2.1 – What is the stock market?

In the previous chapter, we established that investing in equities is vital to generate inflation-beating returns. Having said that, how do we go about investing in equities? Before we dwell further into this topic, it is essential to understand the market ecosystem and the many different entities involved in making our capital market journey smooth.

Just like the way we go to the neighborhood kirana store or a supermarket to shop for our daily needs, similarly, we go to the stock market to shop (read as transact) for investments. The stock market is where all the participants who wish to transact in shares go. Transact means to buy or sell shares in the context of stock markets. The primary purpose of the stock market is to help you facilitate your transactions. So if you want to buy shares of a company, the stock market helps you meet the seller and vice versa.




Unlike a supermarket, 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 conduct transactions (buy or sell). It is also important to note that you can access the stock market via a registered intermediary called the stockbroker. We will discuss the stockbrokers at a later point.

India has two stock exchanges – the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). There were many other exchanges earlier, but none of them survived. So when you talk about the stock markets in India, you are essentially referring to either NSE or BSE. Older stock exchanges like Bangalore Stock Exchange (BgSE), Madras Stock Exchange (MSE), Calcutta Stock Exchange (CSE) have either merged with BSE/NSE or shut shop.

2.2 – 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 –

    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 corporate entities in India
    4. Domestic Asset Management Companies (AMC) – Mutual fund companies like SBI Mutual Fund, HDFC AMC, Edelweiss, ICICI Pru, etc.
    5. Foreign Institutional Investors – Non-Indian corporate entities. These could be foreign asset management companies, hedge funds, and other investors.

Now, irrespective of who participates in the market, the agenda for all is to make profitable transactions. More bluntly put – to make money.

When money is involved, human emotions such as 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 unethical practices. Given this, the stock markets need someone who can set the game rules (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. SEBI aims to promote the development of stock exchanges, protect the interest of retail investors, and regulate market participants’ and financial intermediaries’ activities. In general, SEBI ensures:

    1. The stock exchange conducts its business fairly
    2. Stockbrokers conduct their business fairly
    3. Participants don’t get involved in unfair practices
    4. Corporates don’t use the markets to benefit themselves (Satyam Computers) unduly
    5. Small investors’ interests are protected
    6. Large investors with mega cash piles should not manipulate the markets
    7. Overall development of markets

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

SEBI has prescribed a set of rules and regulations for each entity. 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 its 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 creditworthiness of corporate and governments If a corporate (or Govt) entity wants to avail loan (debt financing), CRAs check for creditworthiness and assign a rating, the basis on which other entities can decide to extend a loan or not.
Debenture Trustees Almost all banks in India Act as a trustee to corporate debenture When companies want to raise a loan, they can issue debentures against which they promise to pay interest. The public can subscribe to these debentures. A Debenture Trustee ensures that the
debenture obligation is honored
Depositories NSDL and CDSL Safekeeping, reporting, and settlement of clients’ securities They act like a digital vault for your shares. The depositories hold your shares and facilitate the exchange of your securities. When you buy shares, these shares sit in your Depositary account, usually referred to as the DEMAT account.
Depository Participant (DP) Most of the banks and few stockbrokers Act as an agent to the depositories You cannot directly interact with NSDL or CDSL. You must liaise with a DP to open and maintain your DEMAT account.
Foreign Institutional Investors (FII) Foreign corporate, funds and individuals Make investments in India These are foreign entities with interest in investing in India. They usually transact large amounts of money, and hence their activity in the markets has 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
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 invests that money in markets intending to make the investments grow and generate wealth.
Portfolio Managers/
Portfolio Management System
Capitalmind Wealth PMS, Motilal PMS, Parag Parikh PMS Offer PMS schemes They work similarly to a mutual fund except in a PMS; you have to invest a minimum of Rs.50,00,000; however, there is no such cap in a mutual fund.
Stock Brokers Zerodha, Sharekhan, ICICI Direct Act as an intermediary between an investor and the stock exchange Stock brokers act as a gateway to the stock markets, giving electronic access to stock markets to facilitate transactions.

We will elaborate on some of these market intermediaries in the next chapter.

