Why invest in equities?

Investing in equities/shares offers many benefits over other asset classes like a high level of liquidity which unlike property, gives you ready access to your money. There are more than 6000 companies listed on the stock market in which you can buy shares so there are plenty to choose from to match your investment needs.

When the market goes up it is called a bullish trend and when the market goes down it is called a bearish trend.

You can buy the shares that are listed on any of the recognized Stock Exchanges.

When you act upon a stock and buy into it, you are taking a position. A position is an amount of money committed to an investment in anticipation of favorable price movements. There are two kinds of positions: -

Long positions are what most people do. When you buy long, that means you are anticipating an upward movement in the price, and that is how you profit. People usually buy stocks at prices lower than usual expecting to sell them later at higher prices and hence make profits.

Short positions are tricky ones. When you buy short, you are anticipating a fall in the price and the fall is the source of your profits. The shares will be sold and when the price falls they will be repurchased and given back and the difference is the where the investor profits. Of course, the investor who has borrowed the shares carries the risk of not having the price move as anticipated, in which case he may lose money in repurchasing the stocks.

It is an order in which only a part of the order quantity is disclosed to the market. The next part is automatically released after the previous order quantity is fulfilled and so on till the full order is executed. For example, if you wish to buy 2000 shares of DLF Ltd, you can enter the disclosed quantity as 200. The order quantity sent to the exchange will to be buy 200 shares. After this request is fulfilled, buy request for the next 200 shares is sent and so on till 2000.

This order allows you to buy and sell a security as soon as the order is released into the market, failing which the order will be cancelled from the market. In case of part execution, the remaining quantity will be cancelled.

Transactions placed in this segment have to be mandatorily settled on gross basis i.e. by taking or giving delivery even if you have bought and sold the shares during the same settlement cycle.

The international experience is that at the security level, options market are almost always more successful than futures market.

Those who want to reduce their risk or may not want to bear the risk can go for index derivatives.

A stock symbol is a unique code that is given to all participating companies in securities trading. Once you know the stock code/symbol of the company (sometimes referred to as a ticker symbol) you can easily obtain information about the company. This is important, as a wise investor will always do a financial analysis before purchasing a stock.

Visit the website of the relevant stock exchanges.

There are various types of instruments in the stock market. They include Shares, Mutual Funds, IPO’s, Futures and Options.

Stock trading happens on Stock Exchanges, but one cannot individually buy stocks off the exchange. To do so, you need to find a suitable broker who will understand your needs and buy stocks on your behalf.

Advances and declines give you an indication of how the overall market has performed. You get a good overview of the general market direction.

A futures contract is a type of derivative instrument, or financial contract where two parties agree to transact a set of financial instruments or physical commodities for future delivery at a particular price. Thus a forward contract is the simplest mode of a derivative transaction. It is an agreement to buy or sell a specific quantity of an asset at a certain future time for a specified price. No cash is exchanged when the contract is entered into.

Each contract entered into has an expiry period. This refers to the period within which the futures contract must be fulfilled. Futures contracts may have durations of 1 month,2 months or at the most 3 months. Each contract expires on the last Thursday of the expiry month and on the very next day a new contract is introduced for trading after expiry of a contract.

You may go for any of the following: a) Hedging b) Speculation c) Arbitrage

Options are contracts that give the holder the right to buy or sell a fixed amount of a certain stock at a specified price within a specified time.

Options may be classified into the following types: a) Call Option-a call option gives the right to buy the security. b) Put Option-A put option gives the holder the right to sell the security.

A variety of factors determine the price of an option.The behaviour of the underlying stock considerably affects the value of an option. Investors have different opinions about how a particular stock will behave in the future and hence may disagree about the value of any given option.In addition, the value of an option decreases as its expiration date approaches. Thus, its value is also highly dependent on the amount of time left before the option expires.

Why invest in equities? What are the facilities offered by DP account?

