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The project is mainly to study the activities and prospects of stock markets.
The past decade has been a golden age for stock exchange in India. It is poised to
dominate the future of corporate finance in India, thanks to reforms in stock market.
Earlier in the initial days of secondary market, trading on Stock Exchanges in India used
to take place through open outcry without use of information technology for immediate
matching or recording of trades. With the advent of technology, the trading in securities is
done on-line with the help of VSAT terminals. Since 1995, trading in securities is screen
based (on-line) trading which eliminated the need for trading floor. Since 2000, internet-
based trading has also made an appearance in India.
The Internet revolution has been changing the fundamentals of our society. It
shapes the way we communicate and the way we do business. It brings us closer and
closer to vital sources of information. It provides us with means to directly interact with
service-oriented computer systems tailored to our specific needs; therefore, we can serve
ourselves better by making our own decisions. This prevailing shift of the business
paradigm is reshaping the financial industry and Transforming the way people
invest.
The secondary market consists of 23 stock exchanges including the Nation Stock
Exchange and the over-the-counter Exchange of India (OTCEI) and inters
Connected Stock Exchange of India Ltd. The secondary market provides a trading place
for the securities already issued to be bought and sold. It also provides liquidity to the
initial buyers in the primary market to re-offer the securities to any interested buyer at
any price, if mutually accepted. An active secondary market actually promotes the
growth of the primary market and capital formation because investors in the primary
market are assured of a continuous market and they can liquidate their investments in the
stock exchange.
With the emergence of on-line trading in India stock Exchanges, the volume of
the securities traded, the market capitalization, the size of market and the market turnover
has increased. The scope of study in on-line trading is very vast.
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the players in the economic growth of a country interact. Various laws have been passed
from time to time to meet this objective. The financial market in India was highly
segmented until the initiation of reforms in 1992-93 on account of a variety of
regulations and administered prices including barriers to entry. The reform process was
initiated with the establishment of Securities and Exchange Board of India (SEBI).
I will continue my study to explain how the on-line trading process is going on in
Bombay Stock Exchange (BSE).
Difficulties like lack of easy access to the market, inadequacy of the market
infrastructure, and problems in locating the right intermediaries, lack of guidance and
advice inhibited the investors from investing in the stock market. At least to have the
basic knowledge about the various functions of the stock exchanges is very important.
After liberalization in 1991, our stock markets experienced drastic changes due
to the setting up of SEBI in 1992, integration of markets, new technology in trading,
introduction of on-line trading, foreign participation etc. these led to the
development of stock market.
The actual process of on-line trading through which immediate access on the
market watch available to the client in placing orders for buying or selling of shares is to
be known.
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OBJECTIVES OF THE STUDY
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LIMITATIONS OF THE STUDY
2. The study in other major aspects can give more accurate results.
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CHAPTER - II
RESEARCH METHODOLOGY:
The methodology of the study is to create the awareness about the Online Trading
system & Dematerialization of Securities. The methodology goes through the
Primary data
Secondary data
Information of the primary data for the study is collected by personal interaction with the
clients and observation.
2. Collecting information from the head of each department and from the staff
working in those departments.
3. A Referring the Capital Market (`dealers) module workbook published by
National Stock Exchange of India.
4. Interacting with the operators at the computer terminals and the clients trading in
Motilal Oswald Securities Limited.
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CHAPTER – III
REVIEW OF LITERATURE
Trading means buying & selling of shares in open market with the help of stock brokers.
Before going for trading of securities thru stock brokers in a stock exchange, we should
be having the following items:
1. Bank Account
I. Dematerialization:
* The process of converting the physical shares into electronic format is known as
dematerialization. The key persons involved here are
1) Depository
2) Depository Participants
I.1) Depository:
* A depository will hold the securities in electronic form on behalf of the clients thru
Depository participants. Depository will regulate & control the various activities of the
Depository Participants.
* There are 2 Depositories in India
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b) CDSL (Central Depositories Securities Ltd)
* A Depositary Participant is the representative for the depository & it acts as a interface
between the clients & depository.
* DP maintains the securities account balances & intimation is given to the client on the
basis of holdings from time to time
I.2.1.Functions of a DP
* Account opening
* Dematerialization
* Accounts statement
* Pledging
* Rematerialsation
* Change in address
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I.3.1.Functions of Registrar:-
* keeping a proper record of applications & money received from investors
* Assisting issuing companies in determining the basis of allotment of securities,
dispatching allotment letters, dispatching of refund order, shares etc
I.3.2.Functions of a share transfer agents:-
* maintaining a record of holders of securities on behalf of the company , handling all
matters related to transfer & redemption of securities of the company
I.3.3.SEBI role on R& T agents:-
* SEBI will undertake inspection of books of accounts, records & documents of R&T
agents. SEBI can suspend the R&T Agent in the circumstances of any defaults or
violation of SEBI act
I.4.Beneficiary Account
* A Demat account (Beneficiary account) is an account opened by the investor with a DP
(Depositary Participant)of his choice to hold shares in electronic form.
* Every beneficiary account holder will be having unique ID.
* In NSDL, beneficiary ID will be in 8 digits and for CDSL, ID will be in 16 digits.
I.5.Demat Account
* This account is like our bank account, it shows the shares we have.
* Like cheque leaf in the bank, here we will be having Delivery instruction slip (DIS) to
transfer our shares to some other persons.
* DP account should be opened with DP participant. The stock broker may be a DP
Participant also.
