Financial service institutions


Financial service institutions have made fascinating growth in India. The financial service institutions are providing a significant role to mobilize savings and reallocation of resources or transfer of financial resources from savers to ultimate borrowers. They are rendering services like merchant banking, mutual fund operations, portfolio managers, lease finance etc. Finical intermediaries help the clients to manage their risk when they invest and channelize their funds to generate maximum returns.

Significant Market Movements During 2007-08

On October 17, 2007, the Nifty fell by 524.15 points from the previous day's close of 5668.05 thereby hitting market wide circuit filter of 10 per cent. This resulted in halt in trading on NSE and BSE. The BSE Sensex was down by 1743.96 points from previous day's close of 19051.86. The market had recovered during the day and Sensex and Nifty closed at 18715.82 points & 5559.3 points, respectively. On January 22, 2008, Sensex fell by 2029.00 points (from previous days closing of 17605.35), thereby hitting market-wide circuit filter of 10 per cent. Nifty fell by 630.45 points (from previous days closing of 5208.80). After this sharp fall during the early morning session, the market had recovered during the day and Sensex and Nifty closed at 16,729.94 points & 4,899.30 points, respectively. The risk management system, real-time monitoring of the broker terminals and market-wide circuit filter got tested and the market withstood a fall of this magnitude without any disruption in settlement process. During the above market fall, the SEBI was in constant touch with the stock exchanges to ensure smooth functioning of the market. The situation was also monitored in coordination with the RBI so as to ensure smooth settlement by market participants.

Share broker is the member of a recognized stock exchange who buys sells or deals in securities on behalf of the client. A certificate of registration from SEBI is mandatory to act as broker. A sub broker acts on behalf of a stock broker as an agent or otherwise for assisting investors in buying, selling or dealing in securities through such brokers, but he is not a member of a stock exchange. Share brokers offer the following two kinds of share trading, offline Share Trading and online share trading. On line share trading is the traditional kind of share treading where as the customer directly or through telephone ask the share brokers to place the order on behalf of him. Online Share Trading is the recent development; the client could place his order on his own from any place he wants, provided he has a computer with an Internet connection.

Changing Scenario Of Indian Share Market

The information technology has made the stock market available to any person who is interested to join the market to invest and to trade. The obvious evidence of this growing interest in the stock market is the massive increase in the volume of traders. With the increasing number of investors every single day, the preferred mode of stock broking has also shown a new shift to the online stock broking. Rather than being burnt by the hassles of communicating with the broker personally, traders invariably choose to log on to the brokers site and enjoy the online share trading.

Despite the fact that online stock broking provides mobility and safety to the trader, one must find the task of choosing a suitable online stock broker still a riddle. Choice of a perfect online broker can be perfect only when it matches every minute wants of an investor. Although the services of all the online brokers are apparently similar, the difference is observed in extras. It is advisable to select the most user friendly platform for online trading to ensure easy and speedy trading. Brokerage fees are also essential and differ among the online brokers. An investor should check if the fee charged is a flat or varies with the volume of trade.

The number of share brokers in India is in increasing trend during the past few years because of growing trend of financial services in India.

Source: Source: Hand book of statistics on Indian securities market 2008

The above table shows the number of share brokers during 2007and 2008. The total number of registered stock brokers as on March 31, 2008, was 9,487 as compared to 9,443 in 2006-07. The share of corporate brokers to the total stock brokers increased marginally to 44.1 per cent in 2007- 08 from 43.5 per cent in 2006-07. NSE had the highest number of 1,129 registered stock brokers, followed by the Calcutta Stock Exchange (957), Bombay Stock Exchange Ltd. (946) and Inter-connected Stock Exchange (ISE) (935). NSE had also the highest number of corporate brokers (1,039), constituting 92.0 per cent of the total stock brokers of NSE. The proportion of corporate brokers at BSE and OTCEI was 81.1 per cent and 76.6 per cent, respectively. Coimbatore stock exchange the registered share brokers and corporate brokers are constant 135and 48 respectively for the year 2007 and 2008. It seems that Coimbatore stock exchange is not very active and business activities are restricted for the last two years.