Following facilities are offered: - Dematerialisation i.e., converting physical certificates to electronic form - Rematerialisation i.e., conversion of securities in demat form into physical certificates - Facilitating repurchase / redemption of units of mutual funds - Electronic settlement of trades - Pledging/hypothecation of dematerialised securities - Electronic credit of securities allotted in public issues, rights issue - Automatic receipt of non-cash corporate benefits such as bonus, in electronic form. - Freezing of demat accounts, so that the debits from the account are not permitted. - Nomination facility - Services related to change of address - Transmission of securities - Other facilities viz. holding debt instruments in the same account, availing stock lending/borrowing facility, etc

No, there is no prescribed minimum balance. You can have a zero balance in your account.

In a bank account, the account is credited only when a ‘paying in’ slip is submitted along with cash/cheque. Similarly, in a depository account ‘Receipt in’ form has to be submitted to receive securities in the account. However, for the convenience of investors, the facility of ‘standing instruction’ is provided. If you say ‘Yes’ for standing instruction, you need not submit ‘Receipt in’ slip every time you buy securities.

This is to protect your interests. Your bank account number will be mentioned on the interest or dividend warrant, you are entitled to, so that these warrants cannot be encashed by anyone else. Further, a bank account number is mandatory to open a DP account

Yes. In the depository system, monetary benefits on your security balances are paid directly into the bank account as per the details provided by you at the time of opening the account. Hence you must ensure that you inform your DP of any subsequent change in bank account details.

You would have to make a request in writing. You would also have to get your signature duly attested by your banker, with whom you hold the bank account that has been specified for receipt of dividend.

You can dematerialise only those certificates that are already registered in your name and are in the list of securities admitted for dematerialisation at CDSL.

The securities should be available for dematerialisation before it is defaced, therefore you should take due care in finding out with DP whether the ISIN (code number for the security in a depository system) has been activated and made available for dematerialisation by the depository. If the certificates are available for dematerialisation you should submit DRF and physical certificates to the DP.

Dematerialisation normally takes about 30 days.

In such cases you need to submit a certified true copy of the marriage certificate along with the Demat Request Form (DRF), when you give your shares for dematting. Also provide an attested new specimen signature.

Yes. You can choose to have all your securities deposited in a single account provided that the securities have the same holders

Yes, you can, with the permission of the bank with whom such shares are pledged.

Yes, Odd lot share certificates can also be dematerialised.

The system provides the facility to freeze the depository accounts for any debits or for both, debits and credits. In an account which is “freezed for debits”, no debits will be permitted from the account, till the time it is unfrozen.

Yes you can have same demat account for the purpose of holding other securities such as government securities, mutual funds etc.

No, shares can be bought and sold only through a trading account. You can also choose to open a Trading Account with us for buying/selling of shares.

No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in your individual name and another certificate is jointly held in your and your spouse’s name, two different accounts would necessarily have to be opened.

That is, some certificates with husband as first holder and wife as second holder and other set of certificates with wife as first holder and husband as the Second holder? In this case you may open only one account with husband and wife as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. You will have to fill-up an additional form called “Transposition cum Demat” form. This would help you to effect change in the order of names as well as dematerialise the securities.

No. The demat account cannot be operated on “either or survivor” basis like the bank account. Any instruction in a Demat account needs to be executed “jointly”.

No. Names of the account-holders for a depository account cannot be changed. If you want to change name or add / delete an account-holder, you need to open a new account in the desired holding pattern (names) and transfer the securities to the newly opened account. The old account may subsequently be closed.

Yes, if you authorize any person to operate your account by executing a power of attorney (POA) and submit it to us, that person can operate the account on your behalf. If you have given POA earlier and now wish to operate the account yourself, the POA has to be revoked by you in writing.

In case you change your address, you need to inform only the DP of the new address DP. When the DP updates the new address in the system, it will be automatically conveyed to all companies in which you hold shares.

Nominations can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, partnership firm, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.

Nomination for joint holders is permitted, however in the event of death of any of the holders the shares will be transmitted to the surviving holder’s name. In the case of death of all holders the securities will be transmitted to the nominee account.

No. Nomination can be made account wise and not security wise.

To nominate the account holder(s) must fill nomination form containing their signatures along with the signatures and photographs of the nominee and signatures of two witnesses. In case if the nominee is a minor then the signature and the photograph of guardian will also be required. This form can be submitted to DP at the time of account opening or at the later date even after the account is opened.

