PROJECT REPORT

FINANCIAL PLANNING & ONLINE

TRADING THROUGH BANKS
UNDERTAKEN FOR HDFC BANK Ltd.

PRESENTED BY:
PRIYANKA JAIN

RICHA SHARMA
Enroll. No: RM/JULY/1680
PGDM-RM
FMS-IRM, Jaipur

Enroll. No: RM/JULY1702

PGDM-RM
FMS-IRM, Jaipur

Submitted to

Faculty of Management Studies

Institute of Rural Management

CORPORATE GUIDE:
Mr. Jayant Pankaj
Dy. Manager
HDFC BANK Ltd., Jaipur

FACULTY GUIDE:
Dr. Preeti Yadav
Faculty
FMS-IRM, Jaipur

CERTIFICATE
This is to certify that this project report entitled Financial Planning & Online Trading
through Banks is a record of project work done independently by Priyanka Jain and
Richa Sharma, under my guidance & supervision and that it has not previously formed
the basis for the award of any degree, fellowship or associate ship to them.

Date: 08/08/2008

(Prof. Preeti Yadav)

DECLARATION

We here by declare that this project work titled Financial Review

Planning and Online Trading through banks conducted at HDFC Bank is
submitted by us to the Faculty of Management Studies- Institute of Rural
Management in partial fulfillment of requirements of MBA programme is a
bonafide work carried by me under the guidance of Prof.Preeti Yadav
This has not been submitted earlier to any other university or Institution for
the award of any degree/diploma/certificate or published any time before.

Place:Jaipur

Priyanka Jain

Date :

Richa Sharma

ACKNOWLEDGEMENT

We would like to express our gratitude to all those who gave us the possibility to
complete this project. We want to thank HDFC Bank, Ltd. for giving us the
permission to commence this project in the first instance, thus giving us an
opportunity to understand.
We would also like to thank the organization as it helped us to apply our deftness, to do
the necessary work and to use the departmental data. This experience of 45 days
lent glisten to our personality and would serve useful when we will join
professional career. We have furthermore to thank Mr. Jayant Pankaj and Mr.
Anurag Jindal who gave and confirmed this permission and encouraged us to go
ahead with the project. We are also bound to Mr. Ashutosh for his stimulating
support.
We are deeply indebted to our supervisor Prof. Rajesh Sharma and Dr. Preeti Yadav
whose help, stimulating suggestions and encouragement helped us in all the time of our
project and writing of this report.
We would also like to acknowledge our deep sense of gratitude to Brig. S K Gaur
Director FMS-IRM. We also express our sincere thanks to Prof. Abhinn Baxi, Faculty
Coordinator and Prof. Rajesh Sharma.
And finally, we reach out to all the respondents who became contributed to this study
with their time, patience and information.

(Richa Sharma)
(Priyanka Jain)

TABLE OF CONTENTS
CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT

S.No.

TOPIC

Page No.

1.

Executive Summery

2.

Objective of the Project

3.

Limitations

10

4.

Overview of project

11

5.

Procedure of FRP

13

6.

Diversification of Investment

14

7.

5 Major Questions

17

7.

Major Investment Areas

16

8.

How to Trade in Securities

22

9.

Company Profile

24

10.

HDFC Sec. Product Offering

25

11.

Comparative Analysis

28

12.

SWOT Analysis

36

13.

Suggestions

38

14.

Bibliography

41

15.

Annexure I

42

LIST OF TABLES AND DIAGRAMS

S.No.
1

Diagram/Charts Heading

Procedure of FRP

Page No.

20
7

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Asset Allocation Methods

Portfolio Recommended by HDFC
5 Major Questions
Major Investment Areas
Stock Exchange Working
Daily Rolling Settlement Cycle
Procedure of Online Trading
Product Offered
Brokerage on Cash Segment
Brokerage on Margin Orders
BTST
Brokerage on Derivatives
HSL
Product Pricing
Comparative Analysis Table
Amount Required in Bank A/C
Recomendation
Brokerage
Market Share
A/C Opening Charges
Maintenance Charges

46
71
72
73
74
75
76
77
78
79
80
81

EXECUTIVE SUMMARY

The report is an earnest endeavor made to understand: How financial planning is done of an individual
How trading of shares is done online

In the first phase of our project we visited to some clients of HDFC BANK and
advised them, how efficiently they should their money to fulfill their future
financial requirement.
In the second phase we understood the procedure of online trading and did a
comparative analysis among 3 online trading service providers. They are HDFC
Securities, Kotak Securities, ICICI Direct. Through this analysis we got a fair idea
of online trading service providers. Accordingly we gave suggestions to HDFC that
they should provide some more convenience to their customers like other brokers
are providing to attract the unshared market.
We also suggested them to create awareness about online trading as there is a
huge potential in the market, but many people are not aware about online trading &
its benefits.

THE OBJECTIVE OF THE PROJECT

To assess the financial need of customers and to suggest a more
profitable investment plans.
9

 To understand the concept of online trading through banks.

To study the features of HDFC Securities & to compare, analyze

them with different online trading service providers.

LIMITATIONS
We were not allowed to sit on live terminals during market hours.

Some of the Confidential Information was not shared with us.

During Financial Review Planning of customers we were not

permitted to give our suggestions due to inexperience.
10

 Customers are conservative while disclosing their financial details.

