Chapt Er 1: Investor's Perception Towards "Stock Trading"

Investor’s perception towards “Stock Trading”
Chapt
er
1
RAYAT INSTITUTE OF MANAGEMENT 1
CHAPTER – 1
INTRODUCION
INDUSTRY PROFILE
1.1.1 Financial Services – Overview
Financial service is a segment of financial system. Financial system facilitates the

transformation of savings of individual, government as well as business into investment
and consumption. It consists of financial intermediaries, financial markets and financial
assets. A vibrant and competitive financial system is necessary to sustain reforms in the
structural aspects of the economy.
All types of activities that are of a financial nature could be brought under the term
“financial services”. Financial services mean “mobilizing and allocating savings”. It
includes all activities involved into the transformation of savings into investment.
The financial service can also be called “financial intermediation”. It is a process by
which funds are mobilized from large number of savers and make them available to all
those who are in need of these. Thus financial services sector is a key area and it is very
vital for industrial developments.
The financial service sector includes banks, insurance companies, building societies,
credit card issues, investment trusts, stock exchanges etc.
1.1.2 Introduction of Stock Exchange
A stock exchange is an essential pillar of the economy. It is the place where the
outstanding securities of corporate, government, semi government and state government
are traded. It is the body which regulates the sale and purchase of shares and securities.

The stock exchanges provide an organized market-place for the investors to buy and sell
securities freely. The market for these securities is almost perfectly competitive one
because large number of sellers and buyers participate. In the stock exchange, there is
active bidding and a two way auction trading takes place. The bargains that are struck are
the fairest price determined by the basic laws of supply and demand. The stock exchange
provides an auction market in which members of the stock exchange participate to ensure
continuity of price and liquidity to investors. The efficient functioning of the stock
exchange creates a climate conducive for an active and growing primary market for new
issues. An active and healthy secondary market in existing securities leads to a better
psychology of expectations.
In India, there are 24 stock exchanges recognized by the SEBI in which the Supremes are
the Bombay Stock Exchange and the National Stock Exchange. Stock Exchanges
discharge three essential functions on capital market.
1. Stock Exchange provides the place for the sale and purchase of securities.
2. It provides linkage between the savings of the household sector and the investment in
the corporate sector/economy. It mobilizes the savings of the household in the corporate
sector so that they can earn some capital gain on their savings. The valuation of the
company is done by the public itself, the investors have their own criteria on the
evaluation of the company.
3. It also provides the market quotations for the shares, debentures and bonds – a sort of
collective judgment from the large number of buyers and sellers in the market. It works
as the barometer not only to the health of the individual but to the nation’s economy as a
whole. Share prices in the market are influenced by many factors – change in
government, change in the finance policy, change in the tax policy, change in the fiscal
policy and many other factors like economic development and financial development.
These trends are influenced to some extent by periodical cycles of booms and depressions
in the free market economics.

1.1.3 Introduction of SEBI
In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently upgraded as
a fully autonomous body (a statutory Board) in the year 1992 with the passing of the
Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place
of Government Control, a statutory and autonomous regulatory board with defined
responsibilities, to cover both development & regulation of the market, and independent
powers has been set up. Paradoxically this is a positive outcome of the Securities Scam of
1990-91.
The basic objectives of the Board were identified as:
 To protect the interests of investors in securities;

 To promote the development of Securities Market;
 To regulate the securities market and
 For matters connected therewith or incidental thereto.
SEBI has introduced the comprehensive regulatory measures, prescribed registration

norms, the eligibility criteria, the code of obligations and the code of conduct for different
intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers,
registrars, portfolio managers, credit rating agencies, underwriters and others. It has
framed bye-laws, risk identification and risk management systems for clearing houses of
stock exchanges etc. which has made dealing in securities both safe and transparent to the
end investor.
Major amendments have been made by SEBI on 14-8-2003, in the Disclosure and
Investor Protection Guidelines 2000. These have been made based on recommendation of
various committees set up by SEBI. The purpose of amendments, as stated in SEBI
circular dated 14-8-2003 is –
 To enhance the level of investors’ protection

 To increase the transparency and efficiency of the primary market
 To strengthen the disclosure and eligibility norms for issuer companies and
 To rationalize and simplify various operational procedures in the primary market
so as to facilitate raising of resources by the issuer companies.
Effective date - The amendments of the Guidelines shall come into force with effect from
14-8-2003. These shall be applicable to all Public Issue/Rights Issue/Offer for Sale for
which observations have not been issued by SEBI till date.
1.1.4 Investment
Investment is parting with one’s fund, to be used by another party, user of fund, for
productive activity. It can mean giving an advance or loan or contributing to the equity
(ownership capital) or debt capital of a corporate or non-corporate business unit.
Generalised, investment means conversion of cash or money into a monetary asset or a
claim on future money for a return. This return is for saving (as abstaining from present
consumption), parting with saving or liquidity ( to be rewarded for waiting for a future
consumption) and lastly for taking a risk involving the uncertainty about the actual return,
time for waiting and cost of getting back funds, safety of funds, and risk of the variability
of the return.
1.1.5 What are Securities?

Investment in capital market is in various financial instruments, which are all claims on
money. These instruments may be of various categories with different characteristics.
These are all called securities in the market. In a legal sense also, the securities contracts
regulation act (1956) has defined the security as inclusive of share, bonds, debenture
stock or any other marketable securities of a company or body corporate, the Govt. and
semi Govt. body etc. It includes all rights and interest in them including warrants, and
loyalty coupons etc., issued by any of the bodies, organizations or the Govt.
In the strict sense of the word, a security is an instrument of promissory note or a method
of borrowing or lending or a source of contributing to the funds needed by a corporate
body or non-corporate body.

It has been seen that what is an investment and the broad spectrum of investment of
investment avenues open to investors. The market in which these securities re dealt with
is called securities market. There are a number of sub-markets in the wide sense of the
securities market, like debt market, equity market etc. being markets in financial
instruments, the demand for and supply of them constitute the market for each of these
instruments.
The basic classification of such instruments on new issues made by the issuers of
securities such as companies, public sector undertakings (P.S.U), Government and semi
Government bodies, and others. The investment in these new securities constitutes the
primary market, while the trading in the existing securities is called the secondary
market.
These markets help the issuers of securities, investors, intermediaries and the national
economy, as a whole, who are all involved in the operations. Firstly, the issuer’s will
benefit as they can raise funds through this method for financing their operations.
Secondly, for investors the markets provide an avenue for channeling their savings and
liquidity is imparted to them for their operations of investment and disinvestment.
These markets provide an avenue for mobilization of savings. They activate the idle
funds for productive use and conversion of savings into investment leading to growth of
fixed assets and productive capacity. Thirdly, these markets provide liquidity to the
investment so that public is attracted to these investments and there is a demand and
supply for these instruments of investments. Lastly these markets promote growth of the
industry and economy in general and of the corporate sector in particular. The securities
markets have thus a crucial role to play in the economy and the stock markets (or
secondary market) are called the windows of the economy.

1.1.5 Classification of Corporate Securities
CLASSIFICATION OF
CORPORATE SECURITIES
OWNERSHIP SECURITIES CREDITORSHIP SECURITIES
ORDINARY OR PREFERENCE DEBENTURES OR

EQUITY SHARES SHARES BONDS
1.1.5.1 Kinds of Ownership Securities or Shares

Companies issue different types of shares to mop up funds from various investors. Before
companies Act 1956 public companies used to issue three types of shares, i.e. Ordinary or
Equity shares, Preference shares and Deferred shares. The companies act, 1956 has
limited the type of shares to only two- Preference shares and Equity shares.
Different types of shares are issued to suit the requirements of investors. Some investors
prefer regular income through it may be low, other may prefer higher returns and they
will be prepared to take risk. So, different types of shares suit different types of investors.
If only one type of shares are issued, the company may not be able to mop up sufficient
funds. The various kinds of shares are discussed as follows:
(a) Equity/Ordinary Shares