* An investor will be having any number demat accounts with different DP
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* Reduction in paper work in transfer of securities
* Reduction in transaction cost
* Change in address recorded with DP gets registered with all companies in which
investors hold securities electronically eliminating the need to correspond with each of
them separately
The person should open one Demat account with any Depository Participant. He/she has
to send DRF (Demat Request Form) to the Registrar & Transfer Agent (R&T Agent)of
the company thru his DP along with the original share certificates. The R&T agent holds
the details about the shares. He checks with signature of the applicant and process it and
intimate about this to company & NSDL. And finally the investor will get the demat
shares thru his/her DP.
I.7.Fungibility:
* Fungible means the dematerialized securities do not have any distinctive numbers. It is
represented only by the number of securities.
* For eg:If one person is having 50 shares of Infosys means ,in a Physical share
certificate the following details will be available:
* Folio Number-25678
* Certificate Number-23476
* Distinctive no-12451-12500
* In his beneficiary account, it shows as Infosys-50.
I.8.Rematerialisation
Rematerialization is the process of converting the electronic form of shares into physical
form (i.e. share certificates)
The Indian capital market has undergone numerous changes in over the years.
Traditionally stock market booms and decline have laid numerous Problems for lay
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investors. A close interaction of these problems revealed that these were due to paper
based trading and settlement. The short learning of the markets become manifest in
the bad deliveries, delays in transfers and irregular settlement etc. the remedial
measure was dematerialization under the depository system. With the introduction of de-
mat system in 1996 and in effect from January 1998, investors in capital market need to
have de-mat a\c. and trading a\c. stock broking houses play a vital role in this field.
These stock broking houses become depository participant of NSDL&CDSL arid help
lay investors to trade in capital markets without any hassles.
4. If registered with any other broker, then the name of broker and concerned stock
exchange and client code number.
5. Passport number /Driving license / Ration card/ voters card identity card.
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6. Each client has to use one registration form. in case of joint names/family members,
a separate form has to be submitted from each person.
Brokerage:
The maximum brokerage that can be charged by a broker is decided by the stock
exchanges as per the Exchanges regulations. The SEBI (stock brokers and sub
brokers),1992 stipulates that sub broker cannot charge from his clients commission
which is more than 1.5% of the value mentioned in the respective purchase (or)sale note.
In India, now many stock broking houses have come up. some of the major
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players are steel city security Ltd., ICICI, India bulls, SHAREKHAN, etc.
some companies provide on line services, some of them are provide only off line
services and some are provide both on Line & off-line. E.g. steel city securities Ltd
Over the years stock markets matured as the platforms for
making Investments. Here we can’t forget the role played by SEBI (Securities
Exchange Board Of India). The regulations passed by SEBI in monitoring and
controlling the trading practices made it comfortable for the investors. Over the last
few decades, the average person’s interest in the stock market has grown
exponentially. What was once a toy of the rich has now turned into the vehicle of
choice for growing wealth. This demand coupled with advances in trading
technology has opened up the markets so that now a day nearly anybody can own
stocks.
Prior to SEBI there was not that awareness of the markets, investors used to
face so many problems with brokers. But after the concept of dematerialization of
Stocks it was made easy. As the next step exchanges like BSE (Bombay
Stock
Exchange) and NSE (National Stock Exchange) allowed with some criteria
“Online
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Today there are so many Stock Broking Houses offering these online
trading services, among which Sharekhan one of the largest service providers.
DOCUMENTATION
Similarly, the sub-broker shall enter into an agreement with the client before
placing orders, with shall be executed on non-judicial stamp paper. The client
should provide information to the sub-brokers in the ‘client registration application
form’.
ON LINE TRADING
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1. NEAT System
The NEAT system supports an order driven market, wherein orders match
on basis of time and price 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.
User ID
Trading Member ID
Password
New Password
Pre-open phase:
The pre-open period is relevant only in the normal market. Order
matching takes place at the end of the session, based on which an opening price is
computed & assigned to all trades of pre-open.
b) Opening:
In this period, all orders that have been entered in the pre-open phase are
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matched. During this phase, the trading member cannot login to the system. If the
member is already logged in the cannot perform trading activities till market
is opened.
c) Open Phase:
The open period indicates the commencement of trading activity. To
signify the start of a trading, a message is sent to all the trade workstation. Order
entry is allowed when all the securities have been opened. During this phase,
orders are matched on a continuous basis. Trading in all the instruments is allowed
unless they are specifically prohibited by the exchange. The activities that are
allowed at this stage are:
Inquiry: Inquiry about the market status, the shares and their prices.
Order entry: Placing an order to buy or sell the scrips by quoting the price
and the quantity of the share.
Order modification: Modifying the order that has been already placed.
The modification may be with respect to price or quantity.
Order cancellation: The order placed already can also be cancelled if the
price or the quantity of scrip is not satisfactory. Order cancellation also
includes quick order cancellation.
d) Market close:
Where the market closes, trading in all instruments for that market comes
to an end. No further orders are accepted, but the user is permitted to perform
activities like inquiries.
e) Surcon:
Surveillance and control (SURCON) is that period after market close during
which, the users have inquiry access only. After the end of SURCON period, the
system processes the data for making the system available for the next trading day.
When the system starts processing data, the interactive connection with the NEAT
system is lost and the message to that effect is displayed at the trader workstation.
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the computer quantities of securities and the price at which he wants to transact
and the transaction is executed through the mainframe computer of the exchange
as soon as the order punched by him finds a matching sale or buy order from a
counter party.
