CLIENT REGISTRATION DOCUMENTS

Who is an 'Non Resident Indian (NRI)' ?

Non Resident Indians fall under the following broad categories:

  • Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.
  • Indian citizens working abroad on assignments with foreign Governments/government agencies or International/Regional Agencies like the UNO, IMF, World Bank, etc.
  • Officials of the Central and State Governments and Public Sector Undertakings deputed abroad on temporary assignments or posted to their offices (including Indian Diplomatic Missions) abroad.

Who is a 'Person of Indian Origin' (PIO)?

A citizen of any country (other than a citizen of Bangladesh or Pakistan) is deemed to be of Indian origin, if,

  • he, at any time, held an Indian passport, or
  • he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 ,or
  • a spouse (not being a citizen of Bangladesh or Pakistan or Sri Lanka) of an Indian citizen or of a person of Indian origin is also deemed to be PIO.

What steps an NRI needs to take to start investing in the Indian stock Market?

Rabbits are small mammals in the family Leporidae of the order Lagomorpha, found in several parts of the world. There are seven different genera in the family classified as rabbits, including the European rabbit (Oryctolagus cuniculus), cottontail rabbit (genus Sylvilagus; 13 species), and the Amami rabbit (Pentalagus furnessi, endangered species on Amami O-shima, Japan). There are many other species of rabbit, and these, along with cottontails, pikas, and hares, make up the order Lagomorpha. Rabbits generally live between four and twenty years.

What is a ’designated bank branch’?

RBI has authorised a few branches of some banks to conduct the business under Portfolio Investment Scheme on behalf of NRIs/OCBs.

What is a Demat Account?

In the advanced countries, depository systems and services have played a significant role in not only facilitating smooth trading and settlement but also attracting foreign investment in the capital market.

The depository system evolved by the National Securities Depositories Limited (NSDL) enables investors to overcome all problems related to handling physical certificates. NSDL is an organization formed to provide electronic depository facilities for securities traded. The securities of investors are held in electronic form through the medium of Depository Participants.

The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. A depository can therefore be conceived of as a "Bank" for securities. An investor wishing to utilise the services offered by a depository has to open an account with the depository through the Depository Participant. This is very similar to opening an account with any of the branches of a bank in order to utilise the services of that bank.

What is a Depository? Who is a Depository Participant?

A depository holds the securities of investors in electronic form just like a bank holds cash of its customers. As in a Bank, investors can deposit/withdraw and transfer securities. The National Securities Depository Limited (NSDL) is the first depository in India. The functions of NSDL are regulated by the Securities and Exchange Board of India (SEBI).

The Depository Participants (DPs) are the link between the Shareholder, the Company and NSDL. Banks, Financial Institutions, Custodians, Stock Brokers etc. can become DPs subject to their meeting certain requirements prescribed by NSDL and SEBI. NSDL publishes from time to time the list of DPs registered with them.

You can open your accounts with one or more DPs, as you like. The procedure for opening an account with the Depository Participant is similar to opening a Savings Bank Account with the Bank. After opening the account, you can hold shares of any number of companies in your account, provided all such companies have entered the depository system.

Which are the broad schemes under which an NRI can make investments in the Indian companies?

Broadly, NRIs are allowed to invest under the PortfolioInvestment Scheme (buying through the secondary market) and through the Direct Subscription route (Investments though IPOs/Private Placements).

Can NRIs invest their funds in Government securities or Units of Unit Trust of India(UTI)?

Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.

Can NRIs make investments in National Savings Certificates issued by Post Offices in India?

Yes. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.

What is the Portfolio Investment Scheme?

Portfolio Investment Scheme (PINS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the 'Non Resident Indians (NRIs)', 'Person of Indian Origin (PIOs )' and 'Overseas Corporate Bodies (OCBs)' 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 DesignatedBank Branch.

What are the types of Rupee accounts generally permitted to be maintained for Portfolio Investment Scheme?

NRIs can maintain two types of account i.e. Non-Resident (External) Rupee Accounts (NRE Accounts) and Ordinary Non-Resident Rupee Accounts (NRO Accounts).

What is the distinction between NRE and NRO accounts?

Funds remitted from abroad or local funds, which can otherwise be remitted abroad to the account holder, can be credited to NRE Accounts. Local funds, which do not qualify for remittance outside India, are required to be credited to NRO accounts.

