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PROJECT REPORT
ON
“STUDY OF BROKING INDUSTRY”
IN
(INDIA INFOLINE LTD)
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR MASTER OF MANAGEMENT
STUDIES (MMS) UNIVERSITY OF MUMBAI (2011 - 2012)
Submitted By:
Mr. VISHAL ROHIDAS RAHATE
Roll No 1110
UNDER THE GUIDANCE OF
Prof. P. M. NAYAK (MIMR Faculty)
Mr. MUKESH JHA (India Infoline)
MUMBAI INSTITUTE OF MANAGEMENT AND RESEARCH (WADALA EAST) MUMBAI – 400037
STUDENT DECLARATION
I hereby declare that the project “Study of Broking Industry” conducted at India Infoline Ltd has been prepared by me under the guidance of Prof. Nayak
I also declare that this project is the result of my own endeavor to understand various aspects of Broking Industry.
This project has not been given to any other University or Institution for the
award of any degree, or personal favors whatsoever. All the details and analysis
provided in the report hold to the best of my knowledge.
Place: Mumbai
Date:
Reg. No- MMS/ ( VISHAL R RAHATE)
Certificate of Approval
Certified that this dissertation on “ Study of Broking Industry ” is a record of genuine work done by Mr. VISHAL R RAHATE, student of MMS of this college under my supervision and guidance and that is hereby approved for forwarding to the Examiners.
PROJECT GUIDE DIRECTOR
(Prof. NAYAK) (Prof. VISHWANATHAN)
MUMBAI INSTITUTE OF MANAGEMENT & RESEARCH
BGPS’SBGPS’S
MUMBAI INSTITUTE OF MANAGEMENT & RESEARCH Founder Chairman : J K JADHAV
Former Director Of Industries, Govt Of Maharashtra
Ref No.: MIMR/11-12/ Date:
TO WHOMSOEVER IT MAY CONCERN
This is to certify that Mr. Vishal R Rahate. is a bonafide student of our
institute. He has successfully carried out his summer project titled
STUDY OF BROKING INDUSTRY at INDIA INFOLINE LTD
This is the original study of Mr.VISHAL R RAHATE. and important
sources of data used by him have been acknowledged in his report. The
report is submitted in partial fulfilment of the requirement of two years
full time course of MASTER IN MANAGEMENT STUDIES (M.M.S)
of UNIVERSITY OF MUMBAI.
Prof. NAYAK Prof. VISHWANATHAN
(Project Guide) (Director)
“J. K. KNOWLEDGE CENTRE”, Near Mbpt Hospital, Wadala (E), Mumbai - 400037
Tel: 24110879, Fax: 2416513 Email: [email protected]
COMPANY CERTIFICATE
ACKNOWLEDGEMENT
The satisfaction of the successful completion of any task wouldn’t be complete
without the expression of gratitude to the people who made it possible.
I express my gratitude to Mr. MUKESH JHA (Branch Manager), Mr. Sudhir
Ghule (Relationship Manager), Mr. Prashant. Patangrao, Mr. Farooq Quereshi
(Relationship manager) India Infoline Ltd, for his support and guidance during
the survey.
I am very thankful to Prof . P. M. Nayak Faculty of Mumbai Institute Of
Management and Research, Wadala for the guidance and interest evinced
throughout the preparation of this project.
I also extend my heartfelt gratitude and thanks to Mr. VISHWANATHAN,
Director of Mumbai Institute Of Management and Research, Wadala.
I take this opportunity, also to express my love and sincere thanks to my family
members and friends for their support and advice during various stage of work.
But last not the least I thank God almighty for giving me the support for the
completion of the task.
Executive Summary
This report deals with the study of Broking Industry. Working in India Infoline
Ltd had given me this opportunity to understand the Indian Stock Market. It
gave me a chance to get valuable insights from a hoard of vastly experienced
people in this field.
The Indian broking industry is one of the oldest trading industries that had been
around even before the establishment of the BSE in 1875. Despite passing
through a number of changes in the post liberalization period, the industry has
found its way towards sustainable growth. The evolution of the brokerage
market is explained in three phases: pre1990, 1990-2000, post 2000.
According to the study of the markets, it is being observed that markets are very
volatile for equity market. In near future a proper financial planning is required
to invest money in all type of financial product because there is good potential
in market to invest. The report also highlights the products and services offered
by the stock broking firms
As the trading in equity market in India is increasing and now more and more
companies are beginning on this market, so trading in equity market in future
can go only in one direction that is up.
The project is done to know the major players in the Stock Broking Industry in
India. The Stock Broking industry is a fragmented industry. We cannot easily
define that who is the key players in the industry. It is not easy to identify that
are lading & dominating the industry. The products & the services are so much
diverse in this industry. In this report we have just given the brief information
about few big players in the stock broking industry in India. Some of the
important players in stock broking industry are India Infoline, Motilal Oswal,
ShareKhan, ICICI Direct, India Bulls, Kotak Securities, Angel Broking
India is amongst the top fifteen stock exchanges in the world in respect of equity
turnover. India emerged as a leading player in commodities futures market.
India is amongst the top five in the number of transactions. India is among the
top five in respect of volume traded in Stock Index Futures and Stock Futures.
India is one of the few markets with extensive dematerialisation of shares.
The project also helps to understand the role of Stock Broking Industry in
Indian economy. Indian Stock Markets With over 20 million shareholders, India
has the third largest investor base in the world after the USA and Japan. Over
9,000 companies are listed on the stock exchanges, which are serviced by
approximately 7,500 stockbrokers. The Indian capital market is significant in
terms of the degree of development, volume of trading and its tremendous
growth potential.
E - broking in India is becoming very famous today. People are also becoming
aware about the many benefits of e broking. E broking is nothing but internet
broking. Broking is done by brokers. They are usually helpers to people who
want to trade in stocks, commodities, futures, options, securities etc. They give
advice to these people on what to buy and when. They also counsel on when to
sell a particular stock so as to gain maximum profit out of it. They charge a
certain percentage of commission out of the gains for their services. Sometimes
they themselves trade on behalf of the buyer if the buyer does not have time.
Internet broking in India makes trading process very simple. It is very beneficial
and advantageous for people who don't have time but want to invest in stocks.
INTRODUCTION
The Indian broking industry is one of the oldest trading industries that had been
around even before the establishment of the BSE in 1875. The roots of a stock
market in India began in the 1860s during the American Civil War that led to a sudden surge in the demand for cotton from India resulting in setting up of a number of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities markets in Europe and the North America in the background of expansion of railroads and exploration of natural resources and land development.
The last decade has been exceptionally good for the stock markets in India. In the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investment, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s.
Total market capitalization of the BSE as on July 31, 1997 was Rs 5,573.07 billion growing by 18 percent over a period of twelve months and as of August 2005 was over $500 billion (about Rs 22 lakh crores). Indian Stock Markets With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan.
An online stock broker’s (online service of stock broker) services definitely transcend the traditional format of trading in stocks personally or via the telephone. By using an online stock broker, the investor no longer faces the constraints of location and busy telephone lines. Information technology has made stock market software reliable means of trading in stock on the Internet, and an online stock broker uses this on his client’s behalf. An online stock broker requires considerable working knowledge of the stock market to help investors trade in stocks. With proliferation of new markets and products, corporate nature of the memberships is enabling broking firms to expand the realm of their operations into other exchanges as also other product offerings
Due to recession phase, the investor always feels finicky and shaky to invest as the fear of acquiring substantial profits increases manifold. The investment in the market becomes more unstable and it affects the economic growth. It leads to lowering of economic growth and simultaneously other related aspects of it.
