Buying stocks is more straightforward, especially after transitioning to electronic and digital channels. However, few things have remained the same, such as how and when stocks get delivered. It is also valid for a few trading parts, such as intraday trading and equity delivery. Today, we learn what equity delivery is and why you must know about this.
In the Indian stock market, when an investor buys or sells, their stakes are not settled immediately or on the same day. The transactions follow a T+2 settlement cycle. Thus, if a buyer purchases a stock on Monday, those shares would be delivered to their DEMAT account on Wednesday.
When the stocks get delivered to their DEMAT account, the account holder can sell or hold them as per his convenience. This is called equity delivery. In this case, the person holding the shares is the owner of the stocks.
Delivery-based trading is one of the many ways one can trade in the Indian stock market. In delivery-based trading, one can hold the shares for as long as they desire after they have been delivered to the investor’s account. The investor has complete ownership of what stocks to buy and how long to wait for an excellent opportunity to sell, taking home a good profit.
This is the different from other stock trading types, such as intraday trading, wherein one can buy and sell stocks within the same trading day.
In the Indian stock market, share transactions do not get delivered at the very instance when they are bought or sold on the same day. These transactions must follow a settlement cycle known as the T+2 cycle. Generally, as per theT+2 settlement cycle; transactions must be completed in the timeline of T+2 days that is, Trading Day + 2 Working Days.
Consider an investor has purchased many stocks on Monday; these stocks are not sent directly to their DEMAT account. This transaction will take T+2 Days, Monday, and two more Working days, which means by Wednesday. In the T+2 settlement phase, the investor can not sell their stock before delivery or make a short position, as the investor has still not received the shares and hence does not own them. Once the shares are delivered to their account, they can hold them for as long as possible and sell them according to their wish. This is the T+2 cycle framework in equity delivery.
When investors buy a stock of any company, they purchase it through a brokerage firm or a broker on a website or any digital application. When you trade on a stock or make a transaction, some part as commissions or brokerage is deducted.
In the process of equity deliveries, investors get many benefits:
More such benefits of delivery based trading:
Disadvantages of equity delivery trading:
A few demerits or some common cons of delivery trading:
Conclusion:
An investor when taking delivery of his shares in their DEMAT account can hold shares for as long as he wishes, unlike in intraday trading where he has to square off his position by the end of the day. The shares are delivered to the investor’s DEMAT account after the settlement cycle of T+2 days.
While taking equity delivery, one must also know the various charges one has to bear, apart from the upfront investment amount. Several charges are applicable when an investor buys into shares through equity delivery, including service tax, stamp duty, costs of the depository participant, among others.
Under the equity delivery trading method, stocks get delivered after the settlement cycle of trading Day+2 working days. Under the intraday trading method, the stock is transacted on the same day of purchase, and the transaction is completed on the same day.
Both trading processes have advantages and disadvantages. As an individual, you must consider and analyse both these methods based on their operations, costs, obligations, etc., and opt for a combination of both.
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Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
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Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.