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FAQ's

  • Yes, any Individual, Hindu undivided Family (HUF),proprietary firm,partnership firm, company,trust or Non Resident Indians (NRI) can open an account with Shah Investors Home Ltd.
  • If you like to buy shares, first of all you have to appoint 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 registefred with SEBI. Once you open an account, you will be able to buy shares in your particular Trading ID, which is called your Trading code.
  • Bank details are required as per KYC norms.
  • Yes, you can appoifnt a POA to operate your Trading Account. However, you have to submit POAf documents as per our requirement.
  • It is mandatory from exchange to give your financial Details in Trading Account Form.
  • We will link your Trading Account with Demat acfcount for Pay in - Pay Out of securities.
  • You will receive Welcome letter, in which you will find all the details related to your Trading Account. If you are hafving account in Internet Trading, than you will receive an email from Internet Depfartment regfarding your trading account.
  • Client can View Statement of Account, Bills, Profit & Loss, Demat Holding from our Back office through their Ufser Id and Password.
  • If you are a Offline Client and like to see your account online, you can request for a password than, we will provide you your Backoffice ID and Password and you will be able to see your Account Online.
  • Market Order - A market order is an order to buy or sell a stock at the current markeft price. Limit Order - To avoid buying or selling a stock at a price higher or lower than you wanted, you need to place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. Stop Loss Order - An order placed with a broker to sell/buy a security when it reaches a certain price. It is designed to limit an investor's loss/profit on a security position.
  • You can either go to the broker's /sub broker's office or place an order over the phone /Internet or as defined in the Model Agrefement signed by you.
  • The Stock Exchanges assign a Unique Order Code Number to each transaction, which is intimated by broker to his client and onfce the order is executed, this order code number is printed on the contract note. At the end of day our representative will call you.
  • Yes, you can modify or cancel your orders, before they are executed.
  • AMO is a After Market Orders. As tfhe term suggests, clients would be able to place orders after market hours on each day. AMO will be applicable on Exchange Criteria.
  • You have to ensure receipt of the following documents for any trade executed on the Exchange: a. Contract note b. In the case of electronic issuance of contract notes by the brokers, the clients shall ensure that the same is digitally signed and in case of inability to view the same, shall communicate the same to the broker, upon which the broker shall ensure that the physical contract note reaches the client within the stipulated time. It is the contract note that gives rise to contractual rights and obligations of parties of the trade. Hence, you should insist on contract note from stockbroker.
  • Contract note is a one type of Bill that shows your confirmed trades on particular day forf and on behalf of client. Contract note is issued in the prescribed format of Rules and regulations of NSE and SEBI guidelines. Contact notes are helpful to track you.
  • Yes, You can View your Bills Online through your userid and Pasfsword form our Back office. You can also able to view your Previous bill and new bills from our Back office anytime and anywhere. You can verify your quantity, price, brokerage and time through.
  • The trading member can charge: 1. Brokerage charged by member broker. 2. Penalties arising on specific default on behalff of client (investor) 3. Service tax as stipulated. – 12.36% charges will be applicable on brokerage, T.O. & O.C. 4. Securities Transaction Tax (STT) as applicable.- 0.125% on market Rate for Delivery and 0.25% on speculation from sell side. 5.Turn over Charges – NSE charges will be 0.05% and BSE charges will be 0.01% 6.Stamp Duty Charges - 0.01% on Delivery and 0.02% on speculation The brokerage, service tax and STT, Turn Over Charges, Stamp Duty charges are indicated separately in the contract note.
  • You have to pay initial Margin of Rs. 10000 to start trading. One can give margin by way of Cheque and by way of Securities. For Derivfatives Segment Margin will be required of Rs. 50000. Clients also have to fulfill Span Margin in order to trade in derivative
  • In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. Presently 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 payout are carried out on T+2 day.
  • Pay in day is the day when the brokers shall make payment or delivery of sefcurities 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.
  • Short delivery refers to a situation where a client, who has sold certain shares during a settlement cycle, fails to deliver the shares to the member either fuflly or partly. It also happens in case of Purchasing a shares.
  • As per T+2 Settlement, You will get delivery of your shares after T + 2 Days into your Demat account.
  • For Example If Mr. A Buys shares of a particular company On Monday as per T+2 Settlement. So Monday is called Day T On Tuesday - customer pays funds to the broker (Shah Inventors Home Ltd) for securities he has purchased. So Tuesday is called Day T+1 On Wednesday Shah investors transfers funds to Exchange. So Wednesday is called Day T+2 On Wednesday - Exchange transfer Shares to Shah investors home Ltd. On Thursday Mr. A can view shares purchased on Monday in your Demat account on Thursday. So Thursday is called Day T+3.
  • 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 Derivative includes: - a. a security derived from a debt instrument, shafre, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security b. a contract which derives its value from the prices, or index of prices, of underlying securities
  • A derivative is an instrument whose value is derived from the value of one or more underlying, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are Forwards, Futures, Options and Swaps.
  • A forward contract is a customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today. The main features of forward contracts are: a. They are bilateral contracts and hence exposed to counter-party risk. b. Each contract is custom designed, and hence is unique in terms of contract size, expiration date and the asset type and quality. f c. The contract price is generally not available in public domain. d. The contract has to be settled by delivery of the asset on expiration date. e. In case, the party wishes to reverse the contract, it has to compulsorily go to the same counter party, which being in a monopoly situation can command the price it wants.
  • Futures are exchange-traded contracts to sell or buy financial instruments or physical commodities for Future delivery at an agreed price. There is an agreement to buy or sell a specified quantity of financial instrument/commodity in a designated Future month at a price agreed upon by the buyer and seller. To make trading possible, the exchange specifies certain standardized features of the contract.
  • Futures is a type of forward contract a. Standardized Vs Customized Contract - Forward contract is customized while the future is standardized. To be more specific, the terms of a Forward Contracts are individually agreed between two counter-parties, while Futures being traded on exchanges have terms standardized by the exchange. Counter party risk - In case of Futures, after a trade is confirmed by two members of exchange, the exchange / clearing house itself becomes the counter-party (or guarantees) to every trade. The credit risk, which in case of forward contracts was on the counter party, gets transferred to exchange/clearing house, reducing the risk to almost nil. b. Liquidity - Futures contracts are much more liquid and their price is much more transparent due to standardization and market reporting of volumes and price. c. Squaring off - A Forward contract can be reversed only with the same counter-party with whom it was entered into. A Futures contract can be reversed with any member of the exchange. d. Mark to Market - Futures contract are market to market everyday to reflect the gains or losses the party makes by crediting or debiting the accounts of the parties respectively.
  • Futures contract based on an index i.e. the underlying asset is the index, are known as Index Futures Contracts. For example, futures contract on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index. Similarly, the options contracts, which are based on some index, are known as Index options contract. However, unlike Index Futures, the buyer of Index Option Contracts has only the right but not the obligation to buy / sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised / assigned only on the expiry date. An index in turn derives its value from the prices of securities that constitute the index and is created to represent the sentiments of the market as a whole or of a particular sector of the economy. Indices that represent the whole market are broad based indices and those that represent a particular sector are sectoral indices. By its very nature, index cannot be delivered on maturity of the Index futures or Index option contracts therefore, these contracts are essentially cash settled on Expiry.
  • 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 lacs, then the lot size for that particular scrips stands to be 200000/1000 = 200 shares i.e. one contract in XYZ Ltd. covers 200 shares.
  • The profits and losses would depend upon the difference between the price at which the position is opened and the price at which it is closed. Let us take some examples. Example 1 Position : Long - Buy June Sensex Futures @ 5500 Payoff : Profit - if the futures price goes up Loss : if the futures price goes down Calculation : The profit or loss would be equal to fifty times the difference in the two rates. If June Sensex Futures is sold @ 5600 there would be a profit of 100 points which is equal to Rs. 5,000 (100 X 50). However if the June Sensex is sold @ 3250 there would be a loss of 50 points which is equal to Rs. 2,500 (50 X50). Example 2 Position : Short Sell June Sensex Futures @ 5500 Payoff : Profit - if the futures price goes down Loss : if the futures price goes up Calculation : The profit or loss would be equal to fifty times the difference in the two rates. If June Sensex Futures is bought @ 5700 there would be a loss of 200 points which is equal to Rs. 10,000 (200 X 50). However if the June Sensex Futures is bought @ 5400, there would be a profit of 100 points which is equal to Rs. 5,000 (100 X50).
  • A calendar spread is created by taking simultaneously two positions : a. A long position in a futures series expiring in any calendar month b.A short position in the same futures as 1 above but for a series expiring in any month other than the 1 above. Examples of Calendar Spreads 1. Long June Sensex Futures Short July Sensex Futures 2. Short July Sensex Futures Long August Sensex Futures A spread position must be closed by reversing both the legs simultaneously. The reversal of 1 above would be a sale of June Sensex Futures while simultaneously buying the July Sensex Futures.
  • Stock Futures are financial contracts where the underlying asset is an individual stock. Stock Future contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. The contracts have standardized specifications like market lot, expiry day, unit of price quotation, tick size and method of settlement.
  • In stock options, the option buyer has the right and not the obligation, to buy or sell the underlying share. In case of stock futures, both the buyer and seller are obliged to buy/sell the underlying share. Risk-return profile is symmetric in case of single stock futures whereas in case of stock options payoff is asymmetric. Also, the price of stock futures is affected mainly by the prices of the underlying stock whereas in case of stock options, volatility of the underlying stock affect the price along with the prices of the underlying stock.
  • In stock options, the option buyer has the right and not the obligation, to buy or sell the underlying share. In case of stock futures, both the buyer and seller are obliged to buy/sell the underlying share. Risk-return profile is symmetric in case of single stock futures whereas in case of stock options payoff is asymmetric. Also, the price of stock futures is affected mainly by the prices of the underlying stock whereas in case of stock options, volatility of the underlying stock affect the price along with the prices of the underlying stock.
  • Stock futures offer a variety of usage to the investors. Some of the key usages are mentioned below: Investors can take long term view on the underlying stock using stock futures. Stock futures offer high leverage. This means that one can take large position with less capital. For example, paying 20% initial margin one can take position for 100 i.e. 5 times the cash outflow. Futures may look overpriced or under priced compared to the spot and can offer opportunities to arbitrage or earn risk-less profit. Single stock ffutures offer arbitrage opportunity between stock futures and the underlying cash market. It also provides arbitrage opportunity between synthetic futures (created through options) and single stock futures. When used efficiently, single-stock futures can be an effective risk management tool. For instance, an investor with position in cash segment can minimize either market risk or price risk of the underlying stock by taking reverse position in an appropriate futures contract.
