Module 1 Introduction to Stock Markets

Chapter 2

Regulators

217

2.1 What is a stock market?

Investing in equities is an important investment that we make in order to generate inflation beating returns. This was the conclusion we drew from the previous chapter. Having said that, how do we go about investing in equities? Clearly before we dwell further into this topic, it is extremely important to understand the ecosystem in which equities operate.

Just like the way we go to the neighborhood kirana store or a super market to shop for our daily needs, similiarly we go to the stock market to shop (read as transact) for equity investments. Stock market is where everyone who wants to transact in shares go to. Transact in simple terms means buying and selling. For all practical purposes, you can’t buy/sell shares of a public company like Infosys without transacting through the stock markets.

The main purpose of the stock market is to help you facilitate your transactions. So if you are a buyer of a share, the stock market helps you meet the seller and vice versa.

Now unlike a super market, the stock market does not exist in a brick and mortar form. It exists in electronic form. You access the market electronically from your computer and go about conducting your transactions (buying and selling of shares).

Also, it is important to note that you can access the stock market via a registered intermediary called the stock broker. We will discuss more about the stock brokers at a later point.

There are two main stock exchanges in India that make up the stock markets. They are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Besides these two exchanges there are a bunch of other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange that are more or less getting phased out and don’t really play any meaningful role anymore.

Ch2-title

2.2 Stock Market Participants and the need to regulate them

The stock market attracts individuals and corporations from diverse backgrounds. Anyone who transacts in the stock market is called a market participant. The market participant can be classified into various categories. Some of the categories of market participants are as follows:

  1. Domestic Retail Participants – These are people like you and me transacting in markets
  2. NRI’s and OCI – These are people of Indian origin but based outside India
  3. Domestic Institutions – These are large corporate entities based in India. Classic example would be the LIC of India.
  4. Domestic Asset Management Companies (AMC) – Typical participants in this category would be the mutual fund companies such as SBI Mutual Fund, DSP Black Rock, Fidelity Investments, HDFC AMC etc.
  5. Foreign Institutional Investors – Non Indian corporate entities. These could be foreign asset management companies, hedge funds and other investors

Now, irrespective of the category of market participant the agenda for everyone is the same – to make profitable transactions. More bluntly put – to make money.

When money is involved, human emotions in the form of greed and fear run high. One can easily fall prey to these emotions and get involved in unfair practices. India has its fair share of such twisted practices, thanks the operations of Harshad Mehta and the like.

Given this, the stock markets need someone who can set the rules of the game (commonly referred to as regulation and compliance) and ensure that people adhere to these regulations and compliance thereby making the markets a level playing field for everyone.

2.3 The Regulator

In India the stock market regulator is called The Securities and Exchange board of India often referred to as SEBI. The objective of SEBI is to promote the development of stock exchanges, protect the interest of retail investors, regulate the activities of market participants and financial intermediaries. In general SEBI ensures…

  1. The stock exchanges (BSE and NSE) conducts its business fairly
  2. Stock brokers and sub brokers conduct their business fairly
  3. Participants don’t get involved in unfair practices
  4. Corporate’s don’t use the markets to unduly benefit themselves (Example – Satyam Computers)
  5. Small retail investors interest are protected
  6. Large investors with huge cash pile should not manipulate the markets
  7. Overall development of markets

Given the above objectives it becomes imperative for SEBI to regulate the following entities. All the entities mentioned below are directly involved in the stock markets. A malpractice by anyone of the following entities can disrupt what is otherwise a harmonious market in India.

SEBI has prescribed a set of rules and regulation to each one of these entities. The entity should operate within the legal framework as prescribed by SEBI. The specific rules applicable to a specific entity are made available by SEBI on their website. They are published under the ‘Legal Framework’ section of their site.