11

Overview of project

12

Financial Review Planning

We have observed that on an average most individuals believe (with much conviction)
that they know it all. However, when it comes to real time investing and decision
making, they are prone to making grave errors. Then to compound the matter further,
due to their ego they carry these errors for many years into the future therefore causing
much harm to themselves, their immediate environment and financial well-being.
To avoid such big blunders there is a need to plan your future and present financial
requirements.
Financial Planning is the process of meeting your life goals through the proper
management of your finances. Financial planning helps you make provision for financial
needs that will arise in the future. It provides direction and meaning to your financial
decisions. It also allows you to understand how each financial decision you make affects
other areas of your finances.
Before taking on the exercise of investment and its management, the investor is well
advised to do the planning before hand and ask all the questions he or she can.
Let us consider another situation. The person reads many news papers. In each of them
he sees a business section. Which has a whole page dedicated to the equity price
movement of the previous day, for all the stocks traded in the equity markets. With
graphs depicting the movement of the index over the duration of the previous day.
He looks through this page every morning and starts monitoring a particular stock, let's
say ACC. He sees the stock at INR 220.00 per share. Over, the next 3 months, he sees it
move up to INR 260.00 per share. Now the stock is at a price INR 40.00 higher. This
sounds good.
He does a little maths and sees that if he had bought 100 shares of ACC at INR 220.00
per share, he would have invested INR 22,000.00. In three months time he would have
brought home a profit of INR 4,000.00 that is an 18.18% return on investment over a 3
month period. This is fantastic!! No bank is going to give this kind of return!
A month later he buys 100 shares of ACC at INR 280.00 per share, investing INR
28,000.00. In the next two months he sees the stock down at INR 250.00 per share.
Disillusioned, he sells his 100 shares and books a loss of INR 3,000.00. Promising never
to gamble again. After another three months ACC was trading at over INR 350.00 per
share.
What went wrong? He did not have an aim to start with. There was only temptation and
probably greed.
Through Financial Planning Investor would be able to get the aim (or objective). He
would be empowered to think, analyze and act. The investor would be able to view and
visualize the financial instruments available for investment. He would gain an
understanding of when to invest and when to divest. This would also enable him to
develop his investment system and also know where to go when he needs guidance.

13

PROCEDURE OF FRP

Note: -

Total Expenses Per annum

100

(Current F.D rate)- [(Tax rate %)( Current F.D rate)]

14

Diversification of Investment
Diversification means having different kinds of investments, such as stocks, bonds, and
mutual funds. It also means having a mix of investments in different sectors or industries.
A well-diversified portfolio might include bonds, money market funds, and stocks of
small, medium, and large companies in a variety of industries and countries. International
stocks, for example, may rise at the same time domestic stocks are falling, softening the
blow to your overall portfolio. Even if your risk tolerance is low, you can still consider
diversifying into riskier investments as long as you keep the overall risk of your portfolio
low.

Determining Your Investment Mix

Financial professionals such as stockbrokers, financial planners, or insurance agents can

help you analyze your financial needs and objectives and recommend a mix of
appropriate investments. In addition, mutual fund organizations may use their own sales
forces or outside professionals to help potential investors. If you prefer to do it yourself,
researching stocks and mutual funds and buying shares can be accomplished through the
mail, over the telephone, or on the Internet. It's not as complicated as you might think
15

An important first step in building a well-diversified investment portfolio is deciding how

to divide your money among various investments - a process called asset allocation
Diversification is essential for successful investors who have multiple goals with
different time horizons. For example, a 30-year-old unmarried investor is likely to need a
different investment mix than a 50-year-old with two children heading off to college in
the next few years. If you are retired, protecting your principal becomes increasingly
important as opposed to growing your investments.

Sample Aggressive Asset Allocation

An aggressive asset allocation is most suitable for investors with a long-term investment
horizon (for example, 20 years or longer), who tolerate risk well, and whose primary goal
is growing their investments.

Sample Moderate Asset Allocation

A moderate asset allocation is most suitable for investors with a medium-term investment
horizon (for example, 10 years or longer), who tolerate risk moderately well, and whose
primary investment goal is a moderate level of growth.

Sample Conservative Asset Allocation

A conservative asset allocation is most suitable for investors with a short-term investment
horizon (for example, less than 10 years), whose risk tolerance is low, and whose primary
investment goals are generating income and protecting against inflation.

16

Maintaining a Diversified Portfolio

It's a good idea to periodically review your investment plan. Because different
investments grow at different rates, your original allocation of money among stocks,
bonds, and mutual funds will change over time. If this happens with your investments,
you will probably need to redistribute some money to bring your investment mix back
into line with your original plan.
In addition to the annual review, whenever you make a major life change, it's time to
reassess your overall financial situation. Some common examples of such changes
include switching careers, retiring, getting married or divorced, having a child, starting
your own business, taking care of an elderly parent, and returning to school or paying
tuition for a child. Most of these events are likely to affect your ability to invest, your
time horizon, and your investment goals, both short-term and long-term.
It's never easy to find the time to review your investment plan when you're in the midst of
any of these life changes. But it's worth making the effort. You don't want to enter a new
phase of your life with a financial plan that was designed for different circumstances.

Portfolio Recommended by HDFC Financial Experts

S. No. Sector

Funds

MF Diversified -Reliance vision

Equity (Large -HDFC TOP 200
Cap)
- Magnam tax gain
- DSPLML Equity
-Reliance regular
MF Siversified savings
(Small, Large,
Med. Cap)
-JM basic

Allocation

Exp.
Returns

Time Horizon

10%

40-50%

Long Term 1-3

years

10%

40-60%

Mid Term 0-2

Years

-JM contra
3

Sectorial Funds -Rel div power sec

fund
-ICICI infrastructure
fund
10%
-Birla Special
Situation

Short Term 0-1

Years
50-60%

Investment with -Regular Pension Plan

risk cover
- UL young star Plan 30%

30-40%

Long Term 5-15

Years

Gold

Gold Biscuit, Coins

10%

12-15%

Life Time

FMP/Fixed
Deposit

3,6,12,18 month FD

5%

8.25-10%

3-12 month

Debt/ Liquid
Funds

Reliance liquid plan

5%

5.75-7.75% 0-3 month

17

Note: - 10-20% Cash in hand or Direct Equity

5 major questions (Considered before investment)

In answering these questions the investor would be able to get the aim (or objective). He
would be empowered to think, analyze and act. The investor would be able to view and
visualize the financial instruments available for investment. He would gain an
understanding of when to invest and when to divest. This would also enable him to
develop his investment system and also know where to go when he needs guidance.