  • The investor can square up his position at any time till the expiry. The investor can first buy and then sell stock futures to square up or can first sell and then buy stock futures to square up his position. E.g. a long (buy) position in December ACC futures, can be squared up by selling December ACC futures.
  • The initial margin needs to be paid to the broker on an up-front basis before taking the position.
  • Yes. The outstanding positions in stock futures are marked to market daily. The closing price of the respective futures contract is considered for marking to market. The notional loss / profit arising out of mark to market is paid / received on T+1 basis.
  • The profits and losses would depend upon the difference between the price at which the position is opened and the price at which it is closed. Let an investor have a long position of one November Stock 'A' Futures @ 430. If the investor square up his position by selling November Stock 'A' futures @ 450, the profit would be Rs. 20 per share. In case, the investor squares up his position by selling November Stock 'A' futures @ 400, the loss would be Rs. 30 per share.
  • 1, 2 and 3 months contracts are available for trading
  • An investor can benefit from a predicted rise in the price of a stock by buying futures. As the price of the futures rises, the investor will make a positive return. As the investor will have to pay only the margin (which forms a fraction of the notional value of contract), his return on investment will be higher than on an efquivalent purchase of shares. An investor can benefit from a predicted fall in the price of stock by selling futures. As the price of the future falls in line with the underlying stock, the investor will make a positive return.
  • Premium is the price paid by the buyer to the seller to acquire the right to buy or sell Strike Price or Exercise Price - The strike or exercise price of an option is the specified/ predetermined price of the underlying asset at which the same can be bought or sold if the option buyer exercises his right to buy/ sell on or before the expiration day. Expiration date - The date on which the option expires is known as Expiration Date. On Expiration date, either the option is exercised or it expires worthless. Exercise Date - The date on which the option is actually exercised is called as Exercise Date. In case of European Options the exercise date is same as the expiration date while in case of American Options, the options contract may be exercised any day between the purchase of the contract and its expiration date (see European/ American Option). In India, options on "Sensex" are European style, whereas options on individual are stocks American style. Open Interest - The total number of options contracts outstanding in the market at any given point of time. Option Holder: is the one who buys an option, which can be a call, or a put option. He enjoys the right to buy or sell the underlying asset at a specified price on or before specified time. His upside potential is unlimited while losses are limited to the Premium paid by him to the option writer. Option seller/ writer: is the one who is obligated to buy (in case of Put option) or to sell (in case of call option), the underlying asset in case the buyer of the option decides to exercise his option. His profits are limited to the premium received from the buyer while his downside is unlimited. Option Series : An option series consists of all the options of a given class with the same expiration date and strike price. e.g. BSXCMAY5500 is an options series which includes all Sensex Call options that are traded with Strike Price of 5500 & Expiry in May. (BSX Stands for BSE Sensex (underlying index), C is for Call Option, May is expiry date & strike Price is 3600).
  • When holder of an option exercises his right to buy/ sell, a randomly selected (by computer) option seller is assigned the obligation to honor the underlying contract, and this process is termed as Assignment.
  • A call option gives the holder (buyer/ one who is long call), the right to buy specified quantity of the underlying asset at the strike price on or before expiration date in case of American option. The seller (one who is short call) however, has the obligation to sell the underlying asset if the buyer of the call option decides to exercise his option to buy. Example : Investor buys One European call option on Stock 'A' at the strike price of Rs. 3500 at a premium of Rs. 100. If the market price of Stock 'A' on the day of expiry is more than Rs. 3500, the option will be exercised. The investor will earn profits once the share price crosses Rs. 3600 (Strike Price + Premium i.e. 3500+100). Suppose stock price is Rs. 3800, the option will be exercised and the investor will buy 1 share of Stock 'A' from the seller of the option at Rs 3500 and sell it in the market at Rs 3800 making a profit of Rs. 200 {(Spot price - Strike price) - Premium}. In another scenario, if at the time of expiry stock price falls below Rs. 3500 say suppose it touches Rs. 3000, the buyer of the call option will choose not to exercise his option. In this case the investor loses the premium (Rs 100), paid which shall be the profit earned by the seller of the call option.
  • A Put option gives the holder (buyer/ one who is long Put), the right to sell specified quantity of the underlying asset at the strike price on or before a expiry date in case of American option. The seller of the put option (one who is short Put) however, has the obligation to buy the underlying asset at the strike price if the buyer decides to exercise his option to sell. Example : An investor buys one European Put option on Stock 'B' at the strike price of Rs. 300, at a premium of Rs. 25. If the market price of Stock 'B', on the day of expiry is less than Rs. 300, the option can be exercised as it is 'in the money'. The investor's Break-even point is Rs. 275 (Strike Price - premium paid) i.e., investor will earn profits if the market falls below 275. Suppose stock price is Rs. 260, the buyer of the Put option immediately buys Stock 'B' from the market @ Rs. 260 & exercises his option selling the Stock 'B' at Rs 300 to the option writer thus making a net profit of Rs. 15 {(Strike price - Spot Price) - Premium paid}. In another scenario, if at the time of expiry, market price of Stock 'B' is Rs 320, the buyer of the Put option will choose not to exercise his option to sell as he can sell in the market at a higher rate. In this case the investor loses the premium paid (i.e Rs 25), which shall be the profit earned by the seller of the Put option.
  • The significant differences in Futures and Options are as under: Futures are agreements/contracts to buy or sell specified quantity of the underlying assets at a price agreed upon by the buyer & seller, on or before a specified time. Both the buyer and seller are obligated to buy/sell the underlying asset. options the buyer enjoys the right & not the obligation, to buy or sell the underlying asset. Futures Contracts have symmetric risk profile for both the buyer as well as the seller, whereas options have asymmetric risk profile. In case of Options, for a buyer (or holder of the option), the downside is limited to the premium (option price) he has paid while the profits may be unlimited. For a seller or writer of an option, however, the downside is unlimited while profits are limited to the premium he has received from the buyer. The Futures contracts prices are affected mainly by the prices of the underlying asset. The prices of options are however; affected by prices of the underlying asset, time remaining for expiry of the contract, interest rate & volatility of the underlying asset.
  • An option is said to be 'at-the-money', when the option's strike price is equal to the underlying asset price. This is true for both puts and calls. A call option is said to be 'in the money' when the strike price of the option is less than the underlying asset price. For example, a Stock A' call option with strike of 3900 is 'in-the-money', when the spot price of Stock 'A' is at 4100 as the call option has a positive exercise value. The call option holder has the right to buy the Stock 'A' at 3900, no matter by what amount the spot price exceeded the strike price. With the spot price at 4100, selling Stock 'A' at this higher price, one can make a profit. On the other hand, a call option is out-of-the-money when the strike price is greater than the underlying asset price. Using the earlier example of Sensex call option, if the Sensex falls to 3700, the call option no longer has positive exercise value. The call holder will not exercise the option to buy Sensex at 3900 when the current price is at 3700 and allow his 'option' right to lapse. Put option is in-the-money when the strike price of the option is greater than the spot price of the underlying asset. For example, a Stock 'A' put at strike of 4400 is in-the-money when the spot price of Stock 'A' is at 4100. When this is the case, the put option has value because the put option holder can sell the Stock 'A' at 4400, an amount greater than the current Stock 'A' of 4100. Likewise, a put option is out-of-the-money when the strike price is less than the spot price of underlying asset. In the above example, the buyer of Stock 'A' put option won't exercise the option when the spot is at 4800. The put no longer has positive exercise value and therefore in this scenario, the put option holder will allow his 'option' right to lapse.
  • A call option position that is covered by an opposite position in the underlying instrument (for example shares, commodities etc), is called a covered call. Writing covered calls involves writing call options when the shares that might have to be delivered (if option holder exercises his right to buy), are already owned. E.g. A writer writes a call on Reliance and at the same time holds shares of Reliance so that if the call is exercised by the buyer, he can deliver the stock. Covered calls are far less risky than naked calls (where there is no opposite position in the underlying), since the worst that can happen is that the investor is required to sell shares already owned at below their market value. When a physical delivery uncovered/ naked call is assigned on exercise, the writer will have to purchase the underlying asset to meet his call obligation and his loss will be the excess of the purchase price over the exercise price of the call reduced by the premium received for writing the call.
  • The intrinsic value of an option is defined as the amount, by which an option is in-the-money, or the immediate exercise value of the option when the underlying position is marked-to-market. For a call option: Intrinsic Value = Spot Price - Strike Price For a put option: Intrinsic Value = Strike Price - Spot Price The intrinsic value of an option must be a positive number or 0. It can't be negative. For a call option, the strike price must be less than the price of the underlying asset for the call to have an intrinsic value greater than 0. For a put option, the strike price must be greater than the underlying asset price for it to have intrinsic value.
  • Time value is the amount option buyers are willing to pay for the possibility that the option may become profitable prior to expiration due to favorable change in the price of the underlying. An option loses its time value as its expiration date nears. At expiration an option is worth only its intrinsic value. Time value cannot be negative.
  • There are two types of factors that affect the value of the option premium: Quantifiable Factors: a. underlying stock price b. the strike price of the option c. the volatility of the underlying stock d. the time to expiration and e. the risk free interest rate Non Quantifiable Factors: Market participants' varying estimates of the underlying asset's future volatility Individuals' varying estimates of future performance of the underlying asset, based on fundamental or technical analysis The effect of supply & demand- both in the options marketplace and in the market for the underlying asset The "depth" of the market for that option - the number of transactions and the contract's trading volume on any given day.
  • The theoretical option pricing models are used by option traders for calculating the fair value of an option on the basis of the earlier mentioned influencing factors. The two most popular option pricing models are: Black Scholes Model which assumes that percentage change in the price of underlying follows a lognormal distribution. Binomial Model which assumes that percentage change in price of the underlying follows a binomial distribution.