Entity Example of companies What do they do? In simpler words
Credit Rating Agency (CRA) CRISIL, ICRA, CARE They rate the credit worthiness of corporate and governments If a corporate or Govt entity wants to avail loan, CRA checks if the entity is worthy of giving a loan
Debenture Trustees Almost all banks in India Act as a trustee to corporate debenture When companies want to raise a loan they can issue debenture against which they promise to pay an interest. These debentures can be subscribed by public. A Debenture Trustee ensures that the
debenture obligation is honored
Depositories NSDL and CDSL Safekeeping, reporting and settlement of clients securities Acts like a vault for the shares that you buy. The depositories hold your shares and facilitate exchange of your securities. When you buy shares these shares sit in your Depositary account usually referred to as the DEMAT account. This is maintained electronically by only two companies in India
Depositary Participant (DP) Most of the banks and few stock brokers Act as an agent to the two depositories You cannot directly interact with NSDL or CDSL. You need to liaison with a DP to open and maintain you DEMAT account
Foreign Institutional Investors Foreign corporate, funds and individuals Make investments in India These are foreign entities with an interest to invest in India. They usually transact in large amounts of money, and hence their activity in the markets have an impact in terms of market sentiment
Merchant Bankers Karvy, Axis Bank, Edelweiss Capital Help companies raise money in the primary markets If a company plans to raise money by floating an IPO, then merchant bankers are the ones who help companies with the IPO process
Asset Management Companies
(AMC)
HDFC AMC, Reliance Capital, SBI Capital Offer Mutual Fund Schemes An AMC collects money from the public, puts that money in a single account and then invest that money in markets with an objective of making the investments grow and thereby generate wealth to its investors.
Portfolio Managers/
Portfolio Management System
(PMS)
Religare Wealth Management, Parag Parikh PMS Offer PMS schemes They work similar to a mutual fund except in a PMS you have to invest a minimum of Rs.25,00,000 however there is no such cap in a mutual fund
Stock Brokers and Sub Brokers Zerodha, Sharekhan, ICICI Direct Act as a intermediary between an investor and the stock exchange Whenever you want to buy or sell shares from the stock exchange you have to do so through registered stock brokers. A sub broker is like an agent to a stock broker

Key takeaways from this chapter

  1. Stock market is the place to go to if you want to transact in equities
  2. Stock markets exists electronically and can be accessed through a stock broker
  3. There are many different kinds of market participants operating in the stock markets
  4. Every entity operating in the market has to be regulated and they can operate only within the framework as prescribed by the regulator
  5. SEBI is the regulator of the securities market in India. They set the legal frame work and regulate all entities interested in operating in the market.
  6. Most importantly you need to remember that SEBI is aware of what you are doing and they can flag you down if you are upto something fishy in the markets!

217 comments

  1. akrsrivastava says:

    I dont quite understand whats the role of a depository. All the shares are in electronic form. If I buy a share, it should come into my trading account. If I sell a share it should go from my trading account to the buyer’s trading account. This buying and selling and transfer of shares should be facilitated by the stock exchange, of course electronically. What is the role of a depository here? And to add to that why should I interact with the depository through a DP. All transactions are electronic, why shouldnt the end user interact with the depository directly?
    Similarly, why couldnt I open a trading account directly with NSE. Why should I need a broker/sub broker? Whatever fees/charges that I pay to broker, I can directly pay to the NSE. Sorry Zerodha…nothing against you 🙂

    • Karthik Rangappa says:

      My colleague Venu Madhav says this –

      The depositories has various functions, allowing to hold shares in electronic form is just one of them. A trading account is an account/window through which you execute transactions, after which if the transaction has resulted in an asset creation such asset would be held somewhere. It is electronically held in your demat account. A Demat account, similar to a bank account is a place where your hold your shares in electronic format.

      Some other functions of a DP are:

      a) Dematerialization – The process of converting material shares into electronic format
      b) Transfers & Transmissions – Moving shares from one demat to another
      c) Settlement of securities
      d) Pledging of dematerialised securities
      e) Facilitating Securities Lending & Borrowing

      There are brokerages to assist clients to trade through the Stock Exchange.Its similar to how if you’d like to buy vegetables, you’d go to a shop and not to the farmer 🙂 Imagine there were no brokers and you had to deal with the Exchange directly. How many clients can one Stock Exchange cater to? It’d be a monopoly where you’d have to be happy with what you got. Having intermediaries ensures you get better services and products.

    • vinay says:

      The market participants are necessary to provide better services in this industry. Since there are lot of financial transactions with millions of customer and billions of transactions practically it is not possible to provide services from one entity. So the specific roles and responsibility are allocated to each different entity to expedite the services for the end users, in terms of financial and asset (equity or other instruments ) settlement and also to provide value added services.

    • Balaji Rao says:

      Hi, it is impossible for a stock exchange to handle clients directly. It is only a facilitator. Like we buy our train tickets from IRCTC since it would not be easy for the Railways Dept to cater to everyone’s buying needs, similarly there has to be stockbrokers who do the due-diligence and get the customers and connect them through the mechanism of a stock market. Since a stockbroker also handles various other services and can be accessed easily we need their presence. We pay a fee as brokerage for receiving such services.

