the investment decision. full research

bac# up in terms of reports, articles, opinions, etc., live time =uotes, latest newson the scrip, technical charts to see how the stoc#*s price has changed over time.

So sitting at home one can ta#e an investment decision at ease after havingresearched and read up fully about the stoc#. Dith the advent of online trading, itwould seem that the mar#ets are ?ust a clic# away. &lease however, do rememberthat currently in India the handful of online trading offers are mere order routingsystems. "ut it will not be long enough before the entire system goes online.

!.2.! >ENE ITS O E=>ROKIN< S*,&ss Tr#'i$%

+bro#ing integrates "an#, @emat account and "ro#erage account.Transfer of money and shares from and to "an# account and @emat account isdone automatically.

No


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researching, ma#ing decisions, entering an order and using a computer. ll thisma#es online investors the masters of their domain and leaves them with no oneto blame. Thus, online trading promotes self+empowerment.

O &rs


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!.2.; /OOPHO/ES IN E=>ROKIN< /#+3 O S)&&'If customers in large number access the site at the same time, server gets

overloaded, so it results into delay in process.

S&+0rit As)&+t

There may be chances of hac#ing of password if customer is not alert.This may cause a ma?or loss to the investor.

/#+3 O ,& i-i,it

If the customer is not alert about his position on last trading day and if he

is not able to s=uare off his position, he has to ta#e delivery compulsory or if hedoesn*t have enough li=uidity, the site will automatically s=uare off his position.This action may or may not be in benefit of customer. Dhereas in conventional

bro#ing, bro#er will inform the customer time to time or will ta#e the decisionhimself in favor of the customer.

N&twor3 Cr#s":

There will be problems and delays due to a large influ of trafficand rapid online trading criteria as it happened on 15 th 3ay, :004 which isreferred to as >,#+3 Mo$'# 5.

Co*)0t&r I,,it&r#+ :Aiteracy of 2omputers is mandatory for traders using this online trading

service. So for those who are computer illiterate, using websites serves as ahandicap for them.

!.! ADVANTA


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!.; /IMITATION O ON /INE TRADIN< OVER

CONVENTIONA/ TRADIN< Aac# of internet penetration

Aac# of e pertise in share mar#et

igh bro#erage

igh operating cost



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CHAPTER ;

A>OUT KARVYF

;.1 OVERVIE(:KARVY , is a premier integrated financial services provider, and ran#ed

among the top five in the country in all its business segments, services over 16million individual investors in various capacities, and provides investor servicesto over 700 corporates, comprising the who is who of 2orporate India. Q 8LCcovers the entire spectrum of financial services such as Stoc# bro#ing, @epository&articipants, @istribution of financial products + mutual funds, bonds, fi eddeposit, e=uities, Insurance "ro#ing, 2ommodities "ro#ing, &ersonal Kinance

dvisory Services, 3erchant "an#ing J 2orporate Kinance, placement of e=uity,I&'s, among others. Qarvy has a professional management team and ran#s amongthe best in technology, operations and research of various industrial segments.

The birth of Qarvy was on a modest scale in 19/1. It began with the visionand enterprise of a small group of practicing 2hartered ccountants who foundedthe flagship company Qarvy 2onsultants Aimited. De started with consultingand financial accounting automation, and carved inroads into the field of registryand share accounting by 19/ . Since then, we have utili-ed our e perience andsuperlative e pertise to go from strength to strength to better our services, to

provide new ones, to innovate, diversify and in the process, evolved Qarvy as one

of India s premier integrated financial service enterprise.

Thus over the last :0 years Qarvy has traveled the success route, towards building a reputation as an integrated financial services provider, offering a widespectrum of services. nd we have made this ?ourney by ta#ing the route of=uality service, path brea#ing innovations in service, versatility in service andfinally.totality in service. 'ur highly =ualified manpower cutting+edgetechnology, comprehensive infrastructure and total customer+focus has securedfor us the position of an emerging financial services giant en?oying the confidenceand support of an enviable clientele across diverse fields in the financial world.

'ur values and vision of attaining total competence in our servicing hasserved as the building bloc# for creating a great financial enterprise, which standssolid on our fortresses of financial strength + our various companies.

Dith the e perience of years of holistic financial servicing behind us andyears of complete e pertise in the industry to loo# forward to, we have nowemerged as a premier integrated financial services provider.



24/48

nd today, we can loo# with pride at the fruits of our mastery ande perience comprehensive financial services that are competently segregated toservice and manage a diverse range of customer re=uirements.

