Algorithmic trading (algo trading) has revolutionized the financial markets by automating the execution of trades based on pre-defined criteria. But is algo trading good to do?
For many people, algo trading offers great advantages. Algorithms can process a lot of data at a very fast speed and make trades at a very low cost. This makes trading much more efficient and profitable. Algorithms can react faster than humans to market fluctuations, allowing traders to take advantage of opportunities that may otherwise not be available. By not having human emotions taking part, there is less emotional risk in trading.
Algorithmic trading is all about using computer algorithms to take control of the trading process. These smart algorithms separate through market data, spot trading opportunities, and place orders for the trader. They can execute trades at lightning speed and in volumes that far surpass what any human could manage, all while keeping emotions out of the equation—something that often clouds human judgment.
At its core, algorithmic trading relies on predefined rules, like price, volume, or time, to determine the optimal moments to buy or sell a security. These rules can range from straightforward to incredibly intricate, weaving in various market factors, technical indicators, and statistical models.
The growth of algo trading has been driven by leaps in technology. With high-speed internet, enhanced data analysis tools, and superior computational power, it’s become much easier to create, backtest, and roll out complex trading strategies. These tech advancements, along with the increased access to financial data, have opened the doors for not just institutional traders but also retail traders to dive into algo trading.
Nowadays, algo trading makes up a heavy chunk of the daily trading volume in financial markets. For instance, in the U.S. stock market, it’s estimated that over 60% of trades are executed using algorithms. This trend underscores the expanding influence of automation in shaping the global financial landscape.
One of the standout perks of algorithmic trading is its speed. Algorithms can analyze massive amounts of market data in real-time and execute trades in the blink of an eye. On the flip side, human traders are limited by their cognitive abilities and can’t react nearly as fast. This speed advantage lets algorithms capitalize on even the tiniest price discrepancies, raking in profits that would be tough to match with manual trading.
Human traders often let their emotions, like fear or greed, cloud their judgment, which can lead to some pretty poor investment decisions. On the other hand, algorithmic trading takes that emotional bias out of the equation. Since algorithms stick to strict, predefined rules, they make trades without getting caught up in the fear of losing money or the temptation to chase after big gains. This results in a more disciplined and consistent approach to trading.
Algo trading systems can be backtested using historical market data, which is a fantastic way for traders to test their strategies without any risk before putting real money on the line. Backtesting helps pinpoint which strategies work best in various market conditions. Plus, algorithms can be fine-tuned and adjusted continuously to keep up with the ever-changing market landscape.
With algo trading, traders can easily diversify their strategies by managing multiple trades at the same time. Algorithms allow them to invest in a range of markets and securities all at once, which helps spread the risk across different assets. This diversification is key to lowering the overall risk of a trading strategy.
Automated systems make trading more efficient, which in turn cuts down on transaction costs. Algorithms can execute trades faster and at lower costs than humans can, especially when you factor in things like bid-ask spreads, slippage, and commissions. For high-frequency traders, those small savings can really add up to significant profits over time.
Algo trading opens the door to executing complex strategies that would be tough for humans to handle manually. For instance, strategies like statistical arbitrage, market making, or pairs trading require quick analysis of huge amounts of data and the ability to make multiple trades simultaneously. These strategies can be effectively carried out through algorithmic trading systems.
Algo trading can be a smart move, but it really depends on what the trader is aiming for, their resources, and their level of expertise. For institutional investors who have access to cutting-edge technology and substantial capital, algorithmic trading can be an incredibly effective way to boost efficiency and profits. On the flip side, retail traders need to think carefully about the costs, complexities, and risks that come with algorithmic trading.
In short, algorithmic trading isn’t a one-size-fits-all approach. Traders must grasp the technology, recognize the potential risks, and thoughtfully evaluate whether the advantages outweigh the hurdles. By doing this, they can make well-informed choices about incorporating algorithmic trading into their investment strategies.
