Cover Story: Enter the e-xchange

Investing in the stockmarket will now be as simple as clicking a mouse from the comfort of your home. No more trudging to your stockbroker's office, or trying to call him up on the phone. With Dalal Street raring to go cyber, BT looks at how e-broking is going to revolutionise buying and selling shares.

The TV is blaring in the drawing room while Neera Bajpai, 26, a housewife in suburban Bangalore, is working in her kitchen. But her ears are trained on the Bazaar programme on CNBC, where an investment banker is saying the only stock he likes right now is Jupiter Telesystems. Neera knows the company because it has a factory right here in Bangalore, and the promoters, the Mehras, are well-known. Quickly, she runs out of the kitchen to her pc and checks out the price of the scrip. It's Rs 550. Minutes later, she's clicking on a research report on the company. And, finally, she's on to her stockbroker's site on the Net, where she places an order for 100 Jupiter shares.

In Mumbai, Jeet Paul, 18, a commerce student, stuns his parents at the dinner table by announcing that he wants to buy 1,000 shares of Creative Eye, a television software company. Jeet's father, Surjit, a banker, first does a double-take, but then remembers how every night Jeet used to watch him when he switched on his pc to review his icicidirect on-line investing account. Creative Eye may be a good stock to go for, muses Surjit. But more than that, he makes a mental note of opening an on-line trading account for Jeet the next day.

It's 11 a.m., and Kaisad Merchant, 42, a Chennai-based software engineer, logs on to hometrade. com to check out his portfolio. Infosys has just announced a 110 per cent increase in profits while its share is quoting at Rs 7,400. At the current price, Kaisad thinks, they are good value for money. He enters a buy-order for 25 shares and checks the amount in his on-line bank account. Kaisad realises that he would be short of Rs 50,000. But the previous day, he had sold 100 shares of Rolta and his account will be credited in time for payment to Infosys. He gets a confirmation of the execution order in 30 seconds, and then clicks on games.com.

How to Trade On-Line

1. Log on the broker's Website

2. Register yourself as a client

3. Fill in the client-broker agreement form on stamp paper

4. Log on to the broker's site using secure user-ID and password

5. The market-watch page will show real-time market data

6. Trade shares directly by entering the symbol of the securities

7. The broker's server will check the limit in the on-line and the demat account for the number of shares, and execute the trade

8. Usually, the order is executed within 20 seconds, and you can get a confirmation

9. The broker will also send e-mail confirmation and printed contract note by mail

10. On the settlement day, the demat and bank accounts also get automatically debited and credited

Welcome to the swish new world of on-line trading. You can do it from the privacy of your bedroom; or at your office pc during lunch time; or even from your friendly neighbourhood cyber-cafe. Buying and selling stocks will never be the same again. Thanks to on-line trading, Bangalore-based Neera has become an inveterate stockmarket player. In the last six months, her initial investment of Rs 2 lakh has more than doubled. No kitty parties for this housewife. Instead, Neera spends hours on her pc, scouring for stock picks. And if she likes something, she clicks on her broker's site to make a purchase. Like her, in Mumbai, Jeet has been multiplying his pocket money by investing on the Net. And this is just the beginning.

Don't be surprised if, in a few years' time, you see a sugarcane farmer in a village on the outskirts of Kolhapur (Maharashtra) surfing the Web to pick stocks. Back of the envelope forecasts suggest that, by 2002, as many as two million investors will log on to their on-line trading accounts. Says V. Shankar, 42, Managing Director, Integrated Stock Exchanges Securities & Services: ''The total number of investors could rise three times, and the number of member broker-dealers or registered intermediaries with the 24 exchanges in India could go up from 10,000 to 60,000.''

Of course, it's still in the fledgling stage. On January 31, 2000, the Securities & Exchange Board of India (SEBI) cleared the guidelines for Net-based securities trading. The trading platform, which was converted from a trading hall to computer terminals at the brokers' premises through VSAT connectivity in 1994, could now be extended to the homes of investors who were now free to trade directly through their stockbrokers from the comfort of their homes. No phone calls; no visits to stockbrokers' offices. Just click on the mouse and you're in the game.