Why to invest

Let us consider why people invest. A person does a job of work to earn an income. At
the end of the month he manages to save a residual amount of his income. Which after a
period of time would add up to a substantial amount (given the added advantage of
interest on bank balances). The person may have received an inheritance or a legacy.
This too is lying in the bank. All this money which is lying in his bank account is earning
only the savings bank rate, which would be 4% to 6% per annum.
The person is rational and knows that today even inflation ranges from 5% to 7%. He
realizes that leaving the money in a savings bank account would tantamount to losing the
value of money over time.
18

To stop this loss of value, he decides to shift the money not required for current expenses
into a 3-5 year fixed deposit. Here he is able to get an interest rate of 7% to 8% per
annum. By definition this person has invested his money. As he has employed the
money in the present, to increase the rate of return in the future.
The aim is clear (to obtain a higher rate of return, which is above the inflation rate), the
financial instrument is available (Fixed deposit), the investment risk is known (which in
this case is zero) and the person goes ahead and invests.

What to invest

The investor would mainly invest his time, effort and financial resources (including
savings and reserves) in this endeavor of investment management.
As individuals, what do we have that we can invest? Well, at the individual level, we
only have time which we can invest. The rest, whether it is a job, an expertise, a hobby,
money, etc. are only the mediums through which we invest or employ or deploy our time.
Lets consider a person working in a large corporation. He is given a job description and
further a job specification. He knows exactly what the job requires and further what is
expected of him. While doing his job, he is investing his time in thought, analysis and
action to accomplish the job at hand. For doing this, which is also called
contribution; the corporation compensates him for his valuable time through the payment
of pay and perks to him.
This person has invested his time in doing a job of work in a corporation, and his return
on investment is the pay, perks and other facilities the corporation gives him every
month.
Similarly, the person wants a higher rate of return on his financial investments (May they are in
equity, debt, bonds, deposits, real estate, art objects, rare stamps and coins). Well, for starters he
would have to invest his time in thought, analysis and action to accomplish it.

When to invest
19

Here the investor would decide when to invest (or buy) and when to divest (or sell) a financial
instrument, keeping the return on investment in mind.
A starting point would be an introspection and self-evaluation to access our strengths and
weaknesses and also our capacity for risk. Risk here would mean reasonable and rational
risk and definitely not wonton risk.
We would have to quantify the results we expect, and when those results are
achieved would be the right time to invest or divest. In a sense we would be detached
from the day to day fluctuations of the financial instruments, given that the larger
parameters of our investment plan are intact. By which we would have to set the
parameters for when to invest and when to divest.
We would now like to add another dimension to the equation. That is when an
individual can and should start investing his or her hard earned resources in financial
instruments.
1. The investor should have a roof over his head. That is to say that the individual's
place of residence should be owned and without any mortgage.
2. The investor should have a steady source of income to enable the provision for
current expenses. Through: A monthly pay package, or a pension or a passive income
(through rental income from another real estate asset owned or mortgaged. Dividend
income from investments in financial instruments already made.
3. The investor should have the time available every day to undertake this exercise in
investment and its management. Most of all, to be able to study, do research and take
action on his leads.
4. The investor should have control over his emotions. Emotions like anger, sadness,
happiness, fear and greed have caused much harm to investors across the globe. An
investor may have the best systems in place, but if he himself is not in the best (that is
balanced) frame of mind. The results too would not be the best.

How to invest
20

There is no Holy Grail, which would guide you to this decision.

This would require the investor to have in place an investment system with all its
checks and balances. This would include investment strategy and tactics with all their
accompanying rules. Fundamental and technical analysis and their relevance to the
financial instrument targeted for investment.

Where to invest

There are many financial investment avenues available today to the investor, ranging
from bank deposits and bonds, to investments in equity, debt, commodities, currencies,
etc., to real estate, to doing a job of work.
We expect that in all probability there would be a positive return on our investment. The
quantum of return would depend on the risk profile of the financial instrument and the
level of risk adopted by the person.

Major investment areas

21

BONDS
BONDS
DIRECT
DIRECT
EQUITY
EQUITY

FIXED
FIXED
DEPOSIT
DEPOSIT

REAL
REAL
ESTATE
ESTATE

Major
Major
Investment
Investment
Areas
Areas

GOLD
GOLD

ULIPs
ULIPs

MUTUAL
MUTUAL
FUNDS
FUNDS

Fixed deposit
A fixed deposit is meant for those investors who want to deposit a lump sum of money
for a fixed period; say for a minimum period of 15 days to five years and above, thereby
earning a higher rate of interest in return. Investor gets a lump sum (principal + interest)
at the maturity of the deposit.
Bank fixed deposits are one of the most common savings scheme open to an average
investor. Fixed deposits also give a higher rate of interest than a savings bank account.
The facilities vary from bank to bank. Some of the facilities offered by banks are
overdraft (loan) facility on the amount deposited, premature withdrawal before maturity
period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks
are subject to control of the Reserve Bank of India

Bonds

22

Commonly called "fixed income investments," they are basically loans or "IOUs." Interest is
earned on the money you lend. The prices of bonds do move up and down, but normally not as
much as stocks. Many people think of bonds as conservative investments, but the returns can
have a high degree of volatility. The fluctuation of interest rates is called interest rate risk, and a
downturn in the bond prices could significantly decrease the overall return of any particular
bond.

Gold

Historically, gold has been a proven method of preserving value when a national currency
was losing value. If your investments are valued in a depreciating currency, allocating a
portion to gold assets is similar to a financial insurance policy. In the past year, the climb
in the price of gold above $800 per ounce is due to many factors, one being that the dollar
is losing value

Investments with risk cover (ULIP)

23

Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value
at any time varies according to the value of the underlying assets at the time. ULIP is life
insurance solution that provides for the benefits of protection and flexibility in
investment. The investment is denoted as units and is represented by the value that it has
attained called as Net Asset Value (NAV)
ULIP came into play in the 1960s and is popular in many countries in the world. The
reason that is attributed to the wide spread popularity of ULIP is because of the
transparency and the flexibility which it offers.
As times progressed the plans were also successfully mapped along with life insurance
need to retirement planning. In today's times, ULIP provides solutions for insurance
planning, financial needs, financial planning for childrens marriage planning also can be
done with this.
ULIPs claim to give an investor the best of both worlds high returns and risk cover.

