What stock brokers don't tell you

DO you find yourself quoting proverbs or famous last words when teaching a child something important? You would rather fall back on their instinctive sense and the shared universal meaning.

It is much the same for stock markets. To learn the fundamentals of the market, the easiest approach would be to use often used maxims from our everyday life.

So here are 11 of them. The knowledge behind each is gained from several excellent books on the vast, fascinating subject of stock market investment such as Peter Lynch's One Up On Wall Street and Beating The Street; Zulu Principle by Jim Slater; and Robert Hagstrom Jr's The Warren Buffet Way.

The application, however, is entirely mine.

1. No gain without pain
This is the base level fundamental of equity investing. There is a close direct relationship between risk and reward. The higher the reward, the greater the risk. Fairly simple to understand, but it is most difficult to live by.

Where there is profit, there is always risk. The greater the opportunity of profit, greater the possibility of loss.

2. Slow and steady doesn't always win the race
Gentlemen who prefer bonds don't know what they are missing! On bonds, there is no return on money; there is only return of money.

Bonds being debt instruments, unlike equity, yield only fixed return. And, with inflation and income tax factored in, there is often no return at all.

(INFLATION METER: Did you know that your expense of Rs 10,000 today will be equal to Rs 46,609 in 2028? That's because inflation is at 8% today! Use our 'cost of living ' tool to find out how inflation will affect your budgets!)

3. United we stand
Investing in equity shares of companies is risk related because returns are linked to the company's profits unlike investing in bank deposits or bonds or debentures where the returns are fixed and accrue to investors regardless of the company's profits.

In the stock market, you are tying yourself to the company's fortune.

4. It takes all kinds to make the world
Stock market behaviour is not unpredictable as it is commonly believed. It simply depends on human behaviour which, as we know, can never be predicted with any reasonable accuracy.

Hence, we have fluctuations in prices of commodities, things and stocks based on greed, emotions, hopes, fantasies, fear and dreams of millions of people, resulting in opportunities of making money out of such fluctuations!

5. Common sense isn't all that common
Not all common stocks are common. Though equity shares as an investment class is one, each company has a distinct identity and performs differently and, therefore, rewards its investors differently.

6. Ignorance is bliss
Investing is nothing but an arbitrage of ignorance. Investing is basically profiting from pricing and difference in market perception of a given product at a given point of time.

Stock market is one place where the buyer and the seller both think that they are smart in their decision.

7. Elephants don't gallop, zebras do
Stock prices of big companies with large capitalisations move up or down rather slowly compared to smaller companies because there is not much market ignorance on big companies to capitalise on.

Hence, smaller companies tend to reward its investors more handsomely.

8. Be a braveheart
You need 'cash' and 'courage' to be an equity investor. If you are prone to panic at losses, remain invested in fixed deposits with banks and government bonds.

If you don’t know who you are, the stock market is too expensive a place to find it out!

9. If you throw peanuts, you get monkeys
Investors make the mistake of not buying good stocks at high prices as also buying bad stocks at low prices. A lay investor tends to buy unsoundcompanies at cheap prices instead of solid companies at high prices.

10. Lose the battle, win the war
Equity investment cannot maximise your income, but it can maximise your wealth. The actual yield by way of dividends on equity shares with reference to their market value is often as low as one per cent on investment.

But capital appreciation in equity values can be insanely high. Ask the initial investors of Infosys or Pantaloons.

11. As you sow, so shall you reap
Saving for investment is not a punishment. Investing is making conscious choices about how you will use your money. It is not about choosing to live rich or die rich.

It is about how you want you and your dear ones to live during your lifetime and thereafter.

Here are a few more pointers.
i. There is no 'high' price or 'low' price of a stock. There is only the 'market' price.

ii. Absolute price of a stock is not relevant. What is important is whether it is underpriced or overpriced.

iii. You can't control the market but you can control your reaction to the market.

iv. Intelligent investing is knowing 'what' to buy; smart investing is knowing 'when' to buy.

v. Your profit is determined by your purchase price and not your sale price.

vi. Don't ask the price of the stock, ask the worth of the company.