COMPANY PROFILE
The IIFL (India Infoline) group, comprising the holding company, India
Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of
the leading players in the Indian financial services space. IIFL offers advice and
execution platform for the entire range of financial services covering products
ranging from Equities and derivatives, Commodities, Wealth management,
Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI
bonds and other small savings instruments. IIFL recently received an in-
principle approval for Securities Trading and Clearing memberships from
Singapore Exchange (SGX) paving the way for IIFL to become the first Indian
brokerage to get a membership of the SGX. IIFL also received membership of
the Colombo Stock Exchange becoming the first foreign broker to enter Sri
Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is
one of India’s leading online destinations for personal finance, stock markets,
economy and business. IIFL has been awarded the ‘Best Broker, India’ by
FinanceAsia and the ‘Most improved brokerage, India’ in the AsiaMoney polls.
India Infoline was also adjudged as ‘Fastest Growing Equity Broking House -
Large firms’ by Dun & Bradstreet. A forerunner in the field of equity research,
IIFL’s research is acknowledged by none other than Forbes as ‘Best of the
Web’ and ‘…a must read for investors in Asia’. Our research is available not
just over the Internet but also on international wire services like Bloomberg,
Thomson First Call and Internet Securities where it is amongst one of the most
read Indian brokers. A network of over 2,500 business locations spread over
more than 500 cities and towns across India facilitates the smooth acquisition
and servicing of a large customer base. All our offices are connected with the
corporate office in Mumbai with cutting edge networking technology. The
group caters to a customer base of about a million customers, over a variety of
mediums viz. online, over the phone and at our branches.
About the IIFL (India Infoline) Group (Bloomberg: IIFL IN Equity)
(Bloomberg: IIFL)
The IIFL group, comprising the holding company, India Infoline Ltd (NSE:
INDIAINFO, BSE: 532636, Bloomberg: IIFL) and its subsidiaries, is one of the
leading players in the Indian financial services space. IIFL offers advice and
execution platform for the entire range of financial services covering products
ranging from Equities and derivatives, Commodities, Wealth management,
Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI
bonds and other small savings instruments. It owns and manages the website,
www.indiainfoline.com, which is one of India’s leading online destinations for
personal finance, stock markets, economy and business. IIFL has also been one
of the first Indian broking houses to get memberships in the Singapore and
Colombo stock exchanges.
IIFL has been assigned the highest broker grading BQ1 by CRISIL, while our
Singapore subsidiary is the first India-based brokerage to get Securities Trading
and Clearing memberships from SGX. IIFL is also the first foreign broking firm
to be granted membership of Sri Lanka’s Colombo Stock Exchange. The
company has set up an office in Sri Lanka as the first step towards full coverage
of this small but highly promising market. To this end, it recently hosted several
foreign and Indian institutional investors and some leading Sri Lankan
corporations at its conference, Discover Sri Lanka – 2010, at Colombo.
IIFL has been awarded the ‘Best Broker, India’ by FinanceAsia and the ‘Most
improved brokerage, India’ in the AsiaMoney polls. IIFL was also adjudged as
‘‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet.
Our chairman, Mr Nirmal Jain, was ranked 2nd in a study of ‘India’s most
valuable CEOs’ by BusinessWorld in November 2009. A forerunner in the field
of equity research, IIFL’s research is acknowledged by none other than Forbes
as ‘Best of the Web’ and ‘…a must read for investors in Asia’. IIFL’s research
is available not just over the Internet but also on international wire services like
Bloomberg, Thomson First Call and Internet Securities where it is amongst one
of the most read Indian brokers.
PRODUCTS AND SERVICES OF INDIA INFOLINE
India Infoline is a one-stop financial services shop, most respected for quality of
its advice, personalized service and cutting-edge technology.
Equities
IIFL is a member of BSE and NSE registered with NSDL and CDSL as a
depository participant and provides broking services in the cash, derivatives and
currency segments, online and offline. IIFL is a dominant player in the retail as
well as institutional segments of the market. It recently became the first Indian
broker to get a membership of the Colombo Stock Exchange and is also the first
Indian broker to have received an in-principle approval for membership of the
Singapore Stock Exchange. IIFL’s Trader Terminal, its proprietary trading
platform, is widely acknowledged as one of the best available for retail
investors. Investors opt for IIFL given its unique combination of superior
Service, cutting-edge proprietary Technology, Advice powered by world-
acclaimed research and its unparalleled Reach owing to its over 2500 business
locations across over 500 cities in India.
IIFL received the BQ1 broker grading (highest grading) from CRISIL. The
assigned grading reflects an effective external interface, robust systems
framework and strong risk management. The grading also reflects IIFL’s
healthy regulatory compliance track record and adequate credit risk profile.
IIFL’s analyst team won Zee Business’ ‘India’s best market analysts awards –
2009’ for being the best in the Oil and Gas and Commodities sectors and a
finalist in the Banking and IT sectors.
IIFL has rapidly emerged as one of the premier institutional equities houses in
India with a team of over 25 research analysts, a full-fledged sales and trading
team coupled with an experienced investment banking team.
The Institutional equities business conducted a very successful ‘Enterprising
India’ global investors’ conference in Mumbai in March 2010, which was
attended by funds with aggregate AUM over US$5 trillion and CEOs and other
executives representing corporates with a combined market capitalization of
over US$500 billion. The ‘Discover Sri Lanka’ global investors’ conference,
held in Colombo in July 2010, was attended by more than 50 leading global and
major local investors and 25 Sri Lankan corporates, along with senior
Government officials.
Commodities
IIFL offers commodities trading to its customers vide its membership of the
MCX and the NCDEX. Our domain knowledge and data based on in depth
research of complex paradigms of commodity kinetics, offers our customers a
unique insight into behavioral patterns of these markets. Our customers are
ideally positioned to make informed investment decisions with a high
probability of success.
Credit and finance
IIFL offers a wide array of secured loan products. Currently, secured loans
(mortgage loans, margin funding, loans against shares) comprise 94% of the
loan book. The Company has discontinued its unsecured products. It has robust
credit processes and collections mechanism resulting in overall NPAs of less
than 1%. The Company has deployed proprietary loan-processing software to
enable stringent credit checks while ensuring fast application processing.
Recently the company has also launched Loans against Gold.
Insurance
IIFL entered the insurance distribution business in 2000 as ICICI Prudential
Life Insurance Co. Ltd’s corporate agent. Later, it became an Insurance broker
in October 2008 in line with its strategy to have an ‘open architecture’ model.
The Company now distributes products of major insurance companies through
its subsidiary India Infoline Insurance Brokers Ltd. Customers can choose from
a wide bouquet of products from several insurance companies including Max
New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life,
Birla Sunlife, Life Insurance Corporation, Kotak Life Insurance and others.
Wealth Management Service
IIFL offers private wealth advisory services to high-net-worth individuals (HNI)
and corporate clients under the ‘IIFL Private Wealth’ brand. IIFL Private
Wealth is managed by a qualified team of MBAs from IIMs and premier
institutes with relevant industry experience. The team advises clients across
asset classes like sovereign and quasi-sovereign debt, corporate and
collateralised debt, direct equity, ETFs and mutual funds, third party PMS,
derivative strategies, real estate and private equity. It has developed innovative
products structured on the fixed income side.
It also has tied up with Interactive Brokers LLC to strengthen its execution
platform and provide investors with a global investment platform.
