FAQ'S

0How does the stock market work?
Equity is ownership & liquid in nature. Dividend is one of the USPs. Growing economy, high consumption, leads to growth of companies. For how long do I have to invest in equity and how much return will I get from it? Long term good asset but volatile. Stay invested for minimum of preferably for 24 months. Buy on dips and benefit from law of average
1Why would I choose stocks?
Stocks are one of the most effective tools for building wealth, as stocks are a share of ownership of a company. You thus have great potential to receive monetary benefits when you own stock shares. Owning stocks of fundamentally strong companies simply lets your money work harder for you since they appreciate in value over a period of time while also offering rich dividends on a periodic basis.
2Why are indices important?
Traditionally, indices have been used as information sources. By looking at an index we know how the market is faring. This information aspect also figures in myriad applications of stock market indices in economic research.
3What is the main difference between offer of shares through book building and offer of shares through normal public issue?
Price at which securities will be allotted is not known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.
4What are derivatives?
Derivatives are financial contracts that derive their value from an underlying asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest. These financial instruments help you make profits by betting on the future value of the underlying asset. So, their value is derived from that of the underlying asset. This is why they are called ‘Derivatives’. The value of the underlying assets changes every now and then. For example, a stock’s value may rise or fall, the exchange rate of a pair of currencies may change, indices may fluctuate, commodity prices may increase or decrease. These changes can help an investor make profits. They can also cause losses. This is where derivatives come handy. It could help you make additional profits by correctly guessing the future price, or it could act as a safety net from losses in the spot market, where the underlying assets are traded.
5How are derivative contracts linked to stock prices?
Suppose you buy a Futures contract of Infosys shares at Rs 3,000 – the stock price of the IT company currently in the spot market. A month later, the contract is slated to expire. At this time, the stock is trading at Rs 3,500. This means, you make a profit of Rs. 500 per share, as you are getting the stocks at a cheaper rate. Had the price remained unchanged, you would have received nothing. Similarly, if the stock price fell by Rs. 800, you would have lost Rs. 800. As we can see, the above contract depends upon the price of the underlying asset – Infosys shares. Similarly, derivatives trading can be conducted on the indices also. Nifty Futures is a very commonly traded derivatives contract in the stock markets. The underlying security in the case of a Nifty Futures contract would be the 50-share Nifty index.
6What are futures contracts?
A futures contract is an agreement between two parties – a buyer and a seller – wherein the former agrees to purchase from the latter, a fixed number of shares or an index at a specific time in the future for a pre-determined price. These details are agreed upon when the transaction takes place. As futures contracts are standardized in terms of expiry dates and contract sizes, they can be freely traded on exchanges. A buyer may not know the identity of the seller and vice versa. Further, every contract is guaranteed and honored by the stock exchange, or more precisely, the clearing house or the clearing corporation of the stock exchange, which is an agency designated to settle trades of investors on the stock exchanges. Futures contracts are available on different kinds of assets – stocks, indices, commodities, currency pairs and so on. Here we will look at the two most common futures contracts – stock futures and index futures.
7What are options?
An ‘Option’ is a type of security that can be bought or sold at a specified price within a specified period of time, in exchange for a non-refundable upfront deposit. An options contract offers the buyer the right to buy, not the obligation to buy at the specified price or date. Options are a type of derivative product. The right to sell a security is called a ‘Put Option’, while the right to buy is called the ‘Call Option’. They can be used as: • Leverage: Options help you profit from changes in share prices without putting down the full price of the share. You get control over the shares without buying them outright. • Hedging : They can also be used to protect yourself from fluctuations in the price of a share and letting you buy or sell the shares at a pre-determined price for a specified period of time Though they have their advantages, trading in options is more complex than trading in regular shares. It calls for a good understanding of trading and investment practices as well as constant monitoring of market fluctuations to protect against losses.
8What are the types of options?