Equity shares, also known as ordinary shares or common shares represent the owner’s
capital in a company. The holders of these shares are the real owners of the company.
They have a control over the working of the company. Equity shareholders are paid
dividend after paying it to the preference shareholders. The rate of dividend on these
depends upon the profits of the company. They may be paid a higher rate of dividend or
they may not get anything. These shareholders take more risk as compared to preference
shareholders. Equity capital is paid after meeting all other claims including that of
preference shareholders. They take risk both regarding dividend and return of capital.
Equity share capital cannot be redeemed during the life time of the company. Equity
shares are classified into following broad categories by stock market analyst:
 Blue Chip Shares
 Growth Shares
 Income Shares
 Cyclical Shares
 Speculative Shares
Voting Rights: equity shareholders are the real owners of the company. They have
voting rights in the meeting of the company and have a control over the working of the
company. The control in case of a company rests with the board of directors who are
elected by the equity shareholders. Directors are appointed in the Annual General
Meeting by majority votes. Each equity share carries one vote and a shareholder has
votes equal to number of equity shares held by him.
(b) Preference Shares

As the name suggests, these shares have certain preferences as compared to other types of
shares. These shares are given two preferences. There is a preference for payment of
dividend. Whenever the company has distributable profits, the dividend is first paid on
preference share capital. Other shareholders are paid dividend only out of the remaining
profits, if any. The second preference for these shares is the repayment of capital at the
time of liquidation of company. After paying outside creditors, preference share capital is
returned. Equity shareholders will be paid only when preference share capital is returned
in full. a fixed rate of dividend is paid on preference share capital.
Voting Rights
Preference shareholders do not have voting rights; so they have no say in the
management of the company. However, they can vote if their own interests are affected.
Those persons who want their money to fetch a constant rate of return even if the earning
is less will prefer to purchase preference shares.
(c) Deferred Shares

These shares were earlier issued to promoters or founders for services rendered to the
company. These shares were known as founders Shares because they were normally
issued to the founders. These shares rank last so far as payment of dividend and return of
capital is concerned. Preference shares and equity shares have priority as to payment of
dividend. These shareholders tried to manage the company with efficiency and economy
because they got dividend only at last. According to Companies Act, 1956 no public
limited company or which is a subsidiary of a public company can issue deferred shares.
1.1.5.2 Creditorship Securities

The term ‘creditorship securities’ is also known as ‘debt capital’, represents debentures
and bonds. They occupy a very significant place in the financial plan of the company.
The use of such creditorship securities in financing of a company generally tends to
reduce the cost of capital and consequently helps it to improve the earnings for its
shareholders.
Debenture or Bonds
Debenture or bonds represent long-term debt instruments. A debenture is a document
under the company’s seal which provides for the payment of a principal sum and interest
thereon at regular intervals which is usually secured by a fixed or floating charge on the
company’s property or undertaking. A debenture holder is a creditor of the company. A
fixed rate of interest is paid on debentures. Bonds may be classified into the following
categories:
• Government of India Relief Bonds

• Tax Saving Bonds

Legal framework for Securities Markets in India

New issues markets and stock exchange are a part of the capital market where the shares,
debentures, bonds and other securities of companies and government are traded. The
stock exchange provides facilities for exchange of shares into money and vice versa. New
issues market is the primary market where the issuers can sell securities, but cannot buy.
Stock Exchange is defined as an association of member brokers who assist, facilitate and
regulate trading in securities. One can buy and sell in the stock exchange or secondary
market.
1.1.6 Classification of Various Markets
CLASSIFICATION OF MARKETS
CAPITAL MONEY
MARKET MARKET
PRIMARY SECONDARY
MARKET MARKET
The financial system consists of the money market and the capital market.
1.1.6.1 Capital Market

The capital market discharges the important function of transfer of savings, especially of
the household sector to companies, governments and public sector bodies. There are
basically two types of market i.e. primary and secondary market and another type of
market is also exist i.e. money market. All these markets are explained below:
(a) Primary Market
Households which are in financial surplus, exchange their savings for shares, debentures
and securities of the financial deficit sectors such as the companies and governments. It is

the primary market. The market consists of investors or buyers, sellers, dealers and does
not reflect a physical location. The participants are regulated by formal rules for
originating financial securities. The primary market in which public issue of securities are
made through prospectus is a retail market and is reached through direct mailing. In the
primary market, new issues of equity and debt are arranged in the form of a new flotation,
either publicity or privately or in the form of a rights offer, to existing shareholders.
Companies raise new cash in exchange for financial claims. Public sector too issue
securities. The transactions in the primary market result in capital formation.
(b) Secondary Market

Capital market apart from the primary market also includes markets where securities that
have been issued in the past are traded. These secondary markets are called stock markets
or equity shares. They enable owners of shares to sell their holdings readily ensuring
liquidity. The secondary market enables investors to continuously rearrange their assets if
they so desire by divesting themselves of such assets while others can use their surplus
funds to acquire them. Any trade of share subsequent to its primary offering is called a
secondary transaction. The initial buyer in the primary market may re-offer the securities
to any interested buyer at whatever price is mutually satisfactory. The stock exchanges
provide a market where such mutually satisfactory prices may be determined. They offer
opportunities primarily for trading risk and boost liquidity.
The presence of an active secondary market actually promotes the growth of the primary
market and capital formation because investors in the primary market are assured that a
continuous market exists and should occasion arise they can liquidate their investment in
the stock exchange. The participants in the secondary market are linked by formal trading
rules and communication networks for trading in securities.
Functions of Secondary Market

The three important functions of secondary/capital market are:-
1. The main function is price discovery process which results from the interactions of
buyers and sellers in the market when they trade assets.

2. It provides the provision of liquidity by providing a mechanism for an investor to sell

financial assets.
3. Finally low cost of transactions and information.
1.1.6.2 Money Market

The money market is a general term for the markets in which banks lend to and borrow
from each other, trade financial instruments such as Certificates of Deposit (CDs) or enter
agreements such as Repos and Reverses. The market normally trades in maturities up to
one year. It provides short to medium term liquidity in the global financial system.
Derivatives of the money market include forward rate agreements (FRAs) and futures. A
sector of the capital market where short term obligations such as Treasury bills,
commercial paper and bankers' acceptances are bought and sold. The market for short-
term funds. Instruments are debt securities usually with maturity between 1 day and 1
year. Instruments consist of short-term securities and bank loans. Securities are usually
only of the highest credit quality. A place to safely invest temporarily-excess funds. The
important money market instruments are:
• Treasury Bills
• Commercial Papers
• Certificates of Deposits
1.1.7 Current Scenario

Various players in Stock Trading segments in Mohali/Chandigarh are as follows:
S.No. PLAYERS
1 Indiainfoline
2 Indiabulls
3 Kotak Securities ltd.
4 Master Capital
6 ICICI direct.com
7 Karvy Stock Broking Ltd

CHAPTER – 1
COMPANY PROFILE (INDIA

( INFOLINE)
1.2.1 Introduction
The INDIA INFOLINE group comprises the holding company; INDIA INFOLINE
LTD.which has wholly owned subsidiaries engaged in distinct yet complementary
businesses which together offer a whole bouquet of products to make your money
grow. The corporate structure has evolved to comply with oddities of the regulatory
framework, but still beautifully help attain synergy and allow flexibility to adapt
dynamics of different businesses. The parent company, INDIA INFOLINE LTD.
owns and manages the web properties www.india infoline.com and 5 paise.com.The
India Infoline group, which is the holding company with its subsidiaries, straddles
the entire financial services space with offerings ranging from equity research,
equities and derivatives trading, commodity trading, portfolio management services ,
mutual funds, life insurance, fixed deposits, gold bonds and other small saving
instruments to loan products and investment banking .
INDIA INFOLINE LTD. Is listed on both the leading stock exchanges in India viz
the stock Exchange, Munbai [BSE] and The National stock exchange [NSE].being a
listed entity, is regulated by SEBI [Securities and Exchange Board of India]. It
undertakes equities research which is acknowledged by none other FORBES as
“BEST OF THE WEB”. India Infoline’s research is available at not just over the
internet but also on international wire services like Thomas first call and Internet
Securities where it is amongst the most read India Brokers.
It’s various subsidiaries are in different lines of business and hence are governed by
different regulators.

