Electronic Trading Platforms - An Effective Means of Day Trading

Electronic Trading Platforms - An Effective Means of Day Trading
20/02/2020

In the last 8-10 years there has been a massive proliferation of electronic trading in India and that has been largely helped by better broadband connectivity and the launch of low cost trading. Be it trading over the internet or trading via mobile apps, the millennial traders and investors are increasingly opting for the electronic platform route. The bigger question is why do intraday traders exhibit a preference for online trading platforms like the PC, laptop and mobile app trading? There are 5 major reasons why online trading has been a big hit with intraday traders.

Online trading platforms give speed of execution

This is an advantage you fully appreciate only when you start trading. Imagine that you have to call up the dealer, place the order, wait for the confirmation and then go through the same ordeal when you reverse the position. Apart from being inefficient, the offline method of calling up the trader and placing orders is also time consuming and results in not getting the best trading price. An online trading platform gives you real time prices and real time trading at the push of a button.

Online trading is about freedom and control

A lot of young first traders have spoken extensively about the merits of freedom and control while placing the order on electronic platforms. You are no longer at the mercy of the trader or the dealer, who would be anyways juggling scores of other clients and would have their own set of priorities. On the other hand, online trading gives you the freedom to execute from wherever you want and at any time during trading hours. In addition, this is about you having control and making trading decisions in your best interest. That is extremely important in online trading where you have a window of just about 4-5 hours on a trade.

You are on top of the audit trail of the trade

A trade (especially a day trade) has a certain process flow in you trading account. Firstly, your order is placed and then it goes to the order book. Once the trade is executed at the price of your choice, the trade goes into the trade book. As an intraday trader, it is essential that you are on top of the order trail so that you can take appropriate action. For example, if the order is still in the order book, it can be cancelled or modified. Once it goes into the trade book, it can only be reversed. Considering the short time frame, it is essential for you to be on top of the audit trail.

Making spot decisions based on charts and order book

One of the unique features of intraday trading is that decisions have to be made at short notice. All intraday decisions; including initiating trades or reversing trades, have to be done with speed. Such decisions are taken based on chart patterns, news flows or based on buying or selling concentration. Offline process cannot be used when speed is required as it would make the trade inefficient. Online trading allows you to get the trigger quickly and also immediately act upon it. That is why online trading fits perfectly for intraday traders.

Trade on the go with alerts

In electronic trading, you can set alerts so that you are alerted as soon as the trigger is hit. Now, you don’t have to worry about calling the dealer but just whip out your laptop or smart phone and complete the trade. It is as simple that! That is why; intraday trading and electronic platforms are almost made for each other.

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Hurled by the IPO Rush? Here’s All You Need to Know About ASBA

ASBA IPO
IPO
by Nikita Bhoota 27/02/2020

ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.

Who can make an ASBA investment?

ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.

  • He must be a resident individual applying under the Retail Quota
  • Bid must be at cut-off price with a single option of number of shares bid
  • ASBA application has to be made through self certified syndicate bankers (SCSB)
  • Such price intibid made in ASBA cannot be revised later on
  • ASBA cannot be used for other categories like employees / shareholders etc.

What are the advantages of ASBA?

ASBA comes as a major boon to retail investors. Here are some of the major advantages.

  • Since the amount is only blocked, you continue to earn interest
  • You don’t worry about refunds as only the allotment money is debited
  • The application process is very simple and you can apply through your bank
  • The blocked amount is included in average quarterly balance (AQB)
  • Even through bids cannot be revised, they can be cancelled.

How can an ASBA application be cancelled?

While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.

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E-trade in India - scope

E-trade in India - scope
01/03/2020

In a way online trading is as simple as online shopping. Of course, you need to do a little more research and do some follow up monitoring, online trading is effectively as simple as that. Your trading account and demat account are online and everything from research to stock screening to order placement, execution, monitoring and follow-up are done online through a single trading platform. It can become a lot more seamless if you are accessing online trading on your smart phone, but we will leave that discussion aside for the time being. That is because, today trading platforms provide all the necessary support and assistance by providing secured real time access to trading, research reports, price analysis of stocks, market news, etc. even the interface between your trading account, demat account and bank account is virtually seamless.