Investment Banking
IIFL’s investment banking division was launched in 2006. The business
leverages upon its strength of research and placement capabilities of the
institutional and retail sales teams. Our experienced investment banking team
possesses the skill-set to manage all kinds of investment banking transactions.
Our close interaction with investors as well as corporates helps us understand
and offer tailor-made solutions to fulfill requirements.
The Company possesses strong placement capabilities across institutional, HNI
and retail investors. This makes it possible for the team to place large issues
with marquee investors.
In FY10, the team advised and managed more than 10 transactions including
four IPOs and four Qualified Institutions Placements
History & Milestones
1995
Commenced operations as an Equity Research firm
1997
Launched research products of leading Indian companies, key sectors and
the economy Client included leading FIIs, banks and companies.
1999
Launched www.indiainfoline.com
2000
Launched online trading through www.5paisa.com Started distribution of
life insurance and mutual fund
2003
Launched proprietary trading platform Trader Terminal for retail
customers
2004
Acquired commodities broking license
Launched Portfolio Management Service
2005
Maiden IPO and listed on NSE, BSE
2006
Acquired membership of DGCX
Commenced the lending business
2007
Commenced institutional equities business under IIFL
Formed Singapore subsidiary, IIFL (Asia) Pte Ltd
2008
Launched IIFL Wealth
Transitioned to insurance broking model
2009
Acquired registration for Housing Finance
SEBI in-principle approval for Mutual Fund
Obtained Venture Capital license
2010
Received in-principle approval for membership of the Singapore Stock
Exchange
Received membership of the Colombo Stock Exchange
List of Stock Exchanges: INDIA
There are 22 stock exchanges in India. These are shown below
• Bombay Stock Exchange
• National Stock Exchange
• Bangalore Stock Exchange
• Bhubaneswar Stock Exchange
• Calcutta Stock Exchange
• Cochin Stock Exchange
• Coimbatore Stock Exchange
• Delhi Stock Exchange
• Guwahati Stock Exchange
• Hyderabad Stock Exchange
• Jaipur Stock Exchange
• Ludhiyuana Stock Exchange
• Madhya Pradesh Stock Exchange
• Madras Stock Exchange
• Magadha Stock Exchange
• Mangalore Stock Exchange
• Meerut Stock Exchange
• OTC Stock Exchange
• Pune Stock Exchange
• Saurasthra Stock Exchange
• Uttar Pradesh Stock Exchange
Evolution of the Indian Brokerage Market
The Indian broking industry is one of the oldest trading industries that had been
around even before the establishment of the BSE in 1875. Despite passing
through a number of changes in the post liberalization period, the industry has
found its way towards sustainable growth. The evolution of the brokerage
market is explained in three phases: pre1990, 1990-2000, post 2000.
Early Years
The equity brokerage industry in India is one of the oldest in the Asia region.
India had an active stock market for about 150 years that played a significant
role in developing risk markets as also promoting enterprise and supporting the
growth of industry.
The roots of a stock market in India began in the 1860s during the American
Civil War that led to a sudden surge in the demand for cotton from India
resulting in setting up of a number of joint stock companies that issued
securities to raise finance. This trend was akin to the rapid growth of securities
markets in Europe and the North America in the background of expansion of
railroads and exploration of natural resources and land development.
Bombay, at that time, was a major financial centre having housed 31 banks, 20
insurance companies and 62 joint stock companies.
In the aftermath of the crash, banks, on whose building steps share brokers used
to gather to seek stock tips and share news, disallowed them to gather there,
thus forcing them to find a place of their own, which later turned into the Dalal
Street. A group of about 300 brokers formed the stock exchange in Jul 1875,
which led to the formation of a trust in 1887 known as the “Native Share and
Stock Brokers Association”.
A unique feature of the stock market development in India was that it was
entirely driven by local enterprise, unlike the banks which during the pre-
independence period were owned and run by the British. Following the
establishment of the first stock exchange in Mumbai, other stock exchanges
came into being in major cities in India, namely Ahmedabad (1894), Calcutta
(1908), Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad
(1944). The stock markets gained from surge and boom in several industries
such as jute (1870s), tea (1880s and 1890s), coal (1904 and 1908) etc, at
different points of time.
Beginning of a new equity culture
A new phase in the Indian stock markets began in the 1970s, with the
introduction of Foreign Exchange Regulation Act (FERA) that led to divestment
of foreign equity by the multinational companies, which created a surge in retail
investing. The early 1980s witnessed another surge in stock markets when
major companies such as Reliance accessed equity markets for resource
mobilisation that evinced huge interest from retail investors.
A new set of economic and financial sector reforms that began in the early
1990s gave further impetus to the growth of the stock markets in India. As a
part of the reform process, it became imperative to strengthen the role of the
capital markets that could play an important role in efficient mobilisation and
allocation of financial resources to the real economy. Towards this end, several
measures were taken to streamline the processes and systems including setting
up an efficient market infrastructure to enable Indian finance to grow further
and mature. The importance of an efficient micro market infrastructure came
into focus following the incidence of market abuses in securities and banking
markets in 1991 and 2001 that led to extensive investigations by two respective
Joint Parliamentary Committees.
The Securities and Exchange Board of India (SEBI), which was set up in 1988
as an administrative arrangement, was given statutory powers with the
enactment of the SEBI Act, 1992. The broad objectives of the SEBI include
• to protect the interests of the investors in securities
• to promote the development of securities markets and to regulate the
securities markets
The scope and functioning of the SEBI has greatly expanded with the rapid
growth of securities markets in India in the last fifteen years.
Following the recommendations of the High Powered Study Group on
Establishment of New Stock Exchanges, the National Stock Exchange of India
(NSE) was promoted by financial institutions with an aim to provide access to
investors all over the country. NSE was incorporated in Nov 1992 as a tax
paying company, the first of such stock exchanges in India, since stock
exchanges earlier were trusts, being run on no-profit basis. NSE was recognized
as a stock exchange under the Securities Contracts (Regulations) Act 1956 in
Apr 1993. It commenced operations in wholesale debt segment in Jun 1994 and
capital market segment (equities) in Nov 1994. The setting up of the National
Stock Exchange brought to Indian capital markets several innovations and
modern practices and procedures such as nationwide trading network, electronic
trading, greater transparency in price discovery and process driven operations
that had significant bearing on further growth of the stock markets in India.
Faster and efficient securities settlement system is an important ingredient of a
successful stock market. To speed the securities settlement process, The
Depositories Act 1996 was passed that allowed for dematerialisation (and
rematerialisation) of securities in depositories and the transfer of securities
through electronic book entry. The National Securities Depository Limited
(NSDL) set up by leading financial institutions, commenced operations in Oct
1996. Regulations governing selection of various types of market intermediaries
as depository participations were made. Subsequently, Central Depository
Services (India) Limited promoted by Bombay Stock Exchange and other
financial institutions came into being.
Rapid Growth
The last decade has been exceptionally good for the stock markets in India. In
the back of wide ranging reforms in regulation and market practice as also the
growing participation of foreign institutional investment, stock markets in India
have showed phenomenal growth in the early 1990s. The stock market
capitalization in mid-2007 is nearly the same size as that of the gross domestic
product as compared to about 25 percent of the latter in the early 2000s.
Investor base continued to grow from domestic and international markets. The
value of share trading witnessed a sharp jump too. Foreign institutional
investment in Indian stock markets showed continuous rise reaching about
USD10 bn in each of these years between FY04 to FY06. Stock markets
became intensely technology and process driven, giving little scope for manual
intervention that has been the source of market abuse in the past. Electronic
trading, digital certification, straight through processing, electronic contract
notes, online broking have emerged as major trends in technology. Risk
management became robust reducing the recurrence of payment defaults.
