HOW CAN I CHOOSE BEST DISCOUNT STOCK BROKER IN INDIA?

While looking for the best discount broker, the following parameters should be evaluated:

Cost: Cost is the most crucial aspect while considering the best broker. Low brokerage charges have been provided by many of the discount brokers, however, you should analyse other costs involved as well such as transaction costs, other taxes, and commissions before selecting a broker. Margin provided by stockbrokers must also be evaluated.

Trading Platform: Technologically advanced trading platforms help in carrying out trading and investing hassle free and in generating expected returns with all the advanced features. Thus, while selecting the best broker, you should have a look at its trading platforms and their features in order to make an ideal decision. Go for the broker who provides platforms that can be operated on mobile, desktop and web with excellent features.

Trading Tools: You should evaluate the trading tools offered by the broker such as indicators, charting tools, watch lists etc. since trading tools are an important part of investing that help you in analysing various factors require to prepare strategies.

Education: Education is yet another important factor in which discount brokers can be evaluated. Trading and investing do not come handy and thus require a constant learning process. Investors can choose the discount brokers that provide thorough knowledge and understanding of stock markets of India, trading, mutual funds, investing and much more.

Support: Finally, potential traders or investors should go for the most reliable and quality customer service. Most of the discount brokers offer low-cost brokerage, however, it will become easy for you to differentiate them on the basis of customer service since not all discount brokers excel in providing quality and regular customer car to their clients. Thus, customer care becomes a crucial aspect since there are times when traders will seek assistance or will have doubts at the time of trading.

ARE DISCOUNT BROKERS SAFE AND HONEST?

There are various myths and misconceptions concerning the discount brokers since they are new concepts for traders or investors. The concept of discount brokers makes traders or investors dicey and skeptical. However, discount brokers are new and trustworthy concept. Thus, the following myths are cleared:

Trustworthiness: Discount brokers can be well trusted as full-service brokers. Since discount brokers are also registered with the stock exchanges and are regulated and controlled by the Securities and Exchange Board of India (SEBI), thus implying no dishonest activity can take place.

Service: It is believed that since discount brokers have lower profit margins, they would be lacking good and reliable customer services and other expected services. However, this is just another misconception, discount brokers provide commendable customer and other services by providing many communication channels such as email, web chat, customer care number etc. and offering trading services in currency derivative, commodity, and stock segments across all popular stock exchanges.

Hidden fees: Discount brokers do not charge any hidden fees or minimum brokerage unlike full-service brokers, who do charge hidden fees. Discount brokers offer free of cost trading platforms including mobile apps, trading terminals, and website. No annual maintenance fee is charged. Moreover, they provide research tools and brokerage calculators that are accessible for free.

IS INVESTING IN MUTUAL FUNDS BETTER THAN INVESTING IN STOCKS?

Out of these two, mutual funds and stocks, the better option depends on person to person and their needs and requirements. If you possess enough knowledge of the stock market and not scared of high risk, then you can opt for investing in stocks and if not, then you can start investing in mutual funds.
Beginners can get confused between investing in mutual funds and investing in stocks. Mutual funds are a basket of stocks, money pooled from various investors in order to invest further in an asset or securities. Everything in mutual funds is managed by a fund manager. Whereas, investors can buy individual stocks through brokers and its sole responsibility of the investor himself to manage his own portfolio.

MUTUAL FUNDS?

  • Risk and Return: High
  • Investor’s behaviour: Aggressive
  • Selection Technique: Performance of the scheme, experience of fund manager and the investment and financial needs of the investor
  • Pricing: Net Asset Value – Based on the closing price of the underlying securities
  • Options: Growth, dividend pay-out, and dividend reinvestment. Dividend option can be daily, weekly, monthly, quarterly, half yearly or annually.
Stocks
  • Risk and Return: Very high depends on the stock
  • Investor’s behaviour: Aggressive
  • Selection Technique: Various techniques are used to invest in stocks and vary from trader or investor, intraday trader or positional trader, growth investor or value investor and more.

WHAT ARE THE DRAWBACKS OF DISCOUNT BROKERS?

  1. No Relationship Manager:

    Relationship manager is not provided by discount brokers as full-service brokers do. Discount brokers cannot be the go-to option for investors who require someone to assist them in managing their portfolio.

  2. All-in-one Roof:

    Full-service broker office all investment product in one roof where discount broker mostly offer stock investment and mutual fund investment option to their client

  3. No advisory:

    No advisory, tips, and recommendations are provided by discount brokers. Full-service brokers assist their clients in all of these.

  4. PMS Service:

    Discount Broker doesn’t provide Portfolio management service to their clients. You can avail this feature in full-service brokers where a fund manager can guide you.

  5. 3 – in – one:

    Discount brokers do not provide 3-in-1 account opening that is banking+demat+trading accounts. However, full-service brokers do have the option of 3-in-1 account.

However, every concept has its own pros and cons. But it can be well said that pros and advantages of Discount brokers overcome all its drawbacks. Its low brokerage rates with efficient customer service and trading platforms outweigh the drawbacks and hence discount brokers are expected to increase in value over time.

HOW TO OPEN A DEMAT ACCOUNT?

To open a demat account, you need a depository participant of CDSL (Central Depository Services Limited). One cannot open a demat account directly with CDSL. You can choose and DP according to your wish.

What is a depository?

A depository is a provider of the facility for holding securities in book entries or an electronic/demat form. It is sort of like a bank which holds securities for your shares, funds, bonds etc.

Steps to Open a Demat Account.

Step 1: First step for opening a demat account requires you to find a depository participant and fill up an account opening form.

Step 2: You will be required to submit the copies of required documents such as identity and address proof, along with account opening form.

Step 3: Afterward, an agreement with your DP needs to be signed by you that provides details of the rights and duties of the investor as well as of DP. You will be entitled to receive a copy of the said agreement and charges’ schedule for future references.

Step 4: After getting done with verification of all the required documents, DP will open an account and thereof provide you the demat account number. All the investments made are credited to your account and selling of securities is debited.

You can have multiple demat accounts if you want to.

WHICH IS BETTER FOR A BEGINNER, A DISCOUNT BROKER OR A FULL-SERVICE BROKER?

For making a decision between these two brokers, one should know the meaning of these brokers:
  1. Full-service brokers: Full-service brokers are those brokers that provide advisory, tips, and recommendations to their clients for investing and thereby charge high commission in return for these services. Their charges are based on a percentage basis. Full-service brokers are known to provide full support in many services such as facilitating trades, management of the portfolio, asset allocation, wealth management, and financial planning to their customers Full-service brokers are HDFC Securities, Sharekhan, Angel Broking, ICICI Direct etc.
  2. Discount brokers: Discount brokers are the brokers that provide lower brokerage charges than full-service brokers. However, no advisory is offered by these brokers. Their charge will be like flat Rs 20. Some of the top Discount brokers are Zerodha, 5 paisa, Fyers etc.