At the basic level, there are 2 types of options: a. Call option (CE) – In simple terms, you buy call if bullish or sell call if bearish. b. Put option (PE) – Again simply put, you buy put if bearish or sell put if bullish. Based on option price w.r.t price of underlying stock/index, there are 3 types of options: a. OTM – Out of money options – e.g. if NIFTY is trading at 8317 currently, all CE’s above strike of 8300 i.e. 8400, 8500, 8600 etc are OTM options. Similarly all puts below 8300 are OTM. b. ATM – At the money – Options where strike price is same as price of underlying stock/index. e.g. Coal India is trading at about 340. So, 340 CE & PE are ATM options. c. ITM – In the money – These are CE’s where strike is below spot (spot is current price of underlying stock/index) or PE’s where strike is above spot e.g. all CE’s below 8400 are ITM.
9Why trade options?
One advantage of option trading as compared to stock trading is the amount of flexibility, you have lots of option strategies to make money in any kind of market – a. Stocks going up b. Stocks going down c. Stocks remaining stagnant or range bound Another advantage is that your money is always liquid. This being a long term investment group, this may not be a consideration for people, but to make money from stocks, you need to block your capital for comparatively longer period of time. Whereas, in options, mostly trades are held maximum till expiry of current month, which is last Thursday of every month. So, you make money without really blocking your capital.
10What instruments can be traded?
All FNO stocks & major indices like NIFTY, BANKNIFTY etc can be traded. But in Indian stock market, most of the stock options are illiquid & hence pose a big risk of getting stuck in case stock makes an unfavorable movement. So, always trade in liquid options. Some of the stocks which are amply liquid are – Reliance, Bharti, DLF, Coal India, Infy, Tata Steel etc. Out of some 200 FnO stocks, there are about 40-45 stocks where current month options are reasonably liquid. So, do not trade outside of these instruments. NIFTY is a great instrument for options trading for following reasons: a. Highly liquid. b. Huge option of strikes available which can be used in different option strategies. c. Even options of next few months are reasonably liquid which can be used in strategies like Calendar Spreads where you combine options of this month & next month expiries.
11How can I place my trade through you?
2 ways viz. Through the dedicated dealer provided to you [Offline Services] & by login to any of the Online products provided to you.
0What are the types of trading account that I can open with PROFITMART?
Equity, Commodity, and Currency account can be opened with PROFITMART.
12Can I take delivery in commodities?
Yes, in selected commodities [Agri/Gold/Silver]
13How will you benefit from Currency Trading?
The Currency Derivatives product is a bundle of opportunities for a number of players. It is a new asset class for diversification of investments for all Resident Indians. It gives hedging opportunities to: • Importers and exporters, who can hedge their future payables and receivables • Borrowers, who can hedge foreign currency (FCY) loans for interest and principal payments • Resident Indians, who can hedge their offshore investments • It gives arbitrage opportunities • It gives trading opportunities because of its volatility and multiplicity • It provides highly transparent rates to traders as it is exchange-traded
0What is the Regulatory Body for Mutual Funds?
Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds mentioned above. All the mutual funds must get registered with SEBI. The only exception is the UTI, since it is a corporation formed under a separate Act of Parliament.
1What 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.
2What 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- Liabilities-Accrued Expenses / Number of Outstanding units

3What 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 realizable 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 realizable value of all assets and dividing by number of units outstanding.
4How 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 is not mandatory requirement to be listed on a stock exchange) may be published at monthly or quarterly intervals.
5What 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. .
6How 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.
7Can 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.
8Are 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.
9What should an investor look into an offer document?
An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.
10As 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.
11What are the benefits of investing in Mutual Funds?

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.

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.

* The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. It is possible to invest in small amounts as and when the investor has surplus funds to invest. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds.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.

12What are the parameters on which a Mutual Fund scheme should be evaluated?
Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoter s image are some of the key factors to be considered while taking an investment decision regarding mutual funds.
13What 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 realizes 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.

Systematic Investment Plan:

Under the Systematic Investment Plan (SIP) also called Automatic Investment Plan (AIP), 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 pre-determined interval.

14What is Entry Load?