The BSE opens at 9.55 a.m. and the trading starts at 10.00 a.m. 5 minutes is
given for the stockbrokers to quote their price and to get a recap of the yesterdays
prices of different scrips. The trading ends at 3.30 P.m. The auction market starts
at 4.00 p.m. and continues till 4.30 after normal on-line trading. In BSE, the trade
starts at 9.55 a.m. and ends at 3.30 p.m. A grace time of 20 minutes from
3.40p.m.to 4.00 p.m. is given in BSE as ‘End of the Session’ for trading.
2.Back Office
To calculate the net mark to market value, Bhav copy file is imported from
NSE/BSE. Net mark to market value is to be known to know the profit or
loss position of the client, basing on which the Trading Manager of SHAREKHAN
Pvt. Ltd. will decide whether the client can trade or not for the next day on
comparing it with the margin paid by the client.
3. REPORTS
After selecting ‘REPORTS’ option from main menu, the member bas
to specify the criteria for which the report is needed. The types of reports that may
be generated are: deliveries reports; receipts reports; obligations reports; custodial
trades reports; bad deliveries reports; funds reports; auctions reports; objections
reports; margins reports; securities reports and miscellaneous reports. The daily
reports of various aspects relating to the trading activities are maintained.
4. CLEARING
Settlement of trades transacted on an exchange requires smooth, preferably
instantaneous, movement of securities and funds in accordance with the prescribed
schedule of pay-in / pay-out. Movement of securities has been almost
instantaneous in the dematerialized environment. Two depositories are in place
to provide electronic transfer of securities. 10 major stock exchanges accounting
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for about 99% of turnover have been connected to depositories. All actively traded
scrips are held, traded and settled in de-mat form. NSE follows a different model
where a clearing corporation guarantees settlement obligations emanating from
trades.
1. SETTLEMENT
The trades accumulated over a trading cycle are clubbed together at the end of the
trading cycle, positions (trades) are netted and the balance obligations are settled.
There are two main types of settlements:
Rolling Settlement
Rolling Settlement
In contrast to account period settlement, under rolling settlement all
open positions at the end of a date ‘T’ mandatory results in delivery and payment
of ‘X’ working days later. In other words, all the net obligations at the end of day’s
trading are to be settled by exchange of funds and delivery on the fifth day from
the trading day. This method of trading and settlement process is called ‘Rolling
Settlement’.
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In order to enhance liquidity, to shorten the settlement cycle and to promote
market for derivatives, SEBI permitted rolling settlement in respect of selected
shares and trades in this segment are settled by de-mat delivery only. As on
January 2001, rolling settlement was available in respect of 156 scrips.
In both the types of settlement, for confirmed trades, the settling bank will
arrange for payment and clearance and depository for effecting transfers by
electronic book entry system. Canara bank provides the clearinghouse facility.
2. COST OF TRADING
The various costs involved in the process of online trading are as follows:
Margins,
Brokerage,
Service tax,
Stamp duty.
Margins
The trade corporation has to maintain a reserve of some amount with BSE
where 30% -50% will be in the form of cash and the remaining in the form of bank
guarantees (securities), FDR’s etc. MOSL has 7.5. Crores as margin with BSE at
present.
Gross intra-day turnover (buy and sell) of a member shall not exceed 33 1/3
time the base capital. Gross exposure of a member at any time shall not exceed 8.5
times the free base capital of one crore rupees and not exceed 12 times over the
free base capital of one crore rupees
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collected. Client margin collection is calculated in 16 types known as ‘Span
calculation’ and the maximum margin is collected from the clients. Motilal
Oswal collects 25% margin money in futures from clients. For trading in index
15% margin is charged. For retail clients, the full amount of the value of shares is
calculated and collected to allow them to purchase the shares
Nil
Brokerage
Delivery Brokerage
This brokerage is charged where there may be buying or selling lot
remaining at the end of the day’s trade. The delivery brokerage is charged from
0.3% to 0.5%.
As per SEBI, maximum brokerage shouldn’t exceed 2.5% both in BSE and
NSE. For retail clients, the brokerage charged is 0.7%. A sub-broker charge 2.5%
from the clients to sell or buy the shares out of which, SHAREKHAN charges
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1% from the sub-broker.
Service tax
In SHAREKHAN Pvt. Ltd., 5% service tax on brokerage is collected from the clients.
Stamp duty
If the stamp duty of 0.006% on turnover is Rs30 or more, only Rs30
is collected in NSE. In BSE, the minimum is 1Re and the maximum stamp duty
is unlimited.
ACCOUNTS
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De-mat Process
When a client places his physical shares for de-mat, MotilalOswal after
inputting the information in depository participants sends the physical shares to the
company, which issued the shares. The client code number and the information
and the clients’ signature is sent to Share Holding Registrar.
There they verify whether the shares really belong to the client and
whether the signature is matching or not. Once they are satisfied that the
information sent through the DP’s are right, the shares are cleared and the
information is passed on to the client. The physical shares are then torn away as
they already exist in electronic form.
When a client enters into DP for de-mat purpose, he is given a unique code
member. He can know his share position easily. It is known as client ID number.
Advantages of Dematerialization
The process of transfer of securities became faster. The fear of loosing the
share certificates is not there because of dematerialization. Theft, forgery,
mutilation of certificates is not found in dematerialization.
4.INTERMEDIARIES
5.MARKET INFORMATION
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In Steel city securities Ltd, daily the research analyst collects the
market information and it is analyzed. The market information is used to forecast
the index movement, price movement of the shares and enables the clients to make
use of the information in trading to get better results.