  • Options Premium is not fixed by the Exchange. The fair value/ theoretical price of an option can be known with the help of pricing models & then depending on market conditions the price is determined by competitive bids & offers in the trading environment. An option's premium / price is the sum of Intrinsic value & time value (explained above). If the price of the underlying stock is held constant, the intrinsic value portion of an option premium will remain constant as well. Therefore, any change in the price of the option will be entirely due to a change in the option's time value. The time value component of the option premium can change in response to a change in the volatility of the underlying, the time to expiry, interest rate fluctuations, dividend payments & to the immediate effect of supply & demand for both the underlying & its option
  • The price of an Option depends on certain factors like price and volatility of the underlying, time to expiry etc. The option Greeks are the tools that measure the sensitivity of the option price to the above-mentioned factors. They are often used by professional traders for trading & managing the risk of large positions in options & stocks. These Option Greeks are: Delta: is the option Greek that measures the estimated change in option premium/price for a change in the price of the underlying. Gamma: measures the estimated change in the Delta of an option for a change in the price of the underlying Vega: measures the estimated change in the option price for a change in the volatility of the underlying. Theta: measures the estimated change in the option price for a change in the time to option expiry. Rho: measures the estimated change in the option price for a change in the risk free interest rates.
  • An option calculator is a tool to calculate the price of an Option on the basis of various influencing factors like the price of the underlying and its volatility, time to expiry, risk free interest rate etc. It also helps the user to understand how a change in any one of the factors or more, will affect the option price.
  • Besides offering flexibility to the buyer in the form of right to buy or sell, the major advantage of options is their versatility. They can be as conservative or as speculative as one's investment strategy dictates. Some of the benefits of Options are as under: a. High leverage as by investing small amount of capital (in the form of premium), one can take exposure in the underlying asset of much greater value. b. Pre-known maximum Risk for an option buyer c. Large profit potential & limited risk for Option buyer3 d. One can protect his equity portfolio from a decline in the market by way of buying a protective put wherein one buys puts against an existing stock position this option position can supply the insurance needed to overcome the uncertainty of the marketplace. Hence, by paying a relatively small premium (compared to the market value of the stock), an investor knows that no matter how far the stock drops, it can be sold at the strike price of the Put anytime until the Put expires. E.g. An investor holding 1 share of Stock 'A' at a market price of Rs 3800 thinks that the stock is over-valued and therefore decides to buy a Put option' at a strike price of Rs. 3800/- by paying a premium of Rs 200/- If the market price of Stock 'A' comes down to Rs 3000/, he can still sell it at Rs 3800/- by exercising his put option. Thus by paying a premium of Rs. 200, he insured his position in the underlying stock.
  • If you anticipate a certain directional movement in the price of a stock, the right to buy or sell that stock at a predetermined price, for a specific duration of time can offer an attractive investment opportunity. The decision as to what type of option to buy is dependent on whether your outlook for the respective security is positive (bullish) or negative (bearish). If your outlook is positive, buying a call option creates the opportunity to share in the upside potential of a stock without having to risk more than a fraction of its market value (premium paid). Conversely, if you anticipate downward movement, buying a put option will enable you to protect against downside risk without limiting profit potential. Purchasing options offer you the ability to position yourself according to your market expectations in a manner such that you can both profit and protect hedge) with limited risk.
  • Option is a contract, which has a market value like any other tradable commodity. Once an option is bought there are following alternatives that an option holder has: You can sell an option of the same series as the one you had bought & close out /square off your position in that option at any time on or before its expiration date. You can exercise the option on the expiration day in case of European Option or; on or before the expiration day in case of an American option. In case the option is 'Out of Money' at the time of expiry, one will not exercise his option, not being profitable and therefore, it will lapse or expire worthless.
  • The risk/ loss of an option buyer is limited to the premium that he has paid
  • The risk of an Options Writer is unlimited whereas his gains are limited to the Premiums earned. When an uncovered call is exercised for physical delivery, the call writer will have to purchase the underlying asset and his loss will be the excess of the purchase price over the exercise price of the call reduced by the premium received for writing the call. The writer of a put option bears a risk of loss if the value of the underlying asset declines below the exercise price. The writer of a put bears the risk of a decline in the price of the underlying asset potentially to zero. When put option holder exercises his option in the falling market, the put writer is bound to purchase the underlying at strike price, even if the underlying is otherwise available in the spot at lower price.
  • Option writing is a specialized job, which is suitable only for the knowledgeable investor who understands the risks, has the financial capacity and has sufficient liquid assets to meet applicable margin requirements. The risk of being an option writer may be reduced by the purchase of other options on the same underlying asset and thereby assuming a spread position or by acquiring other types of hedging positions in the options/ futures and other correlated markets.
  • In the Indian Derivatives market, SEBI has not created any particular category of options writers. Any market participant can write options. However, the margin requirements are stringent for options writers.
  • The Stock Index Options are options where the underlying asset is a Stock Index e.g. Options on 'Sensex'. Index Options were first introduced by Chicago Board of Options Exchange (CBOE) in 1983 on its Index 'S&P 100'. As opposed to options on Individual stocks, index options give an investor the right to buy or sell the value of an index which represents group of stocks.
  • Index options enable investors to gain exposure to a broad market, with one trading decision and frequently with one transaction. To obtain the same level of diversification using individual stocks or individual equity options, numerous decisions and trades would be necessary. Since, broad exposure can be gained with one trade, transaction cost is also reduced by using Index Options. As a percentage of the underlying value, premiums of Index options are usually lower than those of equity options as equity options are more volatile than the Index.
  • Options can offer an investor the flexibility one needs for countless investment situations. An investor can create hedging position or an entirely speculative one, through various strategies that reflect his tolerance for risk. Investors of equity stock options will enjoy more leverage than their counterparts who invest in the underlying stock market itself in form of greater exposure by paying a small amount as premium. Investors can also use options in specific stocks to hedge their holding positions in the underlying (i.e. long in the stock itself), by buying a Protective Put. Thus they will insure their portfolio of equity stocks by paying premium. ESOPs (Employees' stock options) have become a popular compensation tool with more and more companies offering the same to their employees. ESOPs are subject to lock in periods, which could reduce capital gains in falling markets - Derivatives can help arrest that loss.
  • Weekly Options differ mainly in terms of maturity period. Currently Monthly Options have maturity of 1 month, 2 months or 3 months. As 1 month options expire, another options series get generated. In case of Weekly Options, the maturity will be either 1 week or 2 weeks. Monthly Options Series will expire on last Thursday of every month. In case of Weekly Options, series will expire on Friday of every week.
  • If the expiry day of Weekly Options fall on a trading Holiday, then the expiry (as per SEBI guidelines) will be on the previous trading day. If that previous trading day is the last Thursday of the month (i.e. on the same day, the Monthly series is expiring) then the relevant Weekly series expiring on that day will not be generated.
  • The parameters viz. Underlying, Contract Multiplier, Tick size, Price Quotation, Trading Hours, Strike price Intervals of the Weekly Options will remain exactly the same as that of Monthly Options.
  • The profits and losses would depend upon the difference between the price at which the position is opened and the price at which it is closed. Let us take some examples. Example 1 a. Position - Long - Buy June Sensex Futures @ 4,800 b. Payoff b1. Profit - if the futures price goes up b2. Loss - if the futures price goes down c. Calculation - The profit or loss would be equal to fifty times the difference in the two rates. d. If June Sensex Futures is sold @ 4,900 there would be a profit of 100 points which is equal to Rs. 5,000 (100 X 50). e. However if the June Sensex However if the June Sensex Futures is sold @ 4,750, there would be a loss of 50 points which is equal to Rs. 2,500 (50 X50) Example 2 a. Position - Short Sell June Sensex Futures @ 4,600 b. Payoff b1. Profit - if the futures price goes down b2. Loss - if the futures price goes up c. Calculation - The profit or loss would be equal to fifty times the difference in the two rates. c1. If June Sensex Futures is bought @ 4,800 there would be a loss of 200 points which is equal to Rs. 10,000 (200 X 50). c2. However if the June Sensex Futures is bought @ 4,500, there would be a profit of 100 points which is equal to Rs. 5,000 (100 X50).
  • In case the position is not closed the same day, the daily settlement would alter the cash flows depending on the settlement price fixed by the exchange every day. However the net total of all the flows every day would always be equal to the profit or loss calculated above. Profit or loss would only depend upon the opening and closing price of the position, irrespective of how the rates have moved in the intervening days. Lets take the illustration given in example 1 where a long position is opened at 4,800 and closed at 4,900 resulting in a profit of 100 points or Rs. 5,000. Lets assume that the position was closed on the fifth day from the day it was taken. Lets also assume three different series of closing settlement prices on these days and look at the resultant cash flows.
  • The initial margin is only a security provided by the client through the clearing member to the exchange. It can be withdrawn in full after the position is closed. Therefore it does not affect the above calculation of profit or loss. However there would may be a funding cost / transaction cost in providing the security. This cost must be added to your total transaction costs to arrive at the true picture. Other items in transaction costs would include brokerage, stamp duty etc.
  • A calendar spread is created by taking simultaneously two positions : 1. A long position in a futures series expiring in any calendar month 2. A short position in the same futures as 1 aboFve but for a series expiring in any month other than the 1 above. Examples of Calendar Spreads 1. Long June Sensex Futures Short July Sensex Futures 2. Short July Sensex Futures Long August Sensex Futures A spread position must be closed by reversing both the legs simultaneously. The reversal of 1 above would be a sale of June Sensex Futures while simultaneously buying the July Sensex Futures.
  • Online Trading is the process of buying or selling securities through the Internet. To trade online, you need to have access to a personal computer (with a modem), a telephone and an Internet account with any one of the Internet service providers. SHAH INVESTORS HOME LTD as a brokerage house offers users an interface on the Internet (what you see when you log on to our site) and also offers the required guidance for them to place buy or sell orders over the Internet.
  • Any Individual, Hindu undivided Family (HUF), proprietary firm, partnership firm, company, trust or Non Resident Indians (NRI) can open an account with Shah Investors Home Ltd.
  • All trades involve a brokerage firm even if a stockbroker is not used to help with the trade. Although customers may enter orders for trades via the Internet, customers do not have direct access to the securities markets and therefore must use a brokerage firm in order to execute their trades. Customers should also remember to do their homework where their investments are concerned.
  • Internet share trading is more convenient and hassle free. No phone calls, No paperwork, No more writing of cheques, you can trade on your own. Market position will be in front of you. You can trade while working in the office, while you are at home. If computer/Internet is not available at your place; you can go to Cyber cafe also. You can take an experience once; you will know the advantages of that.
  • Following are the benefits of trading with us. No software installation required, easily accessible on browser Transparency in Dealing NSE cash segment, NSE F&O and BSE on single platform Live rate updating Access your ledger balances and account information over internet back office and through phone Online transfer of funds through internet payment gateway Short cut keys for the faster trading After market order facility for intraday traders.