Product expansion took place in a speedy manner. Indian equity markets now
offer, in addition to trading in equities, opportunities in trading of derivatives in
futures and options in index and stocks. ETFs are showing gradual growth.
Within five years of introduction of derivatives, Indian stock markets now are
ranked first in stock futures and fourth in index futures. Indian stock markets are
transaction intensive and thus rank among the top five markets in this regard.
Stock exchange reforms brought in professional management separating
conflicts of interest between brokers as owners of the exchanges and
traders/dealers. The demutualisation and corporatisation of all stock exchanges
is nearing completion and the boards of the stock exchanges now have majority
of independent directors. Foreign institutions took stake in India’s two leading
domestic stock exchanges. While NYSE Group led consortium took stake in the
National Stock Exchange, Deutsche Borse and Singapore Stock Exchange
bought equity in the Bombay Stock Exchange Ltd.
ROLE OF INDUSTRY IN THE ECONOMY
Indian Stock Markets With over 20 million shareholders, India has the third
largest investor base in the world after the USA and Japan. Over 9,000
companies are listed on the stock exchanges, which are serviced by
approximately 7,500 stockbrokers. The Indian capital market is significant in
terms of the degree of development, volume of trading and its tremendous
growth potential.
India's market capitalization was amongst the highest among the emerging
markets. Total market capitalization of the BSE as on July 31, 1997 was Rs
5,573.07 billion growing by 18 percent over a period of twelve months and as of
August 2005 was over $500 billion (about Rs 22 lakh crores).
Country Market cap (US$ billion) % of world
1 USA 15,517 39.5
2 Japan 4,079 10.4
3 United Kingdom 3,067 7.8
4 France 1,828 4.7
5 Germany 1,256 3.2
6 Canada 1,239 3.2
7 Hong Kong 1,001 2.6
8 Switzerland 872 2.2
9 Italy 788 2.0
10 Spain 688 1.8
11 Australia 687 1.8
12 Russia 592 1.5
13 South Korea 557 1.4
14 India 506 1.3
15 Taiwan 475 1.2
Worldwide Stock Markets
Source: ETIG
India has emerged as the world’s 14th largest equity market after it added
several companies to the billion dollar club in terms of capitalization in the last
three months, taking the total to 81 companies. India has become the third
largest Asian market (excluding Japan and Australia) after having toppled
Korea, China and Singapore that have 80, 50 and 47 firms with billion-dollar
market
a. INFRASTRUCTURE DEVELOPMENT
Traditionally brokers were serving the need of local public only as there was
limited infrastructure development. But after the entry of corporate brokers,
now they have not restricted themselves to local boundaries only, Brokers are
going for expanding their network to the wide area. Every corporate broker is
now trying to reach in each of the geographical corner of the country &
providing as many services as possible to the investors.
b. MAJOR DEVELOPMENTS
i) Corporate memberships
There is a growing surge of corporate memberships (92% in NSE and 75% in
BSE), and the scope of functioning of the brokerage firms has transformed from
that of being a family run business to that of professional organized function
that lays greater emphasis on observance of market principles and best
practices. With proliferation of new markets and products, corporate nature of
the memberships is enabling broking firms to expand the realm of their
operations into other exchanges as also other product offerings. Memberships
range from cash market to derivatives to commodities and a few broking firms
are making forays into obtaining memberships in exchanges outside the country
subject to their availability and eligibility.
ii) Wider product offerings
The product offerings of brokerage firms today go much beyond the traditional
trading of equities. A typical brokerage firm today offers trading in equities and
derivatives, most probably commodities futures, exchange traded funds,
distributes mutual funds and insurance and also offers personal loans for
housing, consumptions and other related loans, offers portfolio management
services, and some even go to the extent of creating niche services such as a
brokerage firm offering art advisory services. In the background of growing
opportunities for Investors to invest in India as also abroad, the range of
products and services will widen further. In the offing will be interesting
opportunities that might arise in the exchange enabled corporate bond trading,
soon after its commencement and futures trading that might be introduced in the
near future in the areas of interest rates and Indian currency.
iii) Greater reliance on research
Client advising in India has graduated from personal insights, market tips to
becoming extensively research oriented and governed by fundamentals and
technical factors. Vast progress has been made in developing company research
and refining methods in technical and fundamental analysis. The research and
advice are made online giving ready and real time access to market research for
investors and clients, thus making research important brand equity for the
brokerage firms.
iv) Accessing equity capital markets
Access to reliable financial resources has been one of the major constraints
faced by the equity brokerage industry in India since long. Since the banking
system is not fully integrated with the securities markets, brokerage firms face
limitations in raising financial resources for business and expansion. With
buoyancy of the stock markets and the rising prospects of several well
organized broking firms, important opportunity to access capital markets for
resource mobilization has become available. The recent past witnessed several
leading brokerage firms accessing capital markets for financial resources with
success.
v) Foreign collaborations and joint ventures
The way the brokerage industry is run and the manner in which several of them
pursued growth and development attracted foreign financial institutions and
investment banks to buy stakes in domestic brokerage firms, paving the way for
stronger brokerage entities and possible scope for consolidation in the future.
Foreign firms picked up stake in some of the leading brokerage firms, which
might lead to creating of greater interest in investing in brokerage firms by
entities in India and abroad.
vi) Specialized services/niche broking
While supermarkets approach are adopted in general by broking firms, there are
some which are creating niche services that attract a particular client group such
as day traders, arbitrage trading, investing in small cap stocks etc, and providing
complete range of research and other support to back up this function.
vii) Online broking
Several brokers are extending benefits of online trading through creation of
separate windows. Some others have dedicated online broking portals.
Emergence of online broking enabled reduction in transaction costs and costs of
trading. Keen competition has emerged in online broking services, with some of
these offering trading services at the cost of a few basis points or costs which
are fixed in nature irrespective of the volume of trading conducted. A wide
range of incentives are being created and offered by online brokerage firms to
attract larger number of clients.
viii) Compliance oriented
With stringent regulatory norms in operation, broking industry is giving greater
emphasis on regulatory compliance and observance of market principles and
codes of conduct. Many brokerage firms are investing time, money and
resources to create efficient and effective compliance and reporting systems that
will help them in avoiding costly mistakes and possible market abuses.
Brokerage firms now have a compliance officer who is responsible for all
compliance related aspects and for interacting with clients and other stake
holders on aspects of regulation and compliance.
ix) Focus on training and skill sets
Brokerage firms are giving importance and significance to aspects such as
training on skill sets that could prove to be beneficial in the long run. With the
nature of markets and products becoming more complex, it becomes imperative
for the broking firms to keep their staff continuously updated with latest
development in practices and procedures. Moreover, it is mandated for certain
types of dealers/brokers to seek specific certification and examinations that will
make them eligible to carry business or trade. Greater emphasis on aspects such
as research and analysis is giving scope for in-depth training and skills sets on
topics such as trading programs, valuations, economic and financial forecasting
and company research.
x) From owners to traders
A fundamental change that has taken place in the equity brokerage industry,
which is a global trend as well, is the transformation of broking from owners of
the stock exchange to traders of the stock market. Demutualization and
corporatisation of stock exchanges bifurcated the ownership and trading rights
with brokers vested only with the later and ownership being widely distributed.
Demutualization is providing balanced welfare gains to both the stock
exchanges and the members with the former being able to run as corporations
and the latter being able to avoid conflict of interests that sometimes came as a
major deterrent for the long term growth of the industry.
