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SECONDARY MARKET

What is meant by Secondary market?


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

What is the role of the Secondary Market?


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

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

What is the role of a Stock Exchange in buying and selling shares? The stock exchanges in India, under the overall supervision of the regulatory authority, the Securities and Exchange Board of India (SEBI), provide a trading platform, where buyers and sellers can meet to transact in securities. The trading platform provided by NSE is an electronic one and there is no need for buyers and sellers to meet at a physical location to trade. They can trade through the computerized trading screens available with the NSE trading members or the internet based trading facility provided by the trading members of NSE.

What is Demutualisation of stock exchanges?

Demutualisation refers to the legal structure of an exchange whereby the ownership, the management and the trading rights at the exchange are segregated from one another.

How is a demutualised exchange different from a mutual exchange?


In a mutual exchange, the three functions of ownership, management and trading are concentrated into a single Group. Here, the broker members of the exchange are both the owners and the traders on the exchange and they further manage the exchange as well. This at times can lead to conflicts of interest in decision making. A demutualised exchange, on the other hand, has all these three functions clearly segregated, i.e. the ownership, management and trading are in separate hands.

Currently are there any demutualised stock exchanges in India?


Currently, two stock exchanges in India, the National Stock Exchange (NSE) and Over the Counter Exchange of India (OTCEI) are demutualised.

What is Screen Based Trading?


The trading on stock exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. This imposed limits on trading volumes and effic iency. In order to provide efficiency, liquidity and transparency, NSE introduced a nationwide, on-line, fully-automated screen based trading system (SBTS) where a member can punch into the computer the quantities of a security and the price at which he would like to transact, and the transaction is executed as soon as a matching sale or buy order from a counter party is found.

What is NEAT?
NSE is the first exchange in the world to use satellite communication technology for trading. Its trading system, called National Exchange for Automated Trading (NEAT), is a state of-the-art client server based application. At the server end all trading information is stored in an in-memory database to achieve minimum response time and maximum system availability for users. It has uptime record of 99.7%. For all trades entered into NEAT system, there is uniform response time of less than one second.

How to place orders with the broker?

You may go to the brokers office or place an order on the phone/internet or as defined in the Model Agreement, which every client needs to enter into with his or her broker.

How does an investor get access to internet based trading facility?


There are many brokers of the NSE who provide internet based trading facility to their clients. Internet based trading enables an investor to buy/sell securities through internet which can be accessed from a computer at the investors residence or anywhere else where the client can access the internet. Investors need to get in touch with an NSE broker providing this service to avail of internet based trading facility.

What is a Contract Note?


Contract Note is a confirmation of trades done on a particular day on behalf of the client by a trading member. It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades. It also helps to settle disputes/claims between the investor and the trading member. It is a prerequisite for filing a complaint or arbitration proceeding against the trading member in case of a dispute. A valid contract note should be in the prescribed form, contain the details of trades, stamped with requisite value and duly signed by the authorized signatory. Contract notes are kept in duplicate, the trading member and the client should keep one copy each. After verifying the details contained therein, the client keeps one copy and returns the second copy to the trading member duly acknowledged by him.

What details are required to be mentioned on the contract note issued by the stock broker?
A broker has to issue a contract note to clients for all transactions in the form specified by the stock exchange. The contract note inter-alia should have following: Name, address and SEBI Registration number of the Member broker. Name of partner/proprietor/Authorised Signatory. Dealing Office Address/Tel. No./Fax no., Code number of the member given by the Exchange. Contract number, date of issue of contract note, settlement number and time period for settlement. Constituent (Client) name/Code Number. Order number and order time corresponding to the trades. Trade number and Trade time. Quantity and kind of Security bought/sold by the client. Brokerage and Purchase/Sale rate. Service tax rates, Securities Transaction Tax and any other charges levied

by the broker. Appropriate stamps have to be affixed on the contract note or it is mentioned that the consolidated stamp duty is paid. Signature of the Stock broker/Authorized Signatory.

What is the maximum brokerage that a broker can charge?


The maximum brokerage that can be charged by a broker from his clients as commission cannot be more than 2.5% of the value mentioned in the respective purchase or sale note.

Why should one trade on a recognized stock exchange only for buying/selling shares?
An investor does not get any protection if he trades outside a stock exchange. Trading at the exchange offers investors the best prices prevailing at the time in the market, lack of any counter-party risk which is assumed by the clearing corporation, access to investor grievance and redressal mechanism of stock exchanges, protection upto a prescribed limit, from the Investor Protection Fund etc.

How to know if the broker or sub broker is registered?


One can confirm it by verifying the registration certificate issued by SEBI. A broker's registration number begins with the letters INB and that of a sub broker with the letters INS.

What precautions must one take before investing in the stock markets?
Here are some useful pointers to bear in mind before you invest in the markets: Make sure your broker is registered with SEBI and the exchanges and do not deal with unregistered intermediaries. Ensure that you receive contract notes for all your transactions from your broker within one working day of execution of the trades. All investments carry risk of some kind. Investors should always know the risk that they are taking and invest in a manner that matches their risk tolerance. Do not be misled by market rumours, luring advertisement or hot tips of the day.

Take informed decisions by studying the fundamentals of the company. Find out the business the company is into, its future prospects, quality of management, past track record etc Sources of knowing about a company are through annual reports, economic magazines, databases available with vendors or your financial advisor.

If your financial advisor or broker advises you to invest in a company you have never heard of, be cautious. Spend some time checking out about the company before investing. Do not be attracted by announcements of fantastic results/news reports, about a company. Do your own research before investing in any stock. Do not be attracted to stocks based on what an internet website promotes, unless you have done adequate study of the company. Investing in very low priced stocks or what are known as penny stocks does not guarantee high returns. Be cautious about stocks which show a sudden spurt in price or trading activity. Any advise or tip that claims that there are huge returns expected, especially for acting quickly, may be risky and may to lead to losing some, most, or all of your money.

What Dos and Donts should an investor bear in mind when investing in the stock markets?
Ensure that the intermediary (broker/sub-broker) has a valid SEBI registration certificate. Enter into an agreement with your broker/sub-broker setting out terms and conditions clearly. Ensure that you give all your details in the Know Your Client form. Ensure that you read carefully and understand the contents of the Risk Disclosure Document and then acknowledge it. Insist on a contract note issued by your broker only, for trades done each day. Ensure that you receive the contract note from your broker within 24 hours of the transaction. Ensure that the contract note contains details such as the brokers name, trade time and number, transaction price, brokerage, service tax, securities transaction tax etc. and is signed by the Authorised Signatory of the broker. To cross check genuineness of the transactions, log in to the NSE website

(www.nseindia.com) and go to the trade verification facility extended by NSE at www.nseindia.com/content/equities/eq_trdverify.htm. and securities from your broker. Cross check and reconcile your accounts promptly and in case of any discrepancies bring it to the attention of your broker immediately. Please ensure that you receive payments/deliveries from your broker, for the transactions entered by you, within one working day of the payout date. Ensure that you do not undertake deals on behalf of others or trade on your own name and then issue cheques from a family members / friends bank accounts. Similarly, the Demat delivery instruction slip should be from your own Demat account, not from any other family members/friends accounts. Do not sign blank delivery instruction slip(s) while meeting security payin obligation. No intermediary in the market can accept deposit assuring fixed returns. Hence do not give your money as deposit against assurances of returns. PortfolioManagement Services couldbe offered only by intermediaries having specific approval of SEBI for PMS. Hence, do not part your funds to unauthorized persons for Portfolio Management. Delivery Instruction Slip is a very valuable document. Do not leave signed blank delivery instruction slip with anyone. While meeting pay in obligation make sure that correct ID of authorised intermediary is filled in the Delivery Instruction Form. Be cautious while taking funding form authorised intermediaries as these transactions are not covered under Settlement Guarantee mechanisms of the exchange. Insist on execution of all orders under unique client code allotted to you. Do not accept trades executed under some other client code to your account. When you are authorising someone through Power of Attorney for operation of your DP account, make sure that: your authorizatio n is in favour of registered intermediary only. authorisation is only for limited purpose of debits and credits arising out of valid transactions executed through that intermediary only. you verify DP statement periodically say every month/fortnight to ensure that no unauthorised transactions have taken place in your account. authorization given by you has been properly used for the purpose for which authorization has been given. in case you find wrong entries please report in writing to the authorized intermediary. Dont accept unsigned/duplicate contract note. Dont accept contract note signed by any unauthorised person. Dont delay payment/deliveries of securities to broker. In the event of any discrepancies/disputes, please bring them to the notice of the broker immediately in writing (acknowledged by the broker) and ensure their prompt rectification. In case of sub-broker disputes, inform the main broker in writing about the dispute at the earliest and in any case not later than 6 months.

If your broker/sub-broker does not resolve your complaints within a reasonable period (say within 15 days), please bring it to the attention of the Investor Grievances Cell of the NSE. While lodging a complaint with the Investor Grievances Cell of the NSE, it is very important that you submit copies of all relevant documents like contract notes, proof of payments/delivery of shares etc. alongwith the complaint. Remember, in the absence of sufficient documents, resolution of complaints becomes difficult. Familiarise yourself with the rules, regulations and circulars issued by stock exchanges/SEBI before carrying out any transaction.

What are the products dealt in the Secondary Markets?


Following are the main financial products/instruments dealt in the Secondary market which may be divided broadly into Shares and Bonds: Shares: Equity Shares: An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture. Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares for every 3 shares held at a price of Rs. 125 per share. Bonus Shares: Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns. Preference shares: Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders/debenture holders. Cumulative Preference Shares: A type of preference shares on which dividend accumulates if remained unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

Why should one invest in equities in particular?

When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term. This may be illustrated with the help of following examples: Over a 15 year period between 1990 to 2005, Nifty has given an annualised return of 17%. Mr. Rajan invests in Nifty on January 1, 2000 (index value 1592.90). The Nifty value as of end December 2005 was 2836.55. Holding this investment over this period Jan 2000 to Dec 2005 he gets a return of 78.07%. Investment in shares of ONGC Ltd for the same period gave a return of 465.86%, SBI 301.17% and Reliance 281.42%. Therefore, Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investme nts in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similarhigh returns. Equities are high risk investments. One needs to study them carefully before investing.

What has been the average return on Equities in India?


Since 1990 till date, Indian stock market has returned about 17% to investors on an average in terms of increase in share prices or capital appreciation annually. Besides that on average stocks have paid 1.5% dividend annually.Dividend is a percentage of the face value of a share that a company returns to its shareholders from its annual profits. Compared to How can one acquire equity shares? You may subscribe to issues made by corporates in the primary market. In the primary market, resources are mobilised by the corporates through fresh public issues (IPOs) or through private placements. Alternately, you may purchase shares from the secondary market. To buy and sell securities you should approach a SEBI registered trading member (broker) of a recognized stock exchange. most other forms of investments, investing in equity shares offers the highest rate of return, if invested over a longer duration.

Which are the factors that influence the price of a stock?

Broadly there are two factors: (1) stock specific and (2) market specific. The stockspecific factor is related to peoples expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills. The market specific factor is influenced by the investors sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favourable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavourable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific factor is generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the stock- specific factors. Therefore, a prudent advice to all investors is to analyse and invest and not speculate in shares.

What is a Portfolio?
A Portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investor's goal(s). Items that are considered a part of your portfolio can include any asset you own-from shares, debentures, bonds, mutual fund units to items such as gold, art and even real estate etc. However, for most investors a portfolio has come to signify an investment in financial instruments like shares, debentures, fixed deposits, mutual fund units.

What is Diversification?
It is a risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Diversification is possibly the best way to reduce the risk in a portfolio.

What are the advantages of having a diversified portfolio?