;.2 KARVY OARD O DIRECTORS:

(Q 8LC ST'2Q "8'QI!; AT@.)

Mr. C P#rt"#s#r#t" 2hairman

Mr. M Y0%#$'"#r @irector

Mr. M S R#*#3ris"$# @irector

;.; ACHIEVEMENTS:

mong the top stoc# bro#ers in India (4H of !S volumes) India*s !o. 1 8egistrar J Securities Transfer gents

Aargest !etwor# of "ranches J "usiness ssociates IS' 900: certified operations by @!L mong top 10 Investment ban#ers Aargest @istributor of Kinancial &roducts d?udged as one of the top 0 IT uses in India by 3IS sia Kull Kledged IT driven operations

http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=1%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=1%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=2%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=2%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=3%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=3%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=1%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=2%27)http://pop1%28%27http//www.karvyglobal.com/About_Profile.asp?q=3%27)


25/48

;.G @UA/ITY PO/ICY:

To achieve and retain leadership, Qarvy shall aim for complete customersatisfaction, by combining its human and technological resources, to providesuperior =uality financial services. In the process, Qarvy will strive toe ceed 2ustomer*s e pectations.

KARVY + India s premier integrated financial services company with awide networ# of : offices J 5700 professionals operating from 7 :towns cities and also established presence in F , FQ J FS .

Q 8LC, ran#ed among the top five in the country in all its businesssegments, services over 16 million individual investors in various capacities, and

provides investor services to over 700 corporates, comprising the who is who of2orporate India.

Q 8LC covers the entire spectrum of financial services such as Stoc#"ro#ing, @emat Services, Insurance, Dholesale 8etail @ebt, &rimary 3ar#et,3utual Kunds, Ki ed @eposits, Aoan &roducts @istribution, Investment "an#ing,8egistrars J Share Transfer gents, and 3edical Transcription J "&'.

;. (HAT DOES KARVY O ER?Qarvy offers online trading account through which a customer can buy

and sell shares instantly.It facilitates the customer a speedy and hassle freetransaction. Qarvy s product consists followingG

1. Trading ccount

:. @emat ccount

;. .1 TRADIN< ACCOUNT. n account similar to a traditional ban# account, holding cash and

securities, and is administered by an investment dealer. n account held at a financial institution and administered by an

investment dealer that the account holder uses to employ a trading strategy ratherthan a buy+and+hold investment strategy.

Though trading accounts are traditionally thought to hold onlystoc#s, a trading account can hold cash, foreign cash, securities and a number ofother types of investments.



26/48

Investors who use a number of trading strategies or have a numberof bro#erage accounts may separate their accounts in order to avoid confusion.

'ne account may be a registered account for their retirement savings< anotheraccount may be a buy+and+hold account for their long+term stoc#s< another may

be a margin account< and another may be a trading account used for conductingday+trading activities.

;. .2 DEMAT ACCOUNT.

@emat refers to a dematerialised account.

>ust as you have to open an account with a ban# if you want to save yourmoney, ma#e che=ue payments etc, you need to open a demat account if you wantto buy or sell stoc#s.

So it is ?ust li#e a ban# account where actual money is replaced by shares.

Cou have to approach the @&s (remember, they are li#e ban# branches), toopen your demat account.

Aet*s say your portfolio of shares loo#s li#e thisG 40 of Infosys, : ofDipro, 4 of AA and 100 of 22.

ll these will show in your demat account.

So you don*t have to possess any physical certificates showing that youown these shares. They are all held electronically in your account.

s you buy and sell the shares, they are ad?usted in your account.

>ust li#e a ban# passboo# or statement, the @& will provide you with periodic statements of holdings and transactions.



27/48

CHAPTER = G

SECTORIA/ OVERVIE( O INDIANSHARE MARKET

AUTOMO>I/ES

8an# Survey :006 Survey :004

1. Tata 3otors 3aruti Fdyog

:. 3 J 3 yundai

7. 3aruti Fdyog Tata 3otors

4. "a?a? uto ero onda

. ero onda "a?a? uto

Kour wheelers are now beginning to edge two wheelers out at thehustings.

The reasons behind the shift aren t hard to find. The Indian passenger car sector has come in to its own in the last couple of years. In :004+0 ,the country sold slightly over a million passenger cars, while in the following yearsales closed at 1.14 million units.

India s auto sales are li#ely to remain strong for =uite some time tocome, most of the global big boys are now slugging it out amongst themselves tograb a share of the mar#et.