  • REPI DEAL : Browser based trading platform and REPI TRADE : Software based trading platform
  • We are not a bank, and in that sense cannot offer any banking services. But what we have done is tied up with Internet enabled banks like HDFC Bank, to offer you net transfer facility. We do provide DP facilities of both National Securities Depositories Ltd. (NSDL) and Central Depository Securities Limited (CDSL). It is mandatory to open the designated accounts with us, to avoid any delays in pay in and pay out. We have tied up with HDFC BANK, ICICI BANK, AXIS BANK.
  • To avail of the online trading advantages offered by SIHL you must have to open the demat account with SIHL. As far as bank account is concerned if you want avail the facility of the online fund transfer you need to open your bank account with any of the following banks. 1. HDFC BANK 2. ICICI BANK 3. AXIS BANK (formerly UTI BANK)
  • To open an online trading account with SIHL just send us the email on inet@shahinvestors.com or call us on 30027656-60. You can also get all the details from your nearest SIHL branches.
  • Client Registration Form (includes following) Member client agreement (NSE, BSE) DP account form Auto Payin
  • Documents Required Two photographs Two Photocopy of pan cards Two photocopy of pass book or bank a/c statement Two cancelled cheques
  • Yes you have to maintain the minimum margin of Rs.10000 against which you will get the exposure up to 10 times (Rs.100000).
  • The trading password will be issued only on completion of all registration formalities and a email containing details about your user id and password will be sent you.
  • The password is generated by the system and sent to you such that not even employees of SIHL would know about it. To ensure complete safety and privacy the user will be forced to change his password the very first time he logs into the trading site.
  • You can call or email to our customer support team and they will immediately generate your new password on the fulfillment of some security questions answered by you.
  • After getting your user id and password you need to visit the website of SIHL (www.sihl.in) and select the option of login to online trading from the home page of the website.
  • Yes, provided you have the funds in your account or stocks with your depository participant. Also, the company should be listed on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).
  • Yes, you can modify or cancel your orders, before they are executed.
  • Once you start trading, you can know the status of your accounts online at any time.
  • It is a statement of confirmation of trade(s) done on a particular day for and on behalf of a client. As a online trading client of SIHL you will receive the contract note of your trade through email after the trading session.
  • SIHL provides a wide range of information on what’s happening in the market. This includes: stock quotes, intraday charts, market reports, live news, information on gainers & losers, advances & declines, only buyers & sellers, stocks that are at 52-week high or low, global markets, ADRs, board meetings, latest results and corporate announcements. You can also read IPO news and analysis, find information on the IPOs that are open currently and IPOs that are slated to hit the market. In mutual funds, you can find the net asset value (NAV) of funds, study the best performing funds, and which new fund offerings are open currently. You can also research fund schemes in details.
  • You can check the status of your orders & trades in the order book and trade book of your online trading platform.
  • At SIHL you are also having the facility to place the after market trades.
  • You can buy to the extent you have the margin in your account.
  • Yes at SIHL you can short your position.
  • There are three National level commodity Exchanges in India. :: 1. Multi Commodity exchange of India Ltd.(MCX) Mumbai. 2. National Commodity and Derivatives Exchange (NCDEX) Mumbai. 3. National Commodity Exchange (NMCE), Ahmedabad.
  • It is necessary to have a common platform of commodity futures exchange where demand and supply forces can act together in bringing out the best price for any commodity. The main purpose of a future commodity exchange as a marketplace is to enable commodity producers/processors to sell their produce in advance to protect them against possible price fall for their commodities and allow consumers, traders, processors to buy in advance to protect against possible price increase.
  • You can contact any registered brokers who are having membership of MCX and NCDEX. You can also get a list of more members from the respective exchanges and decide upon the broker you want to choose from.
  • You will have to enter into Commodity Trading account agreements with the broker. You also have to submit proof required by KYC norms of Exchange and Pan card number is compulsory in all cases. You will also need only one bank account. You will need a separate commodity demat account from the National Securities Depository Ltd to trade on the NCDEX/MCX just like in stocks.
  • A commodity futures contract is an agreement between two parties to buy and sell a specified and standardized quantity and quality of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange.
  • A derivative contract is an enforceable agreement whose value is derived from the value of an underlying asset; the underlying asset can be a commodity, precious metal, currency, bond, stock, or, indices of commodities, stocks etc. Four most common examples of derivative instruments are forwards, futures, options and swaps/spreads.
  • A forward contract is a legally enforceable agreement for delivery of goods or the underlying asset on a specific date in future at a price agreed on the date of contract. Under Forward Contracts (Regulation) Act, 1952, all the contracts for delivery of goods, which are settled by payment of money difference or where delivery and payment is made after a period of 11 days, are forward contracts.
  • The provision for delivery is made in the Byelaws of the Associations so as to ensure that the futures prices in commodities are in conformity with the underlying. Delivery is generally at the option of the sellers. However, provisions vary from Exchange to Exchange. Byelaws of some Associations give both the buyer and seller the right to demand/give delivery.
  • Futures Contract is specie of forward contract. Futures are exchange - traded contracts to sell or buy standardized financial instruments or physical commodities for delivery on a specified future date at an agreed price. Futures contracts are used generally for protecting against rich of adverse price fluctuation (hedging). As the terms of the contracts are standardized, these are generally not used for merchandizing propose.
  • Two methods generally used for predicting futures prices are fundamental analysis and technical analysis. The fundamental analysis is concerned with basic supply and demand information, such as, weather patterns, carryover supplies, relevant policies of the Government and agricultural reports. Technical analysis includes analysis of movement of prices in the past. Many participants use fundamental analysis to determine the direction of the market, and technical analysis to time their entry and exist.
  • Participants in forward/futures markets are hedgers, speculators, daytraders/ scalpers, market makers, and, arbitrageurs.
  • Hedger is a user of the market, who enters into futures contract to manage the risk of adverse price fluctuation in respect of his existing or future asset.
  • Arbitrage refers to the simultaneous purchase and sale in two markets so that the selling price is higher than the buying price by more than the transaction cost, so that the arbitrageur makes risk-less profit.
  • Day traders are speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day.
  • Hedging is simply an Investment strategy that is designed to offset investment risk. When hedger is going to buy a commodity in the cash market at a future date, he buys the futures contract now and when he buys the commodity in the cash market, the future contract is squared off to reduce or limit the risk of the purchase price.
  • The exchange operates on all days except Sundays and exchange specified Holidays... Monday to Friday - 10:00 am to 5:00 pm (for all commodities). Monday to Friday – 5:00 pm to 11:30 pm (All commodities except agri commodities and sponge Iron). Saturday – 10:00 am to 2:00 pm All commodities.
  • Long Position – Long Position is buying a contract. Short Position – Short Position is selling a contract.
  • The open interest is the number of contracts outstanding / unsettled in the market.
  • In all commodities average margin is 5%.
  • Settlement period is the cycle, which includes trade execution to settlement of that trade. Commodity trading has a monthly cycle. In all commodities last 5 days of a month are delivery period. If you do not like to give or take delivery than one has to do settlement before 5 days of delivery period.
  • Pay in and pay out of funds for mark to market settlement is affected on T+1 basis. It means that any booked losses or profit of the members are debited or credited in their bank settlement account on the next day of its trading. Pay in and pay out of funds for delivery –based settlement is effected on E+2 /E+3 (E Stands for expiry of contract) basis for delivery of good delivery by the seller or a prescribed in the contract settlement.
  • YES, the exchanges, have made available provisions of settlement of contracts by physical delivery Do we have to pay sales tax for commodity futures transactions? If the trade is squared off before expiry of the contracts, do not have to pay sales Tax. Because selling a futures contract means a commitment to sale. Which is different from actual sale. If the seller does not square off the position and intends to deliver goods in respect of his sale position, than only he is required to pay sales tax.
  • A depository is an organisation, which holds securities of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities.
  • It can be compared with a bank, which holds the funds for depositors. A Bank – Depository Analogy is given in the following table: BANK-DEPOSITORY – AN ANALOGY - BANK Holds funds in an account. DEPOSITORY Hold securities in an account. - BANK Transfers funds between accounts on the instruction of the account holder. DEPOSITORY Transfers securities between accounts on the instruction of the account holder. - BANK Facilitates transfer without having to handle money, DEPOSITORY Facilitates transfer of ownership without having to handle securities. - BANK Facilitates safekeeping of money, DEPOSITORY Facilitates safekeeping of securities.
  • At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with SEBI.
  • A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it gets proper registration from SEBI. Banking services can be availed through a branch whereas depository services can be availed through a DP.
  • As per the available statistics at BSE and NSE, 99.9% settlement takes place in demat mode only. Therefore, in view of the convenience in settlement through demat mode, it is advisable to have a beneficiary owner (BO).
  • Yes, any Individual, Hindu undivided Family (HUF), proprietary firm, partnership firm, company, trust or Non Resident Indians (NRI) can open an account with Shah Investors Home Ltd.
  • At the time of opening an account, you have to sign an agreement with the DP in a NSDL prescribed standard agreement, which details your and your DP’s rights and duties. You have to submit required documents to open account opening form as per KYC norms.
  • Yes. You can open more than one account with the same DP. There is no restriction on the number of accounts you can open with a DP.
  • No. There are no restrictions on the number of DPs you can open accounts with. Just as you can have savings or current accounts with more than one bank, you can open accounts with more than one DP.
  • It is for the protection of investor’s interest. The bank account number will be mentioned on the interest or dividend warrant, so that such warrant cannot be encashed by any one else. Further, cash corporate benefits such as dividend, interest will be credited to the investors account directly through the ECS (Electronic Clearing Service) facility, wherever available, by the company.
  • Yes. Since in the depository system monetary benefits on the security balances are paid as per the bank account details provided by the investor at the time of account opening, the investor must ensure that any subsequent change in bank account details is informed to the DP.
  • Investor should immediately inform his/her DP, who in turn will update the records. This will obviate the need of informing different companies.
  • 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 the individual name and another certificate is jointly with somebody, two different accounts would have to be opened.
  • In this case the investor may open only one account with ‘A’ & ‘B’ as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. An additional form called "Transposition cum Demat" form will have to be filled in. 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.
  • Yes. If the BO authorises any person to operate the account by executing a power of attorney and submit it to the DP, that person can operate the account on behalf of the BO.