The research analyst follows the market closely by watching the price
movement of the shares in the market. The technical analysis is very helpful in
making investment decisions. The research analyst follows different tools of
technical analysis like Japanese candlestick method; Elliot wave theory; Dow
theory; price trends and volume trends; volatility; floating stock and volume of
trade etc., to assess the market. Technical analysis reveals the movement of the
scrip. It explains when to buy a share and when to sell. So, the research analyst
gives much important to the technical analysis to forecast the price movement of
the scrip accurately.
Since, the NSE & BSE are markets with strong form efficiency, as the
market discounts the information itself very quickly and changes as per the
information, the research analyst has only fewer jobs to do here.
The research analyst not only analyses the marketing information but,
every day in SHAREKHAN an edition of the research analyst’s, suggestions on
scripts that have to be bought and sold is also printed which helps the clients of
SHAREKHAN to invest in shares that are profitable. Mostly, the predictions of
the research analyst about the market movement prove to be accurate. So market
information in SHAREKHAN is trust worthy.
LEGAL FRAMEWORK:
It deals with legislative and regulatory provisions relevant from the viewpoint of a
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dealer. The legality of trading is through the various acts and regulators of stock
exchange. Before 1992, the three principal acts governing the securities market were:
The Capital Issues (control) Act, 1947, which restricted the issuers’ access
to the securities market and controlled the pricing of issues.
The Companies Act, 1956, which sets out the code of conduct for
the corporate, sector in relation to issue, allotment and transfer of securities,
and disclosures to be made in public issues.
The Securities Contract (Regulation) Act, 1956 that provides for regulation
of transactions in securities through control over stock exchanges.
SEBI Act, 1992: To ensure effective regulation of the market, SEBI Act,
1992 was enacted to empower SEBI with statutory powers for
Protecting the interests of investors in securities.
Regulators
MOCK TRADING
BSE conducts mock trading for all its trading members. The mock
trading usually takes place once in a month or in two months.
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Mock – trading is a process where the regular online trading is done at all
the trade workstations, which are registered with BSE. Though the on-line
trading is done, payment of funds or deliveries doesn’t take place. Though the
trade results in turnover in crores there is no transfer of funds or share certificates.
The mock-trading process is similar to the regular trading process. Mock trading is
generally done on Saturdays as it is not a working day for the stock exchange and it
doesn’t affect the daily trade in BSE Mock- trading enables the operators to operate
efficiently and to adjust to the changes made if any in the trading system.
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COMPANY PROFILE
Inter-connected stock exchange of India limited [ISE] has been promoted by 14 Regional
stock exchanges to provide cost-effective trading linkage/connectivity to all the members
of the participating Exchanges, with the objective of widening the market for the securities
listed on these Exchanges. ISE aims to address the needs of small companies and retail
investors with the guiding principle of optimizing the existing infrastructure and harnessing
the potential of regional markets, so as to transform these into a liquid and vibrant market
through the use of state-of-the-art technology and networking.
The participating Exchanges of ISE in all about 4500 stock brokers, out of which more
than 200 have been currently registered as traders on ISE. In order to leverage its
infrastructure and to expand its nationwide reach, ISE has also appointed around appointed
around 450 Dealers across 70 cities other than the participating Exchange centers. These
dealers are administratively supported through the regional offices of ISE at Delhi [north],
kolkata [east], Coimbatore, Hyderabad [south] and Nagpur [central], besides Mumbai.
ISE has also floated a wholly-owned subsidiary, ISE securities and services limited [ISS],
which has taken up corporate membership of the National Stock Exchange of India Ltd.
[NSE] in both the Capital Market and Futures and Options segments and The Stock
Exchange, Mumbai In the Equities segment, so that the traders and dealers of ISE can
access other markets in addition to the ISE markets and their local market. ISE thus
provides the investors in smaller cities a one-stop solution for cost-effective and efficient
trading and settlement in securities. With the objective of broad basing the range of its
services, ISE has started offering the full suite of DP facilities to its Traders, Dealers and
their clients.
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Provide a level playing field to small Traders and Dealers by offering an opportunity
to participate in a national markets having investment-oriented business.
Reduce transaction cost.
Provide clearing and settlement facilities to the Traders and Dealers across the
Country at their doorstep in a decentralized mode.
Spread demat trading across the country
SALIENT FEATURES:
Network of intermediaries:
As at the beginning of the financial year 2003-04, 548 intermediaries (207 Traders and 341
Dealers) are registered on ISE. A broad of members forms the bedrock for any Exchange,
and in this respect, ISE has a large pool of registered intermediaries who can be tapped for
any new line of business.
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offered using a common distribution channel. The aggressive pricing policy also ensures
that the intermediaries have sufficient financial incentives for offering these products and
services to the end-clients.
SWOT Analysis
STRENGTHS:
Investments are the oxygen of growth. Within the larger context of the country’s
Increasing investments in Securities Market, the Company is also investing in multiple
spheres - people, technology, capacity expansion and brand building.
This is essential for sustaining the growth momentum and continuous Value creation. Due
to Demutualization of regional stock exchanges and favorable terms of SEBI, different
investors can be a part of the Exchange.
Talent acquisition and retention is one of the key result areas for our senior managers. On
an on-going basis, the Company endeavors to ensure a vibrant and motivated workforce.
The Company is constantly honing people management leadership skills of the employees
and is increasingly investing in Innovative human resource.
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Inter connected stock exchange of India limited. is contributing to a great extent in terms of
turn over as also building up the economy of the country.
