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CHAPTER 1

INTRODUCTION

Globalization has proved to be a boon for the Indian economy. After globalization, there

has been a tremendous growth in the Indian economy. Every sector of the economy has

shown an outstanding performance after globalization.

The project was under taken as to study the Indian online trading. Earlier Trading was

confined in limited boundaries but now the scenario has been totally different after the

entrance of online trading. There is a cut throat competition between the broking houses.

Now the brokers are more concerned about their customers to improve their performance.

The sector is undergoing fundamental changes that have diluted its traditional role of

protecting small deposits against capital and income risk and facilitating the conversion

of savings into investment.Also there have been a drastic increase in the volume of share

traded on stock exchange and with that the online trading has shown Bull Run.

Increasing Internet Trading Volume

Online trading is the service offered on the internet for purchase and sales of shares. Inthe real world, you place orders on your stock broker either verbally or in a written form.

In online trading you will access a stock brokers website through your internet enabled

PC and place orders through the brokers internet based trading engine. These orders are

routed to the stock exchange without manual intervention and executed their own in the

matter of a few seconds. From the past two years, the volume of the internet trading has

increased largely.

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(Graph 1)

Brokerage Industry:

Post major reforms initiative in early 2000s brokerage industry in India is experiencing

rapid growth and diversity. At present apart of brokerage business industry is also

offering wide range of financial services. These developments have resulted in huge spurt

in business and also growing market share of the large sized brokerage houses has led to

surge in enterprise value. In the year 2007 IPOs of large firms (Motilal Oswal, Religare,

and Edelweiss) received huge response (Indian catalog, 2001). At the same time global

and private equity firms have taken stake in brokerage firms. In India there are about 45

equity brokerage houses that are at present listed in the stock exchanges.

Name of broking houses listed in BSE and NSE:-

Unitech

HDIL

JP Associates

NHPC

IFCI

DLF

NTPC

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IDFC

Future Venture India

Industry InsightMajority of the broking firms entered the business post 1990. A majority of members

have memberships in more than one stock exchange and across equities, equity

derivatives and commodities futures in domestic and International stock exchange.

On the back of growing equity culture broking activity is spreading in Tier II and Tier III

cities in India.

Tier II Tier III

Coiambatore Trichy

Trivandrum MaduraiCochin Nasik

Vizag Baroda

Manglore

Pune

Chandigarh

Amritsar

Ludhiana

Jalandhar

Deepening financial system and economic growth has provided growth and expansion

opportunities to broking firms. Access to public equity markets and growing international

investors interest has enabled them to raise resources.

Although there are more than 9000 brokers registered with SEBI 80% of the turnover in

NSE and BSE is accounted by about 100 brokers.

One of the oldest trading industries that have been around even before the establishment

of BSE is the Indian Broking Industry. Post liberalization there have been number of

changes, despite this the stock broking industry was at its pace and retained its

sustainable growth.

To study the trend in the stock broking industry, if we take the database of over 394

broking firms. All the data for the study was collected through responses received

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directly from the broking firms. The insights have been arrived at through an analysis on

various parameters, pertinent to the equity broking industry, such as region, terminal,

market, branches, sub brokers, products and growth areas.

Some key characteristics of the sample 394 firms are:

On the basis of geographical concentration, the west region has the maximum

representation of 52%. Around 24% firms are located in the North, 13% in the South and

10% in the East.

Region Percentage

West 52

North 24

South 13East 10

On basis oftime horizon 3% firms started broking operations before 1950, 65% between

1950-1995 and 32% post 1995 on the basis of terminals, 40% are located at Mumbai,

12% in Delhi, 8% in Ahmedabad , 7% in Kolkata, 4% in Chennai and 29% are from other

cities.

In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade at both

exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and 45% at both,

whereas in the debt market, 31% trade at NSE, 26% at BSE and 43% at both exchanges

Majority of branches are located in the North, i.e. around 40%. West has 31%, 24% are

located in South and 5% in East.

In terms of sub-brokers, around 55% are located in the South, 29% in West, 11% in

North and 4% in East.In terms of various areas of growth, 84% firms have expressed interest in expanding

their institutional clients, 66% firms intend to increase FII clients and 43% are interested

in setting up JV in India and abroad.

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In terms of IT penetration, 62% firms have provided their website and around 94% firms

have email facility.

(Graph 2)

Branches & Sub-Brokers

The maximum concentration of branches is in the North, with as many as 40% of all

branches located there, followed by the Western region, with 31% branches. Around 24%

branches are located in the South and East constitutes for 5% of the total branches of the

total sample.

In case of sub-brokers, almost 55% of them are based in the South. West and North

follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total

sub-brokers.

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(Graph 3)

Where One Firm Looses Out To Other

Lack of well established branches put smaller brokers at a disadvantage when compared

to larger Brick and Mortar players who have presence in every corner of the country.

Bulk of client base is made up of retail investors. Institutional and other high value high

volume investors prefer to trade with so called Blue Chip Brokers. Retail investors are

easy comeeasy go accompanied with inconsistent trading habits. In Bull Run they gain

confidence to invest but in correction phase they lose confidence easily.

