Q1 - What Is Dematerialization (DEMAT)?

A1 - Dematerialization (DEMAT) is the move from physical certificates to

electronic bookkeeping. Actual stock certificates are then removed and
retired from circulation in exchange for electronic recording.

 Dematerialization (DEMAT) is the move from physical certificates to

electronic bookkeeping.
 DEMAT accounts are required by some trading institutions due to the
fact they are the most accurate form of record keeping.
 Dematerialization was designed to offer more security, as well as
increased speed, to financial trades. It has become the norm in
bookkeeping for financial institutions.

With the age of computers and the Depository Trust Company, securities

no longer need to be in certificate form. They can be registered and
transferred electronically.

In earlier eras, transactions at stock exchanges were conducted by traders

who shouted buy and sell prices. The deals were recorded on paper
receipts. After the markets closed, the paperwork would continue in order
to properly register all the transactions.

The Benefits of Dematerialization

Through dematerialization, so-called DEMAT accounts allow for electronic
transactions when shares of stock are bought and sold. Within a DEMAT
account, the certificates for stocks and other securities of the user are held
as a means for seamless trades to be made.

The introduction of dematerialization served to eliminate such a paper-

oriented process. Furthermore, by adopting electronic bookkeeping, this
allowed for accounts to be updated automatically and swiftly.

Dematerialization applies not only to stocks, but also to other forms of

investment such as bonds, mutual funds, and government securities. The
use of dematerialization and DEMAT accounts is comparable to using a
bank and bank accounts to maintain one’s assets rather than personally
storing and exchanging paper money each time a transaction is made.
Using a debit card at a store creates a digital record of purchase and the
amount is deducted from the cardholder’s account. Funds are exchanged
between buyers and sellers without paper currency. Likewise, with
dematerialization, the stock transactions are completed without physical
certificates

If the holder of a physical, paper bond or other security wishes to

dematerialize the document, they usually surrender the certificate with an
intermediary. They should receive some sort of electronic notification that
the record has been dematerialized and they may proceed with conducting
transactions.

Some assets—for example, publicly traded shares—require a DEMAT

account to engage in trades and other transactions. This is because
markets now operate through electronic transactions rather recorded on
paper.

The benefits of dematerialization can also include increased security and

surety of transactions and the elimination of steps that could slow down the
process of clearing transactions. Errors can be avoided that might
otherwise be introduced in the handling of physical records. There might
also be some savings by eliminating paperwork that may have included
processing fees.
Q2 – What does market Capitalization mean?

A2 - Market capitalization is one of the most effective ways of evaluating

the value of a company. It is crucial for readers to understand that this
evaluation of a company’s value is done based on a company’s stocks.
Essentially, this is defined by the total market value of the outstanding
shares of a company. This simple fact also means that publicly owned
companies are the only ones which can be evaluated by this method of
evaluation.

It is vital to understand what market capitalization, especially for

investors, is since this can guide them in choosing the correct shares to
invest in. Fluctuating market conditions and stock prices also impact the
evaluation of a company when this method of evaluation is being used.
For investors, understanding the value of a company is imperative while
creating a long-term investment plan.
Understanding the value and risk associated with a company also helps
an investor to make a balanced investment which is distributed across
stocks from different companies. While judging companies by their
market cap, it is important for investors to understand that this shows the
stage of development of a company in its business venture. Investors
should keep in mind this stage of development of a company while
evaluating them to build their investment portfolio.

Importance of market cap

 Universal method: This is the most widely used method around the
globe to evaluate a company. Since this is one of the universally
accepted methods, this makes it easy for investors to understand a
company’s value irrespective of their geographical or economic locus.
 Precise in suggestion: Suggesting market conditions is always
subject to risks since it can fluctuate due to many factors.
Nevertheless, the market cap is one method which is quite precise in
its evaluation. As a result, though not full-proof due to obvious reasons,
it is a reliable method to judge the risk associated with investing in a
company.
 Affects the index: This method is also used to weigh the shares of
different companies for the index in the share market. Using this
method, stocks with higher market capitalization gets better weight in
the index.
 Helps in comparison: Since this is a universal method that can be
applied to evaluate any company’s market worth, it is a convenient
method for investors to compare different companies. This comparison
not only helps in understanding the size of a company, but also the risk
associated with investing in them.
 Balanced portfolio: Investors should maintain a balanced portfolio
to ensure they do not run the risk of any major loss. This includes
opting to invest in a few top companies by market cap, along with the
high-risk investments in developing enterprises.