The fight is essentially between the asian giants ( Toyota, onda,yundai, 3aruti Su-u#i ) and the merican ones ( Kord, ;eneral 3otors ) then

there are the Indian players li#e Tata 3otors, 3 J 3 along with companies li#e

say 3ercedes "en-, which occupied only the top segments.3aruti Su-u#i had one of the most spectacular launches in the

history of Indian auto that of Swift. In the first three months of its launch, it hadtwice as many boo#ings (71,000 units) as what it could deliver (1 ,000).

Tata 3otors and 3 J 3 have grabbed the imagination of not onlythe automobile community but also the nation. "oth these companies havedemonstrated abilities to design and engineer cars out of India. That also e plains



28/48

why Tata 3otors climbed from ran# 7 rd to Top spot and 3 J 3 from ran# 6 th toran# : nd, dislodging yundai 3otors.

Bajaj Auto

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29/48

"ata 4otors

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3aruti 3 J 3 Tata 3otors ero onda "a?a? uto !et Sales 17,747.00 5, 64.05 :7,657.47 /, 96./1 /, 69./1

!et &rofit / 7.60 1:.65 1, :/.// /10.45 1,101.67

&S(8s) :9.: 4:.75 75. 9 75.5 107.:5

"oo#Lalue(8s)

1 1. : 15:.:: 147.97 54.5/ 451. 1



30/48

!&3(H) 6.40 6.5/ 6.46 9.47 1:./

'&3(H) 17.45 1:.:5 1:.11 1 .:: :0.65

8'2 (H) 71.:/ :5.04 71.: /1.04 :5.:5& 14.79 11.57 :4./1 14. : :6.60

>ANKIN< 6 INANCE

8 !Q SF8L C :006 SF8L C :004

1. S"I @K2 " !Q

:. @K2 " !Q I2I2I " !Q

7. 2ITI " !Q S"I

4. I2I2I " !Q 2ITI " !Q

. &!" 2 ! 8 " !Q

The "an#ing J Kinance industry had it good since :007 tillrecently.

In the survey :006, State "an# of India (S"I), the country s biggest ban# with nearly 14,000 branches (including those of its seven associate



31/48

ban#s) and a loan portfolio of about 8s. 1,70,000 crore, could manage only the 7 rd

position in the ban#ing J finance sector.

"ut as it has ta#en the IT pill, reached the top. S"I tops now. Theyhave ta#en technology to semi urban and rural areas too where about :0H of their

branches are.

S"I has created a networ# about 6,000 T3s, which is a little lessthen 1 7rd the total number of T3s in the country. 3ore importantly, it has tiedup with other ban#s such as IndusInd "an# and @ena "an# to share T3s, whichallows S"I customers to access more than 10,000 T3s.

T3s have been a ma?or platform for growth in retail ban#ing forthem. Since 3arch :004, the number of transactions at S"I s T3s has ?umpednearly 5 times to about 40 million a month.

The ne t biggest T3 alliance belongs to I2I2I "an#.So beneficial has IT been for S"I that it has forged a ?oint venture

with its #ey vendor, T2S, to turn the ban#ing software being developed for its useinto standard products that could be sold worldwide.

S"I has scored its ma?or points through internationali-ationinitiative over the last year. In :00 , it bought three ban#s abroad, albeit smallones, Indian 'cean International "an# in 3auritius, &T "an# Indo3one inIndonesia and ;iro 2ommercial "an# in Qenya. Dhile each of these cost lessthan P 10 million to ac=uire, S"I recently announced that it is willing to bid for

ban#s costing up to P 100 million.

The ban# has also opened branches in 2hina, Saudi rabia andIsrael in the past few months. It is loo#ing to increase the number of its foreign

branches and representative offices to 100 from present / by :00/.

S"I s loans to small and medium enterprises add up to nearly8s.47,000 crore, about 1 7 rd of its total loan portfolio.

S"I also reali-ed it was vital to improve its popular image, forwhich it has gone in for a nearly 8s.100 crore publicity blit-.

&un?ab !ational "an# (&!") too has received a boost in its respectran#ing because of its technology deployment. It has leapfrogged from 17 th to th.

It has already put 60H of its 4, 00 branches online and has also set up nearly 00T3s.