India has been the most liked investment destination for FIIs and also FIIs were net buyers in Indian equity trading markets to the tune of Rs 17 lakh crore in 2020, reduced stake in over 40 large-cap companies sequentially in the quarter ended in December.
Since 2012, banks have remained the investment choice for FIIs. In the last eight years, FIIs favorite sector was banking, oil and gas, capital products financials and more. Within the last 3 years, insurance as a sector got the eye of FIIs and attracted important flows.
Recently, it has come into notice that foreign institutional investors are reducing their stacks in the large caps in India as large-cap stocks have not been performing well in the Indian market.
Foreign investors are expecting that if the market falls, the large-cap stocks will be the first to bear huge losses.
Let’s have a detailed insight into Foreign Institutional Investors and their impact on Indian investors.
FIIs or foreign institutional investors are those investment funds that invest in foreign countries’ assets outside their headquarters. FII plays a significant role in any country’s economy. FIIs are those entities that invest in the Indian stock market.
There are numerous large organizations such as mutual fund entities, and banks that invest a huge amount in the Indian financial market. The presence of FIIs in stock trading and securities purchased by FIIs helps to move the market upward.
FIIs raising or reducing stakes should not be the only parameter by which investors should track before buying or selling a share or investing in a company.
Experts advise investors to do their own study and pick stocks that also match their risk profile. Investors can use both technical and fundamental parameters to make their buy or sell decisions.
Under fundamental parameters one can track Cash flows, EPS, PEG ratio, leverage on the books, revenue growth, as well as future CAPEX, spends, etc.
The reasons for buying, holding or selling any stock depends on the market participant – short term or positional trader, short-term or long-term investor, they say. Based on the financial and portfolio positioning, different actions can be taken.
“Besides fundamentals, there are technical parameters too that one tracks for making buying or selling decisions. One of the key parameters is the positioning of stocks relative to their respective 50, 100, and 200-day moving averages, as well as the direction of each of those averages,” says Kavalireddi, head at a renowned financial institution.
“A trader or a positional investor can use 50-day moving averages to identify short-term entry opportunities and 100/200-day moving averages to identify medium-term entry opportunities. Another technical parameter of importance is the price trend, both on the daily and weekly time frame charts,” he said.
Kavalireddi further added that investors can also track the put-call ratio of stock and index options, market breadth, ratio charts of stocks to indices, etc. “While these parameters do not provide an outright buy or sell signal, they can help one understand market sentiment and market positioning,” he said.
The companies in which FIIs have reduced stakes are mostly blue-chip companies and sector leaders. The primary reason behind the reduction of stakes in large-cap companies may be rebalancing the portfolio or booking the portfolio at a higher level. So if someone is holding any of the large-caps, they could still remain, net buyers, as the long term potential is intact.
Another reason for minimizing their stakes could be profit bookings as stocks like IFB Industries Limited and Adani Industries Limited have generated more than 200 percent returns, Likhita Chepa, a senior research analyst who works at a financial consultations company.
Chepa further added that the underlying reason for reducing their stake may be different for different stocks. Hence, it is advisable to go through a careful study with respect to each stock before making any decision.
Experts also said that the companies coming under Nifty 50 gave phenomenal returns. Most large-cap stock prices have gained a price hike, some delivering returns greater than 100 percent in a short time.
The four large-cap companies that have rallied more than 100 percent are JSW steel, Adani Enterprises, Tata Motors, and Laurus Labs. Meanwhile, nine stocks rose 50-100 percent since June 30.
Many investors think that FII’s decision to reduce stakes in large-cap companies is a negative sign for them. However, this is not so true. Instead, investors grab these opportunities to purchase high-quality stocks.
However, it should be noted that FII's decision to increase or reduce the percentage of shares should not be the only parameters investors should track before buying or selling stock in a company. Therefore, many experts advise investors to do stock market research and do their own study and pick stocks that also match their risk appetite. Also, investors can use both fundamental and technical analysis to make their buy or sell decisions.