The non refundable fee paid to the Asset Management Company at the time of purchase of mutual fund units is termed as Entry Load. Entry Load is added to the NAV (purchase price) when you are purchasing Mutual Fund units.
15What 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.
16What is Purchase price?
Purchase price is the price paid by you to purchase a unit of a mutual fund scheme. If the fund levies an entry load, then the purchase price would be equal to the sum of the NAV and the entry load levied.
17What 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.
18What 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.
20Do 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.
21What 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 from 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'.
22How do 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.1000/- in a mutual fund, your total invested amount was reduced to the extent of entry load charged i.e. Rs.22.5 (@ 2.25%) thereby making your actual investment Rs977.5/-. However, w.e.f August 1, 2009, the entire Rs1000/- 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.
23Can 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.
24Will 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
1What is Life Insurance?
Life Insurance is a contract between you and a life insurance company, which provides your beneficiary with a pre-determined amount in case of your death during the contract term. Buying insurance is extremely useful if you are the principal earning member in the family. In case of your unfortunate premature demise, your family can remain financially secure because of the life insurance policy that you have purchased. The primary purpose of life insurance is therefore protection of the family in the event of death. Today, insurance is also seen as a tool to plan effectively for your future years, your retirement, and for your children's future needs. Today, the market off .
2What is a cash value life policy?
A cash value life policy covers you for your lifetime. "Cash value" means that premiums generally stay level during the premium payment period. The policy not only provides insurance benefits when you die, but it also builds up a dollar value from your premium payments and investment returns. You can borrow against this value with a policy loan or redeem it for cash at any time before the policy matures. Whole life, universal life and extra value life are some of the more popular forms of cash value life policies.
3What kind of life insurance should I buy?
If you have long-term needs - for example, if you require life-long protection for premature death, retirement income or cash to settle your estate - then you should consider cash value insurance. Likewise, if you need protection for a specified period of time, perhaps to pay off a loan or mortgage in the event of your death, term insurance may be the right choice for you. Apply now to get a free quote on term life insurance at affordable rates.
4Can I increase my life insurance coverage?
Usually, you can increase your coverage with a new policy or by adding a rider to your existing policy. However, a universal life policy can be increased without a rider or new policy. All coverage increases require you to provide evidence of insurability to your insurer.
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Convertible" and "renewable" are provisions in a term insurance policy. With a convertible policy, the policyowner has the option to exchange the policy for another insurance plan without evidence of insurability. However, term policies can only be converted to cash value policies. With a renewable policy, the policyowner can renew (or extend) the policy at the end of its term without evidence of insurability. When a policy includes both provisions, they continue until specified ages and then stop. Premium rates increase at each renewal, based on the insured's age.
1What factors should I consider when I insure my home?
Firstly determine the amount and type of insurance that you need. The sum insured or coverage limit of the property should equal 100% of its replacement cost. If the policy limit is less than 85% of the replacement cost of your home, any payment from the insurance company will be less than the full cost to replace your home This is known as Under Insurance. Over and above the basic Fire Insurance, decide which, if any, additional coverage you want to add to your policy. For example, do you want personal possessions or household contents covered against theft or burglary, cover against the risk of civil commotion here in Bali or, separately issued, earthquake and volcanic eruption coverage. Once you have decided on the coverage you want in your insurance policy, consult us. We will be able to help you determine if there are any gaps in coverage you might not have been aware of, we can also explain the details of the policy's exclusions and limitations as well as recommend an insurance company that will live up to your expectations.
2What is the difference between 'actual cash value' and 'replacement cost'?
Covered losses under a personal possessions or household contents policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.
3What are the advantages to using an agent to purchase insurance?
By using an agent to purchase insurance, the policyholder receives more personal service. An agent with whom there is direct contact can be vital when purchasing a product and can prove absolutely necessary when filing a claim. As a local, independent agent we are able to deliver quality insurance with competitive pricing and local personalized service.
1A plan under which the company matches employee contributions using company stock:
Yes; the matching feature is an equity compensation plan that requires shareholder approval, unless an exemption applies (such matching features are common in Section 401(k) plans, which would be covered by the exemption for Section 401(a) plans). This is because the employee does not have the discretion to take the company match in cash, but must take that match in company stock. Note that the existence of a matching provision will not cause other provisions of a compensation plan to be considered subject to our rule if they would not be subject to our rule standing alone.