Key takeaways from this chapter

  1. The stock market is the place to transact in equities.
  2. Stock markets exist electronically and can be accessed through a stockbroker.
  3. There are many different market participants operating in the stock markets.
  4. Every entity operating in the market has to be regulated and can operate only within the framework prescribed by the regulator.
  5. SEBI is the regulator of the securities market in India. They set the legal framework 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 up to something fishy in the markets!


  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???

    • Karthik Rangappa says:

      Cap simply refers to a limit. When investing in MF, you can invest any amount you wish (starting from Rs.500/-) where as in PMS service you need to invest a minimum of Rs.25,00,000/-.

    • Anand Nayak says:

      It basically means a floor not a cap.

  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:


    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 ?


    • 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:


    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.


    • 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.


    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:


    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

    • Karthik Rangappa says:

      Refer section 6.2 to know why and how the stock prices moves – http://zerodha.com/varsity/chapter/the-stock-markets/

      Yes, individuals can influence the stock price movement especially if the liquidity is low. You should avoid dealing with such scrips which has low liquidity.

      • Varad7 says:

        When you say that it’s liquidity is low what exactly do you mean by that?

        • Karthik Rangappa says:

          When liquidity is low, you will find it hard to place market orders as the spread between the bid and ask is quite high. Besides this, there are chances getting stuck with an order as you will not find buyer and sellers easily in the market.

  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!

    • Karthik Rangappa says:

      Yes, this is possible, but it would be an operational issue for both broker and DP.

      • Sai Sreedhar says:

        So, as I understand. I have to open a PIS account with one of the DP (such as Axis Bank, ICICI) and then open a Demat account with Brokerage Firm (Zerodha/Sharekhan)?

  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.

          • Kiran Changia says:

            So this means in intraday trading the shares are not deposited in the DEMAT Account even for he short time for which it is held ?

          • Karthik Rangappa says:

            Yup, the shares don’t hit your DEMAT in case of intraday trading activity.

  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:

    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.

  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:

    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?



  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??

    • Karthik Rangappa says:

      Happy to note that, Sachin!
      You never know what the future holds. No plans as of now, I guess 🙂

  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:


  64. Suvansh Srivastava says:

    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:

    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,

  76. Rituparna Chakraborty says:

    Will Zerodha then be an example of both a DP and a stock broker? Also, are there any examples where one entity is a DP and not a stock broker, and vice versa?

  77. ANIL KUMAR G A says:

    where can we get vidio explanetion of versity?

  78. C S Kanawat says:

    Where will I get the pdf version of the varsity chapters engulfed in a book?

  79. Jaywant P C says:

    i read all the Entities and their respective functions, i’m little curious about Transfer Agency and DP are those same?
    as Transfer Agency also working as safeguard or can say the Accountant for us ( clients) . can you please explain Transfer Agency (RTA) in simpler words and how its different DP?

  80. trader says:

    what does SEBI’s new dictate on maintaining of margins for cash trades mean for retail traders? does it mean we will stop getting the 15 times leverage offered by zerodha for BO/CO trades? also what about the equity derivatives leverage of 27.5 times? will that also be affected due to this new order? will intraday traders be affected due to this?

  81. Anil Yadav says:

    Dear Sir,

    Good evening !!!!!

    Today i get mail from zerodha but i can not understand what is the meaning of this mail.

    (Your zerodha account ****** is due for settlement and it will be settled within the next few days.
    The idle fund in your account will be transfer back to your bank account and you will have to transfer the funds back in order to trade or invest )

    • Karthik Rangappa says:

      This is a part of the quarterly settlement which is mandated by SEBI. Any unutilized funds will be transferred back to your bank account. You will have to send that money back to the trading account if you wish to trade or invest.

  82. vikram says:

    Is zerodha both a DP as well as a broker???

  83. Sunil Awasthi says:

    Hi Karthik,
    To become SEBI registered Financial Advisor, one of the requirements is income tax return for last 3 years as one of the documents. I am an intraday trader in equities only; . I never filed income tax returns. I am MBA, i fulfill other requirements except above document. Is income tax implicit in taxes that are deducted whenever i complete a trade on intraday basis in equities only,not derivatives.
    I repeat I never paid any income tax ever or in other words I never worked anywhere properly so as to have income to be taxed. Can i still become SEBI registered Investment Advisor? If yes, how.
    If no, what should i do. I am an intraday full time trader in equities only.