1.2.2 Management of Company

Mr. Nirmal Jain (CHAIRMAN)
The Board of Directors
Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline
comprises:
Mr Sat Pal Khattar (Non Executive Director)
Mr Sanjiv Ahuja (Independent Director)
Mr Nilesh Vikamsey (Independent Director)
Mr Kranti Sinha (Independent Director)
1.2.3 SUBSIDIARIES OF INDIA INFOLINE LTD ARE: -
INDIA INFOLINE SECURITIES PVT. LTD.
India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is
engaged in the businesses of Equities broking and Portfolio Management Services. It
holds memberships of both the leading stock exchanges of India viz. the Stock Exchange,
Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the
Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.
A SEBI authorized Portfolio Manager, it offers Portfolio Management Services to clients.
These services are offered to clients as different schemes, which are based on differing
investment strategies made to reflect the varied risk-return preferences of clients.
INDIA INFOLINE COMMODIES PVT. LTD.
India Infoline Commodities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is
engaged in the business of commodities broking. Our experience in securities broking
empowered us with the requisite skills and technologies to allow us offer commodities
broking as a contra-cyclical alternative to equities broking. We enjoy memberships with
the MCX and NCDEX, two leading Indian commodities exchanges, and recently

acquired membership of DGCX. We have a multi-channel delivery model, making it

among the select few to online as well as offline trading facilities.
INDIA INFOLINE DISTRIBUTION CO LTD.
India Infoline.com Distribution Co Ltd is a 100% subsidiary of India Infoline Ltd and is
engaged in the business of distribution of Mutual Funds, IPOs, Fixed Deposits and other
small savings products. It is one of the largest 'vendor-independent' distribution houses
and has a wide pan-India footprint of over 232 branches coupled with a huge number of
'feet-on-street', which help source and service customers across the length and breadth of
India. Its unique value proposition of free doorstep expert advice coupled with free pick-
up and delivery of cheques has been met with an enthusiastic response from customers
and fund houses alike. Our business has expanded to include the online distribution of
mutual funds, wherein users can view and compare different product offerings and
download application forms which they can later submit to the product provider.
INDIA INFOLINE INSURANCE SERVICES LTD.

India Infoline Insurance Services Ltd is also a 100% subsidiary of India Infoline Ltd and
is a registered Corporate Agent with the Insurance Regulatory and Development
Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance
Co Ltd, which is India's largest private Life Insurance Company.
INDIA INFOLINE INVESTMENT SERVICES LTD.

India Infoline Investment Service Ltd is also a 100% subsidiary of India Infoline Ltd. It
has an NBFC license from the Reserve Bank of India (RBI) and offers margin-funding
facility to the broking customers.
INDIA INFOLINE INSURANCE BROKERS LTD.

India Infoline Insurance Brokers Ltd is a 100% subsidiary of India Infoline Ltd and is a
newly formed subsidiary which will carry out the business of Insurance broking. We have
applied to IRDA for the insurance broking license and the clearance for the same is
awaited.

1.2.4 BUSINESS MODEL:
Its range of products and services offerings today includes:

A. Brokerage services in equities, derivatives and commodities.
B. Mobilization of Mutual funds and retail distribution of personal investment products.
C. Retail distribution of life insurance plans.
D. Portfolio Management services
E. Fee Based content services.
A. Brokerage services in equities, derivatives and commodities.
a.) ONLINE BROKERAGE:

India Infoline offer subscribes real time trading on the NSE and BSE. Apart
from this they also offer commodities trading on the MCX and NCDEX.
Customers can directly place orders to buy and sell securities through our automated
order processing system. All branches are connected via VSAT. System intelligence
automatically checks the cash balance and positions held, before executing the order.
They update all transaction and portfolio records to reflect trading activity on real
time basis.
b.) OFFLINE BROKERAGE:

They began offering brokerage services as a backup to our online brokerage
offering through all Branches. This was mainly to address the Internet access
problems faced by some of our retail customers. Given the size of the offline market
in India, the add-on service was extended as a full offering. The customers can walk
in and place orders with the dealer in the branch as well as call up and place orders
over the telephone with their respective Relationship Manager/Dealer. The Risk
Management system is centrally controlled and orders placed through branches are
passed through pre-order validation process for availability and allocation of limits.
c.) Mobilization of Mutual Funds and retail distribution of personal
investment products:
Indiainfoline.com offer retail distribution of personal financial products

through its subsidiary India Infoline.com Distribution Services Limited. Their

branches also serve as retail distributors for mutual funds, fixed income investments,
RBI Bonds and other savings products. Its employees solicit orders from customers,
receive payments from the customer made out to the product provider and submit the
orders and the customer’s payment to the product provider. These branches also
provide support to our online customers, and provide customer contact points for our
online business which we believe helps in building good customer relationships.
They have expanded its business to include online distribution of mutual
funds. All online users are are able to view and compare product offerings and
download application forms, which they then submit to the product provider. They
earn a commission from the product provider when a transaction takes place.
C. Retail distribution of Life Insurance products.
Its subsidiary India Infoline Insurance Services Pvt.Ltd. is an IRDA licensed

corporate agent for ICICI Prudential Company Limited. They hire fresh as well as
trained people for selling insurance. All staff engaged in direct selling insurance
undergoes a training program as prescribed by IRDA and get certified.
Besides IRDA, our principal, ICICI Prudential Life Insurance Company
Limited also imparts training on insurance products as well as selling skills. They
also have developed in house training program on insurance and sales.
The channels used for insurance sales are:

• Telemarketing.
• Branch walk-ins by customers.
• Seminars and Workshops.
It has emerged as the leading corporate agent of ICICI Prudential Life

Insurance Company Limited, which is a leading private sector insurance company in
India. They collected first year premium income of Rs.103.96 million in FY04,
which was 287.42% higher than FY03. In the current financial year, he has
mobilized Rs.168.52 million in the first nine months ending December 2004.

D. Portfolio Management Services
They received the license to offer Portfolio Management Services from SEBI
from April 1, 2004 and launched this service in August 2004. It believes that wealth
management and portfolio management services are a logical extension of our
current product offering and research background. They believe that the wealth
management industry in India is poised to witness rapid growth on the back of
higher rate of savings, multiple investment opportunities and changing
demographics. it has constituted an investment committee to manage the portfolios
of the customers. The portfolios are managed on a discretionary basis. Under the
discretionary services scheme, the choice as well as the timing of the investment
decisions rest solely with the portfolio manager.
E. Fee-based content services
They have a dedicated research and analyst team of professionals who

survey, gather and accumulate information and data, and provide their views and
opinions, on companies, industries, markets and people in the news, relying on their
experience and expertise developed over the years. Its internet portal, currently hosts
pages of financial information and original research and analysis on Indian business,
financial markets and economy. The content available on our internet portal includes
updated market news, market statistics, products and commodities database, analysis
of Indian companies and industry, coverage of Indian mutual funds, feature articles
on the Indian economy and Indian business, leader speak – interviews with
prominent figures in the business and political world. They monetize this property by
selling banners, panels, pop ups etc. It also sells space on our website
www.indiainfoline.com in the form of inter alia banners, pop ups, ear panels and
sponsorship of certain modules. It also generates revenue by banners on emails as
well emailing customized advertisement messages to our registered customers.
In addition to our publicly available online content, we
provide fee based research and analysis of Indian businesses and markets for a wide
range of institutional clients both in India and abroad.

Our research and reports are also available through electronic vendors such as
Bloomberg, First Call, and Internet Securities. They receive fees when our content
on Thomson First Call Associates and Internet Securities is accessed.
1.2.5 MAIN OBJECTIVES OF THE COMPANY:
Indiainfoline’s main objectives as contained in the Memorandum of

Association are:
1. To engage or undertake software and internet based services, data processing,

IT enabled services, software development services, selling advertisement space on
the site, web consulting and related services including web designing and web
maintenance, software product development and marketing, software supply
services, computer consultancy services, e-commerce of all types including
electronic financial intermediation business and e-broking, market research, business
and management consultancy.
2. To undertake, conduct, study, carry on, help, promote any kind of research,
probe, investigation, survey, developmental work on economy, industries, business
houses, agricultural and mineral, financial institutions, foreign financial institutions,
capital market on matters related to investment decisions primary equity market,
secondary equity market, debentures, bond, ventures, capital funding proposals,
competitive analysis, preparation of corporate/industry profile etc. and trade/invest in
researched securities.
1.2.5 KEY EVENTS OF THE INDIA INFOLINE GROUP:
S. No. Date key events
1 October 1995: Company was incorporated as Probity Research and Services

Private Limited.
2 March 1996: Company launched Probity 200, research reports on 200 leading
Companies.