      Depositories are those who actually “hold” our shares/securities with them and they are authorized by the govt. A Depository Participant helps the Beneficiaries like you and me to get in and get out our shares by handling our transactions. Only our shares going out and coming is facilitated by Depository Participants while the shares are actually held by the Depositories. Again the problem is volume which just the depositories cannot handle while a DP can handle through their logistics and infrastructure.

    • Vipin P M says:

      Depository is Like a Server Computer ( or Central Bank / Bank HO ) Main Entity .
      DP is like a Client Computer ( or Bank or Branch ) Members ( Brokers ) .
      Your shares are lying in DP A/c ( Demat A/c ) not Trading A/c .
      Demat A/c are using only for depositing shares & securities ( Similar to your Bank A/c , there you are depositing money )
      Trading A/c is window to Buy & Sell Shares ( Like a Cash counter or ATM or CDM ) in Bank .
      We are keeping Funds as Initial margin in Trading a/c , Your trading A/c is linked with demat A/c by a POA for automatic debit & credit securities .
      If you are buying amount debited from Trading A/c , Shares will credited in Demat A/c ( DP A/c ) .
      If you are selling amount will credited to the Trading A/c & Shares will be debited from Demat A/c ( DP A/c ).
      NSE is Stock Exchange .
      Brokers are Members of Exchange .
      Trades are settling by the entity Clearing Corporation ( NSCCL ) Electronic clearing cordinating with Stockexchanges ,Depostorys Members ( Brokers ) ,DPs , Clearing banks , Custodians etc.
      SEBI is the Regulator .
      If SEBI is Regulating brokers the clients are also regulating it is very difficult to regulate retailers .
      Direct membership available for Foreign Institutions .

  2. Suchetha says:

    As the name suggests, a depository is place where things are stored. In the securities market terms, it is an organization where shares, debentures, bonds, mutual funds are held in electronic form. It does so at the investors/client’s request which is made through a registered DP. Apart from the custodial services a depository also facilitates dematerialisation of securities.

    All these services are provided to the client not directly by the depository. It provides these services through its agent referred to as the Depository Participant. These agents ( DP’s) are generally registered with the SEBI. As per the SEBI amongst the others, the three categories of participants who can become a DP are Banks, Financial Institutions and Trading members registered with the SEBI.

    • Jomi says:

      Why is zerodha not a Depository Participant?Most other brokers are.

      • Karthik Rangappa says:

        I guess setting up a DP is on the cards, but not sure about the time line.

      • Venu Madhav says:

        Hi Jomi,
        Initially when we took membership at the Exchanges, our constituent type was of a registered partnership firm. This was because the membership for a partnership firms gets processed faster. As per NSDL & CDSL rules, partnership firms can’t be registered as DP. However we should have our own DP soon.

        • gmish27 says:

          How much (and why) being a DP matters to the retail clients?

          • Karthik Rangappa says:

            DP is an agent to a Depository. When you buy shares, these shares has to be parked at the Depository account. You are permitted to open a depository account only through a DP. Some trading members like Zerodha are DPs as well, it offers a lot of convenience to clients when you have all accounts in 1 place.

  3. Anand says:

    What is the difference between Nsdl&csdl

    • Karthik Rangappa says:

      Both of them are Depositories (in fact there are only 2 depositories in India). No difference between the two.

    • Suchetha says:

      Both NSDL and CDSL are depositories which hold the investors securities in electronic form. The key difference is , NSDL works for the National Stock Exchange and the CDSL works for the Bombay Stock exchange.

  4. Jagmohan Singh Ahluwalia says:

    Portfolio Management System-They work similar to a mutual fund except in a PMS you have to invest a minimum of Rs.25,00,000 however there is no such cap in a mutual fund.What do you mean by “Cap” here???

  5. suraj says:

    What is the difference between hedge funds and MF? Both of them collect operating capital from individual investors and try to appreciate it by investing in different asset classes, but how do you differentiate them? Are there any hedge funds in the Indian market?
    Thank you!

    • Karthik Rangappa says:

      A main difference is with the regulations. Hedge Funds are largely unregulated however a MF is very tightly regulated. Also, the capital that they collect is referred to as a ‘fund’. There are quite a few hedge funds operating in India, suggest you look at AIF category 3 funds.

