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| What is an Equity Share? |
| An equity share represents the form of ownership. The holder of such a share is
a member of the company and has voting rights. |
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| What returns can I expect from my investments in equity shares? What are the
risks? |
| Equity shares are “High-Risk High-Return Investments.” The major distinction
of Equity investment from all other investment avenues is that while the return
from many avenues such as Bank Deposits, Small Saving Schemes, Debentures, Bonds
etc are fixed and certain, the earnings from equity investments are highly uncertain
and varied. A good scrip picked up at the right time could fetch fairly good returns
else the return may be meager or it may even turn negative, i.e. the invested fund
itself may be eroded. In short, if the investment in fixed income category instruments
is secured and risk-free to a large extent, investment in equities and related fields
could be termed as risky. |
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| What is Dividend? |
| Dividend is the part of profit distributed by the company among its investors. It
is usually declared as a percentage of the paid-up value or face value of the share. |
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| What is a Bonus Share? |
| A Share issued by companies to their shareholders free of cost by capitalization
of accumulated reserves from the profits earned in the earlier years. |
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| What is a Bond? |
| A Bond is a promissory note issued by a company or government to its lenders. A
Bond is evidence of debt on which the issuing company usually promises to pay the
bondholder a specified amount of interest at intervals over a specified length of
time, and to repay the original loan on the expiration date. A bond investor lends
money to the issuer and in exchange, the issuer promises to repay the loan amount
on a specified maturity date. |
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| What is a Debenture? |
| It is a Bond issued by a company bearing a fixed rate of interest usually payable
half-yearly on specific dates and principal amount repayable on a particular date
on redemption of the debentures. Debentures are normally secured / charged against
the asset of the company in favor of debenture holder. |
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| What is a Stock Exchange? |
| A Stock Exchange is a place where the buyer and seller meet to trade in shares in
an organized manner. There are at present 25 recognized stock exchanges in the country
that are governed by the Securities Contact (Regulation) Act, 1956. |
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| What shares can I buy? |
| You can buy the shares that are listed on any of the recognized stock exchanges. |
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| Whom should I contact for my stock market-related transactions? |
| To be able to buy or sell shares in the stock markets a client would need to be
registered with a stock broker like Sushil Financial Services Private Limited who
holds membership in stock exchanges and who is registered with SEBI. |
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| Am I required to sign any agreement with the broker or sub-broker? |
| Yes, you have to sign the “Member-Client Agreement” for the purpose
of engaging a broker to execute trades on your behalf from time to time and furnish
details relating to yourself to enable the member to maintain Client Registration
Form. |
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| What is a Member-Client Agreement Form? |
| This form is an agreement entered into between client and broker in the presence
of witnesses wherein the client agrees (is desirous) to trade/invest in the securities
listed on the concerned Exchange through the broker after being satisfied of broker’s
capabilities to deal in the same. |
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| What is Buying & Selling? |
| There are several types of orders that you can dictate to a broker. The most common
type, which is a regular buy or sell order, is called a market order. Another type
of order is a limit order wherein you ask the broker to trade only if the price
reaches a specific level. In a stop order, you tell the broker to sell your shares
if the price drops to a certain level to prevent significant loss because if it
drops to that level it is likely to drop further and your losses are likely to increase. |
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| How could I place orders? |
| Trading can be done via the phone or by coming in person to the office of Sushil
or through any other facility provided by Sushil like Internet trading. The dealer
(employee of Sushil who is supposed to input the investors order into the stock
exchange order system) after checking the authenticity of the person calling and
after checking the margin available in the account would put/enter the order into
the stock exchange system. |
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| What is meant by bullish and bearish trend? |
| When the market goes up it is called a bullish trend and when the market goes down
it is called a bearish trend. |
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| What is taking a position? |
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: |
| 1. Long 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 expecting to sell them
later at higher prices and hence make profits. |
| 2. Short positions: Short positions are the 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 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 |
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| What is an index? |
An index is a stock-market indicator created as a statistical measure of the performance
of an entire market or segment of a market based on a sample of securities from
the market. An index is thus a means to evaluate the overall performance of a market
or of a segment of the market. An index measures the aggregate market movements.
