SUMMER TRAINING PROJECT REPORT ON A STUDY OF ONLINE TRADING AT
( 412, Agarwal Cyber Plaza, Netaji Subhash Palace Pitampura New Delhi)
Submitted in the partial fulfillment for the award of the degree of
BACHELOR OF BUSINESS ADMINISTRATION
Under the Supervision & Guidance of:
Submitted by: Vivek Kumar BBA- Vth SEM(M)
Dr. Ajay Kumar Rathore
0111701708
TECNIA INSTITUTE OF ADVANCED STUDIES Approved by AICTE, Ministry of HRD, Govt. of India Affiliated To Guru Gobind Singh Indraprastha University, Delhi INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085 E-Mail:
[email protected], Website: www.tecnia.in Fax No: 27555120, Tel: 27555121-24
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TECNIA INSTITUTE OF ADVANCED STUDIES (Approved by AICTE, Ministry of HRD, Govt. of India Affiliated To Guru Gobind Singh Indraprastha University, Delhi)
INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085 E-Mail : director.tecniaindia@ gmail.com, Website: www.tecniaindia.org Fax No: 27555120, Tel: 27555121-24
DECLARATION I VIVEK KUMAR Enrolment NO. 0111701708 Class BBA Vth SEM.(M) of the Tecnia Institute of Advanced Studies, Delhi hereby declare that the Summer Training Project Report entitled A STUDY OF ONLINE TRADING is an original work and the same has not been submitted to any other Institute for the award of any other degree.
Signature Student
Countersigned Signature of faculty Guide
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ACKNOWLEDGEMENT I take this opportunity to express my gratitude, high regards and sincere thanks to these respected people who have helped me throughout this project. Dr. Ajay Kumar Rathore Director Tecnia Institute Of Advanced Studies Plot No. 3,Madhuban Chowk, Institutional Area, Rohini, New Delhi - 110085 Mr. Rajesh Antil Assistant Sales Manager Sharekhan Pvt Ltd 412, Agarwal Cyber Plaza, Netaji Subhash Palace Pitampura New Delhi – 110034
Submitted by: Vivek Kumar BBA Vth Sem. (M) 0111701708
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TABLE OF CONTENTS PARTICULARS Executive Summary
PAGE NO. 01
Objectives of study
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Chapter-1 Introduction: 1.1 Overview of Online trading 1.2 Profile of the Company - Overview of SHAREKHAN LTD. - Vision & Mission - Market share - Awards & Achievements - Product range Chapter-2 Situation Review - SWOT analysis Chapter-3 Financial analysis of company - Interpretation through ratios - Limitations Chapter-4 Learning in executive training - Personal experience - Conclusion Bibliography Annexure Questionnaire.
EXECUTIVE SUMMARY
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03 03-13 14 14 15 16 17 18 32 32-34 35 35-43 44 45 46 47 48 49-52 52-53
This project is based on “A STUDY OF ONLINE TRADING” at Sharekhan Limited. Further, in this Project Chapter-1 includes review of literature & the introduction of the company wherein I told about the profile of Sharekhan limited. Chapter-2 includes Situation Review wherein I have shown swot analysis of company. Chapter-3 shows the financial analysis of company. Chapter-4 includes the Learning’s & Findings.
OBJECTIVES OF THE STUDY The Objective is to review the study of ONLINE TRADING at SHAREKHAN as the exchange has changed it’s trading from the outcry mode to online trading on 20th February 1997. It is to analyze the changes in trading after the exchange shifted from outcry to online trading system. 5
To know the online screen based trading system adopted by SHAREKHAN and about its communication facilities. The appropriate configuration to set the network, which would link the SHAREKHAN to individual / members. To know about the latest and future development in the stock exchange trading system.
Stocks The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value. Buying a stock for the long term means that you want to own part of a company and you think that in the future the company will be profitable. If you buy stock in a company and the company performs well, the stock's price should rise. If the company fails, then the stock should fail you, too and go down. Companies list their stocks on the various stock exchanges located throughout the U.S. The stock exchanges actually compete with each other for these listings, since companies that attract more trading make more money for the stock exchange that listed it. Company stocks are assigned a "ticker", or trading symbol by the listing exchange. You may notice some well-chosen tickers that are easy to 6
remember, like "DNA" for the company Genentech, a biotechnology firm. Or some companies' ticker is the same as its name, Nike for example.
Stock market A stock market or equity market is a public market (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market cap is the New York Stock Exchange, NYSE, while in Canada, it is the Toronto Stock Exchange.
Trading Historically, stock markets were physical locations where buyers and sellers met and negotiated. With the improvement in communications technology in the late 20th century, the need for a physical location became less important, as traders could transact from remote locations. Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. The shares of a company may in general be transferred from shareholders to other parties by sale or other mechanisms, unless prohibited. Most jurisdictions have established laws and regulations governing such transfers, particularly if the issuer is a publicly-traded entity. The desire of stockholders to trade their shares has led to the establishment of stock exchanges. A stock exchange is an organization that provides a marketplace for trading shares and other derivatives and financial products. Today, investors are usually 7
represented by stock brokers who buy and sell shares of a wide range of companies on the exchanges. A company may list its shares on an exchange by meeting and maintaining the listing requirements of a particular stock exchange. Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-served basis if there are multiple bidders or askers at a given price.The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.