WEAKNESSES:
No trading by trading members on screen of inter connected stock exchange of India
limited Due to change in technology the role of regional stock exchange needs to be
reinvented.
OPPORTUNITIES:
A large domestic market that is still into traditional fixed income and other government
savings is all buy bound to enter the market sooner if not later.
THREATS:
Global Economic slowdown, Currency mismanagement, High global commodity prices.
Over valuation in Index scripts, Non Liquidity in non-derivatives related scripts. Change in
government focus on controlling inflation.
Products:
Mutual fund schemes
Insurance
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Portfolio Management System
Shares – online and offline
Bonds
Fixed Deposits
Commodities
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3. Trade from any net enabled PC
4. After hour orders
5. Online orders on the phone
6. Timely advice and-research reports
7. Real-time Portfolio tracking
8. Information and Price alerts.
FINANCIAL CAPABILITY:
Taking in to consideration all its assets and liabilities company is valued at around
Rs.
750-850 crores.
HIERARCHY IN SHAREKHAN
THERE ARE 14 MAIN HIERARCHICAL LEVELS IN
SHAREKHAN:
1) Trainees
2) Super trainees
3) Sales executives
4) Assistant sales manager
5) Area sales manager
6) City sales manager
7) Assistant branch manager
8) Branch manager / Franchisee
9) Regional head
10) Cluster head
11) Business head
12) Country head
13) Directors CEO
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1) Proof of Identity:
You can submit a photo Identity of any of the following
Voter ID
Passport
PAN Card
Driving License
RATION CARD
2) Address Proof:
Voter ID Card
Driving License
Passport
Ration Card
Telephone Bill
Electricity Bill
Leave-License
Bank Passbook
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Latest Bank Statement
Insurance Policy
CUSTOMERS:
Government Employees
INDUSTRY PROFILE
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FINANCIAL MARKET:
In economics, a financial market is a mechanism that allows people to
buy and sell (trade) financial securities (such as stocks and bonds), commodities
(such as precious metals or agricultural goods), and other fungible items of value at
low transaction costs and at prices that reflect the efficient –market hypothesis.
According to functional basis financial markets are classified into two types.
They are:
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and intermediaries. The unorganized market is composed of indigenous bankers,
moneylenders, individual professional and non-professionals.
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MONEY MARKET:
The money market is a component of the financial markets for assets
involved in short-term borrowing and lending with original maturities of one year or
shorter time frames. Trading in the money markets involves Treasury bills,
commercial paper, bankers acceptances, certificates of deposit, federal funds, and
short-lived mortgage and asset-backed securities. The money market consists
of financial institutions and dealers in money or credit who wish to either borrow or
lend. Participants borrow and lend for short periods of time, typically up to thirteen
months. Money market trades in short-term financial instruments commonly called
"paper." This contrasts with the capital market for longer-term funding, which is
supplied by bonds and equity
These instruments are often benchmarked to (i.e. priced by reference to) the London
Interbank Offered Rate (LIBOR) for the appropriate term and currency.
Money market is a place where we can raise short-term capital. Again the money market is
classified in to
Interbank call money market
CAPITAL MARKET:
A capital market is a market for securities (debt or equity), where business
enterprises (companies) and governments can raise long-term funds. It is defined as a
market in which money is provided for periods longer than a year , as the raising of
short-term funds takes place on other markets (e.g., the money market). The capital
market includes the stock market (equity securities) and the bond market (debt).
Financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S
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Securities and Exchange Commission (SEC), oversee the capital markets in their
designated jurisdictions to ensure that investors are protected against fraud, among
other duties.
Capital market is a place where we can raise long-term capital. Again the capital
market is classified in to two types and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.
PRIMARY MARKET:
Primary market is generally referred to the market.
SECONDARY MARKET:
The primary market deals with the new issues of securities. Outstanding
securities are traded in the secondary market, which is commonly known as stock
market or stock exchange. “The secondary market is a market where scrip’s are
traded”. It is a market place which provides liquidity to the scrip’s issued in the
primary market.
Thus, the growth of secondary market depends on the primary market. More
the number of companies entering the primary market, the greater are the volume of
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trade at the secondary market. Trading activities in the secondary market are done
through the recognized stock exchanges. Which are 23 in number including Over the
Counter Exchange of India (OTCE), National Stock Exchange of India and
Interconnected Stock Exchange of India.
The following are the intermediaries in the secondary market: Broker/member of stock
exchange – buyer’s broker and seller’s broker
1. Portfolio Manager.
2. Investment advisor.
4. Depository.
5. Depository participants.
In India, the growth of stock exchanges has been linked to the growth
of corporate sector. Though a number of stock exchanges were set up before
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independence but, there was no All India legislation to regulate their working. Every
stock exchange followed its own methods of working. To rectify this situation, the
SECURITY CONTRACTS (REGULATIONS) ACT was passed in 1956.
In 1965, 22 separate provincial stock exchanges were merged into 3 regional stock
exchanges and in 1973 these, in turn, were combined to form the National Stock
Exchange (NSE) under the title of the stock exchange that has trading floors in many
former provincial center. At present, there are 21 stock exchanges in our country.
The over-the counter exchange of India began its operations in 1992. Since 1995,
trading in securities is screen based (on-line).
Calcutta and Bombay were the two business centers in India of the nineteenth century
where securities were traded. Trading was concentrated in bank shares. In 1836, the
Calcutta newspaper Englishman quoted share prices of the Bank of Bengal. The
Commercial Bank and the Chartered Bank, Chartered Mercantile Bank, Chartered
Bank, Agra Bank, Oriental Bank were traded in Bombay.