You are ready to go and need to search for a broker. Keep these in mind.
a. Don't expect your broker to help you to earn 'for' you. He is there to earn 'from' you.

b. The sub-broker makes money. The main broker makes money. Two out of three making money in a single transaction is not a bad bargain.

c. Never ask a broker whether you should buy a particular stock. It is like asking a barber if you need a haircut!

Brokerage stocks are good for long term: R. Balakrishnan

ET Now Fundamental Check with R. Balakrishnan, Investment Analyst.

Just in terms of the kind of the movement that we have been seeing in most of these brokerage stocks specially Motilal Oswal in Wednesday's trade that's fairly excited on the back of good robust numbers coming the stock is up almost 9% would you think it's a good investment opportunity for people who want to play this kind of a market in terms of brokerage stocks?

For a brokerage stock I think this as you said it's a great time because the capital markets activity is reviving, you are seeing IPO pipeline building up so for full service financial services companies I think it's a great opportunity to get in. I think the key question is what kind of numbers they are going to come out with on their NBFC activities because there also I think there is a huge opportunity so this sector is going to look attractive from the one to two year perspective.

Stock traders cracking fast against pre-written software codes

A decade ago, the demise of the open outcry system shifted action from noisy trading floors of stock exchanges to air conditioned dealing rooms of brokerages. Today stock trading is in the throes of the next big change.

Professional day traders, hired by brokerage houses on a profit sharing basis, are slowly losing out to pre-written software codes, which does the same functions at a speed that is humanly impossible. Instead of providing office infrastructure to a dozen ‘jobbers’ (as day traders are known in market parlance), a brokerage can now do with two CDs containing pre-written trading strategies, and two people to oversee the execution.

Not only does it save costs for the brokerage firm, but also improves the chances of making profits, as software codes are faster and efficient than the most skilled of traders. In short, software codes will battle each other for a share of rapidly thinning intra-day trading profits.

This spells serious consequences for the 20-25,000 strong force of professional day traders who speculate in equities. Even veteran traders are dismayed at this emerging trend, as it robs them the fun of matching their wits against those of rival market participants.

Instead, they are now locked in a unequal battle with software programmes, that can spot an arbitrage opportunity and cash in on it even before the traders can press the keys on their trading terminals.

“There has been an increased acceptance of trading software over the last year, as traders are struggling to generate decent returns in the face of volatile market conditions,” says Shubham Pradhan, marketing head at Essex India, a firm that offers trading software.

Indeed, algorithm trading, which involves pre-written software codes identifying and executing arbitrage opportunities at lightning speeds has been at the centre of controversy in a few developed markets, as regulators and a section of investors have raised ethical questions.

But in India, they are fast catching on, as many brokers are gradually reconciling to the fact that even the most skilled of their traders will never be able to match the speed of execution of a software program.

One of the common arbitrage strategies is to sell stock futures quoting at a premium to spot, and buy the shares, thus locking in the difference. Another common strategy is to sell shares on the exchange where the prices are higher, and simultaneously buy them back on the exchange where the prices are lower, or the other way round. But the spread has to be such so as to be able to make a meaningful profit, and a trader should be able to seize on the opportunity as soon as it shows up, because they barely last for a second for a second or two.

Here is where a program can execute the trade faster than a human being. “But you also need sophisticated hardware and a good network to get the maximum benefit out of these software programmes,” said Pradhan who thinks brokerages will cut back on the number of in-house jobbers as well as those hired on a profit sharing basis.

But not everybody shares that view. “Algorithm trading is fast catching on. But there may not be any mass lay-offs at brokerage houses,” says Hitesh Hakani, director, Greeksoft, which claims to have sold 1000 licenses so far. “The broking house can certainly save on costs as the time required to train their staff on these trading programmes will be shorter. Also, you will not need highly skilled jobbers, as is the case with manual trading,” he says.

Market watchers say many of the high-end trading software are not yet on offer for two reasons. One, the stock exchanges trading systems have to be more efficient to for these programmes to deliver optimum results. Two, the software vendors have to run their codes through the stock exchanges for approval, and some fear that proprietary trading strategies could be leaked.

