Market
  • Equities

    The Equities section provides with an insight into the equities segment of NSE & BSE and also provides real-time quotes and statistics of the equities market. In-depth information regarding listing of securities, trading systems & processes, clearing and settlement, risk management, trading statistics etc are available.

    Sharewealth is the registered member of NSE, giving equities at the most importance.

     

     

     

      What are the various types of financial markets?
    The financial markets can broadly be divided into money and capital market.

     

    Money Market

    Money market is a market for debt securities that pay off in the short term usually less than one year, for example the market for 90-days treasury bills. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.

    Capital Market

    Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market can be further divided into primary and secondary markets.

      What is meant by the Secondary Market?

    Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.

     

    For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduit - by facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.

      What is the difference between the primary market and the secondary market?

    In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market is an equity trading avenue in which already existing/pre- issued securities are traded amongst investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

      Who is a broker?

    A broker is a member of a recognized stock exchange, who is permitted to do trades on the screen-based trading system of different stock exchanges. He is enrolled as a member with the concerned exchange and is registered with SEBI.

      Who is a sub broker?

    A sub broker is a person who is registered with SEBI as such and is affiliated to a member of a recognized stock exchange.

      What is SEBI and what is its role?

    The SEBI is the regulatory authority established under Section 3 of SEBI Act 1992 to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith and incidental thereto.

      What is the pay-in day and pay- out day?

    Pay in day is the day when the brokers 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. Settlement cycle is on T+2 rolling settlement basis w.e.f. April 01, 2003. The exchanges have to ensure that the pay out of funds and securities to the clients is done by the broker within 24 hours of the payout. The Exchanges will have to issue press release immediately after pay out.

      What is an Auction?

    The Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member. The shortages 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.

      What is Arbitration?

    Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange.

  • Derivatives

    The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities.

    With Securities Laws (Second Amendment) Act,1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:

     

    • A security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security
    • A contract which derives its value from the prices, or index of prices, of underlying securities.

     

     

      What are the types of Products in Derivatives?
    The financial markets can broadly be divided into money and capital market.

     

    Index Futures

    A futures contract is a standardized contract to buy or sell a specific security at a future date at an agreed price.
    An index future is, as the name suggests, a future on the index i.e. the underlying is the index itself. There is no underlying security or a stock, which is to be delivered to fulfill the obligations as index futures are cash settled. As other derivatives, the contract derives its value from the underlying index. The underlying indices in this case will be the various eligible indices and as permitted by the Regulator from time to time.

    Index Options

    Options contract give its holder the right, but not the obligation, to buy or sell something on or before a specified date at a stated price. Generally index options are European Style. European Style options are those option contracts that can be exercised only on the expiration date. The underlying indices for index options are the various eligible indices and as permitted by the Regulator from time to time.

    Stock Futures

    A stock futures contract is a standardized contract to buy or sell a specific stock at a future date at an agreed price. A stock future is, as the name suggests, a future on a stock i.e. the underlying is a stock. The contract derives its value from the underlying stock. Single stock futures are cash settled.

    Stock Options

    Options on Individual Stocks are options contracts where the underlyings are individual stocks. Based on eligibility criteria and subject to the approval from the regulator, stocks are selected on which options are introduced. These contracts are cash settled and are American style. American Style options are those option contracts that can be exercised on or before the expiration date.

    Weekly Options

    Equity Futures & Options were introduced in India having a maximum life of 3 months. These options expire on the last Thursday of the expiring month. There was a need felt in the market for options of shorter maturity. To cater to this need of the market participants BSE launched weekly options on September 13, 2004 on 4 stocks and the BSE Sensex.

     

    Weekly options have the same characteristics as that of the Monthly Stock Options (stocks and indices) except that these options settle on Friday of every week. These options are introduced on Monday of every week and have a maturity of 2 weeks, expiring on Friday of the expiring week.

      What is minimum contract size?

    The Standing Committee on Finance, a Parliamentary Committee, at the time of recommending amendment to Securities Contract (Regulation) Act, 1956 had recommended that the minimum contract size of derivative contracts traded in the Indian Markets should be pegged not below Rs. 2 Lakhs. Based on this recommendation SEBI has specified that the value of a derivative contract should not be less than Rs. 2 Lakh at the time of introducing the contract in the market. In February 2004, the Exchanges were advised to re-align the contracts sizes of existing derivative contracts to Rs. 2 Lakhs. Subsequently, the Exchanges were authorized to align the contracts sizes as and when required in line with the methodology prescribed by SEBI.

      What is the lot size of a contract?

    Lot size refers to number of underlying securities in one contract. The lot size is determined keeping in mind the minimum contract size requirement at the time of introduction of derivative contracts on a particular underlying.

    For example, if shares of XYZ Ltd are quoted at Rs.1000 each and the minimum contract size is Rs.2 lakhs, then the lot size for that particular scrip stands to be 200000/1000 = 200 shares i.e. one contract in XYZ Ltd. covers 200 shares

     What is the Contract Specification for Futures and Options?

    The contract period for both Futures and Options are 1 month, 2 month and 3 months, each contract ending on the last Thursday of the contract month. If it is holiday, then the immediately preceding business day (Business day is a day during which the underlying stock market is open for trading). On the last trading day, the closing value of the underlying stock is the final settlement price of expiring futures contract. In Options, apart from normal contract period, there's also 1, 2 weeks contract periods.

      What is the margining system in the derivative markets?
    Two type of margins have been specified

    Initial Margin

    Based on 99% VaR and worst case loss over a specified horizon, which depends on the time in which Mark to Market margin is collected.

    Mark to Market Margin (MTM)

    Collected in cash for all Futures contracts and adjusted against the available Liquid Networth for option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement.

      What is the structure of Derivative Markets in India?