2What do I need to check in?
National photo ID, such as passport, driver's licence, ID card, national military service card, etc. The hostel management also accepts current, valid student cards.
3What time can I check in?
Check in is at 11:00 am. The Gothic Point Hostel in Barcelona is open 24 hours, 7 days week. Check-out time is 10.00 am, so your room may not be ready before the check in time if the previous resident has not yet left. If necessary, you can leave personal effects at reception and check in later during the day.
4A plan providing for de minimis issuances of shares to non-officer employees:
Yes; the matching feature is an equity compensation plan that requires shareholder approval, unless an exemption applies (such matching features are common in Section 401(k) plans, which would be covered by the exemption for Section 401(a) plans). This is because the employee does not have the discretion to take the company match in cash, but must take that match in company stock. Note that the existence of a matching provision will not cause other provisions of a compensation plan to be considered subject to our rule if they would not be subject to our rule standing alone.
5What do I need to check in?
National photo ID, such as passport, driver's licence, ID card, national military service card, etc. The hostel management also accepts current, valid student cards.
6 What time can I check in?
Check in is at 11:00 am. The Gothic Point Hostel in Barcelona is open 24 hours, 7 days week. Check-out time is 10.00 am, so your room may not be ready before the check in time if the previous resident has not yet left. If necessary, you can leave personal effects at reception and check in later during the day.
7Does a plan with a fixed maximum number of shares constitute a formula plan if it also contains a formula or schedule for the awarding of grants?
Plans with a fixed maximum number of shares are neither formula plans nor discretionary plans, as those terms are used in our rule, regardless of whether the plan happens to contain some kind of formula relative to an aspect of the plan so long as the shares granted pursuant to the formula count against the maximum number
8How do the shareholder approval rules apply to an equity compensation plan that was adopted by a company before listing on the NYSE, but after June 30, 2003?
Shareholder approval is not required unless and until the plan is materially revised after the company first becomes listed on the NYSE. The new rules apply to the determination of whether a material revision has occurred, and whether an exemption applies. For example, if a company has a discretionary plan in effect before listing, the first grant that occurs after the company lists on the NYSE would be considered a material revision, and would require shareholder approval unless an exemption applied.
9What is considered a material revision to an equity compensation plan?

Below are some examples of material revisions to an equity compensation plan:

  • An expansion of the types of awards available under the plan;
  • A material increase in the number of shares available under the plan;
  • A material expansion of the classes of persons eligible under the plan;
  • A material extension of the term of the plan;
  • A material change in the method of determining the strike price of options;
  • A deletion or limitation of any provision prohibiting repricing.
10If a revision does not fall into one of the listed examples, how do you determine if it is a material revisionunder the rule?
If the revision would have the effect of materially increasing the potential dilution of shareholders over the lifetime of the plan, it is considered material. Also, if the revision has an effect similar to one of the listed examples, it is considered material.
11If an existing plan allows grants of options and restricted stock to employees, and restricted stock to directors, would an amendment to allow options to be granted to directors be a material revision?
Yes. This revision expands the types of awards available to a particular class of persons eligible for the plan. It is therefore similar to two of the listed examples of material revisions: an expansion of the types of awards available under the plan, and a material expansion of the classes of persons eligible under the plan
1What are commodity exchanges?
Commodity exchanges are institutions which provide a platform for trading in commodity futures just as how stock markets provide space for trading in equities and their derivatives. They thus play a critical role in robust price discovery where several buyers and sellers interact and determine the most efficient price for the product. Indian commodity exchanges offer trading in commodity futuresin a number of commodities. Presently, the regulator, Forward Markets Commission allows futures trading in over 120 commodities. There are two types of commodity exchanges in the country- 3 national level and 21 regional.
2What are the unique features of national level commodity exchanges?