A good investment portfolio is a mix of a wide range of asset class. Different securities perform differently at any point in time, so with a mix of asset types, your entire portfolio does not suffer the impact of a decline of any one security. When your stocks go down, you may still have the stability of the bonds in your portfolio. There have been all sorts of academic studies and formulas that demonstrate why diversification is important, but it's really just the simple practice of "not putting all your eggs in one basket." If you spread your investments across various types of assets and markets, you'll reduce the risk of your entire portfolio getting affected by the adverse returns of any single asset class.

Equity (finance)
From Wikipedia, the free encyclopedia
For equity securities, see Stock.

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In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance operations. This creates a liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered, for accounting purposes, sums of liabilities andassets; this is the accounting equation. After liabilities have been accounted for the positive remainder is deemed the owner's interest in the business. This definition is helpful in understanding the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital.

Contents
[hide]

1 Equity investments 2 Accounting

2.1 Book value

3 Shareholders' equity 4 Market value of shares 5 Equity in real estate 6 See also 7 Notes 8 References 9 External links

[edit]Equity

investments

An equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gains, as the value of the stock rises. It may also refer to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup company. When the investment is in infant companies, it is referred to as venture capital investing and is generally regarded as a higher risk than investment in listed going-concern situations. The equities held by private individuals are often held as mutual funds or as other forms of collective investment scheme, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms, such as Schroders, Fidelity Investments or The Vanguard Group. Such holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative, which is usually employed by large private investors and pension funds, is to hold shares directly; in the institutional environment many clients who own portfolios have what are called segregated funds, as opposed to or in addition to the pooled mutual fund alternatives. A calculation can be made to assess whether an equity is over or underpriced, compared with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the ratio of the dividend yield of an equity and that of the long-term bond.

[edit]Accounting

In financial accounting, equity capital is the owners' interest on the assets of the enterprise after deducting all its liabilities.[1] It appears on the balance sheet / statement of financial position,[2] one of the four primary financial statements. Ownership equity includes both tangible and intangible items (such as brand names and reputation / goodwill). Accounts listed under ownership equity include (example):

Share capital (common stock) Preferred stock Capital surplus Retained earnings Treasury stock Stock options Reserve

[edit]Book

value

The book value of equity will change in the case of the following events: Changes in the firm's assets relative to its liabilities. For example, a profitable firm receives more cash for its products than the cost at which it produced these goods, and so in the act of making a profit, it is increasing its assets. Depreciation - Equity will decrease, for example, when machinery depreciates, which is registered as a decline in the value of the asset, and on the liabilities side of the firm's balance sheet as a decrease in shareholders' equity. Issue of new equity in which the firm obtains new capital increases the total shareholders' equity. Share repurchases, in which a firm gives back money to its investors, reducing on the asset side its financial assets, and on the liability side the shareholders' equity. For practical purposes (except for its tax consequences), share repurchasing is similar to a dividend payment, as both consist of the firm giving money back to investors. Rather than giving money to all shareholders immediately in the form of a dividend payment, a share repurchase reduces the number of shares (increases the size of each share) in future income and distributions.

Dividends paid out to preferred stock owners are considered an expense to be subtracted from net income[citation needed](from the point of view of the common share owners).

Other reasons - Assets and liabilities can change without any effect being measured in the Income Statement under certain circumstances; for example, changes in accounting rules may be applied

retroactively. Sometimes assets bought and held in other countries get translated back into the reporting currency at different exchange rates, resulting in a changed value. Equities, also known as securities are shares of companies traded in the stock exchanges. Investing in equities can help you attain your investment goals faster considering that most conventional investments like fixed deposits, PPF, bonds etc. often yield a lesser interest rate. However, the investment needs to be done cautiously since market conditions may be volatile and it takes great knowledge & skills to spot market opportunities.

[edit]Shareholders'

equity

When the owners are shareholders, the interest can be called shareholders' equity; the accounting remains the same, and it is ownership equity spread out among shareholders. If all shareholders are in one and the same class, they share equally in ownership equity from all perspectives. However, shareholders may allow different priority ranking among themselves by the use of share classes and options. This complicates both analysis for stock valuation and accounting. The individual investor is interested not only in the total changes to equity, but also in the increase / decrease in the value of his own personal share of the equity. This reconciliation of equity should be done both in total and on a per share basis. Equity (beginning of year) + net income inter net money you gained dividends how much money you gained or lost so far +/ gain/loss from changes to the number of shares outstanding. = Equity (end of year) if you get more money during the year or less or not anything

[edit]Market

value of shares

In the stock market, market price per share does not correspond to the equity per share calculated in the accounting statements. Stock valuations, which are often much higher, are based on other considerations related to the business' operating cash flow, profits and future prospects; some factors are derived from the accounting statements.

[edit]Equity

in real estate

The notion of equity with respect to real estate comes the equity of redemption. This equity is a property right valued at the difference between the market price of the property and the amount of any mortgage or other encumbrance.

Why should one invest in equities in particular?


1. INVESTMENT BASICS 2. SECURITIES 3. PRIMARY MARKET 4. SECONDARY MARKET 4.1 INTRODUCTION

What is meant by Secondary market? What is the role of the Secondary Market? What is the difference between the Primary Market and the Secondary Market? What is the role of a Stock Exchange in buying and selling shares? What is Demutualisation of stock exchanges? How is a demutualised exchange different from a mutual exchange? Currently are there any demutualised stock exchanges in India? What is Screen Based Trading? What is NEAT? How to place orders with the broker? How does an investor get access to internet based trading facility? What is a Contract Note? What details are required to be mentioned on the contract note issued by the stock broker? What is the maximum brokerage that a broker can charge? Why should one trade on a recognized stock exchange only for buying/selling Shares? How to know if the broker or sub broker is registered? What precautions must one take before investing in the stock markets? What Do's and Don'ts should an investor bear in mind when investing in the stock markets? What are the products dealt in the Secondary Markets? Why should one invest in equities in particular? What has been the average return on Equities in India? Which are the factors that influence the price of a stock? What is meant by the terms Growth Stock / Value Stock? How can one acquire equity shares?

4.1.1 Stock Exchange

4.1.2 Stock Trading

4.2 PRODUCTS IN THE SECONDARY MARKETS 4.2.1 Equity Investment

What is Bid and Ask price? What is a Portfolio? What is Diversification? What are the advantages of having a diversified portfolio? What is a 'Debt Instrument'? What are the features of debt instruments? What is meant by 'Interest' payable by a debenture or a bond? What are the Segments in the Debt Market in India ? Who are the Participants in the Debt Market? Are bonds rated for their credit quality? How can one acquire securities in the debt market?

4.2.2. Debt Investment

5. DERIVATIVES 6. DEPOSITORY 7. MUTUAL FUNDS 8. MISCELLANEOUS 9. CONCEPTS & MODES OF ANALYSIS 10. RATIO ANALYSIS

When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term. This may be illustrated with the help of following examples: a) Over a 15 year period between 1990 to 2005, Nifty has given an annualised return of 17%. b) Mr. Raju invests in Nifty on January 1, 2000 (index value 1592.90). The Nifty value as of end December 2005 was 2836.55. Holding this investment over this period Jan 2000 to Dec 2005 he gets a return of 78.07%. Investment in shares of ONGC Ltd for the same period gave a return of 465.86%, SBI 301.17% and Reliance 281.42%. Therefore, Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investme nts in some shares with a longer tenure of investment have yielded far superior returns than any other investment.

However, this does not mean all equity investments would guarantee similar high returns. Equities are high risk investments. One needs to study them carefully before investing.

What has been the average return on Equities in India?


Since 1990 till date, Indian stock market has returned about 17% to investors on an average in terms of increase in share prices or capital appreciation annually. Besides that on average stocks have paid 1.5% dividend annually. Dividend is a percentage of the face value of a share that a company returns to its shareholders from its annual profits. Compared to most other forms of investments, investing in equity shares offers the highest rate of return, if invested over a longer duration.

Which are the factors that influence the price of a stock?


Broadly there are two factors: (1) stock specific and (2) market specific. The stock-specific factor is related to peoples expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills. The market specific factor is influenced by the investors sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favourable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavourable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific factor is generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the stockspecific factors. Therefore, a prudent advice to all investors is to analyse and invest and not speculate in shares.

What is meant by the terms Growth Stock / Value Stock?


Growth Stocks: In the investment world we come across terms such as Growth stocks, Value stocks etc. Companies whose potential for growth in sales and earnings are excellent, are growing faster than other companies in the market or other stocks in the same industry are called the Growth Stocks. These companies usually pay little or no dividends and instead prefer to reinvest their profits in their business for further expansions. Value Stocks: The task here is to look for stocks that have been overlooked by other investors and which may have a 'hidden value'. These companies may have been beaten down in price because of some bad event, or may be in an industry that's not fancied by most investors. However, even a company that has seen its stock price decline still has assets to its name - buildings, real estate, inventories, subsidiaries, and so on. Many of these assets still have value, yet that value may not be reflected in the stock's price. Value investors look to buy stocks that are undervalued, and then hold those stocks until the rest of the market realizes the real value of the company's assets. The value investors tend to purchase a company's stock usually based on relationships

between the current market price of the company and certain business fundamentals. They like P/E ratio being below a certain absolute limit; dividend yields above a certain absolute limit; Total sales at a certain level relative to the company's market capitalization, or market value etc.

How can one acquire equity shares?


You may subscribe to issues made by corporates in the primary market. In the primary market, resources are mobilised by the corporates through fresh public issues (IPOs) or through private placements. Alternately, you may purchase shares from the secondary market. To buy and sell securities you should approach a SEBI registered trading member (broker) of a recognized stock exchange.

What is Bid and Ask price?


The 'Bid' is the buyer's price. It is this price that you need to know when you have to sell a stock. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell. The 'Ask' (or offer) is what you need to know when you're buying i.e. this is the rate/ price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted 'Ask' price. If an investor looks at a computer screen for a quote on the stock of say XYZ Ltd, it might look something like this: Bid (Buy side) Ask (Sell side) _____________________________________________________________ Qty. Price (Rs.) Price (Rs.) Qty. _____________________________________________________________ 1000 50.25 50.35 2000 500 50.10 50.40 1000 550 50.05 50.50 1500 2500 50.00 50.55 3000 1300 49.85 50.65 1450 _____________________________________________________________ Total 5850 8950 _____________________________________________________________ Here, on the left-hand side after the Bid quantity and price, whereas on the right hand side we find the Ask quantity and prices. The best Buy (Bid) order is the order with the highest price and therefore sits on the first line of the Bid side (1000 shares @ Rs. 50.25). The best Sell (Ask) order is the order with the lowest sell price (2000 shares @ Rs. 50.35). The difference in the price of the best bid and ask is called as the Bid-Ask spread and often is an indicator of liquidity in a stock. The narrower the difference the more liquid or highly traded is the stock.

What is a Portfolio?

A Portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investor's goal(s). Items that are considered a part of your portfolio can include any asset you own-from shares, debentures, bonds, mutual fund units to items such as gold, art and even real estate etc. However, for most investors a portfolio has come to signify an investment in financial instruments like shares, debentures, fixed deposits, mutual fund units.

What is Diversification?
It is a risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Diversification is possibly the best way to reduce the risk in a portfolio.

What are the advantages of having a diversified portfolio?


A good investment portfolio is a mix of a wide range of asset class. Different securities perform differently at any point in time, so with a mix of asset types, your entire portfolio does not suffer the impact of a decline of any one security. When your stocks go down, you may still have the stability of the bonds in your portfolio. There have been all sorts of academic studies and formulas that demonstrate why diversification is important, but it's really just the simple practice of "not putting all your eggs in one basket." If you spread your investments across various types of assets and markets, you'll reduce the risk of your entire portfolio getting affected by the adverse returns of any single asset class. Debt Investment

What is a 'Debt Instrument'?


Debt instrument represents a contract whereby one party lends money to another on predetermined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender. In Indian securities markets, the term 'bond' is used for debt instruments issued by the Central and State governments and public sector organizations and the term 'debenture' is used for instruments issued by private corporate sector.