1.3. Emerging challenges and outlook for the brokerage industry
Brokerage firms in India made much progress in pursuing growth and building
professionalism in operations. Given the nature of the brokerage industry being
very dynamic, changes could be rapid and so as the challenges that emerge from
time to time. A brief description on some of the prospects and challenges of the
brokerage firms are discussed below.
i) Fragmentation
Indian brokerage industry is highly fragmented. Numerous small firms operate
in this space. Given the growing importance of technology in operations and
increasing emphasis on regulatory compliance, smaller firms might find it
constrained to make right type of investments that will help in business growth
and promotion of investor interests.
ii) Capital Adequacy
Capital adequacy has emerged as an important determinant that governs the
scope of business in the financial sector. Current requirements stipulation
capital adequacy in regard to trading exposure, but in future more tighter norms
of capital adequacy might come into force as a part of the prudential norms in
the financial sector. In this background, it becomes imperative for the brokerage
firms to focus on raising capital resources that will enable to give continuous
thrust and focus on business growth.
iii) Global Opportunities
Broking in the future will increasingly become international in character with
the stock markets being open for domestic and international investors including
institutions and individuals, as also opportunities for investing abroad. Keeping
abreast with developments in international markets as also familiarization with
global standards in broking operations and assimilating major practices and
procedures will become relevant for the domestic brokerage firms.
iv) Opportunities from regional finance
Regional economic integration such as that under the European Union and the
ASEAN have greatly benefited businesses in the individual countries with cross
border opportunities that helped to expand the scope and significance of the
business. Initial measures to promote South Asian economic integration is being
made by governments in the region first at the political level to be followed up
in regard to financial markets. South Asian economic integration will provide
greater opportunities for broking firms in India to pursue cross border business.
In view of several of common features prevailing in the markets, it would be
easier to make progress in this regard.
v) Product Dynamics
As domestic finance matures and greater flow of cross border flows continue,
new market segments will come into force, which could benefit the domestic
brokerage firms, if they are well prepared. For instance, in the last three to four
years, brokerage firms had newer opportunities in the form of commodities
futures, distribution of insurance products, wealth management, mutual funds
etc, and as the market momentum continues, broking firms will have an
opportunity to introduce a wider number of products.
vi) Competition from foreign firms
Surging markets and growing opportunities will attract a number of
international firms that will increase the pace of competition. Global firms with
higher levels of capital, expertise and market experience will bring dramatic
changes in the brokerage industry space which the local firms should be able to
absorb and compete. Domestic broking firms should always give due focus to
emerging trends in competition and prepare accordingly.
vii) Investor Protection
Issues of investor interest and protection will assume centre stage. Firms found
not having suitable infrastructure and processes to ensure investor safety and
protection will encounter constraints from regulation as also class action suits
that investors might bring against erring firms. The nature of penalties and
punitive damages would become more severe. It is important for brokerage
firms to establish strong and streamlined systems and procedures for ensuring
investor safety and protection.
A Financial Analysis of Broking Industry
Companies selected for this financial analysis comprise listed (excluding Z group companies) and unlisted securities broking houses. These companies were further screened and selected based on the availability of audited financials for FY10. Every company in the sample has generated a portion of income from brokerage services during FY10. To focus solely on performance of the equity broking industry, we excluded companies that operate in insurance or commodity broking. Thus, the final sample comprises 33 companies including 16 listed ones. To capture the dynamic nature of the broking industry, we have categorised these companies as large (र 3,500 mn or more), medium (between र 500 mn and र 3,500 mn), and small companies (less than र 500 mn) based on broking income.
Revival in derivatives and cash turnover buoys income growth of broking companies
Turnover in the cash and derivatives segment recovered significantly in FY10. The cash segment, which slumped almost 25% during FY09, grew 43.2% to र 55.2 trillion1. Turnover in the NSE cash market surged 50% to र 41.4 trillion while that in the BSE cash market increased 25.3% to र 13.8 trillion.
Turnover in the equity derivatives market jumped 60.3% to र 176.6 trillion in FY10. NSE remained the dominant exchange with more than 99% share in equity derivatives turnover. The NSE’s average daily turnover increased significantly by 59.1% y-o-y to र 720.97 bn during the fiscal.
Improvement in cash and equity derivatives turnover of the BSE and NSE in FY10 translated into healthy income growth of 20.8% to र 54,983 mn for the sample broking companies. Large companies constituted 64.7% of the overall income while mid-size and small ones accounted for 26.8% and 8.5% respectively. Three financial services segment (fund-based services, fee-based services and treasury operations) are the key sources of operational income for the sample broking companies. Fee-based services, including broking services, contributed to 83.8% of these companies’ income. Overall fee-based services of the sample broking companies grew by a healthy 31.8% to र 46,064.4 mn during the fiscal. On the other hand, income from fund-based services (10.4% share) and treasury operations (4.2% share) declined 15.5% and 0.3% respectively.
Growth in total income of broking companies was largely led by income from broking services, whose share in total income increased from 66.4% in FY09 to 74.9% in FY10. Large companies, which have a much more diversified business compared with mid-size and small broking firms, generated 72.9% of total income through broking in FY10. Aggregate broking income of these companies grew 34.1% y-o-y to र 25,934.2 mn during the fiscal. Mid-size broking companies generated the highest proportion (78.6%) of income through broking during FY10. Their broking income grew a healthy 39.8% y-o-y to र 11,573 mn. Broking income of small broking companies grew the fastest among the rest, increasing 40.8% to र 3,665.9 mn. Robust performance of large, mid-size and small broking companies in the broking segment led to overall growth of 36.2% to र 41,173.1 mn in broking income of the sample companies.
Moderate growth in employee cost keeps overall expenses under check
Major cost overheads of broking companies remained the same across the three categories (large, medium and small) during FY10. Employee compensation was the major cost, with aggregate share of 34.2% in overall expenses of the sample companies in FY10. Employee compensation was 34.1% of total expenses at र 9,367.1 mn for large broking companies during the year. This proportion for mid-size sample companies was the highest at 35.6%, while for the small sample companies it was the lowest at 30.4%.
Financial services expenses (including fund-based and fee-based financial services) were the next major cost component for broking companies, accounting for 18.9% of overall expenses during FY10. Large companies spent a relatively higher proportion in financial services expenses at 20.8% of total expenses. On the other hand, mid-size broking houses spent the least (14.2%) among the sample companies. The only cost component that varied across the large, mid-size and small broking companies was marketing expenses. Large broking companies spent 1.5%, whereas mid-size and small firms spent a much higher 7.5% and 14.9%, respectively, on marketing during FY10.
The growth trend in expenses of sample companies was dominated by large broking houses, which constituted almost 62% of overall expenses in FY10. Aggregate expenses of large broking companies grew approximately 5% y-o-y to र 27,468.6 mn, in tandem with the 5.7% increase in their employee expenses during the year. Fee-based financial services expenses of large companies rose the sharpest (60.4%) among the sample companies.
Aggregate expenses of mid-size and small broking houses grew relatively faster than large companies, corresponding to higher growth in their business. Total expenses of mid-size broking companies grew 12.1% to र 12,218.8 mn. Employee expenses and fee based financial services expenses rose significantly by 27.8% and 23.9%, respectively, while marketing expenses spiked 118.9%. Aggregate expenses of small broking companies grew the fastest at 14.1% to र 4,329.9 mn during FY10. Employee expenses increased a moderate 7.4% y-o-y
while marketing and fee based financial service expenses surged more than 40%.