The unique features of national level commodity exchanges are: * They are demutualized, meaning thereby that they are run professionally and there is separation of management from ownership. The independent management does not have any trading interest in the commodities dealt with on the exchange. * They provide online platforms or screen based trading as distinct from the open outcry systems (ring trading) seen on conventional exchanges. This ensures transparency in operations as everyone has access to the same information. * They allow trading in a number of commodities and are hence multi-commodity exchanges. * They are national level exchanges which facilitate trading from anywhere in the country. This a corollary of being an online exchange.
3What are spot and futures prices?
Spot price is the price in the cash market (where one buys and sells goods on the spot just as we make purchases from a shop by paying cash) while future prices are prices of the same commodity at a future date. Therefore, if the spot price of gold is Rs 6000/10 gms today, the 1-month future price would be Rs 6050, while the 2-month future price would be Rs 6100. The difference between spot and futures prices is the cost of carry i.e. interest cost, storing, insurance etc. Normally futures prices are higher than spot prices. The exception is when the futures prices are lower than the spot price, which is called backwardation . This situation is more common in case of agriculture commodities where due to the arrival of crop on certain future dates, the future prices would be lower than the current spot price.
4What are futures & futures contract?
Futures are financial instruments based on a physical underlying (commodity, equities etc.). A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future for a certain price. Therefore (delete), the futures price of wheat is the price of a financial instrument called wheat futures at say, Rs 10/kg at a future date. Market participants are able to buy and sell a certain commodity at a pre-determined price at a later date as specified by the Exchange. For example, if a person wants to buy 10 gms of gold after three months when the price today is say, Rs 6000 per 10 gms (spot prices) and Rs 6050 after three months (futures prices). He enters into a contract through a member of NCDEX to buy gold. On the due date if the price in the spot market is say, Rs 6100, then he still has to pay only Rs 6050, and has hence hedged himself against the price risk.
5What is the platform for commodity future standing?
There are three options - the National Commodity and Derivative Exchange, the Multi Commodity Exchange of India Ltd and the National Multi Commodity Exchange of India Ltd. All three have electronic trading and settlement systems and a national presence.
6Is there only delivery transaction or settlement in cash?
You can do both. All the exchanges have both systems - cash and delivery mechanisms. The choice is yours. If you want your contract to be cash settled, you have to indicate at the time of placing the order that you don't intend to deliver the item. If you plan to take or make delivery, you need to have the required warehouse receipts. The option to settle in cash or through delivery can be changed as many times as one wants till the last day of the expiry of the contract.
7What do I need to start trading in commodity futures?
You will require a bank account. And a separate commodity demat account from the National Securities Depository Ltd to trade on the NCDEX just like in stocks.
8Where do I look for information on commodities?
Daily financial newspapers carry spot prices and relevant news and articles on most commodities. Besides, there are special magazines on agricultural commodities and metals available for subscription. Information easiest to access is from websites. Though many websites are subscription-based, a few also offer information for free. You can surf the web and narrow down you search.
9Who is the regulator?
The exchanges are regulated by the Forward Markets Commission. Unlike the equity markets, brokers don't need to register themselves with the regulator. The FMC deals with exchange administration and will seek to inspect the books of brokers only if foul practices are suspected or if the exchanges themselves fail to take action. In a sense, therefore, the commodity exchanges are more self-regulating than stock exchanges. But this could change if retail participation in commodities grows substantially.
10Who are the players in commodity derivatives?
The commodities market will have three broad categories of market participants apart from brokers and the exchange administration - hedgers, speculators and arbitrageurs. Brokers will intermediate, facilitating hedgers and speculators. Hedgers are essentially players with an underlying risk in a commodity - they may be either producers or consumers who want to transfer the price-risk onto the market. Producer-hedgers are those who want to mitigate the risk of prices declining by the time they actually produce their commodity for sale in the market; consumer hedgers would want to do the opposite. For example, if you are a jeweler with export orders at fixed prices, you might want to buy gold futures to lock into current prices. Investors and traders who want to benefit or profit from price variations are essentially speculators. They serve as counterparties to hedgers and accept the risk offered by the hedgers in a bid to gain from favourable price changes.