Real Estate

Real estate is basically defined as immovable property such as land and everything
permanently attached to it like buildings. Real property as opposed to personal or
movable property is characterized by the right to transfer the title to the land whereas title
to personal property can be retained. The investment in real estate essentially depends on
the risks associated with it, that is to say, even if the venture succeeds when the future
stream of income will accrue to the investor and the alternative investment opportunities.
Real estate investment can be attractive if viewed as a business opportunity; it can
generate rental income, using it as collateral to secure a loan for a business venture, to
offset otherwise taxable income through cash savings on tax-deductible interest rate
losses, or simply from the profits garnered from its resale. Notable, in this context is the
gains reaped by real estate speculators who trade in real estate futures (by buying and
selling purchase options).

Mutual Funds
A mutual fund is a common pool of money in to which investors with common
investment objective place their contributions that are to be invested in accordance with
the stated investment objective of the scheme. The investment manager would invest the
money collected from the investor in to assets that are defined/ permitted by the stated
24

objective of the scheme. For example, an equity fund would invest equity and equity
related instruments and a debt fund would invest in bonds, debentures, gilts etc.

Direct Equity
SHARES

Suppose a group of persons or a business organization propose to start a new project

requiring large amount of money which they are unable to arrange. They form a public
limited company and invite the public to be a part of the project. The company as per
laws of the government announces the issue of shares through which any eligible person
can become a shareholder of the company. In the financial market, stock refers to a
supply of money that a company has raised. This supply comes from people who have
given the company money in the hope that the company will make their money grow.
A share is one of a finite number of equal portions in the capital of a company, entitling
the owner to a proportion of distributed, non-reinvested profits known as dividends, and
to a portion of the value of the company in case of liquidation.

STOCK MARKET
Stock market is the market for securities where organized issuance and trading of shares
takes place. It plays an important role in channelizing capital from the investors to the
business houses which consequently leads to the availability of funds for business
expansion.
25

Basically, Share Market can be divided into two parts:1. Primary Market
The primary is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding
through the sale of a new stock or bond issue. This is typically done through a syndicate
of securities dealers. The process of selling new issues to investors is called underwriting.
In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a
commission that is built into the price of the security offering, though it can be found in
the prospectus.
Features of Primary Market are:1. This is the market for new long term capital. The primary market is the market where
the securities are sold for the first time. Therefore it is also called New Issue Market
(NIM).
2. In a primary issue, the securities are issued by the company directly to investors.
3. The company receives the money and issue new security certificates to the investors.
4. Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
5. The primary market performs the crucial function of facilitating capital formation in
the economy.
6. The new issue market does not include certain other sources of new long term external
finance, such as loans from financial institutions. Borrowers in the new issue market may
be raising capital for converting private capital into public capital; this is known as going
public.
Methods of issuing securities in the Primary Market
1. Initial Public Offer;
2. Rights Issue (For existing Companies); and
3. Preferential Issue

2. Secondary Market
The secondary market is the financial market for trading of securities that have already
been issued in an initial private or public offering. Alternatively, secondary market can
refer to the market for any kind of used goods. The market that exists in a new security
just after the new issue is often referred to as the aftermarket. Once a newly issued stock
is listed on a stock exchange, investors and speculators can easily trade on the exchange,
as market makers provide bids and offers in the new stock.An investor of a secondary
26

market buys a security from another participant of the same and not from any issuing
corporation (as in case of Primary Market).

Shares in the Share Market are either traded through:(a) Stock Exchange These are organized market places where stocks, bonds are other
equivalents are traded between the buyers and sellers where exchange acts as counterparty to both the participants in case of any default.
(b) Over-the -Counter (OTC) These are not centralized exchanges and the trade takes
place through a network of dealers.

STOCK EXCHANGE
A stock exchange is an organized marketplace for securities featured by the centralization
of supply and demand for the transaction of orders by member brokers for institutional
and individual investors.
A stock exchange, share market or bourse is a corporation or mutual organization
which provides "trading" facilities for stock brokers and traders, to trade stocks and other
securities. Stock exchanges also provide facilities for the issue and redemption of
securities as well as other financial instruments and capital events including the payment
of income and dividends. The securities traded on a stock exchange include: shares issued
by companies, unit trusts and other pooled investment products and bonds. To be able to
trade a security on a certain stock exchange, it has to be listed there. Usually there is a
central location at least for recordkeeping, but trade is less and less linked to such a
physical place, as modern markets are electronic networks, which gives them advantages
of speed and cost of transactions. Trade on an exchange is by members only. A stock
exchange is often the most important component of a stock market

Stock exchange working

27

National Stock Exchange and the Bombay Stock Exchange are the two most
significant stock exchanges in India.

The National Stock Exchange (NSE), located in Bombay, is India's first debt
market. It was set up in 1993 to encourage stock exchange reform through system
modernization and competition. It opened for trading in mid-1994. It was recently
accorded recognition as a stock exchange by the Department of Company Affairs. The
instruments traded are, treasury bills, government security and bonds issued by public
sector companies. . It is the largest stock exchange in India in terms of daily turnover and
number of trades, for both equities and derivative trading. The NSE's key index is the
S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market
capitalization.

28

The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index
composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and
most actively traded stocks, representative of various sectors, on the Bombay Stock
Exchange. These companies account for around one-fifth of the market capitalization of
the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSESENSEX is 1978-79.At irregular intervals, the Bombay Stock Exchange (BSE)
authorities review and modify its composition to make sure it reflects current market
conditions.
What are Sensex and Nifty?
The sensex is an index. What is an index? An index is basically an indicator. It gives
you a general idea about whether most of the stocks have gone up or most of the
stocks have gone down.
The Sensex is an indicator of all the major companies of the BSE.
The Nifty is an indicator of all the major companies of the NSE.
If the Sensex goes up, it means that the prices of the stocks of most of the major
companies on the BSE have gone up. If the Sensex goes down, this tells you that the
stock price of most of the major stocks on the BSE have gone down.
The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major
stock exchanges in the country. There are other stock exchanges like the Calcutta
Stock Exchange etc. but they are not as popular as the BSE and the NSE.Most of the
stock trading in the country is done though the BSE & the NSE.
An index that gives you an idea about whether the mid-cap stocks go up and down.
This is called the BSE Mid-cap Index.exes.