The answer to the question, which broker is best for beginners, can vary from person to person. Discount brokers should be the option for beginners since they offer flat brokerage charges with small capital and hence beginners can invest at lower rates initially.

However, if beginners do not procure enough knowledge and need financial advisory, investment tips and advice, and someone to manage their portfolio and provide recommendations, then full-service brokers can be an ideal selection.

Thus, the decision to select a broker for beginners depends on the needs and knowledge of the beginner. You can analyse your needs and then evaluate the advantages and drawbacks of both of these to make an ideal decision.

ARE MUTUAL FUNDS PROFITABLE?

Yes, mutual funds are profitable if invested accordingly.

Mutual Funds are investment schemes that are managed and controlled by financial experts called fund managers. Multiple investors invest in mutual funds. These investment schemes are invested in Shares/Stocks (Equity), Government and Corporate Bonds/Securities/Debentures (Fixed Income) or a mixture of the Equity and Fixed Income Securities. Mutual Funds are bought and sold in Units. Mutual Fund units are given to investors according to the proportion of their investments and value of these units is computed by Net Asset Value (NAV) which is daily announced by the Fund houses.

Investments in mutual funds are profitable since mutual funds offer many benefits:
  • Managed by professionals: Financial experts called fund managers invest in equity and fixed income products on your behalf. Based on their expertise and knowledge, there can be higher returns.
  • Better taxation structures: Various tax incentives are offered by the government of India to investors investing mutual funds. Investment in debt mutual funds come with tax indexation benefits.
  • Better Flexibility: You can redeem mutual funds investment partially and keep the other fully intact since mutual funds are held in units.
  • Better liquidity: Investors can sell open-ended mutual funds anytime hence highly liquid.
  • Better Diversification: Mutual funds are invested in various securities, hence, the risk is diversified.

Conclusion

Due to all these benefits offered by mutual funds’ investments, they can generate higher returns at low risk, making it profitable for investors. Mutual funds investment can prove to be the best option only if invested according to financial goals and objectives of the investor and keeping in mind the risk appetite.

HOW CAN I LEARN ABOUT MUTUAL FUNDS INVESTMENT?

Mutual funds are diversified investment across different securities, which are made by collecting money from various investors. A mutual fund has many investors, ranging from hundreds to thousands. These investors with similar investment goals and objectives pool their money together at a lower cost, with minimum risk to get desired returns.

Usually, a mutual fund introduces various schemes, each with a different investment objective. Thereafter, the units of the said schemes are offered to investors at the face value, usually Rs.10, which is equal to the amount of their investment in the scheme.

  • Open: It is widely used. You can invest and redeem anytime you want.
  • Closed: You can invest only during the start and redeem when it’s tenure ends
  • Interval: You can invest or redeem at only some pre-defined dates.
There are 4 types of mutual funds based on the investment by them.
  • Equity: invest in equity. Risky but generate higher returns.
  • Debt: invest in bonds issued by the government, banks, and corporates. Low risk and lower returns
  • Hybrid: invest in both equity and bonds. Moderate risk and moderate returns.
  • Others: invest in gold, real estate, commodities, etc. Moderate risk and moderate returns.

To begin investing in mutual funds you will require some documents such as PAN card, bank account and KYC (Know your client).

Thereafter you are required to fill up an application form in which necessary details are to be filled up along with the option you want to invest in:
  • Growth
  • Dividend
  • Dividend Reinvestment

You can invest in mutual funds through intermediaries that include banks etc. or directly through the AMCs, and through online portals.

Learning mutual funds investment is a lifelong process, thus you cannot learn about them in one go. You have to keep researching for additional knowledge and start investing since practical exposure is really necessary to gather around understanding and knowledge about investing.

CAN AN NRI OPEN A DEMAT ACCOUNT?

A Non-Resident Indian (NRI) is permitted to use demat account in India and thus trade shares. However, NRI when opening a demat account has to follow the rules as prescribed by the Foreign Exchange Management Act (FEMA).
An NRI is allowed to only hold up to 5% of paid-up capital in an Indian company As per the rules stated by the Reserve Bank of India (RBI,. Additionally, an NRI can invest in Initial Public Offers (IPOs) on a repatriable basis by using NRE demat and funds in their Non-Resident External (NRE) bank account. Non-Resident Ordinary Rupee (NRO) account and NRO demat will be put into use in case of investing on non-repatriable basis.
However, if a person has a demat account before acquiring the status of NRI, they can convert it into the NRO category to trade after leaving the country or open a new account. In both situations, shares previously owned will be transferred to the new NRO holding account.

An NRI can use the demat account through the Portfolio Investment Scheme (PINS) to make investments in India. The PINS scheme allows an NRI to invest in shares and mutual fund units.

Documents required for an NRI to open a demat account:
  • Duly filled demat application form
  • Copy of passport
  • Copy of PAN card
  • Copy of Visa
  • Overseas address proof, such as utility bills, or rental/lease agreement, or sale deed
  • Passport size photograph
  • FEMA declaration
  • Canceled check leaf of NRE/NRO account

All these documents should be attested at the Indian Embassy of the country where the NRI resides.

CAN I HAVE 2 DEMAT ACCOUNTS?

The answer is YES. Yes, you can operate multiple demat and trading accounts with different stockbrokers. However, this is true that you cannot open more than 1 demat account with the same stockbroker. In order to have multiple demat accounts, you need to open each of them with a different stockbroker.

You can open multiple demat accounts if you want to avail the services of different brokers and are expert in investing. There can be various reasons for which you can open multiple demat accounts.

However, there are advantages of opening more than 1 demat account such as availing services of both full-service and discount brokers, there are few disadvantages as well:
  • You will be required to pay Annual maintenance charges for each of the demat accounts.
  • Tracking of every demat account along with trading account may get complex.
  • Your demat account can get freeze if not used for a longer time, so you need to make sure every demat account is active.

CAN NRIs INVEST IN MUTUAL FUNDS?