11In which commodities can I trade?
Though the government has essentially made almost all commodities eligible for futures trading, the nationwide exchanges have earmarked only a select few for starters. While the NMCE has most major agricultural commodities and metals under its fold, the NCDEX, has 10 commodities (gold, silver, castor, soya, rape/mustard oil, crude palm oil, RBD palmolein and cotton). MCX offers futures trading in gold, silver and castorseed, rubber.
12Is stamp duty levied in commodity contracts? What are the stamp duty rates?
As of now, there is no stamp duty applicable for commodity futures that have contract notes generated in electronic form. However, in case of delivery, the stamp duty will be applicable according to the prescribed laws of the state the investor trades in. This is applicable in similar fashion as in stock market.
13How is physical delivery of commodity made on NCDEX?
Based on the specifications of the Exchange, the seller can put in his intention to make physical delivery on the Exchange. The Seller has to inform the exchange that he wants to deliver the product and does so at an assigned warehouse of NCDEX which is certified by the exchange. The goods that are stored in the warehouse are verified by an approved assayer and a certificate is given to the seller. This is facilitated in a demat mode where the person would now hold commodity balances in an electronic account just as one holds a savings bank account in a bank or a demat share of a company. He can draw cheques for the same when he sells the product to a buyer.
14Is physical delivery compulsory?
No, delivery is optional. It is only when the seller puts in the intention to deliver that delivery takes place. Otherwise all contracts are cash settled. NCDEX specifies the warehouses where delivery can take place. However, usually traders use the Exchange as a hedging platform. For example, if I have to buy cotton at Rs 100 after 3 months. I am located in Mumbai but the delivery centre is Ahmedabad. Suppose after 3 months the futures price is Rs 120, as is the spot price. I would not like to go to Ahmedabad and pick up the cotton because of the transport cost, tax payments, insurance etc. I therefore, sell the futures contract on the Exchange for Rs 120 and make a profit of Rs 20. But, the price in the spot market is also Rs 120. I buy cotton at Rs 120 in Mumbai spot market and the implicit loss is Rs 20 now as I had a price of Rs 100 in mind. But, this loss is offset by the gain thus providing the perfect hedge for me.
1What is the difference between Cumulative Deposits and Non- Cumulative deposits?
In a Cumulative Deposits Scheme, interest is payable at the time of maturity along with the principal. This Scheme is suitable for the people who do not require periodic interest payment. This is also called Money Multiplier Scheme. In a Non-Cumulative Deposit Scheme interest is paid on periodical basis.
2What is the minimum tenure for a fixed deposit?
6 Months.
1Do I get the facility of crediting my interest earned to another account when I place a fixed deposit?
Yes, you get to choose between placing a cumulative or non-cumulative deposit at the time of account opening. In a non-cumulative deposit, the interest earned will be paid on a periodical basis whereas in a cumulative deposit the interest earned will be ploughed back with the principal deposit amount.
3What is compounding in FD?
In case of deposit with Cumulative option, interest accrued is added to the existing deposit amount at the end of every year on 31st March. Cumulative scheme of FD is compounded annually.
4Who can buy an FD?
Following entities can buy an FD: Any individual who comes under definition of ''Person of Indian Origin' as defined by the Government of India/Reserve Bank of India, from time to time. Any Non - Resident Indian Non-individual resident legal entities like Hindu Undivided Family, Trust, Association of Persons, Societies, Firms, Companies, etc.
5 Will my deposit get automatically renewed?
No. The Customer will be asked for renewal on Maturity of Deposit.
6What is Company Fixed Deposit?
Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest for prescribed time period.
7How is interest payments made?
Interest is paid on monthly/quarterly/half yearly/yearly or on maturity basis and is sent either through cheque or ECS facility.
8When is TDS deducted on the interest from Company Fixed Deposits?
TDS is deducted if the interest on fixed deposit exceeds Rs.5000/- in a financial year.
9Is there any scope of appreciation of principal?
At the end of deposit period principal plus interest is returned to the deposit holder.