How to trade in securities

The 3 basic things needed for getting started are:
* Demat Account
29

* Trading Account
* Bank Account

Demat Account
A Demat account is like a Bank Account, with the difference being that instead of cash, a
Demat account holds shares. So, if shares are bought, they are deposited into the buyers
Demat account and if shares are sold, they are reduced accordingly from the Demat
account. The shares that are deposited to or reduced from the Demat account are
electronic shares. For an individual wishing to trade in shares, it is compulsory to trade
only in Demat (dematerialized) shares. Physical shares cannot be traded. Demat shares
have many advantages in terms of ease of handling etc.
A Demat account can be opened through most banks and financial institutions, after
filling up the required forms and providing identity and address proofs. The usual charges
associated with a Demat account are:
1. Account opening charges
2. Yearly charges for maintaining the Demat account
3. Recurring periodic charges for holding shares in the Demat account.
4. Other service charges based on transactions carried out. Usually, there are no
transaction / service charges when shares are bought. The charges will be levied when
shares are sold.
The above charges may not be the same across different service providers but a big part is
likely to be the same as regulatory agencies like Securities and Exchange Board of India
(SEBI) specify certain norms.
Trading Account
A Trading account is required if an individual wishes to trade, i.e. buy and sell shares in
the stock exchange. The 2 main stock exchanges in India are the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE). A Trading account can also be
opened with most banks and financial institutions, after filling up the required forms and
providing identity and address proofs. The actual trading can be done by phone, internet
or using transaction slips that are provided at the time of opening the account. Personally,
I have found buying and selling using the internet fairly convenient. There are options to
specify the price at which to buy or sell and it is easy to track the status online.
There is a brokerage charge that is incurred for both buying and selling of shares. This
charge varies across different trading houses. Also, government levies like the Securities
Transaction Tax (STT) will be incurred on such transactions.
Bank account
Needless to say, a Bank account is required for carrying out various financial transactions
associated with trading of shares. This is where the money on sale of shares will be
credited or money for buying shares will be debited from. A normal Savings Account is
enough and nothing additional needs to be done with the Bank account.
30

Trading Process
Once the Demat account, Trading account and Bank account are in place, an individual is
ready to start trading. While it is not necessary to have the Dmat account, Trading
account and Bank account with the same organization, we feel that having it with the
same organization offers additional convenience, especially for individuals trading using
the internet. The following example of buying and selling using a Trading account on the
internet illustrates the convenience of having the Dmat account, Trading account and
Bank account with the same organization.
Buying shares: When an individual wants to buy a share, he/she logs into the Trading
account and specifies the details like the Company name, no. of shares to buy and the
price at which to buy. Depending on this information, the required amount from the Bank
account is set aside for this trade. When the desired price is reached, this trade is executed
and the amount (after adjusting for charges) is debited from the Bank account and the
shares are credited into the Demat account.
If the Bank account had been with a different organization, then for carrying out this
trade, it would have been necessary to move the amount into the Trading account.
Selling shares: When an individual wants to sell a share, he/she logs into the Trading
account and specifies the details like the Company name, no. of shares to sell and the
price at which to sell. Depending on this information, the required no of shares from the
Demat account is set aside for this trade. When the desired price is reached, this trade is
executed and the shares are debited from the Demat account and the amount (after
adjusting for charges) is credited to the Bank account.
If the Bank account had been with a different organization, then after this trade, it would
have been necessary to move the amount from the Trading account into the Bank
account.
Apart from the charges that are levied by the Bank, the Demat account service provider
and the Trading account service provider, there will be additional government taxes like
STT and Service Tax

Rolling Settlement Cycle: (RSC)

31

In a rolling settlement, each trading day(T) is considered as a trading period and trades
executed during the trading day(T) are settled on a T+2 basis i.e. trading day plus two
working days.
There are basically three ways of share trading
Online share Trading
Offline Share Trading
Open Outcry

Online Share Trading

In Online share trading the trading is done by using computer and internet connection. In
other words trading done through computer having internet connection is called online
share trading.
Instead of going to any share broker you can do trading yourself using online share
trading method.
32

Procedure of Online Trading

Online share trading services in India

1. ICICI DIRECT
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

SHAREKHAN
INDIABULLS
5PAISA
MOTILAL OSWAL SECURITIES
HDFC SECURITIES
RELIANCE MONEY
IDBIPAISABUILDER
RELIGARE
GEOJIT
NETWORTH STOCK BROKING LIMITED (NSBL)
KOTAK SECURITIES
UTI SECURITIES LIMITED
ANGEL TRADE

33

Advantages of online share trading

1. Money saving opportunities
the amount of money you save depends primarily on the online brokerage firm that you
choose. No two firms are the same. There may be different regulations, similar to bank
regulations. There are minimum deposits required that must be maintained.
2. Instant online access
you can gain instant access to your account, the value of your portfolio updates
immediately before your eyes.
3. Enter online trades at anytime
you can enter online trades at anytime and from anywhere. This is very convenient if you
live in a different time zone than the country you are trading in. Not to mention, it is
especially fit for investors with busy schedules.
4. With online trading you are in charge
you are in control of your investments. No sales pitches and no hassle. You decide where
to invest your money.
5. Real time stock trading without calling or visiting broker's office.
6. Display real time market watch, historical datas, graphs etc.
7. Investment in IPOs, Mutual Funds and Bonds.
8. Check the trading history; demat account balance and bank account balance at any
time.
9. Provide online tools like market watch, graphs and recommendations to do analysis of
stocks.
10. Place offline orders for buying or selling stocks.
11. Set alert to inform you certain activity on the stock through email or SMS.
12. Customer service through Email or Chat.
13. Secure transactions.
Disadvantages
1. Website performance - sometime the website is too slow or not enough user
friendly.
2. Little long learning curve especially for people who dont know much about
computer and internet.
3. Brokerages are little high
4. Disconnection from Internet - In online share trading there is the possibility that
your internet connection may get slow or get stopped, this may result in
disconnection from share market.
34

5. Computer Problem - If your computer stops functioning then this may also
result in disconnection from share market at this time also you have contact your
executive.