3. June 1998: Company launched Probity Sector reports.
4. May 1999: Company launched an internet portal www.indiainfoline.com and

Changed its name to India Infoline Ltd
5. April 2000: Company forayed into distribution of mutual funds, fixed deposits,
RBI bonds and other small saving products.
6. July 2000: Company launched www.5 paise.com, the e-broking portal and
Started online Trading with membership of BSE and NSE.
7. Dec 2000: Company obtained corporate agency for ICICI prudential Life
Insurance Company Ltd.
8. Sept 2001 Company became the Depository Participant of NSDL.
9. March 2004: Company launched commodities trading by taking Membership of

MCX, NCDEX
10. April 2004: Company received licence from SEBI to offer Portfolio
Management Services
1.2.7 INDIA INFOLINE STRATEGY
India Infoline business plans are to become the leading investment advisor
and intermediary for financial services in India. The key driver is to increase our
customer base in all our products, given them a platform of choice to transact and
support them with quality research. The elements of the strategy include:
a. “One Stop Shop” from advice to transactions:

It has emerged as one of the India’s leading financial Internet portal in
India. They distribute mutual funds and life insurance products through all branches

as well as directly through our sales team. These factors allow us to provide our
customers with an integrated online as well as offline transaction needs. They believe
that our ability to offer multiple products across broking to insurance to mutual funds
to commodities to small savings differentiates us from our competition. This also
offers significant cross selling opportunities which will help in improving margins as
incremental revenue will entail lower customer acquisition and promotion costs.
b. Multi channel delivery model:
They intend providing a single convenient and reliable platform from which
our users can obtain information, trade online or purchase offline a wide
range of personal financial products. These branches have been opened in
cities after a detailed study of demographics and investment patterns in
different cities.
c. Expand our retail network:
They have a retail branch network of 73 branches at 36 locations across India

to provide an alternative channel for our customers to transact with us and to
support our online services. These branches allow our customers the
opportunity to purchase personal financial products and trade such branches
with the assistance of our staff.
Indiainfoline proposes to set up additional 77 branches in 50
cities across India to have a network of 177 branches to further strengthen our
geographic reach.
d. Leverage our content advantage for value added offerings:
They believe that the key to successful investment is research. Indiainfoline

have invested considerable resources in building our research domain skills.
Its top management has hands on experience in equity research. They will
continue to expand the breadth and depth of research and content on Indian
business and finance. This research advantage will enable us to acquire
customers in high value added product offerings especially PMS.

e.Continuous investments in technology platform:
They have leveraged the power of technology to offer an integrated platform

to the customer to transact. It will continue to invest in such technologies that
would enhance customer experience while interacting with us. It has
facilitated integrated trading and depository accounts for the customer,
payment gateways with multiple banks; online internet enabled back office
and MIS. They believe that their technology investments will be a key driver
in scaling up of the business.
f. Acquisition and takeover:
Indiainfoline strongly believes that to become a market leader in the investment

advisory and intermediate space, they have to expand the business. In an
endeavor to do so and as per our business strategy it may pursue inorganic
growth.
1.2.8 TECHNOLOGY:
• Advancements in internet and internet based trading have transformed the

way firms operate in the broking industry. They recognize that their technology is an
important tool for broking operations. They believe that online trading will gain
market here due to significant advantages that it offers.
• It enables the customer to trade directly without any agent intervention.
• It offers customers the convenience of trading from almost anywhere.
• It enables rapid dissemination of information and at reduced costs.
Indiainfoline.com have invested in technology and ensured that we have an optimum

infrastructure to handle the load. Its current technology infrastructure comprises
several high ends Dell, HP, IBM servers running on Microsoft Operating System.

Most of these servers support online customers for trading activities and users for the
www.indiainfoline.com and www.5paisa.com websites.
Its main trading servers [application and database servers] are located at our
Goregaon office and our broadcast servers are hosted at VSNL and Reliance Internet
Service Providers [ISP]. Our website is hosted with Net Magic Solutions, another
ISP. All the three ISPs and our guregaon office are equipped with latest servers and
interruptible power supply systems. The Goregaon office is connected to internet by
optic fiber to net magic solutions which gives bandwidth of more than 10 Mbps. Our
connectivity between the internal and external servers is through this fiber
connection.
Net magic solutions sources band with from VSNL and BHARTI, thereby providing
us with redundancy in the event of a failure of one of the providers gateway. By
collocating some servers with Reliance Infocom we have further increased our
redundancy. They have implemented CISCO Pix firewall, managed by Net Magic.
All our servers, routers and desktops are behind this firewall. All connections to our
trading servers happen in a secure manner using 128 bit encryption. They have a
security certification from Thawte.
The key components of its technology infrastructure include:
a. Online trading software.
b. Surveillance and risk management.
c. Client administration.
d. Back office software.
e. Communication links and VSAT network.
f. Networking and hardware.
g. Security.
1.2.9 COMPETITION:
BROKING –
India Infoline face competition from small local brokers [traditional] and pan
India brokers like Kotak Securities Limited, S.S Kantilal Ishwarlal Securities Private

Limited, India bulls Securities Limited, ICICI Web Trade Limited, Geojit Financial
Services Limited etc. Their strength is their content and research, online technology
platform and customer service.
DISTRIBUTION –
It will face competition from small retail distributors [typically single outlet
unorganized units], brokers who have a distribution set up, old and established
companies like Blue Chip Investment Center Limited, Bajaj Capital Limited, Karvy
Securities Limited and banks including their PMS and Wealth Management desks.
1.2.10 PRODUCT PROFILE
India Infoline group provide facilities of “SINGLE WINDOW MULTIPLE BENEFITS”
a. EQUITY TRADING AND STOCK BROKING:

Primary and Secondary markets. Cash and Derivatives segments
Member-BSE and NSE, DP with NSDL. Rock Bottom Brokerage.
b. PORTFOLIO MANAGEMENT:
SEBI registered, backed by a pool of analysis with vast experience in
managing portfolios.
c. RESEARCH AND ANALYSIS:

Exhaustive information and data mining covering the spectrum of India
Business, industry and financial markets.
d. MUTUAL FUNDS:
Primary agent for the entire phalanx of leading funds. Something to suit
every risk profile.

e. LIFE INSURANCE:
Leading corporate agent of ICICI Prudential Life Insurance Company,
miles ahead of the runner-up
f. COMMODITIES TRADING:
Member of the Multi Commodities Exchange [MCX], [NCDEX]. Again,
rock bottom brokerage and quality research support
g. FIXED INCOME INSTRUMENTS:

From fixed deposits, Post Office Saving schemes to RBI Tax Saving
and Infrastructure Bonds.

CHAPTER – 1
CONCEPTUAL FRAMEWORK
1.3.1 Introduction
Secondary market is the place for sale and purchase of existing securities. It enables an
investor to adjust his holdings of securities in response to changes in his assessment about
risk and return. It also enables him to sell securities for cash to meet his liquidity needs. It
essentially comprises of the stock exchanges, which provide platform for trading of
securities and a host of intermediaries who assist in trading of securities and clearing and
settlement of trades.
1.3.2 Stock Exchange

The stock exchanges are exclusive centres for trading of securities. The regulatory
framework favors them heavily by almost banning trading of securities outside
exchanges. Till recently, they enjoyed territorial monopoly. Listing of companies on the
local stock exchange is mandatory to provide an opportunity to investors to invest in the
securities of local companies. Monopoly of the exchanges within their allocated area,
regional aspirations of the people and mandatory listing on the regional stock exchange
resulted in multiplicity of exchanges. As a result, we have 24 exchanges (the capital stock
exchange, the latest in the list) in the country recognized over a period of time to enable
investors across the length and breadth of the country to access the market.
Until recently, the area of operation/jurisdiction of an exchange was specified at the time
of its recognition, which in effect precluded competition among the exchanges. These are
called regional exchanges. However, the three newly set up exchanges (OTCEI, NSE and
ICSE) were permitted to have nation wide trading since their inception. All other
exchanges have now been allowed to set up trading terminals anywhere in the country.
Further, with extensive use of information technology, the trading platforms of a few
exchanges are also accessible from anywhere through the internet and mobile devices.