10How to choose a good company deposit scheme?
Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little known manufacturing companies. For NBFC s, RBI has made it mandatory to have an Arating to be eligible to accept public deposits, one should go further and look at only AA or AAA schemes. Within a given rating grade, choose the company with a better reputation. Once you decide on a company, next choose the schemes that have given a better return. Unless you need income regularly, you should prefer cumulative to regular income option since the interest earned automatically gets reinvested at the same coupon rate giving upon better yields. It also gives you a lump-sum amount at one go. It is better to make shorter deposit of around 1 year to 3 years. This way you not only can keep a watch on the company s rating and servicing but can also plan to have your money back in case of emergency. Check on the servicing standards of the company. You should not oblige companies that care little about investor services like promptly sending interest warrants or the principal cheque.
11Which companies can accept Deposit?

Companies registered under Companies Act 1956, such as:

  • Manufacturing Companies.
  • Non-Banking Finance Companies.
  • Housing Finance Companies.
  • Financial Institutions.
  • Government Companies.
12Upto what limits can a company accept deposit?
A Non-Banking Non-Finance Company (Manufacturing Company) can accept deposit subject to following limits: Upto 10% of aggregate of paid-up share capital and free reserves if the deposits are from shareholders or guaranteed by directors. Otherwise upto 25% of aggregate of paid-up share capital and free reserves. A Non-Banking Finance Company can accept deposits upto following limits: Equipment Leasing Company can accept four times of its net owned fund. Loan or Investment Company can accept deposit upto one and half time of its net owned funds.
1What is an IPO?
IPO or Initial Public Offer is a way for a company to raise money from investors for its future projects and get listed to Stock Exchange. Or An Initial Public Offer (IPO) is the selling of securities to the public in the primary stock market. Company raising money through IPO is also called as company going public'. From an investor point of view, IPO gives a chance to buy shares of a company, directly from the company at the price of their choice (In book build IPO's). Many a times there is a big difference between the price at which companies decides for its shares and the price on which investor are willing to buy share and that gives a good listing gain for shares allocated to the investor in IPO. From a company prospective, IPO help them to identify their real value which is decided by millions of investor once their shares are listed in stock exchanges. IPO's also provide funds for their future growth or for paying their previous borrowings.
2Who decides the Price Band?
Company with help of lead managers (merchant bankers or syndicate members) decides the price or price band of an IPO. SEBI, the regulatory authority in India or Stock Exchanges do not play any role in fixing the price of a public issue. SEBI just validate the content of the IPO prospectus. Companies and lead managers does lots of market research and road shows before they decide the appropriate price for the IPO. Companies carry a high risk of IPO failure if they ask for higher premium. Many a time investors do not like the company or the issue price and doesn't apply for it, resulting unsubscribe or undersubscribed issue. In this case companies' either revises the issue price or suspends the IPO.
3Who decides the date of the issue?
Once Draft Prospectus' of an IPO is cleared by SEBI and approved by Stock Exchanges then it's up to company going public to finalize the date and duration of an IPO. Company consult with the Lead Managers, Registrar of the issue and Stock Exchanges before decides the date.
4What is a Rights Issue?
Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.
5What is SEBIs Role in an Issue?
Any company making a public issue or a listed company making a rights issue of value of more than Rs.50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI s observation letter is three months only ie. the company has to open its issue within three months period.
6Does it mean that SEBI recommends an issue?
SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document.
7What is the role of registrar of an IPO?
Registrar of a public issue is a prime body in processing IPO's. They are independent financial institution registered with SEBI and stock exchanges. They are appointed by the company going public. Responsibility of a registrar for an IPO is mainly involves processing of IPO applications, allocate shares to applicants based on SEBI guidelines, process refunds through ECS or cheque and transfer allocated shares to investors Demat accounts.
8 What is the role of Lead Managers in an IPO?
Lead managers are independent financial institution appointed by the company going public. Companies appoint more then one lead manager to manage big IPO's. They are known as Book Running Lead Manager and Co Book Running Lead Managers. Their main responsibilities are to initiate the IPO processing, help company in road shows, creating draft offer document and get it approve by SEBI and stock exchanges and helping company to list shares at stock market.