History The two main stock markets of India are:National Stock Exchange(NSE) Bombay stock exchange(BSE) BSE:- At the end of the American civil war, the brokers who thrived out of this war in 1874, found a place in a street, where they would easily assemble and transact business. This street is nowadays, popularly known as DALAL STREET. In 1887, they formally established in Bombay, and were known as “Native Shares and Stock Brokers Association”. In 1895, it acquired a premise in the same street and finally was inaugurated in 1899 with the name Bombay Stock Exchange (BSE). India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin to as far as 125 years when it started as a voluntary non-profit making association. You hear about it any time it reaches a new high or a new low, and you also hear about it daily in statements like 'The BSE Sensitive Index rose 5% today'. Obviously, stocks and stock markets are important. Stocks of public limited companies are bought and sold at a stock exchange. But what really are stock exchanges? Known also as News on the 8
stock market appears in different media every day. he stock market or bourse, a stock exchange is an organized marketplace for securities (like stocks, bonds, options) featured by the centralization of supply and demand for the transaction of orders by member brokers, for institutional and individual investors. The exchange makes buying and selling easy. The need for stock exchanges developed out of early trading activities in agricultural and other commodities. During the middle Ages, traders found it easier to use credit that required supporting documentation of drafts, notes and bills of exchange. (Figure-1) India's other major stock exchange National Stock Exchange (NSE), promoted by leading financial institutions, was established in April 1993. Over the years, several stock exchanges have been established in the major cities of India. There are now 23 recognised stock exchanges — Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai, Ahmedabad, Bangalore, Bhubhaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur, Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and Meerut. NSE:With the liberalization of Indian economy it was found necessary to lift the Indian stock markets on par with the international standards. The NSE was incorporated in 1992 by industrial development bank of India, industrial credit and Investment Corporation of India, industrial finance corporation of India, all insurance corporations, selected commercial banks and others. NSE is India’s leading stock exchange covering more than 160 cities and towns across the country. It provides the modern fully computerized trading system designed to offer investors across the country a safe and easy way to invest to liquidate investment and securities.Investors in many areas of country did not have the same access and opportunity to trade so there arise the need for setting up the national stock exchange. The NSE network has been designed to provide equal access to investors from anywhere in India and to be responsive to their needs. (Figure-2) On its recognition as a stock exchange under the Securities Contract Act, 1956 in April 1993, NSE started operations in the Wholesale Debt Market (WDM) segment in June 1994. Capital market (equities) segment commenced operations in November 1994, and operations in derivative segment started in June 2000.NSE started trading in the capital market segment on November3, 1994 and within one year became the largest exchange in India, in terms of volumes transacted. During the year 2005-06 NSE reported, a turnover of Rs 1,569,556 crores in the equity segment. In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 9
they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred; the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.
Relation of the stock market to the modern financial system The financial systems in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing, flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process.Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock 10
market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit.
The behavior of the stock trading From experience everyone know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets; negative or down trends are referred to as bear markets.) Over-reactions may occur—so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. Economists continue to debate whether financial markets are 'generally' efficient. According to one interpretation of the efficient-market hypothesis (EMH), only changes in fundamental factors, such as the outlook for margins, profits or dividends, ought to affect share prices beyond the short term, where random 'noise' in the system may prevail. (But this largely theoretic academic viewpoint—known as 'hard' EMH—also predicts that little or no trading should take place, contrary to fact, since prices are already at or near equilibrium, having priced in all public knowledge.) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percent—the largest-ever one-day fall in the United States. This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. (But note that such events are predicted to occur strictly by chance , although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this. However, a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Moreover, while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., nontrending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for such large and apparently nonrandom price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable). Other research has shown that psychological factors may result in exaggerated stock price 11
movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold.
Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.The stock market, as with any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the 1987 crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 - 2002 bear market, the average did not rise above 5%). In the run up to 2000, the media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 2000 - 2002 bear market, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)
Investment strategies One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too
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frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).
Online trading Online stock trading is becoming a very popular way in which to invest in the stock market. Ordinary everyday citizens such as you and me can now trade stocks like the pros without paying the ridiculous broker fees that are often associated with trading on the stock market. This doesn't mean there are no fees involved or that you won't be discouraged from capriciously trading stocks. What it does mean is that you will be able to trade stocks, as you may have never been able to do before because the costs involved in trading were so high that only the wealthiest among us could really afford to work the market to any real advantage. Online trading has changed the average investors' involvement in trading their own stocks. The availability of company information has become so widespread and easily attainable that researching and finding stock to buy and sell is as easy as logging onto your computer.You will find quite a few companies that are going to compete for your business when it comes to empowering you to trade stocks online. It is best to go with a business that offers education and advice in addition to the ability to trade. There are many big names in the brokerage business that are getting in touch with the technology of today and offering full service brokers and financial advisors in addition to offering new online services that include Internet trading. There are, broadly, two types of trading in the financial markets:
Business-to-business (B2B) trading, often conducted on exchanges, where large investment banks and brokers trade directly with one another, transacting large amounts of securities, and Business-to-client (B2C) trading, where retail (e.g. individuals buying and selling relatively small amounts of stocks and shares) and institutional clients (e.g. hedge funds, fund managers or insurance companies, trading far larger amounts of securities) buy and sell from brokers or "dealers", who act as middle-men between the clients and the B2B markets If one decides to go with some of the bigger names in the business one should understand that he will pay a little more than he would pay going with many of the lesser name firms and trading companies. The good news is that the bigger names have more to loose after working for decades to establish themselves and develop a good reputation among traders. This means that they are not going to be 13
"fly by night" and are going to work to make sure you have the best possible service from them for your future in the stock market trade.