India saw its first boom in stocks during 1861-65 and its first bubble bursting in 1865.
A group of stock-brokers in Bombay had already come into prominence 1865.
Furthermore, 125 new companies went public during 1863-65. The boom was a
windfall of the American Civil War (1860-65) as the war brought about an upsurge of
Indian Cotton exports of Europe in place of American cotton.
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Between 1850 and 1860, stocks of reclamation companies were extremely active
in Bombay. It was during this period that filling the shallow sea waters between seven
small islands and expanding outwards through further reclamation formed today’s
Bombay Stock Exchange. Public buildings, roads and public gardens were built in the
city. During the first stock boom from 1861-65, stocks of all Companies that were
floated command a premium. Bank and financial associations also attracted investors.
Once the American Civil War ended, the Indian Stock Market crashed on 1 st July
1865.
POWERS OF SEBI:
The securities and exchange board of India act .1992 setting up the securities and
exchange of the act, it shall be the duty of SEBI to protect the interest of investors in
securities and promote, development and regulate the securities market to carry out
its objective SEBI has been vested with the following powers:
a) Regulating the business in stock exchanges and any other securities markets.
b) Registering and regulating the working of stock brokers ,sub-brokers , share
transfer agent bankers to an issue ,merchant bankers ,underwriters, portfolio
managers ,investment advisors and such other intermediaries who may be associated
with securities markets in any manner.
c) Registering and regulating the working of collective investment schemes, including
mutual funds.
d) Promoting and regulating self-regulatory organizations.
e) Prohibiting fraudulent and unfair trade practices relating to securities market
f) Promoting investors education and training of intermediaries in securities market.
g) Prohibiting insider trading in securities.
h) Regulating substantial acquisition of shares and takeover of companies.
i) Calling for information from, undertaking inspection, conducting inquiries and
auditors of the stock exchanges and intermediaries and self regulatory organizations
in the securities market.
J) Performing such functions and exercising such powers under the securities contract
act, 1956 as May delegated to it by the central government
k) Levying fees of other charges for carrying out its work.
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l) Conducting research for the above purposes and
m) Performing such other functions as may be prescribed.
The stock exchanges play an important role in the economic development of a country.
The importance of stock exchange will be clear from the functions they perform and
discussed as follows:
The stock exchanges provide a place where shares and stock are converted
into cash. The exchanges provide a ready market where buyers and sellers are always
available and those who are in need of hard cash can sell their holdings. Had this not
been possible then many persons would have feared for blocking their savings in
securities as they cannot again convert them into cash.
The stock exchanges provide a ready market for securities. The securities once
listed continue to be traded at the exchanges irrespective of the fact that owners go on
changing. The exchanges provide a regular market for trading in securities.
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3. Evaluation of Securities:
The investors can evaluate the worth of their holdings from the prices quoted
at different exchanges for those securities, the securities are quoted under the free
atmosphere of demand and supply and the prices are set on the basis of free market.
Stock exchanges are helpful in evaluating any type of security listed there.
The stock exchanges provide a ready market for various securities. The
investors do not have any difficulty in investing their savings by purchasing shares,
bonds etc. from the exchanges. If this facility is not there then many persons who
want to invest their savings will not find avenues to do so. In this way stock
exchanges play an important role in mopping up surplus funds of investors.
The new and existing concerns need capital for their activities. The new
concerns raise capital for the first time and existing units increase their capital for
expansion and diversification purposes. The shares of new concerns are registered at
stock exchanges and existing companies also sell their shares through brokers etc., at
exchanges. The exchanges are helpful in raising capital both by new and old concerns.
The intending buyers also remain in touch with the exchanges for investing money in
securities.
6. Safety in Dealings:
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7. Listing of Securities:
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2. Advantages to the investors:
Safety of investment.
Helpful in industrialization.
Stock market of any country renders valuable services in an economy in different forms. It
assists in rapid economic development and growth and serves as ail agency of capital
formation. A few important functions rendered by a stock exchange in an economy are
stated as follows:
A) Adequate liquidity and marketability
B) Safety to investors
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c) Evaluation of securities
D) Mobilization of savings
Stock exchanges play a significant role in Indian economy where the saving rate is
the highest in the world and the mass of population is uneducated and living in rural
and semi urban areas.
There are 22 stock exchanges in India .these were founded at different times, In
different places ,under different laws .however , all of them have now been
recognized and regulating under a single law .Namely the securities contracts
(regulations)etc,1956.No persons is in principle ,allowed to organize stock exchanges
other than the recognized ones.
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Earlier BSE was organized as voluntary non-profit making association
of brokers to regulate and protect their interest. After the Security Contracts
(Regulation) Act was passed in 1956, BSE was first recognized on a permanent basis
in 1957. Its business is no longer confined to Mumbai alone; at the end of 1957, there
were 100 other cities in which it had set up business.
Bombay stock exchange raised the threshold limit for listing to Rs.10
crores, moved on to weekly settlement and quicker actions for each settlement.
Settlement is through the clearinghouse. 12 days carry forward is allowed on BSE.
Index I BSE is ‘SENSEX’. BSE membership fee in 1857 was just Rs 1 and now it in
about Rs 2 crores. The number of companies quoted on the stock exchanges is more
than 8,000 of which those listed in BSE are 5,000. The capital listed in Bombay
stock exchange accounted for about 40% of the overall capital listed on all the
stock exchanges whereas, its share of the market capitalization amounted to around
90%. In BSE the total number of companies listed and total number of stocks issued is
higher than any other stock exchange.