What are the features of debt instruments?


Each debt instrument has three features: Maturity, coupon and principal. Maturity: Maturity of a bond refers to the date, on which the bond matures, which is the date on which the borrower has agreed to repay the principal. Term-to-Maturity refers to the number of years remaining for the bond to mature. The Term-to-Maturity changes everyday, from date of issue of the bond until its maturity. The term to maturity of a bond can be calculated on any date, as the distance between such a date and the date of maturity. It is also called the term or the tenure of the bond. Coupon: Coupon refers to the periodic interest payments that are made by the borrower (who is also the issuer of the bond) to the lender (the subscriber of the bond). Coupon rate is the rate

at which interest is paid, and is usually represented as a percentage of the par value of a bond. Principal: Principal is the amount that has been borrowed, and is also called the par value or face value of the bond. The coupon is the product of the principal and the coupon rate. The name of the bond itself conveys the key features of a bond. For example, a GS CG2008 11.40% bond refers to a Central Government bond maturing in the year 2008 and paying a coupon of 11.40%. Since Central Government bonds have a face value of Rs.100 and normally pay coupon semi-annually, this bond will pay Rs. 5.70 as six- monthly coupon, until maturity.

What is meant by 'Interest' payable by a debenture or a bond?


Interest is the amount paid by the borrower (the company) to the lender (the debenture-holder) for borrowing the amount for a specific period of time. The interest may be paid annual, semiannually, quarterly or monthly and is paid usually on the face value (the value printed on the bond certificate) of the bond.

What are the Segments in the Debt Market in India?


There are three main segments in the debt markets in India, viz., (1) Government Securities, (2) Public Sector Units (PSU) bonds, and (3) Corporate securities. The market for Government Securities comprises the Centre, State and State-sponsored securities. In the recent past, local bodies such as municipalities have also begun to tap the debt markets for funds. Some of the PSU bonds are tax free, while most bonds including government securities are not tax-free. Corporate bond markets comprise of commercial paper and bonds. These bonds typically are structured to suit the requirements of investors and the issuing corporate, and include a variety of tailor- made features with respect to interest payments and redemption.

Who are the Participants in the Debt Market?


Given the large size of the trades, Debt market is predominantly a wholesale market, with dominant institutional investor participation. The investors in the debt markets are mainly banks, financial institutions, mutual funds, provident funds, insurance companies and corporates.

Are bonds rated for their credit quality?


Most Bond/Debenture issues are rated by specialised credit rating agencies. Credit rating agencies in India are CRISIL, CARE, ICRA and Fitch. The yield on a bond varies inversely with its credit (safety) rating. The safer the instrument, the lower is the rate of interest offered.

How can one acquire securities in the debt market?


You may subscribe to issues made by the government/corporates in the primary market. Alternatively, you may purchase the same from the secondary market through the stock exchanges.

Q1 A.

What are Derivatives? The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. With Securities Laws (Second Amendment) Act,1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:A Derivative includes: a. a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; b. a contract which derives its value from the prices, or index of prices, of underlying securities;

Q2 A.

What is a Futures Contract? Futures Contract means a legally binding agreement to buy or sell the underlying security on a future date. Future contracts are the organized/standardized contracts in terms of quantity, quality (in case of commodities), delivery time and place for settlement on any date in future. The contract expires on a pre-specified date which is called the expiry date of the contract. On expiry, futures

can be settled by delivery of the underlying asset or cash. Cash settlement enables the settlement of obligations arising out of the future/option contract in cash. Q3 A. What is an Option contract? Options Contract is a type of Derivatives Contract which gives the buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined price within or at end of a specified period. The buyer / holder of the optionpurchases the right from the seller/writer for a consideration which is called the premium. The seller/writer of an option is obligated to settle the option as per the terms of the contract when the buyer/holder exercises his right. The underlying asset could include securities, an index of prices of securities etc. Under Securities Contracts (Regulations) Act,1956 options on securities has been defined as "option in securities" meaning a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, ateji mandi, a galli, a put, a call or a put and call in securities. An Option to buy is called Call option and option to sell is called Put option. Further, if an option that is exercisable on or before the expiry date is called American option and one that is exercisable only on expiry date, is called European option. The price at which the option is to be exercised is called Strike price or Exercise price. Therefore, in the case of American options the buyer has the right to exercise the option at anytime on or before the expiry date. This request for exercise is submitted to the Exchange, which randomly assigns the exercise request to the sellers of the

options, who are obligated to settle the terms of the contract within a specified time frame. As in the case of futures contracts, option contracts can be also be settled by delivery of the underlying asset or cash. However, unlike futures cash settlement in option contract entails paying/receiving the difference between the strike price/exercise price and the price of the underlying asset either at the time of expiry of the contract or at the time of exercise / assignment of the option contract. Q4 A. What are Index Futures and Index Option Contracts? Futures contract based on an index i.e. the underlying asset is the index, are known as Index Futures Contracts. For example, futures contract on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index. Similarly, the options contracts, which are based on some index, are known as Index options contract. However, unlike Index Futures, the buyer of Index Option Contracts has only the right but not the obligation to buy / sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised / assigned only on the expiry date. An index, in turn derives its value from the prices of securities that constitute the index and is created to represent the sentiments of the market as a whole or of a particular sector of the economy. Indices that represent the whole market are broad based indices and those that represent a particular sector are sectoral indices. In the beginning futures and options were permitted only on S&P Nifty and BSE Sensex. Subsequently, sectoral indices were also permitted for derivatives trading subject to fulfilling the eligibility

criteria. Derivative contracts may be permitted on an index if 80% of the index constituents are individually eligible for derivatives trading. However, no single ineligible stock in the index shall have aweightage of more than 5% in the index. The index is required to fulfill the eligibility criteria even after derivatives trading on the index has begun. If the index does not fulfill the criteria for 3 consecutive months, then derivative contracts on such index would be discontinued. By its very nature, index cannot be delivered on maturity of the Index futures or Index option contracts therefore, these contracts are essentially cash settled on Expiry. Q5 A. Why mini derivative contract? The minimum contract size for the mini derivative contract on Index (Sensex and Nifty) is Rs. 1 lakh at the time of its introduction in the market. The lower minimum contract size means that smaller investors are able to hedge their portfolio using these contracts with a lower capital outlay. This means a better hedge for portfolio, and also results in more liquidity in the market. Q6 A. Why longer dated index options? Longer dated derivatives products are useful for those investors who want to have a long term hedge or long term exposure in derivative market. The premiums for longer term derivatives products are higher than for standard options in the same stock because the increased expiration date gives the underlying asset more time to make a substantial move and for the investor to make a healthy profit. Presently, longer dated

options on Sensex and Nifty with tenure of upto 3 years are available for the investors. Q7 A. What is Bond Index? A bond index is used to measure the performance of bond markets. The index is used as a benchmark against which investment managers measure their performance. It is also used as a measure to compare the performance of different asset classes. The government bond market is the most liquid segment of the bond market. Q8 A. What is Volatility Index? Volatility Index is a measure of expected stock market volatility, over a specified time period, conveyed by the prices of stock / index options. It depicts the collective sentiment of the market on the implied future volatility. Q9 A. What is the structure of Derivative Markets in India? Derivative trading in India takes can place either on a separate and independent Derivative Exchange or on a separate segment of an existing Stock Exchange. Derivative Exchange/Segment function as a Self-Regulatory Organisation (SRO) and SEBI acts as the oversight regulator. The clearing & settlement of all trades on the Derivative Exchange/Segment would have to be through a Clearing Corporation/House, which is independent in governance and membership from the Derivative Exchange/Segment. Q10 What are the various membership categories in the equity derivatives market?

A.
i.

The various types of membership in the derivatives market are as follows: Trading Member (TM) A TM is a member of the derivatives exchange and can trade on his own behalf and on behalf of his clients.
ii.

Clearing Member (CM) These members are permitted to settle their own trades as well as the trades of the other nonclearing members known as Trading Members who have agreed to settle the trades through them.

iii.

Self-clearing Member (SCM) A SCM are those clearing members who can clear and settle their own trades only.

Q11 A.
i.

What are the requirements to be a member of the equity derivatives exchange/ clearing corporation? Balance Sheet Networth Requirements: SEBI has prescribed a networth requirement of Rs. 3 crores for clearing members. The clearing members are required to furnish an auditor's certificate for the networth every 6 months to the exchange. Thenetworth requirement is Rs. 1 crore for a self-clearing member. SEBI has not specified any networth requirement for a trading member.
ii.

Liquid Networth Requirements: Every clearing member (both clearing members and self-clearing members) has to the maintainatleast Rs. 50 lakhs as Liquid Networth with

exchange / clearing corporation.


iii.

Certification requirements: The Members are required to pass the certification programme approved by SEBI. Further, every trading member is required to appoint atleast two approved

users who have passed the certification programme. Only the approved users are permitted to operate the derivatives trading terminal. Q12 A. What are requirements for a Member with regard to the conduct of his business? The derivatives member is required to adhere to the code of conduct specified under the SEBI Broker Sub-Broker regulations. The following conditions stipulations have been laid by SEBI on the regulation of sales practices:
i.

Sales Personnel: The derivatives exchange recognizes the persons recommended by the Trading Member and only such persons are authorized to act as sales personnel of the TM. These persons who represent the TM are known as AuthorisedPersons.

ii.

Know-your-client: The member is required to get the Knowyour-client form filled by every one of client. Risk disclosure document: The derivatives member must educate his client on the risks of derivatives by providing a copy of the Risk disclosure document to the client.

iii.

iv.

Member-client agreement: The Member is also required to enter into the Member-client agreement with all his clients.

Q13 A.

Which derivative contracts are permitted by SEBI? Derivative products have been introduced in a phased manner starting with Index Futures Contracts in June 2000. Index Options and Stock Options were introduced in June 2001 and July 2001 followed by Stock Futures in November 2001. Sectoral indices were permitted for derivatives trading in December 2002. During

December 2007 SEBI permitted mini derivative (F&O) contract on Index (Sensex and Nifty). Further, in January 2008, longer tenure Index options contracts and Volatility Index and in April 2008, Bond Index was introduced. In addition to the above, during August 2008, SEBI permitted Exchange traded Currency Derivatives. Q14 A. What is the eligibility criteria for stocks on which

derivatives trading may be permitted? A stock on which stock option and single stock future contracts are proposed to be introduced is required to fulfill the following broad eligibility criteria:i.

The stock shall be chosen from amongst the top 500 stock in terms of average daily market capitalisation and average daily traded value in the previous six month on a rolling basis.

ii.

The stocks median quarter-sigma order size over the last six months shall be not less than Rs.1 Lakh. A stocks quartersigma order size is the mean order size (in value terms) required to cause a change in the stock price equal to onequarter of a standard deviation.

iii.

The market wide position limit in the stock shall not be less than Rs.50 crores.

A stock can be included for derivatives trading as soon as it becomes eligible. However, if the stock does not fulfill the eligibility criteria for 3 consecutive months after being admitted to derivatives trading, then derivative contracts on such a stock would be discontinued.

Q15 A.

What is the lot size of contract in the equity derivatives market? Lot size refers to number of underlying securities in one contract. The lot size is determined keeping in mind the minimum contract size requirement at the time of introduction of derivative contracts on a particular underlying. For example, if shares of XYZ Ltd are quoted at Rs.1000 each and the minimum contract size is Rs.2 lacs, then the lot size for that particular scrips stands to be 200000/1000 = 200 shares i.e. one contract in XYZ Ltd. covers 200 shares.

Q16 A.