High competition among Stock brokers has put significant pressure on the prices. Market

consolidation and merger are expected to keep the broking industry viable in the long

run.

Demanding customers asks for 24/7/365 access to information and transaction capability.

Providing it with minimum overheads is very challenging especially for newer firms who

are yet to realize margin of scale.

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INDIAN STOCK MARKETS AND EXCHANGES

There are 23 recognized stock exchanges in India, including the Over the Counter

Exchange of India (OTCEI) for small and new companies and the National Stock

Exchange (NSE) which was set up as a model exchange to provide nation-wide services

to investors.

Bombay Stock Exchange (BSE)

Bombay Stock Exchange is the oldest stock exchange of India, a premier Stock

Exchange that pioneered the stock broking activity in India, having128 years of

experience seems to be a proud milestone in Indian stock market history. A lot has

changed since 1875 when 318 persons became members of what today is called "The

Stock Exchange, Mumbai" by paying a princely amount of Re1.

Since then, the country's capital markets have passed through both good and bad periods.

The journey in the 20th century has not been an easy one. Till the decade of eighties,

there was no scale to measure the ups and downs in the Indian stock market. The Stock

Exchange, Mumbai (BSE) in 1986 came out with stock index that subsequently became

the barometer of the Indian Stock Market.

SENSEX

SENSEX is not only scientifically designed but also based on globally accepted

construction and review methodology. First compiled in 1986, SENSEX is a basket of 30

constituent stocks representing a sample of large, liquid and representative companies.

The base year of SENSEX is 1978-79 and the base value is 100. The index is widely

reported in both domestic and international markets through print as well as electronic

media.

The index is calculated on the Free-float Market Capitalization methodology. The

"Free-float Market Capitalization" methodology of index construction is regarded as an

industry best practice globally. All major index providers like NIKKEI, NASDAQ and

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DOW JONES use the free float methodology. BSE- PSV index do not use free float

methodology.

The growth of equity markets in India has been phenomenal increase in the previous

decade. Right from early nineties, the stock market witnessed heightened activity in terms

of various bull and bear runs. The SENSEX captured all these events in the most judicial

manner. One can identify the booms and busts of the Indian stock market through sensex.

Major players registered at BSE are ICICI, HDFC, Reliance Industries, TATA motors,

Infosys.

National Stock Exchange (NSE)

The National Stock Exchange of India Limited has genesis in the report of the High

Powered Study Group on Establishment of New Stock Exchanges, which recommended

promotion of a National Stock Exchange by financial institutions (FIs) to provide access

to investors from all across the country on an equal footing. Based on the

recommendations, NSE was promoted by leading Financial Institutions at the behest of

the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,

1956 The Capital Market (Equities) segment commenced operations in November 1994

and operations in Derivatives segment commenced in June 2000.

When Indias National Stock Exchange (NSE) was started in 1994, few believed it would

survive. How could a stock exchange run by a team of untested professionals headed by a

former development banker succeed against existing stock exchanges run by third

generation, savvy stock brokers.

Critics even went to the extent of warning that NSEs sophisticated systems would be a

misfit in an Indian capital market dominated by physical deliveries, arbitrary speculative

trade, and lengthy trade settlements.

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Today, with number of trades touching 6.5 billion (appx) a day and turnover touching

turnover touching Rs 1139.2 billion in value terms, NSE towers over all the other stock

exchanges in the country.

In a ten-year period (NSE completed a decade on June 30, 2004) the National Stock

Exchange has tilted the market system in favor of investors and away from a significant

bias in favor of intermediaries. For a mass of investors across the country, the NSE is

now the focal point for trading in stocks, and futures and options.

The Stock Exchange, (NSE) came out with a stock index that subsequently became

another barometer of the Indian stock market known as NIFTY.

Major players of NSE:-

RIL

NTPC Ltd

BHEL

CIPLA Ltd

ACC Ltd

Major indices of NSE:-

BANK NIFTY

CNX 500

CNX DEFTY

CNX IT

CNX NIFTY

Nifty has been the focal point of investors, as it provides trading the shares as well as

index in futures and options. Before Nifty came into existence trading of index concept

was not present it was introduced by Nifty and is present in it only, till date.

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Stock Trading

Traditionally stock trading is done through stock brokers, personally or through

telephones. As number of people trading in stock market increase enormously in last fewyears, some issues like location constrains, busy phone lines, miss communication etc

start growing in stock broker offices. Information technology (Stock Market Software)

helps stock brokers in solving these problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can trade

shares through a website without any manual intervention from Stock Broker.

In this case these Online Stock Trading companies are stock broker for the investor. They

are registered with one or more Stock Exchanges. Mostly Online Trading Websites in

India trades in BSE and NSE.

There are two different type of trading environments available for online equity trading:-

1. Installable software based Stock Trading Terminal

2. Web (Internet) based trading application

1. Installable software based Stock Trading Terminal

This trading environment requires software to be installed on investors computer. This

software is provided by the stock broker. This softwares require high speed internet

connection. These kind of trading terminals are used by high volume intraday equity

traders.

Advantages

Orders directly send to stock exchanges rather than stock broker. This makes order

execution very fast.