"Trade volume relative to our overall base is still quite small. Volumes are less than 1% of our daily traded volume; but I would expect this number to increase sharply towards the end of the year. To date we have more than 20 clients live and trading actively in India," said Brook Teeter, director - equities
, Credit Suisse, which recently launched a suite of algorithmic strategies broadly termed Advanced Execution Services.

He feels “the ability for the machine to work out the varying nuances of the market at very high speed is a determining factor for success.”

But there are some who fear that the proliferation of algorithm trading could make the market a more difficult place. “Jobbers are a key link in the chain of players that form the stock market ecosystem,” says a BSE broker.

“Unlike software codes that are designed purely to capture momentary arbitrage opportunities, jobbers have open positions at any given point of time, even if in small quantities. This adds to the liquidity in the market, thus providing a cushion against a sudden move in share prices, on either side. Drive the jobbers away, and you will only add to the volatility,” he says.

Tips to select a Good Trading Broker that will make you a Successful Trader in a long run!!

How to find a right and affordable stock broker:

When you begin trading, it is very important for you to research and make sure that you find the broker that is right for you. When you don’t pay attention to the type of broker that you get, you can end up paying a lot more than you ever imagined. Below, we have written some questions that you should ask before you decide on a broker.

1. The first question you should ask is if this broker holds a license or not. You should make sure that this broker knows what they are doing. If they do not have a license, you should keep looking.

2. You need to find out what tools the broker will provide you with. Ask if they will provide you with the latest news and charts. It is necessary to have these tools to get the most out of your trading experience, so you should find a broker that offers it.

3. You need to ask them how fast they do work the stock orders. The faster that a broker can put through your stock orders, the more control you have over your orders.

4. Look into weather or not the broker gets paid for sending your orders to market makers. This would be a very bad idea to get involved in.

5. Learn about the broker’s terms and policy and make sure that it is right for you.

6. The best brokers have a trading demo that you can download and make sure that you are comfortable with it.

7. Pay close attention to the software that you download. Make sure that it is easy for you to use and fast. You can lose a lot of profit due to slow software.

8. Ask the broker if they offer stop losses. This is very important if you want to control your risk.

9. Ask about the time frame that the broker trades. You need to make sure that it fits your schedule.

10. Ask these brokers if there are any other hidden fees that you should know about. Sometimes if brokers show low fees, they charge high fees in other areas.

If you ask all of these questions and the broker is right for you, you have found your broker.

Tips to become a better trade, both in swing and day trading:

Find what kind of stock trading you would like to get into. This decision should not be made over night. You should do your research and really find what is right for you. Day trading is stock trading during the day in which you close out all of your positions at the end of each day. Short-term stock trading is when you hold your positions for a few days at a time. Long-Term trading is when a position is help for weeks, months, or years. You should take your lifestyle into account when you are deciding and it is wise to chose one before you begin trading.

1. The trading style you choose should fit your lifestyle. With day trading, you will need to sit at the computer for hours during the day and give your complete attention to it. With longer-term trading, you don’t have to spend much time at all because it doesn’t take much of your attention.
2. Choose the right broker for you. There are different brokers depending of the type of stock trading you decide on. A day trader will need a broker with fast tools because he is the most active. It is best to use discount brokers with longer-term trading.
3. Choose a good trading strategy. Stock trading is risky no matter what strategy you have. Beginners seem to lose a lot when first starting out until they develop the strategy that is best for them. Whatever strategy you develop, make sure that it is one that helps your control your own risks.
4. Your trading strategy should work for you in every market. The stock market has its ups and its downs. You need to learn how to profit from both.
5. Learn how to pick your stocks. In order to pick the right stock, you will need to do a lot of research and develop skills to help you. If you are beginning and you have not done loads of research, it is advised that you ask a professional’s help.
6. Pick your sell time. When beginners start trading. They do all the research they can on when to buy a stock, but they need to search when to sell a stock just as much. Your profits are only yours when you sell. If you don’t learn when to sell, you can end up waiting too long and lose a lot of profit.
7. Draw the line. You need to think about how much you can win to make you a winner and how much will make you a loser. Learn about yourself and how you would consider yourself if your won or lost certain amounts. Make sure that you never let it go too far.
8. Inform and educate yourself as much as possible. Beginner traders seem to think that they can do better than everyone else without studying. Then they end up losing. It is very important to study and learn as much as possible before entering the market. Some education will be expensive, but it is well worth it.
9. Talk to traders. You will need as much help as you can get. The best way to go is to talk to those who have been where you are. Try to talk to experienced traders who are into the same type of trading you are into.

