44586029 summer-training-report-at-sharekhan-ltd


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44586029 summer-training-report-at-sharekhan-ltd

  1. 1. 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 ofBACHELOR OF BUSINESS ADMINISTRATIONUnder the Supervision Submitted by:& Guidance of: 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: director.tecniaindia@gmail.com, Website: www.tecnia.in Fax No: 27555120, Tel: 27555121-24 1
  2. 2. 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 DECLARATIONI VIVEK KUMAR Enrolment NO. 0111701708 Class BBA Vth SEM.(M) of the TecniaInstitute of Advanced Studies, Delhi hereby declare that the Summer Training ProjectReport entitled A STUDY OF ONLINE TRADING is an original work and the same hasnot been submitted to any other Institute for the award of any other degree. Signature of StudentCountersignedSignature of faculty Guide 2
  3. 3. ACKNOWLEDGEMENTI take this opportunity to express my gratitude, high regards and sincerethanks to these respected people who have helped me throughout thisproject.Dr. Ajay Kumar RathoreDirectorTecnia Institute Of Advanced StudiesPlot No. 3,Madhuban Chowk,Institutional Area, Rohini,New Delhi - 110085Mr. Rajesh AntilAssistant Sales ManagerSharekhan Pvt Ltd412, Agarwal Cyber Plaza,Netaji Subhash PalacePitampuraNew Delhi – 110034Submitted by:Vivek KumarBBA Vth Sem. (M)0111701708 3
  4. 4. TABLE OF CONTENTS PARTICULARS PAGE NO. Executive Summary 01 Objectives of study 02 Chapter-1 Introduction: 03 1.1 Overview of Online trading 03-131.2 Profile of the Company 14 - Overview of SHAREKHAN LTD. 14 - Vision & Mission 15 - Market share 16 - Awards & Achievements 17 - Product range 18 Chapter-2 Situation Review 32 - SWOT analysis 32-34 Chapter-3 Financial analysis of company 35 - Interpretation through ratios 35-43 - Limitations 44 Chapter-4 Learning in executive training 45 - Personal experience 46 - Conclusion 47  Bibliography 48  Annexure . 49-52  Questionnaire. 52-53 EXECUTIVE SUMMARYThis project is based on “A STUDY OF ONLINE TRADING” at SharekhanLimited.Further, in this Project 4
  5. 5. Chapter-1 includes review of literature & the introduction of the companywherein I told about the profile of Sharekhan limited.Chapter-2 includes Situation Review wherein I have shown swot analysis ofcompany.Chapter-3 shows the financial analysis of company.Chapter-4 includes the Learning’s & Findings. OBJECTIVES OF THE STUDYThe Objective is to review the study of ONLINE TRADING atSHAREKHAN as the exchange has changed it’s trading from the outcrymode 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.  To know the online screen based trading system adopted by SHAREKHAN and about its communication facilities. The 5
  6. 6. 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.StocksThe stock or capital stock of a business entity represents the original capital paid into orinvested in the business by its founders. It serves as a security for the creditors of abusiness since it cannot be withdrawn to the detriment of the creditors. Stock is distinctfrom 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 youthink that in the future the company will be profitable. If you buy stock in a company andthe company performs well, the stocks price should rise. If the company fails, then thestock should fail you, too and go down. Companies list their stocks on the various stockexchanges located throughout the U.S. The stock exchanges actually compete with eachother for these listings, since companies that attract more trading make more money forthe stock exchange that listed it. Company stocks are assigned a "ticker", or tradingsymbol by the listing exchange. You may notice some well-chosen tickers that are easy toremember, like "DNA" for the company Genentech, a biotechnology firm. Or somecompanies ticker is the same as its name, Nike for example.Stock market 6
  7. 7. A stock market or equity market is a public market (a loose network of economictransactions, not a physical facility or discrete entity) for the trading of company stockand derivatives at an agreed price; these are securities listed on a stock exchange as wellas 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 markethas been estimated at about $791 trillion face or nominal value, 11 times the size of theentire world economy. The value of the derivatives market, because it is stated in termsof 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 derivativescancel each other out (i.e., a derivative bet on an event occurring is offset by acomparable derivative bet on the event not occurring). Many such relatively illiquidsecurities are valued as marked to model, rather than an actual market price. The stocksare listed and traded on stock exchanges which are entities of a corporation or mutualorganization specialized in the business of bringing buyers and sellers of theorganizations to a listing of stocks and securities together. The largest stock market in theUnited States, by market cap is the New York Stock Exchange, NYSE, while in Canada,it is the Toronto Stock Exchange.TradingHistorically, stock markets were physical locations where buyers and sellers met andnegotiated. With the improvement in communications technology in the late 20thcentury, the need for a physical location became less important, as traders could transactfrom remote locations. Participants in the stock market range from small individual stockinvestors to large hedge fund traders, who can be based anywhere. Their orders usuallyend up with a professional at a stock exchange, who executes the order. Some exchangesare physical locations where transactions are carried out on a trading floor, by a methodknown as open outcry. This type of auction is used in stock exchanges and commodityexchanges where traders may enter "verbal" bids and offers simultaneously. The othertype of stock exchange is a virtual kind, composed of a network of computers wheretrades are made electronically via traders. The shares of a company may in general betransferred from shareholders to other parties by sale or other mechanisms, unlessprohibited. Most jurisdictions have established laws and regulations governing suchtransfers, particularly if the issuer is a publicly-traded entity.The desire of stockholders to trade their shares has led to the establishment of stockexchanges. A stock exchange is an organization that provides a marketplace for tradingshares and other derivatives and financial products. Today, investors are usuallyrepresented by stock brokers who buy and sell shares of a wide range of companies onthe exchanges. A company may list its shares on an exchange by meeting andmaintaining the listing requirements of a particular stock exchange. Actual trades arebased on an auction market model where a potential buyer bids a specific price for a 7
