The term 'commodity' includes all kinds of goods. FCRA defines 'goods' as 'every kind of movable property other than actionable claims, m
and securities'. Futures' trading is organized in such goods or commodities as are permitted by the Central Government.
At present, all go
products of agricultural (including plantation), mineral and fossil origin is allowed for futures trading under the auspices of the commodity exchanges recognized under the FCRA.
The national commodity exchanges have been recognized by the Central Government for organization
trading in all permissible commodities which include precious (gold and silver) and non-ferrous metals; cereals and pulses; raw jute and ju
sugar, gur, potatoes, coffee, rubber and spices, etc.
What are Commodity Futures?
Commodity Futures are contracts to buy specific quantity of a particular commodity at a future date. It is similar to the Index futures and St futures but the underlying happens to be commodities instead of Stocks and Indices.
ISIN (International Securities Identification Number) is the identification number given to a security of an issuer at the time of admitting suc security in the depository system.
What services are provided by a DP?
Dematerialization i.e. converting physical securities into electronic form. Dematerialization i.e. converting electronic securities balances in a BO account into physical form.
To maintain record of holdings in the electronic form
Settlement of trades by delivering/ receiving underlying securities from/in BO accounts.
Settlement of off-market trades i.e. transactions between BOs entered outside the Stock Exchange.
Providing electronic credit in respect of securities allotted by issuers under IPO or otherwise.
Receiving on behalf of Demat account holders non-cash corporate benefits, such as, allotment of bonus and rights shares in electronic for Securities ensuing upon consolidation, stock split or merger/amalgamation of companies.
Pledging of dematerialized securities
Facilitating Securities lending and Borrowing, if the DP is registered as an "Approved Intermediary" for the purpose.
They have a stake in the company. They are concerned not only in the future growth in stock value but in the worth of the company itself
Investments are long-term and they don't sell their shares in an impulse.
quick profit and don't have any stake or interest in the company, but merely
want some quick value addition. Most investor’s b
This category. Their investments - both buying and selling
- are impulsive. Mostly, they don't do any market research and don't follow any
s Company to gain proper knowledge before investing.
The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. T
underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward
option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified
financial asset or to an index of securities.
With Securities Laws (Second Amendment) Act,1999, Derivatives has been included in the def
Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:- A Derivative includes: -
a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any oth
a contract which derives its value from the prices, or index of prices, of underlying securities.
What 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 Stoc
Options were introduced in June 2001 and July 2001 followed by Stock Futures in November 2001.
Sectoral indices were permitted for de
trading in December 2002. Interest Rate Futures on a notional bond and T-bill priced off ZCYC have been introduced in June 2003 and ex
traded interest rate futures on a notional bond priced off a basket of Government Securities were permitted for trading in January 2004.
After an initial deposit has been paid in by you, we will update our database and activate your ID and you can log onto the site and commence trading. The margin money may be deposited in our account through the Internet (if you have opted for the Net Banking Facility ) or you may deposit money in our account in the regular manner, under intimation to us.
Can I buy shares of any value?
You will be given an exposure limit, which will depend on the margin deposited by you. It will be a dynamic online process visible to you on your terminal once the order has been placed. If there is any shortfall in the margin amount, the exact amount of shortfall will be displayed.
You may utilise the Net Banking Facility and immediately transfer the shortfall and execute the trade.
Can shares of any company be traded?
We will be offering trading facilities in scrips which are in compulsory demat for all investors. As of July 1, 2000 there are 583 companies that are compulsory demat for all investors.
E-broking is an internet enabled system that allows the user to buy and sell shares on the exchange directly. You can log into a site like 5paisa.com and execute trades on the exchange.
How much money do I need to start trading?
We offer facility to execute buy and sale transactions up to a calculated trading limit, defined as a multiple of cash amount deposited by you. After registration, you will be required to deposit a certain amount of initial margin deposit, which will be used to calculate your trading limits.
The deposit can be of any amount, but for ease of your trading operations, it should not be less than Rs.5000/-(Rupees five thousand only).
An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or the company has never issued equity to the public, it's known as an IPO. An IPO is also sometimes known as "going public." Technically, the offering to sell but virtually all IPOs result in all the stock offered being sold. IPOs are generally managed by companies that specialize handling IPOs and have experience in determining what the likely IPO offering price should be. If the IPO manager determines that the sto not sell at an offering price that is acceptable to the company, the application for an IPO is usually withdrawn until a better time. As soon as shares of an IPO have been sold, the stock is now tradable through stock exchanges or specialists that trade in the stock and the stock pr go up or down
Basis of Allotment or Basis of Allocation
is a document publishes by registrar of an IPO to stock
exchanges and IPO investors. This document provides
information about final price fixed for an IPO, issue
subscription (bidding) information or demand of an
IPO and share allocation r IPO allotment information
is categorized by number of shares applied by an applicant.
For each such category detail bidding information is
provided in this document including number of valid
application received, total number of share applied,
ratio of the allotment and number allocated to the
applicants. Ratio of the allotment is a critical field
for IPO's oversubscribed multiple times. This field
tells how many Applica receive single lot of shares
among a certain number of applicants. For example,
ratio 1:8 means only one out of eight applicant received
o shares; ratio value 'FIRM' means all the applicants
are eligible to receive certain amount of share.