BSE went over to electronic trading system in Jan 1995 called ‘Bombay online
Trading” (BOLT) system and this become fully operational in May 1995. The BSE has
allowed expansion of online trading system to members of other stock exchanges and have
terminals in other cities since August 1995, to counter the move of the country –wise
network of terminals by National Stock Exchange. The daily turnover in BSE varies from
Rs 400-800 crores. Brokers trading in NSE follow BSE to know the market
ADVANTAGES OF BSE
There are some advantages in favour of the BSE as follows:
1) BADLA SYSTEM
Only the BSE has been allowed to have the badla system. The badla system
provides the market with additional liquidity and the investor with a certain hedging
tool for each of the 100 stocks, which are known as the specified stocks or group
stocks.
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2) BROADER MARKET
Nearly 6,000 stocks are listed on the BSE while the NSE has approximately 1,500 listed
or permitted stocks. BSE thus provides investors with a broader choice of Indian companies
to invest in.
The BSE’s trading system facilitates trading odd lots of shares and such
transactions settle through the exchange’s clearing house. The NSE allows its
members to trade odd lots outside the exchange.
4) REALISTIC APPROACH
The BSE is an association of people and is run by people who are primarily
brokers and who have years of on hand experience in securities business. Under such
management, professionals have been recruited to key administrative positions of the
exchange.
The BSE gives an investor’s broker or custodian more time to make payments
and effect deliveries.
Strengths:
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120 years experience in equity trading
Weakness:
Lack of transparency
OBJECTIVES OF BSE:
The objectives of BSE are:
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Strengths:
Government patronage
Institutional patronage
Hi-tech infrastructure.
Weaknesses:
No track record.
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Uneven track record of computerization in India.
BSE Vs NSE:
There are two camps of thought with regard to preference of either the BSE or
NSE
1. One which had brokers highly recommending the NSE and
Essentially, those brokers who have started business over the past
few years tend to enthusiastically praise the NSE for its transparency, decent risk
controls and simple settlement mechanism .They also claim that since the NSE is never
and not bound by traditions or vested interests, it has brighter prospects for the future,
especially with regard to quicker and further technological advancements.
The nearly two hundred years of British rule resulted a comprehensive legal
system in India. However ,today’s capital markets in India cannot live only on the
British legacy .New wine needs new bottles .After it initiated economic reform in
1991, India quickly repealed or revised old laws, rides and regulations, and legislated
new ones in order to align itself with global capital market standards.
The Indian securities laws, rules and regulations that were amended or newly
enacted for the development of the reborn capital markets include:
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In addition to this, it has so many acts and regulations relating to the bankers issue,
debenture issue, merchant banking, custodians, mutual funds, l’ll regulation act, etc.
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RESULTS AND DISCUSSIONS
Company : LIC HOUSING FINANCE LTD. ( 500253 )
Table 4:1 presents the performance of LIC Housing finance ltd for Period from May
2018 – June2018.
Date Open Close
29 May, 2018
251 261.2
30 May, 2018 264 253.25
31 May, 2018 252.05 246.7
1 June, 2018 248.9 240.65
2 June, 2018 241 239.75
5 June, 2018 240.3 234.9
6 June, 2018 240.6 243.1
7 June, 2018 244 241
8 June,2018 237.5 242.9
9 June, 2018 243.7 241.25
12 June, 2018 244.05 236
13 June, 2018 234.35 234.4
14 June, 2018 235.5 239.65
15 June, 2018 238.95 242.5
16 June, 2018 243.8 245
19 June, 2018 243 243.7
20 June, 2018 240.8 237.7
21 June, 2018 236.05 238.5
22 June, 2018 238 233.4
23 June,2018 235 232.3
26 June, 2018 235 240.6
27 June, 2018 242 240.2
28 June, 2018 240.45 247.25
29 June, 2018 247 243.45
30 June, 2018 243 255
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ANALYSIS& INTERPRETATION:
fluctuations in share price. It noted RS-251.5 on 29 May 2018 and RS-255 on 30th
June 2018.
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Company: RELIANCE INDUSTRIES LTD. ( 500325 )
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ANALYSIS& INTERPRETATION:
The above graph depicts the movement of Reliance Industrial Limited scrip.
RIL has got little losses during May and June because Reliance Industries and
pioneer Natural Resource announce Eagle Ford Shale Joint venture. The Indian
economy’s slower-than-expected growth and fourth quarter heightened concerns of a
prolonged slowdown while also sparking hopes of aggressive interest rate cuts. It
noted RS-
733.4 on May 29th 2018 and RS-729.7 on 30th June 2018.
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Company : : STATE BANK OF INDIA ( 500112 )
Table 4:1 presents the performance of STATE BANK OF INDIA for
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ANALYSIS& INTERPRETATION:
The above graph depicts the movement of SBI script in a month of May to
June. The SBI share prices has fluctuated in month of May and June because of the
policies and procedures which followed by SBI gave very strong positive
impression in the minds of investors and it shows its efficiency by offering good
services to customers sum of schemes introduced by SBI. State Bank of India, like a
debit card base of over 70 million, comprising SBI cash plus, SBI gold debit card
and yuva card his added chip and PIN-based platinum debit card to its bouquet on
March 26. SBI share noted RS-2064.10 on May 29th 2018 and Rs - 2104.85 on 30th
June 2018.