What is corporate adjustment? The basis for any adjustment for corporate action is such that the value of the position of the market participant on cum and ex-date for corporate action continues to remain the same as far as possible. This will facilitate in retaining the relative status of positions viz. in-the-money, at-the-money and out-of-the-money. Any adjustment for corporate actions is carried out on the last day on which a security is traded on a cum basis in the underlying cash market. Adjustments mean modifications to positions and/or contract specifications as listed below: a. b. c. Strike price Position Market/Lot/ Multiplier

The adjustments are carried out on any or all of the above based on the nature of the corporate action. The adjustments for corporate action are carried out on all open, exercised as well as assigned positions.

The corporate actions are broadly classified under stock benefits and cash benefits. The various stock benefits declared by the issuer of capital are: a. b. c. d. e. f. g. h. i. Bonus Rights Merger/ demerger Amalgamation Splits Consolidations Hive-off Warrants, and Secured Premium Notes (SPNs) among others

The cash benefit declared by the issuer of capital is cash dividend. Q17 A.
i.

What is the margining system in the equity derivatives market? Two type of margins have been specified Initial Margin - Based on 99% VaR and worst case loss over a specified horizon, which depends on the time in which Mark to Market margin is collected.
ii.

Mark to Market Margin (MTM) - collected in cash for all Futures contracts and adjusted against the available Liquid Networthfor option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement.

Dr. L.C Gupta Committee had recommended that the level of initial margin required on a position should be related to the risk of loss on the position. The concept of value-at-risk should be used

in calculating required level of initial margins. The initial margins should be large enough to cover the one day loss that can be encountered on the position on 99% of the days. The recommendations of the Dr. L.C Gupta Committee have been a guiding principle for SEBI in prescribing the margin computation & collection methodology to the Exchanges. With the introduction of various derivative products in the Indian securities Markets, the margin computation methodology, especially for initial margin, has been modified to address the specific risk characteristics of the product. The margining methodology specified is consistent with the margining system used in developed financial & commodity derivative markets worldwide. The exchanges were given the freedom to either develop their own margin computation system or adapt the systems available internationally to the requirements of SEBI. A portfolio based margining approach which takes an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in all Derivative Contracts i.e. Index Futures, Index Option, Stock Options and Single Stock Futures, has been prescribed. The initial margin requirements are required to be based on the worst case loss of a portfolio of an individual client to cover 99% VaR over a specified time horizon. What is a Depository? A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities. 2. How is a depository similar to a bank? It can be compared with a bank, which holds the funds for depositors. A Bank Depository analogy is given in the following table: BANK-DEPOSITORY AN ANALOGY

BANK Holds funds in an account Transfers funds between accounts on the instruction of the account holder Facilitates transfer without having to handle money Facilitates safekeeping of money

DEPOSITORY Holds securities in an account Transfers securities between accounts on the instruction of the BO account holder Facilitates transfer of ownership without having to handle securities Facilitates safekeeping of securities

3. How many Depositories are registered with SEBI? At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI. 4. Who is a Depository Participant? A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor and provides depository services.Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations /clearing houses, NBFCs and Registrar to an Issue or Share Transfer Agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a branch whereas depository services can be availed through a DP. 5. What is the minimum networth required for a depository? The minimum networth stipulated by SEBI for a depository is Rs.100 crore. 6. How many Depository Participants are registered with SEBI? As on September 30, 2008, a total of 711 DPs (266 NSDL, 445 CDSL) are registered with SEBI. 7. Is it compulsory for every investor to open a beneficial owner (BO) account to trade in the capital market? As per the available statistics at BSE and NSE, 99.9% transactions take place in dematerialised mode only. Therefore, in view of the convenience of trading in dematerialised mode, it is advisable to have a beneficial owner (BO) account for trading at the exchanges. However to facilitate trading by small investors (Maximum 500 shares, irrespective of their value) in physical mode the stock exchanges provide an additional trading window, which gives one time facility for small investors to sell physical shares which are in compulsory demat list. The buyer of these shares has to demat such shares before further selling.

8. What are the benefits of availing depository services? The benefits are enumerated below: A safe and convenient way to hold securities; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. Reduction in paperwork involved in transfer of securities; Reduction in transaction cost; No odd lot problem, even one share can be traded; Nomination facility; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. Holding investments in equity and debt instruments in a single account. Account Opening 9. How can services of a depository be availed? To avail the services of a depository an investor is required to open a Beneficial Owner (BO) account with a Depository Participant (DP) of any depository. 10. How can one open an account? First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents which serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. Apart from these PAN card has to be shown in original at the time of account opening from April 01, 2006. All applicants should carry original documents for verification by an authorized official of the DP, under his signature. Investor has to sign an agreement with DP in a depository prescribed standard format, which gives details of rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give a unique account number, which is also called BO ID (Beneficial Owner Identification number) and used for all future transactions. 11. What are all charges an investor has to pay for opening and maintenance of a BO account?

SEBI has rationalised the cost structure for dematerialisation by removing account opening charges, transaction charges (for credit or buy transactions of securities), custody charges and account closing charges. Custody charges are now paid by the issuer companies. Broadly,investors are required to pay the charges towards:

Dematerialisation and Rematerialisation of their securities Annual account maintenance charges Transactions fees (only for sell transactions)

The DP may revise the charges by giving 30 days notice in advance. Further, SEBI has also advised the DPs to submit to their Depository their tariff/charge structure every year latest by 30th April and changes made therein, along with the date of effect to enable the investors to have a comparative analysis of the tariff/charge structure of various DPs. The information received by the depositories is put up on their websites. 12. Why should an investor give his bank account details at the time of BO account opening? Bank account details are necessary for the protection of interest of investors. When any cash or non cash corporate benefits such as rights or bonus or dividend is announced for a particular scrip, depositories provide to the concerned issuer /its RTA, the details of the investors, their electronic holdings as on record / book closure date for reckoning the entitlement of corporate benefit. The disbursement of cash benefits such as dividend is credited directly by the Issuer/its RTA to the beneficiary owner through the ECS (Electronic Clearing Service wherever available) facility or by issuing warrants on which bank account details are printed for places where ECS facility is not available. The bank account number is mentioned on the dividend and warrant to avoid any fraudulent misuse. The bank account details will be those which are mentioned in account opening form or modified details that had been intimated subsequently by the investor to the DP. 13. Can an investor change the details of his bank account? Yes. However, the investor must inform the DP regarding change in the bank account and corresponding change in MICR / IFSC code while updating their bank account details with DP. In the depository system monetary benefits on the security balances are paid as per the bank account details provided by the investor at the time of account opening. The investor must ensure that any subsequent changes in bank account details are informed to the DP.

15.14. What should be done if the address of the investor changes? Investor should immediately inform his DP along with necessary documents, who in turn will update the records. This will obviate the need of informing different companies. 14.15. What would be the charges for account closure and securities transfer due to account closing? SEBI has advised that from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a BO, when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are identical in all respects. In case the BO Account at transferor DP is a joint account, the BO account at transferee DP should also be a joint account in the same sequence of ownership. All other transfer of securities consequent to closure of account, not fulfilling the above-stated criteria, would be treated like any other transaction and charged as per the schedule of charges agreed upon between the BO and the DP. 16. Can multiple accounts be opened? Yes. An investor can open more than one account in the same name with the same DP and also with different DPs. For all the accounts, investor has to strictly comply with KYC norms including Proof of Identity, Proof of Address requirements as stipulated by SEBI and also provide PAN number. The investor has to show the original PAN card at the time of opening of demat account. 17. Does the investor have to keep any minimum balance of securities in his account? No. 18. Is it necessary to have account with the same DP as broker has? No. Depository / DP can be chosen by investor as per convenience irrespective of the DP of the broker. 19. Can an investor open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned jointly with others? No. The Demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in the individual name and another certificate is jointly with somebody, two different accounts would have to be opened. 20. What is required to be done if one has physical certificates with the same combination of names, but the sequence of names is different i.e. some certificates with A as first holder and B as second holder

and other set of certificates with B as first holder and A as the second holder? In this case the investor may open only one account with A & B as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. An additional form called "Transposition cum Demat" form will have to be filled in. This would help you to effect change in the order of names as well as dematerialise the securities. 21. Can an investor operate a joint account on "either or survivor" basis just like a bank account? No. The demat account cannot be operated on "either or survivor" basis like the bank account. 22. Can someone else operate the account on behalf of the BO on the basis of a power of attorney? Yes. If the BO authorises any person to operate the account by executing a power of attorney and submit it to the DP, that person can operate the account on behalf of the BO. 23. Can addition or deletion of names of accountholders is permitted after opening the account? No. The names of the account holders of a BO account cannot be changed. If any change has to be effected by addition or deletion, a new account has to be opened in the desired holding pattern (names) and then transfer the securities to the newly opened account. The old account may be closed. 24. Can an investor close his demat account with one DP and transfer all securities to another account with another DP? Yes. The investor can submit account closure request to his DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account. 25. What if there are any discrepancies in the statement of holdings? In case of any discrepancy in the statement of holdings, investor can contact his DP and in case of discrepancies in corporate benefits, one can approach the company / its Registrar and Transfer Agent. If the discrepancy is not resolved, the investor may approach concerned Depository (NSDL or CDSL). 26. Whether investor can freeze his account(s)? Investor can freeze his account and/or ISIN and/or specific number of securities under an ISIN for any given period of time as per applicable Regulations of SEBI and Bye Laws of the respective depository. Dematerialisation 27. What is dematerialisation?

Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited into the BOs account with his DP. 28. How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? In order to dematerialise physical securities one has to fill in a DRF (Demat Request Form) which is available with the DP and submit the same along with physical certificates that are to be dematerialised. Separate DRF has to be filled for each ISIN. The complete process of dematerialisation is outlined below:

Surrender certificates for dematerialisation to your DP. DP intimates to the Depository regarding the request through the system. DP submits the certificates to the registrar of the Issuer Company. Registrar confirms the dematerialisation request from depository. After dematerialising the certificates, Registrar updates accounts and informs depository regarding completion of dematerialisation. Depository updates its accounts and informs the DP.

DP updates the demat account of the investor. 29. What is an ISIN? ISIN (International Securities Identification Number) is a unique 12 digit alpha-numeric identification number allotted for a security (E.g.INE383C01018). Equity-fully paid up, equity-partly paid up, equity with differential voting /dividend rights issued by the same issuer will have different ISINs. 30. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. 31. Do dematerialised shares have distinctive numbers? Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. 32. Can electronic holdings be converted back into physical certificates? Yes. The process is called rematerialisation. If one wishes to get back his securities in the physical form he has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below: Make a request for rematerialisation. Depository participant intimates depository regarding the request through the system. Depository confirms rematerialisation request to the registrar.