  • No. The names of the account holders of a BO account cannot be changed. If any change has to be effected by addition or deletion, a new account has to be opened in the desired holding pattern (names) and then transfer the securities to the newly opened account. The old account may be closed.
  • Yes. The investor can submit account closure request to his DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account.
  • Investors can freeze or lock their accounts for any given period of time, if so desired. Accounts can be frozen for debits (preventing transfer of securities out of accounts) or for credits (preventing any movements of hindrances into accounts) or for both.
  • Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited into the investor's account with his/her DP.
  • In order to dematerialise physical securities one has to fill in a DRF (Demat Request Form) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialisation is outlined below: • Surrender certificates for dematerialisation to your depository participant. • Depository participant intimates Depository of the request through the system. • Depository participant submits the certificates to the registrar of the Issuer Company. Registrar confirms the dematerialisation request from depository. • After dematerialising the certificates, Registrar updates accounts and informs depository of the completion of dematerialisation. • Depository updates its accounts and informs the depository participant. • Depository participant updates the demat account of the investor.
  • ISIN (International Securities Identification Number) is a unique identification number for a security.
  • Yes, odd lot share certificates can also be dematerialised.
  • Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable.
  • Yes. The process is called rematerialisation. If one wishes to get back his securities in the physical form one has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below: • One makes a request for rematerialisation. • Depository participant intimates depository of the request through the system. • Depository confirms rematerialisation request to the registrar. • Registrar updates accounts and prints certificates. • Depository updates accounts and downloads details to depository participant. • Registrar dispatches certificates to investor.
  • The procedure for buying and selling dematerialised securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of purchase:- • The broker will receive the securities in his account on the payout day • The broker will give instruction to its DP to debit his account and credit investor's account • Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriate form. However one can give standing instruction for credit in to ones account that will obviate the need of giving Receipt Instruction every time. In case of sale:- The investor will give delivery instruction to DP to debit his account and credit the broker’s account. Such instruction should reach the DP’s office at least 24 hours before the pay-in as other wise DP will accept the instruction only at the investor’s risk.
  • In a bank account, credit to the account is given only when a 'pay in' slip is submitted together 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, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip everytime you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say 'yes' [or tick ] to standing instruction in the application form.
  • To give the delivery one has to fill a form called Delivery Instruction Slip (DIS). DIS may be compared to cheque book of a bank account. The following precautions are to be taken in respect of DIS:- • Ensure and insist with DP to issue DIS book. • Ensure that DIS numbers are pre-printed and DP takes acknowledgment for the DIS booklet issued to investor. • Ensure that your account number [client id] is pre-stamped. • If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed. • Avoid using loose slips • Do not leave signed blank DIS with anyone viz., broker/sub-broker. • Keep the DIS book under lock and key when not in use. • If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one. • Investor should personally fill in target account -id and all details in the DIS.
  • Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively.
  • It is a requirement from NSDL and Mandatory to mention in DIS. It is categorically mentioned by them that while one carry out “Off Market” transaction (I.e. a transaction not carried out through official market process.) the BO should mention reason why he has transferred this shares to other account. Reason can be in mode of Gift, Donation, transfer from one account to another account with a same client or transfer to family member a/c, closing of Account and Transferring to Other Dp’s Account Etc.
  • Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form there is a provision to indicate the manner in which an investor wants the securities allotted. He has to mention the BO ID and the name and ID of the DP on the application form. Any allotment made will be credited into the BO account.
  • The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from Depositories. The payment to the investors will be made by the company through the ECS (Electronic Clearing Service) facility, wherever available. Thus the dividend / interest will be credited to your bank account directly. Where ECS facility is not available dividend / interest will be given 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 concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from depositories. The entitlement will be credited by the company directly into the BO account.
  • In case of discrepancies in corporate benefits, one can approach the company / its R&T Agent.
  • Yes. In fact, pledging dematerialised securities is easier and more advantageous as compared to pledging physical securities.
  • The procedure to pledge electronic securities is as follows: • Both investor (pledgor) as well as the lender (pledgee) must have depository accounts with the same depository; • Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format ; • The pledgee has to confirm the request through his/her DP; • Once this is done, securities are pledged. • All financial transactions between the pledgor and the pledgee are handled as per usual practice outside the depository system.
  • After one has repaid the loan, one can request for a closure of pledge by instructing the DP in a prescribed format. The pledgee on receiving the repayment will instruct his DP accordingly for the closure of the pledge.
  • Yes, if the pledgee [lender] agrees, one may change the securities offered in a pledge.
  • The securities pledged are only blocked in the account of pledgor in favour of the pledgee. The pledgor would continue to receive all the corporate benefits.
  • If any person required to deliver a security in the market does not readily have that security, he can borrow the same from another person who is willing to lend as per the Securities Lending and Borrowing Scheme.
  • No. Lending and borrowing has to be done through an 'Approved Intermediary' registered with SEBI. The approved intermediary would borrow the securities for further lending to borrowers. Lenders of the securities and borrowers of the securities enter into separate agreements with the approved intermediary for lending and borrowing the securities. Lending and borrowing is effected through the depository system.
  • Yes. You can lend your securities through Approved Intermediaries registered with SEBI.
  • You may enter into an agreement with the approved intermediary to be a lender under this scheme. After that, you may lend securities any time by submitting lending instruction to your DP.
  • Intermediary may return the securities at any time or at the end of the agreed period of lending. Intermediary has to repay the securities together with any benefits received during the period of the loan.
  • The benefits will be given to the Intermediary/borrower. However, whenever the securities are being returned / recalled. Intermediary/borrower will return the securities together with benefits received.
  • Nomination can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.
  • Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder.
  • It is in the interest of the BO to make nomination. This will help his/her from legal heirs to approach court of law, Obtaining of Succession certificate, Save Expenses In absence or deceased of a BO.
  • Transmission is the process by which securities of a deceased account holder are of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held.
  • The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents 1. In case of death of sole holder where the sole holder has appointed a nominee Notarised copy of the death certificate 2. In case of death of the sole holder, where the sole holder has not appointed a nominee Notarised copy of the death certificate Any one of the below mentioned documents - Succession certificate Copy of probated will Letter of Administration The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. The major advantage in case of dematerialised holdings is that the transmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing company or its Registrar separately.
  • 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.
  • A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unitholders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).
  • The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme. Net asset value on a particular date reflects the realisable value that the investor will get for each unit that he his holding if the scheme is liquidated on that date. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing by number of units outstanding.
  • 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. 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. 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: 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. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.
  • For retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because: Mutual Funds provide the benefit of cheap access to expensive stocks. Mutual funds diversify the risk of the investor by investing in a basket of assets. A team of professional fund managers manages them with in-depth research inputs from investment analysts. Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
  • A very important risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of the equity funds will also experience a downturn. However, the company specific risks are largely eliminated due to professional fund management.
  • Financial theory states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.
  • In case of mutual funds, the investments of different investors are pooled to form a common investible corpus and gain/loss to all investors during a given period are same for all investors while in case of portfolio management scheme, the investments of a particular investor remains identifiable to him. Here the gain or loss of all the investors will be different from each other.
  • These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
  • It depends on your investment object, which again depends on your income, age, financial responsibilities, risk taking capacity and tax status. For example a retired government employee is most likely to opt for monthly income plan while a high-income youngster is most likely to opt for growth plan.
  • A systematic investment plan is one where an investor contributes a fixed amount every month and at the prevailing NAV the units are credited to his account. Today many funds are offering this facility.
  • These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.
  • A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
  • Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments.
  • The price or NAV a unitholder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unitholders. It may include exit load, if applicable.
  • Assured return schemes are those schemes that assure a specific return to the unitholders irrespective of performance of the scheme. A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.
  • Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unitholders and giving them option to exit the scheme at prevailing NAV without any load.
  • Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes.
  • An investor should take into account his risk taking capacity, age factor, financial position, etc. As already mentioned, the schemes invest in different type of securities as disclosed in the offer documents and offer different returns and risks. Investors may also consult financial experts before taking decisions. Agents and distributors may also help in this regard.
  • An investor must mention clearly his name, address, number of units applied for and such other information as required in the application form. He must give his bank account number so as to avoid any fraudulent encashment of any cheque/draft issued by the mutual fund at a later date for the purpose of dividend or repurchase. Any changes in the address, bank account number, etc at a later date should be informed to the mutual fund immediately.
  • An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor’s track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.
  • Mutual funds are required to despatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of close-ended schemes, the investors would get either a demat account statement or unit certificates as these are traded in the stock exchanges. In case of open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document.
  • According to SEBI Regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund.
  • A mutual fund is required to despatch to the unitholders the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unitholder. In case of failures to despatch the redemption/repurchase proceeds within the stipulated time period, Asset Management Company is liable to pay interest as specified by SEBI from time to time (15% at present).
  • Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g.structure, investment pattern, etc. can be carried out unless a written communication is sent to each unitholder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unitholders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor.
  • There may be changes from time to time in a mutual fund. The mutual funds are required to inform any material changes to their unitholders. Apart from it, many mutual funds send quarterly newsletters to their investors. At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted.
  • The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place. The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format. The mutual funds are also required to send annual report or abridged annual report to the unitholders at the end of the year. Various studies on mutual fund schemes including yields of different schemes are being published by the financial newspapers on a weekly basis. Apart from these, many research agencies also publish research reports on performance of mutual funds including the ranking of various schemes in terms of their performance. Investors should study these reports and keep themselves informed about the performance of various schemes of different mutual funds. Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc.
  • The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis which are published in the newspapers. Some mutual funds send the portfolios to their unitholders. The scheme portfolio shows investment made in each security i.e. equity, debentures, money market instruments, government securities, etc. and their quantity, market value and % to NAV. These portfolio statements also required to disclose illiquid securities in the portfolio, investment made in rated and unrated debt securities, non-performing assets (NPAs), etc. Some of the mutual funds send newsletters to the unitholders on quarterly basis which also contain portfolios of the schemes.
  • Yes, there is a difference. IPOs of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed.
  • Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below. Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes. On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weightage to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.
  • As already mentioned, the investors must read the offer document of the mutual fund scheme very carefully. They may also look into the past track record of performance of the scheme or other schemes of the same mutual fund. They may also compare the performance with other schemes having similar investment objectives. Though past performance of a scheme is not an indicator of its future performance and good performance in the past may or may not be sustained in the future, this is one of the important factors for making investment decision. In case of debt oriented schemes, apart from looking into past returns, the investors should also see the quality of debt instruments which is reflected in their rating. A scheme with lower rate of return but having investments in better rated instruments may be safer. Similarly, in equities schemes also, investors may look for quality of portfolio. They may also seek advice of experts.