The first step involves opening an NRE or NRO account. Non-Residents Indians are enabled to invest in mutual fund schemes in India. In case of NRIs, no special approval is to be taken from authorities such as the RBI. Investment in mutual funds can be done on a repatriable basis and non-repatriable basis. A Nri should have an NRE account with a bank in India to invest on repatriable basis. In this case, the investment money should be remitted by banking channels or from the NRE account of the NRI investor. Nis can invest on a non-repatriation basis as well with investment funds being given from NRO account or NRE of the NRI

KYC

All KYC formalities should be completed by an NRI by filling up a form and submitting required documents. The documents must be attested by an authorised official who can carry out in-person verification.

Application form

Thereafter, an NRI needs to fill up a standard mutual fund application form. FATCA and CRS declarations should also be made.

Mode of investing

Investment in mutual funds can be done in two ways- self or by a power of attorney. In the case of the latter, the power of attorney holder must be KYC compliant.

Mode of payment

Payment is to be made by cheque drawn on the NRE or NRO account. Also, a foreign inward remittance certificate may have to be submitted in order to confirm the source of funds.

CAN STOP LOSS BE CANCELLED?

Stop loss is termed as an advance order made to sell an asset when reaching a particular price. Stop loss is used to limit the loss or gain in a trade. This is an order made by an investor or trader to a broker by paying a brokerage. In other words, an investor asks the broker to sell a security at a pre-determined price.

If first leg Stop loss order cannot be canceled if the first leg of order is traded. However, one can convert stop loss order into market order if the first leg of order is not traded and goes into pending orders, then Stop Loss order alone cannot be canceled. If the first leg of the order (which is not yet traded/executed) is canceled by the client then Stop Loss order will be canceled by the system automatically.

CAN WE PLACE ORDERS AFTER MARKETS ARE SHUT?

No, one cannot trade after markets are shut. However, you can place orders. Orders that can be placed even after markets are shut are called After-market orders (AMO). AMO is the go-to option for traders or investors who do not get time to trade during the market hours but are willing to invest in the stock market. While placing the after-market order, you should look at the closing price of the stock. You can then select a price which is 5% higher or lower than the closing price. Thereafter, your order will take place the time when the market reopens the next day at the opening price if it falls within that 5% range.

AMOs are beneficial when you do not have time during market hours, also when you require time to undertake research and then plan orders. You need to constantly monitor the price as it keeps fluctuating rapidly during the market hours, which does not happen in after-market orders.

ARE DISCOUNT BROKERS SAFE AND HONEST?

There are various myths and misconceptions concerning the discount brokers since they are new concepts for traders or investors. The concept of discount brokers makes traders or investors dicey and skeptical. However, discount brokers are new and trustworthy concept. Thus, the following myths are cleared:

  • Trustworthiness: Discount brokers can be well trusted as full-service brokers. Since discount brokers are also registered with the stock exchanges and are regulated and controlled by the Securities and Exchange Board of India (SEBI), thus implying no dishonest activity can take place.
  • Service: It is believed that since discount brokers have lower profit margins, they would be lacking good and reliable customer services and other expected services. However, this is just another misconception, discount brokers provide commendable customer and other services by providing many communication channels such as email, web chat, customer care number etc. and offering trading services in currency derivative, commodity, and stock segments across all popular stock exchanges.
  • Hidden fees: Discount brokers do not charge any hidden fees or minimum brokerage unlike full-service brokers, who do charge hidden fees. Discount brokers offer free of cost trading platforms including mobile apps, trading terminals, and website. No annual maintenance fee is charged. Moreover, they provide research tools and brokerage calculators that are accessible for free.

HOW TO OPEN A DEMAT ACCOUNT?

To open a demat account, you need a depository participant of CDSL (Central Depository Services Limited). One cannot open a demat account directly with CDSL. You can choose and DP according to your wish.

What is a depository?

A depository is a provider of the facility for holding securities in book entries or an electronic/demat form. It is sort of like a bank which holds securities for your shares, funds, bonds etc.

Steps to Open a Demat Account.

Step 1: First step for opening a demat account requires you to find a depository participant and fill up an account opening form.

Step 2: You will be required to submit the copies of required documents such as identity and address proof, along with account opening form.

Step 3: Afterward, an agreement with your DP needs to be signed by you that provides details of the rights and duties of the investor as well as of DP. You will be entitled to receive a copy of the said agreement and charges’ schedule for future references.

Step 4: After getting done with verification of all the required documents, DP will open an account and thereof provide you the demat account number. All the investments made are credited to your account and selling of securities is debited.

You can have multiple demat accounts if you want to.

ARE MUTUAL FUNDS PROFITABLE?

Yes, mutual funds are profitable if invested accordingly.

Mutual Funds are investment schemes that are managed and controlled by financial experts called fund managers. Multiple investors invest in mutual funds. These investment schemes are invested in Shares/Stocks (Equity), Government and Corporate Bonds/Securities/Debentures (Fixed Income) or a mixture of the Equity and Fixed Income Securities. Mutual Funds are bought and sold in Units. Mutual Fund units are given to investors according to the proportion of their investments and value of these units is computed by Net Asset Value (NAV) which is daily announced by the Fund houses.

Investments in mutual funds are profitable since mutual funds offer many benefits:
  • Managed by professionals: Financial experts called fund managers invest in equity and fixed income products on your behalf. Based on their expertise and knowledge, there can be higher returns.
  • Better taxation structures: Various tax incentives are offered by the government of India to investors investing mutual funds. Investment in debt mutual funds come with tax indexation benefits.
  • Better Flexibility: You can redeem mutual funds investment partially and keep the other fully intact since mutual funds are held in units.
  • Better liquidity: Investors can sell open-ended mutual funds anytime hence highly liquid.
  • Better Diversification: Mutual funds are invested in various securities, hence, the risk is diversified.
Conclusion

Due to all these benefits offered by mutual funds’ investments, they can generate higher returns at low risk, making it profitable for investors. Mutual funds investment can prove to be the best option only if invested according to financial goals and objectives of the investor and keeping in mind the risk appetite.

CAN INTRADAY TRADING BE PROFITABLE?

You should understand the fundamentals and concept of intraday trading in-depth in order to make stable profits with respect to your investments. One ideal way in intraday trading is to move along with the current market trends, that is, if the market is falling, you should sell first and then buy later and vice versa.

Try to maintain stop-loss levels in order to place profits at regular intervals. In order to do this, you should build a plan where expected profits and stop loss limits are set.

It helps you to limit your loss if the market does not perform well Also, try to invest in highly liquid shares and trade in a small number of shares at a time if you are not a seasoned trader.

Basic Rules of Intraday Trading

An unexpected movement can wipe all your investment in a few minutes. Hence, it is important to keep in mind a few intraday trading basics while carrying out intraday trading.