Many of these firms in addition to offering the ability to buy, sell, and trade online will also offer financial planning for retirement, future expenses, and advice on how to create a fixed income from your investments. They will offer many tips, hints, and advice free of charge on their website while also promoting the services they offer through discounts in hopes of gaining your business for some of the higher ticket transactions that really pay their bills. Online investment services offer consumers the opportunity to invest with lower commissions and fees which means you bring more of the money home when all is said and done and spend far less on fees and expenses associated with investing. By saving these fees you may be doing yourself a huge service but keep in mind that the invaluable advice of a broker can often mean the difference between mild successes and wild successes. If you can manage the fees it is a good plan to at least consult with a broker or financial advisor or planner once or twice a year in order to get the most out of your investment money. According to Chiang-Nan Chao , Robert J. Mockler , Dorothy Dologite :-The market downturn since March 2000 has posed a serious threat to brokerage firms, particularly those that offer online trading Findings of this study suggest that broke rage firms should focus on improving customer services, while at the same time providing services in addition to online trading. Online brokerage firms should move into the areas that have been traditionally dominated by full service brokerage firms and banks. Introduction Online trading has become a formidable force in today's investment market, thanks to recent developments in information technology. Although setbacks in the technology industry discouraged individual investors from actively trading, the total number of online trading accounts continues to grow. As the NASDAQ has dropped from its all time high of 5,000 in March 2000, and the economic situation is continuing to deteriorate, many investors have withdrawn their funds from the stock market Nevertheless, the interest in online trading is expected to increase (12,17). In April 2002, America's third-largest discount brokerage house, Ameritrade, agreed to purchase Datek Online Holdings Corporation, a privately held online trading company, in an all-stock transaction valued at almost $1.29 billion. The move would transform Ameritrade of Omaha, Nebraska, into the largest online brokerage firm in the U.S. in terms of equity trades per day, surpassing industry leaders E*Trade Group, Inc. and Charles Schwab Corporation. The proposed combination comes as the online trading industry appears to be recovering gradually from a severe recession that has prompted consolidation.On the academic side, many recent studies have shown that online brokerages have moved away from offering only online trading, and are now adding many other services (i.e., banking services) in order to survive in this volatile market This study focuses on how online brokerage firms can better serve the market from the online users' standpoint.Online trading became huge business in the late 1990s. The lure of 14
relatively low brokerage costs for electronic share trading, together with the capacity to monitor real-time market developments from a computer screen, have contributed to the fact that internet-based trading now comprises about 20% of all retail share trading. The online trading market has become flooded with discount brokers offering low prices and better transaction costs. Some of the most notable online discount brokers are Ameritrade, E*Trade, Charles Schwab and TD Waterhouse. Full-service firms, including banks, reacted to the emergence of online discount brokers by entering the online market with their own web sites. The full-service Finns want to protect their client base and gain market share in the new online market Discount firms felt a minimal impact from full-service firms entering the online trading marketplace. Many small discount brokerage companies are niche Finns, against which full-service firms do not compete directly. How ever, since the bear market started in early 2000, discount brokerage finns have been more affected by competition. Several firms attribute accelerated changes in competitive approaches to the marketplace to the entry of full-service Finns. These firms explain that competition in online trading has become more similar in product offerings and pricing. The only area left for online trading firms to gain a competitive advantage is through the service provided to their clients. Firms now also compete on the basis of quality service and response to clients. In a way, the entry of fullservice firms has benefited client consumers by establishing a range of product and service options from which they can choose. As a collateral benefit for investors, the convergence of full-service and discount firms' offerings has highlighted niche firms that can serve a limited client base more effectively than larger competitors (5,6,8,11,16). Some firms in the industry state that with the entry of traditional full-service brokers, investors have become more aware of their online trading options, and online trading now appears more legitimate to investors. When customers realized that Merrill Lynch, Fidelity Investments, Paine Webber and other major full-service firms had online trading web sites, it strengthened the credibility and safety of online trading, at least in investors' minds (18,9).With the current market conditions, firms will not win by competing on price or product because most online trading sites offer virtually the same things. Firms have to stand out on service, and the way firms serve people has to stand out on multiple channels. All the companies are offering multiple modalities: Schwab is now like a Smith Barney, and Fidelity Investments competes directly with E*Trade. Thomas Sutton, RightLine Editor-in-Chief, said that:Few people who set out to get rich quick trading stocks online actually become rich. The small group of get-rich-quickers who do make lots of money fast do it purely as a result of chance. They rarely keep their trading gains for very long. This is because trying to get rich quick causes stock traders to take on way too much risk. This is normally done by trading with excessive margin or by investing too much money in one position. Unfortunately, people who are in a hurry to make a lot of money trading online tend not to do a good job of managing risk. Managing trading risk involves focusing more on the potential downside of a trade or investment than the potential upside. In practical terms this means using an objective stock market trading method designed to limit drawdowns in the value of your stock portfolio. If you do a good job of managing risk you will 15
almost certainly make money trading the stock market over the long-term. Those who consistently ignore risk and overload the wagons in an attempt to get rich quick are guaranteed failure. For example, most traders with a get-rich-quick mindset don't realize that if they repeatedly bet everything on trades in which the probability of success is 90% they will eventually lose everything. Sure, they look like a genius for a while, but the one out of every ten trades that happens to be a 'loser' will wipe them out.
