Equity & Share
- Our Services
- Equity & Share
Basics of Equity Investment
Why invest in shares?
Investing in shares is like investing into ownership of a company which no other investment instrument can give you. Unlike any other investment instrument which either give you fixed income or meager returns and no owned share in the same, equity investment gives you an opportunity to become a part of the company ownership and also gives you regular returns on your investment as dividend income or through price changes.
Investing in equity also allows you to enjoy the flexibility of staying invested as long as you wish to, take advantage of the price movements and thus utilize the liquidity. In an overall view, equity investment is better than any other investment.
Can I invest in any share?
By the virtue of investing in shares, you can invest into any share but since investing in equity is like owning a part of the company, you should be careful about which share are you investing your money. The profits that you earn from such investment will largely depend on the shares that you have purchased. If you have invested in a low earning share, no matter much you invest, it is not going to fetch you the same kind of return as a high earning share.
Different types of orders that can be placed
There are various types of orders that can be placed in equity investment; such orders have been listed below:
Delivery order:
Order where shares are delivered into the client’s demat account for settlement and they cannot be sold on the same day of order placement. Once can only sell such shares once their delivery has been received.
Intra-day order:
Order where shares are bought and sold on the same trading day and there is not delivery of shares into the client’s demat account for settlement. For such orders, settlement is done on net payment basis where only monetary effects are given to the client’s account.
Market Order:
An order placed at current market price of a share in order to get instant execution of the order. This order is placed when an investor expects the share price to rise sharply and is thus keen on buying it. Such orders may get executed at market price when your order is placed but there can be some difference in the price at which your order was executed as there could be a price change while you place your order.
After Market Order:
An order that can be placed to buy or sell a share even when the market session is over. Such orders are executed when the next market session opens for trading. After Market orders can be placed within a specific time period which varies between different brokers.
Limit Order:
An order that is placed to buy or sell a share with a price limit in it so that your order gets executed at a price level favorable to you. In a Buy order; limit has to be lesser than the current price and in sell order, it has to be more than the current price.
Guidelines to Equity Investment for beginners
Understand the rules and regulations of equity investment
Before you invest in equity, read through different information sources such as broker websites, articles available online regarding equity investment, newspapers, magazines etc. to get as much information about equity investment rules and regulations as possible.
This will equip you with information and you will be in a better position to take wiser decisions; also it will help you to avoid any mistakes that may take place due to lack of information on rules and regulations to be fulfilled.
Know about the different ways you can invest in Equity
As you start your investment in equity, you should also be updated with the latest news on the different ways you can invest, keep in touch with your investments, place your orders and get updates so that you don’t miss out on an investment opportunity while you are on the move. For example, you can get quotes, place your orders, get market & your investment updates through Online, Email, Phone Call, Mobile Trading and SMS.
CURRENCY
What is currency ?
Currency trading is the act of buying and selling international currencies. Very often, banks and financial trading institutions engage in the act of currency trading. Individual investors can also engage in currency trading, attempting to benefit from variations in the exchange rate of the currencies.
Advantage
- Reduce margin
- Increase liquidity
- Direct trading
- Anytime Trading
Understanding Commodity
What are commodity futures?
Trading in commodity derivatives first started to protect farmers from the risk of the value of their crop going below the cost price of their produce. Derivative contracts were offered on various agricultural products like cotton, rice, coffee, wheat, pepper, etc.
Commodity futures contract is a contractual agreement between two parties to buy or sell a specified quantity and quality of commodity at a certain time in future at a certain price agreed at the time of entering into the contract on the commodity exchange.
Expiry date for different contracts can vary from one contract to another. In commodity derivatives, a buyer and a seller agree upon a price where the buyer is obliged to buy the commodity and the seller is obliged to deliver the commodity on the pre – specified date and price.
Why trade in commodity futures?
Commodities are natural resources used in day to day life. Unlike financial futures; commodity futures do not carry the risk of investors going bankrupt or declaring losses. Commodities have upper and lower price bands. i.e. Beyond a certain price level commodity prices cannot fall as the producers will stop its production and commodity prices cannot raise beyond a certain price level as people will look for availability of substitutes.
Futures’ trading in commodities is transparent and facilitates fair price discovery on account of large scale participation of entities associated with different value chains and reflects views and expectations of wider section of people related to that commodity. This also provides effective platform for price risk management for all segments of players ranging from the producers, the traders, processors, exporters/importers and the end users of the commodity.