Under fundamental analysis, one can track EPS, cash flow, leverage on the books, revenue growth, and more. Buying, holding, and selling any stock depends on the market participant - whether it is a short term or long-term investor. Different actions can be taken based on financial and portfolio positioning.
Foreign institutional investors and FIIs reduce their stakes in large-cap funds to book profits. This decision of FIIs is affecting Indian investor’s psychology that affects their decision whether to buy large-cap stocks or not. Therefore, many experts suggest not to panic about the situation and stick with quality stocks that will help you to develop future wealth creation. Staying or exiting in the large cap completely depends on the individual's decision. But before making any decision, do thorough research and analysis about a company that you want to invest in.
In the past few years, SME IPO has turned out to be the most crucial and dazzling sector of the Indian economy. This is because the employment intensity of SMEs is four times greater than the large-scale enterprise which in turn makes SME the biggest contributor to the GDP of India.
Also, the government has recognized the role and importance of SMEs in their economy. The biggest challenge faced by these enterprises is access to capital. To overcome this, numerous capital markets have recognized the need for a separate exchange for the SME sector.
Keeping this in mind, the BSE and NSE have launched their own platform for small and medium enterprises to list on BSE and NSE. Thus, BSE SME and NSE Emerge are a new source for SME IPOs and provide a listing opportunity to the SMEs with minimum compliances and cost compared to the main board.
An SME exchange is a stock trading platform for small and medium enterprises. The SME trading platform was first set up by SEBI in 2008. However, the major step has been taken by the prime minister’s task force in January 2010 on Micro, Small and Medium Enterprises, which recommended setting up of SME exchange to promote inflow of equity capital in this sector.
Before we dig deep into this, let's understand the meaning of SME IPO, its procedures and its benefits.
SME BSE is a trading platform where only SMEs trade their shares in this exchange trading platform. So, if a company wants to get listed on the exchange, they have to come out with their IPO.
The eligibility criteria for SME IPO is somewhat different from the main board of NSE, BSE. Here are the requirements for the BSE SME IPO.
SME listing not only provides benefits to the company but also benefits its investors, both existing and proposed such as providing an exit route to private equity investors as well as liquidity to the ESOP holding employees.
SME capital market allows many companies to scale up their business. As of now, the BSE SME platform of over 300 companies is listed on it and NSE Emerge has over 180 companies listed on it.
SME listing provides relaxed listing norms and minimal cost of listing as compared to the main exchange which in turn is ideal for the SMEs to raise capital and meet their growth requirement.
BSE and NSE are the platforms where companies list their securities which are also known as the mainboard. SME IPO is the main platform IPOs have been taking place for years. This is because NSE and BSE follow strict eligibility criteria that must be adhered to list on their platform.
BSE SME and NSE Emerge on the other hand, have no so strict eligibility criteria. In addition to this, other requirements for IPO listing such as the requirement of track record, reporting requirements, time frame for listing are quite easy for SME, making a listing on an SME platform quite easier.
SEBI is all set to allow startups to list on the SME platform. Also, the companies seek an opportunity to raise capital as the SME platform gives special relaxations to startups in terms of net worth and profitability. The primary reason for giving special relaxation is to provide capital raising opportunities to SMEs who cannot list on the mainboard because of the huge compliance norms.
To successfully list on SME platform, one should have a demat account with the top stock broker like Swastika who offers promising IPO services to its clients.
There are numerous small firms that seek capital growth. Since they have limited options to raise capital, providing an SME platform for them would be a positive step for the investors who seek growth for their company. With proper relaxation, the SME platform would come out as a primary option for startups to raise capital.
If you are a beginner who has just started stock market trading, chances are there you have come with the same confusion. How many stocks should you own in your portfolio in order to make a desired level of diversification?