Stock market trading online is a type of speculation where education and skill can dramatically improve your odds of winning. Risk management is a skill. Reducing your stock market trading risk dramatically increases the odds that you will win. Stay focused on what you need to know and what you need to do to be successful trading the stock market online. Remember that money is just a by-product of wise trading methods and actions. According to Mark Crisp:-It is common now for people to undertake stock trading online. Historically there have been American stock markets from the 1700s. In Philadelphia an exchange for trading currency was established to enable business owners to support their business and to grow the economy. In the early 1800s, the New York Stock Exchange replaced the Philadelphia exchange. Initially New York Stock Exchange was a group of business people who met on a daily basis on Wall St to trade their stocks or bonds. This initial trading was all done outside until the Exchange moved indoors in the early 1900s. Whilst this traditional formula served its purpose admirably, trading is no longer the bricks and mortar industry it once was. Trading no longer requires you to be in Wall St. The way the New York Stock Exchange works could be compared to an auction. If a company is listed on the stock exchange, they have a post in Wall St whereby trades are listed and a specialist is employed as an "auctioneer" to oversee the bidding on each trade. This form of trading keeps an accurate balance between supply and demand in the stock market so the price of the shares is kept in check. These days, it is far easier to get involved in investing in stocks. In traditional stock trading, you engage a stock broker to take and place your order for you. You phone your broker to take the order and then there can be a delay in the order being executed. Now you no longer need to worry about using a stock broker to act on your behalf. If buying or selling stocks online you can place your order with the click of a mouse. Conveniently, trading this way is also a time saver. Setting up an account with a reputable,online brokerage company is easy. These online companies provide access to a wide range of services that were previously only available via a traditional bricks and mortar stock broking service. Setting up an online account gives you access to a variety of services including: up to the minute stock quotes, detailed historic performances of individual stocks, as well as detailed information about company fundamentals. One of the most common reasons investors like buying and selling stocks online compared with traditional brokerage is price. There are much lower brokerage fees for buying and selling stocks online than there are through buying and selling stocks at a traditional brokerage house.An important advantage of using an online brokerage service to trade stocks online is the significant price saving in brokerage fees. This is combined with the immediacy at which you can gather information required in making your stock 16
purchasing decisions when trading online. Many investors also like the independence associated with trading shares online. Many traditional brokerage houses would try to influence your decisions when trading shares, but an online account means all the decisions you make are fully your own. Online brokerage sites are not just about trading shares online.
Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 704 share shops in 280 cities and India’s premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets. Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to remain the largest shareholder. It is the retail broking arm of the Mumbaibased SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Sharekhan Ltd. is a brokerage firm which is established on 8 th February 2000 and now it is having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. The Company's online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. Share khan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. One can surf across 5,500 17
companies for in-depth information, details about more than 1,500 mutual fund schemes and IPO data. One can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more.
THE COMPANY Name of the company: Sharekhan ltd. Year of Establishment: 1925 Headquarter: Sharekhan SSKI A-206 Phoenix House Phoenix Mills Compound Lower Parel Mumbai - Maharashtra, INDIA- 400013 Nature of Business: Service Provider Services: Depository Services, Online Services and Technical Research. Number of Employees: Over 3500 Website: www.sharekhan.com Slogan: Your Guide to The Financial Jungle.
Vision To be the best retail brokering Brand in the retail business of stock market.
Mission To educate and empower the individual investor to make better investment decisions through quality advice and superior service. Sharekhan is infact• Among the top 3 branded retail service providers • No. 1 player in online business • Largest network of branded broking outlets in the country serving more than 7, 00,000 clients.
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Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength.
AWARDS AND ACHIEVEMENTS - SSKI has been voted as the Top Domestic Brokerage House in the research category, twice by Euromoney Survey and four times by Asiamoney Survey. - Sharekhan Limited won the CNBC AWARD for the year 2004. The team has completed over US$5 billion worth of deals in the last 5 years - making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. If we experience their language, presentation style, content or for that matter the online trading facility, we'll find a common thread; one that helps us make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Sharekhan's all about! "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the’ stock markets. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial services power house, with strong presence in Retail equities Institutional equities Investment banking. In delhi it is having the branches at netaji subash place and Nehru place. We have been given the centre at netaji subash place.
Sharekhan provides 4 in 1 account. -
Demat a/c Trading a/c: for cash calculation Bank a/c: for fund transfer 19
-
Dial and Trade: for query relating trading
PRODUCTS AND SERVICES OF SHAREKHAN LIMITED
(Figure-3)
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METHODOLOGY: The data collection methods include both primary and secondary collection methods. Primary method: This method includes the data collected from the questionnaires and personal interaction with authorized members of Sharekhan Securities limited. Secondary method: The secondary data collection method includes: -The lecturers delivered by the superintendent. -The brochures and material provided by Sharekhan Securities limited. -The data collected from the magazines of the NSE, economic times and from internet.
Demat account: Sharekhan is a depository participant. This means that we can keep the shares in dematerialized form in Sharekhan. But for this one has to the demat account in Sharekhan. Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in his account with the DP. In Sharekhan, under demat account there are two types of terminals. TYPE OF DEMAT DEPOSIT (Refundable) ACCOUNT TERMINAL
CHARGES (nonrefundable)
CLASSIC
Rs.5000
Rs.750
Rs.10000
Nil
Rs.5000
Rs.1000
Rs.10000/25000
Nil
TRADETIGER
Account opening: Opening a DP account with SharekhanOne can open a Depository Participant (DP) account, either through a Sharekhan branch or through a Sharekhan Franchisee center. There is no fee for opening DP accounts with Sharekhan. However a nominal deposit (refundable) is charged towards services which will be adjusted against all future billings.
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All investors have to submit their proof of identity and proof of address along with the prescribed account opening form.
BROKERAGE STRUCTURE OF SHAREKHAN BROKERAGE: INTRADAY
DELIVERY
CASH- EQUITIES
0.05%
0.5%
FnO
0.05%
PREPAID SCHEME
0.025%
0.25%
Sharekhan has tie up with the following banks:
HDFC Axis Bank
IDBI
Citi Bank
IndusInd Bank
Union Bank
ICICI Bank.
MINIMUM INVESTMENT IN MUTUAL FUND: INVESTMENT
MINIMUM AMOUNT
Mutual Fund (Any Company)
5000
Systematic Investment Plan (Any Company)
500
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CUSTOMER
Business class people (high class)
High Net worth Individuals
Service class people
Government Employees
Young Adults (19-30 yrs.)
Adults (35-50 yrs.)