Stock Market Movement

During the first quarter of 2009-10, the domestic stock markets witnessed a recovery commensurate with international stock markets and the rate of recovery turned sharper since the announcement of the general election results. The upward trend could be attributed to a number of positive developments such as reduction in policy rates in April 2009, positive results for Q4 of 2008-09 by some Indian banks and corporate, greater political stability in the post-election period and expectations of a larger stimulus in the Union Budget for 2009-10 and resumption of FIIs' interest in the domestic equity market. The BSE Sensex and the S&P CNX Nifty as on August 17, 2009, showed gains of 52.3 per cent and 45.2 per cent, respectively, over end-March 2009. II.5.39 Activity in the Wholesale Debt Market segment of the NSE improved in 2008-09 with the turnover increasing by 19.0 per cent.

Outlook Of International Stock Market

Source: Source: Hand book of statistics on Indian securities market 2008

The international financial markets were disrupted and at times even turned worse during 2008-09 as the sub-prime crisis affected the financial markets first, before transmitting to financial institutions and the real economy. Collapse of Lehman Brothers in September 2008, has affected Indian financial markets, particularly in the form of reduction in net capital inflows and significant correction in the domestic stock markets on the back of sell-off in the equity market by the foreign institutional investors (FIIs). The withdrawal of funds from the Indian equity markets, as in the case of other emerging market economies (EMEs) and reduced access of the Indian entities to funds from the international markets put significant pressure on dollar liquidity in the domestic foreign exchange market.

FIIs Investment Trend In Equity Market

Source SEBI

Significance Of The Research

The Indian share market has been developed on par with the global markets during the last fifteen years. The out look of the Indian share market has been changed to a great extent. There are so many developments taken place in the Indian share market to name a few, Screen based trading systems, settlements on T+2 basis, Dematerialization of securities, Demutualization of exchanges, Derivatives trading and so on. According to Hand book of statistics on Indian securities market 2008, Securities &Exchange Board of India had been received about 33, 76,888 compliant from investors during the period 1991-92 to 2007-08. This is about an average of 1, 98,640 Compliant per year which is about 800 compliant per treading day. This statistics is about the compliant reported by the investors in fact the real number could be more than 4 to 5 times of dissatisfactions reported.

Share broking firms are also struggles to provide effective service to their customers because of Difficulties in understanding investors needs, Complicated service standards ,Service satisfaction measurement issues, Non availability of defined service models for different type of customers, Categorization of investors, Difficult to distinguish investors behavior, Customers satisfaction and so on.

It is good to say that Indian share market is stronger and popular day by day, on the other hand investor's dissatisfaction is also alarming the growth of the share market. At this juncture it is essential to understand the changing scenario of Indian share market and adaptability of the investors. The study Indian Share broking Institutions - Changing Outlook is aimed to solve the issue.

Research Methodology

The research is aimed to identify the changes and investor's adaptability. The study also intended to investigate investors and share broker's satisfaction towards the changes in share market. The following are the developments and changes taken into account for the research.

  • Screen based trading systems
  • Settlements on T+2 basis
  • Dematerialization of securities
  • Demutualization of exchanges
  • Derivatives trading
  • Mobile trading
  • Integrated accounts
  • Market information and
  • Changes in trading time.

The researcher has used both primary and secondary data; primary data has been collected from the share market 300 investors were selected from ten leading share broking institutions in Coimbatore. Primary data has been collected with the help of a well structured questionnaire contain both objective and descriptive questions. The respondents are selected on simple random basis from the list obtained from the share brokers. The sampling plan for the study is stratified proportionate systematic sampling plan for selecting investors.

Results And Discussions

FDI And Indian Share Marker

Source: Source: Hand book of statistics on Indian securities market 2008

Foreign institutional investors have played a significant role in Indian capital markets. Availability of foreign capital depends on many firm specific factors other than economic development of the country. The above analysie revels that the contribution of foreign institutional investment particularly among companies included in sensitivity index (Sensex) of Bombay Stock Exchange and MationalStock Exchange is significant. The relationship between foreign institutional investment and financial performance and stock performance are closely correlated. It is observed that foreign investors invested more in companies with a higher volume of shares owned by the general public. The financial performance variables the share returns and earnings per share are significant factors influencing their investment decision.