Offline trading

Offline Share Trading In this form of trading the customer either goes to the share
broker's place and sits before the share trading terminal and asks the dealer to place
orders in his account. or rings the share broker, asks the share quotes and other
relevant information, and accordingly places orders over the phone\
How trading of shares happens offline
Investor calls up the broker and gives order
If right order is put
Exchange finds a matching order
Intimates the broker of executed trade
Broker is supposed to send contract notes
Broker will ask for money/shares on pay-in dates.
Investor will issue a cheque / demat receipt to broker
Nevertheless, with all the convenience of online trading there are still investors who
prefer the old fashion way of offline trading. Offline trading has lost some popularity but
it is still the main form of investing. Offline trading offers many benefits as well.
1. The one benefit that an investor appreciates the most is that they are not alone when
making investment decisions.
2. There are experienced and professional brokerage companies that handle their
investments for them.
3. Investors are not faced with the challenge of making these vital investment decisions;
especially, if they do not have the experience necessary to make the appropriate
investments.
4. Also, there is someone there to answer any questions that may cause concerns.
5. Not to mention, with offline trading mistakes are less likely to take place. No one
wants to throw their money away or stand by and watch someone else throw their money
35

away. It may be wise to hire a professional to assist you in making the correct investment
decisions if you feel you lack the knowledge necessary.
Problems of offline trading
Problem 1: Broker is not available in place
Problem 2: Broker takes a wrong order by mistake
Problem 3: Broker takes a right order. But before he could put the order to the
exchange, his other clients called him up. He took their orders. By the time he took all
the orders and sent to the exchange, the price of share changed. Your order is placed
at the wrong price.
Problem 4: Many brokers do not send contract notes. So, the investor does not know
his order status for a long time.
Problem 5: Investor may transfer his money/shares to his brokers pool account
Problem 6: Hassles of Paperwork and chasing broker for monies/shares

Open Outcry Trading

Here, the investors put their orders through the brokers and these share brokers in turn
place and execute orders on behalf of them on the floor of the exchange. These
brokers gather in a particular place on the trading floor known as Trading Post. There
is a person called as the Specialist present in the trading post who does the matching
of the buy and sell orders. This type of auction method is called Open Outcry
Method.

CONCLUSION
In conclusion, from the why we get the aim. From the what, we are able to think,
analyze and act. From the where we see the financial instruments available for
investment. From the when we have an understanding when to invest or divest. And
from the how we get our investment system.
I must caution you at this stage. That whichever the financial instrument chosen for
investment, there will be ups and there will be downs. Good and bad decisions will be
made.
Investment and its management are not gambling; it is an art, which is as
interesting or as boring as you make it to be. It is an ongoing process and would
36

require adjustments from time to time to optimize and maintain the expected rate of
return on our investments. The main aim being to be ahead and above of inflation

Company Profile
HDFC - BANK

Promoted in 1995 by Housing Development Finance Corporation (HDFC), Indias

leading housing finance company, HDFC Bank is one of Indias premier banks providing
a wide range of financial products and services to its over 10 million customers across
hundreds of Indian cities using multiple distribution channels including a pan-India
network of branches, ATMs, phone banking, net banking and mobile banking. Within a
relatively short span of time, the bank has emerged as a leading player in retail banking,
wholesale banking, and treasury operations, its three principal business segments.
The Group's principal activities are to provide banking and other financial services. The
Group operates through four segments: Retail banking, Wholesale banking, Treasury
services and Other Banking Operations. The Retail Banking segment serves retail
customers through a branch network and other delivery channels. This segment raises
deposits from customers and makes loans and provides advisory services to customers.
The Wholesale Banking segment provides loans and transaction services to corporate and
institutional customers. The Treasury Services segment undertakes trading operations on
the proprietary account, foreign exchange operations and derivatives trading. The Other
Banking Operations segment provides services relating to credit cards, debit cards, third
party product distribution and primary dealership business and other associated costs. As
at 31-Mar-2008, the Group operated through a network of 761 branches and 1977 ATMs
in 316 cities in India.
The banks competitive strength clearly lies in the use of technology and the ability to
deliver world-class service with rapid response time. Over the last 10 years, the bank has
successfully gained market share in its target customer franchises while maintaining
healthy profitability and asset quality.

37

MISSION
Our mission is to be World Class Indian Bank benchmarking ourselves against
international standards and best practices in terms of product offerings, technology,
service levels, risk management and audit & compliance. The objective is to build sound
customer franchises across distinct businesses so as to be a preferred provider of banking
services for target retail and wholesale customer segments, and to achieve a healthy
growth in profitability, consistent with the Bank's risk appetite. We are committed to do
this while ensuring the highest levels of ethical standards, professional integrity,
corporate governance and regulatory compliance.

LIST OF BOARD DIRECTORS

Managing Director

Aditya Puri

Director

Arvind Pande

Director

Ashim Samanta

Director

C M Vasudev

Director

Gautam Divan

Executive Director

Harish Engineer

Chairman

Jagdish Capoor
38

Director

Keki M Mistry

Director

Pandit Palande

Executive Director

Paresh Sukthankar,

Director

Renu Karnad

Director

Vineet Jain

HDFC SECURITIES- PROFILE

Profile
HDFC Securities, a trusted financial service provider promoted by HDFC Bank and JP
Morgan Partners and their associates, is a leading stock broking company in the country,
serving a diverse customer base of institutional and retail investors.
HDFCsec.com provides investors a robust platform to trade in Equities in NSE
and BSE, and derivatives in NSE. Website supports customers with the highest standards
of service, convenience and hassle-free trading tools.
Research team tracks the economy, industries and companies to provide the
latest information and analysis. Content offers financial information, analysis, investment
guidance, news & views, and is designed to meet the requirements of everyone from a
beginner to a savvy and well-informed trader.