    • Karthik Rangappa says:

      What gets deducted is the security transaction tax, which is different from income tax. You will have to voluntarily file your income tax. Also, I’m not familiar with the regulations pertaining to this licence, suggest you reach out SEBI for this.

  84. piyush sinha says:

    do i need to login to join in the chat

  85. nitin says:

    Is it allowed to pool funds say 5 lakhs each from from 5 or 6 members of family and friends and I manage pooled fund for F&O trading. if yes, what are the requirements/Pre-requisites? Can i do this activity under a proprietary firm?

  86. Sourav Ghosh says:

    For last 10 months I’m out of India. Can I still trade using my existing zerodha account which is linked with my India bank account? Please let me know if there is any obligations!

  87. Kunal says:

    Hello sir,
    I have updated my e mail id with zerodha. But I still receive mails on previous e mail from NSE.
    How change e mail id with NSE
    Please help me regarding this issue

    • Karthik Rangappa says:

      I’d suggest you speak to the support desk for this, Kunal. Usually, the team updates the exchange as well.

  88. Aditya? says:

    Do stock brokers guide investors when and where to invest?

  89. Chavi says:

    I have a difficulty understanding portfolio management system and their minimum investment criteria . Can you please elaborate more about the same ?

    • Karthik Rangappa says:

      Hmm, to invest in a PMS scheme you need to have a minimum of 50L. A PMS company won’t accept you as a customer if you walk in with a lesser amount since they are not allowed by the regulators.

  90. amandeep says:

    hi sir,
    sir ,i have already one demat account with upstox , now , if i want to switch to zerodha , do i need to close the demat account with upstox , or i can open directly second demat account with you guys …and suppose if i hold some shares in upstox demat account and i switch to zerodha by closing demant in upstox then what about those shares that i am holding in upstox ………

    • Karthik Rangappa says:

      You can open another trading and DEMAT account with us, once this is set up, you can close the account completely there.

  91. Selvakumar says:

    Then the upstox shares he holded will be in loss… How can he close it

  92. Samridhi says:

    Sir, the lesson above still shows the minimum investment in PMS to be Rs 25,00,000. You may want to have that changed 🙂 Really enjoying the learning so far. Thank you!

    • Karthik Rangappa says:

      Sure, its just that these regulations keep changing, the idea is to get the concept and not really the actual numbers 🙂

  93. Manish Mehta says:

    Sir..just a small query.. recently sbi bought share at a price of Rs 10 while the Market price of yes bank was little higher at that time… Can you explain this that how retail investors and domestic institute are buying at different prices. And does that buying of yes bank by sbi also took place in stock market, like you have written practically you have to transact on stock market only to buy or sell share….
    And thank you very much for this great content 😊

    • Karthik Rangappa says:

      Manish, that was an institutional deal, and it was executed close to the market price and not at 10. Rs.10, was wrong information circulated everywhere.

  94. manish mehta says:

    ok sir.. thanks for your quick reply 🙂

  95. Karan says:

    Hi team

    I am having a youtube channel and i want to post videos on youtube of this content , so please tell me if possible to do so and as if there are some copyright issues over there ?

  96. Shashank says:

    Thanks for the great post, I had some doubts after referring to comments all my doubts got cleared. Kudos Karthik/Zerodha to make this happen. All I hope is Zerodha be with same responsibilities of customer centric (if not improve) but not degrade over time once enough users are with Zerodha and I believe until Nitin is there, these things don’t degrade. 🙂

    • Karthik Rangappa says:

      Thanks, Shashank. Customer service is very critical to us. Nithin is a massive source of inspiration to all of us at zerodha, so we won’t let him or the customers down 🙂

  97. Yogesh ingle says:

    Sir I am beginner and I have lot of queries so can you clarify. 1. can we sell our share in 1or 2 days and what is charge we have to pay
    2. I want to invest small amount for instance 1000 in share supposed Reliance. If the share price fall less than 1000 can I wait for share price when will it reache up to reasonable profit

    • Karthik Rangappa says:

      1) You don’t pay any brokerage, but other charges are applicable. Do check this – https://zerodha.com/charges#tab-equities
      2) You can invest in 1000, there is no problem. But not in reliance as the share price is higher than 1000. Yes, you can wait for the share price to increase before you sell it.