HUF (Hindu Undivided Family)
Women (literate and working)
Market Share Sharekhan enjoyed about 20 per cent market share in Web business (Internet trading) in stock markets. Three years ago, Web trading showed lot of promise but with the market witnessing a downturn, there was not much interest among retail customers.
Profits The share of Web trading constituted 22 per cent of the revenue. As Sharekhan's daily trading volume was over Rs 200 crore, the share of Web trading at about Rs 40 crore a day was substantial and a larger part of the volume was coming from day traders
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Its core services are:
Equities, and Derivatives trading on the National Stock Exchange of India Ltd. (NSE), and Bombay Stock Exchange Ltd. (BSE), Commodities trading on National Commodity and Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX), Depository services, Online trading services, IPO Services, Dial-n-Trade Portfolio management services, Fundamental and Technical Research services, In addition to this they also provide advisory services and distributions for mutual funds. Sharekhan ValueLine (a monthly publication with reviews of recommendations, stocks to watch out for etc.) Daily research reports and market review (High Noon & Eagle Eye) Pre-market Report Daily trading calls based on Technical Analysis Cool trading products (Daring Derivatives and Market Strategy)
Sharekhan First Step The Sharekhan FirstStep is a brand new program designed especially for those who are new to investing in shares. All one have to do is open a Sharekhan FirstStep account and they guide us through the investing process.
Features of Trading With Sharekhan: 1. 2. 3. 4.
Freedom from paperwork Instant credit and money transfer Trade from any net enabled PC After hour orders 24
5. 6. 7. 8.
Online orders on the phone Timely advice and-research reports Real-time Portfolio tracking Information and Price alerts.
WEEKLY ANALYSIS
WEEK No. 1: Had training for three days. In this training we were told about Sharekhan Company, history of Sharekhan, organization structure, products, Sharekhan research reports, trading techniques, clients, Demat accounts, Derivatives, and Online trading accounts in brief - Speed Trade and Classic account, learned how to buy and sell shares through these online terminals, Sales technique, Sharekhan`s brokerage. As this was my first week and had training for 3 days I got very less time to understand the products, market and potential customers.
WEEK No. 2: Gained detailed knowledge about classical account. Classical account is a web-based product of sharekhan and consists of Online trading in Equity & Derivative Dial-n-Trade Online Trading + Bank + demat Cash transfer Order and trade confirmation through e-mails Single screen interface for cash and derivative
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WEEK No. 3: In this week we were told about the speed trade. Speed trade tiger is a software of sharekhan which is given to its customers for trading. Speed trade enables its users Online trading in Equity & Derivative Dial-n-Trade Online Trading + Bank + Demat Cash Transfer Order and trade confirmation through e-mails Single screen interface for cash and derivative Live Terminal
WEEK No. 4: We were asked to open a demat account so that we could have practical knowledge about what we have learned in three previous weeks and also we were given an assignment to prepare a portfolio of our investment in five different sectors.
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AGE STRUCTURE OF RESPONDENTS
AGE 15-30 31-45 45-60
RESPONDENT 14 4 2
(Figure-4)
INTERPRETATIONIt can be seen that most of the people who are between 15 to 30 old are most involved in onlne trading while there are four people who are between 31 to 45 and only two are above 45.
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INCOME
Income/Month Below 15000 15001 to 30000 30001 to 45000 Above 45000
(Figure-5)
INTERPRETATION28
Number of Member 12 5 1 2
This is clear from the chart that people having income less than 15000 are more involved in online trading and 5 people are having income more than 15000 but less than 30000 and 3 people are having income more than 30000.
EDUCATION QUALIFICATION
(Figure-6)
INTERPRETATION29
It can be seen that most of the people who are involved in online trading are graduates and 5 respondents are post graduates and 2 people have different education qualification.
ACCOUNT OPENING Account Ref Personal acquintance ReferralClients ReferralNon Clients Call / Wall in Personal Prospect visit
Number of Member
(Figure7)
INTERPRETATIONMany of the respondents opened their accounts through agent(client) of the company & 6 people opened by personal acquaintance while 6 respondents used other mode of account opening.
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6 8 1 2 3
FEEL SAFE..?
Answer Yes No
(Figure-8)
INTERPRETATION31
Number of Member 14 6
It is shown in the figure that 70% of respondents feel safe while trading online and 30% are having fear of fraud.
MOST TRADED STOCK
32
stock Equity M.Funds Commoditie s F&O Other
(Figure-9) 33
Member 7 8 3 1 1
INTERPRETATIONIt can be seen that 40% respondents most trade in mutual fund and 7 people trade in equity & 3 invest in commodities while 1 person trades in future and option and 1 in other stocks.
EXPERIENCE
experience Below 5 Year 5 to 10
Number of Member 17 3
(Figure-10)
RECEIVE UPDATED INFORMATION
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Answer Yes No
Number of Member 9 11
(Figure-11)
SUCCESSFUL BROKER
Successful broker Strongly agree Agree Moderate Disagree Strongly disagree
(Figure-12)
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Number of Member 1 7 10 1 1
INTERPRETATION- It can be seen that most of respondents moderately agree that their broker is successful in online trading & 35% just agree while 1 person is strongly agree on the statement.
SWOT ANALYSIS
Strengths It is a pioneer in online trading with a turn over of Rs.400 crores and more than 800 peoples working in the organization. SSKI the parent company of Share Khan has more than eight decades of trust and credibility in the Indian stock market. In the Asian Money Broker’s poll SSKI won the “India’s best broking house for 2004” award. Share Khan provides multi-channel access to all its customers through a strong online presence with www.sharekhan.com, 250 share shops in 130 cities and a call-center based Dial-n-Trade facility Share Khan has dedicated research teams for fundamental and technical research. Which constantly track the pulse of the market and provide timely investment advice free of cost to its clients which has a strike rate of 70-80%. 36
Easier access to the customer due to largest ground network of 280 branded share shops in 120 cities. Efficient research and analysis team, which is, interpreting the economy and company’s performance accurately, is enhancing the profitability of the client.