This made a huge difference in a geographically vast country like India. It significantly
expanded the reach of the exchange to the homes of ordinary investors and assuaged the
aspiration of the people to have exchanges in their vicinity. The issuers/investors now
prefer to list/trade on exchanges providing nation wide network rather than on regional
exchanges.
NSE and BSE are the major exchanges having nationwide operations. NSE operated
through 2800 VSATS (very small Aperture Terminal) in 358 cities. The turnover in the
CM (Capital Market) segment of NSE from non – Mumbai locations accounted for over
86% of total turnover of other stock exchanges .It is observed that NSE now reports
higher turnover from its trading terminals in the home turf of most of the corresponding
regional exchanges indicating declining attractiveness of regional exchanges even for
local investors. The huge liquidity and order depth of big exchanges further diverted
liquidity of other stock exchanges. As a result, 18 small exchanges put together reported
less than 0.01% of total turnover, while 2 big exchanges accounted for over 98% of
turnover.
1.3.3 Trading Hours of Stock Exchanges
9.55 a.m. - 3.30 p.m. Monday to Friday
1.3.4 Shareholder’s Responsibilities
While you may be happy to note that you have so many rights as a stakeholder in the
company, which should not lead you to complacency; because you have also certain
responsibilities to discharge. To be specific,
• To remain informed;
• To be vigilant;
• To participate and vote in General Meetings;
• To exercise your rights on your own or as a group

1.3.5 Trading of Securities

It should be however noted, however, that trading is a function of demand and supply. It
is an implicit assumption that all securities are alike and are more or less like a
homogeneous commodity assumed in the theoretical model of perfect competition.
Securities would be comparable to a certain extent if we ensure that companies before
being listed have a good track record in the sense that they have been in operation for two
or three years, made profits and have good balance sheets.
Returning to the question of trading, stock exchange offers a market place to conduct
auction of securities to its members. It cannot by itself create demand or supply for
scrip’s. A large number of scrips listed are just bad eggs and no amount of improvement
if facilities would bring in buyers. In the case of good scrips the situation is different.
They are in short supply because they are good and the owners, be they owners of the
company or institutions; do not want to part with them. Sometimes, the owners may be
motivated to keep out outsiders since they like to preserve it as a closely held company.
We cannot compel them to sell their holding.
1.3.6 Risks involved in Trading

When you invested, you did so with certain expectations about the performance of the
company, the prospects of income from and/or the capital growth of the securities that
you now hold, the corporate benefits that may accrue to you etc.
While making that investment decision, you should have, obviously, taken note of and
duly evaluated the attendant risks that go with such expectations.
You would remember that one such risk is that your expectations on income and/or
growth may not materialize.
You would also recall that if you are an investor in the debt instruments, you can have
recourse against the company, besides the market, for redeeming them. But, as an equity
holder of a company, in order to realise the value of such investment, you have recourse
only to the market.
And you would recollect that the disinvestment may result in capital losses also.

Further, you would have also noted that apart from the above mentioned investment risks;
you also face the risk of running into problems with the trading and transfer of the
securities.
1.3.7 Trading System
The fully computerized, on-line trading system used in the WDM (Whole Sale Debt
Market) segment of the Exchange has changed the very manner in which trading is
perceived in the Indian securities market. Besides the fact that the system helped increase
in trading velocities and cut time frames, it has also managed to incorporate the critical
aspect of security in its functioning.
The software, which they used for trading, is called NEAT system. The NEAT system
supports an order driven market, wherein orders match on the basis of price and time
priority. All quantity fields are in units and prices are quoted in Indian rupees. The
regular lot size and tick size for various securities traded is notified by the exchange from
time to time. The capital market system (the NEAT system) has four types of active
markets: Normal Market, Odd Lot Market, Auction Market and Retail Debt Market.
The Exchange provides a facility for screen based trading with order matching facility.
The members are connected from their respective offices at dispersed locations to the
main system at the NSE premises through a high-speed, efficient satellite tele-
communication network. The trading system is an order-driven, automated order
matching system, which does not reveal the identity of parties to an order or a trade. This
helps orders whether large or small to be placed without the members being
disadvantaged by disclosure of their identity. The trading system operates on a price time
priority. Orders are matched automatically by the computer keeping the system
transparent, objective and fair. Where an order does not find a match it remains in the
system and is displayed to the whole market, till a fresh order, which matches, comes in
or the earlier order is cancelled or modified.

The trading system provides tremendous flexibility to the users in terms of the type of
orders that can be placed on the system. Several time-related, price-related or volume-
related conditions can easily be placed on an order. The trading system also provides
complete on-line market information through various inquiry facilities. Detailed
information on the total order depth in a security, the best buys and sells available in the
market, the quantity traded in that security, the high, the low and last traded prices are
available through the various market screens at all points of time.
Investors have the right to sell the securities that you hold at a price and time that you
may choose. You can do so personally with another person or through a recognised stock
exchange. Similarly you have the right to buy securities from anyone or through a
recognised stock exchange at a mutually acceptable price and time.
Whether it is a sale or purchase of securities, affected directly by you or through an

exchange, all trades should be executed by a valid, duly completed and stamped transfer
deed.
If you choose to deal (buy or sell) directly with another person, you are exposed to a
counter party risk, i.e. the risk of non-performance by that party. However, if you deal
through a stock exchange, this counter party risk is reduced due to trade/settlement
guarantee offered by the stock exchange mechanism. Further, you also have certain
protections against defaults by your broker.
When you operate through an exchange, you have the right to receive the best price
prevailing at that time for the trade and the right to receive the money or the shares on
time. You also have the right to receive a contract note from the broker confirming the
trade and indicating the time of execution of the order and other necessary details of the
trade. You also have the right to receive good delivery and the right to insist on
rectification of bad delivery. If you have a dispute with your broker, you can resolve it
through arbitration under the aegis of the exchange.
If you decide to operate through an exchange, you have to avail the services of a SEBI
registered broker/sub-broker. You have to enter into a broker-client agreement and file a

client registration form. Since the contract note is a legally enforceable document, you
should insist on receiving it. You have the obligation to deliver the shares in case of sale
or pay the money in case of purchase within the time prescribed. In case of bad delivery
of securities by you, you have the responsibility to rectify them or replace them with
good ones.
1.3.8 Transfer of Securities

Transfer of securities means that the company has recorded in its books, a change in the
title of ownership of the securities affected either privately or through an exchange
transaction. To affect a transfer, the securities should be sent to the company along with a
valid, duly executed and stamped transfer deed duly signed by or on behalf of the
transferor (seller) and transferee (buyer). It would be a good idea to retain photocopies of
the securities and the transfer deed when they are sent to the company for transfer. It is
essential that you send them by registered post with acknowledgment due and watch out
for the receipt of the acknowledgement card. If you do not receive the confirmation of
receipt within a reasonable period, you should immediately approach the postal
authorities for confirmation.
Sometimes, for your own convenience, you may choose not to transfer the securities
immediately. This may facilitate easy and quick selling of the securities. In that case you
should take care that the transfer deed remains valid. However, in order to avail the
corporate benefits like dividends, bonus or rights from the company, it is essential that
you get the securities transferred in your name.
On receipt of your request for transfer, the company proceeds to transfer the securities as
per provisions of the law. In case they cannot effect the transfer, the company returns the
securities giving details of the grounds under which the transfer could not be effected.
This is known as Company Objection.
When you happen to receive a company objection for transfer, you should proceed to get
the errors/discrepancies corrected. You may have to contact the transferor (the seller)
either directly or through your broker for rectification or replacement with good
securities. Then you can resubmit the securities and the transfer deed to the company for
affecting the transfer. In case you are unable to get the errors rectified or get them
replaced, you have recourse to the seller and his broker through the stock exchange to get
back your money. However, if you had transacted directly with the seller originally, you
have to settle the matter with the seller directly.
Sometimes, your securities may be lost or misplaced. You should immediately request
the company to record a stop transfer of the securities and simultaneously apply
for issue of duplicate securities. For effecting stop transfer, the company may require you
to produce a court order or a copy of the FIR filed by you with the Police. Further, to
issue duplicate securities to you, the company may require you to submit indemnity bond,
affidavit, sureties etc, besides issue of public notice. You have to comply with these
requirements in order to protect your own interest.
Sometimes, it may so happen that the securities are lost in transit either from you to the
company or from the company to you. You have to be on your guard and write to the
company within a month of your sending the securities to the company. The moment it
comes to your notice that either the company has not received the securities that you sent
or you did not receive the securities that the company claims to have sent to you, you
should immediately request the company to record stop transfer and proceed to apply for
duplicate securities.
1.3.9 Depository and Dematerialisation

Shares are traditionally held in physical or paper form. This method has its own inherent
weaknesses like loss/theft of certificates, forged/fake certificates, cumbersome and time
consuming procedure for transfer of shares etc. Therefore, to eliminate these weaknesses,
a new system called Depository System has been established.
A depository is a system which holds your shares in the form of electronic accounts in the
same way a bank holds your money in a savings account.