In case a nomination is not made by the sole account holder, the securities would be transmitted to the account of the legal heir(s), as may be determined by an order of the competent court. However in cases where the value of securities to be transmitted is less than Rs. 5,00,000/- the DP may process the request based on submission of necessary letter of indemnity, surety, affidavits and “No Objection Certificates” documents.

Yes, an NRI can nominate directly. But, the power of attorney holder cannot nominate on behalf of an NRI.

No, a minor cannot nominate either directly or through its guardian.

Only an individual can be a nominee. A nominee cannot be a society, trust, body corporate, partnership firm, karta of Hindu Undivided Family or a power of attorney holder.

No, only one nomination can be made per depository account.

Yes, a minor can be a nominee. In such a case, the guardian will sign on behalf of the nominee and in addition to the name and photograph of the nominee, the name, address and the photograph of the guardian must be submitted to the DP.

Yes, a NRI can be a nominee subject to the exchange control regulations in force.

Yes, the nomination can be changed by the account holder/s anytime, by simply filling up a new nomination form and submitting the same to the DP.

In transmission, the securities of the deceased account holder will be transferred to the account of surviving holder(s)/nominee/legal heirs of the deceased account holder. This process is simpler in case of dematerialised holdings as it can be completed easily by submitting relevant documents to DP.

In the event of death of sole holder, the nominee has to submit various documents such as transmission form, notarised copy of death certificate and an affidavit in the prescribed format to the DP for the purpose of transmission of securities. After verifying these documents and if found in order, the DP will transmit the securities to the account of the nominee.

On submission of Transmission form and a notorised copy of death certificate of the deceased joint holder(s) in the event of death of the joint holder(s), the securities will be transmitted to the surviving holders account. However for transmission of securities, the account of the surviving holder(s) must be in the same sequence in which the names appear in the joint account to be closed.

On every stock exchange, various settlements are effected every day such as daily settlement, auction settlement, etc. Each of these settlements is identified by a combination of a market type and a settlement number. You are required to mention the appropriate settlement details on the delivery instruction slip while transferring the shares to your broker’s account. These settlement details are available on the contract note issued by the broker.

The concerned company obtains the details of beneficiary holders and their holdings from CDSL. The payment to the investors will be made by the company through the ECS (Electronic Clearing Service) facility or by issuing warrants on which your bank account details are printed. The bank account details will be those which you would have mentioned in your account opening form or changed thereafter.

The issuer R&T agent for bonus/rights issue would send an allotment advice to the investor and the DP would send a transaction statement showing credit into his account. The investor can confirm his entitlement by comparing the quantity shown in the advice and statement of transaction given by his DP.

Is the concept of trading in commodity futures new in India?

Commodity futures market was very much there in earlier times in India. In fact it was one the most vibrant markets till the early 70s. But due to numerous restrictions, the market could not develop further. Now that most of these restrictions have been removed, there is enormous scope for the development and growth of the commodity futures market in the country.

Futures prices evolve from the interaction of bids and offers emanating from all over the country which converge in the trading floor or the trading engine. The bid and offer prices are based on the expectations of prices on the maturity date.

The biggest advantage of trading in commodity futures is price risk management and price discovery. Farmers can protect themselves against undesirable price movements and decide upon cropping pattern. The merchandisers avoid price risk. Processors keep control on raw material cost and decreasing inventory values. International traders also can lock in their prices.

Arbitrage is making purchases and sales simultaneously in two different markets to profit from the price differences prevailing in those markets. The factors driving arbitrage are the real or perceived differences in the equilibrium price as determined by supply and demand at various locations.

It is a document issued by a warehouse indicating ownership of a stored commodity and specifying details in respect of some particulars, like, quality, quantity and, sometimes, indicating the crop season. The original depositor or the holder in due course can claim the commodities from the warehouse by producing the warehouse receipt.

Commodities have predefined lot sizes (set by the respective exchanges as per existing regulation) where current price of a particular commodity, for selected expiry, is shown in contract information available & rate units differ for different commodities. The standard unit based on which the price of the contract is quoted for trading is called quotation or base value. E.g. for gold contract, the quotation or base value is 10 grams while it is 1 kg in case of silver on MCX.