It provide almost each and every information which is required to a trader on a singlescreen including stock market charts, live data, alerts, stock market news etc.

Disadvantages

Location constrains - You cannot trade if you are not on the computer where you have

installed trading terminal software.

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It requires high speed internet connection.

These trading terminals are not easily available for low volume share traders.

2. Web (Internet) based trading applicationThis kind of trading environment doesn't require any additional software installation.

They are like other internet websites which investor can access from around the world

through normal internet connection. Below are few advantages and disadvantages of

Online Stock Market Trading:

Advantages of Online Stock Trading (Website based)

Real time stock trading without calling or visiting broker's office.

Display real time market watch, historical datas, graphs etc.

Investment in IPOs, Mutual Funds and Bonds.

Check the trading history; demat account balance and bank account

balance at any time.

Provide online tools like market watch, graphs and recommendations to do

analysis of stocks.

Place offline orders for buying or selling stocks.

Set alert to inform you certain activity on the stock through email or sms. Customer service through Email or Chat.

Disadvantages of Online Stock Trading (Website based)

Website performance - sometime the website is too slow or not enough user friendly.

Little long learning curve especially for people who dont know much about computer.

Brokerages are little high.

Stock Brokers

Investor require a stock broker to buy and sell shares in stock exchanges like BSE and

NSE etc. stock brokers are registered members of stock exchange. A stock broker can

register to and or ore stock exchanges. Only stock brokers can directly buy and sell shares

in stock market. An investor must contact a stock broker to trader stocks. Brokers charge

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commission (brokerages) for their services. Brokerage is usually a percentage of total

amount of trade and varies from broker to broker.

Stock Trading

Earlier stock trading was done through stock brokers personally or through telephones.

Information technology (stock market software i.e. NEAT for NSE and BOLT for BSE)

helps stock brokers in solving these problems with online stock trading.

Need for a broker

As per SEBI (Securities and Exchange Board of India.) regulations, only registered

members can operate in the stock market. One can trade by executing a deal only through

a registered broker of a recognized Stock Exchange or through a SEBI- registered sub-

broker.

The financials and investment industry is a highly competitive in nature with almost well

established firms diversifying and entering into this industry. As of today there are Over

2000 brokers, 10000 sub brokers and 1 core investors. It is highly Competitive with entry

of new aggressive players.

MAJOR PLAYERS

Main players in the brokerage industry are:

India Infoline

ICICI Direct

Angel Broking

Can Money

Geojit

HDFC Securities

Kotak Securities

Relaince Money

Religare

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Share Khan

Artha Money

Way to Wealth

SBI Demat

Bridge securities Ltd.

Mothilal Oswal

Anand Rati

Citi Bank Demat

Dautche Bank

Frankfin

Karvy securities

Appolo sindhuri

Bangalore stock excgange

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CHAPTER 2

REVIEW OF LITERATURE

According to SEBI, (2009) Professional Rating of market intermediaries, as a concept, is

a matter of debate and discussions. The need for rating is felt not only from the point of

view of greater disclosure requirements for investors interests, considering the important

role such intermediaries play, being an interface between investors and exchanges but

also from the point of view of measuring the adequacy of systems and controls to meet

internal as well as external compliance requirements.

So that need for Intermediaries Rating services (Brokers), In view of the developments

that are taking place in the capital markets, the need to constantly upgrade and improve

systems and procedures in operation as well as skill sets has gained considerable

importance. Besides compliance with regulatory requirements both in letter and spirit has

assumed significance so as to mitigate risk and ensure adequate protection of investors

interest.

And Rating objectives / benefits are rated entity would be in a position to brand its image

and capitalize the same for generating more business. In a nutshell, the product may

accrue significant benefits to all stakeholders including the investors, stock brokers

themselves, the regulator and others who will benefit from the transparency and the

consequential focus on efficiency.

According to SEBI and Intermediaries Regulation and Supervision Department, different

factors are consider for rating process Organization structure, Policy on Investors interest,

Risk Management Policy and System, Organization process and procedures,

Management policy on compliance, Financials, History/Background, Firms positioning.

According to Parness, (2009) Investors dont Make Money in the Stock Market. One

reason the institutions make so much money is that they are trading. They make money

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every time you buy or sell. They make money whether you win or lose. That means that

when youre investing, youre basically just sitting there. Youre not going anywhere.

Youre not making money as an investor.

Kenneth A. and Heron R. (2008)The authors investigate how the passage of the

Financial Services Modernization Act of 1999 (FMA) affected stock prices of banks,

thrifts, finance companies and insurance companies. The study looks at stock excess

returns across sectors and company size. The idea is that the passage of the FMA opens

doors for potential mergers and consolidations across banking, financial and insurance

sectors, translating into abnormal positive returns for businesses that are the likely

candidate for mergers and consolidation. The results of the study suggest that the largest

returns to the FMA passage were realized by large investment banks and insurance

companies. The stock prices of banks, both small and large, seemed to be unaffected by

the new legislation while thrifts, finance companies and foreign banks lost value.

Carrow D. (2008) This paper is conceptually similar to the one cited above, in that the

author investigates whether the announcement of a merger between Citicorp and

Travelers abnormally impacted stock prices of financial and insurance companies.