32/48

S7%

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33/48

:27

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!et Sales 47,:47.65 ,6//.9/ 1/,/:1.1: 11,092.86

!et &rofit 4,406.65 /50.5/ :, 40.05 1,439.31

&S(8s) /1.55 :5.04 :5.7 44.81

"oo#Lalue(8s)

: .: 169.:4 :49. 287.79

8' (H) 15.04 15.54 14.6: 17.01

& 11./4 :/.61 :1. 4 10.52

IN RASTRUCTURE

8 !Q SF8L C :006 SF8L C :004

1. A J T A J T:. T T ST A T T ST A

7. " A " A

4. ; !T&2

. !T&2 ;8 SI3



34/48

Surprisingly, there is no change in the top three positions in theInfrastructure sector but down the line, there has been significant reshuffle.

Siemens has made its debut in the ran#ings at ninth place.

"", one of the biggest gainers in this sector, has ?umped sevenran#s to si th place.

indalco has moved up five ran#s to seventh.

; has improved its position in the top ten by reaching fourth position from seventh.

mong the losers, this time are S IA, ;u?. mbu?a, Tata &ower,which have disappeared from the top ten.

;rasim too has declined to eighth from fifth.

This sector s top ten is clearly dominated by the heavy engineeringand power related companies A J T, " A, ; , !T&2.

Infrastructure is a sector to watch out for in the coming year or twoas the economy is booming, and power, roads and ports are e pected to attractlarge investments.

; 6 "

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35/48

Tata Steel

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36/48

!et Sales 17,76:.07 15,144.:: 10, 9.47 22,565.00

!et &rofit 9/7./ 7, 06.7/ 9 7.40 5,807.00

&S(8s) 51.95 61. 1 75./6 6.72"oo#

Lalue(8s): 6.9/ 156.19 :46.:4 51.07

!&3(H) .16 :0.4 9.07 25.73

'&3(H) /.77 76.05 15./: 43.13

8'2 (H) ::.74 0.05 :6./6 14.04

& 17./7 /.5: :0.:5 12.75

IN ORMATION TECHNO/O


37/48

There is the club of the "ig Kive and then there are sundrycompanies.

The si th and seventh position have been swapped by 2ATechnologies and !IIT.

&atni 2omputers, 232 and 3ahindra "ritish Telecom have ta#en/ th, 9 th J 10 th places respectively which was previously held by &olaris, ughesSoftware and @igital ;lobalsoft respectively.

Infosys, which was among the pioneers in organi-ing cheap Indiancoders on rent to the world, has not rested on the millions of dollars it has made inthe process. It has strived for and achieved significant sophistication.

Infosys now offers consultancy services and aspires to become a preferred IT consultancy and services provider.

In :00 +06, Dipro entered the P :+billion IT services revenue club.Kurther, it was accepted by ;eneral 3otors among its tier+I Lendors and given aP 40 million contract. It also ac=uired a chip design company, !ewAogicTechnologies, in urope< a payment processing services provider, m&owerSoftware Services, in the FS< and c3ango Inc., a FS based business servicesmanagement company.

T2S is the oldest and biggest IT services company in India.Kounded in 196/, the company has come to have revenues in e cess of P :.

billion, way ahead of the more high profile Infosys and Dipro, which have barelycrossed the P :+billion mar# in :00 +06. Though it suffered in the reputation

sweepsta#es because of remaining a privately+owned company until recently, ithas decided to consciously ma#e an effort to build a better reputation. Thecompany is considering refurbishing of its corporate branding, including its logo.

The global It services space is a busy mar#etplace and fortunes canma#e change with ?ust one or two big deals. Though Infosys, Dipro, and T2Smay not appear under any threat at the moment, they clearly pose a threat to eachother for the top spot. That isn t food for much e citement, but no one scomplaining.



38/48

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39/48

SA" A4

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I!K'SCS DI&8' T2S S TC 3 I+KA $

!et Sales 9,0:/.00 5,:56.1/ 11,:76.01 4,674.71 902.86

!et &rofit :,4:1.00 1,494./: :,516./5 1,:79.5 197.64

&S(8s) /1.41 :0. 7.67 75.:: 25.69

"oo#Lalue(8s)

:49./969. 4 114.64 177. 5

150.27

!&3(H) :6./: :0. 4 :4.1/ :1./5 21.89

'&3(H) 74./ :6.55 :9.69 :/.: 30.31

8'2 (H) 4 .09 41.1 65.55 71.74 23.63

& 76.6: 7:.66 7 .69 ::./: 22.96



40/48

PETRO/EUM

8 !Q SF8L C :006 SF8L C :004

1 '!;2 &2A

: Indian 'il Indian 'il7 "&2A 8elaince Ind.

4 8eliance Ind. '!;2

&2A "&2A



41/48

'!;2, the dominant domestic oil producer, has swept the peerrespect sweepsta#es in the petroleum sector this year. Aast year, it had trailedthe refiners and finished fourth.