9What is Follow on public offering or FPO?
Follow on public offering (FPO) is public issue of shares for already listed company.
10What is primary & secondary market?
Primary market is the market where shares are offered to investors by the issuer company to raise their capital. Secondary market is the market where stocks are traded after they are initially offered to the investor in primary market (IPO's etc.) and get listed to stock exchange. Secondary market comprises of equity markets and the debt markets. Secondary market is a platform to trade listed equities, while Primary market is the way for companies to enter in to secondary market.
11What is the life cycle of an IPO?
Below is the detail process flow of a 100% Book Building Initial Public Offer IPO. This process flow is just for easy understanding for retail IPO investors. The steps provided below are most general steps involve in the life cycle of an IPO. Real processing steps are more complicated and may be different. Please visit SEBI website, stock exchange website or consult an expert for most current information about IPO life cycle in Indian Stock market.
121. Issuer Company - IPO Process Initialization
  1. Appoint lead manager as book runner.
  2. Appoint registrar of the issue.
  3. Appoint syndicate members.
132. Lead Manager's - Pre Issue Role - Part 1
  1. Prepare draft offer prospectus document for IPO.
  2. File draft offer prospectus with SEBI.
  3. Road shows for the IPO.
143. SEBI Prospectus Review
  1. SEBI review draft offer prospectus.
  2. Revert it back to Lead Manager if need clarification or changes (Step 2).
  3. SEBI approve the draft offer prospectus, the draft offer prospectus is now become Offer Prospectus.
154. Lead Manager - Pre Issue Role - Part 2
  1. Submit the Offer Prospectus to Stock Exchanges, registrar of the issue and get it approved.
  2. Decide the issue date & issue price band with the help of Issuer Company.
  3. Modify Offer Prospectus with date and price band. Document is now called Red Herring Prospectus.
  4. Red Herring Prospectus & IPO Application Forms are printed and posted to syndicate members; through which they are distributed to investors.
165. Investor Bidding for the public issue
  1. Public Issue Open for investors bidding.
  2. Investors fill the application forms and place orders to the syndicate members (syndicate member list is published on the application form).
  3. Syndicate members provide the bidding information to BSE/NSE electronically and bidding status gets updated on BSE/NSE websites.
  4. Syndicate members send all the physically filled forms and cheques to the registrar of the issue.
  5. Investor can revise the bidding by filling a form and submitting it to Syndicate member.
  6. Syndicate members keep updating stock exchange with the latest data.
  7. Public Issue Closes for investors bidding.
176. Lead Manager Price Fixing
  1. Based on the bids received, lead managers evaluate the final issue price.
  2. Lead managers update the 'Red Herring Prospectus' with the final issue price and send it to SEBI and Stock Exchanges.
187. Registrar - Processing IPO Applications
  1. Registrar receives all application forms & cheques from Syndicate members.
  2. They feed applicant data & additional bidding information on computer systems.
  3. Send the cheques for clearance.
  4. Find all bogus application.
  5. Finalize the pattern for share allotment based on all valid bid received.
  6. Prepare 'Basis of Allotment'.
  7. Transfer shares in the demat account of investors.
  8. Refund the remaining money though ECS or Cheques.
198. Lead manager Stock Listing
  1. Once all allocated shares are transferred in investors dp accounts, Lead Manager with the help of Stock Exchange decides Issue Listing Date.
  2. Finally share of the issuer company gets listed in Stock Market.
20What is the difference between an offer document, Red Herring Prospectus, a prospectus and an abridged prospectus? What does it mean when someone says draft offer doc?
Offer document means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue, which is filed Registrar of Companies (ROC) and Stock Exchanges. An offer document covers all the relevant information to help an investor to make his/her investment decision. Draft Offer document means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with ROC/ SEs. SEBI may specifies changes, if any, in the draft Offer Document and the issuer or the Lead Merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC/ SEs. The Draft Offer document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.