Well, investing in stock and curating a portfolio that meets your financial requirements is not as easy a task as it seems to be. The correct number of stocks to hold on your portfolio heavily depends on personal factors such as market condition, time horizon and risk appetite and your tendency for reading market news and keeping up to date on your stock holdings.
When it comes to holding the ideal number of stocks in your portfolio, diversification is the main thing that you should focus on. A systematic diversification in your portfolio minimizes investment risks and can increase your chances of yielding huge returns. Also, experts said that diversification is the best way to invest assets in a variety of assets across different sectors.
Let’s discuss the approach at the value of diversification that helps you to identify long term and short term goals that lead to different investment options. The below points will help you to reach a satisfactory conclusion.
For any investor, it would be ideal to maintain a stock that captures 5-6% of the entire portfolio, said Seth Klarman, a successful investor. As said above, the exact number of stocks in your portfolio is a personal choice based on your knowledge skills, risk appetite and time horizon.
Financial experts mostly said that 20 to 30 stocks are an ideal range for any portfolio. Generally speaking, many sources say 20 to 30 stocks is an ideal range for most portfolios. It’s important to maintain a balance between investing in a diverse range of assets and ensuring that you have the time and resources to manage these investments.
As there is no exact answer to this question, many experts believe that somewhere between 20 to 30 stocks are necessary to create a strong portfolio.
Diversification enables you to capitalize on potential growth in one area without losing out too much if another plunges since not all of your money is concentrated in that field.
Diversification plays an important role in creating a portfolio. This is because diversifying your money in multiple sectors ensures your money stays safe. If one or few stocks fell down, the other industries from different sectors can compensate for the losses that occurred from the former stocks.
In the beginning, you can start with stocks, bonds and mutual funds. As long as you get experience further in diversification, you can increase investments which can vary by sector, company size, geographic location and more.
Here are the factors to consider while opting for the ideal number of stocks in the portfolio:
1. Risk tolerance
This is one of the best risk tolerance factors one needs to be accounted for. Once you know your own risk appetite, you can easily select an industry, stocks and sector. Let’s understand with a suitable example. If the stock of one company under performs, the impact on your overall portfolio is negligible.
2. Return Expectation
It should be noted that as the number of stocks in your portfolio increases, the overall returns on your portfolio decreases. This is because some stocks in the stock market outperform the other stocks while many stocks give average returns. So, the higher returns of a few potential stocks might down due to the performance of weak stocks, which in turn heavily impacts the overall portfolio.
Hence, for better returns, it is advisable to lower the number of stocks and diversify so that you can concentrate on specific companies in which you have confidence in them.
3. Research Capability and Bandwidth
Before making a portfolio, it is important to do a stock market research and quality of information as it helps you to make a successful portfolio. Also, it helps to know how many stocks you should buy.
There is a number of aspects you need to figure for your research:
(i) The company’s fundamentals
Before selecting any stock, it is suggested to analyze the fundamentals of a stock. This is because knowing the fundamentals of a stock will provide you with detailed insight into a company. This will help you to opt for a company that will give you maximum returns in the future.
The fundamentals of the accompanying include earnings, profitability, cash flow statements, annual reports, the performance of a stock and operating margins. Picking a stock is just like marrying a company. You need to be 100 per cent confident in the growth proposition of a company. The higher the operating margin, the higher will be the efficiency of a company.
(ii) Capital Structure
The capital structure of a company is another important parameter as it provides stability and liquidity so that the company’s dependence on long term debt is low.
(iii) Management:
Management is a major performance indicator of the company and a stock performs well only if management is focused and growth-oriented. Hence, it is advisable to research management which is of utmost importance.
4. The time horizon of investment
Many investors think that stocks give them overnight returns. However, this is not the case. If you create a healthy stock portfolio, then it would be better if you should not depend on overnight returns. Do remember that equity is a long term investment and most people use the buy and hold strategy for the same.
The ideal stocks one should have in its portfolio should be between 15 to 25. Also, it depends on everyone’s investment strategy. The investment strategy also suggests how many stocks you should own in a portfolio.