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Company: BHARAT HEAVY ELECTRICALS LTD. ( 500103 )
Table 4:2 presents the performance of BHARAT HEAVY ELECTRICALS
LTD
For the period from May 2018 –June2018.
Open Close
Date
29 May, 2018 225.15 214.05
30 May, 2018 211 226.95
31 May, 2018 228.4 215.45
1 June, 2018 214 216.1
2 June, 2018 216.5 219.25
5 June, 2018 217.1 221.1
6 June, 2018 221.45 217.15
7 June, 2018 215.3 216.6
8 June,2018 212.95 208.95
9 June, 2018 209.2 206.1
12 June, 2018 203.45 200.75
13 June, 2018 202.4 206.75
14 June, 2018 209.4 208.55
15 June, 2018 208 208.75
16 June, 2018 210.5 208.05
19 June, 2018 206.75 208.25
20 June, 2018 209.25 217.1
21 June, 2018 219.55 217.95
22 June, 2018 217 211
23 June,2018 209 212.1
26 June, 2018 211.15 206.85
27 June, 2018 205.75 206.35
28 June, 2018 208.8 210.1
29 June, 2018 212 215.7
30 June, 2018 219.4 218.2
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ANALYSIS& INTERPRETATION:
The above graph depicts the movement of Bharath Heavy Electricals Ltd
Script in the month of May to June. During the month of May and June it
shows fluctuations in the share price because of low confidence in the minds of
investors. BHEL success is particularly striking in light of India’s
dysfunctional power distribution system. Wide spread of global operations and
Acquisitions impact operational efficiency of BHEL. It noted price RS-225.15 on
May 29th 2018 RS-219.4 on 30 th June 2018.
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PERFORMANCE ANALYSIS OF RETURNS
1 year 44 44%
2 years 26 26%
3 years 19 19%
4 years 11 11%
INTERPRETATION
According to this survey we find that 44% people says that we are investing the money
online from one year and 26 % people says that we are investing the money online from
2 years and 19 % to 11% people says that we are investing money online from 3 to 4
years. So we can say that now online trading is very popular in the modern market.
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2. ow will you describe your experience with on-line trading till date?
INTERPRETATION
According to this survey we find that 60% of people find very easy to operate and 15%
people find difficult two operate and 10% and 15% people find no secure and any other.
So we can say that online trading is very simple to operate and easy to understand.
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3. What amount of money you invest normally?
INTERPRETATION
According to this survey we find that 35% of people invest money normally 50000
and 28% of respondents invest money 100000-150000 and 23% and 14% of
respondents invest money between 150000-200000 and any other.
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4. How often do you trade?
INTERPRETATION
According to this survey we find that 10% of respondents do trade daily and 40% of
respondents do trade weekly and 32% and 18% of respondents do trade monthly and
more than one month.
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Lack of awareness 15 15%
INTERPRETATION
According the this survey we find that 15% of respondents says lack of awareness 49%
say shortage of expertise and 14% respondents says shortage of infra-structure and 22%
say any other. So we can say that respondents are shortage of experience.
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opinions Respondents Percentage
T.V. 55 55%
Newspaper 25 25%
Magazines 10 10%
Journal 10 10%
INTERPRETATION
According to this survey we find that 55% people prefer T.V and 25% people prefer
newspaper and 10% people prefer magazines and 10% people prefer journals. So we
can suggest that mostly people are very easily gripped the knowledge through T.V.
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Cultivation 8 8%
Education 10 10%
Employee 22 22%
Worker 15 15%
INTERPRETATION
According to this survey we found that 30% respondents of business people 22% of
employees 15% of workers 10% of education 8% of cultivation and 15 % with none
of the above cultivation people are doing online trading.
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25-30 45 45%
31-35 30 30%
36-40 20 20%
41-50 5 5%
INTERPRETATION
According to this survey we found that 45% of respondents with age group 25-30.
305% with 31-35 age group. 20% with 36-40 and 5% with 41-50 are doing online
trading
9. Monthly income?
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15000 10 10%
20000 18 18%
30000 22 22%
40000 45 45%
INTERPRETATION:
According to this survey we found that 45% of respondents whose income is 40000
and 22% whose income is 3000, 18% respondents with income 20000, 10% with
15000 and 5% with 10000 income are doing online trading.
CHAPTER – V
FINDINGS
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NCDEX, and MCX is done on different terminals.
(NEAT) system and Open Dealer Integrated Network (ODIN) system and
As soon as the trade ends, the client settlement and reports of the trading are
Bills are prepared and the brokerage commission, service tax, stamp duty and
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SUGGESTIONS
Theoretical knowledge about the stocks and markets is essential for the staff
in trading section.
trading, as a small error may tie-up the whole trading for the day.
Provide training program’s to the employees in order to get them adjusted to the
Provide newsletters for investors and employees to know about the capital
SUMMARY
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The focus of the study was Online Trading in INTER-CONNECTED
understand the real process of stock trading. The on-line trading in NSE is done
trading system electronically matches the buyer and seller in an order-driven system
or finds the customer the best price available in quote driven system. Today, in India
In online trading Back Office provide the clients with all the trading related
services in the post market session. Depository participant has attained significance
securities account balances and transfer the shares electronically. Trading activities
clearing procedure.
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REFERENCE
REFERENCE BOOKS:
V.A.AVADHANI
WEBSITES:
www.nseindia.com
www.bseindia.com
www.adityabirlamoney.com
www.sebiindia.com
www.moneycontrol.com
www.ya hoofinance.com
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