  98. mirtunjay sinha says:

    Please update PMS limit now revised to 50 lacs. Not an error as on article date it was 25 lac. 🙂

  99. Alok says:

    What then would be the difference between a DP and a stock broker?

    • Karthik Rangappa says:

      DP is like a custodian of the shares. Like a bank locker for your shares. A broker helps you transact in the market to buy or sell shares.

  100. Vishnu says:

    Hi Karthik,

    Thanks for this wonderful post..

  101. Vish says:

    How do I made my money 2x in a year?

  102. Divakar Shukla says:

    Karvy broker was a scam so it should be removed now.

  103. Yang says:

    Thankyou guys for those nice explanation

  104. Gopal says:

    This might be a silly question but I have always been curious as to how the big shots in India like Rakesh Jhunjhunwala and others invest in the stock markets. I am sure they do not invest through regular stock brokers like Zerodha or Sharekhan. Would really appreciate if you can explain how they do it since you mentioned that an individual can buy stocks only through stock brokers.

  105. Ravi says:

    Sir very basic questions which I would like to clarify
    Who owns the exchange? Is it owned by government?
    BSE has also issued it’s share. Is it good to invest in this as BSE will keep on generating more profit as economy grows ?
    There are two depositories. So can’t anyone else open a depositry?

    • Karthik Rangappa says:

      BSE and NSE are like any other corporate companies. BSE of course is public, so it has public shareholding. NSE is still a private company. Yes, only 2 depositaries in India. Getting a depositary licence is almost impossible.

  106. Ravi Kiran says:

    Hi, is every stock broker a depository participant(DP) ?

  107. Aditya Damodhar D says:

    You said merchant Bankers help with the IPO process. Wat is the IPO process?

  108. Hariharan says:

    hi sir, just a basic question. what is the difference between the functions of a DP and Stockbroker

    • Karthik Rangappa says:

      DP is like a bank, it holds the shares you’ve bought. The stockbroker provides you a platform through which you buy shares.

  109. velmurugan says:

    I did not understand what is Debenture Trustees entity properly

  110. Ananya says:

    If Zerodha is my stock broker, who is my Depository participant here? Please clarify.

  111. Ameya Deshmukh says:

    How can a few stockbrokers act as DPs? My doubt is, the liaison/agreement which we are doing with the banks which act as DPs is say opening an account. What is it with a stockbroker?

    • Karthik Rangappa says:

      Ameya, all DPs procure the same licence the Depositary and have to comply with the same rules. Does not matter if one is a bank or a stock broker.

  112. Ameya Deshmukh says:

    Sir, how is it a depository participant? Because it is interacting directly with the DEMAT account, is that it? How would an arrangement with different stockbrokers and depository participants work? Wouldn’t it be much less efficient then due to two different entities doing the job which can effectively be done by one?

    • Karthik Rangappa says:

      Depositaries don’t interact with clients directly (like the exchanges), they do it via intermediaries like the DPs.

  113. janaki says:

    Am sorry sir. If depositories are helping handling the shares bought and sold?? why they are not giving statements when asked for us to reconcile with the one received from the broker?? they have again referred me to the broker who has already done frauds in my account. Are they only for brokers and corporates?? not for retail customers like me?? This is not to hurt anyone but a small clarification will be useful for many retail customers like me…

  114. trader says:

    if there is margin shortfall when I am doing intraday trading in equity will I have to pay any penalty?

  115. jai says:

    Hey Karthik,

    I am 17 and am looking to make some long term investments and start day trading I just wanted to learn as much as I can do you suggest any videos or platforms I can start learning from and will these modules be helpful to me as I am almost finished with the 1st.

    • Karthik Rangappa says:

      Jai, these are your foundation years. I’d suggest you stick to long term investing and not get distracted by day trading. Do read the module on Fundamental Analysis and inner worth here on VArsity. I’m sure that you set you on the right track!

      Good luck!

  116. Ajay B Jadhav says:

    Thank you Zerodha.

    You can work upto some limit/extent. Zerodha taught me, Take a breath , relax and allow your money to work for you even when you can not work or you are sleeping or for that matter having family time and playing with children. In professional courses, We have been taught to work day and night without rest, bath ,lunch or dinner. But no one teaches to make your money work for you! Zerodha has taken greatest initiative. I beieve, Financial education or investment should be part of each and every professional course. As ultimately we all are working for livelihood, but to What extent can we work ? So , invest. Hats off Zerodha!