39

HDFC Securities, offer a robust platform to invest online in financial products

using state-of-the-art technology. Website provides a wealth of analysis, information and
services so that you can make informed decisions. Research capabilities will bring
unrivalled insights into companies and industries, helps in staying ahead of the pack.
3-in-1 Advantage Account integrates bank account; demat account and online trading
account. Besides online trading, it also allows to trade on the telephone from anywhere.

Equity Offerings
Equity Trading with HDFC Securities
HDFC Securities provides a seamless online real-time platform to trade in stocks. Buying
or selling of shares on both the NSE and the BSE is done at the click of a mouse. By
integrating bank, demat and trading accounts, they have ensured that share trading is
made convenient for customers.
Website provides a wealth of analysis, information and services so that customers
can make informed decisions. Research capabilities will bring unrivalled insights into
companies and industries, helps to stay ahead of the pack.

40

Cash Trading in Equity Trading

Cash orders are Intended For Taking Delivery

If you want to buy shares you must have the entire funds (100%) for
purchasing those shares.
In case of buy order the 100% of the order value is blocked out of your trading
limit. (Funds available to you for trading at any point of time)

In case of a sell order you should have the entire set of shares in your demat
account

In case of a sell order the securities are blocked in the demat account

Brokerage on trades done in Cash Segment

Intra-day-Same day buy & sell. In this, investor can take two positions:

Long Buy- First buy then sell

Short Sell First sell then buy

Margin Trading

Allows trading members to place orders 4 times more than the money
available to the traders
41

This is an Intra-day based trading where-in the position has to be squaredoff by 2:45 pm.

A customer can go long (Buy) if he is bullish or go Short (Sell) shares if

he is bearish.

UNLIKE Cash trading, for both buy and sell orders, instead of blocking
100% of the money required or shares required, only a part of the money
required is blocked as margin.

Please note that shares required is not blocked in Margin even if the first
order was a sell order.

Brokerage in Margin orders

Buy Today Sell Tomorrow (BTST)

BTST:-Allows to sell 100% of the shares bought, without having to wait till the
shares are deposited in your Demat account and hence take advantage of the
rising market or control loss
BTST allows to sell Only NIFTY and SENSEX Stocks.
You need not also wait for two days for the shares come to your account; sell the
same on the very next day.
42

Conditions for BTST

Investor can sell the purchased scrip only up to T+2 days, so lets say if he/she
purchase a scrip on Monday, then he/she can sell the same on Tuesday or on
Wednesday only
The maximum sell quantity is as follows :
NIFTY : 100 % of the total quantity
SENSEX : 100 % of the total quantity
The brokerage would be the Cash segment brokerage on both the legs of the
transaction.

DERIVATIVES
In finance, a security whose price is dependent upon or derived from one or more
underlying assets. The derivative itself is merely a contract between two or more parties.
Its value is determined by fluctuations in the underlying asset. The most common
underlying assets include stocks, bonds, commodities, currencies, interest rates and
market indexes. Most derivatives are characterized by high leverage. Futures contracts,
forward contracts, options and swaps are the most common types of derivatives. There
are even derivatives based on weather data, such as the amount of rain or the number of
sunny days in a particular region. Derivatives are generally used to hedge risk.

F&O Offerings
43

Derivatives Trading through HDFC Securities

HDFC offers a robust platform to buy and sell in Derivatives. It provides
margin to investors so that they can create position in Derivatives Futures for higher
value. Investors can take positions in a Futures contract and for a relatively small
amount of margin money they can take a larger exposure. Investor could also trade in
Options for a small premium, which gives the right in case of "Call" option (obligation
in case of Writing of any option) to purchase/ sell a pre-determined number of shares at a
pre-determined price.HDFC Securities delivers crisp information on Futures and Options,
contract specifications, and calculators on Option pricing and cost of carry.

What are Futures?

A futures contract is an agreement between two parties to buy or sell an asset at a
certain time in the future at a certain price
What are Options?
Calls Option- gives the buyer the right and not the obligation to buy.
Puts Option- gives the buyer the right and not the obligation to sell.
Future and option sophisticated investments that should not be undertaken
casually. Investors whose experience is limited to less volatile, less leveraged and less
risky vehicles like stocks or bonds should be aware that options and futures markets
require a much stronger stomach for risk! Futures and options are not for lazy investors.
Unlike stocks, which can be purchased and held for years, options and futures are timebased assets with deadlines for action.
Options allow to participate in price movements without committing the large amount of
funds needed to buy stock outright. Options can also be used to hedge a stock position, to
acquire or sell stock at a purchase price more favorable than the current market price, or,
in the case of writing options, to earn premium income.
Benefits of options are:It can protect stock holdings from a decline in market price.
44

It can increase income against current stock holding.

It can prepare to buy a stock at a lower price.
Investors can position themselves for a big market move even when they dont know
which way prices will move.
Investors can be benefited from a stock price rise without incurring the cost of buying the
stock outright.