Can money be transferred from NRE account to NRO account or vice versa?

Funds can be freely transferred from NRE account to NRO account. No funds can be transferred from NRO account to NRE account.

Can money transferred from NRE account to NRO account be transferred back to NRE account?

Money once credited into NRO account cannot be transferred back to NRE account. Amount once transferred to NRO account will become non-repatriable.

Can I have multiple NRE and NRO accounts with designated branches of different authorised banks for the purpose of investing in Indian equity markets under the Portfolio Investment Scheme?

No. All investments in Indian equity markets under the Portfolio Investment Scheme must be routed through only one dedicated NRE and NRO account opened with any one of the designated branch of authorised banks. Although you can have multiple NRO and NRE account with different banks/branches but Investments under Portfolio Investment Scheme cannot be made through more than one NRE or NRO account maintained with the designated bank branch.

When a resident becomes non-resident Indian,What happens to his existing bank account in India?

All his bank accounts in India will be redesigned as NRO Accounts.

What is the status of NRO/NRE accounts on the return of the account holder to India?

RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.

What is the permission which an NRI has to obtain to invest under the Portfolio Investment Scheme?

NRIs are allowed to invest in Indian equity markets under the Portfolio Investment Scheme. Under this scheme NRIs/OCBs are permitted to invest in shares/debentures of Indian companies through Stock Exchanges in India. These investments require prior approval of RBI. Designated branch of authorised banks have been now empowered to issue such permissions to NRIs.

How do I get the necessary approvals for Portfolio Investment scheme?

The necessary application is to be submitted to designated branch of authorised bank in one of the prescribed forms, i.e. NRI/RPI. Do NRIs need to have separate approvals for investment through NRE and NRO account? Two separate approvals will be granted for investment through NRE and NRO account. Application for investment on repatriation and non-repatriation basis is made in form no. RPI and NRI respectively.

What is meant by investment through direct subscription route?

As per the regulations NRIs are allowed to invest up to a certain percentage of the total paid up capital of the company by directly subscribing to the equity/convertible debentures of the company either though a public offering made by the company or through private placements on one to one basis. Regulations provide for different ceilings on such investments based on the industry to which the company belongs and also the nature of investments (repatriation / non-repatriation basis).

Do investments made though subscription to Initial Public Offerings (IPOs) or Private placements also come under the preview of Portfolio Investment Scheme?

No. Investments made by NRIs though subscription to Initial Public Offerings (IPOs) or Private placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBI's regulations with regard to Foreign Direct Investments.

Do NRIs need any permission of RBI to subscribe to Initial Public Offerings (IPOs) or Private placements of equity shares/convertible debentures of existing or new companies?

No. NRIs do not require any permission to invest though Initial Public Offerings (IPOs) or Private placements. In such cases, the Issuing company should comply with all necessary regulations for issuing securities to a person resident outside India. Do NRIs need any approval from Reserve Bank of India for selling of the securities acquired through IPOs/Private Placement? No. NRIs can sell such shares/debentures on the Exchange without any approval. However, while seeking the credit of sale proceeds to NRE/NRO account, the bank should be provided with the details regarding date of allotment and cost of acquisition to calculate the taxes, if any.

Do NRIs need to route the sale of securities acquired through IPO/Private Placement through the designated bank branch for Portfolio Investment Scheme, if any?

No. The shares/convertible debentures acquired under IPO cannot be routed through designated bank branch, as this is not covered by Portfolio Investment Scheme.For further details please refer to the FAQ on Non PINS elow.

What are the schemes available to NRIs for direct investments in India with repatriation benefits?

NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24% scheme/40% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by public sector undertakings, Non-resident investors are not required to apply for permission to invest but the company concerned will have to obtain permission from Reserve Bank.

Will repatriation of the original investment and/or dividend income be freely permitted?

Yes. Repatriation of original investment will be permitted after a lock-in period of three years from the date of issue of the equity shares/convertible debentures. In addition, OCBs will be permitted to repatriate net profit (upto 16 per cent) arising from the sale of such investment after the lick-in period of three year. Annual dividend/interest on equity shares/debentures can, however, be freely remitted subject to payment of tax.