  8. 8. stock and a potential seller asks a specific price for the stock. (Buying or selling atmarket 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 ifthere are multiple bidders or askers at a given price.The purpose of a stock exchange is tofacilitate the exchange of securities between buyers and sellers, thus providing amarketplace (virtual or real). The exchanges provide real-time trading information on thelisted securities, facilitating price discovery.HistoryThe 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 in1874, 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 formallyestablished in Bombay, and were known as “Native Shares and Stock BrokersAssociation”. In 1895, it acquired a premise in the same street and finally wasinaugurated in 1899 with the name Bombay Stock Exchange (BSE).Indias premier stock exchange Bombay Stock Exchange (BSE) can also trace back itsorigin 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 itdaily in statements like The BSE Sensitive Index rose 5% today. Obviously, stocks andstock markets are important. Stocks ofpublic limited companies are bought andsold at a stock exchange. But what reallyare stock exchanges? Known also as Newson the stock market appears in differentmedia every day. he stock market or bourse,a stock exchange is an organizedmarketplace for securities (like stocks,bonds, options) featured by thecentralization of supply and demand for thetransaction of orders by member brokers,for institutional and individual investors. 8
  9. 9. The exchange makes buying and selling easy. The need for stock exchanges developedout of early trading activities in agricultural and other commodities. During the middleAges, traders found it easier to use credit that required supporting documentation ofdrafts, notes and bills of exchange. (Figure-1)Indias other major stock exchange National Stock Exchange (NSE), promoted by leadingfinancial institutions, was established in April 1993. Over the years, several stockexchanges have been established in the major cities of India. There are now 23recognised 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 andMeerut.NSE:- With the liberalization of Indian economy it was found necessary to lift the Indianstock markets on par with the international standards. The NSE was incorporated in 1992by industrial development bank of India, industrial credit and Investment Corporation ofIndia, industrial finance corporation of India, all insurance corporations, selectedcommercial banks and others.NSE is India’s leading stock exchange covering more than 160 cities and towns acrossthe country. It provides the modern fullycomputerized trading system designed tooffer investors across the country a safeand easy way to invest to liquidateinvestment and securities.Investors inmany areas of country did not have thesame access and opportunity to trade sothere arise the need for setting up thenational stock exchange. The NSEnetwork has been designed to provideequal access to investors from anywherein India and to be responsive to theirneeds. (Figure-2)On its recognition as a stock exchange under the Securities Contract Act, 1956 in April1993, NSE started operations in the Wholesale Debt Market (WDM) segment in June1994. Capital market (equities) segment commenced operations in November 1994, andoperations in derivative segment started in June 2000.NSE started trading in the capitalmarket segment on November3, 1994 and within one year became the largest exchange inIndia, in terms of volumes transacted. During the year 2005-06 NSE reported, a turnoverof Rs 1,569,556 crores in the equity segment. In 12th century France the courratiers dechange were concerned with managing and regulating the debts of agriculturalcommunities on behalf of the banks. Because these men also traded with debts, theycould be called the first brokers. A common misbelief is that in late 13th century Brugescommodity traders gathered inside the house of a man called Van der Beurze, and in 1309they became the "Brugse Beurse", institutionalizing what had been, until then, aninformal meeting, but actually, the family Van der Beurze had a building in Antwerpwhere those gatherings occurred; the Van der Beurze had Antwerp, as most of the 9
  10. 10. merchants of that period, as their primary place for trading. The idea quickly spreadaround Flanders and neighboring counties and "Beurzen" soon opened in Ghent andAmsterdam. In the middle of the 13th century, Venetian bankers began to trade ingovernment securities. In 1351 the Venetian government outlawed spreading rumorsintended to lower the price of government funds. Bankers in Pisa, Verona, Genoa andFlorence also began trading in government securities during the 14th century. This wasonly possible because these were independent city states not ruled by a duke but a councilof influential citizens. The Dutch later started joint stock companies, which letshareholders invest in business ventures and get a share of their profits - or losses. In1602, the Dutch East India Company issued the first share on the Amsterdam StockExchange. It was the first company to issue stocks and bonds.Relation of the stock market to the modern financial systemThe financial systems in most western countries has undergone a remarkabletransformation. One feature of this development is disintermediation. A portion of thefunds involved in saving and financing, flows directly to the financial markets instead ofbeing routed via the traditional bank lending and deposit operations. The general publicsheightened interest in investing in the stock market, either directly or through mutualfunds, has been an important component of this process.Statistics show that in recentdecades shares have made up an increasingly large proportion of households financialassets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquidassets 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 infinancial portfolios has gone directly to shares but a good deal now takes the form ofvarious 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 rulesfor most funds and insurance, permitting a higher proportion of shares to bonds. Similartendencies are to be found in other industrialized countries. In all developed economicsystems, such as the European Union, the United States, Japan and other developednations, 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.Riskierlong-term saving requires that an individual possess the ability to manage the associatedincreased 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 onlythe individual investor or household, but also the economy on a large scale. Thefollowing deals with some of the risks of the financial sector in general and the stockmarket in particular. This is certainly more important now that so many newcomers haveentered the stock market, or have acquired other risky investments (such as investmentproperty, i.e., real estate and collectables).With each passing year, the noise level in the 10