Overall profit of broking companies soar; small companies see a turnaround
Aggregate profit2 of the broking companies eroded more than 60% and 70% at the operating (EBIDTA) and net (PAT) levels, respectively, in FY09 because of repercussions of the global financial crisis on the Indian stock market. The profit trend changed for the companies with overall profit at the operating level growing 86% to र 19,990 mn during FY10. Operating profit of the large companies, which contributed almost 72% to overall operating profit of the sample, grew 53% to र 14,369.4 mn during the year. Aggregate operating profit of mid-size companies, which slumped 83% to र 1,293.6 mn during FY09, jumped more than three times to र 4,747.1 mn in FY10. Small broking companies also saw substantial growth from र 52.8 mn in FY09 to र 341.7 mn in FY10.
Overall net profit of the sample broking companies increased substantially by 178% to र 10,965.2 mn during FY10. Net profit of the large firms increased 95% to र 8,131.3 mn while that of mid-size ones increased more than 20 times from र 109.2 mn in FY09 to र 2,492.2 mn during the year. Small companies, which had recorded a loss of र 330.6 mn at the net level during FY09, saw a turnaround, recording profit of र 341.7 mn.
Overall NPM of broking companies improved 1122 bps in FY10
Broking companies efficiently managed costs, which resulted in significant improvement in operating profit margin (OPM) during FY10. Overall OPM of the broking sample companies expanded 1468 bps y-o-y to 33.76%. OPM of large companies, which was the highest among the sample, expanded 1183 bps to 37.49%. Mid-size companies saw the highest improvement of 2247 bps to 30.52%. Small companies had the least OPM of 15.38% among the sample companies during FY10.
Overall net profit margin (NPM) of the broking companies expanded 1122 bps to 20.04% during FY10. The NPM of large broking companies increased 920 bps to 22.9% while that of mid-size firms recorded an expansion of 1600 bps to 17%.
Total assets of broking companies grew 22.1%
Current assets and investments are major assets of the broking companies. Current assets constituted 73% while investments formed 21.8% of the total asset base of broking companies in FY10. Total assets held by large companies grew 19.1% to र 131,861.1 mn during the year. Current assets, which constituted almost 70% of the assets of large companies, grew a healthy 29.7% to र 92,750 mn. The book value of investments made by large broking companies declined a marginal 0.1% to र 33,546.9 mn during the year. Mid-size companies, on the other hand, increased their total assets by 29.6% to र 32,966.9 mn. Current assets of mid-size companies, which constituted 82.3% of their total asset base, increased 37.5% to र 27,126.7 mn. Growth in assets of small companies was the fastest among the sample broking companies —36.4% to र 13,915.4 mn. Current assets of these companies grew 41.7% to र 10,693.1 mn while the book value of investments made by these companies increased 50.9% to र 2,121.1 mn.
The investment break-up of broking companies reveals that substantial proportion of their investments is in equity shares and mutual funds. Large broking companies invested almost 75% of their total investments ( र 25,122.9 mn) in equity shares during FY10. The book value of investments in equity shares by a large company declined 1.8%. Investments made through mutual funds, on the other hand, increased 51.2% y-o-y to र 7,646.6 mn during the same period. Mid-size broking houses invested 50.2% and 47.3% of their total investment in equity shares and mutual funds, respectively. Their book value of
investments in equity shares and mutual funds increased 0.3% and 18.2% to र 1,672.8 mn and र 1,577.7 mn respectively. The investment value of small companies grew the fastest among broking companies. The total book value of their investments in equity shares and mutual funds increased 16.1% and 316.6% to र 1,349.8 mn and र 695.3 mn, respectively.
Mid-size broking companies recorded the best RONW
Healthy growth in overall profit translated into better return on networth (RONW), which increased substantially from 6.5% in FY09 to 15.71% in FY10. Small companies had the lowest RONW of 5.8% while mid-size ones recorded the highest RONW of 21.1% among the sample broking companies during FY10. Large companies, which had majority share in overall profit, had a RONW of 15.61% and dominated the trend in the sample.
A more detailed analysis of the RONW of broking companies was done using the DuPont Analysis. The DuPont method analyses the RONW based on the asset turnover, NPM and leverage ratio (Assets/Equity) of the companies. The improvement in the RONW can be due to growth in the NPM and/or asset turnover ratio which are healthy signs for the company. On the other hand, DuPont method also reveals whether the improvement in RONW is mainly due to additional leverage that the company has taken to improve its shareholders returns, thus making it more risky.
The study reveals that the asset turnover of large broking companies reduced from 27.3% in FY09 to 26.9% in FY10 while their leverage factor remained unchanged at 2.5 times during the same period. The improvement in RONW of large companies was largely because of the improvement in their NPM by 920 bps to 22.9% during the year. Therefore, the large companies registered a better RONW largely because of an improvement in the operational efficiency during FY10.
Mid-sized broking companies, on the other hand, managed to improve their asset turnover along with an increase in their leverage factor and NPM during FY10. Asset turnover of mid-sized broking companies, which was the highest among the sample companies, increased from 43% in FY09 to 44.4% in FY10 while their leverage factor increased from 2.2 times in FY09 to 2.8 times in FY10. Despite higher leverage, mid-sized broking companies managed to improve their NPM from 1% during FY09 to 17% in FY10. Thus, the higher RONW of mid-sized companies was due to the combination of higher asset turnover, leverage factor and significant improvement in their operational efficiency during FY10
Major Players in Broking Industry
Brief Introduction of Different Players in Broking Industry
Share khan Depository Services offers dematerialization services to individual and corporate investors.
Share khan, one of India's leading brokerage houses, is the retail arm of SSKI. With over 240 share shops in 110 cities, and India's premier online trading portal www.sharekhan.com, our customers enjoy multi-channel access to the stock markets.
Background of HDFC
HDFC was incorporated in 1977 with the primary objective of meeting a social need – that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.
About HDFC Sec.
HDFC sec is a brand brought to you by HDFC Securities Ltd, which has been promoted by the HDFC Bank & HDFC with the objective of providing the diverse customer base of the HDFC Group and other investors a capability to transact in the Stock Exchanges & other financial market transactions
Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and Goldman Sachs (holding 25% - one of the world's leading investment banks and brokerage firms) is India's leading stock broking house with a market share of around 8%. Kotak Securities Ltd. has been the largest in IPO distribution.
Kotak Securities has 122 branches servicing more than 1,70,000 customers and a coverage of 187 cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments.
India Info line was founded by a group of professionals in 1995, a seemingly distant past in the Internet age. Our meticulous research was published and distributed in printed form to a client base comprising the who's who of Indian business including leading MNCs, investment banks and consulting firms.In early 1999, when Internet penetration in India was at its infancy and the future unknown, we took the hard decision of killing our earlier business model and embracing the Internet. We discontinued delivery of reports in printed form and made available quality research at the click of a mouse. Thus, was born www.indiainfoline.com.We forayed into investment transaction space in early 2000 to complete the value chain.www.5paisa.com was launched for online trading in mid-2000.India Info line Securities Pvt Ltd is a 100% subsidiary of India Info line Ltd, which is engaged in the businesses of Equities broking and Portfolio Management Services. It holds memberships of both the leading stock exchanges of India viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.
India bulls Financial Services Ltd. is a public company and listed on the National Stock Exchange, Bombay Stock Exchange, Luxembourg Stock Exchange and London Stock Exchange. The company ranks at 82nd position in the list of most valuable companies in India has a market capitalization of approx US $ 800 million. The consolidated net worth of the company is approx US $ 400 million.