Analysis of abnormal returns surrounding the merger show that life insurance companies

and large banks experienced significant stock price increases, while the returns of stocks

of smaller banks, health insurers, and property/casualty insurers remain relatively

unchanged.

Estrella, Arturo. (2007)This paper analyses which types of mergers are likely to be most

productive for banks and other financial firms in the United States. The author

acknowledges that the extent to which different business activities are fundamentally

distinct induces a tradeoff between diversification gains and loss of efficiency. The

research considers life insurance, property/casualty insurance, securities, and commercial

firms as potential matches for firms and concludes that potential diversification gains

arise from almost all combinations involving banking and insurance. The paper stands

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out because it shows, unlike other earlier research, that property and casualty insurance

companies offer larger diversification gains to banks than life insurance companies.

Johnston, Jarrod and Madura J. (2007) The authors first summarize previous literature

that examined motives for combining bank and other financial services. Diversification

benefits and product complementarities (i.e. mortgage and mortgage insurance, auto

financing and auto insurance) seem to be the prime motives. However, some earlier

research also suggests that there are few linkages between bank services ands

underwriting services in terms of customers, outlets, or other characteristics that generate

efficiencies. Given the sources of potential gains, it appears that life insurance companies

with their limited underwriting risk and wide variety of other products offered to

individual customers would be more attractive targets for banks than other types of

insurance companies.

Based on these observations, the authors propose to test whether commercial banks,

insurance companies, and brokerage firms were favorably affected by the

Citigroup/Travelers merger for impending consolidation of financial services firms. They

measure the valuation effects resulting from the merger announcement among those

commercial banks and financial services firms most likely to be affected and conclude

that commercial banks, insurance companies, and brokerage firms have all experienced

positive and significant valuation effects upon the announcement of the Citigroup merger.

However, the authors find that the valuation effects are more favorable for brokerage

firms than for commercial banks and for insurance companies.

Finally, the authors perform a cross-sectional analysis which concludes that the largest

banks and the largest brokerage firms experience more favorable valuation than the

smaller banks or smaller brokerage firms. Size does not seem to be significant for

insurance companies

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Industry Publications

Armstrong, Ed and Buse, P. (2006) The article projects that banks would add 5-10

percent to their after tax profits if they aggressively pursue their insurance opportunity."

The author develops a pro forma statement for banks selling 12 different insurance items.

Boros, Joan E. (2006) The author states that convergence depends on its definition.

She offers very useful definitions for convergence: 1) Merger of banks and insurers,

heretofore independent, into a financial supermarket with endless cross-selling potential,

and 2) A combination of insurance and capital markets products moving into a union and

uniformity, or separate markets performing the same functions. This could also be labeled

as securitization of insurance risk and or insurancization of financial risk.

Crystal, Mary (2006) This panel discussion on bank marketing suggests more direct

interaction with customers by direct mail or personal contact. Doing it pro-actively and

by alternative methods: call centers, PC-banking, internet banking and supermarket

banking. Using branding and other retail marketing skills. Bankers have tried to cut down

on personal contact and may have alienated their customers.

Gjertsen, Lee Ann (2006) Insurance agents of New Jersey, Connecticut and

Massachusetts founded an association as Independent Insurance Agents and Brokers

and have applied for a charter for an association savings bank. The bank products are to

be sold by the independent insurance agents that own their own agencies. The bank is to

be named InsurBanc.

Gorski, Lorraine (2004) The article describes how insurers can use the banks customer

base to reach new customers. Banks have the trust of their customers and that would be a

good distribution channel for life insurance, especially in the midlevel or mass market.

Banks could represent 3-4 different insurers therefore the insurance products need to be

competitive (for the customer and the representative) and specific for bank employee

selling. Furthermore, stable relationships are necessary and the product needs to be

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branded and well advertised. Underwriting will stay with the insurers but selling may go

both ways by insurance agents or bank employees.

Steven Gerrard (2004)Insurers have founded banks to offer banking products. One

hundred and thirty five applications were made between Jan.1, 1997 and May 31, 2001.

Insurance banks have an uphill battle to convince their customers to establish a bank

account because it is hard to determine when and why an insurance customer needs a

bank account. On the other hand, it is easier for a bank that provides a loan to sense when

insurance is necessary. Since most people already have a bank account, customer as well

as agents have to be motivated to deal with another financial institution or to switch. In

addition these new institutions often have no brick and mortar establishment but rather

rely on Internet applications and Internet interactions.

Establishing banks enable insurers to get into the trust business and offer a sophisticated

retirement package and to be able to cross-sell insurance products to their customers and

to earn fee income. Although this can be done through partnerships, some insurers want

to do it alone and thus to avoid finding later on unpleasant surprises. They count on their

name recognitions and the availability of their agents (State Farm, Allstate). Increasing

brand awareness, direct mailing, providing up-to-date interest rates should help to lure

customers. Most insurance firms have hired experienced bankers to create and manage

these banks.