    • Anand Nayak says:

      Hedge Funds are usually reserved for large institutional investors, they have a minimum investment requirement wich is even more than that of PMS. Also, unlike mutual funds, hedge funds employ any and every strategy in order to generate alpha (return), like shorting a stock, using leverage and using derivatives.

  6. Arpit Arora says:

    It is written that in a AMC all money goes into a single account and then an investment is made. My question is does the choice of share to be bought rests with the client or the AMC?
    when my money goes into the same account as that of another person then how can I buy the shares of my choice?

    • Karthik Rangappa says:

      No, in fact AMCs exist because most people are not competent enough to identify which stock to buy/sell. Hence the decision to buy or sell a stock is always with the AMC’s Asset Manager and never with the clients. Also, the funds collected are pooled in a single account and transactions happen through this account.

  7. Arpit Arora says:

    Is there a mid-level between an AMC and a PMC?
    Or does that mean I don’t get choose which stock I invest in if I invest less than 25 lakhs?

  8. rathod75 says:

    Hi Guys Thanks for the lovely initiative.Can i get a pdf document or a book format of this

  9. rathod75 says:

    That was quick as always.Karthik

  10. Brijesh says:

    What is the difference between stock market and stock exchange (BSE/NSE)

    • Karthik Rangappa says:

      For all practical purposes, Stock market and stock exchange is the same, they are used interchangeably.

  11. Vineet Bhat says:

    Hey there,
    I wanted to know if there was any age limit for investing in stock markets in India. Is it necessary that i be a person of 18 years to invest in stock markets ? Also, awesome website. i was looking for this kind of website. Great work done !

    • Hey Vineet, just realized looking at your gravatar that you are only 14 years old. Super happy that you are finding this interesting 🙂 , and great job that you are spending time learning at your tender age.
      Btw you not are allowed to open trading and demat account as a minor. However you can use this time to build a strong market foundation. Good luck.

  12. Robin Naniappa says:

    Where in ‘Varsity’, can i get info on “Intraday Trading”?

    • Karthik Rangappa says:

      We will have a different module called “Trading Strategies” sometime soon, you may find that useful.

  13. Chris says:

    Can the DP and the Broker be the same? Example HDFC Securities

  14. chahat dadhich says:

    I m not getting dis table..can u explain wt actually it is?

  15. chahat dadhich says:

    plz explain dis

    • Karthik Rangappa says:

      Like I mentioned earlier – This is a table detailing all the financial intermediaries in the market and their respective role.

  16. bopanna_g says:

    Hi,

    I have been going thru zerodha and everything here is awesome.

    I already have a demat trading A/c with another broker ( did not do much research just signed up regretting now ) is it ok to open one with you if so do i need another demat and trading a/c ? Also is it legal to have 2 or more demat a/cs ?

    Thanks

    • Karthik Rangappa says:

      Its never to late to join us Bopanna 🙂

      Just like a bank account you can have as many Trading and Demat accounts as you want, there is no restriction.

      I would suggest you drop you contact details here – https://zerodha.com/open-account and someone from sales will contact you.

  17. bopanna_g says:

    Thanks much Kartik. That will be the first thing I will do once I am back in India.

  18. Bikalpa Pandey says:

    Hi,

    Regarding 2.2, I would like to know if people living in India but citizen of another country, say Nepal, can also invest in the stock market.

    Thanks.

    • Venu Madhav says:

      Yes, you can invest in the Indian markets. You’ll have to do it through the QFI ( Qualified Foreign Investor)route

      • Bikalpa Pandey says:

        Thanks Venu. I see that Nepal is not a member of FATF, nor is it a member of IOSCO. Are these the only qualifiers for someone to invest through QFI?

        Also, say the person is a resident individual although from a different country, are they allowed to invest?

        • Venu Madhav says:

          Seems like there’s some confusion Bikalpa. SEBI, the regulatory body in India for Financial markets sets norms for investments in India by residents of other countries. Here’s the link to the FAQ which gives you most of the information you need: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1345199799106.pdf

          Specific to residents of Nepal, I’ll check with the Exchanges in India and give you clarity.

          • Sankalpa Koirala says:

            So what was the clarity from exchange????

          • Karthik Rangappa says:

            Will check this today.

          • Venu Madhav says:

            Hi Sankalpa,
            The Exchanges have confirmed that residents of Nepal will have to open their account through the FPI route. You can’t open a resident Indian account.