To be sure, it's early days yet. Currently, there are less than 200 active investors in cyberspace, and just a handful of brokers who offer on-line trading. But even they can hardly keep up with the crush of investors who have registered on their sites. Says C.J. George, 45, Managing Director of the Cochin-headquartered Geojit Securities, which was the first firm to launch on-line trading: ''Going by the initial interest generated, where even people in interior Kerala are complaining that they aren't getting a password to trade, I see villagers too trading on the Net two years hence.''

Geojit, whose site went live on February 1, 2000, already has 3,600 investors registered but has been able to offer on-line trading facilities to only 22 clients so far. This is probably because of the teething problems. Also, in the absence of an on-line interface with a bank, the risk is relatively higher for the broker.

But what is it that will spur investors to make a beeline for on-line trading? For starters, it's the ease of doing trades-with a click of the mouse, you can buy or sell any of the 622 shares that are dematerialised and listed on the National Stock Exchange (NSE). Today, only the NSE offers an order-routing facility-neat XS-and a product for Net-trading-neat IXS-that enables brokers to provide Net trading facilities to investors. The Bombay Stock Exchange (BSE) is expected to offer the facility by July, 2000. Says Manoj Vaish, 38, Director (Corporate Development), BSE: ''When the BSE launches its central Web server at the exchange premises, brokers can authorise their clients through hyperlinks to directly route order to the central Web server. This will help build much more security into the system.'' And the integrated stock exchange is expected to offer total Net solutions to brokers in four months. It may be a couple of years before the rest of the exchanges offer these facilities.

The ease of trading on-line translates into a level playing field for all. It makes it easy for anyone to access Net brokers and trade in stocks. What's more, even the smallest retail investor can now access information that was, till now, restricted to the deep-pocketed big traders. The pre-conditions: a pc with Net connection, a registered account with a broker, a DEMAT account, and an account with a bank having a payment gateway, or an on-line banking facility.

In the past, individual investor had no option but to call or visit a broker to get real-time access to market data. Now, the Net brings data to her on-line. And Net-broking takes her a step further-to be able to trade with a click of the mouse. Says Madhavi Puri Buch, 34, CEO, ICICI Web Trade: ''The Web changes the paradigm. We can now cater to the man putting in just Rs 6,000 worth of trade. It's a sort of democratisation of investing.''

In the trading ring, information is king. With the Net, even dilettante investors can play at being king. Just screen stocks by going to specialised sites which offer research reports and other details on stocks. Once you narrow down the search to a couple of stocks, the next step is to scan the latest news, examine the companies' fundamentals, and study their balance-sheets. You can mine the data at any time, wherever you have a pc, and at no cost. What's more, there are chat-rooms to cybersquabble over stocks and personal portfolio-trackers that on-line broker Websites or personal finance sites offer for free. The Net has certainly made things simple. Says Motilal Oswal, 40, Managing Director, Motilal Oswal Securities: ''Once investors (learn to) research on-line, they will demand more market information.''

Already, investors are raring to go on-line. As soon as investsmartindia.com announced plans for on-line trading, it received over 7,000 registrations while icicidirect.com got 22,000 requests. Says Puri Buch of ICICI Web Trade: ''The premise is that there is enough value to the customer to draw him to a cyberpoint.''

Most brokers would find the rush of 40,000 investors (increasing by the minute) hard to ignore. In Mumbai, stockbrokers by the droves have plans to go on-line. Out of the 500 pending applications with the VSNL for Webserver space and lease-lines, more than 100 are from brokers. Says S.A. Narayan, 39, CEO, Kotak Securities, which will provide on-line trading facilities by early May, 2000: ''Kotak will not only be able to provide Net access to all those who register but will also provide a channel to the investor whereby she can call up and talk to a trader at Kotak Securities and ask his view before deciding to buy or sell.''

But the rush to clamber onto the Net trading bandwagon is not just because of the ease of accessing information that the Net provides. It is also because of the seamlessness that is inherent in on-line trading. Investing via the Net is more transparent, enabling the investor to know when and at what rate his order has been processed. The investor can do an end-to-end audit of her transaction. On-line trading integrates the bank, the brokerage, and the DEMAT accounts to give the user a seamless, hassle-free, and paperless way of trading on the stock exchanges. When the customer punches in a buy or sell trade on her pc, after logging on to the broker's Website, the broker's server will check the limit available in the customer's bank account and DEMAT account, and will execute the trade on the exchange on-line. On settlement, the bank account and the DEMAT account will automatically get debited and credited.'' What's more, the entire process takes just 25 to 30 seconds.