Hogan, John D (2004). In this paper, the author contends that the impact of the GLB Act

on the insurance industry is unclear. It had been widely assumed that the banking

industry would quickly expand into non-banking activities, as synergies could be

expected from the large bank customer information base and frequent contacts with

customers. However, this quick response has not taken place, partly because of

perception of risk in the insurance business.

The author also cites a research study by The Federal Reserve Bank of Atlanta that

suggests that bank holding companies will add insurance products to their lines of

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business for sound reasons such as: 1) small increment costs involved, 2) the presence of

existing customer relationships, 3) revenue diversification, 4) absence of interest rate risk

in insurance compared with loans and 5) banks web-based marketing capability.

McDaniel, David (2003) The article explains that insurance agents are afraid of banks

cutting into their business as they have in Europe where banks are far more efficient than

agents. The article lays out how to make the proposed legislation ineffective, by warning

of unsubstantiated tie-ins and bank coercion, proposing 10-day waiting periods, state

legislation, and tough fire walls.

Milligan, John (2002) First Long Island Bank prospers because it serves a small niche

of small privately owned companies and upscale consumers that it coddles by being

available both in person/ phone and online.

Pasini, Roy (2003) The author states that the insurance industry can defend itself against

the invasion by banks through better customer service and greater use of technological

efficiencies.

Weber, Irene (2002)Weber reports that, since the GLB Act of 1999, a few banks have

acquired insurance firms and then Citigroup split up again. She provides the following

reason for non-convergence:

Regulation: financial and bank holding companies are federally regulated, insurance

firms are state regulated. GLB requires U.S. jurisdiction to adopt uniform or reciprocal

agent and broker licensing laws by November 2002. Reciprocity has apparently been

approved by most states. But new insurance products need to have state approval before

they are allowed to be marketed, which is a slow process. Will there be federal chartering

of insurance firms in the future?

Aquino, Norman P. and Junia C. (2002)This article describes a recent example of

convergence in the Philippines. The U.S. embassy is lobbying for New York Life to sell

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its insurance through Philippines banks. European insurance firms are also interested in

it. Philippines thrifts are accusing the Central bank of not including them. The Philippe

Central bankis interested that banks show that the insurance products are not guaranteed

by the PDIC.

Bowman, Lisa. (2002)Bancassurance in the U.K. is not taking off as expected. Firms are

not making use of the data available and the products are not streamlined for bank sales.

Consumers apparently prefer professional advice from insurance agents, while banks

have a bad reputation for poor service. The author recommends that banks should take on

more rich clients. Instead they stay with second tier customers, thus should employ

second tier agents which would provide off the shelve advice but that has not been

created. This approach would also be more cost efficient. The new model is that

bancassurers acquire pure insurers.

Gibson Henry. (2002)This journalist highly supported the Dresdner Allianz merger.

The new institution is called Allianz Group. The logic behind this giant merger is that the

German government is in favor of German citizens to pursue private and company

pensions which it will support with tax incentives and coercion. The pension industry is

supposed to grow by 15 percent annually. The article suggests that that the familiarity

and easy branch access of Dresdner would better service this population.

Lau, Yen and Chau (2001) conduct a research to know what are the factor which affect

on adoption of online stock trading in Hong Kong. This paper focuses on the

social/organizational perspective by using a research model based on the Decomposed

Version Theory of Planed Behavior (DTPB) to identify the factors that affect investors

adoption of on-line trading. A correlation analysis has been performed to investigate

whether the hypothesized attributes, variables, and belief structure are correlated with

each other. After such analysis, the factors that influence the adoption of the proposed

system have been identified, as well as the relationships between the factors. The results

of the analysis indicate that regarding the hypothesized model, there is strong statistical

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significance that Perceived Usefulness, Perceived Ease of Use, and Compatibility

significantly affect Attitude towards using the proposed system.

Lipin, Steven and Frank, S. (2001)The authors wonder whether the merger will bring

about the promised synergies, and whether consumers really want all their services from

one provider. Can they cross-sell their brands?

Walker, Marcus (2001)This article on the state of the Commerzbank mentions that

tightly focused banks with strong market shares, such as U.K. retail banks, have made

money. Diversified universal banks with no dominant market share such as

Commerzbank or Frankfurt rival Dresdner Bank AG have slipped to losses in some

quarters, raising doubts about their long term viability.

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CHAPTER 3

RESEARCH METHODOLOGY

OBJECTIVES OF THE STUDY

1. To do the comparative analysis of different stock brokerage houses in respect of their

products & services.

2. To find out the most preferred stock broking houses in Ludhiana.

3. To compare service offerings of all competing broking firms in Ludhiana.

Random sampling technique will be used to accomplish the survey.

The sampling place is Feroze Gandhi Market Ludhiana.

The sampling units would be all the demat account holders of the region who are

currently trading in the stock market. A sample size of 100 respondents will be chosen for

the purpose of study.

The method of sampling would be probability sampling as the trends will be chalked

out according to the replies of the respondents. This project focuses on comparison

between perfoemance of different broking companies on the basis of set parameters. The

opinion will be based on hypothesis set and views of respondents.The main aim of

conducting the study would be to, compare the services of the companies which they

offer to their clients.

The research methodology used in the study is survey technique.