  11. 11. stock market rises. Television commentators, financial writers, analysts, and marketstrategists are all overtaking each other to get investors attention. At the same time,individual investors, immersed in chat rooms and message boards, are exchangingquestionable and often misleading tips. Yet, despite all this available information,investors find it increasingly difficult to profit.The behavior of the stock tradingFrom experience everyone know that investors may temporarily move financial pricesaway from their long term aggregate price trends. (Positive or up trends are referred toas bull markets; negative or down trends are referred to as bear markets.) Over-reactionsmay occur—so that excessive optimism (euphoria) may drive prices unduly high orexcessive pessimism may drive prices unduly low. Economists continue to debatewhether financial markets are generally efficient. According to one interpretation of theefficient-market hypothesis (EMH), only changes in fundamental factors, such as theoutlook for margins, profits or dividends, ought to affect share prices beyond the shortterm, where random noise in the system may prevail. (But this largely theoreticacademic viewpoint—known as hard EMH—also predicts that little or no trading shouldtake place, contrary to fact, since prices are already at or near equilibrium, having pricedin all public knowledge.) The hard efficient-market hypothesis is sorely tested by suchevents as the stock market crash in 1987, when the Dow Jones index plummeted 22.6percent—the largest-ever one-day fall in the United States. This event demonstrated thatshare prices can fall dramatically even though, to this day, it is impossible to fix agenerally agreed upon definite cause: a thorough search failed to detect any reasonabledevelopment that might have accounted for the crash. (But note that such events arepredicted to occur strictly by chance , although very rarely.) It seems also to be the casemore generally that many price movements (beyond that which are predicted to occurrandomly) are not occasioned by new information; a study of the fifty largest one-dayshare 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 nearequilibrium, but only that market participants not be able to systematically profit fromany momentary market inefficiencies. Moreover, while EMH predicts that all pricemovement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend overtime periods of weeks or longer. Various explanations for such large and apparently non-random price movements have been promulgated. For instance, some research has shownthat changes in estimated risk, and the use of certain strategies, such as stop-loss limitsand Value at Risk limits, theoretically could cause financial markets to overreact. But thebest 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). Otherresearch has shown that psychological factors may result in exaggerated stock pricemovements (contrary to EMH which assumes such behaviors cancel out). Psychologicalresearch has demonstrated that people are predisposed to seeing patterns, and often willperceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in 11
  12. 12. clouds or ink blots.) In the present context this means that a succession of good newsitems about a company may lead investors to overreact positively (unjustifiably drivingthe price up). A period of good returns also boosts the investors self-confidence,reducing his (psychological) risk threshold.Another phenomenon—also from psychology—that works against an objectiveassessment is group thinking. As social animals, it is not easy to stick to an opinion thatdiffers markedly from that of a majority of the group. An example with which one maybe familiar is the reluctance to enter a restaurant that is empty; people generally prefer tohave their opinion validated by those of others in the group.In one paper the authors drawan 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 thedifferent 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 thepsychology of other investors and how they are likely to react psychologically.The stockmarket, as with any other business, is quite unforgiving of amateurs. Inexperiencedinvestors rarely get the assistance and support they need. In the period running up to the1987 crash, less than 1 percent of the analysts recommendations had been to sell (andeven during the 2000 - 2002 bear market, the average did not rise above 5%). In the runup to 2000, the media amplified the general euphoria, with reports of rapidly rising shareprices and the notion that large sums of money could be quickly earned in the so-callednew economy stock market. (And later amplified the gloom which descended during the2000 - 2002 bear market, so that by summer of 2002, predictions of a DOW averagebelow 5000 were quite common.)Investment strategiesOne of the many things people always want to know about the stock market is, "How do Imake money investing?" There are many different approaches; two basic methods areclassified as either fundamental analysis or technical analysis. Fundamental analysisrefers to analyzing companies by their financial statements found in SEC Filings,business trends, general economic conditions, etc. Technical analysis studies priceactions in markets through the use of charts and quantitative techniques to attempt toforecast price trends regardless of the companys financial prospects. One example of atechnical strategy is the Trend following method, used by John W. Henry and EdSeykota, which uses price patterns, utilizes strict money management and is also rootedin risk control and diversification.Additionally, many choose to invest via the indexmethod. In this method, one holds a weighted or unweighted portfolio consisting of theentire stock market or some segment of the stock market (such as the S&P 500 orWilshire 5000). The principal aim of this strategy is to maximize diversification,minimize taxes from too frequent trading, and ride the general trend of the stock market(which, in the U.S., has averaged nearly 10%/year, compounded annually, since WorldWar II). 12