How to start online trading (e-trading)

You can place trade orders or cancel orders at your will from the comforts of your home. It is as simple as that. It allows you to make your own decision with regards to trading without any interference of the broker. You can buy shares or invest in IPO or buy mutual funds as well. Even bonds, including RBI bonds are available for purchase online. Online trading can be done by simply opening a trading cum demat account with any SEBI registered broker offering the online trading facility. With the power of e-KYC, the account opening can be completed less than an hour. The documents required to open an account are PAN card, address proof, AADHAAR card, mobile number linked to AADHAAR, bank statement, cancelled cheque leaf and passport photograph. That is all.

How online trading has a distinct edge over offline trading

  • Online trading is simple as it enables a trader to have a hassle free trading experience. Anyone can use these platforms as specific skill is not required to carry out trading online. Just worry a tad about online security; that is all.

  • It is less expensive and therefore more economical. Brokers also promote online trading and charge lower rates of brokerage as it reduces maintenance and monitoring as well as RMS costs incurred by the broker.

  • Online trading can be relatively less time consuming. Before the advent of online trading, the process was cumbersome as you had to visit the broker or call your broker for placing or cancelling orders. Now a PC or a smart phone is sufficient.

  • Online trading gives complete control over the process; end to end. It allows the trader to have complete control from order placement to order modification to order cancellation and monitoring. Online trading is also extremely flexible.

  • Reduced chances of errors are one more advantage. In case of traditional offline trading, there were more chances of errors due to miscommunication between the traders and brokers. In online trading, the trader or investor can manage and control the entire trade transactions and execution.

  • It also provides effective and seamless monitoring of investment at all times. You can monitor investments at any time and from anywhere. Loss making stocks can be removed and profit making stocks can be added to your portfolio by observing the market moves.

  • Online trading enables seamless call to action. You can get access to top research recommendations, screeners, sorters, reports and analysis on stock price charts at the click of a button. You can decide the best move and also execute the same with less than three hops.

Future of online trading in India

Online trading has already grown close to 20% of the overall broking market in India and is likely to grow much bigger in the days to come. Online trading is not only being preferred by traders but also being encouraged by brokers. Here is why it has huge scope.

  • With the advent of broadband and low cost bandwidth, the internet access is becoming much more economical to operate.

  • The millennial crowd is having a soft corner for online trading as it gives them more control over their actions.

  • Online trading has now started incorporating machine learning and artificial intelligence so that focused planning of finances is also facilitated.

  • Low cost broking is here to stay and the largest broker in India (by number of registered clients) is already a discount broker predominantly online.

  • With mobile trading catching on, trading is becoming a lot more personal and contiguous. That could make all the difference.

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Did the Budget 2020 Really Disappoint the Capital Markets?

Did the Budget 2020 Really Disappoint the Capital Markets?
02/03/2020

If you gauge the markets by the movement of the Sensex and the Nifty on the day of the Budget then it was surely disappointing. A loss of 1000 points on the Sensex is just one side of the story. The bigger worry is that the last 1 year’s efforts to breach the 40,000 mark on the Sensex have virtually come to a naught after the Sensex fell through that level with a vengeance. But there are some long term positives though there are some short term negatives. Let us first look at the long term positives and then come to the short term negatives that directed the crash in the indices.

Here are some long term capital market positives from Budget 2020

It is easy to get caught up in the panic of the moment, but don’t forget some genuine long term positives in the Union Budget 2020.

  • The decision of the government to exit IDBI Bank entirely is a good starting point and could lead to underlining the fact that the government has no business to be in business. Also, the proposed mega sale of stake in LIC could be a game changer considering its size. It will be almost as important as the Aramco IPO.

  • Partial credit guarantee scheme for NBFCs has been enhanced and that is likely to be a major positive for the NBFCs and the stressed realty sector.