  • Investors should not assume some companies having the name "mutual benefit" as mutual funds. These companies do not come under the purview of SEBI. On the other hand, mutual funds can mobilise funds from the investors by launching schemes only after getting registered with SEBI as mutual funds.
  • In the offer document of any mutual fund scheme, financial performance including the net worth of the sponsor for a period of three years is required to be given. The only purpose is that the investors should know the track record of the company which has sponsored the mutual fund. However, higher net worth of the sponsor does not mean that the scheme would give better returns or the sponsor would compensate in case the NAV falls.
  • Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-yearly results and portfolios of all mutual funds at the web site of Association of mutual funds in India (AMFI) www.amfiindia.com. AMFI has also published useful literature for the investors. Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds" section for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information on mutual funds is given. There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide them in this regard.
  • Primarily, issues can be classified as a Public, Rights or Preferential issues.
  • Initial Public Offering 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. It is a way for a company to raise money from investors for its future projects and get listed to Stock Exchange. Or An Initial Public Offer (IPO) is the selling of securities to the public in the primary stock market.
  • A further public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer to sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.
  • Rights issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date.
  • Offer documents means Prospectus in case of a public issue or offer for sale and letter of offer in case of a rights issue, which is filed Registrar of Companies and Stock Exchanges. Offer Document covers all the relevant information to help an investor to make his/her investment decision.
  • Draft Offer Document means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filling of the offer Document with ROC/Ses. SEBI may specifies changes, if any, in the draft offer Document and the issuer or the lead marchant banker shall carry out such changes in the draft offer document before filing the offer document with ROC/Ses. The Draft Offer document is available on the SEBI website for public comments for a period of 21 days from the filling of the draft Offer Documents with SEBI.
  • Red Herring Prospectus is a prospectus which does not have details of either price or number of shares being offered or the amount of issue. This means that in case price is not disclosed , the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for an FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus.
  • An issuer company is allowed to freely price the issue. The basis of issue price of disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. The issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filling of the final offer documents with SEBI/ROCs
  • Initial Public Offering can be made through the fixed price method, book building method or a combination of both. Fixed Price process ? Price at which the securities are offered/allotted is known in advance to the investor. ? Demand for the securities offered is known only after the closure of the issue. ? Payment if made at the time of subscription wherein refund is given after allocation. Book building process ? Price at which securities will be offered/allotted is not known in advance to the investor. Only an indicative price range is known. ? Demand for the securities offered can be known everyday as the book is built. ? Payment only after allocation
  • Floor Price is the minimum price (lower level) at which bids can be made for an IPO. Cut-off price means the investor is ready to pay whatever price is decided by the company at the end of the book building process. Retail investor has to pay the highest price while placing the bid at Cut-Off price. If company decides the final price lower then the highest price asked for IPO, the remaining amount is return to the retail investor
  • Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red hearing prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at . Only the retail investors have the option of bidding at “cut-off: After the bidding process is complete, the “cut-off” price is arrived at on the lines of Dutch auction. The basis of allotment is then finalized and letters allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process.
  • Company decides on the price band in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.
  • 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. NRI's who apply with less then Rs 1,00,000 /- are also considered as RII category.
  • Yes, RI can bid in a book-built issue for a value not more than Rs. 100000. Any bid made in excess of this will be considered in the HNI catefory.
  • Individual investors, NRI's, companies, trusts etc who bid for more then Rs 1 lakhs are known as Non-institutional bidders. They need not to register with SEBI like RII's. Non-institutional bidders have an allocation of 15% of shares of the total issue size in Book Build IPO's.
  • Financial Institutions, Banks, FII's and Mutual Funds who are registered with SEBI are called QIB's. They usually apply in very high quantities. QIBs are mostly representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes. QIB's have an allocation of 50% of shares of the total issue size in Book Build IPO's.
  • The form for applying/bidding of shares is available with our all offices and Branches.
  • As per the requirement, all the issues of size in excess of Rs.10 crores, are to made compulsorily in the demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he ha to have a demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.
  • The investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against any ‘tips’ or relying on news obtained through unofficial means.
  • As per Clause 8.8.1, Subscription list for public issues shall be kept open for at least 3 working days and not more than 10 working days. In case of Book built issues, the minimum and maximum period for which bidding will be open is 3 – 7 working days extendable by 3 days in case of a revision in the price band. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days. As per clause 8.8.2., Rights issues shall be kept open for at least 30 days and not more than 60 days.
  • 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 exchange is done within 7 days form the finalization of the issue.
  • The investor is entitled to receive a confirmatory allotment Note (CAN) in case he has been allotted shares within 15 days from the date of closureof a book built issue. The registrar has to ensure that the demat credit or refund as applicable is completed with in 15 days of the closure of the book built issue.
  • The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally , it would be around 3 weeks after the closure of the book built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.
  • Yes, SEBI vide its circular dated January 20,2006 has permitted use of ECS for refunds in the issue process.
  • The bank account details will be directly taken from the depositories database and hence are not required to be filled in the application form for issues wholly made in dematerialized form.
  • The application are required to ensure that bank details including MICR code(9 digit code which appears in the cheque leaf) maintained at the depository level are updated.
  • Non- Resident Indian [NRI] means a ‘person resident outside India’ who is a citizen of India or is a ‘person of Indian origin’.
  • ‘Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if a. He at any time held Indian passport; or b. He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or c. The person is a spouse of an Indian citizen or a person referred to in sub-clause [a] or [b]. Investment by PIO in Indian Securities is treated the same as the investment by non-resident Indians and requires same approvals and enjoys the same exemptions.
  • There are two types of investment opportunities available to NRIs: a. Investment with repatriation benefits called NRE A/c b. Investment under non-repatriation basis called NRO A/c
  • Repatriation Means you can take back your capital, profits, and dividends in foreign exchange, which you invested originally in foreign exchange. NRIs are permitted to invest in shares/convertible debentures of Indian companies by Reserve Bank of India, under Portfolio Investment Scheme (PIS). It means that, if you are a NRI living in the USA, you can convert the sale proceeds of your investments in US dollars and can transfer to your bank account in USA without any restrictions. Non-repatriation Means you can get back the proceeds only in Indian rupees, irrespective of the currency you used to invest in the same. Normal procedures for investing in shares/debentures of a company and mutual fund units are applicable here .You cannot repatriate your investment/capital in foreign exchange. The investment made can be in new issues of companies or listed shares in Stock Exchanges. Investment on non-repatriation basis can be made from NRE / FCNR / NRO accounts. It means that If your investment is on Non-Repatriation Basis, you cannot convert your rupees in any foreign currency.
  • To trade on Indian Stock Exchanges in the capacity of an NRI, you would need to: • Open a bank account with a RBI (Reserve Bank of India) approved designated bank branch. • Take RBI approval for investment in the Indian Stock Market. (Portfolio Investment Scheme) • Open a Demat Account with a Depository Participant. • Appoint a broker to execute trades on your behalf on the Exchange.
  • RBI has authorized a few branches of each bank to conduct business under Portfolio Investment Scheme (PIS) on behalf of NRIs/OCBs. These are the main branches of major commercial banks located close to the stock exchanges. NRIs/OCBs will have to route their applications through any of the designated bank branches that have authorization from RBI. You can have as many NRI/NRO accounts in India but you should have only one designated bank for sale/purchase of shares under the Direct/Portfolio Investment Schemes. RBI guidelines permit NRI investors to designate only one bank authorized by RBI to undertake purchase/sale of shares/debentures through the stock exchange .The client has to give a declaration that he has not obtained RBI permission for sale/purchase of shares under the Direct/Portfolio Investment Schemes through any other bank.
  • PIS Stands for Portfolio Investment Scheme Letter. It’s a one time RBI Permission for NRIs to do Trade in Indian Secondary Stock Market. Authorised bank issues this letter. Yes, It is mandatory letter to start trading in the Indian stock market.
  • The application is to be submitted to a designated branch of an authorized dealer in India with the prescribed form. Reserve Bank has authorized a few branches of each authorized dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated authorized dealer branches that have authorization from Reserve Bank. You can open as many NRE/NRO account but one can have only One PIS permission
  • You are requested to fill up any one of the prescribed forms available with Authorized Dealer bank. This form is submitted to RBI, who further grants permission.
  • If you have a NRE/NRO account with any of the above named authorized dealers, then all you need to do is submit an application form for a PIS account. If you however have a NRE/NRO account with a bank other than, you will need to approach any of the authorized banks and provide them details of your account and then apply for the PIS through them.
  • RBI needs to track each and every transaction of NRI from secondary market for the Taxation purpose. All transactions of NRI routes through PIS Account maintain by the authorized bank. RBI views these transactions regularly.
  • All transaction form primary market is excluded from ambit of PIS.Securities purchased as a resident individual are not covered under this scheme. Derivative segment transactions or Mutual fund unit purchases are not within the ambit of the PIS scheme. Shares purchased through IPO's (Initial public offers)
  • No special permission is required. Holding securities in Demat only constitutes change in form and does not need any special permission. However, only those physical securities which already have the status as NR – Repatriable / NR- Non-Repatriable can be dematerialized in the corresponding Depository Accounts
  • Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GoI/RBI. Therefore, individual NRI need not obtain any permission.
  • No. The shares/convertible debentures acquired under IPO cannot be routed through designated bank branch, as Portfolio Investment Scheme does not cover this.
  • It is a Mandatory requirement from NSDL. In India it is compulsory to have “In Person Verification” of Client at the time of Opening an Account, But in case of NRI if they are not able to come to India than in that case they have to Notarized Each and Every Document from Indian Embassy or have to do Notary from the country they are residing. For the Purpose of “ In person Verification” and have to give validation of a genuineness of a person. Therefore, clients have to comply with KYC Norms.
  • Bank details are required as per KYC norms. If you provide a Bank Number than you will receive a Dividend declared by company directly to your bank account through ECS facility.
  • Yes, you can appoint a POA to operate your Trading Account. However, you have to submit POA documents as per requirement.
  • It is mandatory from exchange to give your financial Details in Trading Account Form
  • You will receive Welcome letter, in which you will find all the details related to your Trading Account. If you are having account in Internet Trading, than you will receive an email from Internet Department regarding your trading account.