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CHAPTER 4

DATA ANALYSIS & INTERPRETATION

Income of the respondent

Analysis: From the 100 respondents approached the most common income range was

that between 3 to 5 lacs, 31 respondents belong to that category. The income group of 1-3

lacs and 5-10 lacs stand together at second spot followed by high income class of more

than 10 lacs. In the end is the least income level with 9 respondents to that category.

Interpretation: From the data analysis it can be interpret that the respondents had the

major share of people with the income level of more the 3 lacs. So greater the income

more is the risk taking ability of the investor.

23

9

22

31

22

16

0

5

10

15

20

25

30

35

less than 1 lac 1-3 lacs 3-5 lacs 5-10 lacs more than 10

lacs

RESPONDENTS

INCOME

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Profession of the respondent

Analysis: As the total number of respondents being 100, out of them the managing

professionals were largest in number with 28, followed by business persons at 21. 15

stands for any other profession. 13 stands for IT professionals. 12 stands for market cum

sales executives followed by engineers at 11.

Interpretation: As the large share of the respondents being the managers, the reason for

not could be the study being carried out at FEROZE GANDHI MARKET, LUDHIANA.

It is the hub of Ludhiana managerial concerns. Businessmen being in top two do not

come as surprise because of Ludhiana being an industrial city.

24

12

28

1113

21

15

Market/Cum salesexecutiveManager

Engineer

IT professional

Bsinessman

Any Other

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Percentage of Investment

Analysis: From the data it is found out that as many as 43 respondents invest less than

10% of their income. Investment from 10 to 20% and20 to 30% has 23 and 21

respondents respectively. Last are the 13 respondents who invest more than 30% of their

income.

Interpretation: By studying the data the scene develops that respondents were not too

keen on investing large part of their income on investment into stock market. The people

of Ludhiana may not have as much risk appetite then the people of western INDIA.

25

43

2321

13

0

5

10

15

20

25

30

35

40

45

50

Below 10% 10 to 20% 20 to 30% Above 30%

Respondents

Investment as % of income

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Broking Firms Name

Analysis: This is a very important question as it tells us about the number of respondentsopting for a particular brokerage house. ICICI Direct tops the chart with 27% of the

respondent choice. Angel broking is second in the list with 12 %, than comes Share Khan

with 11%, Religare with 10%, India bulls at 9 and HSBC Invest Direct at the sixth place

with 7% share. Unicon, LSE, India Infoline and others are the ones on the bottom of the

list.

Interpretation: From the above data we can say that ICICI Direct is the undisputed

leader from its competitors. People prefer ICICI Direct more than any other brokerage

house in the market. The reason asked for the great preference of this company is that

they have no hidden costs and they play a very fare game. Unicon securities and India

Infoline did not do well because of their not so well organized structure of proceedings.

26

5

911

27

6

1012

5 57

30

5

10

15

20

25

30

Respondents

Broking Houses

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Informative Parameters about this Brokerage House

12

18

35

6

23

6

Broadcasting Media

Print Media

Friends/Colleagues

Internet

Through BrokersAny Other

Analysis: this question was for the purpose of finding out the best way to advertise for

the brokerage houses. From the survey we came to know that 35% of the respondents

come to know about the brokerage house from their friends and the colleagues.

Information through brokers is another main aspect which is addressed to by the

respondents with number of 23%.

Interpretation: As the scene is quite clear from the above data that the information

through counterparts is the biggest source of information to the respondents, so this

depicts that customer if self be satisfied than only will recommend forward. Print media

is the best place to advertise according to the respondents.

27

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Brokerage paid by Respondent

Analysis: Brokerage is a very important aspect of all brokerage houses. As the brokerage

is negotiable in nature, no company can charge brokerage more than 0.50%. Most

number of respondents i.e. 32 pays the brokerage at 0.20% followed by 0.10% and 0.30%

respectively. Least paid brokerage percentage is 0.40%.

Interpretation: As the brokerage amount is negotiable in nature so it is on the part of

mutual agreement where it settles. In case of big time investors the brokerage is as low as

0.10%. So here most of the persons pay 0.10% the starters or the lesser investors pay the

brokerage at 0.50%.

Way of Trading in the Stock Market

28

28

32

23

89

0

5

10

15

20

25

30

35

0.10% 0.20% 0.30% 0.40% 0.50%

Respondents

% of Brokerage

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43

27

30

Online

Offline

Both

Analysis: It is quite a straight forward question. Here we come to know that 43% ofpeople prefer online trading and 30 do it both way and 27 prefer it in the offline form.

Interpretation: As 43% of the respondents prefer to do it online, the reason of it may be

that majority of the respondents are reasonably young and are used to working on

computers so they can better do it their own way.

29

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Well Informed Number of Investors keeping a look at the market alternatives &

their services

64

36

Yes

No

Analysis: 64% of the respondents do see to the alternatives available and the

opportunities in the market. Rest 36% do not mind this aspect too much.

Interpretation: Most of the people are willing to have a look on how things shape up in

the market. As people want their cost effectiveness in investments so they keep looking at

the services offered by the other companies for making the investments.