Commodity Trading
What are the pre requisites of commodity trading?
One needs to open the commodity trading account with which will enable the user to trade across the exchanges, namely MCX, NCDEX, National Spot Exchange, NCDEX-Spot and NMCE.
If one intends to participate in deliveries, the local sales tax requirements have to be fulfilled, or one can use the C&F agent services.
Do I need to take delivery of the commodity compulsorily every time I put a trade for it?
No, taking delivery of commodity is not compulsory, but most of the commodities are settled by compulsory delivery. The investor who does not wishes to get in to deliveries can hold his positions from the first day of the contract till the specified last trade day. One has to proactively square off his positions well before the expiry of the contract. But if there is any open position at the expiry then it will be settled by delivery. (Delivery logic may differ commodity to commodity, please check the exchange product note for the delivery logic of specific commodity)
Is there any no delivery period for commodities also as applicable in Equity trading?
Unlike equities, commodities are not a dividend yielding assets, and there is no concept of book closures, so there is no concept of “No Delivery” period applicable to commodities.
Regulation
How is commodity trading regulated in India and who regulates it?
Forward Markets Commission (FMC) is the regulatory authority under the Ministry of Consumer Affairs, Food and Public Distribution, of Govt. of India. The FMC regulates commodity trading under the Forward Contracts (Regulation) Act 1952 and Forward Contracts (Regulation) Rules 1954. After the FMC the exchanges have their own rules and bylaws by which the members of the exchange are guided. The FMC from time to time through exchanges and directly gives notifications and announcements regarding commodity trading. To check the latest announcements you can visit www.fmc.gov.in
Is commodity trading also available online as is for Equity & FNO trades? How safe is Online Commodity Trading?
Yes, AnandRathi Commodities Ltd provides online trading through internet for commodities also. It is absolutely safe to trade through our online trading platform.
Settlement
What is the normal settlement cycle for commodity trades?
Unlike equity markets which have common settlement day for all the scrips traded on a particular day, the commodity markets do not have a common cycle. As per the customs and traditions in the market from where the base price of the commodity is derived; the settlement dates defer for each commodity. For example, the Gold contract on MCX trades along with the COMEX Gold, so it has a contract that expires every alternate month, at the same time the Agro commodities have different settlement date. (Please refer to the exchange websites for settlement dates of a specific commodity)
How are margin requirement, risk management and settlements treated in commodity trading?
There are 4 kinds of margins in commodity markets, the total margin is the sum of the following:
Initial Margin – The margin required to initiate the position
Exposure Margin – The margin required to carry the position
Special Margin – Any special or additional margin imposed from time to time
Delivery Margin – Additional margin collected for a short time before the delivery to reduce any settlement risks.
Typically the broker may charge the same amount of margin as specified by the exchange or more, and all clients have to maintain all the above said margins.
If there is any dispute in commodity trading, who would settle the same and how would it be settled?
All the disputes arising out of commodity trading will be settled as per the bylaws of the respective exchange where the trade was done
Are there any taxes levied on commodity trading also?
Similar to the equity exchanges, the commodity market trading also attracts taxes. The taxes applicable on commodity trading consist of the following:
exchange fee charged on every transaction
service tax applicable on the brokerage amount payable
educational cess on the service tax
Stamp Duty on every contract note
As of now the Commodities Transaction Tax (CTT) which was proposed in the budget speech of 2008, has not been implemented, hence CTT is not applicable so far.
IOP
What is IPO ?
IPO stands for Initial Public Offer. IPO is open selling of securities by the company itself for subscription by public at large. When a company wants to raise money, one of the ways it can do by selling its equity shares to the public.
When the company comes out with the issue for the first time IPO arise. Once an IPO is offered to public at large, it is subsequently subscribed and after the end of subscription period it get listed on the stock exchanges. After IPO shareholders can trade their shareholdings on the exchanges.
Advantage
- Liquidity
Contact Us
CIN : U67190GJ2015PTC084307
312 / 313, 3rd Floor, Shivani Complex, Near Kaliyawadi Bridge, Beside Collector Office, Kaliyawadi, Navsari - 396445
info@hpwealthadvisory.com
02637 - 280061