          • Vishwas Shrestha says:

            Dear Sir, I am a citizen of Nepal and Indian resident since last 7 years(ie, I am working in India since 7 years). I have a pan card, an Aadhar card , and a normal SBI saving resident account. I want to start trading in zerodha( Equity,currency and derivatives). How can I do that??. I do Have a citizenship card(of Nepal) but not a passport,(since no visa is required). Pls guide me.

          • Karthik Rangappa says:

            As a citizen of Nepal residing in India and having a PAN, Aadhaar and a resident bank account, you can open a trading and demat account with Zerodha as a normal resident linking that bank account. However, the account opening cannot be done online since the account will be created as an Indian citizen by default. You will have to send us the application forms along with the required documents. You are allowed to trade in equities and derivatives. I’d suggest you email [email protected] for more info on this.

  19. SARAVANA PERUMAL D says:

    Hi Karthik,

    One simple doubt. If i already open the trading & demat account while residing in india. Then, I’ll go to out of the india for career. Then, I’ll do any changes in my account types (Residential to NRI)??? Any formalities or i’ll trade the same before?

    • Karthik Rangappa says:

      You can choose to trade in the same account. However please note, the residential status cannot be changed. If you want change in address then you will have to close the account and open a new one.

  20. vak_arijit says:

    Hello,

    With the changes suggested by the government, is it possible for an individual to run a website where he gives out investment ideas (good companies to invest in) without having the Equity Research Analyst license?

  21. Aiko says:

    Thanks for this initiative! You guys are doing a great job educating the investors.
    I went through the entire article and the comments but I am still not able to understand clearly the difference between DP and DEMAT. I always thought shares are stored in our DEMAT account. As you mentioned if shares actually sit in depositories then why have a DEMAT account then? We could just have a trading account to trade the shares and a depository to hold them. What difference does it make to have a DEMAT account?
    Similarly, how is Depository Participant different from a stock broker? I always thought that you place an order through your broker and he buys/sells the shares for you from the exchanges. Again why do you need a DP here? Putting it in another way, do I need all the following together for a single transaction in the markets?
    1. Stock Exchange
    2. Stock Broker
    3. Depository
    4. Depository Participant
    5. DEMAT Account
    6. Trading Account
    7. Bank Account

    I am sure there are many of us who have same confusions in our head. Appreciate if you can just clear these confusions.

    • Karthik Rangappa says:

      Well, this is how it works.

      Stocks of companies are listed in stock exchanges. For example Infosys. If you wish to buy Infy shares from the stock exchange, then you will have to buy it via a stock broker (you cannot buy it directly from stock exchange). To buy shares from stock exchange via a stock broker, you will need a trading account with your broker. Now, once you buy the stock, it will be electronically credited to your DEMAT account. A DEMAT account is like a safelocker for your shares that you own. A DEMAT account is offered via a Depositary Participant (DP). So in a sense you need a trading account (offered by broker) to buy shares, which will reside in your DEMAT account (offered by DP). Brokers like Zerodha offer both Trading account & DP account, hence your transactions in markets are seamless.

  22. Rajat Maurya says:

    How is a stock price variable? Also can a person be responsible for changing the price of a particular stock for his gains?
    I am getting such confusions after reading the Harshad Mehta Scandal

  23. Sai Sreedhar says:

    If someone has a PIS account with DP (such as Axis Bank), can he trade through another Stock Broker (such as Zerodha)? Or he has to deal only with Axis Bank (in say Axis Direct) as broker? Little confused here!

  24. Samyuktha says:

    Will the bank that we are associated with make any difference?And having a broker is amust?Will they charge us monthly?

  25. shankar kumar says:

    a) I have some shares in paper format. will you help me to convert into electronic format?
    b) I have already one demat account. Can I transfer the shares in that demat account if I open a new one with you?
    c) my bank is also charging Rs 21 /- per transaction. then how you are claiming you are competitive?

    • Karthik Rangappa says:

      For your first two queries – Yes, please write to [email protected] for this.

      For your 3rd query – We give you excellent support, plus free education, plus great trading platforms, plus a great QnA platform, and many tech initiatives…all this for Rs.20 per trade (intraday) and RUPEES ZERO for delivery based trading. Dont’ you think this is competitive enough?

      • Omkar Patkar says:

        Just curious why the name “Zerodha” ? … is it like ZERO charges for DElivery ….and hence “ZERO-D-ha” ?