Weakness Localized presence due to insufficient investments for country wide Expansion. Lack of awareness among customers because of non-aggressive promotional strategies (print media, newspapers, etc). Lesser emphasis on customer retention. Focuses more on HNIs than retail investors which results in meager marketShare as compared to close competitors. Promotional activities conducted by the company are not at par with the other Firms.
Opportunities With the booming capital market it can successfully launch new services and raise its client’s base. It can easily tap the retail investors with small saving through promotional Channels like print media, electronic media, etc. As interest on fixed deposits with post office and banks are all time low, more and More small investors are entering into stock market. 37
Abolition of long term capital gain tax on shares and reduction in short term capital gain is making stock market as hot destination for investment among small investors. Increasing usage of internet through broadband connectivity may boost a whole new breed of investors for trading in securities.
Threats Aggressive promotional strategies by close competitors may hamper Share Khan’s acceptance by new clients. Lack of sufficient branch-offices for speedy delivery of services. Other players are providing margin funds to investors on easy terms where as there is no such facility in share khan. More and more players are venturing into this domain which can further reduce the earnings of Share Khan. Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the market.
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FINANCIAL ANALYSIS Financial statement analysis is a judgmental process. One of the primary objectives is identification of major changes in trends, and relationships and the investigation of the reasons underlying those changes. The judgment process can be improved by experience and the use of analytical tools. Probably the most widely used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items on the financial statement. Financial ratios are usually expressed in percentage or times. Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories:
Liquidity ratios measure a firm's ability to meet its current obligations. Profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business. Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time. Efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business.
A ratio can be computed from any pair of numbers. Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard computation of them does not exist. The following ratio presentation includes ratios that are most often used when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company driven procedure. Analysts are drawn to and use the ones they are comfortable with and understand. 39
Liquidity Ratios Working Capital Working capital compares current assets to current liabilities, and serves as the liquid reserve available to satisfy contingencies and uncertainties. A high working capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm can pay its current liabilities when due.
Formula
Current Assets - Current Liabilities
Acid Test or Quick Ratio A measurement of the liquidity position of the business. The quick ratio compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation. Consequently, a business's quick ratio will be lower than its current ratio. It is a stringent test of liquidity.
Formula
Cash + Marketable Securities + Accounts Receivable Current Liabilities
Current Ratio Provides an indication of the liquidity of the business by comparing the amount of current assets to current liabilities. A business's current assets generally consist of cash, marketable securities, accounts receivable, and inventories. Current liabilities include accounts payable, current maturities of long-term debt, accrued income taxes, and other accrued expenses that are due within one year. In general, businesses prefer to have at least one dollar of current assets for every dollar of current liabilities. However, the normal current ratio fluctuates from industry to industry. A current ratio significantly higher than the industry average could indicate the existence of redundant assets. Conversely, a current ratio significantly lower than the industry average could indicate a lack of liquidity.
Formula
Current Assets Current Liabilities
Cash Ratio Indicates a conservative view of liquidity such as when a company has pledged its receivables and its inventory, or the analyst suspects severe liquidity problems with inventory and receivables.
Formula
Cash Equivalents + Marketable Securities Current Liabilities
Profitability Ratios 40
Net Profit Margin (Return on Sales) A measure of net income dollars generated by each dollar of sales.
Formula
Net Income * Net Sales
* Refinements to the net income figure can make it more accurate than this ratio computation. They could include removal of equity earnings from investments, "other income" and "other expense" items as well as minority share of earnings and nonrecuring items.
Return on Assets Measures the company's ability to utilize its assets to create profits.
Formula
Net Income * (Beginning + Ending Total Assets) / 2
Operating Income Margin A measure of the operating income generated by each dollar of sales.
Formula
Operating Income Net Sales
Return on Investment Measures the income earned on the invested capital.
Formula
Net Income * Long-term Liabilities + Equity
Return on Equity Measures the income earned on the shareholder's investment in the business.
Formula
Net Income * Equity
Gross Profit Margin Indicates the relationship between net sales revenue and the cost of goods sold. This ratio should be compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs.
Formula
Gross Profit Net Sales 41
Financial Leverage Ratios Total Debts to Assets Provides information about the company's ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors.
Formula
Total Liabilities Total Assets
Capitalization Ratio Indicates long-term debt usage.
Formula
Long-Term Debt Long-Term Debt + Owners' Equity
Debt to Equity Indicates how well creditors are protected in case of the company's insolvency.
Formula
Total Debt Total Equity
Long-term Debt to Net Working Capital Provides insight into the ability to pay long term debt from current assets after paying current liabilities.
Formula
Long-term Debt Current Assets - Current Liabilities
Efficiency Ratios Cash Turnover Measures how effective a company is utilizing its cash.
Formula
Net Sales Cash
Sales to Working Capital (Net Working Capital Turnover) Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company's working capital is working too hard.
Formula 42
Net Sales Average Working Capital Total Asset Turnover Measures the activity of the assets and the ability of the business to generate sales through the use of the assets.
Formula
Net Sales Average Total Assets
Fixed Asset Turnover Measures the capacity utilization and the quality of fixed assets.
Formula
Net Sales Net Fixed Assets
Capital Gearing Ratio: Closely related to solvency ratio is the capital gearing ratio. Capital gearing ratio is mainly used to analyze the capital structure of a company.