Registrar updates accounts and prints certificates. Depository updates accounts and downloads details to depository participant. Registrar dispatches certificates to investor. Trading / Settlement 33. What is the procedure for selling dematerialised securities? The procedure for buying and selling dematerialised securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of purchase: The broker will receive the securities in his account on the payout day. The broker will give instruction to its DP to debit his account and credit BO's account. BO will give Receipt Instruction to DP for receiving credit by filling appropriate form. However BO can give standing instruction for credit to his account that will obviate the need of giving Receipt Instruction every time. In case of sale:BO will give delivery instruction through Delivery Instruction Slip (DIS) to DP to debit his account and credit the brokers account. Such instruction should reach the DPs office at least 24 hours before the pay-in, failing which, DP will accept the instruction only at the BOs risk. 34. What 'Standing Instruction' is given in the account opening form? In a bank account, credit to the account is given only when a 'pay in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of BOs, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip everytime you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say 'yes' [or tick ] to standing instruction in the application form. 35. What is delivery instruction slip (DIS)? What precautions do one need to observe with respect to Delivery Instruction Slips? To give the delivery one has to fill a form called Delivery Instruction Slip (DIS). DIS may be compared to cheque book of a bank account. The following precautions are to be taken in respect of DIS: Ensure and insist with DP to issue DIS book. Ensure that DIS numbers are pre-printed and takes acknowledgment for the DIS booklet issued to investor. Ensure that your account number [client id] is pre-stamped. DP

If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed. Avoid using loose slips. Do not leave signed blank DIS with anyone viz., broker/sub-broker, DPs or any other person/entity. Keep the DIS book under lock and key when not in use. If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one. BO should personally fill in target account-id and all details in the DIS. If the DIS booklet is lost / stolen / not traceable, the same must be intimated to the DP immediately in writing. On receipt of such intimation, the DP will cancel the unused DIS of the said booklet. 36. Is it possible to give delivery instructions to the DP over Internet and if yes, how? Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively. The facility can be used by all registered BOs after paying the applicable charges. 37. Is it possible to get securities allotted in public offering directly in the electronic form? Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form, there is a provision to indicate the manner in which an investor wants the securities to be allotted. He has to mention the BO ID, name and DP ID on the application form. Any allotment made will be credited into the BO account. Pledging 38. Can one pledge the dematerialised securities? Yes. Pledging dematerialised securities is easier and more advantageous as compared to pledging physical securities. 39. What should one do to pledge electronic securities? The procedure to pledge electronic securities is as follows: Both BOs, investor (pledgor) and the lender (pledgee) must have BO account with the same depository; Pledgor will have to instruct DP to create pledge in prescribed standard form (Pledge Request Form) with the details of the securities; The lender (pledgee) has to confirm the request through his/her DP; Once this is done, securities are pledged.

All financial transactions between the pledgor and the pledgee are handled as per usual practice outside the depository system. 40. What is the procedure for closure of pledge after repayment of loan? After the repayment of loan, pledgor can request for a closure of pledge by instructing the DP in a prescribed format. The pledgee on receiving the repayment will instruct his DP accordingly for the closure of the pledge. 41. Can pledgor (investor) change the securities offered in a pledge? Yes, if the pledge (lender) agrees, pledgor (investor) may change the securities offered in a pledge. 42. Who will receive the corporate benefits on the pledged securities? The securities pledged are only blocked in the account of pledgor (investor) in favour of the pledge (lender). The pledgor would continue to receive all the corporate benefits. Transaction Statement 43. How does one know that the DP has updated the account after each transaction? The DP provides a Transaction Statement periodically, which gives details of current balances and various transactions made through the depository account. If desired, DP may provide the Transaction Statement at intervals shorter than the stipulated ones, probably at a cost. Depositories also provide SMS Alert facility for demat account holders whereby investors can receive alerts for debits (transfers) to their demat accounts and for credits in respect of corporate actions for IPO and offer for sale. Under this facility, investors can receive alerts, a day after such debits (transfers)/credits take place. These alerts are sent to those account holders who have provided their mobile numbers to their Depository Participants (DPs). 44. At what frequency will the investor receive his Transaction Statement from his DP? DPs have to provide transaction statements to their clients once in a month, if there is any transaction and if there is no transaction, then once in a quarter. DPs also provide transaction statement in electronic form under digital signature subject to their entering into a legally enforceable arrangement with the BOs to this effect. 45. What is to be done if there are any discrepancies in transaction statement? In case of any discrepancy in the transaction statement, BO can contact his DP. If the discrepancy cannot be resolved at the DP level, BO should approach the Depository. 46. Whom should BO contact in case of any investor complaint / problem / query?

In case of any investor complaint / problem / query one may first contact his DP. If DP is unable to solve the complaint / problem / query one should approach concerned depository. If one is not satisfied one may approach SEBI. One may also approach SEBI directly. Nomination 47. Who can nominate? Nomination can be made only by individuals holding beneficial accounts either singly or jointly. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate. 48. Who can be a nominee? Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder. 49. Why is it important to nominate? Nomination is helpful in smooth transmission of shares upon the death of the BO/s. The nomination once made can be changed at a later date as desired by the BO/s. Transmission of dematerialised securities 50. What is transmission of dematerialised securities? Transmission is the process by which securities of a deceased account holder are transferred to the account of his legal heirs / nominee. Process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held. 51. In the event of death of the sole holder, how the successors should claim the securities lying in the demat account? The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents 1. In case of death of sole holder; where the sole holder has appointed a nominee Notarised copy of the death certificate 2. In case of death of the sole holder; where the sole holder has not appointed a nominee Notarised copy of the death certificate And anyone of the below mentioned documents Succession certificate Copy of probated will Letter of Administration

The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. The major advantage in case of dematerialised holdings is that the transmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing company or its Registrar separately.
What is a Mutual Fund ? Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Each scheme of a mutual fund can have different character and objectives. Mutual funds issue units to the investors, which represent an equitable right in the assets of the mutual fund.

What is the difference between an open ended and close ended scheme? Open ended

funds can issue and redeem units any time during the life of the scheme while close ended funds can not issue new units except in case of bonus or rights issue. Hence, unit capital of open ended funds can fluctuate on daily basis while that is not the case for close ended schemes. Other way of explaining the difference is that new investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices in case of open ended schemes while that is not the case in case of close ended schemes. New investors can buy the units from secondary market only.

How are mutual funds different from portfolio management schemes? In case of mutual funds, the investments of different investors are pooled to form a common investible corpus and gain/loss to all investors during a given period are same for all investors while in case of portfolio management scheme, the investments of a particular investor remains identifiable to him. Here the gain or loss of all the investors will be different from each other.

What does Net Asset Value (NAV) of a scheme signify and

what is the basis of its calculation? Net asset value on a particular date reflects the realisable value that the investor will get for each unit that he his holding if the scheme is liquidated on that date. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing by number of units outstanding.

Can I get fixed monthly income by investing in mutual fund units? Yes, there are a number of mutual fund schemes which give you fixed monthly income. Further, you can also get

monthly income by making a single investment in an open ended scheme and redeeming fix value of units at regular intervals.

What are the tax benefits for investing in mutual fund units? Dividend income from mutual fund units will be exempt from income tax with effect from July 1, 1999. Further, investors can get rebate from tax under section 88 of Income Tax Act, 1961 by investing in Equity Linked Saving Schemes of mutual funds. Further benefits are also available under section 54EA and 54EB with regard to relief from long term

capital gains tax in certain specified schemes.

As my dividend receipts from mutual fund units were tax free under section 80 L, will I loose because of the new budget provision whereby my mutual fund will pay 10% tax on total dividend distributed and indirectly even I will end up paying the tax? The above statement is partially true. 10% tax on dividend paid is not applicable for funds which have invested more than 50% in equity for next three years. Hence, if you have invested in an equity scheme, you will not loose out for

the time being. However, in case of debt funds, your statement is true.

Are investments in mutual fund units safe? No stock market related investments can be termed safe with certainty as they are inherently risky. However, different funds have different risk profile which is stated in its objective. Funds which categorize themselves as low risk, invest generally in debt which is less risky than equity. Anyway, as mutual funds have access to services of expert fund managers, they are always safer than direct investment in the stock

markets.

How do I find out about a scheme which suits my individual requirements ? You have to define your individual requirements and then simply go to Choose a Scheme icon on the home page of this web site. You can select your defined parameters and get a list of schemes which would fit the needs.

As mutual fund schemes invest in stock markets only, are they suitable for a small investor like me? Mutual funds are meant only for a small investor like you. The prime reason is that

successful investments in stock markets require careful analysis of scrips which is not possible for a small investor. Mutual funds are usually fully equipped to carry out thorough analysis and can provide superior returns.
Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to a fund company. It is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities. For example, if a fund has assets of $50 million and liabilities of $10 million, it would have a NAV of $40 million. Read more: http://www.investopedia.com/ask/answers/04/032604.asp#ixzz1iI1K0BXB

What is Entry Load and Exit Load in Mutual Fund ?


Mutual Fund Companies incur some expenses to float a fund and also they have many administrative and operative expenses. So to meet those expenses they collect a percentage of fee from the investors, that is called loads. If they collect the fee when you buy the units, then it is called as entry load. If they charge that fee when you sell your units back to them then it is called as exit load.
What is a Mutual Fund?

A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business who collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only.

The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities. Top
What is an Asset Management Company?

An Asset Management Company (AMC) is a highly regulated organisation that pools money from investors and invests the same in a portfolio. They charge a small management fee, which is normally 1.5 per cent of the total funds managed. Top
What is NAV?

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows: NAV= Market value of the fund's investments+Receivables+Accrued Income- LiabilitiesAccrued Expenses ___________________________________________________________________________ ____ Number of Outstanding units Top
How often is the NAV declared?

The NAV of a scheme has to be declared at least once a week. However many Mutual Fund declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. However, NAV of a close-ended scheme targeted to a specific segment or any monthly income scheme (which are not mandatorily required to be listed on a stock exchange) may be published at monthly or quarterly intervals. Top
What are the benefits of investing in Mutual Funds?

1. Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument a professional analytical approach is required in addition to access to research and information and time and methodology to make sound investment decisions and keep monitoring them. 2. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide the small investors with an opportunity to invest in a larger basket of securities. 3. The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. 4. It is possible to invest in small amounts as and when the investor has surplus funds to invest. 5. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds.

6. In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks/bonds. Top
Are there any risks involved in investing in Mutual Funds?

Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the government may come up with new regulation which may affect a particular industry or class of industries. All these factors influence the performance of Mutual Funds. Top
What are the different types of Mutual funds? (a) On the basis of Objective

Equity Funds/ Growth Funds Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds. Diversified funds These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector. Sector funds These funds invest primarily in equity shares of companies in a particular business sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector. Index funds These funds invest in the same pattern as popular market indices like S&P 500 and BSE Index. The value of the index fund varies in proportion to the benchmark index. Tax Saving Funds These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions. Debt / Income Funds These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor. Liquid Funds / Money Market Funds These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. Gilt Funds These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They

are best suited for the medium to long-term investors who are averse to risk. Balanced Funds These funds invest both in equity shares and fixed-income-bearing instruments (debt) in some proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks. Hedge Funds These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio. (b) On the basis of Flexibility Open-ended Funds These funds do not have a fixed date of redemption. Generally they are open for subscription and redemption throughout the year. Their prices are linked to the daily net asset value (NAV). From the investors' perspective, they are much more liquid than closed-ended funds. Investors are permitted to join or withdraw from the fund after an initial lock-in period. Close-ended Funds These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter closed for entry as well as exit. These funds have a fixed date of redemption. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but the discount narrows as maturity nears. These funds are open for subscription only once and can be redeemed only on the fixed date of redemption. The units of these funds are listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit from the fund at any time through the secondary market. Units alloted under Fixed Term Plans & Fixed Maturity Plans shall be credited in your linked Demat account. Interval funds These funds combine the features of both open-ended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity. (c) On the basis of geographic location Domestic funds These funds mobilise the savings of nationals within the country. Offshore Funds These funds facilitate cross border fund flow. They invest in securities of foreign companies. They attract foreign capital for investment. Is there is any tax applicable on the redemption of mutual funds? Yes. The tax applicable is called as STT i.e. Security transaction tax which is 0.25%. STT is applicable only in case of redemption of equity linked schemes Top
What are the different plans that Mutual Funds offer?

Growth Plan and Dividend Plan A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realises capital appreciation on the investment. This plan appeals to investors in the high income bracket. Under the dividend plan, income is distributed from time to time. This plan is ideal to those investors requiring regular income.

Dividend Reinvestment Plan Dividend plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors. Automatic Investment Plan Under the Automatic Investment Plan (AIP) also called Systematic Investment Plan (SIP), the investor is given the option for investing in a specified frequency of months in a specified scheme of the Mutual Fund for a constant sum of investment. AIP allows the investors to plan their savings through a structured regular monthly savings program. Automatic Withdrawal Plan Under the Automatic Withdrawal Plan (AWP) also called Systematic Withdrawal Plan (SWP), a facility is provided to the investor to withdraw a pre-determined amount from his fund at a predetermined interval. Top
What is Exit Load?