Apart from being a general market indicator, indices are used as a benchmark to
evaluate individual portfolio performance. Professional money managers will always
try to outperform the market, i.e. they will always try to do better than the indices.
For example, if the value of a portfolio moves up by 10% while the index moved up
by only 5% then the portfolio is doing better than the market.
We have two renowned indices viz. |
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BSE Sensitive Index (BSE SENSEX) |
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S&P Nifty 50 (NIFTY) |
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| BSE Sensex comprises of 30 large-cap companies. As the name suggests, it is a premier
index on Bombay Stock Exchange (BSE). Nifty comprises of 50 large-cap companies
on the National Stock Exchange (NSE). |
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| What is Methodology of trades? |
| The market watch, i.e. the screen kept open normally on the trade screen would show
the following columns: |
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Best bid price |
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Best bid quantity |
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Best offer price |
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Best offer quantity |
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Last traded price. |
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| The first 2 columns as given above show the available buyers for a particular share
in the stock exchange and the next 2 columns show the available sellers, and the
fifth column shows the price at which the last trade took place. Hence when a investor
wants to buy a share at “market price” ideally the 3rd and the 4th column
would depict how many shares one can get at a stipulated price. The client can also
put a limit price order which would sit in the order book till it reaches a price
time priority when the trade can be executed. |
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| What is a Contract Note? |
| Contract Note is a confirmation of trades done on a particular day on behalf of
the client. It establishes a legally enforceable relationship between the client
and Sushil with respect to the settlement of the trades. The Contract Note would
show settlement number, order number, trade number, time of trade, quantity and
price of the trades, brokerage charged, etc and it would be signed by an authorized
person of Sushil. |
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| What is pay-in day and pay-out day? |
| Pay-in day is the day when the broker shall make payment or delivery of securities
to the exchange. Pay-out day is the day when the exchange makes payment or delivery
of securities to the broker. |
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| What is a depository? |
| A depository can be compared to a bank. A depository holds securities (like shares,
debentures, bonds, Government Securities, units etc.) of investors in electronic
form. Besides holding securities, a depository also provides services related to
transactions in securities. There are two main depositories in India, namely, a)
National Securities Depository Ltd. (NSDL) and b) Central Depository Securities
Ltd. (CDSL), both of which are regulated by SEBI. Sushil Financial Services
Private Limited is a Depository Participant of CDSL and will hold your
securities in electronic form. |
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| What should I do when I want to open an account with a DP? |
| You can approach Sushil Financial Services Private Limited or any DP of your choice
and fill up an account opening form. At the time of opening an account, you have
to sign an agreement with DP in a CDSL prescribed standard agreement, which details
your and your DP’s rights and duties. |
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| What do you mean by ‘Market Trades’ & ‘Off Market Trades’? |
| Any trade settled through a clearing corporation is termed as a ‘Market Trade’.
These trades are done through stock brokers on a stock exchange. ‘Off Market
Trade’ is one which is settled directly between two parties without the involvement
of a clearing corporation. The same delivery instruction slip can be used either
for market trade or off-market trade by ticking one of the two options. |
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| How do I deliver or receive shares to or from Sushil? |
| In case of sales, the investor would need to transfer the shares to the pool account
of Sushil for the specified settlement number. The pool account number for shares
sold on BSE is CM-BP-ID IN654633 and the pool account number for shares sold on
NSE is CM-BP-ID IN563698. The delivery should necessarily come from the demat account
of the investor and not from any other person. Similarly Sushil would directly transfer
shares bought to the account of the investor. |
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| How do I make or receive payments to or from Sushil? |
| Payments to Sushil has to be made via a Account Payee cheque/Demand Draft for the
BSE in favor of Sushil Financial Services Private Limited and for
NSE in favour of Sushil Financial Services Private Limited. The payment should necessarily
come from the bank account of the investor and not from any other person. Similarly
Sushil would pay an Account Payee cheque in the name of the investor, which will
also contain the Bank name and account number of the client. |
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| How long does it take to receive my money for a sale transaction and my shares for
a buy transaction? |
| The pay-out of funds and securities to the clients by Sushil will be within 24 hours
of the pay-out. |
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| What is a Rolling Settlement? |