  13. 13. Online tradingOnline stock trading is becoming a very popular way in which to invest in the stockmarket. Ordinary everyday citizens such as you and me can now trade stocks like the proswithout paying the ridiculous broker fees that are often associated with trading on thestock market. This doesnt mean there are no fees involved or that you wont bediscouraged from capriciously trading stocks. What it does mean is that you will be ableto trade stocks, as you may have never been able to do before because the costs involvedin trading were so high that only the wealthiest among us could really afford to work themarket to any real advantage. Online trading has changed the average investorsinvolvement in trading their own stocks. The availability of company information hasbecome so widespread and easily attainable that researching and finding stock to buy andsell is as easy as logging onto your computer.You will find quite a few companies thatare going to compete for your business when it comes to empowering you to trade stocksonline. It is best to go with a business that offers education and advice in addition to theability to trade. There are many big names in the brokerage business that are getting intouch with the technology of today and offering full service brokers and financialadvisors 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 "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. 13
  14. 14. Many of these firms in addition to offering the ability to buy, sell, and trade online willalso offer financial planning for retirement, future expenses, and advice on how to createa fixed income from your investments. They will offer many tips, hints, and advice freeof charge on their website while also promoting the services they offer through discountsin hopes of gaining your business for some of the higher ticket transactions that reallypay their bills. Online investment services offer consumers the opportunity to invest withlower commissions and fees which means you bring more of the money home when all issaid and done and spend far less on fees and expenses associated with investing. Bysaving these fees you may be doing yourself a huge service but keep in mind that theinvaluable advice of a broker can often mean the difference between mild successes andwild successes. If you can manage the fees it is a good plan to at least consult with abroker or financial advisor or planner once or twice a year in order to get the most out ofyour investment money. According to Chiang-Nan Chao , Robert J. Mockler , Dorothy Dologite :-The marketdownturn since March 2000 has posed a serious threat to brokerage firms, particularlythose that offer online trading Findings of this study suggest that broke rage firms shouldfocus on improving customer services, while at the same time providing services inaddition to online trading. Online brokerage firms should move into the areas that havebeen traditionally dominated by full service brokerage firms and banks.Introduction Online trading has become a formidable force in todays investment market,thanks to recent developments in information technology. Although setbacks in thetechnology industry discouraged individual investors from actively trading, the totalnumber of online trading accounts continues to grow. As the NASDAQ has dropped fromits all time high of 5,000 in March 2000, and the economic situation is continuing todeteriorate, many investors have withdrawn their funds from the stock marketNevertheless, the interest in online trading is expected to increase (12,17).In April 2002, Americas third-largest discount brokerage house, Ameritrade, agreed topurchase Datek Online Holdings Corporation, a privately held online trading company, inan all-stock transaction valued at almost $1.29 billion. The move would transformAmeritrade of Omaha, Nebraska, into the largest online brokerage firm in the U.S. interms of equity trades per day, surpassing industry leaders E*Trade Group, Inc. andCharles Schwab Corporation. The proposed combination comes as the online tradingindustry appears to be recovering gradually from a severe recession that has promptedconsolidation.On the academic side, many recent studies have shown that onlinebrokerages have moved away from offering only online trading, and are now addingmany other services (i.e., banking services) in order to survive in this volatile market Thisstudy focuses on how online brokerage firms can better serve the market from the onlineusers standpoint.Online trading became huge business in the late 1990s. The lure ofrelatively low brokerage costs for electronic share trading, together with the capacity to 14
  15. 15. monitor real-time market developments from a computer screen, have contributed to thefact 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 pricesand better transaction costs. Some of the most notable online discount brokers areAmeritrade, E*Trade, Charles Schwab and TD Waterhouse. Full-service firms, includingbanks, reacted to the emergence of online discount brokers by entering the online marketwith their own web sites.The full-service Finns want to protect their client base and gain market share in the newonline market Discount firms felt a minimal impact from full-service firms entering theonline trading marketplace. Many small discount brokerage companies are niche Finns,against which full-service firms do not compete directly. How ever, since the bear marketstarted in early 2000, discount brokerage finns have been more affected by competition.Several firms attribute accelerated changes in competitive approaches to the marketplaceto the entry of full-service Finns.These firms explain that competition in online trading has become more similar inproduct offerings and pricing. The only area left for online trading firms to gain acompetitive advantage is through the service provided to their clients. Firms now alsocompete on the basis of quality service and response to clients. In a way, the entry of full-service firms has benefited client consumers by establishing a range of product andservice options from which they can choose. As a collateral benefit for investors, theconvergence of full-service and discount firms offerings has highlighted niche firms thatcan 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 nowappears more legitimate to investors. When customers realized that Merrill Lynch,Fidelity Investments, Paine Webber and other major full-service firms had online tradingweb sites, it strengthened the credibility and safety of online trading, at least in investorsminds (18,9).With the current market conditions, firms will not win by competing onprice or product because most online trading sites offer virtually the same things. Firmshave to stand out on service, and the way firms serve people has to stand out on multiplechannels. All the companies are offering multiple modalities: Schwab is now like a SmithBarney, 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. Thesmall group of get-rich-quickers who do make lots of money fast do it purely as a resultof chance. They rarely keep their trading gains for very long. This is because trying to getrich quick causes stock traders to take on way too much risk. This is normally done bytrading 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 notto do a good job of managing risk. Managing trading risk involves focusing more on thepotential downside of a trade or investment than the potential upside. In practical termsthis means using an objective stock market trading method designed to limit drawdownsin the value of your stock portfolio. If you do a good job of managing risk you willalmost certainly make money trading the stock market over the long-term. Those who 15