Depository System provides the following advantages to an investor:

 Your shares cannot be lost or stolen or mutilated;
 You need never doubt the genuineness of your shares i.e. whether they are
forged or fake;
 Share transactions like transfer, transmission etc. can be effected immediately;
 Transaction costs are usually lower than that in the physical segment;
 There is no risk of bad delivery;
 Bonus/Rights shares allotted to you will be immediately credited to your
account;
 You will receive the statement of account of your transactions/holdings
periodically.
When you decide to have your shares in electronic form, you should approach a
Depository Participant (DP) who is an agent of the depository and open an account. You
should surrender your share certificates in physical form and your DP will arrange to get
them sent to and verified by the company and on confirmation credit your account with
an equivalent number of shares. This process is known as dematerialisation. You can
always reverse this process if you so desire and get your shares reconverted into paper
form. This process is known as rematerialisation.
Share transactions (like sale or purchase and transfer/transmission etc.) in the electronic
form can be effected in a much simpler and faster way. All you need to do is that after
confirmation of sales/purchase transaction by your broker, you should approach your DP
with a request to debit/credit your account for the transaction. The depository will
immediately arrange to complete the transaction by updating your account. There is no
need for separate communication to the company to register the transfer.
1.3.10 Key Terms

Arbitration: Settlement of claims, differences or disputes between one member and
another and between a member and his clients, authorized clerks, sub-brokers, etc.,
through appointed arbitrators. It is a quasi-judicial process that is faster and is an
inexpensive way of resolving a dispute. The Exchange facilitates the process of

arbitration between the members and their clients. The disputes between the parties are
resolved through arbitration in accordance with the bye-laws of the Exchange.
Auction: An auction is a mechanism utilized by the Exchange to fulfill its obligation to a

counter party member when a member fails to deliver good securities or make the
payment. Through auction, the Exchange arranges to buy good securities and deliver
them to the buying broker or arranges to realise the cash and pay it to the selling broker.
Bad delivery cell: When a delivery of shares turns out to be bad because of company
objection etc., the investor can approach the bad delivery cell of the stock exchange
through his broker for correction or replacement with good delivery.
Bid and offer: Bid is price of a share a prospective buyer is prepared to pay for particular
scrip. Offer is the price at which a share is offered for sale.
Brokerage: Brokerage is the commission charged by the broker for purchase/sale

transaction done through him. The maximum brokerage chargeable, as stipulated by
SEBI, is at present 2.5% of the trade value.
Carry forward trading: Carry forward trading has evolved in response to local needs in
India and it refers to the trading in which the settlement is postponed to the next account
period on payment of contango charges (known as 'vyaj badla') in which the buyer pays
interest on borrowed funds or the backwardation charges (known as 'undha badla') in
which the short seller pays a charge for borrowing securities.
Circuit breakers: It is a mechanism by which Exchanges temporarily suspend the

trading in a security when its prices are volatile and tend to breach the price band.
Clearing: Clearing refers to the process by which all transactions between members are
settled through multilateral netting.

Company objection: An investor sends the certificate along with the transfer deed to the
company for transfer. In certain cases the registration is rejected because of signature
difference, or if the shares are fake, forged or stolen etc. In such cases the company
returns the shares along with a letter which is termed as a company objection.
Cum-bonus: The share is described as cum-bonus when a purchaser is entitled to receive

the current bonus.
Cum-rights: The share is described as cum-rights when a purchaser is entitled to receive

the current rights.
Day Order: A day order, as the name suggests, is an order which is valid for the day on
which it is entered. If the order is not matched during the day, at the end of the trading
day, the order gets cancelled automatically.
Dematerialization: Dematerialization is the process by which shares in the

physical/paper form are cancelled and credit in the form of electronic balance is
maintained on a highly secure system at the depository.
Ex-bonus: The share is described as ex-bonus when a purchaser is not entitled to receive
the current bonus, the right to which remains with the seller.
Ex-rights: The share is described as ex-rights when a purchaser is not entitled to receive
the current rights, the right of which remains with the seller.
Forward trading: Forward trading refers to trading where contracts traded today are
settled at some future date at prices decided today.
Good-bad delivery: A share certificate together with its transfer form which meets all
the requirements of title transfer from seller to buyer is called good delivery in the
market.

Delivery of a share certificate, together with a deed of transfer, which does not meet
requirements of title transfer from seller to buyer, is called a bad delivery in the market.
Insider trading: Trading in a company's shares by a connected person having non-

public, price sensitive information, such as expansion plans, financial results, takeover
bids, etc., by virtue of his association with that company, is called insider trading.
Market lot: Market lot is the minimum number of shares of a particular security that
must be transacted on the Exchange. Multiples of the market lot may also be transacted.
In de-mat scrip’s the market lot is one Share.
No-delivery period: Whenever a book closure or record date is announced by a

company, the Exchange sets a no-delivery period for that security. During this period,
trading is permitted in that security. However, these trades are settled only after the no-
delivery period is over. This is done to ensure that investor's entitlement for corporate
benefits is clearly determined.
Odd lot: A number of shares that are less than the market lot are known as odd lots.
Under the script based delivery system, these shares are normally traded at a discount to
the prevailing price for the marketable lot.
Order-driven trading: it is a trading initiated to buy/sell orders from investors/brokers.
Over-the-counter: Trading in those stocks which are not listed on a stock exchange.
Pay-in: Pay-in day is the designated day on which the securities or funds are
delivered/paid in by the members to the clearing house of the Exchange.
Pay-out: Pay-out is the designated day on which securities and funds are delivered/paid
out to the members by the clearing house of the Exchange.

Price band: The daily/weekly price limits within which price of a security is allowed to
rise or fall.
Price rigging: When a person or persons acting in concert with each other collude to
artificially increase or decrease the price of a security, that process is called price rigging.
Quote-driven trading: Trading where brokers/market makers give buy/sell quote for
scrip simultaneously.
Record date: Record date is the date on which the beneficial ownership of an investor is
entered into the register of members. Such a member is entitled to get all the corporate
benefits.
Rematerialisation of shares: It is the process through which shares held in electronic

form in a depository are converted into physical form.
Screen-based trading: When buying/selling of securities is done using computers and

matching of trades is done by a stock exchange computer.
Settlements: It refers to the scrip-wise netting of trades by a broker after the trading
period is over.
Settlement guarantee: Settlement guarantee is the guarantee provided by the clearing
corporation for settlement of all trades even if a party defaults to deliver securities or pay
cash.
Splitting/Consolidation: The process of splitting shares that have a high face value into
shares of a lower face value is known as splitting. The reverse process of combining
shares that have a low face value into one share of higher value is known as
consolidation.
Spot trading: Trading by delivery of shares and payment for the same on the date of

purchase or on the next day.
Stop transfer: The instruction given by a registered holder of shares to the company to
stop the transfer of shares as a result of theft, loss etc.
Trade guarantee: Trade guarantee is the guarantee provided by the clearing corporation
for all trades that are executed on the Exchange. In contrast the settlement guarantee,
guarantees the settlement of trade after multilateral netting.
Trading for delivery: Trading conducted with an intention to deliver shares as opposed
to a position that is squared off within the settlement.
Transfer deed: A transfer deed is a form that is used for effecting transfer of shares or
debentures and is valid for a specified period. It should be sent to the company along with
the share certificate for registering the transfer. The transfer deed must be duly stamped
and signed by or on behalf of the transferor and transferee and complete in all respects.
Transmission: Transmission is the lawful process by which the ownership of securities

to the legal heirs of the deceased.

Chapt
er
2
CHAPTER – 2
2. RESEARCH METHODOLOGY
2.1 INVESTOR’S PERCEPTION TOWARDS “STOCK TRADING”
2.2 OBJECTIVE OF STUDY
 To study the processes & procedures involved in stock trading.
 To study the perception of investors regarding stock trading.
 To study the satisfaction level of customers of India Infoline regarding the

services provided.
2.3 Research Design

The research design in this study is descriptive. The research which has
been used is exploratory research as it emphasizes on discovery of ideas, insights
& breaks the complex problem into simple one.
2.4 Data
Both primary and secondary data has been used for the purpose of the data
collection. Primary data has been collected by conducting personal interviews and
administering an undisguised, unbiased structured questionnaire to the
respondents.The secondary data has been collected from secondary sources of
information that included websites, books and previous reports.
2.5 Procedure of data collection

The procedure which has been used for data collection is through questionnaire.

2.6 Sampling Design
2.6.1 Population
All the respondent of Chandigarh in June-July 2007.
2.6.2 Sampling Unit

Target population under the study are those individuals who has been
Investing in the share market i.e. shares or other securities.
2.6.3 Sample Size

The sample size for this project is 50.
2.6.4 Sampling Technique

Non-Probability Sampling.