IPO Offerings
IPO Investing through HDFC Securities
Participating in Initial Public Offerings (IPOs) can be a financially rewarding exercise.
By investing early in a strong company, investors stand a good chance to reap benefits
over the long term. There are gains to be made in many IPOs, for both short term as well
as long term investor.
HDFC Securities offers residents an easy route to investing in IPOs without stepping out
of your house by investing online
Through HDFCsec.com just
LOGIN
SELECT IPO
ENTER AMOUNT
SUBSCRIBE & ITS DONE
No Filling of Forms
No writing Cheques
No standing in QUEUE

45

HSL Account
@ 3-in-1 a/c - HDFC Savings A/c, HDFC Demat A/c, Online Share Trading A/c (EBroking)
@ All three accounts can be opened by filling just one form

Online Trading
A/C

Savings
Bank A/C

Stock
Exchange

Demat
A/C

46

Savings Account with HDFC Bank (Features)

If the customer has an HDFC Savings Account, he/she can link the same to the
Demat and the Online Trading a/c.
Average quarterly balance of Rs. 5000/- needs to be maintained. However, if the
customer already has a ZERO balance a/c he can link that a/c
Wide network of branches and over thousand ATMs to meet all your banking
needs no matter where you are located.
Bank conveniently with facilities like Net Banking and Mobile Banking- check
your account balance, pay utility bills or stop cheque payment, through SMS.
Never overspend- Shop using your International Debit Card that reflects the
actual balance in your savings account.
Personalized cheques with your name printed on each cheque leaf for enhanced
security.
Take advantage of Bill Pay, an instant solution to all your frequent utility bill
payments. Instruct for payment over the phone or through the Internet.
Avail of facilities like Safe Deposit Locker, Sweep-In and Super Saver facility on
your account.
3 Free transactions on SBI/Andhra Bank ATMs per month.
Free Payable-at-Par chequebook, without any usage charges up to a limit of
Rs.50,000/- per month.
Free InstaAlerts for all account holders for lifetime of the account
Free Passbook facility available at home branch for account holders (individuals).
Free Email Statement facility.
The customer cannot link a Savings A/C with Fixed Deposit Facility. In such a
case, the customer has to either open another account or deactivate the facility.

Demat Account with HDFC Bank

Customer can link upto 5 Demat a/c with his HSL a/c
The 5 possible combinations are :A, A+B, A+C, A+B+C & A+C+B
47

 Demat account charges per a/c are Rs. 500 annually(Taxes Extra)
Settlement of Securities traded on the exchanges as well as off market
transactions.
Shorter settlements thereby enhancing liquidity.
Pledging of Securities
Electronic credit in public issue
Auto credit of Rights / Bonus / Public Issues / Dividend credit through ECS.
Auto Credit of Public Issue refunds to the bank account.
No stamp duty on transfer of securities held in demats form.
No concept of Market Lots
Change of address, Signature, Dividend Mandate, registration of power of
attorney, transmission etc. can be effected across companies held in demat form
by a single instruction to the Depository Participant (DP).
Holding / Transaction details through Internet / email.

Product Pricing

48

COMPARATIVE
ANALYSIS

49

Comparison between Features of HDFC Sec, Kotak Sec.,

ICICIDirect

Features

HDFC Sec.

Kotak Sec.

ICICIDirect

Need to have
Saving A/C
with same bank

YES

NO

YES

Live Terminal
Charges

Yes (Rs.
5000 per
Year)

NO

Nominal charges
(Free to HNI
customers)

Off market
facility

NO

YES

NO

Make up of
website

Infuriate

Complicated

User Friendly

Server

High Speed

Slow

Busy

Margin

4 Times

2 Times

3-4 Times

Tips Charges

Rs. 199 per

Month

Rs. 100 per

month

Rs. 1 per SMS

50

Amount required in Bank A/c

10,000
10,000

HDFC Sec.

8,000

Kotak Sec.

5,000

6,000
4,000

ICICIDirect

2,500

2,000
0
HDFC Sec. Kotak Sec. ICICIDirect

Amt. required in bank A/C

HDFC Sec.
ICICI Direct
Kotak sec.

5000
10,000
2500

51

RECOMMENDATION

30%
25%
20%
15%
10%
5%
0%

26%

30%
23%
HDFC Sec.
Kotak sec.
ICICIDirect

52

Recommendation
HDFC Sec.

26%

ICICI Direct

30%

Kotak Sec

23%

BROKERAGE

53

0.75

0.8
0.7
0.6

0.59

HDFC Sec.

0.5

0.5

Kotak Sec.

0.4

ICICIDirect

0.3
0.2
0.1
0
HDFC Sec.

Kotak Sec.

ICICIDirect

Brokerage
HDFC Sec.
ICICIDirect
Kotak Sec.

0.5
0.75
0.59

54

MARKET SHARE

Market share
HDFC
ICICI
KOTAK SEC

26
64
7

55

ACCOUNT OPENING CHARGES

799
800
790
780

HDFC Sec.

770

Kotak Sec.

760

750

750

ICICIDirect

750
740
730
720
HDFC Sec.

Kotak Sec.

ICICIDirect

Account Opening charges

HDFC Sec.
ICICI Direct
Kotak Sec.

799
750
750

56

MAINTAINENCE CHARGES

500

500

500
400

360

300

HDFC Sec.

200

Kotak Sec.
ICICIDirect

100
0
HDFC Sec. Kotak Sec. ICICIDirect

Maintenance charges
HDFC Sec.
ICICI Direct
Kotak Sec.

500
500
360

57

SWOT ANALYSIS

58

STRENGTHS
HDFC securities charges competitive brokerage

Management philosophy and commitment to maximize shareholders returns

59

 Talented and committed professionals

Branches are available in all major cities and the number is growing

Weakness
Lack of effective customer services

Brokerage is high & not negotiable in comparison with local brokers

In online trading, sometimes delay comes so it can be frustrating

Charge amount for live terminal watch

Compulsion of savings A/C with HDFC

Website is not user-friendly

Pre market orders are not possible

Opportunities

Large market segment is untapped

60

 Brand image of HDFC Group

Intensification with a high Pace

Threats
New entrant and existing major players

Less Awareness about online trading and its benefits

Low customer base

Unfamiliarity with net usage

SUGGESTIONS
61

Proper demonstration and training can be provided to customers

Provide offline trading facility

Website can be reformulated and simplified

Can provide customer space and environment for online trading with high
speed server

Can provide off market facility

3-in-1 account need not be a compulsion

Increase awareness among people about online trading

Improvement in call center services and wholly dedicated customer care

team need to be developed

Portfolio trackers can be updated regularly without any delay

Can provide live terminal watch to each and every customer without charge

62