Brokerages upgrade cos on positive economic outlook

June 2 With the equity market gaining momentum and the country’s economic outlook looking stable, brokerages have started upgrading companies here.

Most of the upgrades have been of companies in the capital goods, oil and gas, infrastructure and real estate sectors.

Securities and investment bank Nomura revised its 12-month target price on SAIL from Rs 65 to Rs 90 a share; Goldman Sachs upped its target price for Cairn India to Rs 290 from Rs 240 a share, for Sesa Goa to Rs 180 from Rs 153, and on DLF to Rs 300 from Rs 124.

Nalco, Hindalco, L&T, ONGC, BPCL and HPCL are some of the other company shares whose 12-month target prices have been upgraded. (Some of them, such as DLF, HPCL and ONGC, have already surpassed these targets.)

BHEL, Reliance Industries and Jindal Steel were all rated as sector outperformers by Macquarie Research.

Enam Securities has upgraded Mundra Port, and Cropmton Greaves to ‘outperformers’. Motilal Oswal has maintained its ‘buy’ on Cairn India, JSW Steel, Puravankara Projects, DLF and Jindal Steel.

“The outlook for India looks quite positive now. Our GDP numbers were better than expected; we are definitely on a path to recovery. The infrastructure and power projects will get a boost with the Congress win. PSU disinvestments will also be very good for the economy,” said Mr Alex Mathew, Head of Research at Geojit BNP Paribas Financial Services.

Brokers are advising investors to be cautious about sectors such as IT and healthcare. “Looking at the global situation and our appreciating currency, one should steer clear of companies in the export sector,” said Mr Devesh Kumar, Managing Director at Centrum Broking.

The outlook for India itself has become positive. Bank of American Securities-Merrill Lynch has revised its India GDP growth estimates for FY-10 to 6.3 per cent from 5.3 per cent.

“Recent indicators of investment activity — the Purchasing Managers’ Index, cement sales, and the capital goods component of the Index of Industrial Production — are showing sequential improvement. The economy continues to have significant pent-up demand for investment, especially in infrastructure and in affordable housing. We, therefore, see upside risks to our GDP growth forecast of 5.8 per cent for FY10,” Goldman Sachs stated in a recent report.

The second half of 2009 should see an improvement in the ex-agriculture economy, reflecting the combined effects of a regional trade recovery, India’s fiscal impetus, sharply weaker commodity prices and higher oil and gas output, said HSBC Global Research.

FIIs seem to be back in buying mode now, being net buyers of equity worth Rs 13,886 crore this May itself. In 2009 they have net bought equities worth Rs 10,756 crore so far.

No rush for exit anytime soon, say brokers, fund managers

Investors have stopped looking for exit options as the equity market has witnessed strong support at every high point after the UPA
government got a stable mandate, brokers and fund managers told SundayET.

What has further acted in favour of a rising market is the investor's fear that they would miss the bus if they fail to enter the market now.

Executive director at Benchmark Asset Management Company Rajan Mehta confirmed the trend. "We were expecting some redemption pressure to come once the market inches upward but on the contrary we are getting decent inflows," he said.

The situation could also provide an outlet to mutual fund companies which have been sitting on high cash mainly to meet the anticipated redemption. Sanjay Sinha, CEO at DBS Cholamandalam Asset Management, says, "Generally speaking, most of the mutual fund companies are still sitting on high cash level partly on anticipation that investors who were sitting on losses, will probably exit once markets touches higher levels. The industry has not, however, seen any major redemption in the past couple of months."

There is a general tendency among the investor community that when market goes down people sell either to book profit or to minimise losses and whenever the markets take the reverse turn, investors begin to buy. "We are seeing a change in the general sentiment of investors and many of the expected sellers have become buyers," says Mr Sinha.