Chapt
er
3

3. OBSERVATIONS AND ANALYSIS
This chapter represents the analysis of the primary data collected from the respondent of
Chandigarh who invest in the share market (shares).
1. What is your Occupation/Profession?
Table 3.1: OCCUPATION/PROFESSION OF RESPONDENTS
Options Responses Percentages

Business 10 20
Govt Job 14 28
Private Job 17 34
Any Other 9 18
Fig 3.1: OCCUPATION/PROFESSION OF RESPONDENTS
18% 20%
Business
Govt Job
Private Job
28% Any Other

34%

The inference which is drawn from the above table and chart is that, people who invest
their money in share market mostly belong to the service class.
2. In which of the following investment avenues do you put your money?
(a) Shares Bonds (b) Mutual Funds (c) Bonds/Debentures (d) Post Office/Bank
Table 3.2: CURRENT INVESTMENT PORTFOLIO
Options Responses Percentages

Shares 40 80
Mutual Funds 30 60
Bonds/Debenture 10 20
Post office/Bank 20 40
Fig 3.2: RESPONDENTS INVEST MOSTLY
80%
80%
70%
60%
60%
50%
40% Shares
40% Mutual Funds
30% Bonds/Debenture
20%
Post office/Bank
20%
10%
0%
1
INVESTMENT
Current investment portfolio means all those avenues in which respondents have
already invested. From the collected data it is being analysed that in the current
investment portfolio (50 respondents) 80% are investing in shares, 60% in mutual funds,
40% & 20% in Post office/Bank and Bonds respectively. So the interpretation that is
drawn from the above analysis is that the most favorite among all the investment avenues
is the ‘shares’ even if it’s a risky investment for the respondents

3.3 INVESTORS VIEWS REGARDING RISK AND RETURNS INVOLVE IN

VARIOUS INVESTMENTS.
A.) Is investment in shares risky?
TABLE NO 3.3.1
OPTION RESPONSE PERCENTAGES

Agree 34 68
Neutral 12 24
Disagree 4 8
FIG 4.3.1
68%
70%
60%
50%
Agree
40%
Neutral
24%
30% Disagree
20%
8%
10%
0%
1
B.) Is investment in shares profitable?
TABLE NO 4.3.2
Agree 35 70
Neutral 8 16
Disagree 7 14

FIG 3.3.2
70%
70%
60%
50%
Agree
40% Neutral
30% Disagree
16%
14%
20%
10%
0%
1
Above figures. 3.3.1 And 3.3.2 shows the perceptions of investors towards risk and return
involve in the shares investment. Here the survey disclosed that higher risk lead to high
return.
C.) Is investment in mutual funds less risky than shares?
TABLE NO 3.3.3
Agree 28 56
Neutral 15 30
Disagree 7 14
FIG 3.3.3
56%
60%
50%
40%
30% Agree
30% Neutral
Disagree
20% 14%
10%
0%
1

D.) Is investment in mutual funds more profitable than shares?
TABLE NO 3.3.4
Agree 25 50
Neutral 10 20
Disagree 15 30
FIG 3.3.4
50%
50%
45%
40%
35% 30%
30% Agree
25% 20% Neutral
20% Disagree
15%
10%
5%
0%
1
Above figures 3.3.3 & 3.3.4 shows that investment in Mutual Fund is less risky than
shares, but in case of return, Shares are more profitable as compare to Mutual funds.
E.) Is investment in bonds/debenture is less risky than shares?
TABLE NO 3.3.5
Agree 38 76
Neutral 9 18
Disagree 3 6
FIG 3.3.5

76%
80%
70%
60%
50% Agree
40% Neutral
Disagree
30%
18%
20%
3%
10%
0%
1
F.) Is investment in bonds/debenture Profitable than shares?
TABLE NO 4.3.6
Agree 10 20
Neutral 25 50
Disagree 15 30
FIG 4.3.6
50%
50%
45%
40%
35% 30%
30% Agree
25% 20% Neutral
20% Disagree
15%
10%
5%
0%
1
Above Fig. 3.3.5 & 3.3.6 shows the perception of investors towards risk & return
regarding bonds/debentures as compare to shares. Analysis shows that there is less risk
and return in bonds/debentures as compare to shares because there is a fixed rate of return
is given to the debenture holder.

G.) Is investment in post office/Banks less risky than shares?
TABLE NO 3.3.7
Agree 42 84
Neutral 6 12
Disagree 2 4
FIG 3.3.7
84%
90%
80%
70%
60%
Agree
50%
Neutral
40% Disagree
30%
20% 12%
4%
10%
0%
1
h.) Is investment post office/Banks are profitable than shares?
TABLE NO 3.3.8
Agree 8 16
Neutral 12 24
Disagree 30 60
FIG 3.3.8

60%
60%
50%
40%
Agree
30% 24% Neutral

Disagree
16%
20%
10%
0%
1
Fig. 3.3.7 & 3.3.8 shows the perception of investors towards risk & return regarding Post
office/banks as compare to shares. Analysis shows that there is less risk and return in
Post office/banks as compare to Shares, M.fund & Debenture/bonds.
Table 4.4: RESPONDENTS WHO TRADE DIRECTLY IN MARKET

Options Respondents Percentage
Trade directly in market 34 85
Do not trade directly in 6 15
the market
FIG 3.4
15%
Trade directly in market
Do not trade directly in

the market
85%
In the fig. 3.4, there are 85% respondents who trade directly in the market and only 15%
of respondents who do not trade directly in the market. This means that maximum of the

respondents want to come to their broker for trading purpose and they also want research
and advisory services from their brokers
Table 3.5 REASONS OF SIX RESPONDENTS WHO DON’T TRADE

DIRECTLY IN MARKET
REASONS Rating Respondents
Inconvenience 2 3
Unsure of Delivery 3 4
Don’t Understand procedure of 1 3
Buying & selling in the Market
Above table shows that mostly investors don’t trade directly in market because they don’t
understand procedure of buying & selling in the market.
6. What is your purpose of transacting in securities (shares)?
Table 3.6: RESPONDENTS PURPOSE OF TRANSACTING IN

SHARE MARKET OR SHARES
Options Responses Percentage

Short term capital gains 32 80
Long term capital gains 25 60
Others 10 25
Fig 3.6: PURPOSE OF INVESTING IN SHARES
80%
80%
70% 60%
60%
Short term capital
50% gains
Long term capital
40% gains
25%
30% Others
20%
10%
0%
1

Today different investment schemes have different benefits. Every investor

likes to avail those benefits. Every investor has its own purpose for investment. The
above figure depicts the purpose of investing in share market or shares for the
respondents. It shows that 80% people invest to avail the short term capital gains which
mean they want quick money that is why they are investing in shares, 60% invest for
purpose of long term capital gains, 25% invest in shares due to other reasons that could
be for tax benefits or for making quick money.
7. Which service provider you are using for Share Trading?
Table 3.7: PREFERENCE OF PEOPLE FOR TRADING

COMPANIES/BROKERS
Brokers Responses Percentage (%)
India Infoline 30 60
Indiabulls 5 10
Karvy Stock Broking ltd 6 12
Kotak security ltd. 1 2
Icicidirect 2 4
Any other 5 10
Fig 3.7
60%
60%
50%
India Infoline
40%
Indiabulls
30%
Karvy Stock Broking ltd
20% Kotak security ltd.
10% 12% 10% Icicidirect
10%
2% 4% Any other
0%
1
BROKERS
The above bar graph shows preference of the people for TRADING
COMPANIES/BROKERS. It shows that most of the people prefer India Infoline (60%)
for share trading, second preference is for karvy (12%) & on third place is Indiabulls

(100%) followed by, Icicidirect (4%) & Kotak security ltd (2%). Some people also prefer
other brokers i.e. (10%) for share trading. It means that people now a days prefers more
research and advisory services from their brokers and they want more awareness about
brokers.
8. Are you satisfied with the services provided by your Broker/service provider?
Table 3.8: SATISFACTION LEVEL OF PEOPLE FROM THERE