India bulls, along with its subsidiary companies, offer consumer loans, brokerage and depository services, personal loans, home loans and other financial products and services to the retail markets.India bulls Resources Ltd, a 100 per cent subsidiary of India bulls Financial Services Ltd., has been established with the objective of evolving as an independent oil company over time. The immediate short-term goal is to partner with oil companies who are willing to come to India and bid in the current NELP-6 round. Through its group companies, India bulls are also engaged in real estate development. The company is in the process of developing modern commercial complexes in the heart of Mumbai. India bulls Estates Pvt Ltd. the real estate arm of India bulls Financial Services will set up an integrated township spread across 100 acres in Sonepat, 15 km from Delhi.
ICICI WEB TRADE LIMITED is a company that is venture of ICICI Bank, ICICI Limited to produce an integrated offering of e-broking services. This service is the combination of these entire three organizations. Promotions are looked after ICICI web Trade that has made e-invest facility, commonly known as ICICI Direct.com possible. This company is 100% subsidiary of ICICI Limited. The company enables to have the facility of having all the facilities online. One can view his banking transactions online, view the Demat balance with the latest market values and at the same time buy and sell shares online. This company has pioneered the concept of e-broking in India. The company went online with NSE on 15th April 2000.
Ranbaxy Promoter Group is India's leading business house having diversified interests in Pharmaceuticals, Healthcare, Pathological Labs and Financial Services through Ranbaxy Laboratories Limited, Fortis Healthcare Limited, SRL Ranbaxy Limited and Religare Enterprise Limited respectively. 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 Enterprises 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, we provide various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, there’s 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 country wide branches.
Today, they have a growing network of more than 300 branches and more than 580 business partners spread across more than 300 cities/towns in India and a fully operational international office at London.
Activation ,brokerage and other charges of different stock broking companies
ANGEL BROKING
CRITERIA ANGEL STOCK BROKING
Demat a/c opening charges 660
Brokerage intra day, delivery Classic plan: 3p ,20pFreedom plan; 1p,10p
AMC(Annual Maintenance Charges) Rs.225
Trading funding intra day, delivery 6times,4 times(minimum stock Rs 50000)
Interest rate 18 %pa
Debit period T+2 DAYS
Mode of trading Both online and offline
Margin money 5000,5000,10000
Software installation charges No extra charges
CRITERIA RELIGARE SECURITIES LTD
Demat a/c opening charges 299, 499, 999
Brokerage intra day, delivery Classic plan: 5p ,50pFreedom plan; 3p,30p
AMC (Annual Maintenance Charges) No amc
Trading funding intra day, delivery 6times,4 times(minimum stock rs 500000)
Interest rate 18 %pa
Debit period T+2 DAYS
Mode of trading Both online and offline
Margin money 5000,5000,10000
Software installation charges No extra charges
CRITERIA ICICI DIRECT
Demat a/c opening charges RS 750/-
Brokerage intra day, delivery 50P,75P
AMC(Annual Maintenance Charges) RS 500/-
Trading funding intra day, delivery 3-4 times of the available funds.
Interest rate 18% p.a.
Debit period T+2 DAYS
Mode of trading Both Online & Offline
Margin money -
Software installation charges -
CRITERIA Kotak securities .com
Demat a/c opening charges RS 550
Brokerage intra day, delivery 2.5P,25P
AMC(Annual Maintenance Charges) RS 30pm
Trading funding intra day, delivery 7times,4 times
Interest rate 21%
Debit period T+2
Mode of trading Offline
Margin money Rs8000/-
Software installation charges _
CRITERIA HDFC securities
Demat a/c opening charges Rs 799/-
Brokerage intra day, delivery 15p,50p
AMC(Annual Maintenance Charges) Nil
Trading funding intra day, delivery 10times,4 times
Interest rate -
Debit period T+ 2days
Mode of trading Both
Margin money 5000,10000
Software installation charges -
CRITERIA Anand Rathi
Demat a/c opening charges Rs 633/
Brokerage intra day, delivery 3p(1p),30p(10p)
AMC(Annual Maintenance Charges) -
Trading funding intra day, delivery 6 times,4 times
Interest rate 18%p.a.
Debit period T+2
Mode of trading Both
Margin money 5000
Software installation charges 1000
Various Important Measures Taken By The Indian Government
To Improve The Condition Of Indian Stock Market.
CRITERIA ALLIANZ SECURITIES
Demat a/c opening charges Rs 500/-
Brokerage intra day, delivery 3-2P,30-20P
AMC(Annual Maintenance Charges) NIL
Trading funding intra day, delivery 10 times,4 times
Interest rate -
Debit period T+2
Mode of trading OFFLINE
Margin money NIL
Software installation charges -
Measures Objective Status
Allow foreign institutional investors to invest in equity and debt markets
Liberalization of stock market to attract foreign investment in order to boost economic growth.
Foreign investment up to 49% will be allowed in these companies with a separate FDI cap of 26% and FII cap of 23% after approval from FIPB
Outstanding limit for FII investment in debt securities raised from USD1.75 bn to USD2.0 bn and the same for the corporate debt raised from USD0.5 bn to USD1.5 bn
Expanding the product range offered by the stock exchanges
Bring Indian market at par with the international standards and diversify product portfolio.
SEBI approved new derivative products : mini-contracts on equity indices, options with longer life/tenure, volatility index and F&O contracts, Options on Futures, Bond Indices and F&O contracts, Exchange-Traded Currency (Foreign-Exchange) Futures and Options and Exchange Traded products to cater to different investment strategies
Allowing Indian companies to issues ADRS and GDRS
Allow Indian nationals and companies to invest abroad
Facilitate market integration and give freedom to the companies.
Access to more funds for investment
Mutual funds were allowed to invest in ADRs/GDRs and foreign securities within the overall limit of USD4 bn
Venture capital funds were allowed to invest in foreign securities
Guidelines on issue of Indian Depository Receipts (IDRs) were issued
Divestment of government ownership
Facilitate growth through privatization
Providing minimum public shareholding of 25% in all listed companies
Strengthening of institutional framework in primary and secondary markets
Demutualization
To ensure transparency
Investor protection
Provide a standard framework for operations
SEBI permitted listed companies to send abridged annual report to the shareholders
Exclusive email ID to be given by the primary market intermediaries for registering investor complaints
Stock exchanges advised to update the applicable VAR margin rates at
Deregulation Reduces the
conflict of interest
least five times in a day SEBI approved and notified the
Corporatization and Demutualization Schemes of 19 stock exchanges
BSE and NSE to set up and maintain corporate bond reporting platforms
To capture all information relating to trading.Investor protection
BSE and NSE began maintaining a reporting platform for corporate bonds.
BSE and NSE jointly launched a common portal at www.corpfiling.co.in to disseminate filings made by companies listed in both the exchanges.
Making PAN compulsory Strengthening KYC (Know Your Client)
PAN made compulsory for all categories of investors for opening a DEMAT account with effect from Apr 1, 2006
Transactions necessarily settled through the clearing corporations/clearing house
Investor protection and greater control.
It was made mandatory.
Permit Gold Exchange Traded Funds
Generate options for companies and investors
SEBI allowed the launch of Gold Exchange Traded Funds (GEFTs)
Introduction of mutual fund schemes
Minimize risk for investors and ensure returns.