  16. 16. consistently ignore risk and overload the wagons in an attempt to get rich quick areguaranteed failure. For example, most traders with a get-rich-quick mindset dont realizethat 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 oneout 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 candramatically improve your odds of winning. Risk management is a skill. Reducing yourstock market trading risk dramatically increases the odds that you will win. Stay focusedon what you need to know and what you need to do to be successful trading the stockmarket online. Remember that money is just a by-product of wise trading methods andactions. According to Mark Crisp:-It is common now for people to undertake stocktrading online. Historically there have been American stock markets from the 1700s. InPhiladelphia an exchange for trading currency was established to enable business ownersto support their business and to grow the economy. In the early 1800s, the New YorkStock Exchange replaced the Philadelphia exchange. Initially New York Stock Exchangewas a group of business people who met on a daily basis on Wall St to trade their stocksor bonds. This initial trading was all done outside until the Exchange moved indoors inthe early 1900s. Whilst this traditional formula served its purpose admirably, trading isno longer the bricks and mortar industry it once was. Trading no longer requires you tobe in Wall St. The way the New York Stock Exchange works could be compared to anauction. If a company is listed on the stock exchange, they have a post in Wall Stwhereby trades are listed and a specialist is employed as an "auctioneer" to oversee thebidding on each trade. This form of trading keeps an accurate balance between supplyand demand in the stock market so the price of the shares is kept in check. These days, itis far easier to get involved in investing in stocks. In traditional stock trading, you engagea stock broker to take and place your order for you. You phone your broker to take theorder and then there can be a delay in the order being executed. Now you no longer needto worry about using a stock broker to act on your behalf. If buying or selling stocksonline you can place your order with the click of a mouse. Conveniently, trading this wayis also a time saver. Setting up an account with a reputable,online brokerage company iseasy. These online companies provide access to a wide range of services that werepreviously 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 theminute stock quotes, detailed historic performances of individual stocks, as well asdetailed information about company fundamentals. One of the most common reasonsinvestors like buying and selling stocks online compared with traditional brokerage isprice. There are much lower brokerage fees for buying and selling stocks online thanthere are through buying and selling stocks at a traditional brokerage house.An importantadvantage of using an online brokerage service to trade stocks online is the significantprice saving in brokerage fees. This is combined with the immediacy at which you cangather information required in making your stock purchasing decisions when trading 16
  17. 17. online. Many investors also like the independence associated with trading shares online.Many traditional brokerage houses would try to influence your decisions when tradingshares, 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 tradingplatform. The company provides equity based products (research, equities, derivatives,depository, margin funding, etc.). It has one of the largest networks in the country with704 share shops in 280 cities and India’s premier online trading portalwww.sharekhan.com. With their research expertise, customer commitment and superiortechnology, they provide investors with end-to-end solutions in investments. Theyprovide 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 Mumbai-based SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED]Group.SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacyof more than 80 years in the stock markets, the SSKI group ventured into institutionalbroking and corporate finance over a decade ago. Presently SSKI is one of the leadingplayers in institutional broking and corporate finance activities.Sharekhan offers its customers a wide range of equity related services including tradeexecution on BSE, NSE, and Derivatives. Depository services, online trading, Investmentadvice, Commodities, etc.Sharekhan Ltd. is a brokerage firm which is established on 8 th February 2000 and now itis having all the rights of SSKI. The company was awarded the 2005 Most PreferredStock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to goonline. The Companys online trading and investment site - www.Sharekhan.com - wasalso launched on Feb 8, 2000.This site gives access to superior content and transaction facility to retail customersacross the country. Known for its jargon-free, investor friendly language and high qualityresearch, the content-rich and research oriented portal has stood out among itscontemporaries because of its steadfast dedication to offering customers best-of-breedtechnology and superior market information.Share khan has one of the best states of art web portal providing fundamental andstatistical information across equity, mutual funds and IPOs. One can surf across 5,500 17
  18. 18. companies for in-depth information, details about more than 1,500 mutual fund schemesand IPO data. One can also access other market related details such as board meetings, resultannouncements, FII transactions, buying/selling by mutual funds and much more.THE COMPANYName of the company: Sharekhan ltd.Year of Establishment: 1925Headquarter: Sharekhan SSKI A-206 Phoenix House Phoenix Mills Compound Lower Parel Mumbai - Maharashtra, INDIA- 400013Nature of Business: Service ProviderServices: Depository Services, Online Services and Technical Research.Number of Employees: Over 3500Website: www.sharekhan.comSlogan: Your Guide to The Financial Jungle.VisionTo be the best retail brokering Brand in the retail business of stock market.MissionTo educate and empower the individual investor to make better investmentdecisions 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.Sharekhans management team is one of the strongest in the sector and has positionedSharekhan to take advantage of the growing consumer demand for financial services 18
