Equity also commonly known as stock/ share represents the ownership in a company. Owning one share is enough for a investor
to the part of that company’s assets and earnings. The returns earned in equity depend upon the profits
made by the company, company’s future growth etc
It is a preferred asset class for investment as it provides inflation beating returns compared to traditional asset
classes of fixed deposits and bank deposits interest rates.
Equity is listed in the stock exchanges where customers can use these products for trading and investment perspective.
Trading is buying and selling on same trading date and investing is buying and holding it for shorter
period (Less than 1 year) long term (More than 1 year).
Why Equities?
Equity investors are entitled to receive a dividend from the company. It is one of the main sources of investment income.
Investment in equity offers better returns than traditional investment products like fixed deposit.
Equity is listed on stock exchanges have the benefit of any time liquidity.
Investors can start investing in equity with a relatively small amount of money
Equity Trading Types:
Day Trading (Intraday Trading)
It is the activity of buying and selling with the intent of profiting from price movements in the
stock within a single trading day. They are automatically squared off before the market close to avoid
overnight exposure risk.
Advantages:
Leverage
No overnight risk
Lesser Transaction Costs
Delivery Trading:
Delivery based trading means buying shares and holding them for certain period of time .The shares
that is bought will be credited to the investor demat account of the investor on T+2 day (T being the
day of execution of the order) The investor can hold the shares as long as they want with no time constraints
until they get the desired profit.
Advantages:
It is useful for medium-to-long-term investors.
Eligibility of corporate benefits announced by the companies like Dividends,
Bonus shares ,Rights issues can be availed by the investors if they hold the shares for the longer
duration These benefits the companies offers to its shareholders time to time.
Minimum amount to invest in Equity:
Shares are traded in the stock exchanges of price ranging from paisa to thousands. The investors are required
to keep the of amount to the extent of transaction value i.e. number of shares that they are going to buy
* price per share
For example if investor wants to buy one share of ASHOK LEYLAND of Rs.150, then they have to keep Rs. 150.
Similarly for purchase of 10 share of the ASHOK LEYLAND, it will require Rs. 1500. So there is no minimum
limit to trade.
PSB offers trading leverages according to the trading product type’s i.e.
Leverages is nothing but buying a stock by borrowing funds for trading / investing from a company to increase
the potential return of an investment.
Different types of leverages
Intraday Leverage - Leverage up to 7 times of your initial margin money for equity intraday trading
The initial margin money could be either in the form of cash or exchange approved stocks e.g. If you
have account balance credit of Rs.1000, you can buy stocks of value to the extent of Rs.7, 000.i.e Amount
required is approximately 15 % of share price.
Delivery Based Trading
T + 2 day - Buy stocks by just paying an exchange minimum delivery margin as on the date of transaction
and pay the remaining balance before the stock exchange pay-in date (2nd trading date from the date of transaction).
T + 2 + 5 day (Temporary Funding) - Funding facility @ nominal rate of interest commencing from the 2nd
day (from the exchange payment due date) .Facility to hold the positions by maintenance of minimum threshold
margin percentage and the balance to be paid on or before 7th day from the date of purchase. The company will
honor the payment to the exchange on your behalf on the due date .If the balance payment is not received on
or before the 7th day, company shall sell the shares in the market to
recover the debit / suspend from further trading.
This facility will empower the customer the extra buying power and to grab the ultra-short
term opportunity available in the markets.
Margin Trading Funding (MTF - Long Term Funding)
Margin trading allows you to buy more stock than you'd be able to normally.
It amplifies customer to take exposure in the equity markets over and above their funds to enhance the
investment strategy. Customer has to pay initial margin of 50 % (Not less than the exchange prescribed
margin) on the purchase value and for the balance value, company will extend loan. The stocks purchased
will act as collateral for the loan. MTF is extended against initial margin deposited by the customer which
could be either in the form of cash, or by pledging the exchange approved equity shares.
This facility is as per SEBI norm.