Opening range is recognized during that time and thus one should trade in the first hour. Intraday trend can be identified through the fluctuations of opening range.

Follow the market trend as it may increase the chances for better returns and profits if trend tens to continue.

You can also set entry piece and target levels. You can maintain the level of your losses by setting a stop-loss limit.

The last thing to keep in mind is to withdraw your profits when made as per you expected to maintain a disciplined manner in your intraday trading.

WHAT IS THE DIFFERENCE BETWEEN DEMAT AND TRADING ACCOUNT?

Demat Account:

Demat account is the account where your shares are held in dematerialized form or in electronic form. This account cannot be used for any transaction. You can only save the shares in this account.

Demat account is generally for the people who would like to invest in the market and hold the shares in the electronic form.

Trading Account:

Trading account is the one which you use to buy and sell shares. The main transactions are undertaken through the trading account. Trading account is mostly for traders in derivative segments such as Index, stocks, Commodities, Currencies futures and Options and especially for those who trade in Cash segment.

No Annual maintenance charges are charged for the trading account. The trading account acts as an intermediary between your savings account and your Demat account. Now let us see how demat account, savings account, and trading account are related

A trading account acts as an interface between your demat account and the stock market. In simple words, whenever buying shares, you can place your order through a trading account. Thereafter, the shares bought are stored into your demat account. Likewise while placing an order to sell the shares, a trading account will be used and the same shares will be debited from your demat account.

These accounts, you open with a stockbroker who is a member of NSE / BSE or any other exchange. You should have a bank account, the bank account will be for the purpose of transfer of funds when you buy/sell stocks, the demat account is for transfer or securities when you buy/sell them.

HOW DO I SELECT MUTUAL FUNDS?

Consistent Performance

You should check the past performance of mutual fund you are willing to invest in. Past performance can convey the potential returns that mutual fund will be delivering. The stability of mutual funds is shown by its past performance and hence it should be evaluated.

Investment Objective

Before selecting a fund, you should look out for the goals and objectives of that particular fund in order to correspond it to your own objectives. The ultimate goal of investing is to procure financial and investment objectives, thus you should invest in those mutual funds that aim to deliver returns that exactly matches your needs and objectives. Hence, read all the goals and objectives of a mutual fund while selecting one.

Exit Load

Exit load is the fee charged for exiting the mutual fund scheme. Make sure to look over the exit load imposed on the mutual fund scheme and then decide whether you want to invest or not. Sometimes exit load can be high, turning you into loses, making it important to know the exit load on the particular mutual fund scheme.

Expense Ratio

There is an amount of fee charged by an AMC for administration, management, promotion and distribution of a mutual fund which is known as the expense ratio. Regular plans have a higher expense ratio than direct plans since in regular plans there is an involvement of distributor or an agent to whom commissions are paid which are covered through expense ratio. Hence, it is advised to check the expense ratio while evaluating the returns from a mutual fund scheme. An expense ratio of 1.5% is considered normal.

Fund manager experience

You should check the experience and knowledge of the fund manager who is currently managing the mutual fund scheme in order to analyse his capabilities to put the fund into better assets or securities in order to gather higher returns.

What is the difference between a hedge fund and a mutual fund?

A portfolio investment wherein only a few highly credited investors pool their money in order to buy assets is termed as a hedge fund. Whereas, a mutual fund is an investment vehicle wherein the funds are gathered by numerous investors who pool their money together and securities are purchased through the collection of money.
Hedge funds provide definite returns but mutual fund offer relative returns that vary according to the investment made in the securities.
Hedge funds are employed with advanced investment and risk management strategies and thus managed vigorously in order to generate better returns. Mutual funds do not facilitate aggressive techniques for higher returns.
A few investors invest in a hedge fund, thus a limited number of owners. On the other hand, mutual funds facilitate numerous or thousands of owners that is, a huge number of investors can invest in mutual funds.
The type of investors in case of hedge funds are highly accredited with high net worth. On the other hand, mutual funds are for small and retail investors.
Strict regulations are not imposed on hedge funds. On the contrary, mutual funds are constituted with strict regulations by the Securities Exchange Board of India (SEBI).
The management fees in hedge funds are completely based on the performance of assets as compared to mutual funds, where management fees are computed on the percentage of assets of the funds.
A fund manager in the hedge funds has access to ownership rights over a considerable portion. On the other hand, the fund manager does not hold any ownership rights in mutual funds.

HOW CAN I EARN MONEY FROM STOCK MARKETS?

  • Do not follow the crowd: You should not invest in stocks according to what other investors in the market are doing. In simple words, avoid following the crowd. There may be a phase in the stock market when a stock gains popularity and everyone around you starts investing in it. However, it is just the phase and eventually will pass, thus you should not follow investors around you and try to stay away from these stocks. Try to stick to the stocks that have been providing consistent performance and not just who have started performing well because that may last only for short duration.
  • Be patient: This has to be the most important part while investing. You need to take a break from constantly monitoring your portfolio and from frequent buy and sell, patience is the key to earn profits in investing. You should wait in volatile conditions for markets to get back on track.
  • Mixed portfolio: Try to maintain a diversified portfolio. You can invest in different asset classes. Diversification helps you overcome the risk factor associated with the securities and thereby providing you better returns from every asset class you have invested in. Investing in individual asset class comes with a higher risk that some investors may not handle. Hence, to always be on a safer side and generate returns, a mixed portfolio is a way to go.

HOW TO CLOSE DEMAT ACCOUNT?

Once you decide to close demat account, you need to make sure:

  • There should be no negative cash balance in your demat account.
  • The demat account you want to close should not hold any shares. You should sell them or transfer them to another demat account or can convert them to physical form.
  • Return unused delivery instruction booklet slip to the DP.

After getting done with all of the above, you can send an account closing form either by courier or directly going to a branch or franchise yourself. You can get the account closing form from the stockbroker’s website. After submitting the form, DP will close your demat account in 2-3 business days.

HOW TO CONVERT OFFLINE SHARE CERTIFICATE TO ONLINE DEMAT FORM?