IPO Important Link
Committee Info. Public Issues: Draft Offer Documents filed with SEBI Public Issues: Red Herring Documents filed with ROC Public Issues
Offer Documents filed with ROC Rights Issue: Draft Letters of Offer filed with SEBI Rights Issue: Final Letters of Offer filed with Stock Exchange
What steps does an NRI need to take to start investing in the Indian stock Market?
Steps are as follows:
An NRI should open a new bank account with designated bank branch, which is approved by RBI (Reserve Bank of India) for this purpose.
He should apply for a general approval for investment in Indian Stock Market through his designated bank branch.
He should open a Demat Account with a Depository Participant to hold his shares.
He needs to register with a broker to execute his buy/sell orders on the stock exchange(s)
Officials of Central and State governments and Public Sector Undertakings deputed abroad on temporary assignments or pos Branch/Office (including diplomatic missions) abroad.
Where can an NRI/PIO open a demat account?
NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL. The NRI/PIO needs to mention the type [' NRI' as compared to ' Resident'] and the sub-type ['Repatriable' or 'Non-Repatriable'] in the account opening form collected from the DP.
Does an NRI need any RBI permission to open a demat account?
No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated banks.
Does an NRI require RBI permission for dematerialiation / rematerialisation of securities?
No special permission is required. Holding securities in demat only constitutes change in form and does not need any special permission. However, only those physical securities which already have the status as NR - Repatriable / NR- Non-Repatriable can be dematerialized in the corresponding Depository Accounts.
Can securities purchased under repatriable and non-repatriable category be held in a single demat account?
No. An NRI must open separate demat accounts for holding -repatriable' and 'non-repatriable' securities.
In case a person who is resident in India becomes a non-resident, will he/she be required to change the status of his/her holding from Resident to Non-Resident?
As per section 6(5) of FEMA, NRI can continue to hold the securities, which he/she had purchased as a resident Indian, even after he/she has become a non-resident Indian, on a non-repatriable basis.
In case an NRI becomes a resident in India, will he/she be required to change the status of his/her holding from Non-Resident to Resident?
Yes. It is the responsibility of the NRI to inform the change of status to the designated bank branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.
Can NRIs invest in shares, debentures and units of mutual funds in India?
NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.
Can an NRI purchase securities by subscribing to public issue? What are the permissions/approvals required?
Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GoI/RBI. Therefore, individual NRI need not obtain any permission.
Does an NRI require any permission to receive bonus/rights shares?
What is a designated branch?
Reserve Bank has authorized a few branches of few banks to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated bank branches that have authorization from Reserve Bank.
Whether NRI can apply through more than one designated branch?
No. Each NRI has to select one branch for the purpose of investment under Portfolio Investment Scheme.
Can an NRI purchase or sell shares or convertible debentures on a stock exchange in India on repatriation and/or non-repatriation basis under portfolio investment scheme?
NRIs / PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the Portfolio Investment Scheme. The rules relating to this scheme are as given below: (i) These trades can be done only through a registered broker on a recognized stock exchange. (ii) NRI shall designate a branch of an authorized dealer and route all his/her transactions through this branch of the authorized dealer. (iii) NRI takes delivery of the shares purchased and gives delivery of shares sold. (iv) NRI shall abide by the directions given by RBI/SEBI or such authority if the transaction results in the breach of ceilings stipulated for NRI holding in the company/scheme.
The sale of shares will be subject to payment of applicable taxes.
What are the permissions required for the transfer of securities by NRI/ PIO through off-market trade (transfers outside the purview of Portfolio Investment Scheme of RBI)?
The given below summarizes the permissions required for the off-market transfer:
From NRI to NRI for Sale or Gift transactions one will require General permission no specific permission to be taken Provided that the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares, if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied filed in which the Indian company whose shares are being transferred is engaged.
From NRI to Resident Indian for Sale transaction RBI permission in form TS1 is required
From NRI to Resident Indian for Gift transaction one will require general permission, no specific permission to be taken
From Resident Indian to NRI for sale or gift transaction one will require Prior approval of Secretariat for Industrial Assistance, Government of India, followed by permission from RBI
Can an NRI nominate or be nominated in depository account? Whether such nominee can be person resident in India?
Can NRIs purchase existing shares / debentures of Indian companies by private arrangement?
Yes. Reserve Bank permits NRIs? on application in form FNC 7, to purchase shares / debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU
Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?
Yes. Authorized dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis
Step by step investing procedure for Online trading NRIs in Cash :
1. Please log into IASL Trading Account with your User ID and Trading Password.
2. Check your limits before placing purchase order- Path to follow - Reports - Limit statement
3. Everyday we update your limit on the basis of your bank balance statement received from Axis Bank.
4. For any discrepancy please write mail to firstname.lastname@example.org
Step by step investing procedure for Online trading NRIs in Derivatives
1. Derivative Trading for NRIs is possible only through NRO Account i.e. on Non Repatriable basis.
2. If the NRI has already obtained unique code through some other broker, it should be used. In other words the code will be unique across exchange.