  117. Kashish says:

    A brokerage fee is necessary,i.e, to be paid to a stockbroker but a depository participant fee is necessary too? If yes, Can’t we operate without these two rather than paying a huge sum of fee that could in the first place, be invested?

  118. trader says:

    what will be the number of times leverage offered under MIS product code for stock Futures from 1st March 2021?

  119. Avinash kalashetty says:

    Good explanation sir, I got some information regarding basic stock market how it’s really function, and the above example that u elaborate in simple way i, e vegetable vendor and farmer one , it’s awesome sir… Thank you Zerodha

  120. Twinkle says:

    Hi – I want to start Trading in equities. Reading Varsity till which modules is fine so that I can start with it.

  121. Piyush says:

    Why do we have 2 major Stock exchanges in India? What was the reason to start the second stock exchange?

  122. Dev says:

    Sir , still not able to download the pdf for module 11

  123. Sam says:

    Hi Karthik, can you please update the modules with current data? It would be much helpful as there will be less back-referencing.

    • Karthik Rangappa says:

      Sam, the idea is to give the overall info, cant really update data as the intention is to not make this a data portal 🙂

  124. Kunal says:

    What is the difference between hedge fund and mutual funds?

  125. Owais says:

    Can you explain what is SEBI please?

    • Karthik Rangappa says:

      They are the regulators of Indian capital markets. Think about them as the Dean of a University. The dean sets the rules by taking the opinions of the Head of Depts, Faculty staff, and admin. Likewise, SEBI sets the rules for capital markets by consulting various stakeholders in the system.

  126. Ashok says:

    If bse has been playing all roles in market then why it’s required
    To launch nse? And companies
    Listed on bse are also listed on
    Nse. Why it is so.

  127. Anupam says:

    Just started reading these articles on Zerodha Varsity, fantastic learning experience!!

  128. swarna says:

    understood the concept

  129. Pavan says:

    I didn’t clearly understand the role of Debenture Trustees. Could u explain it in simpler terms?

    “The public can subscribe to these debentures” – Also, kindly throw some light on this part.

    • Karthik Rangappa says:

      Think of these as the custodians of these debentures, ppl responsible for the safe keeping of funds.

  130. Pavan says:

    Does Zerodha facilitate trading of US stocks (NASDAQ etc.)?

  131. Theajus Lurkin Moses says:

    Great explanation Karthik Rangappa, Thank You.

  132. sudip says:

    want to learn the market

  133. Ayush says:

    i am interested in doing day trading. Is zerodha varsity enough for it ?

  134. lakshman says:

    Explained very well sir…..

  135. Purnachandra says:

    I would say Varsity provides gem of information in a plain and simple language, I am glad to have come across Varsity, special thanks to Karthik Rangappa for these tutorials.
    I have started my journey pretty late at 28, but I wish to enter the market with as much knowledge as possible.

    • Karthik Rangappa says:

      Thanks for the kind words, Purnachandra 🙂
      Hope you continue reading and enjoying the content on Varsity 🙂

  136. Manish Jain says:

    Amazing work @Karthik sir. Since CDSL and NSDL are the only to depositary, can one consider CDSL for a long term buy since the indian equity market is growing day by day and this would be benefiting CDSL, CAMS in long run.

  137. Manish Jain says:

    I just wish to know if I was thinking in the right direction!

  138. Jyothi Nanjawade says:

    understandable Content!

  139. Manish Jain says:

    Thank you! 🙂

  140. The Learner says:

    Great Work Karthik and Nithin,
    Guys start reading and stop proofreading.

  141. Gaurav Khatwani says:

    It would be more easier to understand the concept of various participants involved using a graphical representation.

  142. Arun says:

    The Minium investment for PMS is 50,00,000 right?

  143. Rajeshwari says:

    How much money is necessary to invest in intra day trading. My hubby say a minimum of 2 lakh is necessary or else you will face a loss.

  144. Rajesh Sudhir Jagtap says:

    Why are stock brokers mentioned in two entities here?

