EQUITY

“Price is what you pay. Value is what you get.”

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EQUITY

What is Equity?

Equity is the total amount of money that a shareholder is entitled to receive if all of a company’s assets are liquidated after clearing all debts. When a company requires funds for its businesses and meets its working capital requirements, it can use both debt and equity instruments. It dispenses its shares or stocks through Initial Public Offerings (IPOs) or offers loan instruments with fixed interest rates, called debentures. When you invest in a company’s equities, you become its partial owner. Once a listed company provides its stocks to investors, they can be traded – purchased and sold – in stock exchanges, like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

EQUITY

Investing in equity shares is well-favoured as they provide high returns. However, despite their potential high returns, they also have certain risk factors associated. Thus, it is essential to measure their risks before investing in equity stock.

Types of Equity


Shares
Derivatives
Equity Futures
Equity Options
Arbitrage Schemes
Alternative Investment Funds

Benefits of Equity


  • Investment in stocks leads to the highest returns over long-term investment. It is considered one of the feasible and practical forms of investment.
  • Investment in equities can also furnish you with income through dividend issuance. Issuing of dividends is where listed companies share their profits with existing shareholders. Though not compulsory, companies issue dividends to signal profitability and increase their investor base.
  • Despite the high returns, equities possess a more significant risk due to market volatility. One should be good with their market research and make well-thought and planned decisions when investing in the stock market.
  • One can cut down the risks by investing in equity instruments, like Futures and Options (F&O).
  • Investing in equity shares can also help to surpass the impacts of inflation.
  • Investing in shares is an easy process
  • Diversification of investment portfolios can help in gaining higher returns.

WHAT WE DO


Ckredence Wealth Management Private Limited is a registered equity sub-broker with Sushil Financial Services Pvt. Ltd. We offer a user-friendly platform to our clients to help them buy and/or sell shares on the market with ease. We also offer technical and fundamental recommendations to our clients based on our extensive research.

Our clients reap the following benefits:


Extensive Research Products |Short & Long-term wealth creation Ideas | Dedicated RM | All reports on Web & App
|Knowledge sharing webinar |Paperless transaction

Depository Services

In the times of T+2 having a demat account linked to your trading account becomes really convenient. The non-trading clients can also avail Demat Account with Sushil Finance also.

Today Sushil Finance DP Services are available in 148+ business location across country having more than 1,20,000+ accounts having more than 6,000+ Cr cumulative value shares in their account . This is because of the investors trust with Sushil Finance. Demat Account holder with Sushil Finance receive regular information of their Demat account from dedicated & experienced customer service representatives.

  • Register for CDSL's SMS Alert facility - SMART & obtain alerts for any debits or credits due to a corporate action, in your demat account.
  • Accept the DIS book from your DP, only if each slip has been pre-printed with a serial number along with your demat account number & keep it in safe custody.
  • Always mention the details like ISIN, number of securities accurately. In case of any queries, please contact your DP or Broker.
  • Ensure that all demat account holder(s) sign on the DIS & please strike out any blank space on the slip. Cancellations or corrections on the DIS should be countersigned by all the account holder(s).
  • Submit the DIS ahead of the delivery date for all type of market transactions. DIS can be issued with a future execution date.
  • Intimate any change of address or change in bank account details to your DP immediately.
  • Check the demat performance of the issuer company with your DP before sending certificates for demat. Before sending the shares to DP for dematerialisation please check with DP whether that company is in demat list or not.
  • Before granting Power of Attorney to anyone to operate your demat account, carefully examine the scope & implications of powers being granted.
  • The demat account has a nomination facility & it is advisable to appoint a nominee, in case of sole account holders.
  • Ensure that, both, your holding & transaction statements are received periodically as instructed to your DP. You are entitled to receive a transaction statement every month if you have any transactions & once a quarter if there has been no transactions in your account.
  • Check your demat account statement on receipt. In case you notice any unauthorized debits or credits, contact your DP for clarifications immediately.

Don'ts

  • Do not leave your instruction slip book with anyone else. Do not sign blank DIS as it is equivalent to a bearer cheque. Avoid over-writing, cancellations, misspellings, changing of the name & quantity of securities.