  • To begin with, a beneficiary account (BO) needs to be opened with a depository participant (DP), which is an agent of depositories of India that hold your shares, bonds etc. that is, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
  • After finding a depository participant, open a demat account by filling up an account opening form. Along with an account opening form, required documents like PAN card, identity proof, and address proof need to be submitted to your DP.
  • After opening a demat account, your share will be demated after filling a Dematerialisation Request Form (DRF). You are required to submit DRF form to your depository participant long with certificated of shares that you want to convert to demat form.
  • Thereafter, a request through an electronic system is sent to the Registrar and Transfer agent by your depository participant.
  • Then the electronic system will provide a Dematerialisation Request Number (DRN). You will be required to enter the DRN number on DRF form and is submitted to the Registrar and transfer agent along with physical documents, including identity proof, address proof, and share certificates with a standard covering letter.
  • The Registrar and Transfer agent will verify the physical documents, along with the details in the covering letter and the Dematerialisation Request Form.
  • The company you possess shares of holds your name in the Registrar of Members (ROM). Your name thereafter will be replaced by the depository’ name in Registrar of Members (ROM) to the number of shares you have dematerialized.
  • After revising the Registrar of Members (ROM) of the company you possess shares of, a confirmation will be sent to the depository.
  • Finally, your demat account with the depository participant (DP) will be credited with the dematerialized shares.

WHAT CAN BE THE TIPS FOR BEGINNERS IN STOCK MARKET?

  • Have a plan
    To begin investing in the stock market, you need to come up with a plan solely based on your financial goals and investment needs. A financial plan is ideal to meet your short and long term longs, hence prior to starting investing, come up with a plan on how and why you want to enter the market.
  • Research
    You can never learn enough about the stock market since it is a lifelong learning process. Research well before entering into the stock market and even after you have started investing, research and gathering knowledge about stock market should never come to an end. You can go for various online portals that provide an adequate understanding of the market, go to financial experts and evaluate many other options to learn about stocks.
  • Understand risk
    Everyone has one goal while entering into the stock market, that is, the RETURNS. However, returns are associated with the risk. Higher the risk, higher the returns and lower the risk, lower the returns. Therefore, you must analyse your risk appetite or risk tolerance level to understand how much risk you are ready to bear in order to anticipate your returns thereof.
  • Stay patient
    As beginners, you can always stick to long term investments. You need to learn to be patient since returns are not made over a day or two, patience is the key to investing. Do not get afraid of market fluctuations or minor losses.

HOW TO OPEN AN NRI ACCOUNT?

To open an NRI account, Non-resident Indian has to link his or her Non-resident ordinary (NRO) or Non-resident External (NRE) savings bank account with the broker. However, NRIs are not permitted to trade currency and commodity markets in India.

In addition, prior to opening a demat or trading account, a portfolio investment scheme (PIS) permission letter is to be acquired from the reserve bank of India (RBI). You will be assisted by the bank in which you have opened an account to get that permission letter by providing required documents.

A Non-resident can open an NRE or NRO account simultaneously. However, you can link only one account to Demat and trading account. If NRE account is linked, then an NRI can trade in Equity segment, on the other hand, if NRO account gets linked, then he can trade in Equity as well as Derivative segment.

For opening demat and trading account, you need to submit an account opening form along with required following documents:
  • Copy of PIS permission letter;
  • Copy of FEMA declaration
  • Copy of PAN card;
  • Overseas address proof – Copy of Driving License/Foreign Passport/Utility Bills/Bank Statement (not more than 2 months)/Notarized copy of rent agreement/Leave & License agreement/ Sale Deed;
  • Indian address proof, if any;
  • Passport size photograph;
  • In case of an Indian Passport: Copy of valid passport with the place of birth as India and Copy of Valid Visa;
  • In the case of Foreign Passport: Copy of Valid passport, Copy of PIO/OCI card.
  • Proof of Bank account (a canceled cheque leaf of your NRE or NRO savings bank account);
  • Declaration of P.O box in your residing country
  • Declaration form of Foreign Account Tax Compliance Act (FATCA)

Copy of PAN card, Passport, and Foreign address proof have to be attested by Indian Embassy or any other competent authority like Authorised officials of overseas branches of scheduled commercial banks registered in India, public notaries, court magistrate, judge, or the Indian embassy/consulate general in the country that they reside in the country where the NRI resides

HOW TO SELECT STOCKS FOR INTRADAY TRADING?

  • Liquid stocks:
    Liquidity is the key. Liquid stocks tend to have big volume since larger quantities can be purchased and sold without having to affect the price, it is safe to go for liquid stocks. Moreover, intraday trading is all about speed and precise timing, thus liquidity because a lot of volume makes getting into and out of trades convenient and simple.
  • Medium to High volatility:
    To make money in intraday trading, Day traders need price movement. Day traders can choose stocks that tend to fluctuate rapidly on percentage terms, as these can result in generating better results. Usually, Stocks that move 3% or more per day tend to procure consistent large intraday moves to trade. The same can be said for stocks that fluctuate for more than 1.50 per day.
  • Research:
    Day traders should never hesitate to do proper research while going for intraday trading. Thorough research is the most crucial part of intraday trading. One should identify the index and find sectors accordingly. They should come up with a list of several stocks from these sectors. Traders should perhaps find and identify stocks that are liquid. Technical analysis and determining the support and resistance levels along with studying the fundamentals of these stocks can assist traders in finding the right stocks to profit through intraday/day trading.
  • Follow the trend:
    Next major point to keep in mind while intraday trading that moving with the trend will take you closer to profits. One should clearly follow the trends in intraday trading. During a bull run in the stock market, traders must try to identify stocks that have the capability to rise. On the other hand, one should focus on stocks that are expected to decline in the case of a bear trend.

HOW TO TRADE IN DERIVATIVES MARKET?

First things first, you need to conduct thorough research before investing in derivatives. Also, strategies that you may use while investing is the stock market cannot be used while investing in derivatives. Strategies differ in stock and derivatives market. Thus, it becomes crucial to research well and build your strategies first.
Next up, maintain a necessary margin amount. You are required to constantly have a margin amount as per the stock market rules, meaning you cannot withdraw this amount from your trading account until the trade gets settled. Also, one thing to keep in mind is the margin amount changes with the change in the price of the underlying stock. Thus, always keep extra money in your account to meet such contingencies.

Afterward, you can proceed with the transaction through your trading account, however, you need to ensure you’re your trading account provides you the facility to trade in derivatives and if not you can contact your broker to add these services. Then you can place your order online.

Then you need to choose your stocks and their contracts according to the amount you have in hand, the margin requirements, price of the underlying shares along with the price of the contracts. Make sure everything falls under your budget.

HOW TO TRANSFER SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER?

Transferring shares from one demat account to another can be done in two ways: Online and Manually

Online Way to Transfer shares:

Online transfer of shares can be done by EASIEST at CDSL website, which is an easy and fast way to transfer your shares by simply following a few steps:

  • Firstly, go to the ‘Register online’ link at CDSL website and get yourself registered.
  • Select ‘Easiest’
  • Provide the necessary details.
  • Print that forms and submit it to your depository participant.
  • After verification, you will receive a password
  • You can log in through the password and start transferring shares by your own.
Manually

You receive a Delivery Instruction slip or DIS from your stockbroker when you open an account there. You are required to fill up the DIS in order to transfer your shares.