        • Karthik Rangappa says:

          Its a fusion of ‘Zero’ in English and ‘Rodha’ in Sanskrit (means no barrier) to convey the fact that you have no barriers when it comes trading with Zerodha 🙂

      • anand says:

        what you mean by Delivery based trading?

        • Karthik Rangappa says:

          When you buy shares with an intent to keep them for multiple days/months/years, then its called a delivery trade. Delivery because it is delivered (credited) to your DEMAT account.

  26. Parikshit Totawar says:

    Please provide these modules in epub format for easy reading on mobile screens

  27. Kunal says:

    What happens to my shares if my stock broker goes bust and closes its shop ?

  28. praveen says:

    what is difference between positioning and holding

    • Karthik Rangappa says:

      Holding usually refers to the stocks in your DEMAT and position refers to the F&O positions. Can you give a context?

  29. manoj dinne says:

    i am 19 year old student who is curious about the stock market and its profound potnetial in shaping anyones life.can you tell me how to invest in the stocks
    at present i have nothing worth mentioning except my monthly pocket money rs 6000

    • Karthik Rangappa says:

      6K per month is great! Invest at least half of it regularly…either in good quality stocks or in MFs. Trust me you will be much better off compared to your peers in 10 years time. Most importantly learn how compounding works, its the single most important graph when it comes in investing. All most eveything you need to know in stock markets is present here in Varsity. Read up on it.

  30. humptydumpty says:

    What are the different types of accounts and terms here.

    Trading account ?
    Demat account ?
    DP ID ?
    DP Account Number?

    Many companies advertise like 3 in 1 account , Is there any disadvantage / advantage if i keep Demat separate and Trading separate ?

    • Karthik Rangappa says:

      Trading account is the account with your broker, used mainly to buy and sell stocks and F&O. DEMAT account is an account with your Depositary participant which is used to hold shares in electronic format. DP ID is the ID of your depositary participants. DP account number is the number of your DEMAT account (like your bank account number).

      Its always advisable to have a Trading Account and DEMAT along with the same entity. In fact, this is exactly what we offer at Zerodha.

  31. DURYODHAN says:

    Who are The Promoters? Which is not mentioned.

  32. rocky25 says:

    if you buy mutual funds- regular plan- through your demat a/c do you have pay extra?

  33. shakeel ahmad says:

    about delisting of s kumars nationwide ltd, when will be relist?

  34. Neo says:

    Hi,
    Is it compulsory to have a trading account with broker? Can’t​ we simply trade directly without having a broker?

    • Karthik Rangappa says:

      You cannot transact with the exchanges directly. You need to have a broker as an intermediary between yourself and exchanges. Hence trading account with a broker is mandatory.

  35. raj23 says:

    What are your account(trading + Demat) opening,AMC, Brokerage charges

  36. raj23 says:

    Appreciate your work. A great platform to learn about stock market.
    What

  37. raj23 says:

    What is PIS Account

  38. rjazz says:

    is there any clear cut difference between domestic institutions or domestic amcs?

  39. Imtiaz says:

    Hello. I’m a beginner in investing and I’m still educating myself regarding the same. And I would like to thank the zerodha team for articles in the varsity section. I have a question. Is it possible for me to to invest in markets outside india?? Say in Europe or USA. What should I do to invest in the international market?

  40. Harsh says:

    What is the difference between growth type and dividend type of the same mutual fund? Which should one select?

    • Karthik Rangappa says:

      The difference is in the way dividends are treated. In Growth, the dividends are reinvested in the scheme whereas in the investor receives the dividend in the dividend scheme.

  41. Arvind Kuldeep says:

    There should be direct link to next chapter/topic

  42. Hits says:

    I’m happily trading with zerodha from last 1 year but, What if broker like Zerodha closes overnight..!!!
    What would happen of my fund in that and about stocks I have…!!! just eager to know for info…!!

    • Karthik Rangappa says:

      As a broker, we are regulated by SEBI who regulates all the other brokers in the country. The rules are same across the industry. Few things that you need to know –
      1) We are one of the most profitable brokers
      2) Well capitalized
      3) Practice conservative risk management policies

      Given all these things, closing overnight is out of the question.