Tips For New Investors

The capital market is the market for long-term loans (debentures & bonds) & equity capital. Companies & the government can raise funds for long-term investments via the capital market. The capital market includes the stock market, bond market & primary market. Thus, organized capital markets are able to guarantee sound investment opportunities. The capital market can be contrasted with other financial markets such as the money market which deals in short term liquid assets & futures markets which deal in commodities contracts.

What are the functions of the Capital Market?

Capital market enhances capital formation in the economy & comprises of the followings:
  • Primary Market: Primary Market is a place where new offerings by Companies are made either as an Initial Public Offering (IPO) or Rights Issue.
  • Secondary Market: Secondary Market is a market where securities are traded after being initially offered to the public in the Primary Market &/or listed on the Stock Exchange. Majority of trading is done in this market which comprises of equity market & debt market.

What is Financial Market?

The financial markets are markets which facilitate the raising of funds or the investment of assets, depending on viewpoint. They also facilitate handling of various risks. The financial markets can be divided into different subtypes: Capital market consists of:
  • Stock markets, which facilitates equity investment & buying & selling of shares of stock. Bond markets, which provides financing through the issue of debt contracts & the buying & selling of bonds & debentures.
  • Money markets, which provides short term debt financing & investment.
  • Derivatives markets, which provides instruments for handling of financial risks.
  • Futures markets, which provide standardized contracts for trading assets at a forthcoming date.
  • Insurance markets, which facilitates handling of various risks.
  • Foreign exchange markets.
These markets can be either primary markets or secondary markets.

What is Stock Market?

A stock market is a market for the trading of publicly held company stock & associated financial instruments (including stock options, convertibles & stock index futures). Many years ago, worldwide, buyers & sellers were individual investors & businessmen. These days markets have generally become "institutionalized"; that is, buyers & sellers are largely institutions whether pension funds, insurance companies, mutual funds or banks. This rise of the institutional investor has brought growing professionalism to all aspects of the markets.

What is Money Market?

The money market is a subsection of the fixed income market. We generally think of the term "fixed income" as a synonym of bonds. In reality, a bond is just one type of fixed income security. The difference between the money market & the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year). Money market investments are also called cash investments because of their short maturities. Money market securities are essentially IOUs (an abbreviation of the phrase "I owe you") issued by governments, financial institutions & large corporations. These instruments are very liquid & considered extraordinarily safe. Since they are extremely conservative, money market securities offer significantly lower returns than most of the other securities.

Who are the main participants in the capital market?

The capital market framework consists of the following participants:.
  • Stock Exchanges
  • Market intermediaries, such as stock-brokers & Mutual Funds
  • Investors
  • Regulatory institutions (e.g. SEBI)

What are the different types of financial instruments?

The following are the different types of financial instruments:

Debentures: A debenture is the most common form of long-term loan taken by a company. It is usually a loan repayable at a fixed date, although some debentures are irredeemable securities; these are sometimes called perpetual debentures. Most debentures also pay a fixed rate of interest, & this interest must be paid before a dividend is paid to shareholders.

Bonds: A bond is a debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate.

Preference shares: Preferential shareholders enjoy a preferential right over equity shareholders with regards to:
  • Receipt of dividend
  • Receipt of residual funds after liquidation

However, preferential shareholders do not have voting rights; they are entitled only to a fixed dividend. Equity shares: Equity shares represent proportionate ownership in a company. Investors who own equity shares in a company are entitled to ownership rights, such as:
  • Share in the profits of the company (in the form of dividends),
  • Share in the residual funds after liquidation / winding up of the company,
  • Selection of directors in the board, etc.
Government securities: The Central Government & the State Governments issue securities periodically for the purpose of raising loans from the public. There are 2 main types of Government securities:
  • Dated Securities: have a maturity period of more than 1 year
  • Treasury Bills: have a maturity period of less than 1 year

How do I buy financial instruments as investment options?

One cannot buy directly from the market or stock exchange. A buyer has to buy stocks or equity through a Stock Broker, who is a registered authority to deal in equities of various companies. In effect a lot many intermediaries might come in between the buyer & seller, as brokers do their business through many sub-brokers & the like.
The general theory goes that the higher the profit, the greater the risk. Since there is scope for high profit in the Stock Market, investing in the Stock Market can be risky. In fact, more than 80% of the people who put money in the market lose it & a majority of the rest is barely able to protect themselves from losses. Only a minuscule minority of investors are able to garner any substantial profits.

If Stock Market is so risky, why are people in it?