  • The Rs.1000 crore packages for export oriented sectors like pharma and auto ancillaries can weigh positively on the trade deficit and the rupee value.

  • India may get to see the controversial credit default swaps (CDS) making an entry giving a bigger opportunity to hedge risk and to play risky debt on the downside.

  • Budget 2020 has also opened up the floodgates for Government securities to NRIs in a bid to broaden the market.

  • Finally, the Budget has also spoken about a big push to Debt ETFs to fill the gap in the bond markets. All these could be structurally positive for the capital markets.

But the short term outlook for the markets may be under pressure

Short term markets are more optical and less structural. Here is why markets are jittery.

  • LTCG tax was a bad idea in the first place. It impairs long term portfolio values and there were strong expectations of it being scrapped. That did not happen.

  • Getting rid of DDT is a good move but it is now being replaced by dividend tax. This may reduce the burden on lower holding groups but will make companies and promoters wary of paying out dividends.

  • Fiscal deficit at 3.8% was a shocker and the budget has used the full leeway for next two years. Higher fiscal deficit has negative implications for sovereign rating as well as for borrowing costs for corporates.

  • There was little detailing on infrastructure spending other than reiterating the commitment to infuse Rs.103 trillion into infrastructure in the next 5 years.

  • Budget 2020 did almost nothing to assuage the pain of small investors and consumers. The expectation was that the budget would give big breaks to the income groups between Rs.5 lakh and Rs.20 lakhs. Instead, we have a tax scheme that is immensely complicated.

  • Finally, disinvestment target has been enhanced to Rs.210,000 crore (what is that). While it looks optically appealing it is predicated on the LIC divestment and that may be much easier said than done.

It is true that long term efforts are there in the budget but the short sure looks hazy. That explains why markets are unimpressed.
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Budget Impact on Personal Taxes: Good, Bad or Ugly?

Budget Impact on Personal Taxes: Good, Bad or Ugly?
02/03/2020

The one big story of the budget was the dual tax regime with individuals now having to choose their tax regime. What does that mean? How the scrapping of DDT and status quo on LTCG tax impacts taxes!

Now you need to choose your personal tax regime

If you thought that only corporates have a dual tax regime to choose from, then think again. Even individuals will now have to make a choice: old regime versus new regime. Check out the new rates of taxes applicable in contrast to the old rates.

Income Level

Old Tax Rate

New Tax Rate

Up to Rs2.50 lakhs

Nil

Nil

Rs2.50 lakhs to Rs5 lakhs

5%

5%

Rs5.00 lakhs to Rs7.50 lakhs

20%

10%

Rs7.50 lakhs to Rs10 lakhs

20%

15%

Rs10 lakhs to Rs12.5 lakhs

30%

20%

Rs12.5 lakhs to Rs15 lakhs

30%

25%

Above Rs15 lakhs

30%

30%

Source: Budget Documents

If you are delighted about the lower tax rates, just think again. Here is a catch! If you opt for the new tax regime, you forfeit most of the tax exemptions. Effectively, you forfeit tax exemptions under Section 80C, Section 80D and even benefits under LTC, HRA and standard deduction. In a nutshell, 70 out of the 100 exemptions will go away. Only a handful of exemptions like the CPF, gratuity, VRS compensation, retrenchment allowance etc will remain. But you give up on the standard deduction of Rs.50,000 and you don’t get any benefit from life insurance premiums, tuition fees or ELSS investments if you opt for the new tax regime. Let us look at the impact on two distinct income levels.