  19. 19. products in India through investments in research, pan-Indian branch network and anoutstanding technology platform. Further, Sharekhans lineage and relationship withSSKI Group provide it a unique position to understand and leverage the growth of thefinancial services sector.SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bankwith strong research-driven focus. Their team members are widely respected for theircommitment 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 researchcategory, 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 itamong the most significant players raising equity in the Indian market. SSKI, a veteranequities 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 onlinetrading facility, well find a common thread; one that helps us make informed decisionsand simplifies investing in stocks. The common thread of empowerment is whatSharekhans all about!"Sharekhan has always believed in collaborating with like-minded Corporate intoforming 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.Sharekhans expertise lies in stocks and thats what he talks about with authority. So whenhe says that investing in stocks should not be confused with trading in stocks or aportfolio-based strategy is better than betting on a single horse, it is something that isspoken with years of focused learning and experience in the’ stock markets. And thesebeliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of theSSKI group, an Indian financial services power house, with strong presence in Retailequities Institutional equities Investment banking.In delhi it is having the branches at netaji subash place and Nehru place. We have beengiven 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
  20. 20. - Dial and Trade: for query relating tradingPRODUCTS AND SERVICES OF SHAREKHAN LIMITED (Figure-3) 20
  21. 21. METHODOLOGY:The data collection methods include both primary and secondary collection methods.Primary method: This method includes the data collected from the questionnaires andpersonal 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 indematerialized form in Sharekhan. But for this one has to the demat account inSharekhan. Dematerialization is the process by which a client can get physical certificatesconverted 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) CHARGES (nonrefundable)ACCOUNT TERMINALCLASSIC Rs.5000 Rs.750 Rs.10000 NilTRADETIGER Rs.5000 Rs.1000 Rs.10000/25000 NilAccount opening:Opening a DP account with Sharekhan-One can open a Depository Participant (DP) account, either through a Sharekhan branchor 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. 21
  22. 22. All investors have to submit their proof of identity and proof of address along with theprescribed account opening form.BROKERAGE STRUCTURE OF SHAREKHANBROKERAGE: INTRADAY DELIVERYCASH- 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: 22
  23. 23. INVESTMENT MINIMUM AMOUNTMutual Fund (Any Company) 5000Systematic Investment Plan (Any Company) 500CUSTOMER • 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 ShareSharekhan enjoyed about 20 per cent market share in Web business (Internet trading) instock markets. Three years ago, Web trading showed lot of promise but with the marketwitnessing a downturn, there was not much interest among retail customers.Profits 23
  24. 24. The share of Web trading constituted 22 per cent of the revenue. As Sharekhans dailytrading volume was over Rs 200 crore, the share of Web trading at about Rs 40 crore aday was substantial and a larger part of the volume was coming from day tradersIts 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 StepThe Sharekhan FirstStep is a brand new program designed especially for those who arenew to investing in shares. All one have to do is open a Sharekhan FirstStep account andthey guide us through the investing process. 24
  25. 25. Features of Trading With Sharekhan:1. Freedom from paperwork2. Instant credit and money transfer3. Trade from any net enabled PC4. After hour orders5. Online orders on the phone6. Timely advice and-research reports7. Real-time Portfolio tracking8. Information and Price alerts. WEEKLY ANALYSISWEEK 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 inbrief - Speed Trade and Classic account, learned how to buy and sell shares through theseonline terminals, Sales technique, Sharekhan`s brokerage.As this was my first week and had training for 3 days I got very less time to understandthe 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 25
  26. 26.  Cash transfer  Order and trade confirmation through e-mails  Single screen interface for cash and derivativeWEEK No. 3:In this week we were told about the speed trade. Speed trade tiger is a software ofsharekhan 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 TerminalWEEK No. 4: 26
  27. 27. 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. AGE STRUCTURE OF RESPONDENTS Age Chart 10%20% AGE RESPONDENT 15 to 30 15-30 14 31 to 45 46 to 60 31-45 4 45-60 2 70% (Figure-4) 27
  28. 28. INTERPRETATION- It 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. INCOME Income Chart 10% 5% Number of Income/Month Member Below 15000 12 15001 to Below 15000 30000 5 15001 to 30000 30001 to 30001 to 45000 Above 45000 45000 125% Above 45000 2 60% 28
  29. 29. (Figure-5)INTERPRETATION-This is clear from the chart that people having income less than 15000 are more involvedin online trading and 5 people are having income more than 15000 but less than 30000and 3 people are having income more than 30000.EDUCATION QUALIFICATION 29
  30. 30. Education Chart 2 Other 5 Post Graduation Number of Member 13 Graduation 0 2 4 6 8 10 12 14 (Figure-6)INTERPRETATION-It can be seen that most of the people who are involved in online trading are graduatesand 5 respondents are post graduates and 2 people have different education qualification. 30
  31. 31. ACCOUNT OPENING Number Account Ref Chart Account of Ref Member Personal acquintance 6 Referral- Clients 8 15% Referral- 30%10% Non Clients 1 Personal acquintance Call / Wall Referral-Clients in 2 Referral-Non Clients Call / Wall in Personal5% Personal Prospect visit Prospect visit 3 40% (Figure-7) INTERPRETATION- Many 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. 31
  32. 32. FEEL SAFE..? Number of Answer Member Yes 14 No 6 14 14 12 10 8 Number of Member 6 6 4 2 0 Yes No (Figure-8)INTERPRETATION-It is shown in the figure that 70% of respondents feel safe while trading online and 30%are having fear of fraud. 32
  33. 33. MOST TRADED STOCK Membe stock r Equity 7 M.Funds 8 Commoditie s 3 F&O 1 Other 1 Most Traded Stock 8 7 6 5 8 4 Number of Member 7 3 2 3 1 1 1 0 Equity Mutual Funds Commodities F&O Equities Other 33
  34. 34. (Figure-9)INTERPRETATION-It can be seen that 40% respondents most trade in mutual fund and 7 people trade inequity & 3 invest in commodities while 1 person trades in future and option and 1 inother stocks.EXPERIENCE Online Trading Experience 15%experience Number of MemberBelow 5 Year 175 to 10 3 Below 5 Year 5 to 10 85% (Figure-10)RECEIVE UPDATED INFORMATION 34