    Derivative trading in India takes place either on a separate and independent Derivative Exchange or on a separate segment of an existing Stock Exchange. Derivative Exchange/Segment function as a Self-Regulatory Organisation (SRO) and SEBI acts as the oversight regulator. The clearing & settlement of all trades on the Derivative Exchange/Segment would have to be through a Clearing Corporation/House, which is independent in governance and membership from the Derivative Exchange/Segment.

  • 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. At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with SEBI.

     

    A depository interfaces with the investors through its agents called Depository Participants (DPs). If an investor wants to avail the services offered by the depository, the investor has to open an account with a DP. This is similar to opening an account with any branch of a bank in order to utilise the bank's services.

     

    The Depository facilities include,
    Dematerialisation, Rematerialisation, repurchase/redemption of units of mutual funds, electronic settlement of trades in stock exchanges, receipt

    of non-cash corporate benefits such as bonus, in electronic form, transmission of securities, and other facilities like holding debt instruments in the same account, availing stock lending/borrowing facility , etc.
    Sharewealth provides you all Depository services.

     

     

      What is dematerialisation?

    Dematerialisation is a process by which physical certificates are converted into electronic form.

      Who is a Beneficial Owner (BO)?

    "Beneficial Owner" is a person in whose name a demat account is opened with depository for the purpose of holding securities in the electronic form and whose name is recorded as such with the former.

      Who is a Depository Participant?

    A Depository Participant (DP) is an agent of the depository who is authorised to offer depository services to investors. Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.

      Who is an Issuer?

    Issuer means any entity making an issue of securities

      What is an ISIN?

    ISIN (International Securities Identification Number) is the identification number given to a security of an issuer at the time of admitting such security in the depository system.

      Whether different securities issued by the same Issuer will have same ISIN?

    No, different securities issued by the same issuer will have different ISINs.

      What services are provided by a DP?

    Following services can be availed of through a DP:

    • Dematerialisation i.e. converting physical securities into electronic form.
    • Rematerialisation, i.e. converting electronic securities balances in a BO account into physical form.
    • To maintain record of holdings in the electronic form.
    • Settlement of trades by delivering/ receiving underlying securities from/in BO accounts.
    • Settlement of off-market trades i.e. transactions between BOs entered outside the Stock Exchange.
    • Providing electronic credit in respect of securities allotted by issuers under IPO or otherwise.
    • Receiving on behalf of demat account holders non-cash corporate benefits, such as, allotment of bonus and rights shares in electronic form or securities ensuing upon consolidation, stock split or merger/amalgamation of companies.
    • Pledging of dematerialised securities.
    • Facilitating Securities Lending and Borrowing, if the DP is registered as an "Approved Intermediary" for the purpose.
  • Commodities

    Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Forward Contracts (Regulation) Act (FCRA), 1952 defines goods as every kind of movable property other than actionable claims, money and securities.

     

    In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals; cereals and pulses; ginned and un-ginned cotton; oilseeds, oils and oilcakes; raw jute and jute goods; sugar and gur; potatoes and onions; coffee and tea; rubber and spices.etc.
    Sharewealth is the registered member of MCX.

     

     

     

    The three commodity Exchanges in India are:

    • National Commodity & Derivatives Exchange Limited (NCDEX)
    • Multi Commodity Exchange of India Limited (MCX)
    • National Multi-Commodity Exchange of India Limited (NMCEIL)
  • Mutual Fund

    Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.
    Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unitholders.
    The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
    Sharewealth has the AMFI registration and guides in all types of Mutual Fund.

     

     

     

      What are the different types of mutual fund schemes?
    Schemes according to Maturity Period:
    A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

     

    Open-ended Fund/ Scheme

    An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

    Schemes according to Investment Objective

    A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

    Close-ended Fund/ Scheme

    A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

    Growth / Equity Oriented Scheme

    The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

    Income / Debt Oriented Scheme

    The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

    Balanced Fund

    The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

    Money Market or Liquid Fund

    These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

    Gilt Fund

    These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

    Index Funds

    Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.

  • IPO

    An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuers securities. The sale of securities can be either through book building or through normal public issue.

     

    IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.

     

     

     

    Basic Understanding on IPO

     

      What is Book Building?

    SEBI Guidelines defines Book Building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.

      What is the main difference between offer of shares through book building and offer of shares through normal public issue?

    Price at which securities will be allotted is not known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.

      What is minimum number of days for which bid should remain open in book building?

    Book should remain open for minimum of 3 working days.

      What is the floor price in case of book building?

    Floor price is the minimum price at which bids can be made.

      Can the Individual Investor use book building facility for making an application?

    Yes.

      Can the bidder revise his bids?

    Yes.

      Which members will be allowed to participate in book building of issue?

    Book Running Lead Manager appointed by the issuer will intimate to the exchange the list of members who are eligible to participate in the issue. These members will be allowed to enter the bids in the IPO.

      Is it possible to enter bids less than floor price?

    No. The system automatically rejects the bids if price is less than floor price.

      How is the Retail Investor defined as?

    Retail individual investor means an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000.

      Can a retail investor also bid in a book-built issue?

    Yes. He can bid in a book-built issue for a value not more than Rs.1,00,000. Any bid made in excess of this will be considered in the HNI category.

      Is it compulsory to have a Demat Account?

    As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in the demat mode. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.

      Is it possible to know the number of shares that would be allotted?

    In case of fixed price issues, the investor is intimated about the CAN/Refund order within 30 days of the closure of the issue. In case of book built issues, the basis of allotment is finalized by the Book Running lead Managers within 2 weeks from the date of closure of the issue. The registrar then ensures that the demat credit or refund as applicable is completed within 15 days of the closure of the issue. The listing on the stock exchanges is done within 7 days from the finalization of the issue.

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