It’s due to basic human psychology. Men want profits- big & fast. Not many are deterred by the risks involved. The fact is that investment in the stock markets can give, potentially, the fastest Return on Investment (RoI), as the value of a stock can rise pretty fast, ensuring huge profit for investor. People buy shares in a company for either of two reasons:
  • They have a stake in the company. They are concerned not only in the future growth in stock value but in the worth of the company itself. Their investments are long-term & they don't sell their shares in an impulse.
  • They want quick profit & don't have any stake or interest in the company, but merely want some quick value addition. Most investors belong to this category. Their investments - both buying & selling - are impulsive. Mostly, they don't do any market research & don't follow any sector or company to gain proper knowledge before investing.

How can I achieve success in stock market?

He precept is very easy i.e. saving your investment is the first & most important part. This can be done by ensuring that you do not put your money in a company that does not show solid prospects. Fly- by- nights companies or companies whose shares touch the roof suddenly, need to be avoided. Companies that show a steady prospect are good to invest in. Needless to say, this process involves close acquaintance with market movements & a thorough understanding of the concepts involved.

You should know when to dump your shares especially when they are becoming just junk papers. The second thing is that adequate market knowledge is very important especially when you have invested in the stock market. One should be patient & judiciously responsive to market swings. Of course, luck is also a major factor.

What is the best suggestion for investment?

Undoubtedly, it is “Don't put all your eggs in the same basket”. It is very tempting to make all your investment in the same sector when their stocks are going up, but since market trends are very volatile, you are, at the same time, making yourself extremely vulnerable to lose all your money. Dealing with single sector investment requires razor sharp timing with zero margin of error - a tall order in such a speculative & volatile business.

Hence, it is always advisable to make investments in different companies & in different sectors, so that you can achieve stable portfolio diversification & compensate losses in one sector against profits in another sector.

FAQs On Investing

An equity share represents the form of ownership. The holder of such a share is a member of the company & has voting rights.

What returns can I expect from my investments in equity shares? What are the risks?

Equity shares are “High-Risk High-Return Investments.” The major distinction of Equity investment from all other investment avenues is that while the return from many avenues such as Bank Deposits, Small Saving Schemes, Debentures, Bonds etc are fixed & certain, the earnings from equity investments are highly uncertain & varied. A good scrip picked up at the right time could fetch fairly good returns else the return may be meager or it may even turn negative, i.e. the invested fund itself may be eroded. In short, if the investment in fixed income category instruments is secured & risk-free to a large extent, investment in equities & related fields could be termed as risky.

What is Dividend?

Dividend is the part of profit distributed by the company among its investors. It is usually declared as a percentage of the paid-up value or face value of the share.

What is a Bonus Share?

A Share issued by companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years.

What is a Bond?

A Bond is a promissory note issued by a company or government to its lenders. A Bond is evidence of debt on which the issuing company usually promises to pay the bondholder a specified amount of interest at intervals over a specified length of time, & to repay the original loan on the expiration date. A bond investor lends money to the issuer & in exchange, the issuer promises to repay the loan amount on a specified maturity date.

What is a Debenture?

It is a Bond issued by a company bearing a fixed rate of interest usually payable half-yearly on specific dates & principal amount repayable on a particular date on redemption of the debentures. Debentures are normally secured / charged against the asset of the company in favor of debenture holder.

What is a Stock Exchange?

A Stock Exchange is a place where the buyer & seller meet to trade in shares in an organized manner. There are at present 25 recognized stock exchanges in the country that are governed by the Securities Contact (Regulation) Act, 1956.

What shares can I buy?

You can buy the shares that are listed on any of the recognized stock exchanges.

Whom should I contact for my stock market-related transactions?

To be able to buy or sell shares in the stock markets a client would need to be registered with a stock broker like Sushil Financial Services Private Limited who holds membership in stock exchanges & who is registered with SEBI.

Am I required to sign any agreement with the broker or sub-broker?

Yes, you have to sign the “Member-Client Agreement” for the purpose of engaging a broker to execute trades on your behalf from time to time & furnish details relating to yourself to enable the member to maintain Client Registration Form.

What is a Member-Client Agreement Form?

This form is an agreement entered into between client & broker in the presence of witnesses wherein the client agrees (is desirous) to trade/invest in the securities listed on the concerned Exchange through the broker after being satisfied of broker’s capabilities to deal in the same.