Type of stock Market cap

Small-Cap Stocks Up to Rs.500 crore

Mid-Cap Stocks From Rs.500 crore up to Rs.7,000 crore

Large-Cap Stocks From Rs.7,000 crore up to Rs.20,000 crore

Q3- Is Market Capitalization same as market Value?
A3- While market cap is often referred to as the value of a company, or
what a company is worth, a company's true market value is infinitely more
complex. Market value is determined by the valuations or multiples
accorded by investors to companies, such as price-to-sales, price-to-
earnings, enterprise value-to-EBITDA, and so on. These different metrics
take into account several factors in addition to stockholder equity, such as
outstanding bonds, long-term growth potential, corporate debt, taxes, and
interest payments. The higher the valuations, the greater the market value.
Market value can be dependent on numerous other factors, such as the
sector in which the company operates its profitability, debt load, and the
overall market environment. It also reflects investor or analyst opinion.

Key Differences
Market capitalization and market value don't get confused just because
they sound alike. People often use the two interchangeably, referring to a
company's market cap as its "market value" or "stock market value" or
"value in the marketplace." But when they do, they're referring to a specific
type of market value. Market capitalization is essentially a synonym for
the market value of equity.

Also, since it's simply the number of outstanding shares multiplied price, a
company's market cap is one single incontrovertible figure. Market
valuations can vary, depending on the exact metrics and multiples the
analyst uses.
Q4- What does Index mean in stocks?

A4- Luckily you need not actually track these selected companies
individually to get a sense of how the markets are doing. The important
companies are pre-packaged and continuously monitored to give you this
information. This pre-packaged market information tool is called the ‘Market
Index’.
There are two main market indices in India. The S&P BSE
Sensex representing the Bombay stock exchange and CNX
Nifty representing the National Stock exchange.
An ideal index gives us minute by minute reading about how the market
participants perceive the future. The movements in the Index reflect the
changing expectations of the market participants. When the index goes up,
it is because the market participants think the future will be better. The
index drops if the market participants perceive the future pessimistically.
Q5- What are the 3 major stock indexes?

A5- Sensex and Nifty are stock market indices which represent Bombay
Stock Exchange (BSE) and National Stock Exchange (NSE) respectively.
Sensex - BSE is India’s first listed exchange which was established in
1875. The total companies listed on the exchange are close to around
6000. The total market capitalisation of all the companies listed on BSE is
Rs. 1,24,69,879 crore. BSE's popular equity index - the S&P BSE
SENSEX - is India's most widely tracked stock market benchmark index. It
is traded internationally on the EUREX as well as leading exchanges of the
BRCS nations (Brazil, Russia, China and South Africa). BSE Sensex
consists of 30 top scrip from different sectors which forms this index. BSE
SENSEX is calculated on a free-float market capitalization methodology
and the performance of these stocks impact the performance of Sensex.
BSE has recently launched a special platform for trading in SME securities.
It has also launched a free float index - S&P BSE Sensex. BSE has a lot of
other indices under various categories of Equity and fixed income. Indices
under Equity include- Market cap/broad, Sector & Industry, Thematic,
Strategy, Sustainability, and Volatility. Indices under Fixed income include -
Composite, Government, Corporate, and Money Market.
Nifty - NSE began its operations in the year 1994. Nifty consists of 50 top
scrips from different sectors which forms this index. NSE has a lot of other
indices under various categories - broad market indices, sectoral indices,
strategy indices, thematic indices and fixed income indices. The total
market capitalisation of all the companies listed on NSE is Rs 12,282,127
crore.
In the year 2016, NSE launched Nifty 50 Index futures trading on TAIFEX.
Nifty50 was earlier known as CNX Nifty. It was renamed Nifty50 in the year
2015. NSE has also been felicitated with a lot of awards over the years.
Q6- What is the difference between spot nifty 50 and sgx
nifty?