Formula
Equity Share Capital Fixed Interest Bearing Funds
Retained Earnings to Total Assets Ratio This ratio indicates the extent to which assets have been paid for by company profits.A retained earnings to total assets ratio near 1:1 (100%) indicates that growth has been financed through profits, not increased debt.A low ratio indicates that growth may not be sustainable as it is financed from increasing debt, instead of reinvesting profits.
Formula
Retained earnings Total assets
Cash Flow Indicator Ratios: Operating Cash Flow/Sales Ratio This ratio, which is expressed as a percentage, compares a company's operating cash flow to its net sales or revenues, which gives investors an idea of the company's 43
ability to turn sales into cash.
Formula:
Operating cash flow Net sales(revenues)
Cash Turnover Ratio The cash turnover ratio indicates the number of times that cash turns over in a year Formula Sales Cash Cash Flow to Long Term Debt Ratio The cash flow to long term debt ratio appraises the adequacy of available funds to pay obligations. Formula Cash flow Long term debt
Operations Cash Flow to Current Liabilities Ratio If the operations cash flow to current liabilities ratio keeps increasing, it may indicate that cash inflows are increasing and need to be invested. Formula Cash flow from operations Current liabilities
Cash Flow for Investing to Cash Flows from Operating and Financing This ratio compares the funds needed for investment to the funds obtained from financing and operations. Formula Cash flows from investing . Cash flows from operations + cash flows from financing
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SOLVING & ANALYSING RATIOS: i> Net profit margin = 152.02 x100 = 22.82% 665.99 A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. This is compared with the last year’s profit margin of company.
ii> Quick ratio = 1656.05 = 1.31 1258.52 Ideal Quick ratio is 1:1. Company needs to improve this.
iii> Current ratio = 1709.81 = 1.36 1258.52 Ideal Quick ratio is 2:1. Company needs to increase its assets or decrease its liabilities.
iv> Operating profit margin = 246.85x100 = 37.06 665.99 A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.
v> Total debt/equity ratio = 497.750 = 0.45 1107.71
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The normally acceptable debt-equity ratio is 2:1. Ratio less than one means equity provides a majority of the financing.
vi> Return on investment = 152.02x100 = 9.47 1605.46 Higher ratio is better. In this case the ratio has increased as compared to last year’s ratio (8.23).
the
vii> Gross profit margin = 271.14 x 100 = 40.72% 665.99 Higher the ratio better it is.
viii> Return on equity = 152.02 = 13.73 1107.71
ix> Capitalization ratio = 497.75 = 0.31 or 31% 1605.46 Low debt and high equity levels in the capitalization ratio indicate investment quality.
x> Long term debt to net working capital = 497.75 = 1.11 451.29
xi> Fixed assets turnover ratio = 665.99 = 0.57 1152.42 A high ratio means a high rate of efficiency of utilization of fixed asset and low ratio means improper use of the assets.
xii> Debtor turnover ratio = 665.99 = 1.15 577.50 Higher ratio is better. In this case company’s net sale is more than the average debtors.
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xiii> Capital gearing ratio = 1107.71 = 2.23 497.75
xiv> Operating cash flow ratio = 5.120 x 100 = 0.76% 665.99 The greater the amount of operating cash flow, the better.
xv> Cash flow to long term debt = 131.59 = 0.26 497.75 The higher the percentage ratio, the better the company's ability to carry its total debt. In this case, their debt load is higher than their operating cash flows, giving it a ratio of less than one, however the percentage (being below 40%) is considered low.
xvi> Cash turnover ratio = 665.99 = 1.18 561.84
xvii> Operations cash flow to current liabilities = 5.1200 x 100 = 0.49% 1026.21 Any result less than 1 indicates that the company is not able to liquidate its current liabilities from operating cash flow; the company will probably have to sell assets, borrow money or issue stock in order to meet its short term debt obligations.
xviii> Retained earnings to total assets = 177.54 = 0.11 1605.46 Retained earnings to total assets ratio near 1:1 (100%) indicates that growth has been financed through profits, not increased debt. This low ratio indicates that growth is not sustainable as it is financed from increasing debt, instead of reinvesting profits.
xix> Equity multiplier = 1605.46 = 1.44 1107.71 The equity multiplier ratio discloses the amount of investment leverage. A higher equity multiplier indicates higher financial leverage, which means the company is relying more on debt to finance its assets.
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xx> Cash flow for investing to cash flow from operating and financing =-
265.620 5.12+392.08
= -265.62 397.20 = -0.66
LIMITATIONS OF THE STUDY: Despite of the training my level best, there were still some limitation which I think remains there to draw fruitful conclusion. There were some practical problems which come across and could not be properly death with
The advisory services being promised by the brokers would be of little use to investors looking for an insight into the market.
As a client one will access the NSE through a server of the online brokerage and this may involve queuing delays
The company does not provide its financial report to anyone. So the balance sheet, cash-flow-statement & profit and loss account shown in this project are not audited and are of some other’s company.
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LEARNINGS & FINDINGS
LEARNINGS: During my summer training, I have learned:
Importance of information technology in the field of stock broking is immense.
Stock broking companies run with the help of IT. The terminal through which the brokers buy and sell shares is software that completely depends on the internet. For Sharekhan, this terminal has been designed by the software company “Spider”. Buying and selling through internet is fast. As soon as the prices of the shares goes up or comes down then they can be sold or purchased instantly within seconds. Customer Relationship is very necessary for the company to retain the customers.
In Sharekhan Ltd. I have learned a lot relating to the finance, learned the meaning of the words that are mostly used in the share market. 49
Learned about various products of the Sharekhan Limited, Learned various aspects regarding Share Market.
Learned how to use online trading terminal.
Learned the various policies of the company.
Learned about various products used in the share market especially Demat accounts and
Derivatives.
Got the practical knowledge of the market.