  35. 35. Updated Information Number of Answer Member 9 Yes 9 No 11 Yes No 11 Successful broker (Figure-11) SUCCESSFUL BROKER 5% 5% 5% 35% Strongly agree Agree Moderate Successful Number of Disagree broker Member Strongly disagree Strongly agree 1 Agree 750% Moderate 10 Disagree 1 Strongly disagree 1 35
  36. 36. (Figure-12)INTERPRETATION- It can be seen that most of respondents moderately agree that theirbroker is successful in online trading & 35% just agree while 1 person is strongly agreeon the statement. SWOT ANALYSISStrengths  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 36
  37. 37.  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%.  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 market- Share 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. 37
  38. 38.  As interest on fixed deposits with post office and banks are all time low, more and More small investors are entering into stock market.  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. 38
  39. 39. FINANCIAL ANALYSISFinancial statement analysis is a judgmental process. One of the primary objectives isidentification of major changes in trends, and relationships and the investigation of thereasons underlying those changes. The judgment process can be improved by experienceand the use of analytical tools. Probably the most widely used financial analysistechnique is ratio analysis, the analysis of relationships between two or more line itemson the financial statement. Financial ratios are usually expressed in percentage or times.Generally, financial ratios are calculated for the purpose of evaluating aspects of acompanys operations and fall into the following categories: • Liquidity ratios measure a firms ability to meet its current obligations. • Profitability ratios measure managements 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 firms ability to raise additional debt and its capacity to pay its liabilities on time. • Efficiency, activity or turnover ratios provide information about managements 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 variablesincluded in financial statements, a very long list of meaningful ratios can be derived. Astandard list of ratios or standard computation of them does not exist. The following ratiopresentation includes ratios that are most often used when evaluating the credit 39
  40. 40. worthiness of a customer. Ratio analysis becomes a very personal or company drivenprocedure. Analysts are drawn to and use the ones they are comfortable with andunderstand.Liquidity RatiosWorking CapitalWorking capital compares current assets to current liabilities, and serves as the liquidreserve available to satisfy contingencies and uncertainties. A high working capitalbalance is mandated if the entity is unable to borrow on short notice. The ratio indicatesthe short-term solvency of a business and in determining if a firm can pay its currentliabilities when due. • Formula Current Assets - Current LiabilitiesAcid Test or Quick RatioA measurement of the liquidity position of the business. The quick ratio compares thecash plus cash equivalents and accounts receivable to the current liabilities. The primarydifference between the current ratio and the quick ratio is the quick ratio does not includeinventory and prepaid expenses in the calculation. Consequently, a businesss quick ratiowill be lower than its current ratio. It is a stringent test of liquidity. • Formula Cash + Marketable Securities + Accounts Receivable Current LiabilitiesCurrent RatioProvides an indication of the liquidity of the business by comparing the amount of currentassets to current liabilities. A businesss current assets generally consist of cash,marketable securities, accounts receivable, and inventories. Current liabilities includeaccounts payable, current maturities of long-term debt, accrued income taxes, and otheraccrued expenses that are due within one year. In general, businesses prefer to have atleast one dollar of current assets for every dollar of current liabilities. However, thenormal current ratio fluctuates from industry to industry. A current ratio significantlyhigher than the industry average could indicate the existence of redundant assets.Conversely, a current ratio significantly lower than the industry average could indicate alack of liquidity. • Formula Current Assets Current LiabilitiesCash RatioIndicates a conservative view of liquidity such as when a company has pledged itsreceivables and its inventory, or the analyst suspects severe liquidity problems withinventory and receivables. • Formula 40
  41. 41. Cash Equivalents + Marketable Securities Current LiabilitiesProfitability RatiosNet 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 ratiocomputation. They could include removal of equity earnings from investments, "otherincome" and "other expense" items as well as minority share of earnings and nonrecuringitems.Return on AssetsMeasures the companys ability to utilize its assets to create profits. • Formula Net Income * (Beginning + Ending Total Assets) / 2Operating Income MarginA measure of the operating income generated by each dollar of sales. • Formula Operating Income Net SalesReturn on InvestmentMeasures the income earned on the invested capital. • Formula Net Income * Long-term Liabilities + EquityReturn on EquityMeasures the income earned on the shareholders investment in the business. • Formula Net Income * EquityGross Profit MarginIndicates the relationship between net sales revenue and the cost of goods sold. This ratio 41
  42. 42. should be compared with industry data as it may indicate insufficient volume andexcessive purchasing or labor costs. • Formula Gross Profit Net SalesFinancial Leverage RatiosTotal Debts to AssetsProvides information about the companys ability to absorb asset reductions arising fromlosses without jeopardizing the interest of creditors. • Formula Total Liabilities Total AssetsCapitalization RatioIndicates long-term debt usage. • Formula Long-Term Debt Long-Term Debt + Owners EquityDebt to EquityIndicates how well creditors are protected in case of the companys insolvency. • Formula Total Debt Total EquityLong-term Debt to Net Working CapitalProvides insight into the ability to pay long term debt from current assets after payingcurrent liabilities. • Formula Long-term Debt Current Assets - Current LiabilitiesEfficiency RatiosCash TurnoverMeasures how effective a company is utilizing its cash. • Formula Net Sales Cash 42
