Charges levied on a demat account

Before going to DP for opening a Demat account, We should know what all type of charges are levied for opening the account. Here I listed them.

Different types of Demat Account Charges:
There are 3 major charges charged on a demat account: >
1. Account Opening fee :> There may or may not be an opening account fee, depends on your DP.
2. Annual maintenance fee :> Charged in advance, for maintaining your portfolio.
3. Transaction fee :> Charged for crediting/debiting securities to and from the account on a monthly basis.

Do not confuse Demat account charges with brokerage charges.
Demat account charges are levied to your DP and Brokerage charges are paid to your Broker, in case if your DP and broker are 2 different entities.
There are also other type of charges levied on a demat account like Dematerialization, Rematerialization, Pledge Services, off market transfers, STT charges and they may or may not be applicable and varies from DP to DP.

Demat Account: First step to trade in share market

If you have ever been interested in learning about the stock market, this is your chance.
With growing share market awareness, more and more people now want to participate in the share market. To do this, we should understand the basic requirements to trade in shares. Let me take you along to the fantastic world of trading in shares.
So we will start with Demat Account.

A company listed on a stock exchange; have to offer the securities (e.g. shares) in both physical and dematerialized mode.
-Physical mode means actual certificates giving information about the shares of a company owned by a person.
-Dematerialization is the process of converting physical shares i.e. shares certificates into an electronic form.

Dematerialization of shares is optional and an investor can still hold shares in physical form.
But we have to demat the shares if we want to sell the shares through the Stock exchanges, because now a day’s almost all of the shares trading happens using the Demat mode of shares.
For trading through the Demat mode of shares, DEMAT account is required.
You need to maintain an account with a depository (for more info see note@ the end of this blog) if you intend to hold securities in demat form.

What is a DEMAT account?
DEMAT Account refers to a dematerialised account.
A DEMAT account is an account which we need for buying/selling the shares/stocks of a company and other equities like mutual funds, exchange traded funds - Gold ETFs etc.

Demat account hold equities, we cannot put money in demat account.
Let's say: If I buy shares like this: 50 of Infosys, 25 of Reliance, 15 of TCS. All these shares will be shown in my demat account.
So we don't have to possess any physical certificates showing that we own these shares. They are all held electronically in our account.
As we buy and sell the shares, they are adjusted in our account.
We have to contact the DPs (For information on DPs See note @the end of this blog), to open the demat account. He will give you all the required details for opening DEMAT.
After opening the demat account, the DP will provide you with periodic statements of holdings and transactions, just like a bank statement. However for sake of your own information, it is better to keep a record of the shares purchase prices of on your own as this information is not included in the statement.

There are several DPs in India for e.g. ICICIDirect,Kotak,SBI,Sharekhan,Reliance Money,Motilal Oswal etc.

There are many Benefits of holding shares in DEMAT form:
Benefits:

-Immediate transfer of shares. Demat avoids the time consuming and complex process of getting shares transferred in the name of buyers.
-Elimination of risks associated with physical certificates such as bad delivery, fake securities (in postal delivery), etc.
- Reduction in paperwork involved in transfer of shares.
- Holding investments in shares, debts and mutual fund units in a single account.
-Also automatic credits of shares into demat account, in case if a company declares bonus shares or split of shares.
-It is also safe, secure and convenient.
-No stamp duty for transfer of shares
-Transmission of securities is done by DPs.We don’t have to interact with companies.

The next blog will be on other DEMAT details like How to open DEMAT Account.

Note: Like bank holds money in a Bank account, Depository holds securities (i.e. Shares, Bonds, Mutual fund units etc.) in an account.
The Depository provides its services to investors through its agents called depository participants (DPs).Banks, Financial Institutions, and SEBI registered members can become DPs.

NEFT Vs RTGS

NEFT & RTGS are the online facilities for transferring money within the country. NEFT & RTGS allows accounts holders in the banks to electronically transfer the funds intra-bank.