Whether you want a concentrated portfolio of high dividend-yielding blue-chip stocks or if you are investing in small-cap stocks or put a large number of stocks to minimize the overall risk of investment. The choice is completely yours.
Creating a trading strategy that outperforms the market can seem like a difficult task, but with the right approach, it’s definitely achievable. Here’s a simple guide to help you develop a strategy that could give you an edge.
Before you start, think about what you want to achieve. Are you looking for short-term gains or long-term growth? Knowing your goals will help you shape your strategy to match.
Figure out how much risk you’re willing to take. Are you comfortable with high-risk, high-reward trades, or do you prefer a safer approach with steadier returns? Your risk tolerance will guide your investment choices and strategy.
Research is key. Study different markets and assets to understand how they behave. Look into historical data and trends to see what has worked in the past. This knowledge will help you make more informed decisions.
There are various trading styles to choose from:
Develop a detailed trading plan that includes:
Technical analysis involves studying price charts and patterns to predict future movements. Learn how to read charts, identify trends, and use indicators to make better trading decisions.
While technical analysis is important, don’t ignore the fundamentals. Pay attention to news and events that might impact the market, such as economic reports or company earnings.
Before you commit real money, test your strategy with a paper trading account or a small investment. This helps you see how your strategy performs without risking too much.
Once you start trading, keep track of your performance. Analyse what’s working and what isn’t. Be ready to adjust your strategy based on your results and changing market conditions.
Stick to your plan and avoid making impulsive decisions based on emotions. Discipline is crucial for long-term success.
Developing a trading strategy that beats the market takes time, effort, and patience. By setting clear goals, understanding your risk tolerance, doing thorough research, and staying disciplined, you can create a strategy that helps you achieve your financial objectives. Keep learning and adapting, and you’ll be on your way to becoming a successful trader.
A stock broker acts as an intermediary, facilitating the buying and selling of stocks and securities in a stock exchange on behalf of financial institutions and firms. Investors cannot directly trade in stock exchanges; hence, the role of a stock broker is crucial.
To successfully carry the transaction of stocks trading, you are required with an intermediary who helps you in purchasing and selling the stocks in a much better way. This intermediary can be a person or a company that is authorized to do the transaction of stocks on your behalf. Such a company or person is known as a stock broker in India.
A stock broker in India can be either a stockbroking firm or an independent entity, providing stockbroking services to customers. The primary role of a stock broker is to execute buy and sell orders for clients, and to offer insights that help investors make insightful decisions.
Before we step into the importance of stock broker, let’s figure out how to choose the best online stock broker:
How to Choose the Best Online Stock Broker?
Selecting the right online stock broker is crucial for successful investing. A good stock broker not only helps you identify potential stocks but also guides you in choosing the best ones for generating returns.
If you are a newbie who wants to invest in stock market trading, it is suggested to pick the best online stock broker, as with the help of it, you can handle all the stock market operations at a fingertips.
Here are some tips to select the best online stock broker:
1. Understand Your Basics
Know your investment needs. Opt for a stock broker who understands your expectations from stock trading. Many online stock brokers charge high brokerage fees, which may not suit new investors. Look for brokers like Swastika Investmart that offer excellent trading services at affordable rates.
2. Stock Market Pricing
It is important to check the pricing of a stock broker before deciding to move further. Try to find out the AMC annual maintenance charges. These charges vary from broker to broker. Some brokers charge very high amounts, while others, like Swastika Investmart, offer competitive and transparent pricing.
3. Range of Trading Segments
Different investors have different priorities in trading financial products such as Equity, commodities, IPOs, FDs and more. Go for the stock broker who has different financial products.
4. Fund Transfer Process
Select a stock broker which comes with 3 in 1 Demat account as the stock broker provides seamless fund transfer services which allow investors to trade with ease. This feature, offered by Swastika Investmart, allows you to trade with ease without constantly transferring money.