Mutual funds were allowed to invest in ADRs/GDRs and foreign securities within the overall limit of USD4 bn
Mutual fund trustees are required to certify that the scheme approved by them is a new product and is not a minor modification of an existing scheme/product
SEBI Mutual Fund regulations were amended so as to permit the launch of Capital Protection Oriented schemes
SEBI directed MFs to dispatch statement of accounts to unit holders under SIP/STP/SWP on
every quarter.
The Evolution of Stock Brokers with Online Trading
The fact is, only a registered (SEBI) stock broker can buy and sell shares in the stock market. Such an individual is registered on one or many stock exchanges and is authorized to transact on behalf of others. Apart from that, an online stock broker is very valuable to investors who are not technically inclined and have no or little prior knowledge of stock trading. Such investors can use their own online stock trading accounts to obtain necessary information and place
online trades at any time of the day. Others, however, still require a human interface - a real person who will place trades on their behalf.
An online stock broker’s (online service of stock broker) services definitely transcend the traditional format of trading in stocks personally or via the telephone. By using an online stock broker, the investor no longer faces the constraints of location and busy telephone lines. Information technology has made stock market software reliable means of trading in stock on the Internet, and an online stock broker uses this on his client’s behalf. An online stock broker requires considerable working knowledge of the stock market to help investors trade in stocks. Though they are independent of established brokerage firms, they are still bound by the same SEBI regulations that govern offline as well as online stock firms. They have in-depth experience in dealing with actively traded commodities and stocks.
By using such a stock broker, one gains greater access and can also save money on stock trades. Because of this, there are now many investors in the stock market than there have ever been previously. There are now any number of investment choices available, and online brokers can leverage these by the power of the Internet coupled with their own expertise and experience. There can be occasional hiccups while using the services of one’s online stock broker. For instance, the accelerated growth of online trading can cause busy servers at certain times of the day. This makes it difficult to log on to one’s broker’s website. This is not a serious limitation, and invariably applies only to the first and last thirty minutes of a stock market day. Even this limitation will become history as online trading matures. The most successful traders often have as many as four or five brokers, though a single reliable broker suffices for those who only trade occasionally.
By using such a stock broker, one gains greater access and can also save money
on stock trades. Because of this, there are now many investors in the stock
market than there have ever been previously. There are now any number of
investment choices available, and online brokers can leverage these by the
power of the Internet coupled with their own expertise and experience. There
can be occasional hiccups while using the services of one's online stock broker.
For instance, the accelerated growth of online trading can cause busy servers at
certain times of the day. This makes it difficult to log on to one's broker's
website. This is not a serious limitation, and invariably applies only to the first
and last thirty minutes of a stock market day. Even this limitation will become
history as online trading matures. The most successful traders often have as
many as four or five brokers, though a single reliable broker suffices for those
who only trade occasionally
BENEFITS OF ONLINE TRADING IN STOCK MARKET
Regardless of whether you’re an experienced stock trader or new to trading
stock, you may never have experienced the joy of stock trading online. If that’s
the case, and you are currently thinking of trading online, you may want to
know what all the fuss is about! To help you understand, the following are just
some of the benefits of online stock market trading:
Commissions
One of the biggest, if not the biggest, benefit of trading stocks online is the
reduced stock broker commissions you’ll be expected to pay. In most cases,
when trading stock online, brokers will charge you a commission of between $7
and $10 per trade. However, if you trade in sufficiently large enough volume, it
is possible for you to negotiate with your broker so that these brokers’ fees can
be as low as $0.01 of the transaction value.
Control
When you use a broker in the real world you may find that your broker will not
agree to execute a trade, believing your decision to buy or sell the stock in
question is flawed. When you trade stock online this is no longer a problem,
your broker has no input as to when you buy and sell stock – you do!
Portfolio
In the real world some brokers will not buy certain stock – for example, some
penny stocks. This may limit the stock you are able to have as part of your
investment portfolio. However, when you trade online, subject to availability,
you can trade in any stock - on any stock exchange - you want!
Information
With the use of computer software programs, you can use stock charts, technical
indicators and real time stock prices to help you make the investment decision
you want to make, when you want to make it.
Time
One of the essential elements about trading stock is the time it takes to execute
the trade, as this can mean the difference between making a profit and making a
loss. In the real world you have to phone your broker and ask him to sell/buy
the stock. The broker then phones the trader, who gives the broker the price.
The broker than tells you the price and you either agree to buy/sell or not to. If
you agree to buy/sell, the trader then phones the order through to the trader.
Online you push your mouse over a cursor and press buy/sell. A much quicker
sell!
Volume
Assuming you are happy paying the commission, you can trade as large or small
as you want over the Internet. In the real world, most brokers require a
minimum buy/sell that is out of the reach of most individual traders.
Finally…
All in all, online stock trading is about ‘you’. It provides you with the
opportunity to trade in stocks without having to pay large commissions while
keeping control over your investment decisions.
EFFECT OF RECESSION ON STOCK MARKET
Recession is often considered as a synonym to depression, in emotional terms. It’s a fact that recession is decelerated phase where everything goes downhill and everything goes berserk. To reconcile, recession means decline, downturn, collapse or depression, in common understanding. In short, recession is decline in a country’s GDP growth for two or more consecutive quarters of a year and is a phase where profits, employment, investment spending and household incomes experiences a regular fall-down.
As we discussed that recession is negative economic growth for two consecutive quarters, it signifies a fall in real GDP, lower National income and lower National Output. Recession has negative impact on economic growth and makes unconstructive impact on the nation. The impact of recession is often characterized by following factors – impulsive rise in unemployment, rise in government borrowing, sharp decline in stock markets and share prices, lower inflation and fall in investment.
It was in news that almost thousands of employees of a private aircraft went jobless as the company fired them from job. They were terminated for no personal reasons but because the company is reeling under the pressure of recession and was not able to cope up with the expenses of their salaries and perks. Recession leads to impulsive rise in unemployment and it can be viewed in every sector and industry. The problem of unemployment in India is deep-rooted and it intensified to extra quarters, in phases of recession.
In recession phase, government is always pressurized to large extent as it comes like an unwanted bad news for them. It results into lower tax revenues because of lower income tax and lower corporation tax revenues. Government is expected to spend higher for unemployment benefits and so it lead to higher borrowing to make both ends meet. Recession becomes a pessimistic phase for the ruling government as it is burdened up with extra weight of borrowing.
Recession makes a resounding impact on share markets and so it affects share prices to great extent. It is because recession leads to lower profitability and also lower dividends. It makes share market look shaky and share-holders often face disappointment. Many a times shares fall sharp as an anticipation of predictable financial disaster, arising out from the fear of recession. It is not always that share prices fall as there can be any other reasons for their decline.
A recession will reduce the appropriate demand and correspondingly will enforce pressure on the prices and will rage out price-war in the market. To retain consumers, the price-wars may lead to decline in rates and so it might results into lower inflation rates. Due to lower spending capacity, the lowered prices may sound impossible for many but the fact is that recession leads out cut-throat competition and that sometimes affects the quality of the product.
Due to recession phase, the investor always feels finicky and shaky to invest as the fear of acquiring substantial profits increases manifold. The investment in the market becomes more unstable and it affects the economic growth. It leads to lowering of economic growth and simultaneously other related aspects of it.
BIBLIOGRAPHY:
BOOKS:1) Research Methodology, written by Uma Sekaran2) Financial Management, written by I M Pandey
Websites:1) www.indiainfoline.com
2) www.google.com 3) www.nse.india.com 4) www.cdsl.com 5) http://www.dnb.co.in/EquityBroking 6) www.nsdl.com 7) www.business-standard.com
OTHERS:
1. LMS (Lead Management System)2. YELLOW PAGES.