| In a Rolling Settlement trades executed during the day are settled based on the
net obligations for the day. In NSE and BSE, the trades pertaining to the rolling
settlement are settled on a T+2 day basis where T stands for the trade day. Hence
trades executed on a Monday are typically settled on the following Wednesday (considering
2 working days from the trade day). The funds and securities pay-in and pay-out
are carried out on T+2 day. |
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| What is an Auction? |
| The securities are put up for auction by the Exchange on account of non-delivery
of securities by the selling trading member to ensure that the buying trading member
receives the securities due to him. The non-delivery by the trading member could
arise on account of short delivery. The Exchange purchases the requisite quantity
in the Auction Market and gives them to the buying trading member. |
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| What happens if I could not make the payment of money or deliver shares on the pay-in day? |
In case of purchase on your behalf, the member broker has the liberty to close out
transactions by selling securities in case you fail to make full payment to the
broker for the execution of contract before pay-in day as fixed by Stock Exchange
for the concerned settlement period unless you already have an equivalent credit
with the broker. The shortages in case of sales are met through auction process
and the difference in price indicated in Contract Note and price received through
auction is paid by member to the Exchange which is then liable to be recovered from
the client.
In both the cases any loss in transactions will be deductible from the margin money
paid by you. |
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| What happens if the shares are not bought in the auction? |
If the shares could not be bought in the auction i.e. if shares are not offered
for sale in the auction, the transactions are closed out as per SEBI guidelines.
The guidelines stipulate that “the close out price will be the highest price
recorded in that scrip on the exchange in the settlement in which the concerned
contract was entered into and up to the date of auction/close out OR 20% above the
official closing price on the exchange on the day on which auction offers are called
for, whichever is higher.”
Since in the rolling settlement the auction and the close out takes place during
trading hours the reference price in the rolling settlement for close out procedures
would be taken as the previous day’s closing price. |
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| What happens if I do not get my money or share on the due date? |
In case a broker fails to deliver to you in time and make the proper payment of
money/shares or you have a complaint against the conduct of the broker, you can
file a complaint with the respective stock exchange. The exchange is required to
resolve all complaints. To resolve the dispute the complainant can also resort to
arbitration as provided on the reverse of Contract Note /Purchase or Sale Note.
However, if the complaint is not addressed by the Stock Exchanges or is unduly delayed
then the complaints along with supporting documents may be forwarded to Secondary
Market Department of SEBI. Your complaint would be followed up with the exchanges
for expeditious redressal.
In case of a complaint against a sub-broker, for redressal the complaint may be
forwarded to the concerned broker with whom the subbroker is affiliated. |
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| What are the additional charges other than brokerage that can be levied on the
investor? |
| The trading member can charge: |
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Securities Transaction Tax. |
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Service tax as applicable. |
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Transaction charges levied by NSE, Stamp duty and other charges directly attributable
to the transaction. |
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| (Note: The brokerage and service tax is indicated separately in the contract note.) |
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| How are margins paid? |
| Exchange prescribes margin rules from time to time, which currently are calculated
on the Value at Risk model. Margins are to be paid by the investor before placing
the order. |
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| What are the rights of the investor? |
| The right to get proof of price/brokerage charged, money/shares on time, Statement
of Accounts and Contract Note from trading member. |
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| What are the obligations of the investor? |
| The obligations are: |
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Signing a proper Member-Constituent Agreement |
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Possessing a valid contract or purchase/sale note |
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Delivering securities & making payment on time |
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Providing margin before trade |
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| Who is a Portfolio Manager? |
Any person who pursuant to a contract or arrangement with a client, advises or directs
or undertakes on behalf of the client (whether as a discretionary portfolio manager
or otherwise) the management or administration of a portfolio of securities or the
funds of the client, as the case may be is a Portfolio Manager.
Sushil Financial Services Private Limited is a SEBI Registered
Portfolio Manager (Reg. No.INP000001116) that offers Discretionary Portfolio Management
Services to an investor with a minimum of Rs.10 lakhs. |
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