    For example, in the entity DEPOSITORY PARTCIPANT there are banks and stockbrokers.
    Aren’t they the same as last entity Stock Broker and Sub Broker.
    Like Zerodha, HDFC securities and ICICI Direct would come under both the entities then why is it mentioned separately?
    Please assist in understanding.

    • Karthik Rangappa says:

      When you become a broker, you do so by taking up a membership with exchanges, brokers are also called Trading Members (TM). Likewise, when you become a member of a depositary, you are called a Depositary participant (DP). Two separate licenses, that’s it.

  145. Harsh says:

    I wanted to know what are investment banks and are they similar to merchant banks?

    • Karthik Rangappa says:

      A merchant bank is one unit within an Investment bank. Think of an investment back as a supermarket for financial services.

  146. Falc says:

    Awesome work guys! @zerodha Varsity!

  147. Amol Joshi says:

    Then why is Government / SEBI allowing such hedge funds? Is it related to chit fund scams?

  148. Satya Prakash says:

    Excellent, nicely explained.

  149. Aram says:

    What is the difference between trading account and demat account?

  150. Jairaj says:

    Please update PMS cap as the minimum amount to invest in PMS is increased by SEBI from 25L to 50L. Varsity is the best place for learning and reference. Keep going!

  151. Aadhan Deshmukh says:

    As you said above “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.” Can you be more specific like where can i see the rules applicable to Zerodha

    • Karthik Rangappa says:

      There is no specific rule for Zerodha as such. But there are rules set for all the brokers via a master circular. Brokers or Trading Members have to comply with those rules.

  152. Chandrapalan says:

    Very valuable information,thanks

  153. Pranita says:

    Crystal clear explanation and great examples. Thankyou so much for simplifying it.

  154. Dhananjay Bhujbal says:

    Sir can LLP trade in stock market? If yes then is there any requirement for designated partners to be something? Like exams or something like that

    Tried to find answer but couldn’t get what I am looking for.

  155. Dhananjay Bhujbal says:

    Yes but I mean to say can LLP do trading business?

    Let say I want to setup LLP with one more partner to do trading activities only. Can I do that? Do me as designated partner need to have any registration with SEBI or anything like that as a fund manager or whatever? Any requirement specific qualification?

    • Karthik Rangappa says:

      Nothing as such. You open an account and start trading. You won’t be advising or managing any money, so no license is required.

  156. Dhananjay says:

    Won’t they ask me where does that money come from? In companies bank account. If I am collecting money from other people and trading then?

    • Karthik Rangappa says:

      How can you accept money from others? You will have to report that to IT and company’s auditors right? I’d suggest you speak to CA once.

  157. Dhananjay says:

    Basically my query is:

    Let say I want to start trading firm which will take funds form other people (Outside company), We will trade and then will return funds and returns to them. All this to be done do we need to have license/certification or anything from RBI or SEBI

    • Karthik Rangappa says:

      LLP has a restriction of 20 partners only. You cant exceed that. Also, if the main business of LLP is trading, then that is classified as a financial institution and hence comes under RBI’s radar. So while you can, there are multiple limitations that will not permit you to easily carry out this business. End of the day, you will have to get a PMS license.

  158. Dhananjay says:

    Thanks a lot for clarification.

  159. Dhananjay says:

    Also for PMS there is minimum ticket size of 50 Lakhs and as pwr my knowledge PMS are not allowed to trade in derivatives (beyond their position size in equity).

    Is there any way by which a person can collect funds from retail people (with no minimum ticket size), trade in all segments and run business that way

  160. Vimal James says:

    So if I buy a share of Infosys and sell it, who is buying the share from me? Is it for granted that anytime I want to sell, there will always be another person looking to buy?

    • Karthik Rangappa says:

      That’s called liquidity. As long as the stock is liquid, there will be buyers and sellers for the stock.

  161. Vinayaka Prabhu says:

    Thanks for the explanation.
    Just out of curiosity.
    What do we have in the USA? (for SEBI, NSDL, CDSL, BSE, NSE, CRA)
    US SEC,
    Why is Wall Street famous? Is there any place like that for India?

    Is CRA similar to our Credit Score but for Govt and Corp?

    Will there be companies listed only in CDSL and not in NSDL and vice versa? (Why do we have two Depository for a country?)

