You need to factor in the minimum balance requirement of the bank before opting for the broker. For instance, IndiaBulls has trading membership only in the NSE. So, you may not be able to transact on the BSE if you choose that firm. IndiaBulls also requires you to open a savings bank account with HDFC Bank, for which the opening balance is Rs 1,000. You will also be required to maintain a quarterly minimum balance of Rs 25,000.

Blocked capital

Offline or online, most brokers require you to maintain a minimum balance which determines the trading limits.

IndiaBulls allows you to trade eight times the amount maintained in your account. For delivery-based transactions, you can trade four times the amount. The remaining value should be transferred before the start of the next trading day. If not, an interest of 21 per cent per annum is levied on the outstanding balance. In the case of ICICI Direct, on placing your order, the entire value of the transaction is earmarked and blocked in your savings bank account for this purpose. This is possible as all the three accounts — trading, savings bank and demat — are linked. A 4 per cent interest accrues for the amount until the order is executed.

Check the clauses carefully to see how much leverage (4/8 times) you get on the balance maintained, the penalty on non-remittance and whether interest accrues on the capital maintained with the broker.

Costs can add up

Brokers usually have recurring and one-time charges (account opening fees). Recurring charges are the annual maintenance fee and the brokerages on transactions.

Brokerage is usually 0.25-0.85 per cent of the transaction value or a flat rate (between Rs 10 and Rs 50) on a per trade basis, whichever is less. Some brokerages charge customers with large accounts less. Annual charges for the demat account can be anything between Rs 250 and Rs 750. The brokerage may or may not include service tax.

Trade confirmation

Trading Web sites have their own order book, which is matched in the exchange's order book. Brokers may not always trade in your name. This could mean a potential conflict of interest. However, this is not a major problem now, as you can cross-check on the same day whether your broker has carried out the trading instructions in the NSE or the BSE. You can use the trade confirmation feature offered on the Web sites of both exchanges (www.bseindia.com and www.nseindia.com) to track your trades. The facility allows you to check your trades of the last five days too. You can verify the same day's trades after 7 p.m. on the NSE, and the next day on the BSE. You can also track your derivatives trades on the NSE site. To track the trades on the Web site of the exchanges, you need a client code, order size and time among other things. In the case of web trading, there are three ways to confirm your trade. One, the confirmation of the trade executed is available immediately on the screen. Second through e-mail and, third, through the electronic contract note.

Offline trading

With a broker, it becomes tedious to place orders when you are travelling. Broking houses do have tie-ups and branches in important cities. Check about the availability of such services. The online broking sites remove this difficulty from trading. But check whether an offline trade order can be placed if the site is not accessible.

Security

An immediate concern for investors using Net trading facilities is safety. SEBI mandates security measures for web trade, besides the usual user ID and multi-level passwords. However, it still pays to check with existing clients about the web trade site. In absence of such contacts, stay away from lesser-known sites. For a first time investor, it is prudent to trade with the facility backed by good institutional support even if it means sacrificing some profits. It is helpful if your on-line/offline brokerages have customer service to answer queries.

Suitability

Online trading gives first-time and low-volume investors an edge over physical broker trading in terms of convenience. Also, it is more transparent. Banks that offer trading platforms make for seamless trading and payment options.

The entire transaction process — from placing the order to making payments and delivery — takes place seamlessly, and requires minimal follow-up. The brokerage and demat rates are determined by the frequency and value of trades. The existing slab structures of brokerages tend to favour active traders. However, the costs are largely the same regardless of whether you are trading offline or online. Once you get the hang of the process you can shift to an offline broker, if needed. Given the present cost structures, there may be some savings to be had by making such a shift.

This could change if the scale of online trading picks up. Then, online platforms may be able to lower their costs. So keep a tab on who offers what to use the cost-effective trading platform.

Tools and services

IF YOU trade with an offline broker, you can either follow his advice as to when to buy or sell or make your own choice.

There are Web sites, such as www.wow-india.com and www.equitymaster.com, which provide advisory services. But these sites should, at best, be used as one of the inputs in an investment decision. They should not be the sole reference point for a buy or sell. As you need to do your own stock picking, you need research materials such as historical stock charts.

What you need to check

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