NEFT Vs RTGS

 

Sr.No	Differences	NEFT	RTGS
1	Full Form	National Electronic Funds Transfer	Real Time Gross Settlement
2	Settlement	Deferred net settlement (DNS) and settles transactions in batches	Continuous Settlement of fund transfers on an order by order basis.[Real time basis]
3	Transactions processed till time	Only Transactions received till a particular cut-off time are processed	Transactions are processed continuously all the business time
4	How much can be transferred	No limit on maximum or minimum amount that can be transferred	Limit is Minimum of 2 lakhs and no limit on maximum amount but banks may restrict the amount you can transfer in one day
5	Charges on outward transfers	For transfers up to 1 lakh-Not more than RS 5	2 TO 5 Lakh -Not more than Rs 30
		1 to 2 lakh-Not more than Rs 10	Above rupees 5 lakhs -Not more than Rs 55
		More than 2 lakhs-Not more than Rs 15
6	Operating hours	It Operates in hourly batches twelve settlements from 8 am to 7 pm on week days (Monday through Friday) six settlements from 8 am to 1 pm on Saturdays.(for each bank / branch the above timings may sometimes vary)	From 9.00 hours to 16.30   hours on week days                                        from 9.00 hours to 13.30 hours on Saturdays(for each bank / branch the above timings may sometimes vary)
7	Processing Time	Transfers made are slow as compared to RTGS	Transfers made are quick as compared to NEFT

 

Collection of Quotes:The Richest Man in Babylon

This is a must read wealth building book. It is written in a story-like format. You may feel the language used a bit different, but the messages are very clear.
The wealth building principles like “Seven cures for a lean purse” and “The 5 laws of gold” are nicely explained and easy to understand.

Some of the financial quotes in this book are really nice and here I am giving you the collection.

Collection of some good quotes from a must read inspiring book on wealth building:

Money is the medium by which earthly success is measured.

Money makes possible the enjoyment of the best the earth affords.

Money is plentiful for those who understand the simple laws which govern its acquisition.

Action will lead thee forward to the successes you most desire.

To attract good luck to oneself, it is necessary to take advantages of opportunities.

Men of Action are favored by the GODDESS of good luck.

Wealth is power. With wealth many things are possible.

Every gold piece that you save is a slave to work for you. Every copper it earns is its child that also can earn for you.

Advice is one thing that is freely given away, but watch that you take only what is worth having.
Live on less than you earn.

Opportunity is a haughty goddess who wastes no time with those who are unprepared.

Good luck waits to come to that man who accepts opportunity.

Wealth that comes quickly goes the same way.

Wealth that stays to give enjoyment and satisfaction to its owner comes gradually.

Where the determination is, the way can be found.

A BULL MARKET? What is it?

What is Bull Market?

 

You often hear of the market being bullish or bearish. But what is a bull market?

The term Bull Market is most frequently used in respect of stock markets.

 

What is Bull Market?

A bull market is one in which prices of securities are rising or are expected to rise.

It is a prolonged period where the security prices rise faster than their historical average.

Bull market is based on the investor’s belief that the upward trend of securities will continue in the long term.

Bull Market indicates that the economy of the country is strong and also suggests good level of employment.

Why Bull markets happen?

Cause: It can happen as a result of

·         Economic recovery

·         Economic boom,

·         Investor psychology

·         Positive Political event

What things Investor should do in Bull Market?                                                      Investors must take advantage of the rising prices in the bull market and buy securities early, when prices reach their peak sell it i.e. book profits.

Example of Bull Market:                                                                                                 There had been a number of bull markets. There had been the rally in the Sensex, where it has run from 7,000 in June of 2005 to over 21,000 in early 2008.

 

SLR-Statutory Liquidity Ratio-Simplified

SLR:

 

“SLR Decreased from 24% to 23% with effect from 11/08/2012 by RBI”. 

This was the news published in the year 2012.

To understand the impact of the news on stock market, we first have to understand what SLR is.

SLR means- Statutory Liquidity Ratio.

It is a tool used by RBI to control inflation and to boost growth.

Since last 2 years, RBI's primary aim is to control inflation.

 

Objectives of SLR: The main objectives for maintaining the SLR ratio are the following:

To control the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.

To compel the commercial banks to invest in government securities like government bonds.

SLR regulates credit growth in the country.
 