&ersistently high international oil prices mostly in theP 0+5 per barrel range + have considerably boosted its revenues and profits. s a result,'!;2 s mar#et capitali-ation is approaching 8s :,00,000 crore.

'!;2 s numbers have been awesome. In :00 +06, the companynotched up net profits of 8s. 14,15 crore on net sales of 8s. 0,900 crore.

'!;2 may not be the largest company in terms of revenues refiner and mar#eter Indian 'il 2orporation(I'2) has three times greaterrevenue+but its profit are about three times that of I'2.

The most dramatic change in the ran#ing since the last survey

involved &2A, which has slipped to the th spot from the top. 2learly the

effect of the burial of the proposal to privati-e the company has shown up its popular perception.

'!;2 s oil production declined by nearly 10H in :00 +06 to :4.4million tonnes, after stagnant production of :6+:5 million tones for threeyears, 'IA India inched up its oil production to 7.:7 million tonenes from :.9million tones in :00:+07.

The mar#eting companies Indian 'il, "&2A and &2A+ cane pect to bounce bac# in the perception polls once oil prices go off boil orwhen they are allowed to price their products freely. That, at the moment,

seems a distant possibility.So, the producers '!;2, 'il India and 8eliance are li#ely to

continue to hog the limelight for now.

'2>9

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42/48

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43/48

(:9;

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'!;2 I'2 8 AI !2 "&2A &2A

!et Sales 46,511.: 1 7, 49.:1 89,124.46 63,857.00 6 ,6/0.97

!et &rofit 1:,9/7.0 4,/91.7/ 9,069.34 965.80 1,:55.77

&S(8s) / .61 79./ 63.70 30.46 7 . 9"oo#Lalue(8s) 7:/. 7 :::.45

324.11 212.95:49.04

!&3(H) :5.59 7.19 10.18 1.51 1.94'&3(H) 47.74 .6: 16.81 3.28 7.6:8'2 (H) 76.61 16.57 18.76 15.91 15.16& 10.71 11.01 12.50 11.62 /.60

PHARMACEUTICA/S

8 !Q SF8L C :006 SF8L C :004

1 8anba y @r. 8eddy s: @r. 8eddy s 2ipla

7 &fi-er 8anba y

4 ;SQ &harma &fi-er

2ipla ;SQ &harma



44/48

The pharmaceutical companies have not had it good over the lastcouple of years.

aving whetted the appetite for con=uest of the western genericsmar#ets, 8anba y Aaboratories, @r. 8eddy s and their il# have failed to ma#emuch headway of late.

&atent holders li#e &fi-er and ;la oSmithQline (;SQ) havewo#en up to the threat of generics and are battling hard in the FS and uropeancourts to stall or delay the launch of generic versions of their popular products.

Indian companies have also become victims of their past success ina way, as generics companies from all over the world have flooded the FS Koodand @rug dministrator (K@ ) with re=uests for drug approvals, which has

slowed down the approval process for everyone.Indian pharma companies are continuing to prepare for the

scramble to ma#e good the P 100 billion generics opportunity that is about tounfold in the FS and uropean mar#ets following e piry of a large number of

patents over the ne t three years. !ot only they are continuing to file theirgeneric formulations and a variety of dosages to the FS K@ to access the FSgenerics mar#et, they are also trying to overcome the limitation of being outsidersin F pharma mar#et by ac=uiring local generics companies there.

8anba y has a great incentive to remain a provider of cheaper,generic alternatives to successful products because of the demand for healthcare

reforms in the world s largest and most e pensive pharma mar#et.8anba y is also pressuring ahead with its 8J@ e penditure, which

it raised to 8s469 crore in :00 from 8s.771 crore in the previous year.

@r. 8eddy s has, however, stepped bac# a bit on the 8J@ frontduring this year having spent a tidy sum the last year. Kor the first three =uarters ,its 8J@ spend has come down by a third to 8S. 1:1 crore in :00 +06 from 8s.1/4 crore in :004+0 .

2ipla has gone down the order to th postion. The company has notmade much news on the 8J@ front.

mong the pharma multinationals operating in India, &fi-er hascome out best, having swapped the top spot with ;SQ. &fi-er is beginning to bring new products into the Indian mar#et.

Dhile 8anba y and @r. 8eddy s have got the bac#ing of corporateIndia this time, they will have to deliver healthy dose of performance on thegenerics e ports front to retain that respect.



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