  43. 43. 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 companys working capital is working too hard. • Formula Net Sales Average Working CapitalTotal Asset TurnoverMeasures the activity of the assets and the ability of the business to generate salesthrough the use of the assets. • Formula Net Sales Average Total AssetsFixed Asset TurnoverMeasures the capacity utilization and the quality of fixed assets. • Formula Net Sales Net Fixed AssetsCapital Gearing Ratio:Closely related to solvency ratio is the capital gearing ratio. Capital gearing ratio ismainly used to analyze the capital structure of a company. • Formula Equity Share Capital Fixed Interest Bearing FundsRetained Earnings to Total Assets RatioThis ratio indicates the extent to which assets have been paid for by companyprofits.A retained earnings to total assets ratio near 1:1 (100%) indicates thatgrowth has been financed through profits, not increased debt.A low ratio indicatesthat growth may not be sustainable as it is financed from increasing debt, instead ofreinvesting profits. • Formula Retained earnings Total assets 43
  44. 44. Cash Flow Indicator Ratios:Operating Cash Flow/Sales RatioThis ratio, which is expressed as a percentage, compares a companys operatingcash flow to its net sales or revenues, which gives investors an idea of the companysability to turn sales into cash. • Formula: Operating cash flow Net sales(revenues)Cash Turnover RatioThe cash turnover ratio indicates the number of times that cash turns over in a year • Formula Sales CashCash Flow to Long Term Debt RatioThe cash flow to long term debt ratio appraises the adequacy of available funds topay obligations. • Formula Cash flow Long term debtOperations Cash Flow to Current Liabilities RatioIf the operations cash flow to current liabilities ratio keeps increasing, it mayindicate that cash inflows are increasing and need to be invested. • Formula Cash flow from operations Current liabilitiesCash Flow for Investing to Cash Flows from Operating and FinancingThis ratio compares the funds needed for investment to the funds obtained fromfinancing and operations. • Formula Cash flows from investing . Cash flows from operations + cash flows from financing 44
  45. 45. 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. 45
  46. 46. v> Total debt/equity ratio = 497.750 = 0.45 1107.71 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 the last year’s ratio (8.23).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 1107.71ix> 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 = 1.11 451.29xi> 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 46
  47. 47. Higher ratio is better. In this case company’s net sale is more than the average debtors.xiii> Capital gearing ratio = 1107.71 = 2.23 497.75xiv> 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 companys 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 = 1.18 561.84xvii> 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 47
  48. 48. 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.xx> Cash flow for investing to cash flow from operating and financing =- 265.620 5.12+392.08 = -265.62 397.20 = -0.66LIMITATIONS OF THE STUDY:Despite of the training my level best, there were still some limitation which I thinkremains there to draw fruitful conclusion. There were some practical problems whichcome 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. 48
  49. 49. LEARNINGS & FINDINGSLEARNINGS: 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 49
  50. 50. 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. • 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. 50
  51. 51. 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. 51
  52. 52. • 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 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
  53. 53. Newspapers:-  The Times of India  The Economic TimesBOOKS:-  Beri G.C, Marketing Research  Gupta C.B, Marketing Management. ANNEXUREBalance sheet Mar Mar 10 09Equity share capital 57.04 56.68Share application money 0.40 11.37Preference share capital - - 1,050.6Reserves & surplus 980.13 7Secured loans 1.17 1.70Unsecured loans 496.58 0.10 1,605.8 1,049.9Total 6 9Gross block 108.83 143.68Less : revaluation reserve - -Less : accumulated depreciation 60.63 44.94Net block 48.20 98.73Capital work-in-progress 1.75 4.51 1,104.2Investments 869.31 2 1,709.8Current assets, loans & advances 778.75 1 53
  54. 54. Mar Mar 10 09 1,258.1Less : current liabilities & provisions 701.31 2Total net current assets 451.69 77.43Miscellaneous expenses not written - - 1,605.8 1,049.9Total 6 9 1,101.4Book value of unquoted investments 869.28 9Market value of quoted investments 3.27 0.03Contingent liabilities 24.17 20.85 2852.1 2834.0Number of equity sharesoutstanding (Lacs) 5 0Cash flow statement Mar Mar 10 09Profit before tax 233.31 151.48Net cashflow-operating activity 5.12 513.70 -Net cash used in investing activity -18.71 265.62 -Netcash used in fin. activity 392.08 279.11Net inc/dec in cash and equivlnt 131.59 215.88Cash and equivalnt begin of year 430.25 214.37Cash and equivalnt end of year 561.84 430.25 54
  55. 55. Profit loss account Mar Mar 10 09IncomeOperating income 665.99 542.27ExpensesMaterial consumed - -Manufacturing expenses 14.52 93.32Personnel expenses 162.62 136.91Selling expenses 137.18 67.38Adminstrative expenses 104.83 85.81Expenses capitalised - -Cost of sales 419.14 383.42Operating profit 246.85 158.85Other recurring income 24.30 29.37Adjusted PBDIT 271.14 188.22Financial expenses 13.88 11.15Depreciation 31.86 25.56Other write offs - -Adjusted PBT 225.40 151.51Tax charges 77.34 47.88Adjusted PAT 148.07 103.63Non recurring items 7.90 -0.03Other non cash adjustments -3.96 2.23Reported net profit 152.02 105.83Earnigs before appropriation 277.22 228.74Equity dividend 85.20 79.45Preference dividend - -Dividend tax 14.48 13.50Retained earnings 177.54 135.79 QUESTIONNAIRE A STUDY ON ONLINE TRADING ON SHAREKHAN LTD 55
  56. 56. The purpose of this questionnaire is to know the behavior of investors about online tradingand this is only for academic purpose.1. Name………………………2. Age □ 15 to 30 □ 31 to 45 □ 46 to 60 □ above 603. Income per month □ Below 15000 □ 15001 to 30000 □ 30001 to 45000 □ above 450004. Education qualification □ Graduation □ post graduation □ Others5. Do you know about online trading? □ Yes □ No6. How was account opened? □ Personal acquaintance □ Referral-Clients □ Referral-Non Clients □ Call/Walk in □ Personal Prospect Visit7. Net worth involved in online trading ………………...8. Do you feel safe while trading online? □ Yes □ No 56
  57. 57. 9. In which stock you most trade online □ Equity □ Mutual Funds □ Commodities □ F&O Equitie □ Other10. No. of years of online trading experience in stocks at this firm □ below 5 yrs □ 5 to 1011. Do you receive updated online information regarding the stock market from yourdealer/broker? □Yes □No12. Do you believe that your trader/broker is very successful in online trading? □ Strongly Agree □Agree □Moderate □Disagree □Strongly Disagree 57