30

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Different Rating Parameters

Services 5(Highest) 4 3 2 1(Lowest) Rank

Research Engine 39 11 30 15 5 3.83

Customer Support 28 13 12 27 20 3.52

Office Infrastructure 3 9 20 27 41 2.06

After sales Services 30 10 25 25 10 3.25

Technology 2 18 18 22 40 2.20

Brokerage 25 20 20 30 5 3.30

Analysis: By studying this table we come to know that research engine is the factor of

prime importance for respondents followed by customer support and the brokerage.

Interpretation:With the help of Likerts scale, people believe that better research engine

would help them long way in taking good investment decisions so it is the main factor

that is considered by the respondents. Brokerage has always been matter of concern

because of that money factor.

Major Factors considered before Investing

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Analysis: As the above mentioned figures show that 31% respondents want the pace of

growth of investments and 28% want safety so the opinions are quite mixed on this

aspect.

Interpretation: The respondents have mixed opinion on this aspect as the share of voting

is divided between pace of growth and safety.

Persons willing to shift their brokerage house

32

19

31

28

22

0

5

10

15

20

25

30

35

Oppurtuity ofsteady growth

Pace at whichwealth grows

Safety ofinvestment

Amount ofmonthly income

Respondents

Factors

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47

53

Yes

No

Analysis: This straight forward question asks about the fact that whether the respondent

is willing to change his/her brokerage house in the future and 53% are in favor of

changing and 47% think otherwise.

Interpretation: Almost half of the respondents are in favor of change and half against it,

the ones who want to change are not satisfied with their company are willing to do it at

some other place.

Percentage of those who are satisfied with certain services at their brokerage house

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Basis: Research

engine

Brokerage Technology Office

infrastructure

Customer

Support

After sales

services

Avg

India Infoline 100 80 90 70 80 70 82

India bulls 90 90 80 70 90 80 82

Share khan 90 80 80 80 90 90 85ICICI Direct 90 90 90 80 90 90 87

Reliance

Money

60 80 70 80 70 70 70

Religare 70 90 70 60 80 80 72

Angel broking 80 80 90 80 80 70 80

Unicon 70 80 80 70 70 80 75

LSE 70 90 80 80 60 70 75

HSBC Invest

Direct

90 70 80 80 80 70 78

34

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CHAPTER 5

FINDINGS AND CONCLUSION

ICICI Invest Direct has the maximum share in the market

HSBC Invest Direct has lot of catching up still, to compete with likes of ICICI and Share

Khan

Religare has to work on its infrastructure as 40% of its clients are not satisfied with it,

Brokerage is a major concern for clients of all the broking firms

Most of the people play it safe in investing

North is the booming place for all stock brokers

After sale services of the concern have major role to play in ascertain the satisfaction

level of the clients

Online trading is becoming very popular

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Conclusion

As per the result of study, there are many things that can be concluded regarding the

Stock Broking Firms in the region. First of all we can say that the investor is very

sensitive towards the brokerage charged at the company. Any excess brokerage charged

would lead to unsatisfied clients. The customer also expects after sale services from the

company, the cases where the company does not care about the product sold tends to

hamper its clients big time. Every company must have adequate infrastructure to

accommodate the investors coming to the office. ICICI Direct has been leader in the

survey because of the facts that it has very nominal brokerage charges and the

infrastructure is also adequate. In the end we can conclude by saying that customer

delight is the way to go forward for the companies.

36

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BIBLIOGRAPHY

Reference to magazines

Smart update (HSBC Invest Direct)

Business Outlook

Reference to web pages

http://www.moneycontrol.com/

http://www.nseindia.com/

http://www.bseindia.com/http://www.hsbc.com/

http://www.finance.indiamart.com/markets/nse/

http://www.google.com/

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QUESTIONNAIRE

I Suruchi Kapur , student of MBA IV in GNIMT, Ludhiana, doing my final year MBA

finance project as a part of course curriculum I am contributing a survey on Market

penetration of different stock broking firms and a look in to the services offered bythem. I request to spare some valuable time to fill this questionnaire. I assure you that

the data provided by you will be kept confidential and will be used for this project only.

1. Income of the respondent?

A. Below one lacs B. 1 to 3 lacs C. 3 to 5 lacs D. 5 to 10 lacs E. More than 10 lacs

2. Out of the following which profession describes you the best?

A. Market/ cum sales executive B. Manager C. An engineer D. IT professional E. Business man F. Any other

3. What percentage of income do you invest in stock market?

A. Below 10 % B. 10 to 20 % C. 20 to 30 % D. Above 30%

4. With which brokerage house do you have your demat account?

A. India Infoline B. India bulls C. Share khan

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D. Motilal oswal E.ICICI direct F. Reliance money G. Religare H. Angel broking I. Unicon J. LSE K. HSBC Invest Direct L. Any other (specify)

5. How do you come to know about this brokerage house?

A. Broadcasting Media B. Print Media C. Friends/ Colleagues D. Internet E. Through Brokers F. Any Other (Specify)

6. Brokerage paid by you?

A 0.10% B 0.20% C 0.30% D 0.40% E 0.50%

7. Which option do you prefer for trading in stock market?

A. Online B. Offline C. Both

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8. Do you regularly analyze the other brokerage firms with respect to the following

parameters?