In fact, new fund offers (NFOs) in equity segment, which was completely dry for the last several months, have begun to see some action. Recently, ICICI Prudential Mutual Fund and IDFC MF garnered more than Rs 1,300 cr through two of their NFOs. Target Return Fund of ICICI Prudential MF received around Rs 800 cr, whereas, Hybrid Infrastructure Portfolio of IDFC MF has mobilised almost Rs 500 cr till date. In addition, there are a number of NFOs which are still open for the subscription. Also, BSE Sensex and Nifty, which have been heading towards north for sometime, have proved that the demand is now more than supply.

Also, the institutional investors have started putting money in the equity market. In the last three months, mutual fund community invested more than Rs 3,000 cr in the shares. In fact, in the last one month, foreign institutional investors (FIIs) invested about Rs 18,000 cr.

According to Prasanth Prabhakaran, Sr VP & all India head for broking at Kotak Securities, the rally of Sensex from 10,000 to the current level of over 14,000 was unexpected. Also, the outcome of the elections surprised many, and consequently on Monday, May 18, 2009, no major trade could take place as trading was halted after the indices touched upper circuit twice. "Now, since we have a stable government on the driver's seat, investors expect economic condition to improve gradually, and hence prefer to remain invested. Yet the Budget is the next big event coming up," he said.

How to become a stock broker in India

Overview:

In my previous article, “READ THIS if you want to learn how to invest in India’s stock markets” we discussed various aspects of investing in Indian stock markets. In this article let us see what one has to do if he wants to become a stock broker.

Definition of “Stock Broker”:

A stock broker is a qualified, registered and regulated professional who buys and sells stocks and derivatives in the secondary market on behalf of their clients (investors, institutions etc.). All transactions carried out in the stock exchanges are done through brokers only. They maintain the basic information about their clients like names, contact information, PAN number, demat and bank account details etc. A broker may allow a client to place orders depending upon the funds which are available in the clients trading account. The brokers issue contract notes when trades are done. They also send periodical reports about the transaction history to their clients. The online brokers may also have these details on their web site which can be accessible only by the client.

Definition of a Portfolio Manager:

A broker is not entitled to advise the clients to buy or sell a security unless they are registered with SEBI as portfolio managers and an agreement is entered into by both the client and the portfolio manager. A portfolio manager can be discretionary or non-discretionary depending upon whether he manages the clients’ funds directly or just gives an investment advice. Some of the brokers-cum-registered portfolio managers are Geojit Financial Services Limited, India Infoline Limited, Indiabulls Securities Limited, etc. It may be noted here these are listed companies at BSE and NSE. There are separate procedures to become a portfolio manager.

Responsibility of brokers:

Brokers are expected to act based on the best interests of their clients. They may inform the clients promptly about margin calls, additional documentation if required etc. They are also required to send the contract notes as and when trades are carried out by/on behalf of the clients.

Brokerage:

This is the commission charged by the broker for the transaction. It could be a percentage of the trade value or flat amount per trade depending upon the agreement between the client and the broker. In India, brokers need to pay a service tax of 12.36% for the brokerage collected from their clients. This is passed on to the investors ultimately.

Who can become a broker in India?

• An individual, a firm or a corporate can become a trading member(broker) of a stock exchange

• Minimum age shall be 21 for individuals and partners/directors of firms/corporates

• Individual/Partners/Directors must be at least graduates

• Should have a minimum of 2 years experience in an activity related to dealing in securities or as portfolio manager or as investment consultant or as a merchant banker or in financial services or treasury, broker, sub broker, dealer, authorised agent or authorised clerk or authorised representative of a recognised stock exchange

• For membership at the National Stock Exchange, a minimum paid up equity capital of Rs.30 lakhs is required for corporates.

Application form for membership at NSE is available from this link. Instructions for filling are also available at the web site.

It is to be noted here that those who want to become brokers

• Should not have defaulted in a stock exchange

• Should not have become bankrupt

• Should not have been involved in fraud, dishonesty, etc.

The applicant shall also pay an interest free security deposit for cash, futures & options and wholesale debt market segments separately. For Cash/F & O segment trading the deposit is Rs.125 lakhs. Visit this link for other segments.

Once the application is received by the exchange, the membership is granted after due scrutiny and the process is given below.