  43. Ajk says:

    Hi, thanks for all the hard work put in preparing this material.. Its very helpful, just one ux advice, could we get a ‘top button’ to go to top obviously.. The comments themselves are a learning and once you reach to the bottom one has to scroll all the way back manually to go to next chapter or another way is to have an index at the bottom as well

  44. shishir sonekar says:

    Still not much clear with the concept of Hedge Funds, why it comes in the category of foreign institutional investors.

    • Karthik Rangappa says:

      Becuase hedge funds are considered foreign institutional investors. If you want to set up a hedge fund in India, then it will be known as an Alternative Investment Fund (AIF).

  45. DJ says:

    As most of the work is being done by DPs and brokers so why we need Depositories? What type of work they do?

    • Karthik Rangappa says:

      Well, you can extend the same argument for the exchange as well 🙂

      As an end user, you won’t really appreciate the work that goes in as most of the process is not directly visible to you. But trust me, they do a lot of work to ensure our assets are safe in digital format 🙂

  46. jyotshna says:

    Can broker sell your shares and take money away. Ex : I hold some shares ( say 10 lakh worth) and broker can sell that ( similar to call & trade, so brokers can sell ) and funds of that shares credits to bank account after 2 day, Is there any possibility that broker may take that money and money will not credit to clients bank account ?

  47. P.s.perumal says:

    What is the difference between the dematerialised share and physical format of share

    • Karthik Rangappa says:

      Earlier shares were issued as share certificates in paper form, this was referred to as a physical form. However, the shares are digitized and stored in DEMAT accounts, this is called DEMAT format.

  48. akash garg says:

    what is difference between depository participant and stock broker as both behaves as a intermediatry between investor and stock market?

    • Karthik Rangappa says:

      DP is an intermediary between the Depository itself (CDSL/NSDL) and the investor, just like the way a stock broker is an intermediary between the investor and stock markets. Its just the stockbroker can also choose to be a depository participant.

  49. P.s.perumal says:

    Can I sell a stock from one exchange to another exchange that is a buy a share from Nse and I can able to sell it on Coimbatore stock exchange

  50. Vinod says:

    Hi Zerodha Team, Awesome job from your guys by explaining the investors from basics about Investing and trading.:)

  51. Biswajit C says:

    Market terms so simply explained. Good job!

  52. chinmay says:

    Hello…
    I am a beginner .I cant distinguish between sharekhan and zerodha. Actually what is the main difference between zerodha and sharekhan. So i cant choose . but recently i have registered with zerodha.

  53. Mahesh Dudhanale says:

    what’s the role of AMCs?

  54. DARSHAN MALPANI says:

    CAN WE KNOW A DAILY TRACK OF FUND MANAGERS, MEANS WHICH SHARE THEY BUY, AT WHAT PRICE, WHEN, AND WHERE THEY EXIT? IF YES, HOW CAN WE KNOW IT?

  55. Aravind says:

    When actually an IPO is issued? Can you explain it..

  56. Relm says:

    If we buy a share of 1lakh…. Will the selling price of the share be the same or it may vary….. What will be a price for selling a share?

    • Karthik Rangappa says:

      If you’ve placed a limit order (explained later in this module), then the price will be the same. However, if you place a market order (explained later in the module), the rates may differ.

  57. Ashok says:

    Nice elaboration, Sir.
    I’m investing in myself first before going into the Trading/Investing world.
    Thank you for your efforts to make this world a better place by conveying your knowledge to others.

    • Karthik Rangappa says:

      That is, in fact, the right approach to markets, Ashok. Spend lot of time learning, markets will always give you opportunities 🙂

  58. Nikhil Sinha says:

    Are all the lessons/Chapters/Modules on Zerodha Varsity are dynamic in nature and often Updated/Upgraded?

    Hopefully I get a reply.

  59. About gadhvi says:

    If zerodha is going to by my intermediary when I open a demat Ac with them. Who will need my depositary.? Or I won’t need one of I do only trading and not investing.

    • Karthik Rangappa says:

      The depositary is CDSL, we act as a depositary participant and help you facilitate buying and selling of shares from your depositary account.

  60. Sachin says:

    Very much happy to say that i m Zerodha Family member. 🙂

    But m Wating for “Zerodha” ipo. 😉

    Is there any plan in future??

  61. Yogesh says:

    Content is very much simple to grasp and help individual grow as investor.

    Just a suggestion to enrich the content , while explaining , there are reference to real life incidents, such as Harshad Mehta’s scandal, Satyam etc. It will be great to put the link to this, either internal or external wiki to help understand the them quickly . I will prefer internal Zerodha link , explain the matter in simple and crisp terms .