After filling up the DIS slip, you need to submit that slip after signing to your current broker.

Take due acknowledgment slip for filled DIS slip

Thereafter, 2-3 business days are taken by the current broker to transfer shares to the target broker.

Is there any ceiling on the Investments under the Portfolio Investment Scheme?

  • Under PIS, NRIs are permitted to invest in shares of listed Indian companies in recognized Stock Exchanges with certain ceilings imposed.
  • NRIs can invest through designated ADs, on repatriation and nonrepatriation basis under PIS route up to 5 per cent of the paid-up capital / paid-up value of each series of debentures of listed Indian companies.
  • When NRIs purchase shares or convertible debentures, the aggregate paid-up value for these is not allowed to exceed 10 per cent of the paid-up capital of the company / paid-up value of each series of debentures of the company.
    If the general body of the Indian company releases a special resolution then the aggregate ceiling can be increased to 24 per cent from 10 per cent.

WHAT ARE BEAR AND BULL MARKETS?

A bear market is a period when prices of securities are declining. It tends to be a situation during investment periods when prices of securities fall for more than 20%. A bear market is the opposite of a bull market, in which prices tend to increase. The bear market can be resulted from a weakened economy of the country and thus leave a negative impact on securities traded in the share market such as stocks, bonds, and commodities. Hence, it is advisable to invest in safe investments and creating a mixed portfolio. You can invest in securities that generate fixed income such as bonds etc.

A bull market is a period when prices of securities are said to increase significantly or are expected to rise. Compared to the bear market, a bull market cycle is for a longer period. Bull markets last for months or even years. Bull markets really occur when the economy is strong or on the verge of getting strong. The demand and tone of the market remain positive during a bull market situation. However, the supply of securities remains short as few people are willing to sell during the bull market and investors are willing to purchase more, hence demand remains strong. However, the risk factor is also high in the bull market. The ultimate goal of investors to purchase securities and take part in stock markets in a bull market is to earn profits.

WHAT ARE BLUE CHIP STOCKS?

Blue chip stocks are the stocks of those companies that are stable, well-established and financially strong and have been in the market for a long period of time. Basically, these are stocks of companies that are well recognized due to their financial performance and credibility. These stocks are usually market leaders. Therefore, these stocks belonging to reputed companies tend to cost higher. Moreover, these stocks are capable of providing better and higher returns even in tough and volatile market situations. Also, blue-chip stocks have been known to provide stable or increasing dividends. Investment span of blue-chip stocks often remains long-term of more than 7 years perhaps.

Blue-chip stocks are often considered a safe investment, considering their ability to face tough market conditions and not being highly volatile. They tend to provide moderate growth potential while providing stable dividends, often quarterly.

Blue-chip stocks are often suited for long term investors and not smaller investors since these stocks cost higher.

What are brokerage charges of Zerodha?

While trading or buying and selling stocks through Zerodha, customers or traders need to pay a commission or brokerage. Hence, brokerage charges of Zerodha are as follows.

Segments : Brokerage fee
Equity Delivery : Rs 0
Equity Intraday : Rs. 20 or 0.1 % whichever is lower, per executive order
Equity Futures : Rs. 20 or 0.1 % whichever is lower, per executive order
Equity options : Rs. 20 or 0.1 % whichever is lower, per executive order
Currency Futures : Rs. 20 or 0.1 % whichever is lower, per executive order
Currency Options : Rs. 20 or 0.1 % whichever is lower, per executive order

What are Large-cap, mid-cap and small-cap stocks?

Large-cap stocks: These stocks are considered to be the first class in market capitalization. These stocks are of well-established companies that have been in the market for years. The market capitalization of these companies is high above Rs20,000cr.

Large-cap companies are stable and tend to have a strong market presence, thus stocks for these companies are termes as a safe investment. You can easily get information on these companies through media, newspapers, social media, internet etc.

In India, examples of large-cap companies include Wipro, TCS, and Infosys, among others.

Mid-cap stocks

Mid-cap companies can be considered to border large-cap and small-cap companies on both ends of the market capitalization spectrum. Typical, their market capitalization lies between Rs5,000-20,000cr. Mid-cap companies are considerably smaller than large-cap companies in all aspect such as– revenue, profitability, employees, client base, etc.

Investors usually are willing to invest in these companies since these companies possess the capability to become an overnight success. They have a high potential for growth in the future and thus for better returns.

Mid-cap companies are not really disclosed in public and hence it gets difficult to acquire information on these companies, making it complex for an investor to research about its stocks.

Small-cap stocks.

Most small-cap companies tend to be either start-up enterprises or companies still in the development stage. In simple words, they have low revenues and a few numbers of employees and clients. Also, one cannot get access to information about these companies easily.

small-cap companies can be a good option for investors willing to invest for a long term and possess moderate to high-risk tolerance, since not much people know about small-cap companies and they are at the initial stage, stocks of these companies are considered highly risky.

WHAT ARE LOAD FUNDS AND NO-LOAD FUNDS?

In a loadmutualfund, you are charged an initial sales fee along with the number of shares purchased. The charge is termed as load and it can be from 4% to 8% of the amount that you invest or a flat fee, depending on the mutual fund provider. For instance, if you invest Rs.2000 in a 5% load mutual fund, that will imply you have invested Rs.1900 with Rs.100 as a commission to the company.

There are two types of load mutual fund:

  • Back-end load fund which implies that extra fee will be charged when you will exit or redeem your mutual fund shares.
  • Another is a front-end load fund wherein fee will be charged up front, in the beginning.

No-Load Mutual Fund

In a no-load mutual fund, you can buy or redeem shares after a certain duration without having to pay any commission or sales charge. However, most no-load funds charge a specific fee if you redeem too early, usually within the initial five years, but long term investors do not need to pay anything in case of no-load funds.

It is expected that both types of mutual funds provide similar returns. However, if you are an investor who seeks financial advisory, research, and tips, then load funds are the option for you since commission charged in load funds is usually for the services provides. On the other hand, one can opt for no-load funds if no advisory is needed and you can maintain your portfolio on your own.

WHAT ARE THE TYPES OF DERIVATIVES?