The non refundable fee paid to the Asset Management Company at the time of redemption/ transfer of units between schemes of mutual funds is termed as exit load. It is deducted from the NAV(selling price) at the time of such redemption/ transfer. Top
What is redemption price?

Redemption price is the price received on selling units of open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load. Top
What is repurchase price?

Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load. Top
What is a Switch?

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, risk profiles or changing circumstances during their lifetime. Top
What is Shut-Out Period?

After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a right to declare Shut-Out period not exceeding 5 days at the end of each month/quarter/half-year, as the case may be, for the investors opting for payment of dividend under the respective Dividends Plans. The declaration of the Shut-Out period is envisaged to facilitate the AMC/the Registrar to determine the Units of the unitholders eligible for receipt of dividend under the

various Dividend Options. Further, the Shut-Out period will also help in expeditious processing and despatch of dividend warrants. During the Shut-Out period investors may make purchases into the Scheme but the Purchase Price for subscription of units will be calculated using the NAV as at the end of the first Business Day in the following month/quarter/half-year as the case may be, depending on the Dividend Plan chosen by the investor. Therefore, if investments are made during the Shut -Out period, Units to the credit of the Unitholder's account will be created only on the first Business Day of the following month/ quarter/half year, as the case may be, depending on the dividend plan chosen by the investor. The Shut-Out period applies to new investors in the Scheme as well as to Unitholders making additional purchases of Units into an existing folio. The Trustee reserves the right to change the Shut-Out period and prescribe new Shut- Out period, from time to time. Top
Is there any minimum lock-in period for my units?

There is no lock-in period in the case of open-ended funds. However in the case of tax saving funds a minimum lock-in period is applicable. The lock-in period for different tax saving schemes are as follows:
section minimum lock-in period

U/s 88 U/s 54EA U/s 54EB

3 yrs. 3 yrs. 7 yrs. Top

Who are the issuers of Mutual funds in India?

Unit Trust of India was the first mutual fund which began operations in 1964. Other issuers of Mutual funds are Public sector banks like SBI, Canara Bank, Bank of India, Institutions like IDBI, ICICI, GIC, LIC, Foreign Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like Kothari Pioneer, DSP Merrill Lynch, Sundaram, Kotak Mahindra, Cholamandalam etc. Top
What are the factors that influence the performance of Mutual Funds?

The performances of Mutual funds are influenced by the performance of the stock market as well as the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies as well as the economy as a whole. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy. Top
As a new investor how do I select a particular scheme?

Choice of any scheme would depend to a large extent on the investor preferences. For an investor willing to undertake risks, equity funds would be the most suitable as they offer the maximum returns. Debt funds are suited for those investors who prefer regular income and safety. Gilt funds are best suited for the medium to long-term investors who are averse to risk. Balanced funds are ideal for medium- to long-term investors willing to take moderate risks. Liquid funds are ideal for Corporates, institutional investors and business houses who invest

their funds for very short periods. Tax Saving Funds are ideal for those investors who want to avail tax benefits. An important aspect while selecting a particular scheme is the duration of the investment. Depending on your time horizon you can select a particular scheme. Besides all this, factors like promoter's image, objective of the fund and returns given by the funds on different schemes should also be taken into account while selecting a particular scheme. Top
What are the rights that are available to a Mutual Fund holder?

As per SEBI Regulations on Mutual Funds, an investor is entitled to 1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks from the date your request for a unit certificate is received by the Mutual Fund. 2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme; 3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase 4. The trustees shall be bound to make such disclosures to the unit holders as are essential in order to keep them informed about any information which may have an adverse bearing on their investments. 5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund. 6. 75% of the unit holders can pass a resolution to wind-up the scheme. 7. An investor can send complaints to SEBI, who will take up the matter with the concerned Mutual Funds and follow up with them till they are resolved. Top
It is very often said that Mutual Funds have performed badly. Please explain?

The performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net Asset Value (NAV). However a fund's performance should be evaluated on the basis of a comparison with the relevant indices and alternative instruments. The NAV varies from fund to fund. Therefore this argument is not entirely true. However some funds have performed poorly with their NAV quoting well below their original IPO price.
Top Can I invest in mutual funds in joint holder mode through www.icicidirect.com?

Currently the investment in Mutual fund is available as single mode and the facility of investing in joint holder mode shall be made available in near future.
Can I make a nomination for the mutual fund units purchased through www.icicidirect.com?

Yes. The website www.icicidirect.com. provides you a facility to make nomination(s) for your Mutual Fund units purchased online.
Top Will nomination(s) made in my linked demat/ bank account(s) be automatically updated for the mutual fund units purchased online?

No. Nomination details of your linked bank or demat account are not considered for your online mutual fund purchases. Hence, you would be required to make a separate nomination request for your mutual fund folios.

Top What is the effect of making a nomination?

Nomination causes all rights and/or amount(s) payable in respect of your Mutual Fund Holdings to vest in and be transferred to your nominee upon your death. If your legal heir is different from your nominee, your legal heir cannot dispute this action as transfer by the respective AMC(s) in favour of a Nominee acts as valid discharge by the AMC(s) against the legal heir of the deceased holder.
Top Who can make a nomination?

Investors in the Category of "Individuals" are permitted to make a nomination for their mutual fund units. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family and a holder of Power of Attorney are not allowed to nominate.
Top Whom can I nominate?

You can nominate any individual as your nominee. However, you cannot nominate the following as your nominee with regard to your mutual fund units: a. A Trust b. A Society c. A Body Corporate d. A Partnership Firm e. Karta of a Hindu Undivided Family f. A Power of Attorney Holder
Top Can I nominate a Non Resident Indian as my nominee?

Yes. A non-resident Indian can be a nominee subject to the exchange controls in force, from time to time.
Top Can I nominate a minor as my nominee?

Yes. You are permitted to nominate a minor. However, if you nominate a minor, do provide the name and address of the minor's guardian in the nomination request.
Top Can I nominate more than one person in my Mutual Fund Folios ?

You can nominate only one person per mutual fund folio held by you. If you hold more than 1 folio, you can nominate different individuals for each folio but multiple nominees under the same folio is not permitted.
Top Where can I view the details of my mutual fund folios purchased throughwww.icicidirect.com ?

To view the details of your mutual fund folios purchased online visit the Unit Holdings page of the Mutual Fund section of your ICICIDirect trading account.
Top Will my existing mutual fund nomination automatically get updated for all future online Mutual Fund purchases also?

No. Nomination made in your existing mutual fund folios will not be automatically updated for new folios created for fresh mutual fund purchases made by you. For all new folios, you will be required to make a separate nomination request.
Top Can I change my nominee?

Yes. You can change your nomination at any time before you redeem your mutual fund units. On making a change request, your existing nomination details will be substituted with the new details as provided by you.
Top Can I cancel a nomination made by me?

Yes. You can cancel your existing nomination at any time before you redeem your mutual fund units.
Top How do I place a request for Nomination or Change in nomination / Cancellation of my existing nomination through www.icicidirect.com

To make a Nomination request / Change an earlier Nomination, you would be required to fill the prescribed Form (click to download the form). Update Nominee details form for HSBC Update Nominee details form for ING Please fill in all the relevant details and send the duly signed form to the following address: Attn: Mutual Funds Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp. Juinagar Railway Station, Navi Mumbai - 400705 NOTE: Your nomination/ change/ cancellation request will be registered only for those folio numbers details of which are mentioned in the Request form.
Top How much time will the process of nomination/ change of nomination/ cancellation of nomination take ?

ICICI Securities Limited shall endeavour to process your request on best effort basis within a reasonable time (7 days from the date of receipt of the duly filled forms at our corporate office). However, please note that ICICI Securities Limited cannot be held responsible for any delay in processing of your request or loss of documents for reasons beyond the control of ICICI

Securities Limited.
Top How will I know about the status of my nomination related requests?

The status of your request will be updated by ICICI Securities Limited in the "My messages" section of your ICICIDirect trading account. In case your request is rejected, the reason(s) for such rejection will also be updated.
Top I have purchased mutual fund units through www.icicidirect.com. Can I send my nomination request directly to the respective Asset Management Company (AMC) of the mutual fund(s) ?

No. AMC(s) do not accept any direct/ offline request for nomination or other transactions in mutual fund folios that are purchased online. Hence you will have to route all your transactions including nomination related requests through www.icicidirect.com.
Top when will I be able to see my purchase details?

The order book reflects details of all the orders placed by you. All successful transactions will be updated in the Unit Holding link within T+3 or T+5 days (depending on the AMC's rules and regulation)
Top Do I have to pay any entry load for mutual fund purchases made after August 01, 2009 ?

No. Prior to the implementation of the SEBI guideline, an entry load of 2.25% was charged on all Mutual fund purchases. As per the new guidelines issued by SEBI, with effect from August 1, 2009, entry load will not be charged on purchases in existing mutual fund schemes or on schemes launched thereafter . However, any investment made by you in an NFO which was launched prior to August 1, 2009 will continue to attract entry load and other charges as specified in the offer document.
Top What exit load will I have to pay as on date?

Exit Load varies for different schemes and is generally charged as a percentage of NAV. The Exit load normally varies between 0.25% to 2% of the redemption value. Some mutual funds however do not charge any exit load. Such mutual funds are referred to as 'No Load Funds'.
Top How does the new SEBI Guidelines impact my mutual fund transactions ?

SEBI Guidelines stipulate that with effect from August 1, 2009,there shall be no entry load for any Mutual Fund scheme whether existing or new. SEBI Guidelines further stipulate that investors will be required to pay upfront commission directly to distributors. This means that earlier if you invested Rs. 10,000/- in a mutual fund, your total invested amount was reduced to the extent of entry load charged ie Rs.225 (@ 2.25%) thereby making your actual investment Rs9775/-. However, w.e.f August 1, 2009, the entire Rs. 10.000/- invested by you would be your investment in the mutual fund. However, while you will not be charged any entry load, you will have to pay 'Transaction charges' directly to your distributor as per the applicable fee

structure. Click here for more information on the I-Sec Fee structure.
Top In light of the new SEBI guidelines, what would be my effective purchase price?

Effective Purchase Price is the sum of the NAV, transaction charges and service charges divided by the number of units purchased. For example: Let's say you purchased 1,000 MF units for Rs. 10,000. If the transaction and service charges applicable are Rs. 100 and Rs. 10.30 respectively, then the effective purchase price per unit will be Rs. 10.11 (i.e. Rs. 10110.30/1000 units). It is the price which you actually pay to purchase a single unit of a Mutual Fund Scheme.
Top I have invested in a New Fund Offer (NFO) of a scheme launched prior to August 1, 2009. Will I too get the benefit of the new SEBI Guidelines on entry load?

No. Entry load has been abolished only with effect from August 1, 2009. Any investment made by you in an NFO which was launched prior to August 1, 2009 will continue to attract Entry Load and other charges as specified in the offer document.
Top Will I be charged Transaction Charges on investments made after August 01, 2009, in NFOs launched prior to August 01, 09?

Yes. Although upfront Transaction Charges and Service Tax(ST) would be charged to you on placing a purchase order in NFO launched prior to August 1, 2009, such charges will be refunded subsequently.
Top Do I need to allocate funds for investing in Mutual Funds?

Yes, just as in the secondary market, you will need to allocate funds for the purpose of investing in Mutual Funds. Under the Modify Allocation option you would have a separate section for allocating money for Mutual Funds. Also the funds which are allocated for investments in Mutual Fund will not be allowed for transactions in the secondary market. Top
Can I modify /cancel my transactions?

Yes, while placing any mutual fund order, modify or cancel option would be available to you till the final confirmation of the order is placed by you. Once you click on Final Confirmation you cannot modify or cancel the order placed by you. You can only modify / cancel any Systematic Investment Plan (SIP) / Systematic Withdrawal Plan (SWP) order placed by you. Top
Will I get an online confirmation of my transactions?