    Thank you

    • Karthik Rangappa says:

      In the US, you do have depositaries. But its largely credit entries in the books of broking companies. This is an interesting topic, will try and make a video on it 🙂

  162. Amol Desai says:

    Thanks very much sir for giving such knowledge in a very easy 🥳💝

  163. Deepanshu says:

    Fantastic explanation.
    Thanks for clarifying

  164. Vidit says:

    Difference between a DP and a stockbroker. Is Zerodha both a DP and a stockbroker?

  165. Niraj says:

    Dp connect stokbroker and nse/bse.
    Right or wrong

  166. Ronnie says:

    Thanks for the enlightenment. I realized you were specific to India, as a non Indian, how can I infuse this knowledge while transacting in my country?

    • Karthik Rangappa says:

      Yes, but please check the relevance once before going ahead. While the broader mechanisms are the same, there could be slight variation due to regulatory changes.

  167. Pratik Gehlot 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.

  168. Khyati Jain says:

    When a person wants to invest in stocks, does she have to do it directly via a stock broker like Zerodha? Or are interactions with other entities like DP etc also involved on a direct level? Also is the DEMAT account linked to the stockbroking entity or must it be managed separately?

    • Karthik Rangappa says:

      Only stock brokers can help you open trading and demat accounts. So you must choose a stock broker based on your requirements and open via the broker.

  169. Nithya says:

    Hi Karthik,
    Under Debenture trustees, can you please explain the sentence “The public can subscribe to the debentures”. I am not sure I understand what that means. Do the public earn through those debentures? If so how?

    • Karthik Rangappa says:

      It means that the public (any retail investor) can subscribe to these debentures and benefit from the interest payments.

  170. Jyothi says:

    Hi sir,
    Can a chartered accountant do intraday trading?
    Thank you sir.

  171. Jyothi says:

    Hi sir,
    Thank you for your response sir.
    Can a chartered accountant trade index derivatives in intraday?
    Thank you sir.

  172. Saurabh says:

    Depositories and clearing house are the same?

  173. Rahul says:

    Kartik sir

    Do institutional traders (FII & DII) also trade through stock brokers like zerodha?

  174. Alok says:

    Hello Karthik,

    For equities market, there are today 3 exchanges with permitted. The third one being Metropolitan Stock Exchange of India Ltd. which has recognition until Sep 15 2023.

    We can refer the SEBI document linked below to refer these details.


  175. Alok says:

    Hello Karthik,

    > you have to invest a minimum of Rs.50,00,000; however, there is no such cap in a mutual fund.

    A cap is defined as “an upper limit imposed on spending or borrowing.” see: https://www.google.com/search?q=cap+meaning. What you probably mean is a “floor” or minimum threshold?

  176. LS says:

    Hi Mr. Karthik. Thanks for all the valuable information provided by you. However, I have recently entered in Mutual fund arena. MAy be this question is irrelevant to the topic covered in the video as its directed towards a specific fund – Its a fund with Crisil rating 5 Stars; Mid Cap fund, now the Nifty 50 is at 4.8% returns for 1 month; but this fund is just at 1.7% returns. Could you please enlighten on the subject matter.

    • Karthik Rangappa says:

      Firstly, you should not look at this data on a month on month basis. Please look at it from a 3 or 5 year perspective. As far as the interpretation is concerned, it means the fund has underperformed the index.

  177. Milind says:

    are financial intermediaries like stockbrokers and stock exchanges also a type of market participants?

  178. Ayush says:

    Quality of the content and Simplicity of the language makes this course best.

  179. Avinash says:

    Great details on the stock market, its participant and the regulatory bodies. However I wonder why there are only three names under stock broker ” Zerodha, share khan, and icici direct, what about grow and five paise? Are they not legit enough to be on this list? I myself transact through Zerodha only as it seems fairly simple and trustable.

    • Karthik Rangappa says:

      They are all legit. Its just that when we wrote this chapter, they dint exist. You are free to choose your broker, we are all regulated by the same regulator 🙂

  180. Samarth says:

    Thanks, learnt a lot of things from the Comments as well. Cheers Karthik and Team Varsity.

  181. Chandrabhushan Prasad says:

    Well explained.