  • Client can View Statement of Account, Bills, Profit & Loss, Demat Holding from our Back office through their User Id and Password.
  • The Stock Exchanges assign a Unique Order Code Number to each transaction, which is intimated by broker to his client and once the order is executed, this order code number is printed on the contract note. At the end of day our representative will email you and confirm your trade.
  • Contract note is a one type of Bill that shows your confirmed trades on particular day for and on behalf of client. Contract note is issued in the prescribed format of Rules and regulations of NSE and SEBI guidelines. Contact notes are helpful to track your transaction and also for tax purpose. Clients can collect bills from office on same day of transaction. The contract notes will be delivered to you by post.
  • Yes, You can View your Bills Online through your user id and Password form our Back office. You can also able to view your Previous bill and new bills from our back office anytime and anywhere. You can verify your quantity, price, brokerage and time through your Contact note.
  • The trading member can charge: 1. Brokerage charged by member broker. 2. Penalties arising on specific default on behalf of client (investor) 3. Service tax as stipulated. – 12.36% charges will be applicable on brokerage, T.O. & O.C. 4. Securities Transaction Tax (STT) as applicable.- 0.125% on market Rate for Delivery and 0.25% on speculation from sell side. 5.Turn over Charges – NSE charges will be 0.05% and BSE charges will be 0.01% 6.Stamp Duty Charges - 0.01% on Delivery and 0.02% on speculation The brokerage, service tax and STT, Turn Over Charges, Stamp Duty charges are indicated separately in the contract note
  • In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. Presently 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 payout are carried out on T+2 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 broker does the pay out of funds and securities to the clients within 24 hours of the payout. The Exchanges will have to issue press release immediately after pay out.
  • Short delivery refers to a situation where a client, who has sold certain shares during a settlement cycle, fails to deliver the shares to the member either fully or partly. It also happens in case of Purchasing a shares. If you have purchased a shares and you will not receive fully or partly shares from exchange than it is also called a Short delivery of purchased shares.
  • As per T+2 Settlement, You will get delivery of your shares after T + 2 Days into your Demat account.
  • When there is no specific company’s share in clients Demat account and by mistake if he/ she sell the same than Auction happens. Auction Process: You sold the shares and those shares has been bought buy some one in the market. As there are no shares in your Demat Account exchange have to buy those shares from the market on behalf of you and delivered the same to the buyer.
  • 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 member pays price received through auction to the Exchange, which is then liable to be recovered from the client.
  • No. Securities received against investments under ‘Foreign Direct Investment scheme (FDI)’, ‘Portfolio Investment scheme (PIS)’ and ‘Scheme for Investment’ on non – repatriation basis have to be credited into separate Demat accounts. Investment under PIS could be on repatriation or non – repatriation basis. Investment under FDI scheme is on repatriation basis.
  • As per section 6(5) of FEMA, NRI can continue to hold the securities, which he/she had purchased as a resident Indian, even after he/she has become a non-resident Indian, on a non-repatriable basis.
  • Yes. It is the responsibility of the NRI to inform the change of status to the designated authorized dealer branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the Demat account. Subsequently, a new Demat account in the resident status will have to be opened; securities should be transferred from the NRI Demat account to resident account and then close the NRI Demat account.
  • Yes. An NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the company (equity as well as preference capital) or the aggregate paid up value of each series of convertible debentures as the case may be. For the purpose of this ceiling, investment under the Portfolio Investment Scheme on repatriation as well as non-repatriation basis will be clubbed together. There is an overall ceiling of 10% of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by all NRIs/OCBs put together. The overall ceiling can be raised to 30% if the company concerned passes a special resolution to that effect in its general body meeting. Shares/convertible debentures acquired through IPO/Private Placement are excluded for the purpose of above limits.
  • An NRI will have to immediately off load such portion of the holding, which is in excess of the prescribed limit.
  • The table given below summarizes the permissions required for the off-market transfer: From To Transaction Permissions Required NRI NRI Sale or Gift General permission, no specific permission to be taken* NRI Resident Indian Gift Prior approval of RBI required. NRI Resident Indian Sale under private arrangement General permission already available. Resident Indian NRI Gift Prior approval of RBI/FIPB should be obtained. Resident Indian NRI Sale under private arrangement General permission is already available provided the shares being transferred are not of the companies engaged in financial service sectors, such transfer does not attract SEBI takeover code and the activity of the company should be eligible for FDI. * Provided that the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares, if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied filed in which the Indian company whose shares are being transferred is engaged.
  • On becoming an NRI, a new depository account with appropriate NRI status is to be opened and all the balances held in account with ‘Resident’ status should be transferred to the account with NRI status & securities held under this account will be treated on non-repatriable basis. Change of status should be informed by client to registrar of Company mentioning a change of his/her status for each script he/she is holding in resident account.
  • Yes, NRI can receive shares in inheritance. RBI permission is not required to be obtained and the shares will be held on non-repatriable basis.
  • While the respective designated bank branch monitors limits of individual holdings by NRIs, RBI monitors the holding limits by NRIs in aggregate. Once the aggregate holding of NRIs builds up/ about to build up to the maximum prescribed ceiling, RBI puts the concerned stock under the Restrict List/Watch List, which is published by RBI from time to time. What happens if an NRI purchases a stock in excess of the prescribed limit? An NRI will have to immediately off load such portion of the holding, which is in excess of the prescribed limit. So if NRI gets profit from it then that Profit will go into their NRO account.
  • Income on investments (capital gains) forming part of sales proceeds is subject to Capital Gains tax. The rate of tax depends upon the period of holding. Currently the tax rate applicable for short-term capital gains is 15% and there is no long-term capital.
  • Capital gain is the calculated based on the difference between the net sale consideration (sell price less brokerage) and the cost of acquisition (purchase price plus brokerage) of the concerned holding. Value of holding is calculated on FIFO (First In First Out) basis.
  • Short term Capital gain, Long term Capital gain & Speculative Gains Short term capital gain: Any capital gain arising out of sell of shares/debentures held for a period not more than 12 months from the date of its acquisition shall be a short term capital gain. . Short Term Capital Gain (held for less than 12 months) from sale of shares is taxable @ 15% + SC + EC (if STT is paid). Long-term capital gain: Any capital gain arising out of sell of shares/debentures held for more than 12 months from the date of its acquisition shall be a long term capital gain. Presently the long-term capital gain is totally free of any Tax. The period of holding is defined as the period from the date of purchase to the date of sale. Long Term Capital Gain (held for more than 12 months) from Sale of Shares is exempt from Income Tax (if STT is paid). For example if the sale transaction date is 01-01-2005, all those purchases, which are affected up to 01-01-2004, are eligible as long term capital gain tax. Purchase made on 02-01-2004 and thereafter will be subjected to short term capital gain tax. Speculative Profits are not eligible for taxation under these special provisions. Speculative profits are taxable at normal rates as applicable to any resident individual. Speculative loss cannot be set off against any income including speculative profits.
  • To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated bank.
  • As per Indian tax laws, all the capital gains arising out of sale transactions are subject to tax. In the case of NRIs, the capital gain arising out of sale transaction is subject to deduction of tax at source (TDS) i.e. at the time of crediting the sale proceeds to the respective NRE account by the concerned bank branch. Accordingly, the concerned bank shall determine the tax liability and tax will be deducted at source. The concerned bank, which has deducted tax at source, shall issue a certificate in this regard.
  • There is no Gift Tax on Gift of Shares / Mutual Funds to any person. Gift of shares / Mutual Fund is also not considered as taxable income under the Income Tax Act. Where as gift of money is considered as taxable income in the hands of donee in excess of Rs. 50000 except gift is given to a close relative defined under the Act.
  • In the advanced countries, depository systems and services have played a significant role in not only facilitating smooth trading and settlement but also attracting foreign investment in the capital market. The depository system evolved by the National Securities Depositories Limited (NSDL) enables investors to overcome all problems related to handling physical certificates. NSDL is an organization formed to provide electronic depository facilities for securities traded. The securities of investors are held in electronic form through the medium of Depository Participants. The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. A depository can therefore be conceived of as a "Bank" for securities. An investor wishing to utilize the services offered by a depository has to open an account with the depository through the Depository Participant. This is very similar to opening an account with any of the branches of a bank in order to utilize the services of that bank.
  • As per SIHL rules and guidelines, all clients who open a Trading Account with Shah Investors need to have a Demat Account with Shah Investors. A client can continue to keep his/her Demat Account with another DP, but will have to open a new Demat Account with Shah Investors.
  • Yes. For the purpose of determining ownership of holding, the first holder is taken into account. Hence, even though other joint holders may be persons resident in India, the sale proceeds of such securities can be repatriated in case the first holder is permitted to repatriate funds.
  • A depository holds the securities of investors in electronic form just like a bank holds cash of its customers. As in a Bank, investors can deposit/withdraw and transfer securities. The National Securities Depository Limited (NSDL) is the first depository in India. The Securities and Exchange Board of India (SEBI) regulate the functions of NSDL. The Depository Participants (DPs) are the link between the Shareholder, the Company and NSDL. Banks, Financial Institutions, Custodians, Stock Brokers etc. can become DPs subject to their meeting certain requirements prescribed by NSDL and SEBI. NSDL publishes from time to time the list of DPs registered with them. You can open your accounts with one DP, as you like. The procedure for opening an account with the Depository Participant is similar to opening a Savings Bank Account with the Bank. After opening the account, you can hold shares of any number of companies in your account, provided all such companies have entered the depository system.
  • We can provide you your Demat A/c number and password and you have to open our website-www.shahinvestors.com and click to Demat Holding Online than go to check your Online Demat Holding you have to type your Demat A/c no and Password and able to view the Demat A/c holding status and for check it out the Trading contract bills please click to back office and go to individual login and type your trading code and password you can able to check back dated trading bill in detail.
  • Yes. For the purpose of determining ownership of holding, the first holder is taken into account. Hence, even though other joint holders may be persons resident in India, the sale proceeds of such securities can be repatriated in case the first holder is permitted to repatriate funds.
  • Whenever a client executes a Buy/Sell Trade in any of the exchanges, a bill for the same is generated from our side (a copy of the bill is sent to the client by email). This bill is then presented to the respective bank of the client by Shah Investors. The bank verifies the clients account number and status and issues or accepts the cheque for the amount of the bill.