Investors Age And Adaptability Of Changing Services Offerings

Source: Primary Data

The share broking institutions are dynamic in the recent past, their service offerings are changed due to the developments of information technology. There is no more material form of share certificate; the investors need not depend on the share broker to place order. The information about various developments and performance of industries are available to the investors in a few mouse.

The above analysis has been done to know the customer's adaptability of various new services offered to them. A seven point rating scale has been developed to study the adaptability. The mean relevance rating on 7-point scale is presented in the above table the research revels that the investor's adoptability and their age have close relationship. The age group below 25years is able to adapt screen based treading, mobile treading and integrated accounts. The age group of above 55 years is find it very difficult adapt the changes in the share market.

Investors Gender And Their Adaptability & Satisfaction

Source: Primary data

It is found that the general trend is men are more involved in share business than women. The general assumption is men are taking more risk than women and their adaptability also very high than women. The study revels that absolutely there is no difference between man and women for adopting new service offerings and their satisfaction.

Investors Profession, Adaptability And Satisfaction

The investors are classifier into five categories like students, Government employees, Private sector employees, Service sector employees, professional and full time traders and investors. The above table demonstrates data relating investor's satisfaction and adaptability (in percentage). It is found from the study that there is a close correlation between adaptability and investors satisfaction. The present study reveals that professional traders and investors are able to adapt the changes and developments happening in the present share market but their satisfaction level in many new service offerings are average.

Share Brokers And Services Offerings

Source: Primary data

To study the share broker's ability to satisfy the investor's ten share broking institutions were selected and the following services are taken in to consideration for measuring customer satisfaction; Screen based trading systems, Dematerialization of securities, Derivatives trading, Mobile trading , integrated accounts and Market information. A five point scale has been constituted to measure the investors satisfaction on various modern service offered by the share brokers. The above table indicates the mean value of investor's satisfaction on different services. It is found from the research the customer satisfaction is not reached supreme level of satisfaction. It is very vital for the share brokers to understand the customers and satisfy them in the ever changing Indian share market.

Investor'S Satisfaction On Various Services Provided By The Share Brokers

There are number of services offered by the share brokers to the investors, the most important services are analysised. The customers are very much satisfied about IPO facilities offered by the share brokers. The customers are also happy with the research report and trading software. Most of the customers are having problems with their market exposure. They were also not very happy with mobile trading facilities and derivatives report offered to them. The ranks express the view that the modern services are not reaching properly and customer's satisfaction is also poor. Share brokerage firms in India made much progress in pursuing growth and building professionalism in operations in recent days.

Brokerage firms had newer opportunities in the form of commodities futures, distribution of insurance products, wealth management, mutual funds etc, and as the market momentum continues, broking firms will have an opportunity to introduce a wider number of products also. At this juncture it is essential that share brokers must care a great deal about the customers and their satisfaction.

Customers Relationship - Relevance & Importance

Source: Primary data

A good relationship between the service providing institutions and customers will create excellent value over a period of time for both the parties. Customer acquisition is important for the newly established institutions, customer retention is vital for the established institutions, whether it is new or old brilliant CRM policy will serve the purpose. The above customer retention model through CRM initiatives will help the share brokers to understand the customer's needs and wants and also the service providers. The researcher has suggested some remedy to retain the customers through CRM initiatives. In order to implement successful CRM in a share broking institution the following suggestions has been recommended.

  • Service employee's involvement is very essential.
  • Internal marketing through proper and regular training to the service employees
  • Their must be a clear service policy.
  • Proper maintenance of customer's data base.
  • Innovative service technology
  • Regular events to approach customers.
  • Benefits to the customers for repeat usage of the service.
  • Management's commitment towards CRM activities.
  • Regular investors training
  • Regular investors meet to exit their problems and difficulties.

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!