  182. NC says:

    Couldnt understand the difference between AMC and PMS

    • Karthik Rangappa says:

      PMS is portfolio management services for HNIs and UNHINs.
      AMCs run mutual fund scheme in which anyone can invest.

  183. Shubham says:

    Hello Sir,

    My question is that the Nifty 50 is made up of 50 companies. So ideally the movement of prices of these 50 companies according to their weightage moves the Nifty 50 index.

    So isn’t there a lag(delay in price change) between the movement of the 50 companies and the nifty 50 index price.
    Or for that matter any index such as banknifty, finnifty etc etc.

    Or is it instantaneous??

  184. Shubham says:

    To Follow up,

    The prices of stocks move indexes correct?

    Now recently there is an article where they are talking about NSE opening trading from 6 pm to 9 pm only for index.

    If no index constituents are trading then how will the index trade??

  185. Charmicals says:

    Is a ‘Depositary Participant (DP)’ same as a ‘stock broker’?

    The subtle difference(s) as per GPT: DPs are primarily responsible for the safekeeping and administration of securities in electronic form, whereas stockbrokers are primarily involved in executing buy and sell orders for securities in the financial market.
    However, your article, otherwise written quite well, gives me an impression that both are same.

    As I understand is this the process of transaction:
    Stock broker → DP → Depositories → Market

    Am I correct?

    • Karthik Rangappa says:

      Thats right, DPs are agents of Depositories and they are ensure the safety of your shares and assets. A stock broker can be a DP (by acquiring the license).

  186. Swapnil Kharate says:

    I am really liking this course. Really good, brief and informative.

  187. seven7czar says:

    Possible changes in this module:

    1) “Before we dwell further into this topic” ~ I think this should either be “Before we dwell further on this topic” or “Before we delve further into this topic”.

    2) “They rate the creditworthiness of corporate and governments” ~ Use “corporates” instead?

    3) “Foreign corporate, funds and individuals” ~ same as 2.

  188. Nabin says:

    What about foreign investor [nepalese citizen]?
    What should they do to invest in Indian stock market?

    • Karthik Rangappa says:

      You will have to register yourself as a FPI, unless India-Nepal has an easy access to invest in Indian markets. Please do check with your bank about this.

  189. Niketh says:

    How does SEBI respond or take action if a Foreign Institutional Investor (FII) invests heavily in an underperforming stock, causing a significant price increase, and then exits the market with profits?

    • Karthik Rangappa says:

      Hmm, they could do it with an intent of profiting right? Nothing wrong with it. Its a risk that they are taking.

  190. Akshay says:


    I have a doubt that depositories keep our shares right. Brokers helps for transacting. So what will happen if a broker goes down. What happens to the shares we own. Can you please comment.


    • Karthik Rangappa says:

      The shares will still be safe with the depository, Akshay. If your broker goes bust, you can transfer out your shares to a new DP.

  191. Kunal Kar says:

    PMS same as mutual fund?
    I think clarity is missing

    • Karthik Rangappa says:

      No, they are two different vehicles. Is there any specific confusion with this? I’ll be happy to explain.

  192. Preet says:

    What if a certain AMC incurs heavy losses, what happens to the returns of the people who invested? Like take a hypothetical situation in which an AMC incurred losses, what could possibly be the sequence of events leading this situation?

  193. Akshat says:

    so, does the work of merchant banker end after IPO of an institution and if yes, then how does company transact new shares in the market?

  194. Siddharth says:

    what are the difference between stockmarket, stockbroker and stock exchange??

  195. Rad says:

    I’m an OCI, meaning I am of Indian origin, but a citizen of the USA. does this mean that I have to undergo any special process before trading?

  196. Rad says:

    Of course, I mean before trading in Indian markets… sorry ‘bout that

  197. SANKALP RAY says:

    Is reading modules important or the videos provided are enough??

  198. Chinki says:

    Is stock exchange and stock market both terms are same

  199. Mukta priyadarshini says:

    What is sentiment ?
    What is cap?

  200. D says:

    Is it a good ideo to primarily focus on the videos to prepare for the exam or are they more of a revision?

  201. shrawan says:

    do domestic inst and amc come under DII

  202. chandradev says:

    mostly, who will invest in PMS schemes?
    and if debentures are not secured by charge on asset of the company then debentures trustee will come into picture or not?

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