Income of Rs.15 lakhs

Income of Rs.30 lakhs

Details

Old Regime

New Regime

Details

Old Regime

New Regime

Income

15,00,000

15,00,000

Income

30,00,000

30,00,000

Deductions

2,00,000

Nil

Deductions

4,25,000

Nil

Taxable Income

13,00,000

15,00,000

Taxable Income

25,75,000

30,00,000

Tax

2,02,500

1,87,500

Tax

5,85,000

6,37,500

Cess @ 4%

8,100

7,500

Cess @ 4%

23,400

25,500

Tax Payable

2,10,600

1,95,000

Tax Payable

6,08,400

6,63,000

Standard Deduction 50K & Section 80C of 150K

SD + 80C + 80D + Sec 24 considered

There is a marginal benefit at the income level of Rs.15 lakhs but as you go to higher income levels, the old regime appears to be clearly more profitable. You need to make a smart relative assessment before opting for the right tax regime for you.

Dividend tax incidence will now be on the investor

After 20 years, dividend distribution tax has come to an end. DDT was always unfair because it hit the small and large investor alike. It was a steep cost because while the rate was 15%, the effective cost of DDT came to 20.56%. However, promoter groups have to shell out tax at close to 43% on their dividend income. Of course, governments will collect a huge sum by way of dividend tax but it could impact dividend declaration.

Some good news on homes; but only for old regime

The special tax incentive of Rs1.50 lakhs per annum on low cost houses, over and above the existing benefit of Rs2 lakhs under Section 24 of the Income Tax Act has been extended by one more year till March 2021. This benefit will not be available if you opt for the new tax regime.

In addition, the Budget also made some progress on granting partial amnesty in the case of pending litigations and also the move towards faceless appears. But the big story remains the dual regime and the efficacy of the new tax regime.

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Here’s All You Need to Know About Getting a Demat Account

Open Demat Account
by 5paisa Research Team 25/03/2020

Demat Account is almost like a bank account. Just like you hold funds in your bank account, you hold shares and other securities in the Demat Account. Having a Demat Account is mandatory for trading in equities as per SEBI regulations. 

How to open Demat Account?

Demat Account can be opened online or offline. It is normally opened along with trading account (TCD) by the broker. Demat Account can be opened with any authorised depository participant (DP); which could be a bank or a broker. Here is how to open a Demat Account.

For offline Demat Account, you need to fill up the demat form and sign the demat agreement and submit to your DP. Basic documents like PAN Card, Proof of identity, Proof of residence and cancelled cheque are required. Copies of self-attested documents must be submitted to the DP along with the signed DP agreement. Carry the originals for verification by the officer. Demat account opening can take up to 4-5 days, if all the documents are in place.

Online Demat Accounts can be opened by filling up the online form on the DP website. You must authenticate your identify and address with your Aadhar Card and verify the same with OTP sent to mobile. An in-person-verification (IPV) has to be done before fully activating the demat account. Only Aadhar address will be considered for online demat.

Check: Procedure to open a Demat account


How to use the Demat Account

With a demat account, your purchase, sale and holding of securities are in electronic mode. You must issue a signed Debit Instruction Slip (DIS) to sell shares or you can give a power of attorney (POA) to the broker. When you sell shares, the demat account gets debited and when you buy shares the demat account gets credited.  All corporate actions like bonuses and splits are automatically credited to your demat account. Dividends are directly credited to the mapped bank account. 

Documents Required for Demat Account

As stated earlier, demat account opening requires proof of identity and proof of address. Proof of identity can be any statutorily issued photo identity like passport, Aadhar, driving license, voter card etc. Proof of address can be any of the above with complete and latest address or electricity or land line bill. In case of online demat account opening, the Aadhar address will be considered. In addition, submission of PAN card and cancelled cheque are mandatory for opening demat account.

Importance of having a Demat account

Here are some of the key uses of having a demat account.

1. It facilitates non-physical holding of securities

2. Demat account can hold equities, bonds, ETFs, gold bonds and other securities

3. Corporate actions are automatically executed in demat account

4. One point intimation of change in address, email, mobile to all companies

5. Eliminates risk of physical holdings like bad delivery, mutilation of certificates, loss in transit, forgery, fake certificates etc.

6. Trading shares, holding in demat and bank transfers become one seamless chain if you opt for online trading

7. Demat is also cost effective compared to dealing in physical certificates