FINDINGS AND OBSERVATIONS:
Fluctuations are more in secondary market than any other market.
There are more speculators than investors.
Information plays a vital role in the secondary market.
Previously rolling settlement is T+5 days, now it changed to T+2 days and further it will be changing to T+1 day.
It was also observed that many broking houses offering internet trading allow clients to
use their conventional system as well just ensure that they do not
loose them and this instead of offering e-broking services they becomes service providers.
The number of players is increasing at a steady rate and today there are over a dozen of brokerage houses who have opted to offer net trading to their customers and prominent among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct.
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CONCLUSION AND RECOMMENDATIONS
Things have changed for the better with the SHAREKHAN going on-line coupled with endeavor to stream line the whole trading system, things have changed dramatically over the last 3 to 4 years. New and advanced technologies have breached geographical and cultural barriers, and have brought the countrywide market to doorstep.
The introduction of on-line trading would influence the investors resulting in an increase in the business of the exchange. It has helped the brokers handling a vast amount of transactions and this can be an efficient trading, delivering, settlement system with adequate protection to investors. The trading of SHAREKHAN of the first day was Rs. 1.8 crores.
Due to invention of online trading there has been greater benefit to the investors as they could sell / buy shares as and when required and that to with online trading.
The broker’s has a greater scope than compared to the earlier times because of invention of online trading.
The concept of business has changed today, this is a service oriented industry hence the survival would require them to provide the best possible service to the clients.
I recommend the exchange authorities to take steps to educate Investors about 51
their rights and duties. I suggest to the exchange authorities to increase the investors’ confidences.
I recommend the exchange authorities to be vigilant to curb wide fluctuations of prices.
The speculative pressures are responsible for the wide changes in the price, not attracting the genuine investors to the greater extent towards the market.
Genuine investors are not at all interested in the speculative gain as their investment is based on the future profits, therefore the authorities of the exchange should be more vigilant to curb the speculation.
BIBLIOGRAPHY
www.sharekhan.com www.economictimes.com www.moneycontrol.com www.bseindia.com www.nseindia.com www.sebi.gov.in www.investors.com www.investopedia.com 52
Newspapers:-
The Times of India The Economic Times BOOKS:-
Beri G.C, Marketing Research Gupta C.B, Marketing Management.
ANNEXURE Balance sheet
Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments
Mar ' 10 57.04 0.40 1,050.6 7 1.17 496.58 1,605.8 6 108.83 60.63 48.20 1.75 1,104.2 2 53
Mar ' 09 56.68 11.37 980.13 1.70 0.10 1,049.9 9 143.68 44.94 98.73 4.51 869.31
Mar ' 10 1,709.8 Current assets, loans & advances 1 1,258.1 Less : current liabilities & provisions 2 Total net current assets 451.69 Miscellaneous expenses not written 1,605.8 Total 6 1,101.4 Book value of unquoted investments 9 Market value of quoted investments 3.27 Contingent liabilities 24.17 2852.1 Number of equity sharesoutstanding (Lacs) 5
Mar ' 09 778.75 701.31 77.43 1,049.9 9 869.28 0.03 20.85 2834.0 0
Mar ' Mar ' Cash flow statement 10 09 Mar ' Mar ' Income 10 09 Operating income 665.99 542.27 Profit before tax 233.31 151.48 Expenses Net cashflow-operating activity 5.12 513.70 Material Net cash consumed used in investing activity - -18.71 Manufacturing expenses 14.52265.62 93.32 Personnel expenses 136.91-279.11 Netcash used in fin. activity 162.62392.08 Selling expenses 137.18131.59 67.38215.88 Net inc/dec in cash and equivlnt Adminstrative expenses 104.83430.25 85.81214.37 Cash and equivalnt begin of year Expenses capitalisedend of yearCash and equivalnt 561.84 430.25 Cost of sales 419.14 383.42 Operating profit 246.85 158.85 Other recurring income 24.30 29.37 Profit loss account Adjusted PBDIT 271.14 188.22 Financial expenses 13.88 11.15 Depreciation 31.86 25.56 Other write offs Adjusted PBT 225.40 151.51 Tax charges 77.34 47.88 Adjusted PAT 148.07 103.63 Non recurring items 7.90 -0.03 Other non cash adjustments -3.96 2.23 Reported net profit 152.02 105.83 QUESTIONNAIRE Earnigs before appropriation 277.22 228.74 54 Equity dividend 85.20 79.45 Preference dividend Dividend tax 14.48 13.50 Retained earnings 177.54 135.79
A STUDY ON ONLINE TRADING ON SHAREKHAN LTD The purpose of this questionnaire is to know the behavior of investors about online trading and this is only for academic purpose.
1. Name……………………… 2. Age □ 15 to 30
□ 31 to 45
□ 46 to 60
□ above 60
3. Income per month □ Below 15000
□ 15001 to 30000
□ 30001 to 45000
□ above 45000
4. Education qualification □ Graduation
□ post graduation
□ Others 5. Do you know about online trading? □ Yes
□ No
6. How was account opened? □ Personal acquaintance
□ Referral-Clients
□ Referral-Non Clients
□ Call/Walk in
□ Personal Prospect Visit 7. Net worth involved in online trading ………………...
8. Do you feel safe while trading online? 55
□ Yes
□ No
9. In which stock you most trade online □ Equity
□ Mutual Funds
□ Commodities
□ F&O Equitie
□ Other 10. No. of years of online trading experience in stocks at this firm □ below 5 yrs
□ 5 to 10
11. Do you receive updated online information regarding the stock market from your dealer/broker? □Yes
□No
12. Do you believe that your trader/broker is very successful in online trading? □ Strongly Agree
□Agree
□Disagree
□Strongly Disagree
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□Moderate