Can NRIs invest in non-convertible debentures on repatriation basis?

Yes. Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD.

What is the procedure to be followed for making investment in the schemes of domestic Mutual Funds or public sector bonds with repatriation benefits?

The concerned Fund/Public Sector Undertaking should obtain necessary permission from Reserve Bank for issue of units/bonds to NRIs. Applications for the purpose are required to be made to the Central Office of Reserve Bank in form ISD(R).

Do NRIs need to route the sale of securities acquired through IPO/Private Placement through the designated bank branch for Portfolio Investment Scheme, if any?

No. The shares/convertible debentures acquired under IPO cannot be routed through designated bank branch, as this is not covered by Portfolio Investment Scheme.For further details please refer to the FAQ on Non PINS elow.

Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?

Yes. Reserve Bank has granted general permission to NRIs to acquire shares of PSEs on their bids being successful provided the holding of a single NRI investor does not exceed one per cent of the paid up capital of the PSE concerned , the purchase consideration /bid money is paid by way of remittance from abroad or by debit to his NRE/FCNR accounts.

What is the procedure for issue of rights entitlement to NRIs?

The concerned company should approach Reserve Bank for issue of rights entitlement to NRIs in the prescribed form if on repatriation basis. However, rights entitlement on non-repatriation basis would be covered by the general permission

Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?

If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad. Interest earned during the financial year 1994- 95 and onwards can, however, be remitted to the extent permitted by Reserve Bank.

Can NRIs obtain loans abroad against the collateral of share/debentures of Indian companies?

Yes. Authorised 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.

Is permission of Reserve Bank required for making investments in new issues of Indian companies on non- repatriation basis?

No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights/bonus issue provided the investee company is not engaged in agricultural /plantation activity or real estate business(excluding real estate development i.e. development of property and construction of houses). or chit fund or is not a Nidhi company.

Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?

No. However, the firms/companies concerned are required to file declarations with Reserve Bank in form DIN giving particulars of the investments made. within ninety days from the date of the investment.

Can NRI individuals make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institution on non/repatriation basis?

Yes.

Can Overseas Corporate Bodies make similar investments in mutual funds on non-repatriation basis?

OCBs can make such investments only in domestic public/ private sector Mutual Funds. They can also make investments in Money Market Mutual Funds.

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 purchase existing shares/debentures of Indian companies by private arrangement?Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?

No. Reserve Bank has granted general permission to companies in India to enter the overseas addresses of the shareholders in their books in such cases provided the companies obtain undertakings from the holders that they will not seek repatriation of any income or sale proceeds of the security.

Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?

Yes. Income/interest accruing during on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation. The entire income earned during the financial year 1996 - 1997 onwards will be eligible for repatriation. Note : The investment/principal amount of deposits made/held on non-repatriation basis will, however, not be allowed to be repatriated abroad.

What is the procedure to be followed for seeking repatriation in such cases?

NRIs should designate a branch of an authorised dealer through whom the remittance of income is to be made and make an application in form RCI to the designated branch giving details of incomes earned during the previous financial year alongwith a Chartered Accountant's Certificate. The designated branch will allow the remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant.

Is there any limit for purchase of shares/convertible debentures by NRIs under the Portfolio Investment Scheme?

Yes. 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 to 30% if the company concerned passes a special resolution to that effect in its general body meeting. Shares/convertible debentures acquired through IPO/Private Placement are excluded for the purpose of above limits.

Who monitors these ceilings on the holdings by NRIs/OCBs? What is RBI's Restrict List/Watch List?

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 happens if an NRI purchases a stock in excess of the prescribed limit?

An NRI will have to immediately off load such portion of the holding, which is in excess of the prescribed limit.

Taxation of Capital Gains and TDS

What are the tax obligations applicable to NRIs?

Income on investments (capital gains) forming part of sales proceeds are subject to Capital Gains tax. The rate of tax depends upon the period of holding. Currently the tax rate applicable for short-term capital gains and long-term capital gains is 31.5% and 10.5% respectively. These tax rates are inclusive of 5% surcharge.

What is meant by 'long term capital gain' and 'short term capital gain'?

Capital assets can be either short-term or long term and so be the capital gains arising therefrom. Short term capital gain: Any capital gain arising out of sell of shares/debentures held for a period not more than 12 months from the date of its acquisition shall be a short term capital gain.

Long term capital gain: Any capital gain arising out of sell of shares/debentures held for more than 12 months from the date of its acquisition shall be a long term capital gain.

The period of holding is defined as the period from the date of purchase to the date of sale. For example if the sale transaction date is 15-06-2000, all those purchases, which are affected up to 15-06-1999, are eligible for long term capital gain tax. Purchase made on 16-06-1999 and thereafter will be subjected to short term capital gain tax.

How is amount of capital gain determined?

Capital gain is the calculated based on the difference between the net sale consideration (sell price less brokerage) and the cost of acquisition (purchase price plus brokerage) of the concerned holding. Value of holding is calculated on FIFO (First In First Out) basis.

What is 'Double Taxation Avoidance Treaty'?

India has entered into Double Taxation Avoidance Treaties with certain countries under which NRIs who are residing in any of these countries, are liable to pay income tax at the rate applicable in India or in the country where they are residing, which ever is lower.

How can NRIs take benefit of 'Double Tax Avoidance Treaty'?

To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to the designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated bank.

If my income is covered under the provisions of 'Double Taxation Avoidance Treaty' and thereby attracts tax at confessional rate or NIL rate, Would you still deduct TDS on sale transaction?

Once the designated bank has recognised your account under 'Double Taxation Avoidance Treaty', TDS would also be deducted as per the applicable concessional/NIL rate as the case may be.

What is "Tax Deduction at Source (TDS)" on capital gains arising out of sale of holdings by NRIs?

As per Indian tax laws, all the capital gains arising out of sale transactions are subject to tax. In the case of NRIs, the capital gain arising out of sale transaction is subject to deduction of tax at source (TDS) i.e. at the time of crediting the sale proceeds to the respective NRE/NRO account by the concerned bank branch. Accordingly, the concerned bank shall determine the tax liability and tax will be deducted at source. The concerned bank, which has deducted tax at source, shall issue a certificate in this regard.

Is TDS deductible if the sale proceeds are credited to NRO Bank account?

No TDS is deductible if the sale proceeds are credited to NRO Bank account.

Can I square up my transaction in the same settlement?

As per the Regulations, NRI investors should take delivery of shares purchased and give delivery of shares sold which implies that for sell transaction you have to give delivery irrespective of the fact that the same shares have been bought by you in the same settlement cycle. For buy transaction, the stock would be credited to your demat account independently.

As long as your sell transaction is backed by actual holdings in your demat account and the buy transaction is validated against the trading limits available, you can do two independent buy and sell transactions in the same stock in the same settlement cycle.

Can loss from one transaction be set off against gain from another transaction while calculating TDS?

No. As per the terms of portfolio investment scheme, setting off of losses against gains in not permitted. Bank will calculate TDS, wherever applicable, on every sale transaction independently.

I am holding 100 shares of ABC. 75 shares have been allotted in IPO and remaining 25 shares have been purchased from secondary market. Can I sell entire 100 shares by placing one order for 100 shares?

No. You must place two orders for 75 shares and 25 shares. 75 shares acquired through IPO would be sold from your Non PINS account and 25 shares purchased through the secondary market would be sold from your PINS account.

Equity is the backbone of capital markets and for investors it offers best returns. No doubt, it is risky instrument but more the risk more the return. At Bezel Stock Brokers you get services of an efficient team of experienced dealers which is the key to success for equity trading. You also get valuable recommendations from our research team to assist you recognize the investment opportunities in the equity markets.

We make trading activity easy for you by just opening a Trading A/C .We have alternative means of trade like Phone/Fax or Internet. We would also provide trading through the ODIN Platform which offers facility of trading in one single screen in NSE, BSE & commodities on real time. You get Order confirmation, Contracts and Bills through E-mail on a daily basis and the same will be available on our website.

Investment is either an increase in human capital or an increase in the stock of capital goods. Investments are assets which pay you back on a periodic basis. Where as speculation means the ownership of an asset with the intent to profit from expected changes in supply or demand. There’s a huge string attached to speculation. We promote delivery based share trading.

For last few years commodities trading has drawn attention of a very large section of traders. Their participation has been increasing in geometric proportion. The volumes in commodity exchanges are rising daily and touching new highs. In the fast paced business of commodities trading, it is necessary to find someone who wants to take the time to help you understand the potential profit opportunities as well as the risks involved in today's markets. Bezel Commodities is a member of (MCX) & (NCDEX) which is an independent and de-mutualised commodity exchange has permanent recognition from Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country.

Investment is either an increase in human capital or an increase in the stock of capital goods. Investments are assets which pay you back on a perioBezel Commodities is a full service commodity futures broker, discount commodities broker, online trading futures and brokerage firm. Our business strategy is that an educated trader should make better trades. Bezel Commodities is a client friendly commodity future firm which is dedicated to providing the best service available in the industry today and to provide its clients with the tools that can assist them in becoming more successful in their commodity trading. You can conveniently have access to your contract bills on our website.

Investment is either an increase in human capital or an increase in the stock of capital goods. Investments are assets which pay you back on a periodic basis. Where as speculation means the ownership of an asset with the intent to profit from expected changes in supply or demand. There’s a huge string attached to speculation. We promote delivery based share trading.

Bezel Group is one of the Pioneers of E-Broking in India. Bezel launched its Web Portal www.bezelgroup.in to enable both Resident Indians and Non Resident Indians (NRIs) do Online Trading in Equity, Derivative, Commodities and Currency. Our unique online customer care portal to provide personalized customer care service ensures that Bezel is the best E-Broker in India.

E-Broking Account with Bezel empowers the client to trade/invest online in:

  • EQUITY
  • DERIVATIVE
  • CURRENCY
  • MUTUAL FUND
  • IPO

The Currency market is the largest and most liquid financial market in the world. It is the arena in which a nation''s currency is exchanged for that of another at a mutually agreed rate. It was created in the 1970''s when international trade transitioned from fixed to floating exchange rates. Traditionally, the currency market has been the preserve of banks and larger financial institutions.

However with advances in technology, and the global nature of the market, it is now possible for traders of all levels of experience to take part in online currency trading. It offers traders huge opportunities to benefit from fluctuations in the currency markets and eliminate underline foreign currency fluctuation risk arising gue to resion such as commodity trading, international trading, frequent overseas travelling, close correlations with equity indexes and international investments.

Average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007. Some firms specializing on foreign exchange market had put the average daily turnover in excess of US $4 trillion. Currency trading volume in India have now reached to 1 trillion* INR on a daily basis

  • USD - INR AGAINST US DOLLAR
  • EUR - INR AGAINST EUROPIAN CURRENCY
  • GBP - INR AGAINST GREAT BRITAIN POUND
  • YEN - INR AGAINST JAPANESE YEN

What are Currency Derivatives?

FUTURES: An agreement between two parties to buy or sell a standard quantity of currency at a certain time in future at predetermined price on the floor of an organized futures exchange. Future Contracts are special types of forward/OTC contracts. This mens that futures are standardized exchange traded contracts.

OPTIONS: An option is a contract between a buyer and a seller that gives the buyer the option the right, but not the obligation to buy or sell a specified asset (underlying) on or before the Options expiration time, at an agreed price (the strike price).

Derivatives, worldwide are recognized as Risk Management products. The term derivatives indicates that the product/ contract derives its value from some underlying i.e. it does not have any independent value. This underlying can be securities, commodities, bullion, currency, livestock, or anything else. In other words, derivatives means forward, futures, option or any other hybrid product/contract of predetermined fixed duration, linked for the purpose of contract fulfillment to the value of a specified asset or an index.

Derivatives reduce market risk and increase the willingness to trade in stock market. Trading in derivatives involves lower cost of trading and it also leads to increased volume in the stock market. Investors would be always looking for some hedging tool to protect themselves from the high volatility. This is possible with the use of Options and Futures Contracts traded in the Derivatives Market.

Future contracts are the organized/standardized contracts in terms of quantity, quality, delivery time, and place from settlement on any date in future. These contracts are traded on the exchanges. In futures market, clearing corporation /house becomes the counter-party to all the trades or provides the unconditional guarantee for their settlement i. e. assumes the financial integrity of the entire system. Option is the right given by the option seller to the option buyer to buy or sell a specific asset at a specific price on or before a specific date. Index derivatives are derivative products for which underlying in the cash market is index. Index derivatives are used to hedge against the market risk.

Hedging is the process of reducing exposure to risk. Hedging comprises any act that reduces the price risk of a certain position in the cash market. Futures contracts continue to be an important means of hedging as they enable the market participants to alter the risks they face from unexpected adverse price changes.

A Mutual Fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don't have to figure out which stocks or bonds to buy). If you would like to know the history of mutual funds, By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification.

Advantages of A Mutual Fund

PROFESSIONAL MANAGEMENT -The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. DIVERSIFICATION - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money.

ECONOMIES OF SCALE -Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay..

LIQUIDITY -Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.

SIMPLICITY -Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as Rs 1000 can be invested on a monthly basis.

IPO stands for Initial Public Offering. It is the first sale of a company's shares to the public and a way for a company to float on a stock exchange. Companies float on a market to raise money, often to meet a specific business objective or fund further expansion. Floating a company raises its profile and allows the shares to become tradable through the secondary market (stock exchange).

The company will issue an Offer Document and investors should read this carefully to weigh up the risks and rewards before deciding whether to invest. Traditionally IPO opportunities have been restricted to institutional investors (the Banks and Investment Houses)

Coming Soon.....

  • Don't panic The market is volatile. Accept that. It will keep fluctuating. Don't panic. If the prices of your shares have plummeted, there is no reason to want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed. Ditto with your mutual fund. Does the Net Asset Value deep dipping and then rising slightly? Hold on. Don't sell unnecessarily.
  • Don't make huge investments When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages. Keep some money aside and zero in on a few companies you believe in. When the market dips --buy them. When the market dips again, , you can pick up some more. Keep buying the shares periodically. Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. But the fact remains, no one can time the market. It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares over a period of time; this way, you will average your costs. Pick a few stocks and invest in them gradually. Ditto with a mutual fund. Invest small amounts gradually via a Systematic Investment Plan. Here, you invest a fixed amount every month into your fund and you get units allocated to you.
  • Don't chase performance A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically. Ditto with a mutual fund. Every fund will show a great return in the current bull run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice.
  • Don't ignore expenses When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits specially if you are selling for small gains (where the price of stock has risen by a few rupees). With mutual funds, if you have already paid an entry load, then you most probably won't have to pay an exit load. Entry loads and exit loads are fees levied on the Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them. If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil).
  • Get rid of the junk Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilise the money elsewhere if you no longer believe in them. Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment.
  • Diversify Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors. Also, when you look at your total equity investments, don't just look at stocks. Look at equity funds as well. To balance your equity investments, put a portion of your investments in fixed income instruments like the Public Provident Fund, post office deposits, bonds and National Savings Certificates. If you have none of these or very little investment in these, consider a balanced fund or a debt fund.
  • Believe in your investment Don't invest in shares based on a tip, no matter who gives it to you. Tread cautiously. Invest in stocks you truly believe in. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it. Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it.
  • Stick to your strategy If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market has been delivering great returns. Stick to your allocation.
  • Read, understand, and be updated about the guidelines and circulars of the Exchange and of the Forward Markets Commission.
  • Refer and understand all the provisions of Forward Contracts (Regulations) Act, 1952 dealing with futures trading in commodities and amendments thereof from time to time, including provisions and rates relating to the sales tax, value added tax, APMC Tax, Mandi Cess and Tax, octroi, excise duty, stamp duty, etc., applicable on the underlying commodity of any contracts offered for trading by NCDEX.
  • Read the commodity contracts circulars issued by NCDEX and carefully note the contract specifications of the commodity in which you wish to trade. The contract specifications are subject to change from time to time.
  • Before entering into buy and sell transactions please be aware of all the factors that go into the mechanism of pricing, trading and clearing.
  • Read the product note of the commodity in which you wish to deal to understand the commodity and parameters that impact on the trading and settlement of the commodity.
  • Understand the Delivery & Settlement Procedures of the commodity that you wish to deal in the futures market.
  • Study historical and seasonal price movements of the commodity that you wish to deal in the futures market.
  • Keep track of Governments’ Policy announcements from time to time of the commodity that you wish to deal in the futures market.
  • Apply your own prudent judgment for investments in commodity futures and take informed decisions.
  • Comply with Taxation and other Central Government/State Governments regulatory issues.
  • Go through all Rules, Bye Laws, Regulations Circulars, and directives issued by NCDEX.
  • Since the investment is based on various types of margins, be aware of the risks associated with your positions in the market and margin calls made from time to time.
  • Collect/Pay Mark-to-Market margins on your futures positions on a daily basis from/to your member.
  • Be aware of your risk taking ability and fix stop-loss limits. Liquidate your positions at such levels to reduce further losses, if any.
  • In case of any doubt/problems, contact Exchange’s Help Desk or email at askus@ncdex.com
  • Trade only through registered members of the Exchange. Check with the Exchange to see whether the member is registered with the Exchange.
  • Insist on filling up a standard ‘Know Your Client (KYC)’ form and on getting a Client-Id.
  • Insist on reading and signing standard ‘Risk Disclosure Agreement'.
  • Cross check the genuineness of trades carried out at NCDEX through the trade verification facility available on NCDEX website. The trades can be verified online at www.ncdex.com/marketdata/hist trade verification.aspx where trade information is available up to 3 working days from the trade date.
  • While trading through an authorized person ensure that a duly signed contract note has been issued by the member or its authorized persons for every executed trade, highlighting the details of the trade along with your unique Client-Id.
  • Obtain receipt for collaterals deposited with the member towards margins.
  • Go through the Rules, Bye-laws, Regulations, Circulars, directives, notifications of the Exchange as well as of the Regulators, Governments and other authorities and details of Client-Trading Member Agreement to know your rights and duties vis-à-vis those of the member.
  • State clearly who will be placing orders on your behalf. Give precise and clear instructions while placing, modifying or canceling orders.
  • Ask all relevant questions and clear your doubts with your member before transacting.
  • Ensure that the Contract Note contains all the relevant information such as Member Registration Number, Order No., Order Date, Order time, Trade No., Trade rate, Quantity, Arbitration Clause.
  • Insist on receiving the bills for every settlement.
  • Insist on periodical statements of your ledger account.
  • Scrutinize minutely both the transaction as well as the holding statements that you receive from your Depository Participant.
  • Keep Delivery Instruction Slips (DIS) book issued by DPs in safe possession.
  • Ensure that the DIS numbers are pre-printed and your account number (Client-Id) is mentioned in the DIS book.
  • Freeze your Demat account in case of your absence for longer duration or in case of not using the account frequently.
  • Pay required margins in time and only by Cheque and ask for receipt thereof from the member. Deliver the commodities in case of sale or pay the money in case of purchase within the time prescribed
  • Do not fall prey to market rumours.
  • Do not go by any explicit/implicit promise made by analysts/advisors/experts/market intermediary until convinced.
  • Do not deal based on Bull/Bear run of commodity markets sentiments.
  • Do not go by the reports/predictions made in various print and electronic forms without verification.
  • Do not trade on any product without knowing the risk and rewards associated with it.
  • Do not start trading before reading and understanding the Risk Disclosure Agreement and entering into the prescribed agreement with the Member.
  • Do not deal with unregistered intermediaries even if their charges are lower and/or margins are lesser.
  • Do not undertake off-market transactions in commodities with a member of the Exchange, unless such member records in the agreement for sale, note or memorandum that he is selling/purchasing the goods as the case may be, for his own account and obtains a consent from you in respect thereof as required u/s 15 (4) of the Forward Contracts (Regulation) Act, 1952.
  • Do not neglect to set out in writing, orders for higher value given over phone.
  • Do not accept unsigned/duplicate contract note/confirmation memo.
  • Do not accept contract note/confirmation memo signed by any unauthorized person.
  • Do not delay payment/deliveries of commodities to member.
  • Do not get carried away by luring advertisements, rumours, hot tips, promise of unrealistic returns, etc.
  • Do not forget to take note of risks involved in the investments.
  • Do not sign blank Delivery Instruction Slips (DIS) while furnishing securities deposits and/or keep them with Depository Participants (DP) or broker to save time.
  • Trade only through registered Members In the interest of your own safety, it is important to trade only through registered members since the commodity exchanges have jurisdiction over them in terms of their own rules, bye laws, etc and can therefore, play a role in resolving investor grievances or even take action against the members if necessary. The exchange has no jurisdiction over entities who are not their members.
  • Familiarize yourself with FMC guidelines and rules, regulations, byelaws, circulars, etc. of MCX Familiarize yourselves with FMC guidelines and rules, bye laws, etc. of the exchange to have an adequate understanding of the legal framework under which the commodity futures are traded. This would be useful in terms of giving you a better understanding of the procedures relating to trading, clearing and settlement, your rights as investor, etc.
  • Take an informed decision Be sure that you are taking an informed decision. Read the product note available on the exchange website to understand the commodity specifications. Keep track of Government policy announcements such as the Minimum Support Price, Export/Import policy, etc, which have a significant impact on the prices of commodities. Also keep track of exchange announcements made through circulars regarding the methodology of computation of due date rates, launch of new contracts, etc. Understand the commodity thoroughly. Study historical and seasonal price movements of the commodity.
  • Understand the Delivery and Settlement Procedure. Thoroughly understand the delivery and settlement procedure which differs from commodity to commodity in terms of quality implications, place of delivery, options, penalties, margins, etc. This information is given in the product note available on the website. Understanding of delivery would help in avoiding rejection of your delivery.
  • Understand and Comply with Taxation and other relevant laws. Before initiating a trade, ascertain whether the price of the commodity is inclusive or exclusive of various taxes applicable at the delivery centre at the given point of time. Be aware of implications of various taxes such as Sales tax, Service tax, VAT, etc. Make sure that you understand and comply with accounting standards for derivatives.
  • Pay all applicable margins. Collect / pay mark-to-market margins on a daily basis. Pay all the applicable margins on your futures position to the member. Also, collect or pay (as the case may be) mark-to-market margins from/to the member which are required to be settled on a daily basis.
  • Insist on documentation with the member such as Member Client agreement, and Know Your Client. Enter into an agreement with the member since that would ensure that you have recourse to all the investor protection mechanisms of the exchange. Co-operate with the member in filling up the 'Know Your Client form. This form has been devised to ensure that a member knows all his clients properly, and you are thus protected from the risk which may arise out of a member having unsuitable clients. Only clients with pan numbers are allowed to trade on commodity exchanges.
  • Read and understand the Risk Disclosure Document. The Risk Disclosure Document provides valuable insight into the risk associated with futures trading. It is therefore, in your interest to carefully read and understand this document.
  • Insist on signed Contract Notes containing all relevant information such as Member Registration Number, Order Details, Trade Rate, Quantity, etc. Insist on signed contract notes with all the relevant information for all your trades. The contract note is a proof of the transaction between you and the member and is absolutely essential for you to be able to approach the exchange for redressal of your complaints, availing arbitration mechanisms, etc.
  • Obtain receipt for collateral deposited with the Members. Take a receipt from your members for collateral deposited with them.
  • Insist on a periodical statement of your ledger account. Monitor your account with the member properly by insisting on a periodical statement of your ledger account.
  • Freeze your demat account in case of a long absence. Freeze your demat account if it is not being used frequently for any reason, so that it is not misused.
  • Dont get misled by rumors, luring advertisements and promises, and bull/bear run of market sentiments.
  • Take an informed decision. Do not get misled by rumors, luring advertisements, etc. nor get swayed by bull/bear run of market sentiments.
  • Don't trade any contract without knowing the associated risks.
  • You should be fully aware of risk associated with your position in the market arising out of variety of factors such as Government policy, volatility, macro-economic factors, international price movements, etc.
  • Don't undertake off-market transactions.
  • Do not undertake off-market transactions which are not only illegal but also unsafe since the same may not fall under the jurisdiction of the exchange.
  • Don't accept/pay cash.
  • Do not pay cash to the members nor take any cash as payments. It is in your interest to deal through cheques, demand drafts, etc. since these instruments leave a proper audit trail.
  • Don't sign blank Delivery Instruction Slips.
  • It is not advisable to sign blank delivery instruction slips, since the same can be misused.
  • Don't delay payment/deliveries to Members.
  • Do not delay payment or deliveries to members to avoid losses arising out of penalties, closing of positions, etc.
Client Registration Documents (Rights & Obligations, Risk Disclosure Document, Do's & Don't's) in Vernacular Language :
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