5. Expertise of Research Team
While selecting a stock broker, it would be ideal to check the research team provided by the stock broker first. This is because the research reports generated by the stock broker help investors in picking the best stocks that would give them high returns.
In share trading, margin trading refers to the process where individual investors buy more stocks than they can afford. Also known as intraday trading, margin trading allows all the transaction of stocks (buying and selling) in a single day.
Now Intraday’s stock brokers are well capitalized. Here, stock broker lends capital to the traders who want to leverage their positions. A margin amount is to be paid by traders after which they are allowed to take positions in the stock market. Generally, the margin amount is 50%.
Mostly, a broker deals in all types of securities. The stock brokers suggests the best deals to its clients such as when to buy or sell a stock. Majorly suggest the stocks on the basis of advisory, and research reports suggested by them.
A stock broker receives orders from multiple traders and places those orders on a stock exchange. Once the order is successfully placed, trades will get to know about it. However, this is the case with full-service stock broker of India, online brokers facilitate trades with trading platforms where traders can place their orders on their own.
All the orders are automatically visible in your Demat account once they are successfully placed and executed.
Full-service stock brokers charge commissions in the form of brokerage for the services they provide to traders. This charge is some percentage of the trader they provide to clients. Discount brokers charge a flat commission which is pre-decided on every executed order.
Now, many of you have acknowledged the fact that how share trading can play a valuable role in your life. Yes, you heard it right. Investing in online share trading gives you bundles of opportunities to invest in different types of stocks.
Once you gain appropriate knowledge about stock trading, you can easily perform transactions with such ease and book a significant amount of profit. In case you need any help, you can easily connect with an online stock broker, during the initial days. Once you become a thorough expert in buying and selling shares then you can try to do it on your own.
Things you need to know:
PAN Card
For the Demat account opening process, you must require the important document as proof i.e PAN Card. It is a valid ID proof that is issued by the government of India.
Depository Participants
NSDL (National Securities Depository Limited) and CSDL (Central Security Depositories Limited) are the primary depository participants of India that help you to store the shares you hold. They provide you with a unique account pertaining to the same.
Many people often get confused with the term Demat and Trading account. Demat Account shows the number of shares you hold. Trading account, on the other hand, allows you to buy and sell shares that you currently have.
Picking the right Stock Broker
If you are a beginner then it is suggested to consult a full-service trusted broker. This is because the full-service broker gives you guidance on the day to day aspects of share trading. These stock brokers are SEBI (Security and Exchange Board of India) certified and given licence to act as a broker. In other words, a broker is an intermediary between an independent stock broking firm and share trader.
Ways to Perform Buying and Selling of Shares
This is how you perform in buying and selling shares. For instance, you have bought shares of Rs 890 with the assistance of a broker, the broker will ensure you regarding the purchase order or stop order. Also, they help you to execute the stop order if you want to stop the transactions during the day.
How are the Stock Brokers in India regulated?
Stock brokers in India are regulated under the Securities and Exchange Board of India Act 1992, Securities Contract Regulations Act, 1956, and also the Securities and Exchange Board of India (Stockbrokers and sub-brokers Regulations), 1992.
In addition to this, stock brokers are also regulated under other regulations and bylaws that SEBI may issue from time to time.
Important Note:
Every stockbroker in India needs to be a member of stock exchanges and also requires to be registered with SEBI. Stockbrokers display their registration details on their websites and even on official documents. To get any inquiry about registration, one can also visit the SEBI website and find details of registered stockbrokers.
Now you all know about stock brokers and how they are regulated, let's take a quick tour of the types of stock brokers.
Based on the types of service provided, there are majorly two types of stockbrokers - full-service stock brokers and a discount stock broker.
Comprehensive Services: Offer full trading services and a wide range of add-ons to clients.
Advisory Services: Provide advisory services to help clients make good investment decisions.
Research Reports: Supply detailed research reports on various stocks and market trends.