A6- 1. SGX nifty is Nifty futures contract trading in Singapore Stock

Exchange and in India, Nifty contract trades on NSE.
2. The contract size of SGX Nifty is different compared to Nifty. In India, we
have 75 shares in every Nifty contract Lot whereas the SGX nifty does not
have a contract with shares in it. SGX Nifty is denominated in terms of US
dollars. Say, if Nifty is trading at 9500, then the contract size of SGX Nifty
will be 9500*(2 USD) i.e., 19000 USD.
For example, if the Nifty moves up by 100 points for the day, then make a
profit of 100 rupees per share.  Therefore, total profit in case of Nifty will be
100*75 = Rs 7,500. But in the case of SGX Nifty, we will be making a profit
of 100*2 = 200 USD per contract.
3. Now, In India, in the case of Nifty, we see Open Interest as the ‘number
of shares’ outstanding. But in the case of SGX Nifty the Open Interest
shows the ‘number of contracts’ outstanding. Both Nifty and SGX Nifty are
highly liquid and a very high volume of trading happens in that.
4. SGX Nifty still trading way after the closure of the Indian Nifty market, we
see an impact of this global news on the SGX Nifty price movement. This
further directly impacts the opening pricing of Nifty, the very next day. And
that is one of the reasons we see the Indian Nifty market opening at a
premium or discount over the previous day’s close.
Q7 – What is the difference between trading and demat
account?

A7- 1. One major difference between the two accounts pertains to the
functions each performs. A trading account is used for the buying and
selling of securities by means of it getting debited from your Demat account
and sold in the market. A Demat account, on the other hand, allows
investors to keep their financial instruments in an electronic format. This
also works in a way where you can change your electronic format securities
into physical form as well.

2. A trading account functions in the same way as your current bank

account would; it, in fact, links up to your Demat and your bank account. It
works to sell your shares in the market by withdrawing them from your
Demat account. A Demat account is a place where the shares and
securities that you buy from the market are stored. Unlike a trading account
that functions like a current bank account, a Demat account works like a
saving account.
Q8- Is it mandatory to have a demat account to apply in IPO?

A8- Yes it's mandatory to have a demat account to apply in an IPO. IPO
Allocated shares are transfer to investors demat account. If you don't
provide correct demat account information your IPO bidding application will
not consider for share allotment.

Q9 – Do I have to pay yearly maintenance charges even I do

not hold any shares in my demat account?
A9- Yes. We have to pay yearly maintenance charges even if we do not
hold any shares. If we don’t pay AMC charge

1. You will be bombarded with reminders via Email, SMS and Phone
Calls by the broker.
2. After some time, your demat account is declared a dormant account
(inactive). This means you can't do any transaction until it's
reactivated.
3. To reactivate, you have to pay the reactivation fee (~ Rs 500) and
clear all the dues (AMC + interest).
4. To close a dormant demat account; you have to reactivate it first.
5. If you have no holdings and have a dormant account with a broker,
they will not allow you to open another account.
6. The brokers (depository participants or DP) hold the dormant account
forever. They will keep sending you reminders and a demat account
statement.
Q10- What is difference between intraday and delivery?

A10- Intraday trading - When you’re buying and selling of stocks within
the same trading day, you’re indulging in intraday trading. In this course
of action, stocks are purchased with the aim of earning profits and not
with any objective of investment. This is done by harnessing the
movement of stock indices, which means that the varied prices of the
stocks are harnessed in order to earn profits from trading of stocks.
To participate in Intraday trading, an online trading account must be set
up with specific orders which are explicit to intraday trading. These
orders are squared off before the trading day ends.
Delivery trading - Delivery trading is one of the most common trading
methods in the stock market. Unlike intraday trading, delivery trading
involves a more pronounced intention of investment than just trading
opportunities. This is because the investors have it in mind to hold on to
their stockholdings for a longer period of time.
In this process, there are no time constraints in the selling of stocks. As
long as the stocks are delivered to the associated demat accounts, it is
considered as a delivery trade.
You cannot perform delivery trades without a demat account - since a
demat account is where your stocks will be stored.

Intraday Trading v/s Delivery Trading

It is easy to conclude that intraday trading is usually completed within a

day. This typically means that all the shares purchased in the day must
be sold by the end of the day, before the closing of the markets. If these
shares are not sold, they are automatically squared off at the closing
time.
However, on the other hand, in delivery based trading, shares bought
can be maintained for a longer duration for higher profit returns.
While intraday trading gives the opportunity for low capital accounts and
margin payments, delivery trading requires complete amounts for its
transactions.
As an intraday trader, if one can judge and forecast the value of shares
at short and small intervals, then intraday trading is a good idea.
Nevertheless, there are many technical tools which assist in predicting
short term price movements.
However, if one thinks long term investing is better suited for them, and
they are able to pick shares based on company’s intrinsic value and
relatable assessments (such as the company’s fundamental indicators -
like price-to-earnings ratio, book value and the like), delivery based
trading can be considered as a better option.