If RBI sets SLR to 25%, that a Bank must keep 25% of its Total deposits, into non-cash forms prescribed by RBI: that is….

1.            in Gold

2.            In Corporate Bonds / Shares approved by RBI

3.            G-Sec (Government Securities/ Treasury Bonds)

But most banks prefer to put all the money in Government securities (G-Sec), because they're safer than the other two.

If any Indian bank fails to maintain the required level of Statutory Liquidity Ratio, then it becomes liable to pay penalty to Reserve Bank of India.

 

Bank must not give away all its loans to risky loan takers.

Banks must invest part of its money in safe and liquid investment.

So during emergency, bank can sell those liquid investments and take out the money.

For example, Government securities, gold, corporate bonds of reputed companies like L&T, reliance, TCS.

These are safe investments. These are also liquid, because you can sell them quickly whenever you want.

So, bank should invest part of common-men’s money in safe investments like Government securities, gold and corporate bonds of highly reputed companies.

BUT who will decide how much money should be invested by banks in safe investments?

 Answer is RBI via SLR (Statutory liquidity ratio). 

What happens if SLR is decreased/increased?

If SLR is decreased, then banks have more money to lend and they will charge less interest rate on loans to lure more customers.

If SLR is increased, then banks have less money to lend they’ll charge more interest rates on loans to keep the profit margin same.

So in the above mentioned news, the impact is banks have more money to lend i.e. more liquidity in the system and also banks will

Charge less interest rate. This is done to fuel the growth in the economy. 

Why it is called statutory liquidity ratio?

It is called Statutory because it is provided by the Law.(The RBI act)

This Act says SLR cannot be more than 40% and less than 25%.

But in 2007, Government amended the act and removed the lower limit of 25%, so thus RBI went to 24 and 23% SLR.

List of World Stock Market Indices Which have impact on Indian Stock Market

	Country Name	Stock Market Indices
Asian Market	India	Nifty 50
		Sensex
	Taiwan	Taiwan TAIEX  INDEX
	Australia	S&P/ASX 200 INDEX
		S&P/ASX 300 INDEX
	Malaysia	FTSC Bursa Malaysia EMAS
	Singapore	Straight times index STI
	Japan	Nikkei 225
		TOPIX INDEX TOKYO
	korea	KOSPI
	HongKong	Hang Seng
	Indonesia	Jakarta COMPOSITE INDEX
	Thiland	THAI SET 50 INDEX[SET50]
		SET
	China	Shanghai composite
	Russia	MICEX INDEX
		RDXUSD
		RUSSIAN RDX INDEX
	NEWZEALAND	NZX ALL INDEX(NZSE)
		NZX 50 Gross Index
European Market	France	CAC 40 INDEX(CAC)
		CAC ALL-TRADABLE(SBF250)
	GERMANY	DAX INDEX(DAX)
		HDAX INDEX(HDAX)
	Greece	ASE(ATHEX COMPOSITE INDEX)
		FTASE(FTSC LARGE CAP)
	UK	FTSC 100 INDEX
		FTSC ALL-SHARE INDEX
American Market	US	DOW JONES
		NASDAQ
		S&P 500
		NYSE COMPOSITE INDEX
	BRAZIL	BRAZIL IBrX INDEX

Comparision of Demat Charges in India

Compare Demat charges in India

This blog post is about Demat charges paid to different DPs in India.

Comparison table of Demat charges:

In the table, I have not included charges for Dematerialization, Rematerialization, Pledge Services, off-market transfers, included only 3 major charges:

Depository  participants	Account Opening Charges	Account Maintenance Charges	Transaction Charges
ICICI BANK	NIL	Rs. 500 /- per year	0.04 % of the transaction value. Minimum Rs. 15/-
SBI	NIL	Rs. 250 /- per year	for individual account Rs. 20/- per trade
Sharekhan	NIL	Rs. 300 /- per year	0.03 % of the value of transaction. Minimum Rs. 30/-
Kotak securities	NIL	Rs. 30 /- per month	0.04 % of the value of security. Minimum Rs. 23/-for sell transactions

 There are many other factors which you should consider while choosing the DP other than charges like their service, track record, your frequency and volume of trading.

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