As soon as you confirm your order you can view the details of your transaction in the order book. Also an email will be sent to your email address. Top
Can I transact anytime during the day?

Yes, you can transact at any time of the day. However, in order to get the NAV of the current day you would have to transact before the cut-off time of the scheme. If you place any order after the said cut-off time, you would be eligible for NAV of the next day. As per SEBI guidelines the cutoff time for accepting orders in Non-liquid funds is 1500 hrs and in Liquid funds it is 1200 hrs. However taking into account internal transaction processing time, ICICIdirect.com has kept the cutoff time, for accepting orders in Non-liquid funds as 1330 hrs and in Liquid funds as 1030 hrs. Top
Can I purchase after the time which is displayed beside the scheme?

In order to get the NAV of the same day, you can purchase up to the cut-off time of the scheme, after which you will get the next day's NAV. (If the next day is a holiday, then the NAV of the next working day). Top
Is there a minimum transaction amount for each scheme?

As decided by the fund, there is a minimum transaction amount indicated against each scheme. You will get to see the minimum transaction amount in the Place Order screen. Top
Can I use the funds allocated for investments in secondary market towards investments in Mutual Fund ?

In order to invest in Mutual Fund, you will need to separately allocate funds for the same. This option is available to you in the Modify Allocation screen. Top
After my first purchase, can I immediately enter another transaction?

After your first purchase you will not be permitted to transact for a period of 4 to 7 days depending on the processing time of the Mutual Funds' Registrar. After you place an investment order in any Mutual Fund for the first time a Folio Number is generated for that particular fund. Until the Folio number is generated you will not be allowed to place any further orders for that particular Mutual Fund. After the Folio Number is generated you can place any number of order in any schemes of the Mutual Fund. In the case of Franklin Templeton MF and Birla Sun Life MF, the Folio Number is generated for each scheme offered by the MF. Hence the processing time would be for each scheme of the Mutual Fund. Suppose if you place an order for a Liquid Fund, then a folio number is generated for that scheme only and to place an order for the first time in a balanced fund you will have again wait till a new folio number is generated. Top
Who are the users of this facility and how?

All ICICI Direct customers who are Non-resident Indians, whose accounts are activated, can use the same login Id and password to invest in Mutual Funds.You can invest in units of a Mutual fund from either the Non-Pins NRE or Non-Pins NRO account. Top
I do not have an account with ICICI Direct, but would like to invest in Mutual Funds. What do I

do?

You can contact any ICICI Centre to open accounts or fill in the application form on the web site and our Customer Service Executive will visit you for opening your e-invest account. Once the processing of your form is completed, you can start investing in Mutual Funds online. Top
How do I convert my existing portfolio units to icicidirect's portfolio?

You can transfer in your existing mutual fund units to your ICICIdirect account by filling a Transfer-in request form which is available on the site. However this facility of Transfer-in can be availed only if you're a sole holder in the physical units else your request cannot be processed. Transfer In request can be placed through the "Transfer In" link on the Mutual Fund page. Fill in the existing folio number alloted for that scheme. Thereafter you need to take a printout of the duly filled form and forward it to ICICIdirect. In case of transfer-in of dividend schemes, the dividend re-investment option will by default be activated and will appear as "Y". In case the dividend re-investment option as per your records is dividend pay-out "N", to change the dividend re-investment option you can use the modify dividend re-investment hyperlink. The units are converted to electronic form within 30 days. You can check the status of your request the TI Book link. Once the units are converted into electronic form, the same will be updated in the Unit Holdings link. Top
How do I purchase from your web site?

Click on the link "Place Order " in the MF Trading section. This will take you to all the schemes of the fund. The details of the scheme are indicated against each scheme. Select PURCHASE in the drop down menu and then click on GO to place your purchase order. You can also select the option for dividend reinvestment through the purchase order screen. In case you are an NRI, first you need to decide is whether you want repatriation benefit or not. If you want repatriation benefit, select the Non-Pins NRE account. Select Non-Pins NRO account if you do not want repatriation benefit. Top
Can I as an NRI buy Mutual Fund Units in the PINS account?

No, you cannot purchase mutual fund units in the PINS account. You can only do so in the Non-Pins account. Top
When will I be able to see my purchase details?

The details of your transactions will be immediately updated in your order book. An email will also be sent to you and the entry in your portfolio will be displayed within T+3 days. Top
How do I redeem my Mutual Fund scheme units?

Click on the link "Place Order" in the MF Trading section. This will display all the scheme units held by you, with details against each scheme. Select the REDEEM option in the drop down menu and then click on GO to place your redemption request. You can either redeem a certain amount or specify the number of units held by you. There is a minimum transaction amount that is indicated against each scheme. A cut off time is also displayed to get that day's NAV.

The details of your transactions will be immediately updated in your order book, an email will be sent and your bank account will be credited after T+3 days (the date of pay-out would differ for scheme and will not necessarily be T+3 days). Top
Will TDS be deducted on the redemption of units? If yes what will be the basis of deduction of TDS

TDS is not deducted on the sale proceeds for Resident Indians. In case of NRI's, TDS will be deducted on the sale proceeds. The TDS will deducted depending upon whether it is a short-term capital gain or long term capital gains. For short term capital gain the tax is deducted @ 33% while in case of long term capital gains it is deducted @ 11%. Top
Where can I see the TDS deducted on the sale proceeds?

The TDS deducted for NRI can be seen by Clicking on the executed hyperlink against the transaction. You will find the complete details of the redemption including the TDS deducted. Top
How do I switch from a particular scheme?

Click on the link "Place Order" in the MF Trading section. This will display all the scheme units held by you, with details against each scheme. Select the SWITCH option in the drop down menu and then click on GO to place your switch request. Click on the scheme you wish to Switch From. There is a minimum transaction amount indicated against the scheme. Also the scheme you wish to "Switch To" carries a minimum transaction amount. Therefore the amount which you will be switching will be higher of the two. The details of your transactions will be immediately updated in your order book, an email will be sent showing the "Switch From" and "Switch To" units. The entry in your portfolio will be displayed within T+3 days. Since this does not involve any transfer of funds, your bank account will not be affected. Switch Out is treated as redemption. Hence, in case of NRI's, TDS will be deducted on Switch out transaction also. The gross amount after deducting the TDS will be used for switch in Transaction i.e. units worth equivalent to the net amount will be utilized to switching in into the desired scheme. Top
How does the Automatic/ Systematic Investment Plan (AIP/ SIP) work?

Select the option "SIP" followed by "Create a Systematic Investment Plan". Select the fund name and the scheme. A screen will appear with the details of that scheme similar to that in the Purchase screen. In addition to these details you will have to fill up the frequency with which the investments will be made and the start date. From the date specified a fixed amount will be debited to your bank account. An email will be sent showing the details of the amount invested and the entry in your portfolio will be displayed within T+3 days. You can however enter into only one plan per scheme. In case you do not have sufficient funds in your account in any specific month, the SIP would be rejected for that particular month Top
How does the Automatic/ Systematic Withdrawal Plan (AWP/SWP) work?

Select the option for "Systematic Withdrawal Plan". Select the fund name and the scheme. A screen will appear with the details of that scheme similar to that in the Redemption screen. In addition to these details you will have to fill up the frequency with which the withdrawals will be made and the start date. From the date specified a fixed amount will be credited to your bank account. An email will be sent showing the details of the amount withdrawn and the entry in your portfolio will be displayed within T+3 days. You can however enter into only one plan per scheme. However if a SWP\AWP request is rejected for insufficient units, then the entire Plan will be scraped automatically. You will also receive an e-mail indicating that the plan has been scrapped. Top
Will TDS be deducted on dividend received?

No, TDS will not be deducted on Dividend payments for both Resident as well as NRI's. Top
If I change my address, what do I need to do?

For change of address, you will have to send a letter to us with both the old and new address mentioned in it. All the co-holders should sign this letter. It can be sent by post or faxed to us. Top
Can I transact on a holiday?

Yes, You can place your request even on a holiday. However, the request would be processed on the next business day and respective NAV would be applicable as per the Mutual Fund's offer document. Top
How to change the address & Contact details in Mutual Fund at AMC.

For change of address, you will have to send a letter to us with both the old and new address mentioned in it. All the co-holders should sign this letter. It can be sent by post or faxed to us. You need to provide a separate copy of Request for Change of Address for each of the Fund ( AMC ) held by you in ICICIdirect.com Account. If you are KYC Compliant, please approach CDSL Ventures Limited ( CVL ) for changing the correspondence address. You can visit CDSL http://www.cvlindia.com for more details. Please send the filled in form at the below address : Mutual Fund Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp Juinagar Railway Station, Navi Mumbai - 400705. Top
How to change the Bank details in Mutual Fund at AMC.

To update the new Bank account at AMC we would require Request for Update Bank Account letter at the below address.

You need to provide a separate copy for each of the Fund ( AMC ) held by you in ICICIdirect.com Account. Mutual Fund Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp Juinagar Railway Station, Navi Mumbai - 400705. Top
How to update Tax status.

If your Residential Status has changed, please provide Change in Tax Status form at the below address. You need to provide a separate copy for each of the Fund ( AMC ) held by you in ICICIdirect.com Account. Please send the request at : Mutual Fund Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp Juinagar Railway Station, Navi Mumbai - 400705. Top
How do I consolidate the Folio's.

Please provide Folio Consolidation Letter at the below address : Mutual Fund Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp Juinagar Railway Station, Navi Mumbai - 400705. You need to place online Folio Consolidation Request from your ICICIdirect.com account before sending phyiscal request. Path: Login to www.icicidirect.com > Mutual Fund > Folio Consolidation. Top
I wish to change the Dividend Option Plan.

To change the dividend option from normal payout to re-investment or vice -versa, you can place a request on line and need to provide request for Change in Dividend Option for every Scheme that you wish to update. Please send the request at : Mutual Fund Operations Team ICICI Securities Limited Shree Sawan Knowledge Park, Ground Floor, Plot No. D-507, T.T.C Ind Area, M.I.D.C, Turbhe, Opp Juinagar Railway Station,

Navi Mumbai - 400705. You need to place online Dividend Option change Request from your ICICIdirect.com account before sending phyiscal request. Path: Login to www.icicidirect.com > Mutual Fund > Dividend Option. Top
What is meant by Joint Holder facility in Investment products?

Joint Holder facility is a facility by ICICI Securities Limited (I-Sec) on www.icicidirect.com for making investments in Investment Products in Joint Holding mode. Top
What is meant by Investment products ?

Investment products like Fixed deposits, Mutual Fund units, GOI Bonds that are offered by ISec in it's capacity as a referral agent to a Principal. The term does not include Equity/ Currency /other products traded on the exchanges. Top
What will be the mode of operation under the joint holding pattern?

The mode of operation for the joint holding will be 'Anyone or Survivor' only. Top
Who can avail of the Joint Holder facility?

The Joint Holder facility can be availed of by all the existing as well as new clients of I-Sec. The holder of the online trading account has the right to request for availing the facility. Top
Can a joint holder in the linked demat or bank account make a request for availing the Joint Holder facility?

No. As mentioned above, only the trading account holder ie the First holder in the linked demat and bank account alone can make a request for availing the Joint Holder facility. Top
How can I avail of the Joint Holder facility?

To avail of the Joint Holder facility, you will have to first register the names of the persons with whom you wish to make investments jointly through www.iccidirect.com. After the persons are successfully registered with I-Sec as your joint holders, you can start making investments in joint mode . Top
Who can be registered as Joint Holder ?

You may predominately appoint any person, aged 18 years or above, who are your family members or other persons as Joint Holders. You will have to mention your relationship with the person while requesting for registering him as a Joint Holder. Top

Can the joint holders in my Demat and Bank Account be registered as joint holders for Investment products also?