The cost-of-carry of a commodity is the sum of all the costs including interest, insurance, storage costs, and other miscellaneous costs. Usually, the commodity futures price in the exchange is the spot price plus cost-of-carry.

It is the extra margin imposed by the exchange on the contracts when it enters the concluding phase i.e. it starts with tender period and goes up to delivery/settlement of trade. This amount is applicable on both the outstanding buy and sell positions.

In most commodities and financial derivatives market, the term refers to buying contracts maturing in nearby month, and selling the deferred month contracts, to profit from the wide spread which is larger than the cost of carry.

In most of commodities and financial derivatives market, the term refers to selling the nearby contract month, and buying the distant contract, to profit from saving in the cost of carry

Yes, like equity markets, commodity market has circuit breakers. Exchanges have circuit filters in place. The filters vary from commodity to commodity but the maximum individual commodity circuit filter is 6 per cent. The price of any commodity that fluctuates either way beyond its set price limit will fall in circuit breaker category

A settlement takes place either through squaring off your position or by cash settlement or physical delivery. Squaring off is taking a opposite position to the initial stance, which means in the case of an original buy contract an investor would have to take a sell contract. An investor who intends to give or take delivery would have to inform his broker of the same prior to the start of delivery period. In case of delivery, a warehouse receipt is provided. Delivery is at the option of the seller; a buyer can take delivery only in case of a willing seller. All unmatched/rejected/excess positions are cash settled; all open positions for which no delivery information is submitted are also cash settled. Under cash settlement, the difference between the contract price and settlement price is to be paid or received.

While trading in commodities, with any registered broker, client has to pay certain charges (apart from margin requirements for trading) which are as follows: 1. Brokerage 2. Service tax 3. Education Cess 4. Exchange Transaction Charges 5. Stamp Duty; and 6. Commodities Transaction Tax (CTT), which is levied in respect of non-agricultural commodities.

The following commodities are actively traded in these two Exchanges: Multi Commodity Exchange (MCX) Bullion: Gold and Silver Metals: Aluminum, Copper, Zinc etc. Oil and Oil Seed: Refined Soy Oil, Soy Bean etc. Energy: Brent crude oil, Crude oil, etc. Other commodities: Urad, Chana, Wheat, Guar Seed, Sugar, Potato etc. National Commodity & Derivatives Exchange (NCDEX) Bullion: Gold and Silver Metals: Aluminum, Copper, Nickel, Sponge iron and Zinc. Oil and Oil Seed: Castor oil, Crude Palm oil, Soy Oil, Soy Bean etc. Energy: Brent crude oil, and Furnace oil. Agro Commodities: Cotton, Chana, Maize, Guar seed, Sugar, Rubber, etc. For newly listed commodities please visit home page of exchange websites and

You can find detailed contract specifications on the websites of the exchanges – and

Yes, there is a maximum permissible limit on holding a particular commodity for client as well as member. It varies from commodity to commodity and exchange to exchange

Yes, but its not compulsory, buyers and sellers intending to take/give delivery should express their intention to the exchange. The exchange will match delivery randomly and assign it accordingly.

No. Options in goods are presently prohibited under Section 19 of the Forward Contracts (Regulation) Act, 1952. However the market expects the government to permit options trading in commodities soon.

Daily MTM will be cash-settled by exchange on T+1 basis i.e., next working day after the trading day. However in case of delivery, the settlement date may be five to seven days after the expiry as per contract specifications and exchange rules. The settlement procedure is also available on the related exchange site.

Investors Grievances may be mailed to
Membership Nos. NSE-10798 BSE Clg. No.-0226, MCX-56190, NCDEX-1256,
CDSL DP Id-38000 NCDEX-00358 MCX-16605, AMFI ARN-78041
SEBI Regn Nos. NSE-INZ000178336, BSE-INB/F/E 011079838, Commodity - INZ000035935, CDSL-IN-DP-32-2015, Research Analyst - INH100005011, Portfolio Manager -INP000005926, Merchant Banker INM000012537
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