There are mainly four kinds of Derivatives products

  • Forwards: It is an agreement between two parties in order to buy or sell an underlying asset at a specific future date at a pre-determined price which is decided on the date of the contract. Both the parties tend to be obligated to respect the contract in future regardless of the price of the underlying asset at that particular time, that is, at the expiry of the contract. Two parties are allowed to negotiate the terms and conditions in the contract and thus forwards are known as over the counter (OTC) contracts.
  • Futures: Futures contract is almost like a forward contract with a minor difference. The difference is that in a futures contract, the transaction is conducted through an organised and regulated exchange and not negotiated by the two parties directly.
  • Options: Under options contract, one procures aright and not an obligation to sell or buy an underlying asset on or before a mentioned date at the stated price. A buyer of the option pays the premium and buys the right, whereas, writer/seller of the option receives the premium along with the obligation to sell/ buy the underlying asset if the buyer claims his right.
  • Swaps: It is known as an agreement between two parties made in order to exchange cash flows in the future based on a pre-determined formula. Swaps order assist market participants in managing the risk factor affiliated with volatile interest rates and currency exchange rates.

WHAT DOES ADVANCES AND DECLINE MEAN IN STOCK MARKET?

Advances and declines (A/D) are termed as the measure of the number of stocks that have advanced at price and the number of stocks that have declined in price during a certain period of time. A/D is usually shown in the form of a ratio which depicts the actual direction of the market such as if there are more number of stocks that have advanced at prices that a number of stocks that declined on a single trading day, the market direction will imply a bullish trend. The A/D is usually used as an indicator that confirms the trend and is often used along with other analysis and tools to interpret the ten of the overall market.

The most common way to observe A/D data is a chart interpretation which shows the cumulative difference between the advances and the declines. The period taken on the chart can be one week, one month, or any other specific time frame but since it is often used to identify new or developing trends, it should be pertaining to the positions in your portfolio. You should look for new highs and lows on the A/D chart. The A/D line will usually top-out and start a gradual decline before the overall market as the near market peaks. However, as it is often said about other technical indicators as well, make sure A/D corresponds with other signals as well.

WHAT IS AN IPO?

IPO, initial public offering, refers to the very first or initial sale of stock by a company in order to borrow funds from the public. An IPO enables a company to go public, until before an IPO a company remains private with a small number of shareholders who are early investors such as founders, families etc. Thereafter, stocks of companies are available for the public to buy. Public constitutes of individuals and institutions who were not a part of the company when formed and want to be a part of that company by investing in the stock.

Companies often initiate to go public as IPO enables them to borrow a huge amount of money from the public to carry out their operations. There are various ways of borrowing money such as capital ventures, banks etc. However, through IPO a company can raise the largest sum of money.

ADVANTAGES OF IPO TO COMPANIES
  • Through IPO, a company is able to raise a huge amount of capital.
  • IPO provides an opportunity for companies to attract a higher number of investors within a short span of time.
  • IPO helps in increasing profits for companies as going public leads to higher status and reputation thus attracting various business opportunities.
  • As a public listed company, it becomes easier to facilitate mergers and acquisitions.
  • The company gets a lower cost of capital.

WHAT IS BOOK BUILDING ISSUE AND FIXED PRICE METHOD IN IPO?

Book building is a method of determining the price to place on securities offering such as Initial Public Offering (IPO). The price of each share is not fixed at the beginning in book building. The offer document mentions a price range i.e. floor price (lower price) and cap price (upper price). Investors bid on the shares prior to the settling of a final price. The price of the issue thereby is determined based on the demand at various prices level ranging within a specified range for the issue from prospective investors. Investors must mention how much shares they want to buy at what price.

FIXED PRICE

Under the fixed price method, the company attempting to go public tends to fix a price for which its shares will be offered to investors. The investors, in this case, will know the share prices before the company goes public. Demand will be determined only when the issue gets closed. An investor is required to pay the full share price while making the application for this IPO.

WHAT IS MARGIN TRADING?

Margin trading is a process of trading in which investors can buy the stocks or securities more than they are capable of or can afford to. For margin trading, a margin account is opened in which the resources to buy more securities are made available by the broker. The broker lends the money to buy more shares and keep them as collateral.

To open a margin account, a request to the broker is to be made. Also, a certain amount of cash is to be paid to the broker which is called minimum margin. This is given to the broker so that he can recover the money by squaring off.

Then after the account is opened, an amount is to be given called initial margin, which is a specific percentage of the amount pre-determined by the broker for the traded values.

For margin trading, you need to be aware of 3 things:
  • You are required to maintain a minimum margin during the session because the stock price can fall more than expected on volatile days.
  • You are supposed to square off your position after every trading session. That is, if you have sold shares, you need to buy them at the end of the session. Likewise, if you have purchased shares, you have to sell them at the end of the session.
  • Last, you need to convert it into a delivery trade after trade, in that case, you need to maintain cash in order to buy all the shares you bought during the trading session and also to cover broker’s additional fees.

WHAT IS PORTFOLIO INVESTMENT SCHEME (PIS)?

Portfolio Investment Scheme (PIS) is a scheme of reserve bank of India under which:

Non-Resident Indian (NRIs) are able to purchase and sell shares/convertible debentures of Indian companies on Stock Exchanges under Portfolio Investment Scheme. In order to receive this, an NRI will have to apply to a designated branch of the bank which deals in Portfolio Investment since all sales and purchase transactions are carried through the designated branch of the bank. PIS is a permission letter that you get from RBI before opening a trading or demat account. The bank perhaps, where you have opened your NRE/NRO account will take care of the process for getting you a PIS in order to start trading in India after providing required documents.

Where online trades are being done is there any documents that I need to receive from the trading member for the trades executed?

The trading member is required to issue a contract note within 24 hours from the date of completion of the trade, for every trade that is made on the Stock exchange. Internet-based investors usually tend to consider Digital contract notes. To get the digital contract notes, usually an email id is used, thus investors should provide their valid email ID at the time of registration. If an investor wants to receive physical contract notes, they should mention it at the time of registration and not mention in the email ID. Investors are recommended to keep a regular check on contract notes and contact trading member in case of any changes, issues or modification. Trading members are also required to provide quarterly statements of funds and securities to the investor. This statement can be received by the investor digitally if opted for a digital document.

Which financial documents to check while evaluating a company in fundamental analysis?

Analysing financial reports of a company is an essential step for understanding a company and making a decision for investment.

The financial reports that potential investors need to look at are-

  • Annual reports– These reports are filed by public companies and can give exposure to all the key information of the companies. These are posted at the end of every year, 31st March and contains data for the entire year.
  • Balance Sheets– A balance sheet shows all the assets and liabilities of a company for the given period. Analysing the debt and asset holdings of a company can tell about the stability of the company.
  • P&L Statement– P&L statement provides information regarding the profitability of a company.
  • Cash Flow Statement– Cash flow statement provides information regarding cash inflows and outflows during various activities and show the profitability of a company.