    • Karthik Rangappa says:

      We dont have an internal wiki of sorts, Yogesh. But this is a good suggestion, will try and incorporate this going forward. Thanks.

  62. gohan chpk nani says:

    as a begginer, a) whether i have to create dmat,trading account now
    b) i am confused with multiple accounts in order choose any stock where do we go and select?
    c) what will be the minimum investment we can put into the stock
    d) how can we select particular stock

    • Karthik Rangappa says:

      1) You need a Trading & DEMAT account if you intend to trade and invest in the market
      2) You can select this in the ‘Marketwatch’, which is available in the trading terminal, which is provided by your broker when you open a trading account
      3) There is no minimum as such
      4) Based on your research and understanding of the market

  63. gohan chpk nani says:

    Tq..

  64. Suvansh Srivastava says:

    Hi:
    I have two 3in1 accounts one of Kotak bank and one of ICICI bank. Due to this I have two DEMAT accounts already. I don’t use any of these and have now planned to use ZERODHA. Will Zerodha open a third Demat account for me or can I use the previous ones? also how can I close my older demat accounts?

    • Karthik Rangappa says:

      Suvansh, you can link the same DEMAT and start buying the shares. But selling becomes an issue as Zerodha won’t have the POA. I’d suggest you close the other two DEMAT accounts and open a new one with Zerodha.

  65. Abhijit says:

    I still don’t understand the difference between between AMC and PMC.
    Is it just the difference between amount of fund they manage?
    Also what are the wealth management companies?

    • Karthik Rangappa says:

      AMC is Asset management companies like HDFC, Axis, DSP, Franklin etc. They deal with Mutual Funds. PMS is Portfolio Management Services, offered by PMS individuals/corporates with PMS licence. They too manage money for people, but with a minimum starting capital of 25L.

  66. Dibakar Bala says:

    Which theme are you using ? Could you please share.

  67. Dhinesh Babu says:

    Hi… I am a small trader. Just know the basics about stock market. I want to make a carrier in this field and want learn in-depth of fundamental analysis, technical analysis, etc,. Kindly guide me the right direction for learning.

    • Karthik Rangappa says:

      You are in the right place, Dhinesh. I’d suggest you go through these modules sequentially and get yourself familiar with both trading and investing.

  68. Dinesh says:

    Sir I want known how can I buy shares of foreign countries

    • Karthik Rangappa says:

      You will have to open a broking account with an overseas broker and then buy shares. RBI permits you to invest upto $250K per year under Liberalized Remittance Scheme (LRS) scheme.

  69. Pathik Modi says:

    Dear Karthik sir,
    It’s best platform to learn basic and deep knowledge about stock market.I liked it. One kindly request sir, please accept my request in LinkedIn platform.

  70. Rohan says:

    Sir
    can I make money through this platform
    Just wanted to start something which would help me to grow …..

  71. Mani says:

    Hello sir, latest there was a news that 15 stocks are moved to restricted category. In that news I came across following information which I am unable to understand sir, can you please explain

    1) Trading in 15 securities will be available in Trade for Trade segment at a price band of 5 per cent or lower
    2) no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory
    3) the settlement will be done on trade-to-trade basis and no netting off will be allowed

  72. omi says:

    Just curious to know , does high net worth traders also use brokers to trade or have their own membership with exchanges.

  73. Shrey Jain says:

    Hi, I’m new to markets and finding this content amazing. Big thanks to you! I just wanted to ask this, you had mentioned earlier that SEBI can track down all the activities of traders. I also read recently that there are operators in the Indian market who try to manipulate prices by forming unions..
    So why does that not get traced by SEBI?

    • Karthik Rangappa says:

      Glad you liked the content, Shrey. The exchange’s surveillance does play an active role in cracking such cartels.

  74. Rajan Thadani says:

    how does SEBI put restriction on unfair practices. by the way what as per SEBI are unfair practices?

  75. Rajan Thadani says:

    Debenture Trustees/ Almost all banks in India / Act as a trustee to corporate debenture/ When companies want to raise a loan they can issue debenture against which they promise to pay an interest. These debentures can be subscribed by public. A Debenture Trustee ensures that the debenture obligation is honored

    If a company fails to fulfil obligations what action SEBI takes against them. It is seen in past that SEBI does not take any action and company is allowed to go free,

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