1. Interactive session with Membership Recommendation Committee

2. Approval by Membership Approval Committee / Board

3. Offer letter of provisional membership of Exchange

4. Submission of documents for SEBI registration by applicant

5. Receipt of SEBI certificate

6. Enablement on the Exchange

Please note that this is the procedure for NSE. For other exchanges, respective web sites may be visited.

Once the membership is given, the broker must comply with the rules and regulations of the exchange by providing documents like audited accounts, insurance policies, networth certificates, shareholding pattern details etc.

The membership could be transferred to another person or a firm subject to the rules of the exchange. Members could be suspended/penalized/warned/expelled for misconduct, unprofessionalism, failure to pay margin money, etc.

The following institutes in India offer educational programmes on capital markets:

• Bombay Stock Exchange Training Institute, Mumbai

• National Stock Exchange of India, Mumbai

• Institute of Financial and Investment Planning, Mumbai

• All India Centre for Capital Market Studies, Nasik

• Institute of Chartered Financial Analysts of India, Hyderabad

• Institute of Cpital Market Development, New Delhi

• Institute of Company Secretaries of India, New Delhi

Conclusion:

It requires a lot of understanding about companies, managements, businesses, fundamentals, technicals, procedures etc. to be familiar with activities of stock market. Those who are ambitious of becoming brokers need to have plenty of investment and trading experience.

How to select an online broker

To say that online investing has grown extraordinarily fast over the past couple of years is akin to describing Marilyn Monroe as reasonably attractive. While it may be easy to trade on the Net, finding the right online broker takes some doing.

Given that online trading is still at a nascent stage, online brokers are willing to offer many options -- brokerages that decline as volumes soar, waiver of account opening charges, access to research reports, and the facility of transacting in financial instruments through the trading website. So whom should you choose? The answer depends on a host of variables -- both qualitative and quantitative.

Qualitative factors are usually a little hard to assess and largely pertain to expectations of service standards. It helps to talk to acquaintances who trade online about the website's reliability, ease of fund transfer and transaction, and the customer service quality of the e-broker, the only human interface in the entire mechanism. Nonetheless, there are some key factors that help you compare e-brokers.

Brokerage. It's a recurring cost and can potentially draw down returns. Every player claims that his brokerage is the lowest or at least promises to charge the minimum once an investor opens an account and starts trading. But this promise is contingent on the trading volumes of the investor.

The brokerage differs from company to company. To give an indicative figure, ICICIDirect.com charges 0.75 per cent for a quarterly volume of less than Rs 10 lakh (Rs 1 million) and 0.25 per cent for an amount in excess of Rs 5 crore (Rs 50 million).

The brokerage for the quarter that follows the opening of an online trading account is determined by the opening amount of investment, irrespective of the subsequent investments in that quarter.

Any amount due to either the broker or investor over and above the brokerage paid is settled every quarter and the opening amount of the next quarter determines the brokerage that will be paid in that quarter.

While 5paisa.com has the lowest brokerage -- 0.25 per cent -- on delivery, Angel Broking offers the lowest -- 0.02 per cent -- on intra-day trading (see A Comparative Look at Online Brokers).

Position traders -- investors who buy and hold securities for the long haul -- typically opt for low brokerages. Daily traders, who trade in large volumes, usually settle for what brokers call zero per cent brokerage.

This does not mean that they are not charged brokerage, but alludes to a fixed brokerage fee irrespective of turnover or up to a certain turnover for a period of time: higher the investment, lower the brokerage.

For instance, Reliance [Get Quote] Money charges Rs 500 for delivery-based volumes up to Rs 10 lakh (Rs 1 million) for two months. If one trades with 5paisa.com for the same volume, the brokerage amount will be Rs 2,500 (at the rate of 0.25 per cent brokerage). So, at this volume, Reliance Money scores over 5paisa.com. However, the fixed brokerage of Reliance Money is higher than 5paisa.com's brokerage for investments less than Rs 2 lakh.