A. Yes B. No If yes, please tick the appropriate options:

Services 5(Highest) 4 3 2 1(Lowest)

Research Engine

Customer Support

Office Infrastructure

After sales Services

Technology

Brokerage

Abbreviations: HS: Highly Satisfied

SS: Somewhat Satisfied

N: Neutral

SD: Somewhat Dissatisfied

9. What factor do you consider most important before choosing an investment?

A. Opportunity of steady growth B. How quickly will I be able to increase my wealth C. The safety of my investment principle D. The amount of monthly income the investment will generate.

10. Do you want to shift to other stock brokerage house in near future?

A. Yes B. No

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Market penetration of various financial services offered

by different stock broking firms in Ludhiana

A

PROJECT REPORT

SUBMITTED TO

PUNJAB TECHNICAL UNIVERSITY

JALANDHAR (INDIA)

IN PARTIAL FULFILMENT OF THE REQUIREMENTS

FOR THE DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION

IN

MANGEMENT

By

Suruchi Kapur

1174058

Department of Business Management

Guru Nanak Institute Of Management & Technology

(GNIMT) 2011-1341

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STUDENTS DECLARATION

I hereby certify that the work which is being presented in the report, entitled Market

penetration of various financial services offered by different stock broking firms inLudhiana in the partial fulfilment of the requirements for the award of the degree of

Masters of business administration and submitted in Guru Nanak institute of

Management and Technology, Ludhiana as an authentic record of my own work carried

out during a period from Dec 16, 2013 to Feb15, 2013 under the supervision of Prof.

Pankaj Goel.

The matter embodied in this thesis has not been submitted by me for the award of any

other degree of this or any other University/institute.

SURUCHI KAPUR

This is to certify that the above statement made by the candidate is correct to the best of

our knowledge.

PROF. PANKAJ GOEL

The Viva voice examination ofSURUCHI KAPURhas been held on ___________.

Sign of Supervisor Sign. of Director/Dy. Director Sign of External Examiner

42

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ACKNOWLEDGEMENT

As drops of water gradually fill up the pitcher so do knowledge, virtue and wealth

and experience accumulate little by little-- Chanakya Niti

The big task of undertaking such a work could not have been possible without the

wholesome inducement, sense of accommodation and purpose guidance provided by

various persons in the successful completion of this report. I am extremely grateful to our

Director Col. H.S. Singha for providing us better infrastructure and other inputs for study.

I am equally thankful to Ms. Sandhya Mehta (lecturer and H.O.D. of management) whose

excellent guidance has served as a constant source of inspiration and helped me a lot in

carrying out the research of the project. I express my deep feeling of gratitude and

profound respect to Mr. Pankaj Goel under whose valuable guidance the work has been

planned and completed.

Last but not the least, I owe more than a debt of gratitude to all the persons who have

helped me directly and indirectly in my project.

Suruchi Kapur

43

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ABSTRACT

Ever since we have attained independence we have been attaining some sort of

nourishment in one field or another. Finance is the backbone of every country and India

is no exception. Being the country it is have lot of pressure of population and that burdenhas to be born by the earning population of the country. Indian financial market has been

progressing leaps and bounds in last decade or so

World see India as the emerging power of the planet and Indian finance has major role to

play in letting the country in this great position. Share market is the breathing zone of

Indian financial market. Every Indian company which has some significance with lot of

people has been listed in the stock exchange and has been affecting country.

The shares are traded at these stock exchanges. And the one primary thing that is required

to purchase these shares is DEMAT account. There are many brokerage houses in India

like ICICI Direct, Share Khan etc. which enable the investor to trade in the share market.

They provide their expertise opinion which helps the investors in reaping profits

So main objective of our research has been achieved as we have found the leader in the

form ICICI Direct and the following firms like Share Khan, Religare. The main reason

why these firms top the list are their sincerity towards their customer handling.

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CONTENTS

CHAPTER TOPIC PAGE

1. INTRODUCTION 1 13

2. REVIEW OF LITERATURE 14 21

3. RESEARCH METHODOLOGY 22

4. DATA ANALYSIS AND INTERPRETATION 23 34

5. FINDINGS & CONCLUSION 35 36

BIBLIOGRAPHY 37

APPENDIX 38 40

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LIST OF TABLES

Figure

No.

PARTICULARS PAGE

NO.

1 Industry Insight 3

2 Percentage of firms in each region 4

3 Different Rating Parameters 31

4 Percentage of those who are satisfied with certain services at

their brokerage house

34

46

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LIST OF FIGURES

Figure

No.

PARTICULARS PAGE

NO.

1 Trading Volume 2

2 Percentage of Sub-Brokers in each region 5

3 Percentage of branches in each region 6

4 Income of the respondents 23

5 Profession of the respondent 24

6 Percentage of Investment 25

7 Broking Firms Name 26

8 Informative Parameters about this Brokerage House 27

9 Brokerage paid by Respondent 28

10 Way of Trading in the Stock Market 29

11 Well Informed Number of Investors keeping a look at the

market alternatives & their services

30

12 Major Factors considered before Investing 32

13. Persons willing to shift their brokerage house 33