Yes, you may register your joint holders in Demat and Bank Account as joint holders for Investment products also. Top
What is the eligibility criteria for registering a person as Joint Holder?

An individual who is 18 years or above and who has a PAN card can be registered as Joint Holder. Top
Is there any limit on the number of persons I can register as joint holders ?

Yes. Currently, you can appoint maximum 3 persons as Joint Holders. Top
How many Joint holders can I select while making Investments?

The number of Joint holders that you will be permitted to select will depend on the product feature. Thus while some products may allow you to select all the 3 Joint Holders there may be others in which Joint holding will not be permitted. Top
How would I know what is the permitted number of Joint Holders any Investment?

Depending on the product, the site www.icicidirect.com will allow you to select only the permitted number of Joint holders. Top
Is there any limit on the different combination of Joint Holders while making investments?

No. You may choose to have as many combinations as you wish across different joint holders. Top
I am a registered customer of I-Sec. What is the process for registering a person as my Joint Holder?

For registering a person as your Joint Holder, you will have to submit the duly filled and signed request letter to the nearest ICICI Center/ISec Hub. Please click here to download registration form /request letter. In addition to the request letter, you will also have to submit self attested KYC documents of each proposed joint holders. Further, if you are not already registered with CVL (CDSL Ventures Limited), you will have to fill the MF KYC form also for completing KYC formalities with CVL. Top
I am not a registered customer. Is it mandatory to fill the Joint Holder request letter at the time of account opening?

No, the Joint Holder facility is optional. You may or may not opt for availing the facility at the

time of account opening. However, you may avail of the facility at any time even after the account is opened. Top
Is it mandatory for the Joint Holders to be KYC complaint with CVL?

Yes, it is mandatory that the Joint holder is KYC Compliant as per CVL. Top
Can I add Joint Holders in my existing folios?

No. You cannot add joint holders to your existing folios. Top
How will I know about status of my Joint Holder registration request?

After the Joint Holder has been registered, the name will be updated the system and will be displayed in the logged in section of your www.icicidirect.com account. The processing of your registration request will normally be completed within 7 working days. Top
Where can I view the names of my registered Joint Holders ?

You can view the names of your registered Joint Holders as follows: In case of Mutual Funds: On the Unit Holding Page of the Mutual Fund section under the column Nominee/Joint Holder by clicking on the "View Joint Holder". In case of Fixed Deposit/GOI Bonds: Order Placement Page under the column Nominee and clicking on the "View Joint Holder". Top
Can I deactivate any Joint Holder at a later date?

Yes, you may request for removing/deleting the name of any joint holder at any point in time after the registration . Top
What is the process for deactivation of Joint Holder/s ?

To deactivate a Joint Holder, you will have to submit a duly filled and signed request letter to any of the ICICI Securities Centers/hubs. On receipt of the request and on verifying your signature, I-Sec shall deactivate such Joint Holders. Top
What happens after a Joint Holder is deactivated?

After a Joint Holder is deactivated, all further purchases in the scheme will be made in a fresh folio only. Also, I-Sec shall cancel all the pending transactions and running SIP [if any]. Kindly note that incase you are holding any mutual fund units with the said person as Joint

Holder in that case you will only have an option to redeem such units (at any time) and the redemption proceeds of the same shall be credited directly by the AMC/Registrar to your registered bank account. Top
Is there a guide that will help me understand how to place transactions in Joint mode?

Please click here to understand the process of order placement. Top


Are there any changes in the way I redeem or switch investments held in Joint mode?

No there is no change in the procedure for redeeming/switching your existing units. Top
Can I make Additional Purchase from the Unit holdings page?

Yes, you have an option to place fresh purchase transactions from the Unit Holding Page. You will have to click on 'Additional purchase link' mentioned against the folio on the Unit Holding Page. Thereafter, the process flow remains the same Top
Can I Transfer-In my existing offline Mutual Fund units which I am holding in Joint Holding mode to my ICICIdirect account?

Yes, you can transfer your existing offline mutual fund units which you are holding in Joint Holder Mode to your ICICIdirect Account provided you have registered the said joint holders . Please ensure that the names of all the holders in the offline folio matches exactly with the names as registered on www.icicidirect.com. Top
What is the procedure for transferring the offline mutual fund units to my www.icicidirect.com account?

To transfer your offline units to your www.icicidirect.com account, you will have to follow the below process: Visit the Transfer In Page under the Mutual Fund section Enter the the scheme name Enter the folio name as mentioned in the Statement of accounts

Please ensure that the name of the Joint Holders is the same as mentioned in the latest Statement of Account provided by your AMC. Top
Can the Joint Holders give instructions for any transaction on www.icicidirect.com?

No. I-Sec will not accept any instruction, whether financial or non financial, from the joint holders as the trading account is held by you and not the joint holders. The holder of the trading account, will be the authorised person for all the registered joint holders and I-Sec will accept instructions only from the account holder.

Top
Will I-Sec send related communications to the joint holders for investment held with them jointly?

No. All communications pertaining to the investments made through www.icicidirect.com, whether in Single name or Joint name, will be sent to you I.e. holder of the trading account only. Top
Incase of an unfortunate event of demise of any of the Joint Holders, what formalities have to be completed by the surviving Joint Holders?

All the surviving Joint Holders (for each folio - separately) will have to inform the respective AMC/Registrar and I-Sec of the demise of the Joint Holder and will have to complete all the legal formalities as mandated by the respective AMC / I-Sec. I-Sec will cancel all SIPs and pending purchases that are registered in joint name with the deceased Joint Holder.

MISCELLANEOUS

What Are Corporate Actions?


When a publicly-traded company issues a corporate action, it is initiating a process that will bring actual change to its stock. By understanding these different types of processes and their effects, an investor can have a clearer picture of what a corporate action indicates about a company's financial affairs and how that action will influence the company's share price and performance. This knowledge, in turn, will aid the investor in determining whether to buy or sell the stock in question. Corporate actions are typically agreed upon by a company's board of directors and authorized by the shareholders. Some examples are stock splits, dividends, mergers and acquisitions, rights issues and spin offs. Let's take a closer look at these different examples of corporate actions. Stock Splits As the name implies, a stock split (also referred to as a bonus share) divides each of the outstanding shares of a company, thereby lowering the price per share - the market will adjust the price on the day the action is implemented. A stock split, however, is a non-event, meaning that it does not affect a company's equity, or its market capitalization. Only the number of shares outstanding change, so a stock split does not directly change the value or net assets of a company. A company announcing a 2-for-1 (2:1) stock split, for example, will distribute an additional share for every one outstanding share, so the total shares outstanding will double. If the company had 50 shares outstanding, it will have 100 after the stock split. At the same time, because the value of the company and its shares did not change, the price per share will drop by half. So if the pre-

split price was $100 per share, the new price will be $50 per share. So why would a firm issue such an action? More often than not, the board of directors will approve (and the shareholders will authorize) a stock split in order to increase the liquidity of the share on the market. The result of the 2-for-1 stock split in our example above is two-fold: (1) the drop in share price will make the stock more attractive to a wider pool of investors, and (2) the increase in available shares outstanding on the stock exchange will make the stock more available to interested buyers. So do keep in mind that the value of the company, or its market capitalization (shares outstanding x market price/share), does not change, but the greater liquidity and higher demand on the share will typically drive the share price up, thereby increasing the company's market capitalization and value. A split can also be referred to in percentage terms. Thus, a 2 for 1 (2:1) split can also be termed a stock split of 100%. A 3 for 2 split (3:2) would be a 50% split, and so on. A reverse split might be implemented by a company that would like to increase the price of its shares. If a $1 stock had a reverse split of 1 for 10 (1:10), holders would have to trade in 10 of their old shares for one new one, but the stock would increase from $1 to $10 per share (retaining the same market capitalization). A company may decide to use a reverse split to shed its status as a "penny stock". Other times companies may use a reverse split to drive out small investors. Dividends There are two types of dividends a company can issue: cash and stock dividends. Typically only one or the other is issued at a specific period of time (either quarterly, bi-annually or yearly) but both may occur simultaneously. When a dividend is declared and issued, the equity of a company is affected because the distributable equity (retained earnings and/or paid-in capital) is reduced. A cash dividend is straightforward. For each share owned, a certain amount of money is distributed to each shareholder. Thus, if an investor owns 100 shares and the cash dividend is $0.50 per share, the owner will receive $50 in total. A stock dividend also comes from distributable equity but in the form of stock instead of cash. A stock dividend of 10%, for example, means that for every 10 shares owned, the shareholder receives an additional share. If the company has 1,000,000 shares outstanding (common stock), the stock dividend would increase the company's outstanding shares to a total of 1,100,000. The increase in shares outstanding, however, dilutes the earnings per share, so the stock price would decrease. The distribution of a cash dividend can signal to an investor that the company has substantial retained earnings from which the shareholders can directly benefit. By using its retained capital or paid-in capital account, a company is indicating that it can replace those funds in the future. At the same time, however, when a growth stock starts to issue dividends, the company may be changing: if it was a rapidly growing company, a newly declared dividend may indicate that the company has reached a stable level of growth that it is sustainable into the future.

Rights Issues A company implementing a rights issue is offering additional and/or new shares but only to already existing shareholders. The existing shareholders are given the right to purchase or receive these shares before they are offered to the public. A rights issue regularly takes place in the form of a stock split, and can indicate that existing shareholders are being offered a chance to take advantage of a promising new development. Mergers and Acquisitions A merger occurs when two or more companies combine into one while all parties involved mutually agree to the terms of the merge. The merge usually occurs when one company surrenders its stock to the other. If a company undergoes a merger, it may indicate to shareholders that the company has confidence in its ability to take on more responsibilities. On the other hand, a merger could also indicate a shrinking industry in which smaller companies are being combined with larger corporations. For more information, see "What happens to the stock price of companies that are merging together?" In the case of an acquisition, however, a company seeks out and buys a majority stake of a target company's shares; the shares are not swapped or merged. Acquisitions can often be friendly but also hostile, meaning that the acquired company does not find it favorable that a majority of its shares was bought by another entity. A reverse merger can also occur. This happens when a private company acquires an already publicly-listed company (albeit one that is not successful). The private company in essence turns into the publicly-traded company to gain trading status without having to go through the tedious process of the initial public offering.Thus, the private company merges with the public company, which is usually a shell at the time of the merger, and usually changes its name and issues new shares. Spin Offs A spin off occurs when an existing publicly-traded company sells a part of its assets or distributes new shares in order to create a newly independent company. Often the new shares will be offered through a rights issue to existing shareholders before they are offered to new investors (if at all). Depending on the situation, a spin-off could be indicative of a company ready to take on a new challenge or one that is restructuring or refocusing the activities of the main business. Conclusion It is important for an investor to understand the various types of corporate actions in order to get a clearer picture of how a company's decisions affect the shareholder. The type of action used can tell the investor a lot about the company, and all actions will change the stock itself one way or another. Read more: http://www.investopedia.com/articles/03/081303.asp#ixzz1iI3Z6Wsa What is a stock split? Why do stocks split?

All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision by the company's board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split, every shareholder with one stock is given an additional share. So, if a company had 10 million shares outstanding before the split, it will have 20 million shares outstanding after a 2-for-1 split. A stock's price is also affected by a stock split. After a split, the stock price will be reduced since the number of shares outstanding has increased. In the example of a 2-for-1 split, the share price will be halved. Thus, although the number of outstanding shares and the stock price change, the market capitalization remains constant. A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. A stock split can also result in a stock price increase following the decrease immediately after the split. Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices. Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices. Read more: http://www.investopedia.com/ask/answers/113.asp#ixzz1iI4OezRa

Definition of 'Buyback'
The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking

for a controlling stake.

Investopedia explains 'Buyback'


A buyback allows companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. Buybacks can be carried out in two ways: 1. Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.

2. Companies buy back shares on the open market over an extended period of time.
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