For onliners

• Brokerage is a recurring cost. Higher trading volume slabs attract lower brokerage. You'll also have to pay an annual maintenance charge.
• Some brokers insist on a minimum transaction volume and charge their lowest brokerage for it.
• Opt for the same depository and trading body to avoid delays in settlement of shares and cash.
• Margin trading could attract higher brokerage than regular transactions.
• Online brokers provide regular updates on market favourites.
• Pick the online broker with the maximum number of collaborating banks.
• Check out the website's speed and reliability, ease of fund transfer, and the e-broker's customer service quality.
• The broker's infrastructure should be able to handle large trade volumes.

Account opening and maintenance costs. In order to trade, an investor needs to open two accounts with the brokerage firm - a demat account to keep the shares and a trading account to trade.

If cost is an issue, you may select Almondz, for instance, since it charges only Rs 400 for opening an account (see A Comparative Look at Online Brokers), but do not hold a demat account with one company and a trading account with another since it delays the settlement of shares and cash.

Another fixed cost is the annual maintenance charge. While some companies such as Kotak Securities have a high maintenance charge, Almondz, Religare, Reliance Money, 5paisa.com and IndiaBulls [Get Quote] charge nothing at all.

Minimum trade requirements. Some online brokers insist on a minimum transaction volume for which they charge their lowest brokerage. For instance, ICICIDirect.com has set its minimum transaction at Rs 500 and charges a brokerage of Rs 25 on it. Geojit Financial Services [Get Quote] has not fixed a minimum transaction amount, but the minimum brokerage is Rs 20.

Margin trading. This is available in the online domain and involves paying only a proportion of the trade value upfront. Such trades could attract higher brokerage than the regular transactions.

Mostly traders, who go for intraday transactions, go for this form of trading. Investors typically invest for longer periods and margin trading is not suitable for them as brokers charge huge interest on the value of the trade that is not paid upfront.

Access to research. Online brokers provide regular updates on market favourites - stocks to buy, hold or sell - through the Net as well as SMS. Apart from this, a relationship manager is appointed who works as an intermediary between the investor and the broker, and plays the helpful tipper.

Investors need to remember amidst the daily onslaught of tips that too much trading does not necessarily translate into big bucks.

Tie-ups with banks. To trade with a broking company, you need to have an account with one of its collaborating banks. Typically, broking firms have fewer collaborations with public sector banks. Almondz scores above others here since it has tie-ups with numerous private sector banks and 19 public sector ones.

Apart from the charges mentioned above, an investor is required to pay the security transaction tax and service tax (including education cess of 3 per cent), which amount, respectively, to 0.125 per cent of the transaction value and 12.36 per cent of the brokerage amount. These also raise the cost of the trade.

Reliance Money offers lowest brokerage for Day Traders

Reliance Money (owned by Reliance Capital) is offering lowest brokerage for trading in stock markets in India. The company is offering a value package under which one can do trading at very low cost. Reliance is also offering demat, insurance and mutual fund services. Reliance money has different options for Beginner, Moderate Traders and Heavy Traders. A single window for Banking, Trading and Demat Account. The clients can easily transfer funds across accounts.

Your account is safeguarded with a unique security number that act as a dynamic password and changes every 32 seconds. Reliance Money also offers Risk Analyser for analysis of your risk profile.

The introductory offer includes.

You pay Rs 500 and you get Day Trading limit of Rs 5 Lac

Pay 500 more and get Day Trading limit of Rs 1 Crore

Pay Rs 1350 and get Day Trading limit of Rs 5 Crore.

The fee you pay is valid for a specific time period. You can contact your local Reliance Money office or visit their website at http://www.reliancemoney.com

Indiabulls is offering 5 paisa (per Rs 100) for day trading and with taxes and stamp duty, your cost becomes nearly 6 paisa per Rs 100. They will provide you with a software and the interface is almost similar to your traditional broker terminal. You can put orders in real time and see many stats for stock markets. If you are active day trader, Indiabulls will also send you daily contract notes. Their website also offers facility to download the contract notes. The customer care executive or your personal account manager will be always at your help in case you need any information or you are stuck somewhere. Overall, their services are good and the network is well developed all over India.

5 Paisa is also offering a price similar to Indiabulls. The offer additional advice and some tips to their clients.

While, Mansukh offers similar price, they have additional benefit that they only charge you if you make profits.

Indiabulls offers stock research and tips in case you are active day trader.