Relationship Managers: Assign relationship managers to assist with client needs.
Variety of Services: Offer additional services such as IPOs, mutual funds, insurance, loans, etc.
Established Players: Often have a strong presence with branches across the country.
Client Convenience: Easier for clients to access services and get advice due to widespread branches.
Limited Services: Do not provide advisory services or research facilities.
Online Platform: Emerged due to the ease and accessibility of the internet.
Trading Platform: Offer an online trading platform for clients to execute trades.
Flat Brokerage Fees: Charge flat brokerage fees, typically a set fee per transaction.
Cost-Effective: Generally more cost-effective for clients who do not require additional services.
Online stockbroking services are faster than traditional ones because transactions can be done over the internet. They also allow stockbrokers to connect with clients via email and chat, providing real-time updates.
In addition to stockbrokers, it's useful to understand sub-brokers. A sub-broker works on behalf of a stockbroker to help investors trade financial securities. Unlike stockbrokers, sub-brokers are not directly members of the stock exchange and need to register with SEBI to trade.
Rights and Responsibilities of Stock Brokers, Clients, and Authorised Persons
All parties involved in trading services—whether clients, authorised persons, or stock brokers—are governed by SEBI regulations, which ensure clarity and transparency in all transactions and liabilities related to share trading.
Here is a summary of the rights and responsibilities for the top stock brokers in India:
Integrity:
A stock broker must uphold the highest standards of integrity, fairness, and promptness in all business activities.
Exercise of Due Skill and Care:
A stock broker is required to exercise care, diligence, and due skill in every aspect of their business operations.
Manipulation:
A stock broker must refrain from engaging in deceptive schemes, fraudulent transactions, or spreading rumours that could distort market equilibrium or lead to personal gains.
Malpractices:
A stock broker should not create or participate in the creation of a false market, whether individually or in collaboration with others. Additionally, they must avoid any actions that could harm investors' interests or disrupt the fair and smooth functioning of the market. Excessive speculative trading beyond reasonable business limits, especially if not aligned with the broker's financial stability, is strictly prohibited.
Compliance with Statutory Requirements:
A stock broker must adhere to all relevant provisions of the law, including rules and regulations issued by the government, the Securities and Exchange Board of India (SEBI), and the stock exchange as applicable.
Education:
While there are no specific educational prerequisites for becoming a stock broker, certain courses can provide valuable insights and advantages in the field. The minimum qualification is a bachelor's degree, coupled with at least two years of experience in a stock broking firm. Many stock brokers further enhance their expertise with a Master of Business Administration (MBA) in finance, which equips them with knowledge in mathematics, statistics, qualitative analysis, and more.
Experience:
Gaining experience in a stock broking firm is crucial for aspiring stock brokers. This hands-on experience provides a deep understanding of stock market regulations, financial markets, and accounting practices.
The Indian capital market is recognized as one of the most organised and regulated sectors, largely due to the efforts of SEBI. Whether you are an investor or a stock broker, it is essential to operate within the guidelines set by SEBI to avoid potential challenges.
Market Watchdog SEBI has brought a new policy to the initial public offering (IPO) process easier and faster in connection with the IPO. Another master move by SEBI is to simplify the entire procedures with a focus on reducing the listing time from 6 days to 4 days.
Also, SEBI considers IPO investor grievances for those who use a unified payment interface (UPI) for payment. The market regulator has further said that it has allowed the Payment UPI for investors who wish to invest in IPOs. According to SBI norms, only the UPI handles it has mandated can be used for issuing IPO mandates.
The SEBI has already minimized the listing time from seven days to six days post-closing of the bidding. This blocks the fund of an investor if he could not get the entire subscription.
Earlier, the regulator had ended the practice of allowing the issuer to block the entire subscription amount in the Demat account by allowing the money to be blocked in the investor’s account through the Absa facility. This helped investors not to block their money in a third party account till the IPO process is over.