What is Buying & Selling?

There are several types of orders that you can dictate to a broker. The most common type, which is a regular buy or sell order, is called a market order. Another type of order is a limit order wherein you ask the broker to trade only if the price reaches a specific level. In a stop order, you tell the broker to sell your shares if the price drops to a certain level to prevent significant loss because if it drops to that level it is likely to drop further & your losses are likely to increase.

How could I place orders?

Trading can be done via the phone or by coming in person to the office of Sushil or through any other facility provided by Sushil like Internet trading. The dealer (employee of Sushil who is supposed to input the investors order into the stock exchange order system) after checking the authenticity of the person calling & after checking the margin available in the account would put/enter the order into the stock exchange system.

What is meant by bullish & bearish trend?

When the market goes up it is called a bullish trend & when the market goes down it is called a bearish trend.

What is taking a position?

When you act upon a stock & buy into it, you are taking a position. A position is an amount of money committed to an investment in anticipation of favorable price movements.

There are two kinds of positions:

Long positions: Long positions are what most people do. When you buy long, that means you are anticipating an upward movement in the price, & that is how you profit. People usually buy stocks at prices expecting to sell them later at higher prices & hence make profits.

Short positions: Short positions are the tricky ones. When you buy short, you are anticipating a fall in the price & the fall is the source of your profits. The shares will be sold & when the price falls they will be repurchased & given back & the difference is the where the investor profits. Of course, the investor who borrowed the shares carries the risk of not having the price move as anticipated, in which case he may lose money in repurchasing the stocks.

What is an index?

These funds invest in An index is a stock-market indicator created as a statistical measure of the performance of an entire market or segment of a market based on a sample of securities from the market. An index is thus a means to evaluate the overall performance of a market or of a segment of the market. An index measures the aggregate market movements.

Apart from being a general market indicator, indices are used as a benchmark to evaluate individual portfolio performance. Professional money managers will always try to outperform the market, i.e. they will always try to do better than the indices. For example, if the value of a portfolio moves up by 10% while the index moved up by only 5% then the portfolio is doing better than the market.

We have two renowned indices viz.


- BSE Sensitive Index (BSE SENSEX)
- S&P Nifty 50 (NIFTY)

BSE Sensex comprises of 30 large-cap companies. As the name suggests, it is a premier index on Bombay Stock Exchange (BSE). Nifty comprises of 50 large-cap companies on the National Stock Exchange (NSE).

What is Methodology of trades?

The market watch, i.e. the screen kept open normally on the trade screen would show the following columns:

Best bid price
Best bid quantity
Best offer price
Best offer quantity
Last traded price.

The first 2 columns as given above show the available buyers for a particular share in the stock exchange & the next 2 columns show the available sellers, & the fifth column shows the price at which the last trade took place. Hence when a investor wants to buy a share at “market price” ideally the 3rd & the 4th column would depict how many shares one can get at a stipulated price. The client can also put a limit price order which would sit in the order book till it reaches a price time priority when the trade can be executed.

What is a Contract Note?

Contract Note is a confirmation of trades done on a particular day on behalf of the client. It establishes a legally enforceable relationship between the client & Sushil with respect to the settlement of the trades. The Contract Note would show settlement number, order number, trade number, time of trade, quantity & price of the trades, brokerage charged, etc & it would be signed by an authorized person of Sushil.

What is pay-in day & pay-out day?

Pay-in day is the day when the broker shall make payment or delivery of securities to the exchange. Pay-out day is the day when the exchange makes payment or delivery of securities to the broker.

What is a depository?

A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities. There are two main depositories in India, namely, a) National Securities Depository Ltd. (NSDL) & b) Central Depository Securities Ltd. (CDSL), both of which are regulated by SEBI. Sushil Financial Services Private Limited is a Depository Participant of CDSL & will hold your securities in electronic form.

What should I do when I want to open an account with a DP?

You can approach Sushil Financial Services Private Limited or any DP of your choice & fill up an account opening form. At the time of opening an account, you have to sign an agreement with DP in a CDSL prescribed standard agreement, which details your & your DP’s rights & duties.

What do you mean by ‘Market Trades ’&‘Off Market Trades’?