  • A Fixed Maturity Plan (FMP) is a fixed income scheme and generally is 100% equity free. FMPs have a fixed life and a definite maturity date i.e. they are closed ended schemes and hence the name Fixed Maturity. Post the maturity date the fund ceases to exist and your investment along with the appreciation is automatically returned back to you.
  • Though Fixed Maturity plans do not guarantee returns they are relatively more predictable in their returns. Here’s how. As investments generally do not flow in or out during the tenure of the scheme it allows the Fund manager of the FMP to lock into a pre-decided fixed instrument (could be debentures, Commercial Paper, Certificate of Deposit, Gilts i.e. securities issued by the Government of India.) and hold on to it till the expiry of the instrument. Quite naturally the maturity profile of this fixed income instrument would be similar to the maturity profile of the scheme thus lending FMPs their relative predictability. Thus unlike an open ended fixed income fund, the fund manager here generally does not trade.
  • FMPs come in various maturities. Typical maturity periods are 90 day, 180 days, yearly (though the maturity tends to be slightly more than a year to avail of double indexation benefits), 3 years etc. A 90 day FMP simply means a FMP with a maturity of 90 days.
  • FMPs that have a maturity of more than 90 days, have to provide investors specific exit dates where investors can withdraw. But this comes at a price. These exit dates are pre-decided and known beforehand. You can withdraw only after paying an exit load i.e. a penalty for early withdrawal as the fund manager may have to break the scheme’s investment in an otherwise locked-in instrument thus entailing transaction costs and in an extreme scenario even a decline in returns of the portfolio as new instruments may or may not yield the earlier yields.
  • Though FMPs have a definite maturity, the credit quality of the portfolio is crucial. Credit quality simply means if the issuer of the fixed instrument that the fund manager chooses to invest in is reputable or not. AAA is the rating that is issued to a reputed borrower. Logically a better quality portfolio should yield you less than a portfolio which compromises on portfolio for returns.
  • Fixed Deposit is an account maintained with a Bank, HFC (Housing Finance Company), Corporate, NBFC (Non Banking Finance Company) or any other entity wherein the money is given at a particular rate of interest for a particular period of time.
  • The interest rate on FD varies depending upon the tenure and amount of principal.
  • The time period for which the FD is made is called the tenure.
  • The tenures varies from 1 year to 7 year (12 months to 84 months)
  • Interest is paid as per the scheme chosen for the FD. In case of Monthly / Quarterly / Annual Income Plan, interest is paid on a monthly/quarterly/annual basis. In case of Cumulative scheme, compound interest is paid at the end of the term of FD along with principal.
  • In case of Cumulative Scheme deposits, interest accrued is added back to the principal at the end of every month/quarter/half-year/year depending upon the compounding factor. Cumulative scheme of is compounded annually.
  • The documents required (apart from duly filled FD Application Form) are the proof of residence and PAN No. If a depositor is not assessed for tax then you will have to fill Form No.60 as per the regulations.
  • Yes, if the investor does not have PAN and is not assessed for tax then he/ she has to fill Form No.60 according to the guidelines.
  • Yes, you can open several accounts with the same name but the interest income will be clubbed.
  • The Deposit Receipt duly discharged with a revenue stamp should be surrendered to the company on maturity for the repayment of the principal amount . This must be done at least a month before the maturity to enable the company to renew or refund the deposits as the case may be.
  • Yes, you can have the FD in the joint account mode. A maximum of 3 joint holders for a deposit are permitted as per the NHB guidelines.
  • In this facility, any one of the account holders (if it is in a joint name) can stake a claim to the money deposited and operate the account without the signature of the other account holder(s). Moreover, if one of the account holders has expired without any nomination, the other account holder can claim the funds on maturity.
  • In this case, both account holders have to be present at the time of withdrawal of deposits and their signatures have to be present on the cheque. In the case of one account holder expiring, the other account holder(s) have to furnish the death certificate of the expired account holder in order to claim the funds on maturity.
  • If the FD matures and the investor does not claim the money then he/ she can renew deposit for the same or different tenure depending on the interest rates.
  • The payment after maturity of the FD is paid in the form of cheque/pay order/demand draft/direct credit into the depositor’s bank account.
  • Nomination is a form of instruction by an investor, directing the company to pay the matured fund amount to a particular person in case the original account holder expires.
  • No, the FD is not transferable.
  • You just have to write an application informing of any change. This must be signed by all the account holders
  • If the interest on the FD exceeds Rs.5000 then the company deducts TDS while making the payments.
  • Yes, it is mandatory for the companies to club the interest income on all the accounts of the account holder and deduct TDS if interest is more than Rs. 5000. The Income Tax is deducted at source in accordance with the Section 194-A of the Income Tax Act except where appropriate certificates/Forms ie. Form 15H/15G is submitted at least one month before the due date of interest.
  • NO, there is no limit as to the number of FDs. You can be a customer of as many companies as you like.
  • You should immediately inform the company so that the company can issue you a duplicate receipt after getting an indemnity bond from you.
  • Yes, the guardian of the minor can sign on his/ her behalf on the form.
  • Yes, one can ask for the nomination form and nominate any person to be the beneficiary in case one expire before the deposit maturity date.
  • The payment in that case will be made on the next day.
  • Yes, company may consider making premature payment of the deposit subject to the conditions laid down by the company, on a request made by depositor.
  • No. The depositor is advised to satisfy himself about the financial position and all relevant aspects before placing his deposit with the HFC. A person making public deposits with HFCs should satisfy himself that it holds a valid certificate of registration for accepting public deposits from NHB. NHB while issuing certificate of registration to an HFC specifically mentions whether or not it can accept public deposits.
  • Yes, they do get extra benefits in the form of higher interest rates.
  • Yes, Housing Finance Companies and Non-banking Finance Companies offer loan facility upto 75% of the principal amount.
  • Any currency other than the local currency which is used in settling international transactions (export, import) is called foreign currency. The system of trading in and converting the currency of one country into that of another currency is referred to as foreign exchange (Forex).
  • A countries currency exchange rate is typically affected by supply and demand for the countries currency in the international foreign exchange market. The demand and supply dynamics is principally influenced by factors like interest rates, inflation, trade balance and economic and political scenario of the country. The level of confidence in the economy of a particular country also influences the currency of that country.
  • There are several reasons. A rise in export earning of the country increase foreign exchange supply. A rise in imports increases demand. These are the objective reasons, but there are many subjective reasons too. Some of the subjective reasons are: directional view points of the market participants, expectations of national economic performance, confidence in a country's economy and so on.
  • A currency futures contract is the standardized version of a forward contract that is traded on the regulated exchanges. It is an agreement to buy or sell a specified quantity of an underlying currency on a specified in future at specified rate (e.g., USD 1= INR 44.00).
  • We need currency futures if our business is influenced by fluctuations in currency exchange rates. If you are in India and importing something, you have done the costing of your imports on the basis of a certain exchange rate between the Indian Rupee and the relevant foreign currency (usually, the US Dollar or the EURO). By the time you actually import, the value of Indian Rupee may have gone down and you may lose out on your income in terms of Indian Rupees by paying higher. On the contrary, if you are exporting something and the value of Indian Rupee have gone up, you earn less in terms of Rupee than you had anticipated. Currency futures helps you hedge against these exchange rate risks.
  • The exchange-traded futures, as compared to OTC forwards, serve the same economic purpose, yet differ in fundamental ways. Exchange traded contracts are standardized. In an exchange traded scenario where the market lot is fixed at much lesser size than the OTC market, equitable opportunities is provided to all classes of investors whether large or small to participate in the futures market. The other advantages of an exchange traded market would be greater transparency, efficiency and accessibility. The counterparty risk (credit risk) in futures contract is eliminated by the presence of a clearing house / corporation, which by assuming counterparty guarantee, eliminates default risk.
  • An resident Indian or company including banks, and financial institutions can participate in the futures market. However at present, Foreign Institutional Investors (FIIs) and Non Resident Indians (NRIs) are not permitted to participate in currency futures market.
  • The timings as provided by National Stock Exchange (NSE) of India is 9:00 hrs to 17:00 hrs IST from Monday to Friday.
  • At present, the SEBI has given the approval of trading in 4 currency pairs. US Dollar-Indian Rupee (USD/INR), Euro - Indian Rupee (EUR/INR), Great Britain Pound- Indian Rupee (GBP/INR), Japanese Yen - Indian Rupee (JPY/INR). With the trading point of View Future contracts are available for next 12 months for each currency pair and Option Contract are available only in USD/INR currency pair for next 3 months.
  • There are next 12 months currency futures contracts are available for 4 currency pairs and Option Contracts are available only in USD/INR currency pair and its next 3 months are active on NSE. Each contract end on Two working days prior to the last business day of the expiry month at 12:15pm.
  • The minimum contract size of the USD/INR futures contract is USD 1000.
  • No, the current currency derivative market required contracts to be settled in cash and the settlement prices of the contract would be RBI’s reference rate on the last trading day.
  • They are settled in cash in Indian Rupees.
  • The last trading day of a futures contract shall be two working days prior to the last working day of the month. The settlement price is RBI's reference rate on last trading day.
  • In India, the currency derivative market falls under the purview of Security Exchange Board of India (SEBI). Indian Rupee trades in a managed floating rate regime and thus RBI intervention is also seen at time. Besides, the bye-laws of respective Exchange Platform will also apply.
  • A new Demat Account is not required. Further as the currency future contract is based on NSE platform, the existing SIHL equity client are required to fill up a new contract agreement known as KYC form however the client code would be the same as their equity client code. On the contrary, new SIHL client or the existing SIHL Commodity Client are required to open up a new trading account by filling up KYC form and they will be given a new client code for currency trading.
  • Hedge is an investment position taken in order to protect oneself from the risk of an unfavorable price move in a currency.
  • • To mitigate Exchange rate risk: Fluctuations in the exchange rate of currencies give rise to exchange rate risk. As the time gap between finalizing an export/import order and receiving/making payment against it widens, the possibility of fluctuation of exchange rate rises. A hedge helps in protecting businesses from unfavorable fluctuations. • To avail the following benefits: It brings certainty in business- you would know the precise exchange rate at which your receivables/payables will be converted. Helps in estimating receipts and payments-once you are aware of one side on the P/L you can plan the other. Business is immune to any further movement in currency markets, thus Relieving itself of the exercise of tracking currency market.
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Prevent Unauthorised transactions in your account. Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day. Issued in the interest of investors.

KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

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