Which stocks to avoid while investing?

Low liquid Companies:

You may face a situation when stocks prices are continuously falling but you still fail to get a buyer. Low liquid markets make it difficult for you to exit. Thus, stay away from lo liquid companies. In other words, avoid companies that have an average trading volume of less than ten lakhs.

High debt companies:
Companies that are in under a huge debt should never be your option of investing since these companies lack in providing dividends and other interests. Thus, try to avoid companies that have a debt to equity ratio greater than 1.

Falling knife category companies:
Always avoid investing in companies whose share price has been continuously falling, since falling share price tremendously depicts the state and stability of a company. You get a lot of companies listed on the stock exchange which you can explore but investing in companies like these will provide you no good rather losses.

Low visibility companies:
There can be situations when you cannot find much information about a company on the internet or financial websites and are not much transparent in their operations. You should stay away from such companies as researching for those companies can become a complex process. Moreover, you may get across manipulated information if you dig deeper and find any unreliable source. Thus try to avoid companies that are not much visible.

What is Thematic Investing?

Thematic investing is basically an investment in stocks that represent a certain theme. It is generally investing in stocks but based on themes categorized.

The themes can vary according to the fund manager or broker but few examples of the themes can be:

An economic trend – For example, a rapid rise of eCommerce in India, Dip in Oil Prices or Clean India Campaign.

Industry-based – For example Quality Banks, Hospitality, Agriculture.

Investing strategy driven theme – For example High Dividend Paying Stocks, Fast Growing Small Companies or Stocks selected using Joel Greenblatt’s Magic Formula.

In this way, you invest in themes while investing in stocks. You can explore various themes according to your needs and start investing.

WHAT ARE THE RIKS ASSOCIATED WITH EQUITY INVESTMENTS?

There are some risks associated with equity investments such as:

  • Business risks-

Business risks are basically the risk that is associated with the success of a company’s business, that is, demand for its products. It pertains to the company’s performance and stability along with its capability of covering the market share.

  • Financial risks-

Financial risk is related to the company’s ability to manage its finances in order to make sure that it has an optimum level of debt, equity, and reserves. Looking at the debt and equity level of a company, shareholders can anticipate the earnings such as higher debt or financial leverage will imply higher interest costs and thereby reduced earnings to equity shareholders.

  • Industry risk-

Companies operate in the industry and that industry tends to have an impact on the performance of the companies since industries face numerous changes such as technological, regulations and fashion, and much more which eventually may hinder the performance level of a company.

  • Management risks-

Management risks concern management skills, vision, and level of corporate governance, which may affect the stability and performance of a company.

  • Political, economic and exchange rate risks-

These macro-economic risks have the tendency to affect tall stocks and these risks are not controllable by the company.

  • Market risks-

Market risks are general risks that are associated with investing in the stock market. It may procure when the market may turn bearish, volatile or when you may have invested at the peak of the market cycle.

WHAT ARE NRE AND NRO ACCOUNTS?

A bank account wherein the principal amount, as well as interest earned, can be repatriated is termed as Non-resident External Account (NRE). Dollars from a foreign bank account can be transferred which thereby gets converted into rupee in NRE account. Moreover, funds can also be re-converted into dollars and can be thus transferred or sent back to foreign bank account along with the interest earned. This process of moving an asset from a foreign country to home country of investors is termed as repatriability.

An NRO account is generally a savings or current account opened in India. Through NRO account, NRIs can hold their income earned in India that can be rent, dividends, the pension from abroad etc. Foreign currency when deposited into NRO account gets converted into Indian rupee and NRIs can accumulate and manage their rupee funds with the help of this account.

What are Balanced Mutual funds?

Balanced funds usually invest 50-70% of the portfolio in stocks and the remainder is invested in debt instruments and bonds. Basically, these funds invest in a mix or combination of equities and fixed income securities. These funds aim at balancing the goal of getting higher returns with the minimum risk associated with them. There is a formula related to splitting up the money in various investments. The risk associated with these type of funds is less than pure equity funds but more than fixed income funds. There are two categories in balanced funds:

Aggressive funds constitute more equities and fewer bonds, whereas conservative funds are those which have fewer equities relative to bonds.

How can I open a trading account?

Opening a trading account is a simple and fast process. Procedure for opening a trading account can vary from broker to broker. For your convenience, you can explore the stockbroker’s website at which you want to get registered and open a trading account for their exact procedure. But overall, the following procedure is followed:

To begin with opening a trading account, you are required to register yourself with a stockbroker, which is registered in SEBI. The stockbroker must have been given a unique registration number by SEBI in order to create a trading account.

After selecting and getting registered with a stockbroker, an account opening form is to be filled, online or offline. The mode can vary according to the broker you select.

Then you need to submit KYC (Know your client) documents along with the along with the Account Opening form. The documents include PAN card, Aadhar card, passport and as may be prescribed by the broker.

However, you do not need to go through this if you already have a demat account with the stockbroker.

Once you submit all the required documents along with the account opening form, your application will be followed by a verification process by the authorities. Once the verification process is completed, you will receive your trading account details.

The duration in which you can get your trading account opened may vary according to the processing time. However, mostly a week is taken for the whole process. This time may get delayed if you fail to provide all the documents or provide incorrect details.

HOW CAN NRIs APPLY UNDER PIS?

  • NRIs can invest in the shares or bonds of companies but are not permitted to do day trading/intraday trading. They are required to mandatorily take delivery of shares and no borrowing or short selling is allowed.
  • NRIs can, however, invest in futures and options that are traded on recognised stock exchanges. Global index funds and other managers carry out such trades on a non-repatriation basis only, subject to regulatory limits.
  • There is a limit to the amount of investments NRIs can make in a stock. These limits are thereby strictly fixed by the RBI and supervised regularly. In case of investments under repatriation basis, up to 5% of the paid-up capital of a company for a single NRI is allowed. Aggregate investments by NRIs in a particular stock should not exceed 10% of paid-up capital of the company. However, after passing a specific resolution, this ceiling can go up to 24%.
  • When a resident becomes an NRI, he/she is allowed to hold the securities on a non-repatriation basis.
    On the contrary, when an NRI becomes a resident Indian, the status of holding needs to be changed by informing the designated authorised branch. Also, NRI demat account is to be closed and a new demat account should be opened.
  • NRIs are also allowed to invest in IPOs or initial public offerings of stocks in India without any further permission.