Any trade settled through a clearing corporation is termed as a ‘Market Trade’. These trades are done through stock brokers on a stock exchange. ‘Off Market Trade’ is one which is settled directly between two parties without the involvement of a clearing corporation. The same delivery instruction slip can be used either for market trade or off-market trade by ticking one of the two options.

How do I deliver or receive shares to or from Sushil?

In case of sales, the investor would need to transfer the shares to the pool account of Sushil for the specified settlement number. The pool account number for shares sold on BSE is CM-BP-ID IN654633 & the pool account number for shares sold on NSE is CM-BP-ID IN563698. The delivery should necessarily come from the demat account of the investor & not from any other person. Similarly Sushil would directly transfer shares bought to the account of the investor.

How do I make or receive payments to or from Sushil?

Payments to Sushil has to be made via a Account Payee cheque/Demand Draft for the BSE in favor of Sushil Financial Services Private Limited & for NSE in favour of Sushil Financial Services Private Limited. The payment should necessarily come from the bank account of the investor & not from any other person. Similarly Sushil would pay an Account Payee cheque in the name of the investor, which will also contain the Bank name & account number of the client.

How long does it take to receive my money for a sale transaction & my shares for a buy transaction?

The pay-out of funds & securities to the clients by Sushil will be within 24 hours of the pay-out.

What is a Rolling Settlement?

In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. In NSE & BSE, the trades pertaining to the rolling settlement are settled on a T+2 day basis where T stands for the trade day. Hence trades executed on a Monday are typically settled on the following Wednesday (considering 2 working days from the trade day). The funds & securities pay-in & pay-out are carried out on T+2 day.

What is an Auction?

The securities are put up for auction by the Exchange on account of non-delivery of securities by the selling trading member to ensure that the buying trading member receives the securities due to him. The non-delivery by the trading member could arise on account of short delivery. The Exchange purchases the requisite quantity in the Auction Market & gives them to the buying trading member.

What happens if I could not make the payment of money or deliver shares on the pay-in day?

In case of purchase on your behalf, the member broker has the liberty to close out transactions by selling securities in case you fail to make full payment to the broker for the execution of contract before pay-in day as fixed by Stock Exchange for the concerned settlement period unless you already have an equivalent credit with the broker. The shortages in case of sales are met through auction process & the difference in price indicated in Contract Note & price received through auction is paid by member to the Exchange which is then liable to be recovered from the client.

In both the cases any loss in transactions will be deductible from the margin money paid by you.

What happens if the shares are not bought in the auction?

If the shares could not be bought in the auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulate that “the close out price will be the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract was entered into & up to the date of auction/close out OR 20% above the official closing price on the exchange on the day on which auction offers are called for, whichever is higher.” Since in the rolling settlement the auction & the close out takes place during trading hours the reference price in the rolling settlement for close out procedures would be taken as the previous day’s closing price.

What happens if I do not get my money or share on the due date?

Undoubtedly, it is “Don't put all your eggs in the same basket”. It is very tempting to make all your investment in the same sector when their stocks are going up, but since market trends are very volatile, you are, at the same time, making yourself extremely vulnerable to lose all your money. Dealing with single sector investment requires razor sharp timing with zero margin of error - a tall order in such a speculative & volatile business.

Hence, it is always advisable to make investments in different companies & in different sectors, so that you can achieve stable portfolio diversification & compensate losses in one sector against profits in another sector.

What are the additional charges other than brokerage that can be levied on the investor?

The trading member can charge:

Securities Transaction Tax.
Service tax as applicable.
Transaction charges levied by NSE, Stamp duty & other charges directly attributable to the transaction.

(Note: The brokerage & service tax is indicated separately in the contract note.)

How are margins paid?

Exchange prescribes margin rules from time to time, which currently are calculated on the Value at Risk model. Margins are to be paid by the investor before placing the order.

What are the rights of the investor?

The right to get proof of price/brokerage charged, money/shares on time, Statement of Accounts & Contract Note from trading member.

What are the obligations of the investor?

The obligations are:

Signing a proper Member-Constituent Agreement
Possessing a valid contract or purchase/sale note
Delivering securities & making payment on time
Providing margin before trade

Who is a Portfolio Manager?

Any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the client, as the case may be is a Portfolio Manager. Sushil Financial Services Private Limited is a SEBI Registered Portfolio Manager (Reg. No.INP000001116) that offers Discretionary Portfolio Management Services to an investor with a minimum of Rs.10 lakhs.