BROKERS/SERVICE PROVIDER

Very Satisfied 15 30
Satisfied 18 36
Indifferent 6 12
Dissatisfied 8 16
16
Very Dissatisfied 3 6
Fig 4.8
Satisfaction level of People
6%
16% 30% V Satisfied
Satisfied
Indifferent
12% Dissatisfied
V Dissatisfied
36%
The above pie chart indicates the Satisfaction level of the people from their service
provider/broker, who have filled the questionnaires. Most of the people i.e. 36% people

are satisfied from their Brokers, 30% people are Very satisfied , 12% people are not even
satisfied nor dissatisfied and only 16% people are dissatisfied from the services of their
brokers & 6% are very dissatisfied from their brokers.
9. Do you want to trade with India Infoline ltd., which are providing research?
TABLE 3.9: RESPONDENTS PREFERENCE TOWARDS INDIA

INFOLINE STOCK BROKING LTD

Yes 35 70
No 15 30
Fig 3.9: PREFERENCE OF PEOPLE TOWARDS INDIAINFOLINE
No, 30%
Yes
No
Yes, 70%
As the study was done to know about the preference of respondents towards India
Infoline ltd Above data shows that 70% respondents want to trade with India infoline ltd..
This indicates most of the people are aware about India infoline ltd.
10. How much importance do you give to each of the following factors while
Choosing your Broker/Service provider?
Table 3.10: PEOPLE PREFERENCES WHILE CHOOSING THE

BROKER/SERVICE PROVIDER
Convenience 25 50
Market Goodwill 32 64

Better Services 30 60
Charges 20 40
FIG 3.10
70% 64%
60%
60% 50%
50% 40% Convenience
40% Market Goodwill
30% Better Services
Charges
20%
10%
0%
1
In the figure, it is shown that people looked at various factors while choosing their
Service provider/Broker. 64% people preferred goodwill the most important factor while
choosing their broker. The second preference of respondents is better services 60%,
another factors are convenience 50% and charges 40%.
11. What are your expectations of good services from Broker/service provider?
Please rate (1 to 5) the reasons.
Table 3.11: EXPECTATIONS OF RESPONDENTS FROM

BROKERS
Sr.No. Expectations Rating Respondents

1 Prompt Delivery 3 25
2 Conscious Staff 4 22
3 Research & Advisory 5 26
4 Prompt Payment 2 28
5 Transparency 1 35
In the above Table No.3.11, It shows the expectations of respondents from their Brokers
and here the rating value is calculated for every response.

LIMITATIONS OF THE STUDY
 Respondents hesitate to give the actual information.

 Respondents were not fully aware about the share market or investment schemes,
so there were some biased responses.
 All the information, which is taken, is based on primary and secondary data that
has its own limitations.
 Sample size taken is small and may not be sufficient to predict the results with
100% accuracy.
 The study only covers the area of Chandigarh that may not be applicable to other
areas

Chapt
er
4
Chapter 4
FINDINGS/CONCLUSION
 People invest more in share market or shares due to good returns even if it’s a
risky market.
 Most of the people consider share market as a volatile market as it gives quick
returns to them.
 People are less aware about financial advisory firms and their services.
 Maximum number of people manages their investment portfolio by themselves.
 People are not fully aware about the procedure involved in the share market

Chapt
er
5
CHAPTER – 5
RECOMMENDATIONS/SUGGESTIONS
 More efforts should be made to make people aware about share market and
different investment schemes in it.
 India Infoline should spread more awareness about all its products and services.
 India Infoline should try to increase the number of staff and terminals in the
trading section.
 Communication gap should be removed to satisfy the investors.

ANNEXTURE
ANNEXTURE
Questionnaire
1. What is your Occupation/Profession?
(a) Business
(b) Govt. Job
(c) Private Job
(d) Any Other
2 (a) Do you invest your money?
(a) Yes (b) No

If yes then proceed further.
3. In which of the following investment avenues do you put your money?
(a) Shares Bonds (b) Mutual Funds (c) Bonds/Debentures (d) Post Office/Bank
4. What are your views regarding the following investments.
Statements Agree Neutral Disagree

Is investment in shares risky
Is investment in shares profitable
Is investment in mutual funds less
risky than shares
Is investment in mutual funds more
profitable than shares
Is investment in bonds is less risky
than shares
Is investment in bonds Profitable
than shares
Is savings in post office/Banks less
risky than shares
Is savings in post office/Banks are
profitable than shares

5. Do you trade directly in Market?

(a) Yes (b) No
If Not please rate (1 to 3) the reasons for it as given.

REASONS Rating
Inconvenience
Unsure of Delivery
Don’t Understand procedure of
Buying & selling in the Market
6. What is your purpose of transacting in securities (shares)?
(a) Short term capital gains (b) Long term capital gains (c) Any other
7. Which service provider you are using for Share Trading?

• India Infoline
• Indiabulls
• Karvy Stock Broking Ltd
• Kotak mahindra
• Icicidirect
• Any Other
8. Are you satisfied with the services provided by your Broker/service provider?
V Satisfied Satisfied Indifferent Dissatisfied V Dissatisfied
9. Do you want to trade with India Infoline ltd., which are providing research?
(a) Yes (b) No
10. How much importance do you give to each of the following factors while
Choosing your Broker/Service provider?
Sr. no. Factor Response
1 Convenience
2 Market Goodwill
3 Better Services
4 Charges

11. What are your expectations of good services from Broker/service provider?
Please rate (1 to 5) the reasons.
Sr. No. Expectations Rating
1 Prompt Delivery
2 Conscious Staff
3 Research & Advisory
4 Prompt Payment
5 Transparency
PERSONAL PROFILE:-
Name :-
Age :-
Contact no :-

BIBLIOGRAPHY

BIBLIOGRAPHY
Bhalla, V.K., “Introduction to Financial Services”

2nd Edition, Mumbai: Pearson Publishers, 1999.
Pandian, Punithavathy “Security Analysis & Portfolio Management”

New Delhi: Vikas Publishing House pvt. Ltd, 2001.
Web Sites
www.Nseindia.com
www.Karvy.com
www.Bseindia.com
www.Indiainfoline.com
www.Sharekhan.com


Chapt Er 1: Investor's Perception Towards "Stock Trading"

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Chapt Er 1: Investor's Perception Towards "Stock Trading"

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Investor’s perception towards “Stock Trading”

1.1.1 Financial Services – Overview

Financial service is a segment of financial system. Financial system facilitates the

1.1.2 Introduction of Stock Exchange

RAYAT INSTITUTE OF MANAGEMENT 2

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1.1.3 Introduction of SEBI

The basic objectives of the Board were identified as:

 To protect the interests of investors in securities;

SEBI has introduced the comprehensive regulatory measures, prescribed registration

 To enhance the level of investors’ protection

1.1.5 What are Securities?

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1.1.5 Classification of Corporate Securities

OWNERSHIP SECURITIES CREDITORSHIP SECURITIES

ORDINARY OR PREFERENCE DEBENTURES OR

1.1.5.1 Kinds of Ownership Securities or Shares

(a) Equity/Ordinary Shares

(b) Preference Shares

(c) Deferred Shares

1.1.5.2 Creditorship Securities

• Government of India Relief Bonds

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Legal framework for Securities Markets in India

1.1.6 Classification of Various Markets

1.1.6.1 Capital Market

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(b) Secondary Market

Functions of Secondary Market

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2. It provides the provision of liquidity by providing a mechanism for an investor to sell

1.1.6.2 Money Market

1.1.7 Current Scenario

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COMPANY PROFILE (INDIA

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1.2.2 Management of Company

The Board of Directors

Mr Sat Pal Khattar (Non Executive Director)

Mr Sanjiv Ahuja (Independent Director)

Mr Nilesh Vikamsey (Independent Director)

Mr Kranti Sinha (Independent Director)

1.2.3 SUBSIDIARIES OF INDIA INFOLINE LTD ARE: -

INDIA INFOLINE SECURITIES PVT. LTD.

INDIA INFOLINE COMMODIES PVT. LTD.

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acquired membership of DGCX. We have a multi-channel delivery model, making it

INDIA INFOLINE DISTRIBUTION CO LTD.

INDIA INFOLINE INSURANCE SERVICES LTD.

INDIA INFOLINE INVESTMENT SERVICES LTD.

INDIA INFOLINE INSURANCE BROKERS LTD.

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1.2.4 BUSINESS MODEL:

Its range of products and services offerings today includes:

A. Brokerage services in equities, derivatives and commodities.

a.) ONLINE BROKERAGE:

b.) OFFLINE BROKERAGE:

Indiainfoline.com offer retail distribution of personal financial products

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C. Retail distribution of Life Insurance products.

Its subsidiary India Infoline Insurance Services Pvt.Ltd. is an IRDA licensed

The channels used for insurance sales are: