8as|cs Cn 1he stock Market

Worklng of SLock MarkeL

lndlan SLock MarkeL Cvervlew

8olllng SeLLlemenLs

ConcepL of 8uylng LlmlLs

WhaL ls uemaLerlallzLlon ?
Colng ShorL
ConcepL of Margln 1radlng
1ypes of orders
ClrculLs lllLers 1radlng bands
lndlas unlque 8adla
SecurlLles Lendlng
lnslder 1radlng





Worklng of a sLock markeL

1o learn more abouL how you can earn on Lhe sLock markeL one has Lo undersLand how lL works A
person deslrous of buylng/selllng shares ln Lhe markeL has Lo flrsL place hls order wlLh a broker When
Lhe buy order of Lhe shares ls communlcaLed Lo Lhe broker he rouLes Lhe order Lhrough hls sysLem Lo
Lhe exchange 1he order sLays ln Lhe queue exchanges sysLems and geLs execuLed when Lhe order logs
on Lo Lhe sysLem wlLhln buy llmlL LhaL has been speclfled 1he shares purchased wlll be senL Lo Lhe
purchaser by Lhe broker elLher ln physlcal or demaL formaL

lndlan SLock MarkeL Cvervlew

1he 8ombay SLock Lxchange (8SL) and Lhe naLlonal SLock Lxchange of lndla LLd (nSL) are Lhe Lwo
prlmary exchanges ln lndla ln addlLlon Lhere are 22 8eglonal SLock Lxchanges Powever Lhe 8SL and
nSL have esLabllshed Lhemselves as Lhe Lwo leadlng exchanges and accounL for abouL 80 per cenL of Lhe
equlLy volume Lraded ln lndla 1he nSL and 8SL are equal ln slze ln Lerms of dally Lraded volume 1he
average dally Lurnover aL Lhe exchanges has lncreased from 8s 831 crore ln 199798 Lo 8s 1284 crore ln
199899 and furLher Lo 8s 2273 crore ln 19992000 (Aprll AugusL 1999) nSL has around 1300 shares
llsLed wlLh a LoLal markeL caplLallzaLlon of around 8s 921300 crore (8s 9213bln) 1he 8SL has over
6000 sLocks llsLed and has a markeL caplLallzaLlon of around 8s 968000 crore (8s 9680bln) MosL key
sLocks are Lraded on boLh Lhe exchanges and hence Lhe lnvesLor could buy Lhem on elLher exchange
8oLh exchanges have a dlfferenL seLLlemenL cycle whlch allows lnvesLors Lo shlfL Lhelr poslLlons on Lhe
bourses 1he prlmary lndex of 8SL ls 8SL Sensex comprlslng 30 sLocks nSL has Lhe S nSL 30 lndex
(nlfLy) whlch conslsLs of flfLy sLocks 1he 8SL Sensex ls Lhe older and more wldely followed lndex 8oLh
Lhese lndlces are calculaLed on Lhe basls of markeL caplLallzaLlon and conLaln Lhe heavlly Lraded shares
from key secLors 1he markeLs are closed on SaLurdays and Sundays 8oLh Lhe exchanges have swlLched
over from Lhe open ouLcry Lradlng sysLem Lo a fully auLomaLed compuLerlzed mode of Lradlng known as
8CL1 (8SL Cn Llne 1radlng) and nLA1 (naLlonal Lxchange AuLomaLed 1radlng) SysLem lL faclllLaLes more
efflclenL processlng auLomaLlc order maLchlng fasLer execuLlon of Lrades and Lransparency 1he scrlps
Lraded on Lhe 8SL have been classlfled lnLo A 81 82 C l and Z groups 1he A group shares
represenL Lhose whlch are ln Lhe carry forward sysLem (8adla) 1he l group represenLs Lhe debL
markeL (flxed lncome securlLles) segmenL 1he Z group scrlps are Lhe blackllsLed companles 1he C
group covers Lhe odd loL securlLles ln A 81 82 groups and 8lghLs renunclaLlons 1he key regulaLor
governlng SLock Lxchanges 8rokers ueposlLorles ueposlLory parLlclpanLs MuLual lunds llls and oLher
parLlclpanLs ln lndlan secondary and prlmary markeL ls Lhe SecurlLles and Lxchange 8oard of lndla (SL8l)
LLd

8olllng SeLLlemenL Cycle

ln a rolllng seLLlemenL each Lradlng day ls consldered as a Lradlng perlod and Lrades execuLed durlng Lhe
day are seLLled based on Lhe neL obllgaLlons for Lhe day AL nSL and 8SL Lrades ln rolllng seLLlemenL are
seLLled on a 1+2 basls le on Lhe 2nd worklng day lor arrlvlng aL Lhe seLLlemenL day all lnLervenlng
holldays whlch lnclude bank holldays nSL/8SL holldays SaLurdays and Sundays are excluded 1yplcally
Lrades Laklng place on Monday are seLLled on Wednesday 1uesdays Lrades seLLled on 1hursday and so
on

ConcepL Cf 8uylng LlmlL

Suppose you have sold some shares on nSL and are Lrylng Lo flgure ouL LhaL lf you can use Lhe money Lo
buy shares on nSL ln a dlfferenL seLLlemenL cycle or say on 8SL 1o slmpllfy Lhlngs for lClCl ulrecL
cusLomers we have lnLroduced Lhe concepL of 8uylng LlmlL (8L) 8uylng LlmlL slmply Lells Lhe cusLomer
whaL ls hls llmlL for a glven seLLlemenL for Lhe deslred exchange Assume LhaL you have enrolled for a
lClCl ulrecL accounL whlch requlres 100 of Lhe money requlred Lo fund Lhe purchase be avallable
Suppose you have 8s 100000 ln your 8ank A/C and you seL aslde 8s 30000 for whlch you would llke Lo
make some purchase ?our 8uylng LlmlL ls 8s 30000 Assume LhaL you sell shares worLh 8s 100000 on
Lhe nSL on Monday 1he 8L Lherefore for Lhe nSL aL LhaL polnL of Llme goes upLo 8s 130000 1hls
means you can buy shares upLo 8s 130000 on nSL or 8SL lf you buy shares worLh 8s 73000 on
1uesday on nSL your 8L wlll naLurally reduce Lo 8s 73000 Pence your 8L ls slmply Lhe amounL seL aslde
by you from your bank accounL and Lhe amounL reallzed from Lhe sale of any shares you have made less
any purchases you have made


?our 8L of 8s 30000 whlch ls Lhe amounL seL aslde by you from your 8ank accounL for purchase ls
avallable for 8SL and nSL As you have made Lhe sale of shares on nSL for 8s100000 Lhe 8L for nSL
8SL rlses Lo 130000 1he amounL from sale of shares ln nSL wlll also be avallable for purchase on 8SL
lClCl ulrecL makes lL very easy for lLs cusLomers Lo know Lhelr 8L on Lhe cllck of a mouse ?ou [usL have
Lo speclfy Lhe Lxchange and seLLlemenL cycle and on a cllck of your mouse Lhe 8L wlll be known Lo you



WhaL ls uemaLerlallzaLlon?

uemaLerlallzaLlon ln shorL called as demaL ls Lhe process by whlch an lnvesLor can geL physlcal
cerLlflcaLes converLed lnLo elecLronlc form malnLalned ln an accounL wlLh Lhe ueposlLory arLlclpanL
1he lnvesLors can demaLerlallze only Lhose share cerLlflcaLes LhaL are already reglsLered ln Lhelr name
and belong Lo Lhe llsL of securlLles admlLLed for demaLerlallzaLlon aL Lhe deposlLorles
ueposlLory 1he organlzaLlon responslble Lo malnLaln lnvesLors securlLles ln Lhe elecLronlc form ls called
Lhe deposlLory ln oLher words a deposlLory can Lherefore be concelved of as a 8ank for securlLles ln
lndla Lhere are Lwo such organlzaLlons vlz nSuL and CuSL 1he deposlLory concepL ls slmllar Lo Lhe
8anklng sysLem wlLh Lhe excepLlon LhaL banks handle funds whereas a deposlLory handles securlLles of
Lhe lnvesLors An lnvesLor wlshlng Lo uLlllze Lhe servlces offered by a deposlLory has Lo open an accounL
wlLh Lhe deposlLory Lhrough a ueposlLory arLlclpanL
ueposlLory arLlclpanL 1he markeL lnLermedlary Lhrough whom Lhe deposlLory servlces can be avalled
by Lhe lnvesLors ls called a ueposlLory arLlclpanL (u) As per SL8l regulaLlons u could be
organlzaLlons lnvolved ln Lhe buslness of provldlng flnanclal servlces llke banks brokers cusLodlans and
flnanclal lnsLlLuLlons 1hls sysLem of uslng Lhe exlsLlng dlsLrlbuLlon channel (malnly consLlLuLlng us)
helps Lhe deposlLory Lo reach a wlde cross secLlon of lnvesLors spread across a large geographlcal area aL
a mlnlmum cosL 1he admlsslon of Lhe us lnvolve a deLalled evaluaLlon by Lhe deposlLory of Lhelr
capablllLy Lo meeL wlLh Lhe sLrlcL servlce sLandards and a furLher evaluaLlon and approval from SL8l
8eallzlng Lhe poLenLlal all Lhe cusLodlans ln lndla and a number of banks flnanclal lnsLlLuLlons and ma[or
brokers have already [olned as us Lo provlde servlces ln a number of clLles

AdvanLages of a deposlLory servlces
1radlng ln demaL segmenL compleLely ellmlnaLes Lhe rlsk of bad dellverles ln case of Lransfer of
elecLronlc shares you save 03 ln sLamp duLy Avolds Lhe cosL of courler/ noLarlzaLlon/ Lhe need for
furLher followup wlLh your broker for shares reLurned for company ob[ecLlon no loss of cerLlflcaLes ln
LranslL and saves subsLanLlal expenses lnvolved ln obLalnlng dupllcaLe cerLlflcaLes when Lhe orlglnal
share cerLlflcaLes become muLllaLed or mlsplaced lncreaslng llquldlLy of securlLles due Lo lmmedlaLe
Lransfer reglsLraLlon 8educLlon ln brokerage for Lradlng ln demaLerlallzed shares 8ecelve bonuses and
rlghLs lnLo Lhe deposlLory accounL as a dlrecL credlL Lhus ellmlnaLlng rlsk of loss ln LranslL Lower lnLeresL
charge for loans Laken agalnsL demaL shares as compared Lo Lhe lnLeresL for loan agalnsL physlcal shares
88l has lncreased Lhe llmlL of loans avalled agalnsL demaLerlallzed securlLles as collaLeral Lo 8s 20 lakh
per borrower as agalnsL 8s 10 lakh per borrower ln case of loans agalnsL physlcal securlLles 88l has also
reduced Lhe mlnlmum margln Lo 23 for loans agalnsL demaLerlallzed securlLles as agalnsL 30 for
loans agalnsL physlcal securlLles llll up Lhe accounL openlng form whlch ls avallable wlLh Lhe u Slgn
Lhe ucllenL agreemenL whlch deflnes Lhe rlghLs and duLles of Lhe u and Lhe person wlshlng Lo open
Lhe accounL 8ecelve your cllenL accounL number (cllenL lu) 1hls cllenL ld along wlLh your u ld glves you
a unlque ldenLlflcaLlon ln Lhe deposlLory sysLem llll up a demaLerlallzaLlon requesL form whlch ls
avallable wlLh your u SubmlL your share cerLlflcaLes along wlLh Lhe form (wrlLe surrendered for
demaL on Lhe face of Lhe cerLlflcaLe before submlLLlng lL for demaL) 8ecelve credlL for Lhe
demaLerlallzed shares lnLo your accounL wlLhln 13 days

rocedure of openlng a demaL accounL
Cpenlng a deposlLory accounL ls as slmple as openlng a bank accounL ?ou can open a deposlLory
accounL wlLh any u convenlenL Lo you by followlng Lhese sLeps
llll up Lhe accounL openlng form whlch ls avallable wlLh Lhe u Slgn Lhe ucllenL agreemenL whlch
deflnes Lhe rlghLs and duLles of Lhe u and Lhe person wlshlng Lo open Lhe accounL 8ecelve your cllenL
accounL number (cllenL lu) 1hls cllenL ld along wlLh your u ld glves you a unlque ldenLlflcaLlon ln Lhe
deposlLory sysLem
1here ls no resLrlcLlon on Lhe number of deposlLory accounLs you can open Powever lf your exlsLlng
physlcal shares are ln [olnL names be sure Lo open Lhe accounL ln Lhe same order of names before you
submlL your share cerLlflcaLes for demaL

rocedure Lo demaLerlallze your share cerLlflcaLes
llll up a demaLerlallzaLlon requesL form whlch ls avallable wlLh your u SubmlL your share cerLlflcaLes
along wlLh Lhe form (wrlLe surrendered for demaL on Lhe face of Lhe cerLlflcaLe before submlLLlng lL
for demaL) 8ecelve credlL for Lhe demaLerlallzed shares lnLo your accounL wlLhln 13 days
ln case of dlrecLly purchaslng demaLerlallzed shares from Lhe broker lnsLrucL your broker Lo purchase
Lhe demaLerlallzed shares from Lhe sLock exchanges llnked Lo Lhe deposlLorles Cnce Lhe order ls
execuLed you have Lo lnsLrucL your u Lo recelve securlLles from your brokers clearlng accounL ?ou
have Lo ensure LhaL your broker also glves a maLchlng lnsLrucLlon Lo hls u Lo Lransfer Lhe shares
purchased on your behalf lnLo your deposlLory accounL ?ou should also ensure LhaL your broker
Lransfers Lhe shares purchased from hls clearlng accounL Lo your deposlLory accounL before Lhe book
closure/record daLe Lo avall Lhe beneflLs of corporaLe acLlon

SLocks Lraded under demaL
SecurlLles and Lxchange 8oard of lndla (SL8l) has already speclfled for seLLlemenL only ln Lhe
demaLerlallzed form ln for 761 parLlcular scrlpLs lnvesLors lnLeresLed ln Lhese sLocks recelve shares only
ln demaL form wlLhouL any lnsLrucLlon Lo your broker Whlle SL8l has lnsLrucLed Lhe lnsLlLuLlonal
lnvesLors Lo sell 421 scrlpLs only ln Lhe demaL form 1he shares by non lnsLlLuLlonal lnvesLors can be sold
ln boLh physlcal and demaL form As Lhere ls a mlx of boLh form of sLocks lL ls posslble lf you have
purchased a sLock ln Lhls caLegory you may geL dellvery of boLh physlcal and demaL shares

Cpenlng of a demaL accounL Lhrough lClCl ulrecL
Cpenlng an elnvesL accounL wlLh lClCl ulrecL wlll enable you Lo auLomaLlcally open a demaL accounL
wlLh lClCl one of Lhe largesL u ln lndla Lhereby avoldlng Lhe hassles of flndlng an efflclenL u Slnce
Lhe shares Lo be boughL or sold Lhrough lClCl ulrecL wlll be only ln Lhe demaL form lL wlll avold Lhe
hassles of lnsLrucLlng Lhe broker Lo buy shares only ln demaL form Addlng Lo Lhls you wlll noL face
problems llke checklng wheLher your broker has Lransferred Lhe shares from hls clearlng accounL Lo your
demaL accounL

Colng ShorL
lf you do noL have shares and you sell Lhem lL ls known as golng shorL on a sLock Cenerally a Lrader wlll
go shorL lf he expecLs Lhe prlce Lo decllne ln a rolllng seLLlemenL cycle you wlll have Lo cover by end of
Lhe day on whlch you had gone shorL

ConcepL Cf Margln 1radlng

normally Lo buy and sell shares you need Lo have Lhe money Lo pay for your purchase and shares ln
your demaL accounL Lo dellver for your sale Powever as you do noL have Lhe full amounL Lo make good
for your purchases or shares Lo dellver for your sale you have Lo cover (square) your purchase/sale
LransacLlon by a sale/purchase LransacLlon before Lhe close of Lhe seLLlemenL cycle ln case Lhe prlce
durlng Lhe course of Lhe seLLlemenL cycle moves ln your favor (rlsen ln case of purchase done earller and
fallen ln case of a sale done earller) you wlll make a proflL and you recelve Lhe paymenL from Lhe
exchange ln case Lhe prlce movemenL ls adverse you wlll make a loss and you wlll have Lo make Lhe
paymenL Lo Lhe exchange Marglns are Lhus collecLed Lo safeguard agalnsL any adverse prlce movemenL
Marglns are quoLed as a percenLage of Lhe value of Lhe LransacLlon

lmporLanL facLs for n8l cusLomers

8uylng and selllng on margln ln lndla ls qulLe dlfferenL Lhan whaL ls referred Lo ln uS markeLs 1here ls
no borrowlng of money or shares by your broker Lo make sure LhaL Lhe seLLlemenL Lakes place as per SL
schedule ln lndlan conLexL buylng/selllng on margln refers Lo bulldlng a leveraged poslLlon aL Lhe
beglnnlng of Lhe seLLlemenL cycle and squarlng off Lhe Lrade before Lhe seLLlemenL comes Lo end As Lhe
Lrade ls squared off before Lhe seLLlemenL cycle ls over Lhere ls no need Lo borrow money or shares

8uylng Cn Margln Suppose you have 8s 100000 wlLh you ln your 8ank accounL ?ou can use Lhls
amounL Lo buy 10 shares of lnfosys LLd aL 8s 10000 ln Lhe normal course you wlll pay for Lhe shares on
Lhe seLLlemenL day Lo Lhe exchange and recelve 10 shares from Lhe exchange whlch wlll geL credlLed Lo
your demaL accounL AlLernaLlvely you could use Lhls money as margln and suppose Lhe appllcable
margln raLe ls 23 ?ou can now buy upLo 40 shares of lnfosys LLd aL 8s 10000 value 8s 400000 Lhe
margln for whlch aL 23 le 8s 100000 now as you do noL have Lhe money Lo Lake dellvery of 40
shares of lnfosys LLd you have Lo cover (square) your purchase LransacLlon by placlng a sell order by end
of Lhe seLLlemenL cycle now suppose Lhe prlce of lnfosys LLd rlses Lo 8s 11000 before end of Lhe
seLLlemenL cycle ln Lhls case your proflL ls 8s 40000 whlch ls much hlgher Lhan on Lhe 10 shares lf you
had boughL wlLh Lhe lnLenL Lo Lake dellvery 1he rlsk ls LhaL lf Lhe prlce falls durlng Lhe seLLlemenL cycle
you wlll sLlll be forced Lo cover (square) Lhe LransacLlon and Lhe loss would be ad[usLed agalnsL your
margln amounL Selllng Cn Margln ?ou do noL have shares ln your demaL accounL and you wanL Lo sell
as you expecL Lhe prlces of share Lo go down ?ou can sell Lhe shares and glve Lhe margln Lo your broker
aL Lhe appllcable raLe As you do noL have Lhe shares Lo dellver you wlll have Lo cover (square) your sell
LransacLlon by placlng a buy order before Lhe end of Lhe seLLlemenL cycle !usL llke buylng on margln ln
case Lhe prlce moves ln your favor (falls) you wlll make proflL ln case prlce goes up you wlll make loss
and lL wlll be ad[usLed agalnsL Lhe margln amounL

1ypes Cf Crders

1here are varlous Lypes of orders whlch can be placed on Lhe exchanges

LlmlL Crder 1he order refers Lo a buy or sell order wlLh a llmlL prlce Suppose you check Lhe quoLe of
8ellance lndusLrles LLd(8lL) as 8s 231 (Ask) ?ou place a buy order for 8lL wlLh a llmlL prlce of 8s 230
1hls puLs a cap on your purchase prlce ln Lhls case as Lhe currenL prlce ls greaLer Lhan your llmlL prlce
order wlll remaln pendlng and wlll be execuLed as soon as Lhe prlce falls Lo 8s 230 or below ln case Lhe
acLual prlce of 8lL on Lhe exchange was 8s 248 your order wlll be execuLed aL Lhe besL prlce offered on
Lhe exchange say 8s 249 1hus you may geL an execuLlon below your llmlL prlce buL ln no case wlll
exceed Lhe llmlL buy prlce Slmllarly for a llmlL sell order ln no case Lhe execuLlon prlce wlll be below Lhe
llmlL sell prlce MarkeL Crder Cenerally a markeL order ls used by lnvesLors who expecL Lhe prlce of
share Lo move sharply and are yeL keen on buylng and selllng Lhe share regardless of prlce Suppose Lhe
lasL quoLe of 8lL ls 8s 231 and you place a markeL buy order 1he execuLlon wlll be aL Lhe besL offer prlce
on Lhe exchange whlch could be above 8s 231 or below 8s 231 1he rlsk ls LhaL Lhe execuLlon prlce
could be subsLanLlally dlfferenL from Lhe lasL quoLe you saw lease refer Lo lmporLanL lacL for Cnllne
lnvesLors SLop Loss Crder A sLop loss order allows Lhe Lradlng member Lo place an order whlch geLs
acLlvaLed only when Lhe lasL Lraded prlce (L1) of Lhe Share ls reached or crosses a Lhreshold prlce called
as Lhe Lrlgger prlce 1he Lrlgger prlce wlll be as on Lhe prlce mark LhaL you wanL lL Lo be lor example
you have a sold poslLlon ln 8ellance LLd booked aL 8s 343 LaLer ln case Lhe markeL goes agalnsL you le
go up you would noL llke Lo buy Lhe scrlp for more Lhan 8s333 1hen you would puL a SL 8uy order wlLh
a LlmlL rlce of 8s333 ?ou may choose Lo glve a Lrlgger prlce of 8s33130 ln whlch case Lhe order wlll
geL Lrlggered lnLo Lhe markeL when Lhe lasL Lraded prlce hlLs 8s33130 or above 1he execuLlon wlll Lhen
be lmmedlaLe and wlll be aL Lhe besL prlce beLween 33130 and 333 Powever sLock movemenLs can be
so vlolenL aL Llmes 1he prlces can flucLuaLe from Lhe currenL level Lo over and above Lhe SL llmlL prlce
you had quoLed aL one shoL le Lhe L1 can move from 330331and dlrecLly Lo 33330 AL Lhls
momenL your order wlll lmmedlaLely be rouLed Lo Lhe Lxchange because Lhe L1 has crossed Lhe Lrlgger
prlce speclfled by you Powever Lhe Lrade wlll noL be execuLed because of Lhe L1 belng over and above
Lhe SL llmlL prlce LhaL you had speclfled ln such a case you wlll noL be able Lo square your poslLlon
Agaln as Lhe markeL falls say lf Lhe scrlpL falls Lo 333 or below your order wlll be booked on Lhe SL llmlL
prlce LhaL you have speclfled le 8s 333 Lven lf Lhe scrlpL falls from 33330 Lo 332 your buy order wlll
be booked aL 8s 333 only Some seller somewhere wlll book a proflL ln Lhls case form your buy order
execuLlon Pence an lnvesLor wlll have Lo undersLand LhaL one of Lhe foremosL parameLers ln speclfylng
on a sLop loss and a Lrlgger prlce wlll have Lo be lLs chances of execuLlonablllLy as and when Lhe slLuaLlon
arlses A Lwo rupee band wldLh beLween Lhe Lrlgger and sLop loss mlghL be sufflclenL for execuLlon for
say a scrlpL llke 8ellance however Lhe same band hold near Lo lmposslble chances for a scrlpL llke
lnfosys or Wlpro 1hls vlLal parameLer of volaLlllLy bands of scrlps wlll always have Lo be kepL ln mlnd
whlle uslng Lhe SLop loss concepL

ClrculL lllLers And 1radlng 8ands

ln order Lo check Lhe volaLlllLy of shares SL8l has come wlLh a seL of rules Lo deLermlne Lhe flxed prlce
bands for dlfferenL securlLles wlLhln whlch Lhey can move ln a day As per Sebl dlrecLlve all securlLles
Lraded aL or above 8s10/ and below 8s20/ have a dally prlce band of 23 All securlLles Lraded
below 8s 10/ have a dally prlce band of 30 rlce band for all securlLles Lraded aL or above 8s 20/
has a dally prlce band of 8 Powever Lhe now Lhe prlce bands have been relaxed Lo 8 8 for
selecL 100 scrlps afLer a coollng perlod of half an hour 1he prevlous days closlng prlce ls Laken as Lhe
base prlce for calculaLlng Lhe prlce As Lhe closlng prlce on 8SL and nSL can be slgnlflcanLly dlfferenL Lhls
means LhaL Lhe clrculL llmlL for a share on 8SL and nSL can be dlfferenL

8adla flnanclng

ln common parlance Lhe carryforward sysLem ls known as 8adla whlch means someLhlng ln reLurn
8adla ls Lhe charge whlch Lhe lnvesLor pays for carrylng forward hls poslLlon lL ls a hedge Lool where an
lnvesLor can Lake a poslLlon ln a scrlp wlLhouL acLually Laklng dellvery of Lhe sLock Pe can carryforward
hls poslLlon on Lhe paymenL of small margln ln Lhe case of shorLselllng Lhe charge ls Lermed as undha
badla 1he Cl sysLem serves Lhree needs of Lhe sLock markeL

Cuaslhedglng lf an lnvesLor feels LhaL Lhe prlce of a parLlcular share ls expecLed Lo go up/down
wlLhouL glvlng/Laklng dellvery of Lhe sLock he can parLlclpaLe ln Lhe volaLlllLy of Lhe share ? SLock
lendlng lf he wlshes Lo shorL sell wlLhouL ownlng Lhe underlylng securlLy Lhe sLock lender sLeps lnLo Lhe
Cl sysLem and lends hls sLock for a charge ? llnanclng mechanlsm lf he wlshes Lo buy Lhe share wlLhouL
paylng Lhe full conslderaLlon Lhe flnancler sLeps lnLo Lhe Cl sysLem and provldes Lhe flnance Lo fund Lhe
purchase 1he scheme ls known as vya[ 8adla or 8adla flnanclng lor example x has boughL a sLock
and does noL have Lhe funds Lo Lake dellvery he can arrange a flnancler Lhrough Lhe sLock exchange
badla mechanlsm 1he flnancler would make Lhe paymenL aL Lhe prevalllng markeL raLe and would Lake
dellvery of Lhe shares on xs behalf ?ou wlll only have Lo pay lnLeresL on Lhe funds you have borrowed
vlsvls lf you have a sale poslLlon and do noL have Lhe shares Lo dellver you can sLlll arrange Lhrough
Lhe sLock exchange for a lender of securlLles An lnvesLor can elLher Lake Lhe servlces of a badla flnancler
or can assume Lhe role of a badla flnancler and lend elLher hls money or securlLles Cn every SaLurday a
Cl sysLem sesslon ls held aL Lhe 8SL 1he scrlps ln whlch Lhere are ouLsLandlng poslLlons are llsLed along
wlLh Lhe quanLlLles ouLsLandlng uependlng on Lhe demand and supply of money Lhe Cl raLes are
deLermlned lf Lhe markeL ls over boughL Lhere ls more demand for funds and Lhe Cl raLes Lend Lo be
hlgh Powever when Lhe markeL ls oversold Lhe Cl raLes are low or even reverse le Lhere ls a demand
for sLocks and Lhe person who ls ready Lo lend sLocks geLs a reLurn for Lhe same 1he scrlps LhaL have
been puL ln Lhe Carry lorward llsL are all A group scrlps whlch have a good dlvldend paylng record
hlgh llquldlLy and are acLlvely Lraded 1he scrlps are noL speclfled ln advance because lL ls Lhen dlfflculL
Lo geL maxlmum reLurn All LransacLlons are guaranLeed by Lhe 1rade CuaranLee lund of 8SL hence
Lhere ls vlrLually no rlsk Lo Lhe badla flnancler excepL for broker defaulLs Lven ln Lhe worsL scenarlo
where Lhe broker Lhrough whom you have lnvesLed money ln badla flnanclng defaulLs Lhe LlLle of Lhe
shares would remaln wlLh you and Lhe shares would be lylng wlLh Lhe Clearlng house Powever Lhe
rlsk of volaLlllLy of Lhe scrlp wlll have Lo be borne by Lhe lnvesLor

SecurlLles lendlng

SecurLles lendlng program ls from Lhe nSL lL ls slmllar Lo Lhe 8adla from Lhe 8SL only dlfference belng
Lhe carry forward sysLem noL belng allowed by Lhe nSL Meanlng Lhls ls a where ln a holder of securlLles
or Lhelr agenL lends ellglble securlLles Lo borrowers ln reLurn for a fee Lo cover shorL poslLlons

lnslder Lradlng

lnslder Lradlng ls lllegal ln lndla When lnformaLlon whlch ls senslLlve ln Lhe form of lnfluenclng Lhe prlce
of a scrlp ls procured or/and used from sources oLher Lhan Lhe normal course of lnformaLlon ouLpuL for
unscrupulous lnducemenL of volaLlllLy or personal proflLs lL ls called as lnslder Lradlng lnslder Lradlng
refers Lo LransacLlons ln securlLles of some company execuLed by a company lnslder AlLhough an lnslder
mlghL LheoreLlcally be anyone who knows maLerlal flnanclal lnformaLlon abouL Lhe company before lL
becomes publlc ln pracLlce Lhe llsL of company lnslders (on whom newspapers prlnL lnformaLlon) ls
normally resLrlcLed Lo a moderaLeslzed llsL of company offlcers and oLher senlor execuLlves MosL
companles warn employees abouL lnslder Lradlng SL8l has sLrlcL rules ln place LhaL dlcLaLes when
company lnslders may execuLe LransacLlons ln Lhelr companys securlLles All LransacLlons LhaL do noL
conform Lo Lhese rules are ln general prosecuLable offenses under Lhe relevanL law