3. Up front Margin has to be collected from the client for M- TO -M.
4. When entering the orders broker have to use the code allotted by the Exchange.
5. NRI/broker has to ensure that the trades don't exceed the overall limits for NRIs as specified by the Exchange. Investment limits in derivative segment are also monitored at Exchange level. Penalty is charged by exchange in case of violations.
PORTFOLIO INVESTMENT SCHEMES (PIS)
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) (defined in Schedule 3 of Foreign Exchange Management Act 2000) through which NRIs and PIOs can purchase and sell shares and convertible debentures of Indian companies on a recognized stock exchange in India by routing all such purchase/sale transactions through their account held with a Designated Bank Branch
What are the Transactions covered under PIS?
1. Fresh purchase from the secondary market as an NRI
2. Sale of shares, which were bought under PIS
What are the transactions not allowed or are not covered under PIS?
1. Sale of shares, which were not bought under PIS, like Gifts, subscription to IPOs or shares bought as resident Indian, or received in bonus.
2. Fresh subscription for IPOs as an NRI
3. Investment in Mutual Funds.
These transactions need to be routed through NON PIS account.
How many PIC accounts can one NRI have?
PIS can be obtained only through one banker at a time.
Can an NRI client transfer a PIS account?
Yes. If the NRI is already having a PIS account with some other bank, he has to close that account and provide the following documents to the new bank along with the application form:
1. NOC: No objection certificate is required from the previous bank stating that the client does not have any dues with them and the bank does not have any problem in his transferring the relationship to other bank. (It is not required for fresh PIS approval)
2. Previous approval letter: Bank X would have issued a PIS approval letter. This letter is required.
3. Details of the existing investments in the form on Annexure II and Annexure III.
What are the Documents required for reporting to PIS?
For any transaction to be reported to PIS, contract note of the broker should reach PIS department within one working day following the day of transaction.
There are two NRIs, A and B. Person A has bought some shares when he was resident Indian. Now he has become an NRI, can he sell these shares under PIS?
For any transaction to be reported to PIS, contract note of the broker should reach PIS department within one working day following the day of transaction.
Person A has bought some shares under PIS, now he has gifted those shares to Person B, who is also an NRI. Can Person B sell these shares under PIS?
Although these shares were purchased under PIS, but for B still these shares are received as gift, so B cannot sell these shares under PIS.
What are the Investments under PIS on repatriation and non-repatriation basis?
Investment can be made on repatriation as well as non-repatriation basis. However, an NRI will have to open NRE account as well as NRO account with designated bank branch as the sale proceeds of non-repatriation investment can only be credited to NRO account. If the customer is having any previous holdings, he needs to open NRO bank account as the sale proceeds of these investments will go to NRO account only.
The repatriation of the sale proceeds, net of taxes, are allowed if the original purchase was made on repatriation basis and such investments were ? made out of funds from NRE/FCNR account or by means of remittance from abroad.
What are the Rates applicable under TDS?
TDS rate is different as per the tenure of the investment. It can be classified into:
Long-term capital gain If the period of holding is more than 1 year i.e. the difference between the date of purchase and sell is more than 1 year, then the TDS rate applicable is 0 %.
Short-term capital gain - If the period of holding is less than 1 year i.e. the difference between the date of purchase and sell is less than 1 year, then the TDS rate applicable is 15%. (Excluding Service Tax and Education cess)
How is TDS calculated?
TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term. No TDS is charged on losses.
For any TDS to be deducted and money to be remitted to bank account, there are three things that have to be verified.
1. Amount of gain = Selling price - Purchase price
2. Duration of holding i.e. long term or short term = Selling date - Purchase date
3. Source of fund for purchase i.e. NRE or NRO
What is the Limit for purchase by NRIs under the PIS?
An NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the company (equity as well as preference capital) or the aggregate paid up value of each series of convertible debentures as the case may be. For the purpose of this ceiling, investment under the Portfolio Investment Scheme on repatriation as well as non-repatriation basis will be clubbed together.
There is an overall ceiling of 10% of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by all NRIs/OCBs put together. The overall ceiling can be raised if the company concerned passes a special resolution to that effect in its general body meeting.
While limits of individual holdings by NRIs/OCBs are monitored by the respective designated bank branch, RBI monitors the holding limits by NRIs/OCBs in aggregate. Once the aggregate holding of NRIs/OCBs builds up/ about to build up to the maximum prescribed ceiling, RBI puts the concerned stock under the Restrict List/Watch List which is published by RBI from time to time.
What are OCBs?
A Overseas Corporate Body (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-Resident Indians directly or indirectly but irrevocably. OCBs were debarred from Portfolio Investment Scheme w.e.f November 29, 2001. OCBs have been banned as a class of investor w.e.f September 16, 2003. However, they have been permitted to continue to hold the securities acquired by them prior to these dates. Accordingly OCBs may open a demat account, however it can be only for the purpose of dematerializing the existing holdings.
Reference: FAQs hosted on RBI Website www.rbi.org under the head "Chapter III - Investments in Securities /shares and company deposits.