SEBI chairman Ajay Tyagi further said SEBI is trying to simplify the process of IPO by reducing the time taken for listing a company on the stock exchange after the IPO to four days from six days.
This year, the IPO market or share market is giving satisfying results as the fund raising through the primary issues is more than six years combined. According to Ajay Tyagi, the formalization of the economy after the demonetization, softer interest rate regime, as well as increasing public awareness about mutual funds, has uplifted the demand side, while outstanding issues have helped the supply side.
In order to maintain the stable regulations, Tyagi said, he wants to continue with the stable regulations as any sort of overburden will lead to lower investment which is not good for the primary market.
Seeking the broader investor’s participation in the MF industry, Ajay Tyagi said the AUM of the industry is still working well over at Rs 21 trillion which is one-fifth of the banking sector.
In order to grow the MF industry in a transparent manner, he said the SEBI has created a separate division that primarily focuses on mutual funds so that there is no miss-selling.
For the smooth process of IPO, SEBI will address the delays of the mandate by investors for blocking of funds because of the problems that occurred at the stock brokers’ end.
The share trading policy will also work on the issues regarding the unblocking of funds in partial allotment cases after the finalization of BOA (the basis of allotment).
The basis of allotment is a document that contains the basics on which the equity shares are allotted to the successful bidders. BOA is a document that is published by the registrar of IPO after the share finalization based on SEBI guidelines.
SEBI also set a new framework in which sponsor banks are required to send any pending application for unblocking of funds to the registrar along with the allotment file not later than 12.30 pm on BOA+1.
Next, the registrar would submit bank-wise pending UPI applications to SCSBs with the allotment file for unblocking before 2 pm on BOA+1. This will be followed by the confirmation submitted by SCSBs to lead managers on BOA+1. If SCB fails to provide any details on the time, then SEBI will take strict action for this.
These changes will come into effect from May 1, 2021. SEBI’s new framework comprises a lot of things that include that the self-certified syndicate banks SCSBs will be required to find out the nodal offer for SME IPO applications that are processed through UPI payment gateway. Also, SCSBs need to submit all the processing details to SEBI within seven working days.
According to the new framework, SEBI gives clear instructions that brokers and investment bankers need to compensate any IPO applicants by paying Rs 100 or 15 per cent interest per annum on the application amount depending on which one of the two is higher.
In addition to this, the sponsor banks will host a portal for intermediaries or stock brokers where the IPO date is listed. The portal comprises all the details of the blocking or unblocking of funds, apps, any downtime or delays, the performance of UPI handles and more. Overall, any process that is involved in the bidding process of the IPO will be documented.
The intermediaries, aka online stock broker that include in IPO are merchant bankers, underwriters, registrars are registered by SEBI. These intermediaries perform all the IPO related activities including preparation of draft offer documents, the basis of allotment, and crediting of shares to the successful applicants of IPOs.
In 2018, SEBI had introduced the use of UPI as a payment gateway for retail individual investors. This acronym ASBA refers to an investor’s application to SCSBs. The application contains an authorization to block bank account debit till it is selected for allotment after finalization on the basis of allotment. The ASBA facility was made mandatory for all investors who were applying for an IPO in 2016.
Needless to say, the use of the UPI payment method will not only uplift the process for IPOs by investors but also increase their confidence while entering the market. According to NITI aayog, the popularity of UPI has suddenly increased over time with nearly 2.3 billion transactions amounting to Rs 4.2 trillion.
Market regulator SEBI’s primary objective is to ensure that the upcoming IPO process should be smooth, efficient and fast so that the maximum investors can get the maximum benefit from the seamless process. It also assists investors to object to grievances. Also, through UPI payment method, investors can successfully carry out the IPO application process, which is a quite popular payment gateway and easily used on any electronic device like a laptop, smartphone, tablets. By doing so, SEBI makes a great effort in making the process seamless, fast and effective for all investors involved.
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